Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

Chapter 12: Strategic Leadership 387

the way people are managed and in the broader corporate focus. Thus, his style has been

transformational as well.

Transformational leadership is considered to be one of the most effective strategic

leadership styles. This style entails motivating followers to exceed the expectations others

have of them, to continuously enrich their capabilities, and to place the interests of the

organization above their own.^16 Transformational leaders develop and communicate a

vision for the organization and formulate a strategy to achieve that vision. They make

followers aware of the need to achieve valued organizational outcomes and encourage

them to continuously strive for higher levels of achievement.

Transformational leaders have a high degree of integrity and character. Speaking

about character, one CEO said the following:

“Leaders are shaped and defined by character. Leaders inspire and enable others to do
excellent work and realize their potential. As a result, they build successful, enduring
organizations.”^17
Additionally, transformational leaders have emotional intelligence. Emotionally intel-
ligent leaders understand themselves well, have strong motivation, are empathetic
with others, and have effective interpersonal skills.^18 As a result of these characteristics,
transformational leaders are especially effective in promoting and nurturing innova-
tion in firms.^19

12-2 The Role of Top-Level Managers

To exercise the duties of their role, top-level managers make many decisions, such as the

strategic actions and responses that are part of the competitive rivalry with which the

firm is involved at a point in time (see Chapter 5). More broadly, they are involved with

making many decisions associated with first selecting and then implementing the firm’s

strategies.

When making decisions related to using the strategic management process, managers

(certainly top-level ones) often use their discretion (or latitude for action).^20 Managerial dis-

cretion differs significantly across industries. The primary factors that determine the amount

of decision-making discretion held by a manager (especially a top-level manager) are

1. external environmental sources such as the industry structure, the rate of market
   growth in the firm’s primary industry, and the degree to which products can be dif-
   ferentiated


2. characteristics of the organization, including its size, age, resources, and culture


3. characteristics of the manager, including commitment to the firm and its strategic
   outcomes, tolerance for ambiguity, skills in working with different people, and aspi-
   ration levels (see Figure 12.2)
   Because strategic leaders’ decisions are intended to help the firm outperform competitors,
   how managers exercise discretion when making decisions is critical to the firm’s success^21
   and affects or shapes the firm’s culture.
   Top-level managers’ roles in verifying that their firm effectively uses the strategic
   management process are complex and challenging. Because of this, top management
   teams, rather than a single top-level manager, typically make these types of decisions.^22

12-2a Top Management Teams

The top management team is composed of the individuals who are responsible for mak-

ing certain the firm uses the strategic management process, especially for the purpose of

A top management team is

composed of the individuals

who are responsible for

making certain the firm uses

the strategic management

process, especially for the

purpose of selecting and

implementing strategies.