Chapter 2: Leading the Process of Crafting and Executing Strategy

Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University

McGraw-Hill/Irwin Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

If you dont know where you are going, any road will take you there.
Cheshire Cat to Alice
Lewis Carroll, Alice in Wonderland

If you articulate a vision that makes people passionate, there are so many amazing things you can do.
Dr. Sophie Vandebroek Xerox Corporation

Chapter Learning Objectives

1. Grasp why it is critical for company managers to think long and hard about where a company needs to head and why. 2. Understand the importance of setting both strategic and financial objectives. 3. Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels. 4. Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets. 5. Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently. 6. Understand why the strategic management process is ongoing, not an every-now-and-then task. 7. Learn what leadership skills management must exhibit to drive strategy execution forward. 8. Become aware of the role and responsibility of a companys board of directors in overseeing the strategic management process.
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Chapter Roadmap
What Does the Strategy-Making, Strategy-Executing

process Entail?
Phase 1: Developing a Strategic Vision
Phase 2: Setting Objectives Phase 3: Crafting a Strategy

Phase 4: Implementing and Executing the Strategy

Phase 5: Evaluating Performance and Initiating

Corrective Adjustments
Leading the Strategic Management Process
Corporate Governance: The Role of the Board of

Directors in the Strategy-Making, Strategy-Executing Process

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Figure 2.1: The Strategy-Making, Strategy-Executing Process

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Developing a Strategic Vision

Phase 1
Involves thinking strategically about Future direction of company Changes in companys product/market/customer technology to improve

Current market position Future prospects

A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the companys strategic course in preparing for the future.
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Table 2.1: Factors to Consider in Deciding on a Companys Future Direction

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Key Elements of a Strategic Vision

Delineates managements aspirations for the

business
Provides a panoramic view of where we are going
Charts a strategic path Is distinctive and specific to

a particular organization
Avoids use of generic language that is dull and boring and that could apply to most any company

Captures the emotions of

employees and steers them in a common direction Is challenging and a bit beyond a companys immediate reach
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Role of a Strategic Vision

A well-conceived, well-communicated vision

functions as a valuable managerial tool to

Give the organization a sense of direction, mold organizational identity, and create a committed enterprise Illuminate the companys directional path Provide managers with a reference point to Make strategic decisions Translate the vision into hard-edged
objectives and strategies Prepare the company for the future
A strategic vision exists only as words and has no organizational impact unless and until it wins the commitment of company personnel and energizes them to act in ways that move the company along the intended strategic path!
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Table 2.2: Characteristics of an Effectively Worded Vision Statement

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Table 2.3: Common Shortcomings in Company Vision Statements

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Example of Strategic Vision

Red Hat
To extend our position as the most trusted Linux and open source provider to the enterprise. We intend to grow the market for Linux through a complete range of enterprise Red Hat Linux software, a powerful Internet management platform, and associated support and services.
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Example of Strategic Vision

UBS
We are determined to be the best global financial services company. We focus on wealth and asset management, and on investment

banking and securities businesses. We continually earn recognition and trust from clients, shareholders, and staff through our ability to anticipate, learn and shape our future. We share a common ambition to succeed by delivering quality in what we do. Our purpose is to help our clients make financial decisions with confidence. We use our resources to develop effective solutions and services for our clients. We foster a distinctive, meritocratic culture of ambition, performance and learning as this attracts, retains and develops the best talent for our company. By growing both our client and our talent franchises, we add sustainable value for our shareholders.
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Examples of Strategic Visions

Caterpillar
Be the global leader in customer value.

eBay
Provide a global trading platform where practically anyone can trade practically anything.
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Strategic Vision vs. Mission

A strategic vision A companys mission

concerns a firms future business path - where we are going

Markets to be pursued
Future product/market/ customer/technology focus Kind of company management is trying to create

statement typically focuses on its present business purpose - who we are and what we do
Current product and service offerings Customer needs and customer groups being served Geographic coverage

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Characteristics of a Mission Statement

Identifies boundaries of a companys current

business and says something about Present products and services Types of customers served Geographic coverage Conveys Who we are, What we do, and Why we are here
A good mission statement describes a companys business makeup and purpose in language specific enough to give the company its own identity and distinguish it from other enterprises in the same or other industries!
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Key Elements of a Mission Statement

A complete mission statement should cover three

things: Customer needs being met What is being satisfied Customer groups or markets being served Who is being satisfied What the organization does (in terms of business approaches, technologies used, and activities performed) to satisfy the targeted needs of the targeted customer groups How customer needs are satisfied
A companys mission is not to make a profit! Its true mission is its answer to What will we do to make a profit? Making a profit is an objective or intended outcome!
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Mission Statement: Trader Joes

(a unique grocery store chain)

To give our customers the best food and beverage
values that they can find anywhere and to provide them with the information required for informed

buying decisions. We provide these with a dedication to the highest quality of customer satisfaction
delivered with a sense of warmth, friendliness, fun,

individual pride, and company spirit.

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Mission Statement: OSHA

Occupational Safety and Health Administration

To promote the safety and health of Americas

workers by setting and enforcing standards; Providing training, outreach, and education; Establishing partnerships; Encouraging continual process improvement in workplace safety and health.
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Linking the Vision with Company Values

Companies often develop a statement of values to guide a

companys pursuit of its vision and strategy and paint the white lines for how a companys business is to be conducted
Company values statements typically contain four to eight beliefs, traits, and behaviors relating to such things as Fair treatment, integrity, ethical behavior, innovation, teamwork, product quality, customer satisfaction, social responsibility, community citizenship
But values statements remain a bunch of nice words until

espoused beliefs, traits, and behaviors are Incorporated into companys operations and work practices Used as benchmarks for job appraisal, promotions, and rewards If company personnel are not held accountable for displaying company values in doing their jobs, then the company values statement is a bunch of empty words!
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Example: American Express Company Values

Customer commitment Quality and Integrity

Respect for people

Teamwork
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Example: Toyotas Company Values

Respect for and development of employees Teamwork Getting quality right the first time Learning Continuous improvement Embracing change in pursuit of low-cost, top-notch manufacturing excellence in motor vehicles
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Example: DuPonts Company Values

Safety

Ethics

Respect for people

Environmental stewardship
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Example: Abbott Laboratories Company Values

Pioneering

Achieving

Caring

Enduring
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Example: Yahoos Core Values

Excellence Committed to winning with integrity. Innovation Thrive on creativity an ingenuity. Customer Fixation Respect our customers above all else.

Teamwork Treat one another with respect and communicate openly.

Community Share an infectious sense of mission to make an impact on society. Fun Believe humor is essential to success. What Yahoo Doesnt Value Singles out 54 things it does not value losing, bureaucracy, good enough, arrogance, status quo, formality, quick fixes
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Communicating the Strategic Vision

Winning support for the vision involves Putting where we are going and why in writing Distributing the statement organization-wide Having executives explain vision to employees An engaging, inspirational vision Challenges and motivates workforce Articulates a compelling case for where company is headed Evokes positive support and excitement Arouses a committed organizational effort to move in a common direction
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Capturing the Vision in a Slogan

FedEx
Satisfying worldwide demand for fast, time-definite, reliable distribution.

Home Depot
Helping people improve the places where they live and work.

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Capturing the Vision in a Slogan

Scotland Yard
To make London the safest major city in the world.

Charles Schwab
To provide customers with the most useful and ethical financial services in the world.
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Recognizing Strategic Inflection Points

Sometimes an order-of-magnitude change occurs in

a companys environment that

Dramatically alters its future prospects
Mandates radical revision of its strategic course
Critical decisions have to be made about where to

go from here
A major new directional path may have to be taken A major new strategy may be needed
Responding quickly to unfolding changes in the

marketplace lessons a companys chances of

Becoming trapped in a stagnant business or Letting attractive new growth opportunities slip away
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Intels Strategic Inflection Points

Prior to mid-1980s
Focus on memory chips

Starting in mid-1980s
Abandon memory chip business (due to lower-cost
Japanese companies taking over the market) and

Become preeminent supplier of microprocessors to PC

industry

Be undisputed leader in driving

PC technology forward

1998
Shift focus from PC technology to becoming the
preeminent building block supplier to Internet economy
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Overcoming Resistance to a New Strategic Vision

Mobilizing support for a new vision entails

Reiterating basis for the new direction

Addressing employee concerns head-on

Calming fears
Lifting spirits Providing updates and progress reports as events unfold
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Test Your Knowledge

The difference between a company's mission statement and the concept of a strategic vision is that
A. the mission statement lays out the desire to make a profit, whereas the strategic vision addresses what strategy the company will employ in trying to make a profit. B. a mission statement deals with where we are headed whereas a strategic vision provides the critical answer to how will we get there? C. a mission deals with what a company is trying to do and a vision concerns what a company ought to do. D. a mission statement typically concerns an enterprises present business scope and purposewho we are, what we do, and why we are herewhereas the focus of a strategic vision is on the direction the company is headed and what its future product-customer-market-technology focus will be. E. a mission is about what to accomplish for shareholders whereas a strategic vision concerns what to accomplish for customers.
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Payoffs of a Clear Strategic Vision

Crystallizes an organizations long-term

direction
Reduces risk of rudderless decision-making Creates a committed enterprise

where organizational members enthusiastically pursue efforts to make the vision a reality
Provides a beacon to keep strategy-related

actions of all managers on common path

Helps an organization prepare for the future
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Setting Objectives
Phase 2
Purpose of setting objectives Converts vision into specific performance targets Creates yardsticks to track performance Well-stated objectives are

Quantifiable
Measurable Contain a deadline for achievement Spell-out how much of what kind

of performance by when
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Importance of Setting Stretch Objectives

Objectives should be set at levels that

stretch an organization to
Perform at its full potential, delivering the best possible results Push firm to be more inventive Exhibit more urgency to improve its business position Be intentional and focused in its actions
Theres no better way to avoid ho-hum results than by setting stretch objectives and using compensation incentives to motivate organization members to achieve the stretch performance targets!
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Types of Objectives Required

Financial Objectives
Outcomes focused on improving financial performance

Strategic Objectives
Outcomes focused on improving competitive strength and market standing

$
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Examples: Financial Objectives

Annual revenue growth of X% X % increase in after-tax profits annual Earnings per share growth of X% annually Annual dividend increases of X% Profit margins of X% X% return on capital employed (ROCE) Annual stock price increases that average X% over

time
Strong bond and credit ratings
Sufficient internal cash flows to fund 100% of new

capital investment
Stable earnings during periods of recession
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Examples: Strategic Objectives

Winning an X% market share within 3 years Achieving lower overall costs than rivals Overtaking key competitors on product performance

or quality or customer service within 2 years Deriving X% of revenues from sale of new products introduced in past 5 years Being the recognized industry leader in product innovation and/or technological know-how Having a wider product line than rivals Consistently getting new or improved products to market ahead of rivals Having stronger national or global sales and distribution capabilities than rivals
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Good Strategic Performance Is the Key to Better Financial Performance

Achieving good financial performance is not enough Current financial results are lagging indicators reflecting results of past decisions and actions good profitability now does not translate into stronger capability for delivering even better financial results later However, setting well-chosen strategic

objectives and achieving them signals

Growing competitiveness Growing strength in the marketplace
A company that is growing competitively stronger is

developing the capability for better financial performance in the years ahead
Good strategic performance is thus a leading indicator of a companys capability to deliver improved future financial performance
Unless a company sets and achieves stretch strategic objectives it is not developing the competitive muscle to deliver even better financial results in the years ahead!
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A Balanced Scorecard Approach Setting Strategic and Financial Objectives

A balanced scorecard for measuring

company performance is optimal; it entails Setting financial and strategic objectives Placing balanced emphasis on achieving
both types of objectives
(However, if a companys financial performance is dismal or if its very survival is in doubt because of poor financial results, then stressing the achievement of the financial objectives and temporarily deemphasizing the strategic objectives may have merit)

Just tracking financial performance overlooks the

importance of measuring whether a company is strengthening its competitiveness and market position
The surest path to sustained future profitability year after year is to relentlessly pursue strategic outcomes that strengthen a companys business position and give it a growing competitive advantage over rivals!
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General Motors Objectives

Reduce the percentage of automobiles

using conventional internal combustion engines (ICE) through the development of hybrid ICEs, plug-in hybrid ICEs, range-extended electric vehicles, and hydrogen fuel cell electric engines Reduce automotive structural costs to benchmark levels of 23 percent of revenue by 2012 from 34 percent in 2005 Reduce annual U.S. labor costs by an additional $5 billion by 2011
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The Home Depots Objectives

Be the number one destination for professional

contractors, whose business accounted for roughly 30 percent of 2006 sales

Improve in-stock positions so customers can find

and buy exactly what they need

Deliver differentiated customer service and the

know-how that our customers have come to expect from The Home Depot
Repurchase $22.5 billion of outstanding shares

during 2008
Open 55 new store locations with 5 store

relocations in 2008
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The Objectives at Yum! Brands

(KFC, Pizza Hut, Taco Bell)
Open 100 KFC restaurants in Vietnam by 2010 Expand Taco Bell restaurant concept to Dubai, India,

Spain and Japan during 2008 and 2009 Increase number of international restaurant locations from 12,000 in 2007 to 15,000 in 2012 Increase operating profit from international operations from $480 million in 2007 to $770 million in 2012 Expand Pizza Huts menu to include pasta and chicken dishes Decrease the number of company owned restaurant units in U.S. from 20% of units in 2007 to less than 10% of units by 2010 Increase the number of Taco Bell units in the U.S. by 2%3% annually between 2008 and 2010
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Avons Objectives
Increase our beauty sales and market

share Strengthen our brand image Enhance the representative experience Realize annualized cost savings of $430 million through improvements in marketing processes, sales model and organizational activities Achieve annualized cost savings of $200 million through a strategic sourcing initiative
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Test Your Knowledge

Which of the following represents the best example of a well-stated strategic objective (as opposed to a well-stated financial objective)?
A. Achieve revenue growth of 150% annually B. Achieve a AA bond rating within 3 years and an annual cash flow of $750 million C. Invest more money in R&D to enable the company to offer customers the widest selection of products in the industry D. Increase market share from 15% to 20% and achieve the lowest overall costs of any producer in the industry, both within three years E. Pay more attention to reducing costs over the next two years
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For Discussion: Your Opinion

Which matters most to a companys future financial performance setting and pursuing financial performance targets or setting and pursuing strategic performance targets? What arguments support your answer?

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Both Short-Term and Long-Term Objectives Are Needed

Short-term objectives Targets to be achieved soon Milestones or stair steps for reaching long-range performance targets

Long-term objectives
Targets to be achieved within 3 to 5 years Calls for actions now that will permit reaching targeted long-range performance later
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Concept of Strategic Intent

A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective!

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Characteristics of Strategic Intent

Indicates firms intent to making quantum

gains in competing against key rivals and to establishing itself as a winner in the marketplace, often against long odds
Involves establishing a grandiose

performance target out of proportion to immediate capabilities and market position but then devoting the firms full resources and energies to achieving the target over time
Entails sustained, aggressive actions to take

market share away from rivals and achieve a much stronger market position
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Test Your Knowledge

A company pursues strategic intent when
A. it pursues its strategic vision. B. it crafts a strategy and proceeds to implement it. C. it adopts a strategic plan and tries to execute it. D. it sets objectives and pursues their achievement.

E. it relentlessly pursues an ambitious strategic objective and concentrates its full resources and competitive actions on achieving that objective.
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Objectives Are Needed at All Levels

The objective-setting process is more topdown than bottom up
1. First, set organization-wide objectives and performance targets 2. Next, set business and product line objectives 3. Then, establish functional and departmental objectives

4. Individual objectives are established last

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Importance of Top-Down Objectives

Provides guidelines for objective-setting and

strategy-making in lower-level organizational units Helps ensure that performance targets set by business units, divisions, and departments are directly connected to achieving company-wide objectives Top-down objective-setting has two advantages Leads to cohesive and compatible objectives
and strategies up and down the organization Helps unify internal efforts to move company along the chosen strategic path
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Crafting a Strategy
Phase 3
Strategy-making involves astute

entrepreneurship
Actively searching for opportunities to do new things or Actively searching for opportunities to do existing things in new or better ways Strategizing involves Developing timely responses to happenings in the external environment and Steering company activities in new directions dictated by shifting market conditions
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Crafting a Good Strategy Requires Good Business Entrepreneurship

Developing a winning strategy involves

Diagnosing the direction and force of the market changes underway and making timely strategic adjustments Spotting new or better ways to satisfy customer needs Figuring out how to outwit and outmaneuver competitors

Pursuing ways to strengthen the firms competitive capabilities

Proactively trying to out-innovate rivals
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The Role of Astute Entrepreneurship in Crafting a Companys Strategy

Masterful strategies come partly (maybe mostly) by doing things differently from competitors where it counts Innovating more creatively Being more efficient Being more imaginative Adapting faster Rather than running with the herd! Good strategy-making is therefore inseparable from good entrepreneurship one cannot exist without the other!
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The Hows That Define a Firm's Strategy

How to grow the business How to please customers How to outcompete rivals How to respond to changing market

conditions
How to manage each functional

piece of the business (R&D, production, marketing, HR, finance, and so on)
How to achieve targeted levels of

performance
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Who Is Involved in Strategy Making?

CEO (chief executive officer)

Has ultimate responsibility for leading the strategy-making process Functions as strategic visionary and chief architect of strategy
Senior executives

Typically have influential roles in fashioning those strategy components involving their areas of responsibility
Managers of subsidiaries, divisions, geographic

regions, plants, and other important operating units (and, often, key employees with specialized expertise)
Some pieces of the strategy are best orchestrated by onthe-scene company personnel with detailed familiarity of the piece of the business they are in charge of running
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Why Is Strategy-Making Nearly Always a Collaborative Process?

The job is often way too big for one person or a

small executive groupmany strategic issues are complex or cut across multiple areas of expertise
The more a companys operations cut across

different products, industries and geographic areas, the more that headquarters executives must delegate strategy-making authority to down-the-line managers in charge of particular functions and operating units
In todays companies every manager typically has a strategy-making roleranging from major to minorfor the area he or she heads!
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For Discussion: Your Opinion

Crafting a companys strategy is really a job for senior executives and the companys board of directors.

True or false? Discuss and explain.

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Figure 2.2: A Companys Strategy-Making Hierarchy

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Corporate Strategy
Orchestrated by headquarters executives and involves
Moves to diversify into different industries Actions to boost the combined performance

of the companys different businesses

Actions to capture cross-business synergies Establishing investment

priorities and steering corporate resources into the most attractive businesses
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Business Strategy
Concerns the actions and approaches crafted to produce successful performance in one specific line of business. Is usually the responsibility of the manager in charge of the business and involves
Crafting competitive moves to build

sustainable competitive advantage

Seeing that lower-level strategies within

the business are well-matched to the overall business strategy

Gaining approval of business-level strategic

moves by corporate-level officers and directors

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Functional Strategies
Concerns the game plan for a function, activity, or process within a business; is usually orchestrated by the functional head and involves Crafting functional strategic initiatives that will support the overall business strategy
Adding function-related

strategic details to the overall business strategy

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Operating Strategies
Are generally crafted by frontline managers

(subject to review and approval by higherranking managers) Concern the relatively narrow strategic initiatives and approaches for managing key operating units (geographic regions, distribution centers, plants) and strategicallyrelevant operating activities (advertising, supply chain activities, Internet sales) Add further detail and completeness to functional and business strategies
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Levels of Strategy-Making in a Diversified Company

Corporate-Level Managers Business-Level Managers

Corporate Strategy
Two-Way Influence

Business Strategies
Two-Way Influence

Functional Managers

Functional Strategies
Two-Way Influence

Operating Managers

Operating Strategies
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Levels of Strategy-Making in a Single-Business Company

Business-Level Managers

Business Strategy
Two-Way Influence

Functional Managers

Functional Strategies

Two-Way Influence

Operating Managers

Operating Strategies

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Test Your Knowledge

The strategy-making hierarchy in a single business company consists of
A. it pursues business strategy, divisional strategies, and departmental strategies. B. business strategy, functional strategies, and operating strategies, whereas in a diversified company it consists of corporate strategy, business strategies (one for each business the diversified company is in), functional strategies, and operating strategies. C. business strategy and operating strategy. D. company strategy, divisional strategies, and functional strategies. E. corporate strategy, divisional strategies, and departmental strategies.
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Uniting the Companys Strategy-Making Effort

A firms strategy is a collection of initiatives

undertaken by managers at all levels in the organizational hierarchy Pieces of strategy should fit together like the pieces of a puzzle Key approaches used to unify all strategic initiatives into a cohesive, company-wide action plan
Effectively communicate companys vision, objectives, and major strategies to all personnel Diligently review lower-level strategies for consistency and support of higher-level strategiesrevise as needed
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What Is a Strategic Plan?

Its strategic vision and business mission

A Companys Strategic Plan Consists of

Its strategy
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Its strategic and financial objectives

Implementing and Executing Strategy

Phase 4
Operations-oriented activity aimed at

performing core business activities in a strategy-supportive manner

Tougher and more time-consuming

than crafting strategy

Key tasks include Improving the efficiency with which the strategy is being executed Showing measurable progress in achieving both operating excellence and targeted results
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What Does Implementing and Executing the Strategy Involve?

Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Instituting best practices and programs

for continuous improvement

Installing information, communication,

and operating systems

Motivating people to pursue the target objectives

Tying rewards to achievement of results

Creating a strategy-supportive corporate culture Exerting the leadership necessary to drive the

process forward and keep improving

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Organizational Characteristics of Good Strategy Execution

Requires a concerted effort to achieve

operating excellence
Involves a companys entire management

team
Hinges on skills and cooperation

of operating mangers who can

Push needed changes in their
organizational units

Consistently deliver good results

Success is best indicated by

Meeting or beating performance targets Progress in achieving the strategic vision
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Evaluating Performance and Making Corrective Adjustments

Phase 5
Crafting and implementing a strategy is not a

one-time exercise
Customer needs and competitive conditions change New opportunities appear; technology
advances; any number of other outside developments occur

One or more aspects of executing the

strategy may not be going well

New managers with different ideas take over Organizational learning occurs

All these trigger a need for corrective actions

and adjustments on an as-needed basis

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Monitoring, Evaluating, and Adjusting as Needed

Taking actions to adjust to the march of

events tends to result in one or more of the following

Altering long-term direction and/or redefining the mission/vision Raising, lowering, or changing performance objectives Modifying the strategy Improving strategy execution
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Leading the Strategic Management Process

Diverse leadership challenges include Exerting take-charge leadership Being a spark plug for change and action Ramrodding things through Achieving results Leading the strategic management

process can involve various styles and approaches

Being a hard-nosed authoritarian Being a perceptive listener Being a compromising decision maker Delegating authority to people closest to the action Being a coach Assuming a highly visible role in guiding the process Making brief ceremonial appearances
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Numerous Roles of Strategic Leaders

Culture Builder

Visionary

Taskmaster
Process Integrator

Mentor

Chief Entrepreneur & Strategist

Negotiator Capabilities Builder

Coach

Head Cheerleader Arbitrator Chief Administrator & Strategy Implementer

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Resource Acquirer & Allocator Crisis Solver Motivator Policy Enforcer

Spokesperson
Consensus Builder Policymaker

Things a Chief Strategy Implementer Must Do to Be Successful

1. Stay on top of whats happening 2. Make sure company has a
good strategic plan

3. Put constructive pressure on

company to achieve good results

4. Push corrective actions to improve overall

strategic performance

5. Lead development of stronger core

competencies and competitive capabilities

6. Display ethical integrity and lead social

responsibility initiatives
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Role #1: Stay on Top of Whats Happening

Develop a broad network of formal

and informal sources of information

Talk with many people at all levels Be an avid practitioner of MBWA Observe situation firsthand Monitor operating results regularly Get feedback from customers Watch competitive reactions of rivals
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Role #2: Make Sure Company Has a Good Strategic Plan

Two key responsibilities of CEO and top-

level executives
Effectively communicate companys vision, objectives, and major strategy components to down-the-line managers and key personnel Exercise due diligence in reviewing lower-level strategies for consistency and support of higherlevel strategies

Effective leadership minimizes

potential for conflict between different levels in the strategy hierarchy

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Stimulate Corporate Intrapreneurship

Encourage individuals and teams to develop

and champion proposals for

New technologies or technological
applications New products or product lines New business ventures New strategic initiatives

Requires senior executives to Judge which proposals merit support Provide organizational and budgetary support for worthwhile proposals Create an organizational climate where freethinking and new ideas are welcome
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Approaches to Promoting Innovation

Encourage individuals and groups to brainstorm

proposals for new business ventures or improving existing products Take special pains to nourish and support people eager to test new business ventures and explore adding new or improved products Ensure
Rewards for successful champions
are large and visible People are not punished when their ideas are not pursued and are encouraged to try again

Use various kinds of ad hoc organizational

forms to support ideas and experimentation

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Role #3: Put Constructive Pressure on Company to Achieve Good Results

Successful leaders spend time

Mobilizing organizational energy behind

Good strategy execution and Operating excellence

Nurturing a results-oriented work climate
Promoting enabling cultural drivers

Strong sense of involvement on part of company

personnel

Emphasis on individual initiative and creativity Respect for contributions of individuals and
groups

Pride in doing things right

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Role #4: Push Corrective Actions to Improve Strategy-Making and Strategy-Execution

Requires deciding When adjustments are needed What adjustments to make Involves Adjusting long-term direction, objectives, and strategy on an as-needed basis in response to unfolding events and changing circumstances Promoting fresh initiatives to bring internal activities and behavior into better alignment with strategy

Making changes to pick up the pace when results fall short of performance targets
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Steps Involved in Making Corrective Adjustments

Sensing needs Gathering information Developing options and

exploring their pros and cons

Putting forth action proposals

and partial solutions

Striving for a consensus
Formally adopting an agreed-on course of

action
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Role #5: Promote Stronger Core Competencies and Capabilities

Top management intervention is

required to establish better or new

Resource strengths and competencies Competitive capabilities

Senior managers must

lead the effort because

Competencies reside in combined efforts of different work groups and departments, thus requiring cross-functional collaboration Stronger competencies and capabilities can lead to a competitive edge over rivals
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Role #6: Display Ethics Leadership and Lead Social Responsibility Initiatives
Set an excellent example in
Our ethics code is . . .

Displaying ethical behaviors

Demonstrating character and personal integrity in actions and decisions Declare unequivocal support for high ethical

standards and expect all employees to conduct themselves in an ethical fashion

Encourage compliance and establish tough

consequences for unethical behavior

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Key Approaches to Enforcing Ethical Behavior

Have mandatory ethics training for employees Openly encourage employees to

report possible infractions via

Anonymous calls to a hotline or Posting to a special company Web site

Conduct an annual audit to assess

Each managers efforts to uphold ethical standards Actions taken by managers to remedy deficient conduct

Require all employees to sign a statement annually

certifying they have complied with the ethics code

Make sure ethical violations carry appropriate

punishment, including dismissal for egregious violations

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Test Your Knowledge

Assuming that a companys senior executives are really serious about enforcing high standards of ethical behavior, then they probably need to consider doing all but which one of the following?
A. Appointing a committee of high-profile employees to serve on a committee or task force that is charged with (a) being champions of high ethical standards, (b) finding ways to ingrain high ethical standards as a cultural norm, and (3) heading up the companys ethics enforcement process B. Having mandatory ethics training programs for employees C. Conducting an annual audit of each managers efforts to uphold ethical standards and requiring formal reports on the actions taken by managers to remedy deficient conduct D. Requiring all employees to sign a statement annually certifying that they have complied with the companys code of ethics and making sure that ethical violations carry appropriate punishment, including dismissal if the violation is sufficiently egregious E. Openly encouraging company personnel to report possible infractions via anonymous calls to a hotline or e-mails sent to a designated address
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For Discussion: Your Opinion

What would your reaction be if your employer required you to sign a statement annually certifying that you have complied with the companys code of ethics?

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Actions Demonstrating Commitment to a Strategy of Social Responsibility

Craft a strategy that positively improves

well-being of employees, environment, communities, and society Use social and environmental metrics to evaluate company performance Tie social and environmental performance to executive compensation Take special pains to protect environment Take an active role in community affairs Generously support charitable causes and projects benefiting society Support workforce diversity and commit to improving the overall well-being of employees
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Corporate Governance: Strategic Role of a Board of Directors

Exercise strong oversight to ensure five

tasks of strategic management are executed to benefit

Shareholders or Stakeholders

Make sure executive actions are not only

proper but also aligned with interests of stakeholders

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Obligations of a Board of Directors

Be inquiring critics and overseers

Evaluate caliber of senior executives

strategy-making and strategy-executing skills Institute a compensation plan for top executives rewarding them for results that serve interests of
Stakeholders and Shareholders Oversee a companys

financial accounting and reporting practices

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Key Responsibilities of Board Members

Be well informed about a companys performance Guide and judge CEO and other top executives Exhibit courage to curb inappropriate or unduly

risky management actions

Confirm that CEO is doing what

board expects
Provide insight and advice to management Be intensely involved in debating pros and cons

of key actions and decisions

Board members have a very important oversight role in the strategy-making, strategy-executing process!
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