Miles A. ZacharyMGT 4380

Strategic Management

Leading StrategicallyChapter 2

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” – Jack Welch, former GE CEO

A vision is one key aspect of an organization a leader may use to inspire employees

It describes what an organization hopes to become in the futureClearBriefEmpowering

Organizational Vision

In a survey of 1,500 top firm executives, 98% reported that a leaders must first and foremost have “a strong sense of vision.”90% reported that they have questioned their

own ability to be visionary leadersMany firms do not articulate a visionOf the firms that do have vision statements,

many fail to empower employees appropriately

Thus, a strong vision embraced by employees is a powerful competitive advantage

Organizational Vision

An organization’s mission statement attempts to capture the organization’s identity; it answers the question “Who are we?”

While vision statements focus on the future, mission statements should be written around the past and present

Strong mission statements suggest why organizational stakeholders (e.g. employees, suppliers, customers, community) why they should support the organization and ensure it’s success

Mission Statements

While mission and vision statements are different, they should pursue similar goals

Organizations are often troubled by divergent mission statements and vision statementsExample: Universities established with mission

statements focusing solely on educating citizens v. pursuing lofty research goals inline with the university’s vision

Organizations may accomplish this by focusing on developing and pursuing narrower objectives—goals

Mission Statements

Goals are smaller-scoped objectives that provide clear and tangible to employees in their day-to-day work

The most effective goals are:SpecificMeasurableAggressiveRealisticTime-bound

SMART Goals

Specific goals are explicit and direct people’s energy; often times they require articulated steps to achieve them

Measurable goals are quantifiable; useful because success can be clearly determined

Aggressive goals are challenging; require people test and extend their limits

Realistic goals are achievable; while goals should be lofty, they should be reasonable

Time-bound goals are finite; there is a delineated time horizon

SMART Goals

The period of time after a goal is achieved is important, but often overlooked

An organization should determine whether to accept it’s new position or reformulate and pursue a new goalExample: After achieving their goal of landing

on the moon, NASA failed to articulate their next goal

And now what…?

Organizational performance is a broad term that encompasses how well an organization is pursuing their mission, vision, and goals

A vital aspect of strategic managementThe ultimate dependent variable in strategic

management researchOrganizational performance is subjective and

depends upon how it is defined

Organizational Performance

Two important considerations:1. Performance measures—a metric with

which performance can be gauged (e.g. ROA, Tobin’s q, stock price, earnings per share)

2. Performance referents—a standard that can be held against a measure to determine an organization’s relative performance (e.g. industry standards, competitor performance, social norms)

Different measures and referents communicate different information; suggests the importance of multiple measures of performance

Organizational Performance

Many measures and referents exist, so it’s important to identify rich yet manageable objectives

The balanced scorecard approach was developed by Harvard professors Robert Kaplan and David Norton to help managers diversify performance analysis

Recommends that managers focus on a few key measures reflecting four (4) dimensions

1. Financial2. Customer3. Internal business process4. Learning and growth

Balanced Scorecard

The triple bottom line approach to reflects a more holistic view of performance than the balanced scorecard approach

Focuses on three (3) bases:1. People (society)2. Planet (environment)3. Profit (financial)

Developed in the 1980’s, but gained popularity in the late 1990’s

Many firms are finding social cache by emphasizing social and environmental values

Triple Bottom Line

Many CEOs are thrust into the public spotlightFirm Advantages

Enhance corporate imageIncrease stock priceImprove stakeholder morale

Firm DisadvantagesGaps in actual and expected performance may be

magnifiedUnethical or illegal behavior attracts negative

publicity

CEO Celebrity

Individual CEOs are presented with both benefits and costsIndividual Benefits

High compensation/benefitsPrestige-based powerElite network opportunities

Individual CostsFace bad reputation with negative performanceIncreased media scrutinyFriends and family forced into the spotlight

CEO Celebrity

While entrepreneurship is traditionally thought of as a person starting a new venture, corporate entrepreneurship describes entrepreneurial activity in an existing organization

Organizations failing to continually innovate fall into the trap of creative destruction (Schumpeter, 1934)

Corporate entrepreneurs innovate new products and services and find/develop resources to support it

Successful corporate innovators are valuable organizational assets and can benefit from this value

However, some risks still exist…

Corporate Entrepreneurship

Entrepreneurial orientation (EO) refers to the processes, practices, and decision-making styles of organizations that act entrepreneurially

Firm-level conceptEssential part of crafting an entrepreneurial strategyA firm’s EO is determined by aggregating 5

dimensions:AutonomyCompetitive Aggressiveness Innovativeness ProactivenessRisk-taking

Entrepreneurial Orientation

AutonomyGenerally refers to the freedom that individuals and

groups/teams have to introduce and develop new ideasReflects a lack of hindrances associated with

organizational bureaucraciesStructure is key

Competitive AggressivenessTendency for a firm to intensely engage competitors

rather than avoid them Includes strategic ploys to gain favorable industry

positionsCompetitive action is powerful and executives must

consider the short and long-run consequences

Entrepreneurial Orientation

InnovativenessThe tendency to pursue creativity and

experimentationInnovativeness is aimed at creating new

products, services, processes, and/or skills to increase a firms advantage(s)

Innovations may build on an existing advantage or introduce a radically different advantage

Firms should assess how new innovations impact existing advantages (cannibalization)

Firms with strong innovative abilities tend to enjoy better firm performance than others

Entrepreneurial Orientation

ProactivenessThe tendency to anticipate and act on future needs

rather than waiting to reactAdopts an opportunity-seeking perspectiveTypically first or early to enter a marketCan often capitalize on first-mover advantages, but is

also subject to first-mover disadvantagesRisk-taking

Tendency to engage in risky or bold actions as opposed to cautious

Different people perceive risk and uncertainty differently

Some industries reward/punish risk-taking differently

Entrepreneurial Orientation

Steps can be taken to increase a firm’s EOExecutives should design an organization’s

structure to promote and enhance the five dimensions of EOLeverage power/influenceEcological design

Additionally, executives should properly monitor the EO level of a firmGauge employee satisfactionExamine key entrepreneurial performance

measuresSlack capital/resourcesR&D expenditures

Building an Entrepreneurial Orientation

Executives (namely the CEO) are responsible for establishing a firm’s mission, vision, and goals

They should also work to encourage the necessary culture to accomplish their objectives

Performance metrics and referents are important when determining a firm’s relative and absolute position, but must be chosen carefully

Executives should determine a firm’s appropriate level of EO and work to encourage responsible levels of EO

Conclusions