Strategic Leadership

Definition of Strategic Leadership

One key strategic role of both general and functional managers is to use all their knowledge, energy, and enthusiasm to provide strategic leadership for their subordinates and develop a high performing organization. Several authors have identified key characteristics of strong strategic leaders that lead to high performance:

  1. Vision, Eloquence, and Consistency
  2. Articulation of a business model
  3. Commitment
  4. Being well informed
  5. Willingness to delegate and empower
  6. Astute use of power
  7. Emotional Intelligence

Vision, Eloquence, and Consistency:

One key task of leadership is to give an organization a sense of direction. Strong leaders have a clear, compelling vision of where the organization should go, eloquently communicate this vision to others within the organization in terms that energize people, and consistently articulate their vision until it becomes part of the organization’s culture. 

Historic example of strong business leaders includes Microsoft’s Bill Gates. For years, Bill Gates vision of a world in which there would be a windows based personal computer on every desk was a driving force at Microsoft. More recently, that vision has involved into one of a world in which windows based software can be found on any computing device, from PCs and servers to video game consoles, cell phones, and handheld computers.

Articulation of a business model:

Another key characteristic of good strategic leaders is their ability to identify and articulate the business model the company will use to attain its vision. A business model is the manager’s conception of how the various strategies that the company pursues fit together into a congruent whole.

For example, at Dell company, Michael Dell identified and articulated the basic business model of the company; the direct sales business model. The various strategies that Dell has pursued over the years have refined this basic model, creating one that is very robust in terms of its efficiency and effectiveness. Although individual strategies can take root in many different places in an organization, and although their identification is not the exclusive preserve of top management, only strategic leaders have the perspective required to make sure that the various strategies fit together into a congruent whole and form a valid and compelling business model. If strategic leaders lack a clear conception of the company’s business model, it is likely that the strategies the firm pursues will not fit together, and the result will be lack of focus and poor performance. 

Commitment:

Strong leaders demonstrate their commitment to their visions and business models by actions and words, and they often lead by example. Consider Nucor’s former CEO, Ken Iverson. Nucor is a very efficient steelmaker with perhaps the lowest cost structure in the steel industry. It has achieved 30 years of profitable performance in an industry where most other companies have lost money due to a relentless focus on cost minimization. In his tenure as CEO, Iverson set the example; he answered his own phone, employed only one secretary, drove an old car, flew coach class, and was proud of the fact that his base salary was the lowest of the fortune 500 CEOs (Iverson made most of his money from performance based pay bonuses) This commitment was a powerful signal to employees that Iverson was serious about doing everything possible to minimize costs. It earned him the respect of Nucor employees and made them more willing to work hard. Although Iverson has retired, his legacy lives on in Nucor’s cost conscious organizational culture or, and like all other great leaders, his impact will last beyond his tenure.

Being well informed:

Effective strategic leaders develop a network of formal and informal sources who keep them well informed about what is going on within the company. At Starbucks, the first thing that former CEO Jim Donald did every morning was call 5 to 10 stored, talk to the managers and other employees, and get a sense for how their stores were performing. Donald also stopped at a local Starbucks every morning on the way to work to buy his morning coffee. This allowed him to get to know individual employees very well. Donald found these informal contacts to be a useful source of information about how the company was performing.

Using informal and unconventional ways to gather information is wise because formal channels can be captured by special interests within the organization or by gatekeeper’s managers who may misrepresent the true state of affairs to the leader. People like Donald and Kelleher who constantly interact with employees at all levels are better able to build informal information networks than leaders who closet themselves and never interact with lower level employees.

Willingness to delegate and empower:

High performance leaders are skilled at delegation. They recognize that unless they learn how to delegate effectively, they can quickly become overloaded with responsibilities. They also recognize that empowering subordinates to make decisions is a good motivational tool and often results in decisions being made by those who must implement them. At the same time, astute leaders recognize that they need to maintain control over certain key decisions. Thus, although they will delegate many important decisions to lower level employees, they will not delegate those that they judge to be of critical importance to the future success of the organization, such as articulating the company’s vision and business model.

Astute use of power:

Edward Wrap noted that effective leaders tend to be very astute in their use of power. He argued that strategic leaders must often play the power game with skill and attempt to build consensus for their ideas rather than use their authority to force ideas through; they must act as members of a coalition or its democratic leaders rather than as dictators. In Pfeffer’s view, power comes from control over resources that are important to the organization: budget, capital, positions, information, and knowledge. Politically astute managers use these resources to acquire another critical resource; critically placed allies who can help them attain their strategies objectives.

Emotional Intelligence:

Emotional intelligence, a term coined by Daniel Goleman, describes a bundle of psychological attributes that many strong, effective leaders exhibit:

1.Self awareness – the ability to understand one’s own moods, emotions, and drives as well as their effect on others.

2. Self regulation – the ability to control or redirect disruptive impulses or moods; that is, to think before acting.

3. Motivation – a passion for work that goes beyond money or status and a propensity to pursue goals with energy and persistence.

4. Empathy – the ability to understand the feelings and viewpoints of subordinates and to take those into account when making decisions.

5. Social skills – friends with a purpose.

According to Goleman, leaders who exhibit a high degree of emotional intelligence tend to be more effective than those who lack these attributes. Their self-awareness and self-regulation help to elicit the trust and confidence of subordinates. In Goleman’s view, people respect leaders who, because they are self-aware, recognize their own limitations and, because they are self regulating, consider decisions carefully.

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