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Strategic management can be defined as an art & science of formulating, implementing and evaluating cross-functional decisions that enables an organization to reach its organizational or corporate goals effectively and efficiently. Leadership and Strategic Management have the most crucial linkages and it is important to note that strategy of an organization is developed through its leadership vision and organizational philosophy. Leadership and management are different approaches as management just follows orders while leaders inspire others to get the task done and generate orders and commands for management to follow.
In this paper, Lincoln Electric has been selected for studying the important linkages between leadership and strategic management. The paper is divided in three main tasks. The first task provides (a) an explanation of the link between strategic management and leadership, (b) an analysis of the impact of management and leadership styles on strategic decisions and (c) an evaluation of how leadership styles can be adapted to different situations. The second task is to (a) review the impact that selected theories of management and leadership have on organizational strategy and (b) create a leadership strategy that supports organizational direction (with the perspective of Apple Inc.). The final task discusses how to (a) use appropriate methods to review current leadership requirements, (b) plan for the development of future situations requiring leadership, (c) plan the development of leadership skills for a specific requirement, and (d) report on the usefulness of methods used to plan the development of leadership skills. In the end, conclusion is made to summarize the discussion and analysis.
Linkage between strategic management and leadership
It is important to note that leadership plays the most dominant role in helping the organization to reach its goals and objectives. It is because leadership plays the key role in devising an effective and efficient strategy that enables an organization to reach its corporate goals and objectives.
Leaders of the organization develop organizational philosophy or operating philosophy of an organization that how it operates. Organizational philosophy develops its culture and structure. It is interesting to note that the vision and mission are important for devising an effective strategy and this vision and mission of organization is highly dependent on organization's culture and structure. Thus, vision and mission (developed ultimately by leadership) gives rise to the strategy of an organization to reach its organizational goals and objectives i.e. to gain a sustainable competitive advantage in the marketplace relative to competition or to anticipate growth through mergers or acquisitions. Therefore, there is an important linkage between strategic management and leadership of an organization as leadership ultimately sets the strategic direction of an organization through the above process that is discussed above. The same linkage of strategic management and leadership is present in the case of Lincoln electric and it will be discussed in task 2.
Some of the important linkages between strategic management and leadership are:
Leadership is concerned about the vision while strategic management is focused on implementation according to the vision identified by the leadership.
The orientation of leadership is towards change management and anticipation of environmental changes. On the other hand, strategic management is oriented towards adaptation to change identified by the leadership and it does not take the initiatives of organizational and environmental change management.
Leadership is concerned with the dynamics of a situation and it identifies and realizes that how to leverage its resources to respond to the dynamics of the situation. Moreover, it is concerned with harmonizing or changing the culture to meet the challenges of dynamic external environment. On the other hand, strategic management is concerned with the technique and it follows the orders of the leadership. Strategic Management function is to make all the stakeholders adaptable to cultural change which is identified by the leadership.
Leadership is empowering while strategic management is being empowered.
Actions of leadership require skills but the influence of actions of leadership is strongly on character of leaders. Strategic Management is all about skills and management actions are skill oriented rather than character oriented.
It is interesting to note that leadership is concerned with positive possibilities while strategic management is concerned about negative consequences.
The basic responsibility of leaders is to build and reshape the organization while strategic management is concerned about following leadership vision to assist in building and reshaping the organization.
Leadership is all about taking risks because leaders understand their strengths and weaknesses and leaders tend to learn from their mistakes. While the strategic management is more concerned about avoiding risk and adopting risk response strategies.
Leadership set goals while management focus mostly on goals set by their higher levels or leadership.
Leadership take initiatives beyond its responsibility, support goals, provide direction and empower others. Strategic Management is more concerned about segmenting areas of responsibility and it follows leadership vision, organizational philosophy and organizational culture rather than taking initiatives.
Impact of management and leadership style on strategic decisions
Leadership styles and management plays an important role in the strategic decision of an organization. As discussed earlier, leadership inspires management to meet strategic objectives and therefore impact of leadership on strategic decisions is more dominant that management and leadership styles are crucial in taking strategic decisions for an organization. Different leadership styles are discussed below which are:
Autocratic or authoritarian style
In the autocratic or authoritarian style, decision making power is centralized to the leader and the leader holds the main decision making power. The most prominent example of authoritarian leaders is the dictatorship. It is important to note that Autocratic or authoritarian style do not consider or entertain the recommendation, consultation or suggestion from subordinates but rather they would like to implement their own authority on them. It is interesting to note that the Autocratic or authoritarian style leadership style is a useful motivational tool for a manager or leader as it motivates the leader or manager to perform. Also, the decision making process in Autocratic or authoritarian style is very quick and straightforward because only one person is decides for the whole group. Moreover, Autocratic or authoritarian style leaders keep the decision making power with them always and decide solely on their personal opinions unless or until they feel that they should share it with the rest of the group.
Laissez-faire or free rein style
In Laissez-faire or free rein style, the leader does not lead the group but rather it leaves the group entirely to itself. In simple words, the leader allows maximum freedom to its subordinates. For example, the subordinates are free to make their own policies and decision independently and freely.
Participative or democratic style
The participative or democratic leaders rely heavily on the consensus of the management and subordinates to take strategic decisions or to set strategic directions. They rely heavily on the consulting of the employees and management to devise strategies for reaching organizational goals. Team and Management of the corporation in this style of leadership is effective but it is a slow process. It is interesting to note that leaders in this case are selected by the consensus of subordinates or management unlike in authoritarian style of leadership.
Impact of leadership style on management and strategic decisions
Different leadership styles are effective and efficient based on different situations and contexts. For example, sometimes the organizations have to make immediate decisions where time is very little to converge on an agreement. In this case an Autocratic or authoritarian style is more effective because a designated authority who have more experience and expertise than the rest of the team could make and implement decision rapidly and quickly to respond to the given scenario.
On the other side, in case of a highly motivated and aligned team with a homogenous level of expertise and experience, Laissez-faire or free rein style would be more effective and efficient. It depends on scenario and objectives that which leadership style should be chosen.
Review of selected theories of management and leadership impact on Lincoln Electric organizational strategy
Vision, Mission and Value Statement
Leadership is the most crucial reason for the success of an organization. Leadership enables the organization to gain a sustainable competitive advantage in the marketplace. It is because leadership develops operating and organizational philosophy which shapes vision, mission, and organizational culture of the organization. Vision, Mission and organizational culture play the most crucial to devise and effective and efficient strategy to gain a sustainable competitive advantage in the marketplace. Therefore, leadership is the most important element in making vision, mission and value statements and these statements reflects the leadership traits and personalities and their visions.
The vision, mission and value statements can be implied from their official website which reflects the leadership and organizational philosophy of Lincoln Electric. Vision statement can be formulated as "To be the global manufacturer and market leader of the highest quality welding, cutting and joining products". The Mission statement for Lincoln Electric can be stated as" To endure passion for development and application market leadership and global manufacturer vision by providing complete solutions that make their customers more productive and successful". Finally, the value statement can be described as "the customer value would be provided to customers by strengthening and maximizing the satisfaction of employees and customer value would generate shareholders' value in return with the maximum employee motivation and satisfaction". (Lincoln Electric, 2010)
Operating Philosophy or organizational philosophy
It is interesting to note the company operating philosophy is highly characterized by the Christian ethics and it was leadership vision of James F. Lincoln which then became the organizational and operating philosophy of Lincoln Electric. The above implied vision, mission and value statements reflect the Christian ethics that are gained from the operating philosophy of Lincoln Electric. Highest quality products are provided to the customers by identifying customer needs and wants with a sense of empathy. The value is provided to customers in terms of product efficiency rather than price discounts and customer enjoys long term benefits and overall cost reduction in the form of less repairing, maintenance, replacement and upgrading. The organizational philosophy of Christian ethics had six core values which are: Respond to our customers needs and expectations with quality, integrity, and value, Recognize people as our most valuable asset, maintain and expand the Lincoln Incentive Management Philosophy, practice prudent and responsible financial management, strive continually to be environmentally responsible, and support communities where we operate and industries in which we participate. The six values define thoroughly the operating philosophy of Lincoln Electric regarding customers, stockholders, unionism and employees. (Buller & Schuler, 2006)
The employees are working on a piece rate basis with a performance score which motivates the employees to work hard. If an employee is not performing well then it would hit the piece rate basis and the employee would miss the financial incentives. Job security is very high at Lincoln Electric as the employees are not punished but motivated in case of failures. The employees are not fired because of the Christian empathy operating philosophy but employees realize that if they would not perform well then they would miss their financial incentives which drives employees' attitudes to work efficiently under high job security for gaining the maximum bonuses and incentives. (Buller & Schuler, 2006)
Lincoln Management Incentives and Bonus Plan
The management incentives and bonus plan of Lincoln electric are very motivational and attractive. The Lincoln bonus plan is strategically aligned with the piece rate pay plan which was discussed in above. It is a fact that Lincoln electric management incentives and bonus plans are the amounts worth more than half of the employee normal pay or wage. Management incentives and bonuses are based on performance based reward/point system. The management incentive and bonus plans are considered as a financial motivator in Lincoln electric. Management incentives and bonuses are considered to be the share and recognition of employees for their contribution in the financial and competitive performance of the Lincoln Electric. Points are allotted according to the contribution of each employee or manager to the financial performance and management incentives and bonuses are rewarded according to the points scored by the employees. The management incentives and bonus plans are based on reinforcement theory which states that behavior is a function of its consequences. (Robbins, 2005)
Leadership strategy - Strategic issues driving the success of Lincoln Electric
A clear analysis of Lincoln Electric indicates that Lincoln Electric has no strategic issues as it is exploiting its core competencies and capabilities to gain a sustainable competitive advantage in the marketplace. It is performing differently from rivals. According to Michael Porter (1996), Strategic Positioning and operational effectiveness are two entirely different approaches and concepts. Operational Effectiveness is necessary for a business success but not sufficient for it. An organization has to develop a strong strategic positioning to be globally competitive and to gain a sustainable competitive advantage which is not imitable by competition. Strategic Positioning is an entirely different approach and it is "performing different activities from competitors or performing similar activities in different ways". On the other hand, operational effectiveness is just performing similar activities from rivals in a better but not different way. Therefore, the competitive advantage gained from operational effectiveness is easily imitable because the competitors may also adopt the same or better practices to come up with the same or a better advantage. But, in case of strategic positioning, competitors could not imitate because the corporation adopting strategic positioning is entirely different from rivals and a competitor has to copy the whole activity systems to imitate that competitive advantage which is almost impossible because the own strategic positioning of that particular competitor would be lost after doing this. Japanese companies were well known for best-practices and Total Quality Management. Their global competitiveness was based on operational effectiveness in the 1970s and 1980s. In the race of operational effectiveness, the Japanese companies could not develop strategic positioning and fell under the trap of competitive convergence. The focus of Japanese corporations was to imitate competitors and just to perform better. Japanese enjoyed success because the world economies were growing. But when the markets became saturated; the Japanese firms were stuck in their own traps and finally rubbed out of markets. (Porter, What is Strategy, 1996)
Lincoln Electric has developed a strategic positioning rather than operational effectiveness. The most crucial reason for Lincoln Electric's survival is its strong human resource management in the most union obsessed part of US. Lincoln Electric activity systems supported each other to have a sustainable competitive edge. The focus of Lincoln Electric was to develop a "strategic position" while the rivals were more concerned about operational effectiveness which was necessary but not sufficient.
Current leadership requirements
It is important to note that organizations devise efficient business level and corporate strategies to gain a sustainable competitive advantage in the marketplace relative to competition. The leadership plays the most dominant role in devising strategies for corporation to sustain a competitive advantage. Leadership develops organizational philosophy and organizational philosophy gives rise to vision and mission for the organization. The strategic objectives of an organization are set on the basis of its visions and missions.
Therefore, understanding and knowledge of leadership philosophy and its implications is the most effective skill for efficient leadership. The individuals working in the Lincoln Electric must have knowledge of organizational philosophy and its culture and personal goals of individuals must be aligned with the organizational philosophy for effective leadership. Personal skills of the individuals must be compatible with the organizational philosophy to develop leadership in them.
The personal skills which are required for efficient leadership are:
Ability to frame and reframe events
Ability to integrate the perspectives of others
Self-Motivation (Ambler, 2006)
All the above personal skills of individuals must be compatible with the professional skill of "understanding of organizational philosophy" to reach organizational strategic goals.
Development of future situation for requiring leadership
As we have already discussed that every organization makes efficient business level and corporate strategies to gain a sustainable competitive advantage in the marketplace relative to competition. The leadership plays the most dominant role in devising strategies for corporation to sustain a competitive advantage. Leadership develops organizational philosophy and organizational philosophy gives rise to vision and mission for the organization. The strategic objectives of an organization are set on the basis of its visions and missions.
Professionally, understanding of organizational philosophy, aligns the personal goals of an individual with organizational goals and the person realizes that, to be successful, he must reach organizational strategic goals for reaching his own personal goals because an incentive or compensation and motivation is added with this understanding of organizational philosophy. Therefore, motivation (career development, personal goals) and compensation (rewards, promotions) provide means for both kinds of goals or objective accomplishment.
Personally, having interpersonal skills and capabilities, creates awareness among the individuals that corporate culture and philosophy is important for the success of the individuals and organization. The development of self-motivation with the above concept develops a driving force that guides the individual to meet their personal goals by moving on the way of reaching strategic goals of the organization.
Leadership skills for a specific situation
For example, the changing market trends motivate the Lincoln Electric to devise more environment and user friendly tools for its customers. In this case, organization must devise activity systems and strategy according to its leadership philosophy and operating philosophy because it is the core competency of the organization. It must seek ways for harmonizing personal goals of individuals with the leadership goals by compensating them effectively. Leadership must be developed by teaching individuals organizational philosophy which comes from leadership.
The Lincoln Electric must design a one year management trainee program in which individuals must be trained both professional and personally for strategic goals achievement. There should be four modules. The first module must include the professional literature such as "competitive strategy by Michael porter", different academic articles related to strategy and leadership, complete description of organizational and leadership philosophy to develop personal skills for strategic goals achievement. The second module must involve motivational approaches and methodology for defining ways to harmonize personal with professional goals, compensation and benefits as incentives to integrate personal goals with professional goals and an overview of organization. The third module must include rotation of individuals among the different departments and capacities and final module must require the individuals to manage some pilot projects to reach organizational strategic goals. It is important that organizational and leadership philosophy must be reinforced in each and every module by the trainers. The last two modules are designed to increase involvement of individuals at the different strategic levels. The training must conducted and supervised by the true leaders of the organization.
In this paper, important linkages between strategic management and leadership of an organization were studied and analyzed. The first introduced the links between strategic management and leadership. The second part applied management and leadership philosophies to study the Lincoln Electric which is one of the successful organizations of the world. The last part recommended some strategies to develop and boost leadership across the organization. It can be concluded that leadership plays the key role in the strategic management and success of an organization.