L4- Strategic Leadership, Corp. Governance & Org. Structure Flashcards
strategic leadership is…
the ability to anticipate and envision while maintaining flexibility and empowering others to create strategic change
transactional leadership
clarification and specificication of what’s expected from the followers.
e.g by setting objectives, reward and punishment, supervision
transformational leadership
motivating and inspiring followers to achieve more than expected
choosing to influence rather than direct.
lessons from steve jobs
- focus and simplify
- take responsibility
- when behind, leapfrog
- push for perfection
- engage face to face
- know the big picture + details
- engage face to face
- stay hungry and foolish
- combine humanities with sciences
- impute (attribute positive qualities to others)
- bend reality (challenge status quo)
- don’t be a slave to focus groups
how does strategic leadership shape a company:?
Effective strategic leadership starts by defining a clear vision and mission. These, in turn, shape the formulation and implementation of strategies, leading to strategic competitiveness and above-average returns.
leaders determine strategic direction in terms of (2)
- core ideology
- envisioned future
how to establish balanced organizational controls?
balanced scorecard framework
what does a balanced scorecard framework do?
tracks and evaluates an organizations performance using four key metrics.
4 key metrics of a balanced scorecard framework
- financial
- customer
- internal business process
- learning and growth
what does learning and growth under balanced scorecard include?
Improvements in innovation ability
Number of new products compared to competitors
Increases in employee’s skills
what does customer under balanced scorecard framework include?
Assessment of ability to anticipate customer needs
Effectiveness of customer service practices
Percentage of repeat businesses
Quality of communications with customers
top level managers are responsible for:
selecting and implementing strategies
corporate governance is…
set of mechanisms used to manage the r.ship among stakeholders and determine the strategic direction and performance of org.s
upper echelon perspective
explores how the characteristics and experiences of top executives shape decision making and governance structures.
bridges the gap between psychology, sociology, and the study of strategic orientation.
explain how strategic choices are made acc to upper echeleon
there’s the situation at hand, decision makers bring their knowledge, and asssumptions (cognitive base and values). therefore, they can’t absorb or focus every aspect of the situation (limited field of vision). Even within this limited field, the decision-maker selectively perceives stimuli. the perceived information is then interpreted through their lense. the culmination of all of this forms managerial perceptions, and shapes strategic decisions
list upper echelon order (7)
- situation
- cognitive base and values
- limited field of vision
- selective perception
- interpretation
- managerial perceptions
- strategic choice
define Principal Agent Problem
conflict of interest between the owner (principal) and the manager (agent) where the agent may not always act in the best interests of the owner. The principal bears the risk, and the manager is responsible for decision making.
sub-elements of principal agent problem (3)
- information asymmetry
- moral hazard
- managerial opportunism
how can diversification be an agency problem?
When top-level executives diversify, they’re often doing it to protect their own jobs, not necessarily to make the company more successful.
1) risk reduction 2) empire building 3) compensation
list all internal governance mechanism (3)
- ownership concentration
- board of directors
- executive compensation
list all external governance mechanisms (2)
- market for corporate contorl
- defensive tactics against hostile takeovers
-> golden parachute: providing lucrative leaving packages
-> poison pill: implementing measures to discourage acquisition
define ownership concentration
significant stakeholders owning at least 5% of company shares
define board of directors
Elected group overseeing top managers.
Safeguards owners’ interests, ensures managers act in the company’s best interest.
CEO duality may pose challenges.
define executive compensation
Paying managers to align with owners’ interests.
explain market for corporate control as an external corporate governance mechanism
external entites lieke firms and individuals take ownership perceived as undervalued, and they change management (as they’re seen as responsible)
explain golden parachute as a defense mechanism
it’s like a “stay bonus” – they get paid to stay and resist the takeover, rather than leaving easily. The money is meant to discourage executives from supporting the change in ownership.
define organizational structure
formal reporting relationships, procedures, controls, authority, and decision-making processes.
traditional forms of organizational strucutre
- simple
- functional
- multidivisional
simple structure
Owner manager takes all important decisions and monitors activities.
Staff serve as an extension of managers authority
typically single product line in single geographic market
functional structure
Consists of a CEO and limited corporate staff
Functional line managers are dominant in production, accounting, marketing, r&d, engineering, and human resources.
Active sharing of knowledge within a functional area
define functional line manager
specialists running key areas like finance marketing etc.
multi-divisional structure
Organized into operating divisions, each functioning as a distinct business or profit center.
Top corporate officers delegate responsibilities to division managers, allowing for decentralized decision-making.
Aims to minimize coordination and control issues, fostering effective comparison between divisions.
three types of multidivisional structure
- cooperative
- competitive
- strategic business unit
matrix organizational structure
Combines both functional specialization and business product/ project specialization.
what’s the purpose of matrix org. structure?
managing large and complex projects that require collaboration across different functional areas.
potential challenge of matrix org.
employees reporting to two managers (functional and operational) may lead to confusion and conflict in decision-making.
define organizational culture
complex set of ideologies, symbols, and core values that are shared throughout the firm, and how they conduct business. Involves: emphasizing ethical practices (1), establishing balanced organizational controls (2).
define organizational controls
controls that guide the use of strategy by comparing actual and expected results.
Financial controls ->
objective criteria that measures the firm’s performance against previously established financial standards like ROI/ ROA
strategic controls ->
criteria that verifies that the firm is using appropriate strategies for the conditions in the external environment, and competitive advantage. E.g primary and support activities.
strategic controls examine the fit btw:
Opportunities in the external environment -> what the firm MIGHT do
Competitive advantage -> what the firm CAN do
In managerial terms, lower risk is associated with….
related and unrelated diversification, where skills transfer and independent unit operations simplify oversight.
For shareholders, lower risk is tied to…
dominant business strategies and related constrained diversification, leveraging existing strengths and reducing uncertainty through synergies.
Matches Between Business-Level Strategies & Functional Structure are based on: (3)
- specialization -> type and number of jobs required
- centralization -> how much dm authority is at higher managerial levels
- formalization -> how important formal rules are
cooperative multi divisional works best with ->
related constrained strategy
Cooperative structure promotes collaboration among divisions, crucial for executing a Related Constrained Strategy.
Encourages close working relationships, vital for strategies where divisions share products or markets.
competitive multi-divisional structure works best with ->
unrelated diversification strategy
Competitive form is characterized by high decentralization and a lack of integrating mechanisms.
Aligns with an Unrelated Diversification Strategy, allowing divisions to operate independently in unrelated businesses.
SBU multidivisional
SBU Multi-Divisional structure establishes separate profit centers within a diversified firm.
Aligns with a Diversified Strategy, offering flexibility for each profit center to independently pursue diverse activities, maintaining autonomy and contributing to diversification goals.
