978-1285866352 Chapter 11 Solution Manual Part 1

Unlock access to all the studying documents.

View Full Document

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 215

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

CHAPTER 11

Strategic Leadership and Change Management

Chapter Outline

I. Strategic Leadership

A. Globalization and Environmental Sustainability

B. Strategic Leadership and the Strategic Management Process

II. The Strategic Management Process

A. Crafting a Vision and Mission Statement

B. Setting Organizational Objectives

C. Strategy Formulation

D. Strategy Execution

E. Strategy Evaluation and Control

III. Leading Change

A. The Need for Change

B. The Role of Strategic Leaders in Managing Change

C. The Change Management Process

D. Why People Resist Change

E. Minimizing Resistance to Change

216 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

New To This Edition

 The chapter has been updated throughout. There are 98 references and 12 are from the 5e; so 86 or 90% of

the references are new to this edition.

 The opening case has been updated.

 All the Concept Application Exercises have been modified.

 The subsection on Strategic Leadership Failures has been dropped.

 The focus of the chapter is on Strategic Leadership: as such we made it is the first major heading (level

one) and converted Globalization and Environmental Sustainability into a level two sub-heading under

Strategic Leadership.

 The first part of the chapter on Strategic Leadership and the Strategic Management Process has undergone

significant restructuring and re-writing.

o It has been shortened

o A new subheading titled “Leading the Strategic Management Process” has been added under

strategic leadership.

o Each of the five tasks of the strategic management process are discussed as level 2 subheadings

with significant revisions and updates.

o Exhibit 11-1 (Strategic Management Framework) has been replaced with a new exhibit). It is

now titled “The Strategic Management Process.”

 We have eliminated the subsection (level 3 heading) titled “Recommendations for Minimizing Resistance

to Change.”

 The subsection titled Strategic Management in Action has been dropped.

 Exhibit 11-2 (Change Implementation Process) has been dropped.

 The end-of-chapter case has been updated.

Lecture Outline

PowerPoint: You may use the PowerPoint supplement to enhance your lectures. Even if your classroom is not

equipped to use PowerPoint, you can review the material on your personal computer to get teaching ideas and to

copy the slides. Copies of the slides can be made into overheads. (Slide 11-1 is Chapter title and Slide 11-2 is LOs)

I. STRATEGIC LEADERSHIP (Slide 11-3)

Although there are varying definitions of the concept of strategic leadership, they all seem to revolve around the

same themes: vision, change, people, and performance.

Strategic leadership is the responsibility of the CEO and top management.

They take the lead in crafting the organization’s vision, mission, core values, objectives and strategies.

Strategic leaders are responsible for the organization’s near-term performance, as well as for creating conditions that

will ensure the organization’s long-term competitiveness.

The effective strategic leader must be capable of:

 Anticipating and forecasting events in the external environment that have the potential to impact business

performance—they observe from the outside in.

 Finding and sustaining competitive advantage by building core competencies and selecting the right

entrepreneurial opportunities to pursue.

 Evaluating strategy implementation and results systematically, and making strategic adjustments

 Building a highly effective, efficient, and motivated team of employees.

 Selecting, developing, and mentoring a talented team of top leaders who can sense, capture, and shape

market opportunities for firm growth.

 Deciding on appropriate goals and priorities

 Communicating effectively.

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 217

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

Strategic leadership is defined as a leader’s ability to anticipate, envision, maintain flexibility, think

strategically, and work with others to initiate changes that will create a viable future for an organization.

Self-Assessment 11-1

Strategic Leadership

If you want students to complete the Self-Assessment exercises throughout the

book, you may want to tell students and spend a little time talking about them.

A. Globalization and Environmental Sustainability (Slide 11-4)

Globalization

How successful a company is at exploiting emerging opportunities and dealing with associated threats

depends crucially on leadership’s ability to cultivate a global mind-set among managers and their followers.

International experience is now considered key for anyone aspiring to top leadership in their organization.

Environmental Sustainability

There seems to be emerging a collective understanding that the natural environment (which includes physical

resources, wildlife, and climate) cannot sustain itself if human behavior towards the air, water, land, natural

resources, flora, and fauna does not change.

Sustainability is about conservation of natural resources and minimization of waste in operations through

actions such as recycling.

Being pro-environment is also financially good for business. It’s called “green marketing” and more

companies are doing well selling products that are environmentally friendly like cars (Tesla Motors and

Toyota), packaging for consumer goods (Proctor and Gamble, General Mills), and shoes (Nike).

Learning Outcome (LO) 11-1. Discuss the role of strategic leadership in the strategic management

process.

Strategic leaders establish organizational direction through vision and strategy. They lead the strategic

management process by crafting a vision everyone can believe in and work toward. Strategic leaders

encourage a team effort through the entire strategic management process, knowing when to be actively

involved and when to simply facilitate. They understand that broad participation is key to success but that

ultimate responsibility rest on them.

B. Strategic Leadership and the Strategic Management Process (Slide 11-5 and 11-6)

The link between leadership and strategy was firmly established in the early 1960s with the heightened

application of strategy to business planning.

However, by the mid-1960s, there were attempts to separate the two as some dismissed the role of leadership in

strategic planning in favor of objective analyses of the external environment that eliminated any need for

leadership skills, judgment, values, or intuition.

Today, the reverse is taking place. There is a consensus on the view that leadership and the strategic

management process are inter-connected.

You need an experienced strategist to lead the process and when this has happened, the outcome has been

positive for the organization.

So, what is the strategic management process?

Some of the key questions requiring top management input and leadership during the strategic management

process include:

 What’s our vision?

 What’s our mission?

 What are our objectives – short and long term? Is there company-wide clarity about what our

objectives?

 Who is our customer(s) and what are their needs?

 Do we have a viable and competitive business model?

218 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

 What are the changes/trends taking place in our industry and broader environment and why?

 Do we understand where these changes will take the market (and us)?

 Who are our competitors (direct and indirect) and how do they rank against us?

 Do we understand our competitors’ strategies? Can we find ways to outcompete them?

 In terms of our positioning, how are we different? What’s our culture and is it strong or weak?

 What is our core strategy? Are we innovative and bold with our strategy? Are we taking appropriate

risks? Do we understand what needs to be done and who will be accountable for specific parts of the

plan?

 As we get to the execution phase of our strategy, do we have the right people to execute the strategy?

Do we have the right kinds and level of resources to execute our strategy? What is our compensation

structure? What are the performance targets for tracking success?

 In terms of our positioning, how are we different? What’s our culture and is it strong or weak?

 How does our overall strategic road map look? Do all the parts fit together? Will it satisfy our

stakeholders? Are we on the right track to realizing our vision?

 What contingency plans do we have if the bets we make prove unsuccessful?

Taking the leading role in addressing these and other questions is what strategic leadership is about. Some

describe it as strategic thinking.

These questions provide content for the strategic management framework which consists of five key decision

categories (see Exhibit 11.1):

 Crafting a strategic vision and mission statement, setting objectives, strategy formulation, strategy

execution and strategy evaluation and control.

II. THE STRATEGIC MANAGEMENT PROCESS (Slide 11-7)

The strategic management process is the set of decisions and actions used to formulate and implement specific

strategies that are aligned with the organization’s capabilities and its environment, to achieve organizational goals.

Formulating and executing strategy is the central theme of strategic leadership in any organization.

LO 11-2. Identify the five major decision categories in the strategic management process.

The five key decision categories are: (1) craft a strategic vision and mission statement, (2) set strategic

objectives, (3) formulate strategy or strategies, (4) execute strategy, and (5) evaluate and control

strategy.

YOU MAKE THE ETHICAL CALL 11.1

Strategic Leadership and Management

Answers will vary based on opinion.

A. Crafting a Vision and Mission Statement (Slide 11-8)

Strategic leadership starts with communicating what direction the organization wants to go.

It is generally believed that a leader’s inspiring vision motivates followers to focus on reaching a desirable

future state that is better than the present state.

A mission statement on the other hand specifies an organization’s present purpose—its market niche

(customers), products/services offerings, operating principles, and business model.

A vision statement represents a future aspiration, whereas the mission statement represents the enduring

purpose of the organization in the present.

The job of strategic leadership is to ensure that the best vision and mission statements are put forth and that

they are widely shared and embraced by members of the organization

WORK APPLICATION 11-1

Write an inspiring vision statement for an organization you work or worked for.

If the company has one, you may use it or revise it. Explain why you think it has

an inspirational appeal.

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 219

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

1. Crafting a Strategic Vision (Slide 11-9)

A strategic vision is defined as an ambitious view of the future that everyone in the organization can

believe in and that is not readily attainable, yet offers a future that is better in important ways than what

now exists.

A mission statement is an enduring statement of purpose that distinguishes one organization from other

similar enterprises.

It is the organization’s core purpose and reason for existence. It is in a company’s mission statement that

its business model (or at least part of it) is revealed.

3. Crafting a Values Statement (Slide 11-11)

A values statement is the set of beliefs, traits and behavioral norms that management has determined

should guide the pursuit of its vision and mission.

WORK APPLICATION 11-2

Write an inspiring mission statement for an organization you work or worked for.

If the company has one, you may use it or revise it. Explain the core values and

core purpose your mission statement.

LO 11-3. Explain the relationship between objectives and strategies.

Corporate objectives are the desired outcomes that an organization seeks to achieve for its various

stakeholders. Strategies are the means by which objectives will be realized. It is for this reason that the

vision, mission, and objectives of an organization are established before the strategy formulation step in the

strategic management process.

B. Setting Organizational Objectives (Slide 11-12)

Objectives are the desired immediate and long-term outcomes that an organization seeks to achieve for its

various stakeholders—employees, customers, shareholders, and others.

Companies develop both financial and strategic objectives.

Financial objectives may include measures such as return on investment, sales, profits, earnings per share, or

return on equity.

Strategic goals may include acquiring new customers, opening new market, or creating new products.

Commitment to organizational outcomes is achieved when there is broad participation in goal setting, and

rewards are linked to goal achievement.

According to goal-setting theory, people with specific, measurable, achievable, relevant and time-specific goals

perform better than those with vague goals (such as “do your best”) or easily attained goals.

LO 11-4. Describe the relevance of analyzing an organization’s internal and external environment as

part of strategy formulation.

The basic premise of an environmental (situation) analysis is that organizations need to formulate strategies

to take advantage of external opportunities and to avoid or reduce the negative impact of external threats.

Monitoring the industry and competitive environment presents emerging opportunities or threats that can

220 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

influence the choice of strategies to pursue. Analyzing the internal environment focuses on assessing an

organization’s financial position, employee capabilities and core competencies, culture, and the

organization’s structure. This analysis reveals the organization’s strengths and weaknesses. The combined

analysis of the external and internal environment is commonly referred to as SWOT or situation analysis.

The best strategies are those that rely on the organization’s strengths to exploit opportunities and avert

threats. A strategy that relies on the weaknesses of the organization for its execution is doomed to fail.

C. Strategy Formulation (Slide 11-13)

Strategy formulation is about selecting appropriate strategies for achieving an organization’s objectives.

Therefore, strategies are the means to the ends (objectives).

A strategy is an organization’s chosen plan of action for outperforming its competitors and achieving superior

outcomes.

Before formulating a core strategy, an organization must first complete an analysis of its environment, also

called a situation analysis.

1. Environmental or Situation Analysis (Slide 11-14)

A situation analysis focuses on an organization’s internal environment (for its strengths and weaknesses)

and its external environment (for opportunities and threats).

The external environment focuses on the industry and general environments.

Trends or changes taking place in an organization’s industry and general environment represent

opportunities or threats.

An analysis of the internal environment reveals the organization’s strengths and weaknesses.

They determine the attractiveness or unattractiveness of the industry environments.

Awareness of the trends taking place in these environmental sectors provides critical input for selecting an

appropriate strategy or strategies.

A failure to focus inward leaves one rudderless, a failure to focus on others renders one clueless, and a

failure to focus outward may cause one to be blindsided.

A good strategist knows where the organization is headed (vision), knows what the competitors are doing

or plan to do (competitor intelligence) and is aware and prepared for newly emerging opportunities and

threats before competitors.

The combined analysis of the external and internal environment is commonly referred to as SWOT

(Strengths, Weaknesses, Opportunities, and Threats) analysis.

The effectiveness of an organization’s strategies is influenced by the degree of fit or alignment between the

organization’s internal capabilities/resources (strengths) and its opportunities.

The outcome of an environmental analysis can also lead to a fine-turning of the strategic vision, mission

and long-term objectives.

2. Selecting from Alternative Strategies (Slide 11-15 and Discussion Question on Slide 11-16)

An organization’s core strategy is the source of its competitive advantage and is how the organization

differentiates itself from its competitors.

There are three generic core strategies that strategic leaders can select from:

 Broad or Niche Differentiation Strategy: Develop innovative products or exceptional services

ahead of your competitors that are difficult to imitate or copy (think Apple, Google, Facebook,

3M, Nike, BMW, etc).

 Broad or Niche Low-Cost Strategy: Operational efficiency: Gain cost advantage through relentless

attention to productivity improvement and cost management (think Wal-Mart, SW Airlines,

Costco, Dollar General, etc).

 Best-Cost or Value-Based Strategy: This strategy aims to satisfy the value-conscious customer

who desires upscale products and services, though not as high as those of the differentiator and is

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 221

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

willing a pay a little more than the low-cost providers are charging. It is also called a hybrid

strategy

Delivering value to the customer is the central premise of any strategy.

Customer value is the perceived benefits received to the perceived price paid by the customer.

WORK APPLICATION 11-3

Think of your college or university. Prepare a SWOT analysis that identifies one

opportunity and one threat facing your institution in the next five years. Also

identify a strength and a weakness that you think your institution has.

CONCEPT APPLICATION 11-1

Strategic Management Process

Answers to the Concept Application questions are at the end of lecture outline.

D. Strategy Execution (Slide 11-17)

Strategy execution is the primary domain of operational leaders – those who are in charge of functional

departments such as marketing, production, finance, human resources, and R&D. They provide the leadership

necessary to convert plans into actions.

Strategy implementation takes place through the basic organizational architecture (structure, culture, policies,

procedures, systems, incentives, and governance) that makes things happen.

There are a number of factors that need to be present for strategy execution to progress successfully, they

include:

 Having the right leadership and skilled employees to execute the strategy

 Creating a strategy-supportive organizational structure

 Provide adequate resources and capabilities

 Institute the right policies and procedures

 Create appropriate reward and incentive package

 Adopt best practices, and instill a culture that supports good strategy execution

1. Strong Leadership and Competent Managers (Slide 11-18)

A strong leadership team and an abundance of skilled and well trained operational leaders/managers make a

difference.

Any organization aiming for effective strategy execution should look for these desired leader/manager

qualities, listed in order of importance

 Be a good coach

 Empower your team and don’t micromanage

 Express interest in your team members’ success and well-being

 Be productive and results-oriented

 Be a good communicator and listen to your team

 Help your employees with career development

 Have a clear vision and strategy for the team

 Have technical skills so you can advise the team

2. Appropriate Policies and Procedure (Slide 11-19)

Policies and procedures insure consistency in how employees do their jobs because they standardize the

way specific strategy-execution tasks are performed.

This insures the quality and reliability of the strategy execution process.

3. Adequate Organizational Capabilities (Slide 11-20)

Resources are the foundation of a company’s capabilities and core competencies.

222 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

Building a company’s capabilities into core competencies and further into distinctive core competencies is

a key responsibility of strategic leadership.

A distinctive core competence is a capability that allows an organization to perform extremely well in

comparison to competitors and is the basis for a competitive advantage.

The most distinctive and hard-to-imitate resource available to firms is knowledge, especially people-based

knowledge. Such competencies are referred to as human capital.

Another resource that can affect strategy execution is time. Managers must avoid becoming trapped in the

vicious cycle of rigidity and inaction, sometimes called “paralysis by analysis.”

4. Having the Right Corporate Culture (Slide 11-21)

An organization’s culture is the aggregate of beliefs, norms, attitudes, values, assumptions, and ways of

doing things that is shared by members of an organization and taught to new members.

The shared actions and interactions of employees across functional boundaries help create an organizational

identity that differentiates the organization from rivals.

Organizational identity is the members’ consensual understanding of “who we are as an organization”

that emerges from that which is central, distinctive, and enduring to the organization as a whole.

5. Appropriate Rewards and Incentives (Slide 11-22)

Rewards and incentives are powerful motivating tools that can greatly enhance strategy execution.

The right package of financial and nonfinancial incentives will drive up employee commitment, hard work,

speed, quality, and satisfaction, leading to greater output and profitability.

Underlining the discussion of successful strategy execution is the concept of “strategic alignment” or “fit”

with various components of a firm’s strategic framework.

WORK APPLICATION 11-4

Identify a core competence of an organization you work or worked for. Explain

how it differentiates the organization from its competitors.

CONCEPT APPLICATION 11-2

Strategic Leadership

Answers to the Concept Application questions are at the end of lecture outline.

E. Strategy Evaluation and Control (Slide 11-23 and Discussion Question on Slide 11-24)

LO 11-5. Explain the importance of strategy evaluation in the strategic management process.

Strategy evaluation involves three fundamental activities: (1) reviewing internal and external factors that are

the bases for the current strategies; (2) measuring performance against stated objectives; and (3) taking

corrective action. Corrective action utilizes the feedback that results from the strategy evaluation process.

Strategy evaluation and control compares actual results (outcomes) with expected results (stated objectives).

Effective strategy evaluation is a three-step process:

(1) Reviewing internal and external factors that are the bases for the current strategy,

(2) Measuring actual performance against stated objectives, and

(3) Taking corrective action

Feedback from strategy evaluation should be shared throughout the organization and necessary changes acted

upon.

III. LEADING ORGANIZATIONAL CHANGE (Slide 11-25)

Organizational or institutional change is an alteration of not only structures, systems, and processes, but also a

cognitive leadership reorientation.

Leaders must be ready and able to make necessary changes when conditions warrant such actions.

Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e 223

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

Successful implementation of strategic change can re-energize a business while failure can lead to loss of confidence

among employees.

Organizational change can be transformational or incremental, and sometimes an incremental change can amplify

into a much larger and radical change than was first anticipated.

A transformational change can be as radical as changing an organization’s entire business model or as simple as

changing a company policy.

Our focus here is on organizational or institutional change – change that affects the entire organization.

Ultimately, organizational change is about changes in human behavior. It is about people doing things differently.

For example:

 Re-engineering business practices

 Learning new processes or systems

 Adopting new technologies

 Acquiring new skills and capabilities

YOU MAKE THE ETHICAL CALL 11.2

Change Through Upgrading

Answers will vary based on opinion.

A. The Need for Organizational Change (Slide 11-26)

The need for change may be triggered by weaknesses in an organization’s internal environment or because of

threats in its external environment.

Externally, threats in the form of:

 direct competition from key rivals,

 new technologies and innovations that render a company’s existing technologies or processes obsolete,

 weakness in the economy and consequent effects on an organization’s performance,

 new regulations with strategic implications for an organization or

 major changes in consumer attitudes and buying behavior that negatively affect demand for a company’s

products/services.

The need for change may also be triggered by emerging opportunities in the external environment that a

company is not prepared or capable of exploiting.

Internally, the need for change may be triggered by:

 a leadership change;

 A company’s internal assessment may also reveal weaknesses in its capabilities or competencies that

need to be addressed.

It is the leader’s responsibility to communicate the need for change, especially when the organization is in crisis

state.

People need to know that change is needed—now—and why.

The leader has to create a sense of urgency or what Edgar Schein – a leading scholar on change management –

referred to as “survival anxiety.

Survival anxiety is the feeling that unless an organization makes a change, it is going to be out of business or

fail to achieve some important goals.

According to Professor Schein, the prospect of learning something new creates “learning anxiety.”

Communicating the urgency for change is critical, but leaders have to also acknowledge the anxiety that

learning new skills and technologies can create.

Left unmanaged, learning anxiety can create strong resistance even when the need to survive is high.

B. The Role of Top Leaders in Managing Change (Slide 11-27 and Discussion Question on Slide 11-28)

To insure successful change execution, effective leaders stay engaged and do things such as:

224 Instructor’s Manual for Leadership: Theory, Application, Skill Development, 6e

use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

for classroom use.

 Continuing to articulate a compelling reason for the change.

 Eliminate policies, procedures, and behaviors that undermine change efforts.

 Maintaining adequate human, financial and material resources.

 Forming a coalition of supporters and experts to counter any opposition.

 Celebrating milestones along the way.

 Staying the course in spite of perceived difficulties.

 Incentivizing workers with recognition and rewards.

 Keeping the process transparent.

Effective leaders are role models for change

C. The Change Management Process (Slide 11-29)

One of the earliest and most widely used change management process theories is Kurt Lewin’s classic theory of

planned change, also known as the force-field model of change.

The three steps are:

(1) “Unfreeze” an existing state.

(2) Move to a new and desirable state (Changing Phase).

(3) “Refreeze” that new state

LO 11-6. Describe the change management process using Kurt Lewin’s force-field model of change.

The force-field model proposes that the change process can be divided into three steps: unfreezing, changing, and

refreezing. During the unfreezing phase, the leader establishes the need for change by communicating the

problems associated with the current situation and presenting a vision of a better future. Awareness of the need

for change and acceptance of a new direction sets the stage for the changing phase. It is during the second step

that the proposed change is implemented. It is action oriented. The leader must empower followers to act on the

change by giving them resources, information, and discretion to make decisions. The leader removes obstacles to

change, which may include policies, procedures, and structures that are counterproductive to the change effort.

The third phase, refreezing, involves institutionalizing the change so that it is not reversed soon after

implementation. Because of refreezing, old habits, values, customs, and attitudes are permanently replaced.

Step 1. Unfreeze

Identify the problems or threats facing the organization that make for an urgent need to change.

People have to be convinced of the need for change.

Invest the time at this early stage to uncover not just the threat, but its root cause(s).

Step 2. Change

This step is about execution of the change.

The key is developing new attitudes, values and behaviors that are aligned with the proposed change.

People look to the leader for a plan of action.

Some specific actions include:

 Form a powerful coalition of supporters,

 Consistently communicate the rationale for the change and empower followers to act on it.

 Celebrate short-term wins and consolidate gains for greater change.

Step 3. Refreeze

A variety of strategies may be adopted to achieve this, including

 New rules, attitudes, traditions, regulations, and reward schemes to reinforce the new changes

and maximize the desired behaviors of all organizational members.

Complete transformation can only occur when the desired changes in behavior become habitual.