What Is Strategic Leadership Commerce Essay

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Strategic leadership is about providing an organisation with vision and direction. It entails creating purpose and context for growth that lead to organisational success. Strategic leadership promotes 'out-of-the-box' thinking that is the cornerstone for a business' future growth. Strategic leadership is not about micromanaging business strategies; its purpose is to provide the umbrella under which organisations think up appropriate strategies and create value (Adair, 2002).

It would be odd discussing strategic leadership without mentioning strategy and strategic management within the same context. Strategic management as a field of study emerged during the 1960s. Mintzberg (1990) located 10 'schools' of strategy research which developed from that period and he placed Porter within what he referred to as the 'positioning school'. The positioning school views strategy formation as an analytic process.

According to Mintzberg (1990), Porter's Competitive Strategy (1980) was considered 'a watershed' in the development of strategic management thought as it met the needs of both academics and managers who were looking for a 'theory of strategic management'. Porter's generic strategies and five forces industry framework presented academics with models which could be empirically tested. Porter presented the possibility of selecting a strategy based on a well-defined position in the economic market-place backed-up by 'analysis' rather than 'prescription' (Rumelt 1974).

On the other hand when we look at strategy, we are able to trace its origins to military tradition. In classical strategy the world is a rigid hierarchy where a solitary general is entitled with the final decision making. To form modern business strategy, this military model adaptation is complemented by an intellectual inheritance from economics. Classical strategy therefore places great emphasis on the willingness and capability of managers to adopt profit maximizing strategies through coherent long term planning. Porter's model is easily placed in the classical mould, especially since his books offer advice on obtaining 'above average industry profits' (Harfield, 1998).

Though strategic leadership contains attributes that are similar to the military tradition of strategy, it is important to note that today business leadership affects the moral capability and performance of organizations (Finkelstein and Hambrick, 1996). Strategic leadership involves sketching out a road map that will allow the business to unleash its full potential for example by fashioning the organisation's portfolio of businesses and by defining the organisational culture, structure and values needed to achieve overall corporate vision and goals (Adair, 2002). Additionally, these strategic business leaders are now called upon to influence the scope and character of formal ethics programs and the integration of ethics into everyday organizational life (Dukerich et al., 1990) especially after the indiscretions of Enron, Parmalat, and World Com etc. Strategic leadership calls for responsibility in managing integrity capacity as a strategic organizational asset.

Strategic leadership goes beyond Porter's 'strategic guide' to obtaining above average industry profits. Adair (2002) asserts that strategic leadership concerns itself with fulfilling three broad functions, namely: achieving the organisation's common task, building and maintaining the organisation as a team and finally motivating and developing the individual. This trio of functions are intertwined and can be subdivided into seven role functions as follows: vision, strategic thinking and planning, administration, organisational fitness to situational requirement, corporate energy and morale, relating the organisation to allies and partners and finally leading the organisational learning and teaching by example.

In the wake of the global recession attributed to the avaricious behaviour of the world's major financial players, strategic leadership must now cater for an inclusion of capacity for repeated alignment of process to moral awareness, character, deliberation and conduct that demonstrates balanced judgment. It also needs to enhance a sustained moral development process that promotes supportive systems for making moral decisions (Petrick and Quinn, 2000). This is referred to as the integrity capacity for an organisation. Driscoll and Hoffmann (1999) claim that business leaders and organizations with high integrity capacity are more likely than competi­tors to be aware of and more rapidly respond to stakeholder moral concerns, arrive at balanced decisions that form sound policies, and build supportive systems that sustain excellence.

Strategic leadership recognises that fifty-one of the world's largest economies are corporations; therefore as Karliner (1997) states, cor­porate leaders need to be held accountable for adverse impacts of their decision making, such as deepening poverty, social disintegration and environmental destruction. Korten (1999) further adds that many current U.S. CEOs would concur with the aphorism that "what's good for Microsoft is good for the world," when in fact "what's good for corporate leaders may be highly injurious to the world," e.g., widespread corporate leadership endorsement or condoning of migration of "dirty industries" to developing countries.

Strategic business leadership goes beyond Porter's industry competition angle as it seeks to increase awareness of accountability for protecting orga­nizational integrity capacity as a strategic asset and of accountability for developing judgment integrity that arrives at balanced moral decisions at the microeconomic operational level and the macroeconomic strategic level (Petrick & Quinn 2001).

In a nut shell, strategic leadership encompasses leadership development, change management, strategic planning, performance management and accountability practices, to ensure that effective plans are successfully and ethically implemented.

National cultural values and effects on strategic leadership for organizations development

Schein (1985) claims that one unique and essential function of leadership is the manipulation of culture yet most scholarly analyses of leadership address organizational cultures only peripherally (House and Singh 1987) while conversely, many analyses of organizational cultures give minor attention to leadership (Snyder 1988).

Like any individual, executives who are charged with the duty to give strategic leadership maintain a wide array of values e.g. religious, political and social values (Guth & Tagiuri 1965). Researchers contend, however, that a select subset is especially germane to strategic leadership and decision making, and many agree that among the most influential are the social values embedded in national culture (Finkelstein & Hambrick 1996). Cultural values are central to shaping managerial views of the environment and appropriate organizational responses (Schein 1985). Consequently, cultural values are posited to influence the strategy formulation process and its outcomes (Hambrick & Brandon 1988).

Among the earliest and most enduring influences on executive value development is national culture (England 1975). National culture is defined as that set of shared assumptions and culture representing the system of socially constructed meanings and preferences a group develops as it collectively negotiates environmental forces and the complexities of internal integration (Hofstede 1991; Schein 1985).

Restated, national culture can be interpreted as a common frame of reference or logic by which members of a society view organizations, the environment, and their relations to one another. Scholars have surmised that national culture is likely to yield important effects on the process by which the environment is known and responded to by an organization (Schneider 1989). An important volume of strategy research is founded on the premise that to remain viable, organizations must adapt to changes in their environment. Thus, it is presumed that as the firm's strategic leaders, top managers monitor the external environment for developments of relevance to the organization and its strategic policies, and initiate adjustment as needed (Hambrick and Mason 1984).

The small body of theoretical and empirical work explicitly linking leadership and organizational culture has been focused on how leaders establish or change cultures (Trice & Beyer 1986). Yet the systematic analysis of the part leadership plays in organizational cultures must consider its role in cultural continuity and persistence as well as in cultural emergence and change. Cultural strategic leadership that either creates or changes organizational cultures is referred to as innovative and it is most likely to differ from that which maintains organizational cultures at status quo.

As members of national societies, managers not only contribute to the collective formulation of cultural norms and views, they experience social reinforcement pressures which bring their individual level assumptions and preferences into close alignment with those of their native culture (Van Maanen & Laurent 1993). In fact, research has shown that the different views and assumptions embedded in national culture are manifested in the behaviors and actions by which organizational members discharge their duties (Shane 1995) and also in managerial attitudes and beliefs (Lodge & Vogel 1987).

Recently, scholars have begun to explore the link between national culture and strategic decision making (Geletkanycz 1997). The conceptual work of Hambrick and Brandon (1988) and Schneider (1989) suggests that the variation in executives' strategic orientation may be attributable to the different values embedded within national cultures.

Executives, socialized from an early age to the value orientations of their cultural heritage, bring them to their senior management roles and responsibilities, including strategic decision making (Hambrick and Mason, 1984). Therefore we are not surprised that cultural values will be reflected in executives' strategic choices. In particular, Hambrick and Brandon (1988) and Schneider (1989) suggest that cultural values will not only help to shape executives' view of organizations and the external contingencies they face, but also executives' preferences for different courses of strategic action. Cultural values capture the salient dimensions of this understanding, together with broad societal preferences surrounding issues of organization and adaptation (Hofstede 1991).

A cultural approach to strategic leadership can illuminate how leaders influence the understandings and networks of meanings that others hold and express through their actions. Leadership may best be viewed in terms of two continua: the one for instrumental leadership indicates the degree to which instrumental behaviors and ideas are affected by a leadership process; the second, for cultural leadership, indicates the degree to which understandings and expressive behaviors are affected by a leadership process (Trice & Beyer 1991).

Cultures help to motivate people to continue to exert effort in socially acceptable behaviors toward collectively defined ends. In this way, national cultures provide some degree of order and continuity in social life (Moore & Meyerhoff 1977).

Weber's seminal analysis of charisma recognized that leadership is crucial to both continuity and change. His insight suggests that cultural leadership involves not only leaders who originate new cultures or change existing ones, but also subsequent leaders who carry forward others' cultural innovations. He also suggests that the social mechanisms through which leadership operates to create cultural innovation are not the same as those used to produce cultural maintenance (Weber 1947).

One of Weber's elements of charismatic leadership suggests that cultural leaders inculcate their followers with certain emotionally charged ideas, in effect with the substance of culture. This idea is echoed in the current popularity of the terms "vision" and "visioning" among practitioners. Friedland (1964) argues that this charismatic vision must be validated with some form of victory.

Because cultural strategic leadership rests heavily on the acceptance and approval of some set of followers, it probably cannot endure without their attributing successful performance to the influence of the leader. In organizations, followers can be any set of stakeholders, including the Board of Directors, stockholders, lower-level managers or rank-and-file workers.

Charismatic leadership is a highly specific subset of cultural strategic leadership - one likely to produce cultural innovation. However, it seems too restrictive to argue that all innovative cultural leaders must necessarily be charismatic. Cultural strategic leadership is a more general and common phenomenon than charisma.

Organizational / regional context

The prevailing view among many observers of the Middle East is that the states in the Arab Gulf are fragile entities on the verge of popular revolt and governmental collapse. The complaint most often heard is that the governmental structures of these states are not keeping up with the stresses and strains that have accompanied the dramatic, and at times traumatic, social changes to their societies that have resulted from years of oil wealth (Anthony 1986). A closer look at the Gulf States and a review of their efforts in establishing the Gulf Co-operation Council (GCC), however, shows that many of these fears are misplaced and that events in the Gulf are often misunderstood.

The establishment of the GCC has proven surprisingly successful; in fact it achieved more in its initial four years than the European Economic Community, upon which it is modeled, did in its first ten years. Quite apart from its immediate economic and security ramifications, the GCC stands as proof that extensive political and economic co-operation in the Arab world is possible (Anthony 1986). The common language, religion, and culture are a subtle but perhaps the most influential factor in maintaining solidarity within the GCC.

Our organisational of concern is the National Bank of Kuwait (NBK). NBK is Kuwait's largest private sector organization and Middle East's highest rated bank as per the Moody's, Standard & Poor's and Fitch Ratings. The bank is characterized by its conservative approach to risk management and a solid financial position. NBK prides itself with its technological sophistication, well-diversified and strong franchise, stable and capable management team and dominant market share. Global Finance named NBK one of the world's 50 safest banks in 2009.

We cannot highlight National Bank of Kuwait's success without looking at the environment within which it operates. An organization's environment constrains and shapes activities and behaviors within the boundaries of the firm (Dess & Beard 1984). Kuwait was the first Arab country in the Gulf to have an elected parliament and full political rights were granted to women in 2005. The country has an open pro-Western stance and to pursue reforms the government introduced laws which opened the door to foreign investors. The country is also characterised by having one of the most outspoken media within the GCC.

In addition to that banks within the GCC have been facing an increasingly competitive environment as a result of the wide ranging deregulation and a quickening pace of financial innovation. The lifting of constraints on balance sheets, interest rates and commissions, technological advances and the reduction in functional and geographical barriers have unleashed unprecedented forces working towards a major restructuring and consolidation in the Middle East banking industry (Shihata 1998).

Also, since 9/11, more opportunities have been presented to financial institutions in the Middle East as the World markets have become less welcoming to high net worth Middle Eastern investors. For instance, all transactions in and out of the US markets are now being thoroughly scrutinized something which high net worth investors who seek privacy find intrusive. These higher demands of US supervision and scrutiny have made Middle Eastern investors to decide to invest locally instead. The market dynamics of the region have therefore been changed by the change in regulatory stature in Western markets thus creating new opportunities for wealth managers and banks such as the NBK, in the Middle East.

The GCC region is experiencing deregulation, privatization and globalization forces that have created pressures on banking institutions to deal more effectively with evolving circumstances through restructuring, consolidation and new financial products. They have made the banks' supervisory agencies more flexible in allowing banks to introduce new innovative products.

We are also witnessing a rise in the global desire for Islamic based financial products. The Islam religion is dominant within the GCC and heavily influences activities there. The influence of religion on strategic choice through personality, beliefs and values can also be indirect, operating through the ethical dimension (Milton-Smith, 1995; Robert, 1991).

Finkelstein and Hambrick (1996) define strategic leadership as the strategic choice process at the top executive or board level. Beyond the otherwise deterministic impact of organizational and environmental constraints on strategic decision-making, the discretion enjoyed to various degrees by top executives impacts their strategic choices (Hambrick and Finkelstein 1987).

From the discussion we can therefore attribute National Bank of Kuwait's success to the government's policies with regards to encouraging foreign investments, liberalizing the economy, the ongoing deregulation, privatization and globalization forces that are affecting the entire GCC, a rising demand for Islamic banking and financial services and a strategic leadership that has a conservative approach to risk management, a well-diversified and strong franchise and has embraced use of sophisticated technology.

Recommendation

The National Bank of Kuwait (NBK) is already a recognized leader in financial services provision within the Middle East and emerging markets therefore that which is required is sustainability of its market position. Also of importance to note is that the organization would be better placed to compete within the global arena it leadership seek the strengthening of the GCC region. As the world is recovering from the global financial crises the following recommendations are given.

The NBK operates in a global economy therefore it is performance is linked to the general health of the financial the developed economies. To maintain its market leadership therefore, the global economy needs to be restored. NBK should work with the GCC in encouraging effort to revamp and recapitalize the financial systems in the West.

The GCC should reject trade protectionism and push for maintenance of open trade. This would enable the region to experience economic expansion which would trickle down to increasing wealth of its citizenry. NBK would benefit from this increased economic power within the region.

The GCC should support processes that maintain healthy levels of liquidity and international capital flows. It is important for the region to prevent shortages of foreign exchange while improving on SME and trade financing. To this end, the GCC strategic leaders should put structures in place that would enhance an open, outward looking at futuristic regional economic and financial integration.

Finally, the NBK must not lose sight of the changing behavioral patterns of customers and industry practices. It must continually seek to be at par with new products and service offerings while retaining its solid financial position and conservative approach to risk management which shielded it from the adverse effects of the global financial crisis.

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