Strategic Leadership - Essay Example

Strategic Leadership Introduction In the organisation, because of its modern day dynamics and inter-linked internal divisional structure, the organisation requires leadership that can maintain knowledge of current business operations and finance. At the same time, the organisation requires a forward-thinking, authoritarian practitioner who can develop successful future-based policies that guide the organisation toward success, expansion and profitability. This is the heart of strategic leadership: An individual or group that surveys the current business environment, compares its structure and performance to external forces, and develops a mission or vision that guides the organisation toward future objectives. This is the element of strategic leadership: a forward-thinking planning unit that accommodates current flexibility in design and operations to fulfil a future goal as it pertains to organisational success. This paper will highlight what strategic leadership means in today’s organisations as well as a discussion on the day-to-day relevance of strategic management as compared to organisational realities. The nature of strategic leadership Organisational leaders in a management role must consider systems integrity, maintain control over current operational function, and improve cultural and executive-level confidence in financial data when making decisions (Kittredge, 2009). Understanding how to move the organisation forward means understanding what currently drives issues of production, staffing, human resources, marketing, and competitive position among competitors with similar product and service offerings in the external marketplace. Generally, this function is accomplished by performing external audits, such as Porter’s Five Forces Analysis or SWOT Analysis, to gain understanding of consumer preferences as well as competitive activities designed to remove market share from the organisation. In order to develop an effective future-based strategy, the current market position of the business and its internal operations and structure must be understood. Strategic leadership is then defined as first understanding product and customer profitability opportunities, how to develop effective marketing strategies, establish effective and compliance-based accounting strategies, and also develop a total quality management system to guide current production or technologies designed to support the business. It is a form of management accounting that designs and evaluates performance against strategic analysis tools (Fung, 2006). Once these fundamentals of current business strategy are understood, a strategic leader then develops an appropriate mission or vision about how to achieve organisational goals over the long-term. Human capital is one of the most important elements of organisational success, thus a strategic leader understands the dynamics employee psychology and sociology in order to establish a culture of human loyalty toward achieving what has been spelled out in the mission or vision statement. A strategic leader, in order to achieve long-term goals, must understand what drives motivation in employee and management groups and then appeal to these needs in a variety of ways. Peacock (2008, p.44) identifies “just relying on yearly appraisals forces them to work in a pre-defined set of tasks without taking into account what they are capable of”. A strategic leader goes beyond simple performance analyses and works consistently to develop employees to be active contributors to meeting long-term goals as identified through new mission values and practices. Therefore, strategic leadership should be defined as not only achievement of future objectives toward organisational profitability, it should be seen as a transformational management style. A leader with these qualities will “open new thinking for fresh possibilities, re-imagine purpose and vision, ignite growth for employees, and ensure people have purpose and decision power” (Adams & Adams, 2009, p.17). Once the strategic leader has championed a long-term purpose, they must model behaviours toward the strategic goal and align the organisation so that it is structurally sound for achieving transformation and long-term goals as they have been identified in mission and vision. “Culture is considered one of the most powerful factors” affecting an organisation, based on its “socio-technical activity” related to human resources (Tsui & Windsor, 2001, p.145). In order to achieve long-term goals successfully, higher emphasis on employee-based needs fulfilment and change management philosophy is necessary to gain commitment. Other fundamental behaviours associated with strategic management include maintaining a knowledge of cash flow, cost analysis, service development for customers, and other elements of management accounting (Cable, Healy & Mathew, 2009). Many organisations, especially multi-national businesses, operate in an environment with regulations and compliance demands, thus in order to achieve long-term goals, such compliance strategies are necessary to be an effective strategic leader. This may mean adopting international accounting principles and even maintain a stronger focus on sustaining vendor relationships (such as with raw materials in supply chain) to ensure such compliance exists. Other elements of strategic leadership include maintaining knowledge of quality control and lean manufacturing for cost savings, life cycle costing methodology, benchmarking against successful organisations of similar design or product offering, the ability to empower employees, and also establish an auditing system to ensure compliance and success (D’Souza, 2009). The role of a strategic leader is a dynamic and well-involved system of knowledge as it relates to the entire organisational model and its many inter-linked divisions. In order to determine whether an organisation has the capability and capacity to achieve long-term goals, such as expanding market presence internationally, a fundamental and in-depth knowledge of all financial-based system and structural design is imperative. Lord (1996, p.348) identifies the strategic leadership process as exploiting cost reduction strategies, collecting competitor information, and finding a system by which to match accounting principles with strategic goals. It has been defined as “business unit identification with strategic market and cost analyses”, with an ongoing strategic evaluation through auditing and accountability systems (Dixon & Smith, 1993, p.606). Therefore, a genuine strategic leader should be considered a knowledge expert when it comes to the internal dynamics of organisational design, both human and technical, in order to create future-based policies or growth strategies that will be effective over time. Phipps & Burbach (2010, p.138) reinforce all of the aforementioned elements necessary to be considered a strategic leader. These authors identify strategic management as: “Determining the organisation’s purpose or vision, exploiting core competencies, developing human capital, sustaining an effective organisational culture, emphasizing ethical practices, and establishing balanced organisational controls”. All of these elements must be in place in order for strategic leadership to be considered a high competitive advantage for the organisation, which was identified through other research studies in the effort to clearly define a strategic leadership role. The notion of modelling ethical practices is also part of transformational leadership design, with the belief that individuals at the organisation will model these same behaviours when the strategic leader expresses the importance of ethical business activity. Thus, the role of strategic leader is comparable to that of a mentor that helps others in the organisation achieve their greatest success and commitment both through ethical behaviour and through knowledge exchange. It should be offered, then, that a strategic leader must be well-rounded and knowledgeable not only as it relates to budget and finance, but to the whole of the organisation and its many inter-connected systems. It is nearly impossible for a business to achieve long-term goals without the dedication and assistance of multiple internal partners that range from sales teams to service teams. An ineffective strategic leader can identify a long-term goal and then simply demand compliance, however resistance to this change is likely. An effective strategic leader understands how each division at the business impacts momentum and works independently or with others’ assistance from internal knowledge professionals to establish a new governance structure or set of rules and regulations that much be complied with to achieve the goals as they have been identified. It is a diverse and multi-faceted role of understanding current business condition and then developing new strategies to use these efficiencies to reach a future milestone of success. How is strategic leadership applied realistically The importance of the external environment cannot be dismissed when considering the importance and functionality of strategic leadership in today’s organisational environment. Most organisations that function for profit serve some targeted customer or client base with products and services, therefore much in terms of accounting-based revenues stem from client interactions. In the retail and airline industries, as two examples, strategic leadership means understanding the external forces that will drive higher profitability or serve to remove market share compared to competition. Coles, a large retailer, developed a loyalty card for customers known as FlyBuys that offered frequent flyer points each time a shopper spent £5 (Foley, 2009). This partnership of consumer-based rewards was designed to give both the airline and the retailer more exposure, the ability to target more demographics of buyers and ensure their loyalty, and also impacted the current pricing policy at the strategic level. This is an example of how developing new strategies to meet customer demand are relevant to strategic policy as long-term brand recognition and brand loyalty are important issues related to revenue production. This is all related to marketing, a significant influencer in order to develop a worthwhile strategic goal. “The breadth of marketing is huge, from sales drives and sampling, through to merchandising. It brings creative, cutting-edge solutions that provide data and maximise sales” (Louis, 2009, p.18). This is why conducting the external forces analysis is necessary to gain knowledge of what is currently driving consumer behaviour. Many organisations, in an effort to reach a strategic goal, will establish customer relationship management databases that gathers demographic and sales-related data to determine which regions of the operating environment have the most potential for sales growth and which are underperforming. A strategic leader, in the here and now, uses these potent consumer-based tools to gain a clear picture of how to move forward. This might include shutting down non-performing business units based on this data or developing a new marketing and advertising strategy in order to stay competitive and meet with customer demand ratios. In order to receive the return on investment required of a new and flexible strategic initiative, some organisations develop a partnership with field marketing professionals. “Field marketing brings cutting-edge, creative solutions and should be considered a central tenet of branding strategy” (Louis, p.18). Strategic leadership also requires such partnerships or joint ventures related to marketing strategy in order to build a foundation for future growth. Customers’ revenues, for an organisation that provides products and services, are one of the most paramount issues and is subject to rising demand and price elasticities depending on the regional or international economic health associated with buyer markets. A strategic leader must understand whether or not buyers are affected by economic conditions and re-establish new pricing policies or offer incentives, when applicable, during these periods. Strategic leadership is a constant process of understanding the external dynamics of buyer behaviour and then developing workable and worthwhile strategies, based on capacity issues, that will bring more value to the brand of merchandise being offered; or the corporate brand itself. Consider a scenario where a production-based industry formulates a five-year strategic plan for capital investment into a foreign country in an effort to build more production capacity overseas. One element is to consider issues of environmental sustainability, and whether it is a regulatory burden to conduct business in a new country or whether taking steps toward environmental sustainability will have immediate advantages for compliance issues. “Environmental sustainability can be a source of competitive advantage” (Ross, 2010, p.32). A strategic leader that has determined expansion is the vision or mission of the organisation then drafts a series of policies related to environmentalism, makes a series of action plans, and then budgets against the measures toward this sustainability that are necessary to achieve the goal (Ross). Outside of the more obvious factors needing assessment for expansion, such as operational capacity and human capital development, achieving environmental sustainability means developing a flexible production system and changing the methodology by which materials are purchased or by which certain production-generated emissions require alteration. These are cost and labour intensive activities that need to be measured with current budget capacity and future budget projections based on a variety of assessment criteria. Issues of supplier/vendor contracts must also be considered when a strategic goal has been identified and expressed across the entire organisational hierarchy. Under Porter’s Five Forces Model, an strategic leader must consider whether the organisation maintains control in the supplier market and then work to change or improve this position. Porter offers that suppliers are made weak by their reliance on some retail store successes as it relates to consumer-based commodity products (Porter, 2011). If the organisation is a grocery store, as one example, this power over suppliers gives considerable advantages and new cost-saving contracts can be developed because of this leverage. However, a retailer with multiple competition, such as a fashion outlet, will likely witness that consumers have considerable strength and lower price flexibility that will determine long-term revenue growth and current/future marketing strategies. It is essential to understand the level of control over key players in the external market that contribute to business profitability and lean production goals when applicable. The grocery store Aldi, a privately owned grocery stores that currently operates in Europe and the United States, maintains 500 stores. Its most recent strategic ambition is to expand the organisation to 1500 units of operation. However, this has been complicated by the store’s managing directly in the UK and Ireland and the publicity associated (Thomas, 2009). Even though the strategic goal is to align the business for more international units of operation, it is greatly affected by internal politics and the views of the external stakeholder, as well as media sources that can serve to give positive publicity or negative public relations that will impact profit successes. Aldi, in an effort to gain more buyer segment attention, introduced celebrity advertising to help position this discount market as a key market player among competition such as Tesco. However, the organisation was viewed by stakeholders as having a “split brand personality” through these efforts (Thomas, 2009). This is an acknowledgement that in order to achieve long-term goals, the strategic leader must be in-tune with what is occurring outside of the business hierarchy and understand the consumer and social beliefs about the organisation and develop strategies to combat any negative sentiment. In the real-time organisational environment, strategic leadership also involves setting pricing strategies that will lead to long-term revenue expectations. In an organisation that exports its products, such as Sony in Japan, issues of tariffs and international quotas must be considered with external trade partners. “Tariff rates and pricing strategies are concerns for strategic leadership” (Carbaugh, 2009, p.145). When an organisation sets short-term pricing on its products, profit expectations are the first consideration. Secondly, the trade partner sets such tariffs as a means to generate more national revenues or as a means of cost control that can impact whether or not a competitive or premium price tag can be placed on the organisation’s merchandise offerings. Foreign capital investment and foreign consumer price sensitivity must be considered, in the short-term, as part of long-term profit or market position expectations in order for effective strategic leadership to occur. A strategic leader may have to work with governmental regulators to negotiate tariffs when pricing is affected or focus more heavily on over-performing sales environments to drive maximum growth in sales. In this case, more concentration on lower-level human resources, such as providing new training to retail salespersons, might be necessary to achieve long-term goals as these employees are the point-of-contact as representatives of the corporation and its merchandise brand. There is one fundamental problem, however, that faces the strategic leader in most businesses and can jeopardize achievement of short-term goals to reach the pinnacle of the mission or vision as it has been established. Because of the complicated and dynamic emotional responses of a wide variety of employee demographics at the organisation, resistance to change when it is implied or demanded can impede forward progress. “Great companies rely heavily on their cultures to support their change management efforts. Culture change is about development, not just growth” (Want, 2009, p.10). A strategic leader must understand what currently makes up the culture at the organisation and further analyze what motivates employees and mid-tier managers to perform to expectations. In some cases, the strategic leader must adopt the role of change champion, someone who constantly reinforces communication about the importance of the new vision and inspires others with charismatic or authoritarian posturing. The change agent is defined as “an undeserving victim of the irrational and dysfunctional responses of change recipients” (Ford, Ford & D’Amelio, 2008, p.362). The key words of irrational and dysfunctional reinforce how dramatic and imperative sociological and psychological knowledge is as a means to achieve cultural unity and harmony. Individuals who have been instructed that a change will occur will have their own unique motives for why they might not want to cooperative with the new goal. The strategic leader must then innovate new human resources best practices or create cooperative work teams in order to facilitate trust and openness between management and employee populations (Want, 2009). In some organisations, change resistance stems from minimal empowerment for employees, thus leadership development and autonomy might be two short-term strategies in order to achieve better competitive human capital toward meeting long-term goals in the new mission or vision. The literature suggests that no strategic focus that relies on human labour to reach its milestones can be successful without a change champion or extensive knowledge of motivational theory. Some of the most fundamental lessons associated with motivational theory are provided by psychologists such as Abraham Maslow, who offers that an employee requires job security and a sense of organisational belonging in order to be confident about their role in change and achieve the maximum of their total performance capacity (Weiten & Lloyd, 2005). These are fundamental and foundational human needs and the strategic leader would likely witness decay of short-term growth or restructuring if the culture is one of individualism and where change resistance is constantly present. In this type of environment, if applicable, the strategic leader must be a counsellor and controller that is people-centred and willing to consult with internal HR managers to develop policies of short-term reward for meeting performance targets. D’Souza (2009) compares all of the strategic function to triple bottom line accounting and governance achievable through strategic audit. More emphasis should be placed on measurement and auditing tools as means of ensuring that the organisation and its human capital is well on its way toward achieving the long-term goals identified in mission and vision. Analysis tools such as the balanced scorecard, performance appraisal, or total quality management checklists are only a few examples of how to ensure the organisation is meeting labour-related, cost-related, and production-related milestones. These auditing tools provide valuable information, even when in the form of employee surveys, about the hindrances toward achieving the new strategic mission and help to iron out inefficiencies in key areas such as production, operations, service, and marketing. The aforementioned socio-technical activity that exists in the modern organisation involves creating a system of interaction between employees and technology in a way that drives the most productivity and cost savings. A short-term investment in new enterprise resource planning software, as one example, might eliminate the burdens of higher payroll by consolidating job roles, thus saving the organisation considerable capital as it moves toward long-term objectives of revenue growth or expansion capabilities. This might mean acting as a champion for mapping all job functions for information technology implementation and then restructuring the entire organisation or its divisions to achieve maximum productivity and cost savings. Though this is only one example of the social and technological systems that drive achievement, they are constant concerns for the strategic leader if the business is to be structured properly to achieve the long-term strategic goal. “To remain relevant to the business world, an organisation must be rigorous in its syllabus, thought leadership and internal governance” (Joachim, 2010, p.1). Internal governance is understanding all elements of the business and how they are inter-linked to determine whether technology can improve inefficient social and labour-based systems for cost savings objectives. The goal in the short-term to achieve long-run goals and ambitions is to ensure the organisation operates like an efficient machine, under a system theory philosophy. All areas of production, service, marketing, governance, quality assurance, purchasing, and accounting must be aligned with human resources in order to achieve an effective return on investment toward the long-term goal. This means establishing a system of balanced internal controls, with assistance from mid-tier managers, to ensure that employees are performing to identified performance targets. For example, a list of criteria can be developed by human resources for ongoing appraisal and feedback and then establish a set of disciplinary action if it is identified that performance is not meeting goals. Control is vital in meeting strategic goals which will require more interaction with mid-level management so that they are clear in how to provide guidance to employees. Consider, for instance, an organisation that demands a long-term goal of reducing call centre reliance as it relates to customers. The strategic leader will realize that human resources is necessary to achieve change and motivation by the customer service team and also determine what systems should be adopted to replace the unwanted call centre system currently in place. New training packages or human capital development might be required that cannot be accomplished solely by the strategist, but with cooperative strategies with internal management teams. However, without establishing new training or identifying how to restructure, change efforts will not be a source of long-term competitive advantage. Thus, it should be said that knowledge exchanges with in-house management practitioners is vital and crucial to meeting long-term performance expectations, especially when the organisation maintains a heavy reliance on human labourers and their motivational levels. Conclusion It has been established that the role of strategic leader is vigorous, sometimes self-motivated, but always future focused for long-term business growth and market positioning. The role of production, marketing, accounting, and human relations must be considered as primary contributors to achieving long-term goals. At the same time, it was established that cost awareness, auditing capabilities, and cost-reduction must be present to achieve a future goal, unless the mission or vision does not require extensive capital investment. Each organisation, depending on their service and product offerings or basic function as it pertains to its operating environment, is different and therefore requires new strategies that are innovative from other competition in similar markets. Sales and the role of consumer behaviour marked the importance of understanding external driving forces that impede or fuel success and then comparing internal capacity to this knowledge to align the business more effectively. Strategic leadership might require changing a control and authority hierarchy to maximize effectiveness and establish better employee controls, however there is definitely a linkage between current and real-time business that must occur for long-term outcomes that favour the business strategy. A strategic manager understands all dimensions of the business, works with a people-centred focus, and ensures compliance to regulations in order to find long-term strategic success. From the development of a new governance council to simple motivational strategies targeted at employees to gain their commitment, the role of strategist is an intensive process that begins with knowledge collection and ends with knowledge dissemination and exchange. It is unrealistic, based on the literature and research provided, to assume that strategic leadership goals will meet with success without considering all divisions and how they inter-connect as an organisational unit or system. Strategic leadership not only identifies a current future position for the business, but creates a performance expectation that closes any knowledge or skills gaps whilst also maximizing profit and capital investment. Strategic leadership should be defined, in conclusion, as a system of auditing, collaboration, and business restructuring that is relevant in the real-time operating environment to change future market and profit position. References Adams, W. & Adams, C. (2009). 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