Strategic Management is no longer an activity reserved for the CEO, or other individual senior executives. The internal and external competitive environments are so volatile today, it is unrealistic to expect one, or a handful or executives, to be capable of a comprehensive strategic view and management of the firm.
There are so many driving forces influencing strategy development. Thompson, Strickland, and Gamble (2005, p.69) describe "Driving forces are those that have the biggest influence on what kinds of changes will take place in the industry's structure and competitive environment. Some driving forces originate in the company's macro environment; some originate from within the company's more immediate industry and competitive environment". Some examples of driving forces facing organizations today are new entrants into the market. "The entry of one or more foreign companies into a geographic market once dominated by domestic firms nearly always shakes up competitive conditions" (Thompson, Strickland, and Gamble (2005, p.71). The need to respond to the driving forces of technological change and process innovation often creates difficulties in responding to customer needs in a timely manner.
The point is, environmental scanning and resulting appropriate strategic actions in response to change should not be a "back room" activity among a handful of executives. The latest research has shown that organizations that use "high involvement leadership" by observing the warning signs and involving key members within their strategy development process attain higher levels of performance.
So what are the pitfalls of strategic management in times of change? There are many influences on the senior management team in times of change. The following issues must be effectively managed.
PITFALL #1: COMPLACENCY
Kotter (1995, p.59-67) claims that 50% of companies which fail in leading change, failed due to underestimating the need to establish a strong sense of urgency to respond to market opportunities or avoid crises. Kotter's rule of thumb for an urgency rate being high enough is "when about 75% of the Company's management is honestly convinced that business as usual is totally unacceptable. Anything less can produce various serious problems later on in the process" (Kotter, 1995, p.62).
PITFALL #2: LACK OF VISION AND SUPPORT
Kotter stresses the need for leadership to build a powerful coalition of the top management team and have a powerful vision which can be communicated "in five minutes or less and get a reaction that signifies both understanding and interest" (Kotter, 1995, p.63). This vision must be powerful enough and communicated throughout all available communication channels, otherwise a "transformation is impossible unless hundreds or thousands of people are willing to help, often to the point of making short-term sacrifices" (Kotter, 1995, p.63). Schwenk (1997) cautions that expression of the diversity of views must be allowed. Questioning the leader for more information and motive should not be discouraged, otherwise, true commitment among employees can not be achieved.
PITFALL #3: LEADERSHIP REACTIVITY
"In a successful transformation, managers actively look for ways to obtain clear performance improvements, establish goals in the yearly planning system, achieve the objectives, and reward the people involved with recognition, promotions, and even money" (Kotter,1995, p.65). Executives need to be careful not to declare victory too quickly. "Instead of declaring victory, leaders of successful efforts use the credibility afforded by short term wins to tackle even bigger problems. They go after systems and structures that are not consistent with the transformation vision and have not been confronted before" ((Kotter, 1995, p.66). Leaders must lead the way in demonstrating new behaviors, attitudes and values, and communicate constantly how the new change order has improved performance (Kotter, 1995).
PITFALL #4: INABILITY TO DIAGNOSE AND ACT UPON CHANGE
Incremental changes "affect selected components of the organization. The fundamental aim of such change is to enhance the effectiveness of the organization, but within the general framework of the strategy, mode of organizing, and use that already are in place" (Nadler & Tushman, 1990, p.79). Strategic changes have an impact on the whole system of the organization and fundamentally redefine what the organization is or change its basic framework, including strategy, structure, people, processes, and in some cases core values" (Nadler & Tushman,1990, p.79).
According to Nadler and Tushman (1990), a key challenge for executives facing turbulent environments, is to learn how to effectively anticipate, initiate, lead, and manage reorientations. Tushman, Newman & Romanelli (1986. p.29) "Recent studies of companies over long periods show that the most successful firms maintain a workable equilibrium for several years or decades, but are also able to initiate and carry out sharp, widespread changes, referred to as reorientations, when their environments shift. Such upheaval may bring renewed vigor to the enterprise. Less successful firms, on the other hand, get stuck in a particular pattern. The leaders of these firms either do not see the need for reorientation or they are unable to carry through the necessary frame breaking changes. While not all re-orientations succeed, those organizations which do not initiate re-orientations as environments shift underperform" (Tushman, Newman & Romanelli, 1986. p.29).
PITFALL #5: USING THE WRONG LEADERSHIP STYLE
Nadler and Tushman (1990) clarify the differences between charismatic and instrumental leadership, and the implications of their use during change.
The charismatic leader is one who articulates vision, sets and models high expectations, demonstrates excitement and confidence, and expresses personal support, empathy, and confidence in people. They warn of the limitations of the charismatic leader. "In light of these risks, it appears that the charismatic leader is a necessary component-but not a sufficient component-of the organizational leadership required for effective organizational reorganization. There is a need to move beyond the charismatic leader" (Nadler & Tushman, 1990, p.85).
Nadler & Tushman (1990, p.85) cite another style of leadership that is necessary in leading strategic change. "An important leadership role is to build competent teams, clarify required behaviors, build in measurement, and administer rewards and punishments so that individuals perceive that behavior consistent with the change is central for them in achieving their own goals. We call this type of leadership instrumental leadership, since it focuses on the management of teams, structures, and managerial processes to create individual instrumentalities"(Nadler & Tushman, 1990, p.85).
"Instrumental leadership focuses on the challenge of shaping consistent behaviors in support of the reorientation. The charismatic leader excites individuals, shapes their aspirations, and directs their energy" (Nadler & Tushman, 1990, p.86). Leadership of strategic re-orientations requires not only charisma, but also substantial instrumental skills in building executive teams, roles, and systems in support of the change, as well as institutional skills in defusing leadership throughout the organization" (Nadler & Tushman,1990, p.81).
PITFALL #6: LACK OF SENIOR MANAGAGEMENT TEAM DIVERSITY
In complex strategic decisions, the views of multiple decision-makers need to be sought, understood, debated, and sometimes combined in order to arrive at a correct diagnosis or formulation of the strategic problem" (Schwenk, 1997, p. 5). Schwenk (1995) further warns of the negative implications of homogeneity within a senior management team. "Technological change, strategic re-orientations, and environmental jolts are associated with greater team heterogeneity and increased team change (Schwenk, 1995, p.481).
SO, WHAT'S NEXT?
Beyond the obvious prevention of the above stated pitfalls, you can bring together your extended leadership team at a facilitated offsite to diagnose the environmental factors affecting your business, establish a vision, values, goals and strategies to productively and collaboratively move the organization forward. This can be accomplished in much less time, and for less money than you might have realized. Cashman Development has the experience of working with your leadership team to productively tap your own existing expertise and set forth a strategic direction from which to move forward. Our facilitated process delivers results. Ask yourself: Is the future of your organization worth a two to three day offsite investment? When you are ready, contact us for a no-pressure, no-obligation quote.
Dennis Cashman
President, Cashman Development
References:
Kotter, J. P. (1995, March-April). Leading change: why transformation efforts fail. Harvard Business Review, 59-67.
Nadler, D. A., & Tushman, M. L. (1990, winter). Beyond that charismatic leader: Leadership and organizational change. California Management Review, 77-97.
Schwenk, C. R. (1995). Strategic decision making. Journal of Management, 21(3), 471-493.
Schwenk, C. R. (1997). The case for weaker leadership. Business Strategy Review, 8(3), 4-9.
Thompson, Jr., A. A., Strickland III, A. J., & Gamble, J. E. (2005). Crafting and Executing Strategy: The Quest for Competitive Advantage. New York: McGraw Hill/Irwin.
Tushman, M. L., Newman, W. H., & Romanelli, E. (1986). Convergence and upheaval: Managing the unsteady pace of organizational evolution. California Management Review, 29(1), 29-44.
