Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

388 Part 3: Strategic Actions: Strategy Implementation

selecting and implementing strategies. Typically, the top management team includes the

officers of the corporation, defined by the title of vice president and above or by service

as a member of the board of directors.^23 Among other outcomes, the quality of a top

management team’s decisions affects the firm’s ability to innovate and change in ways that

contribute to its efforts to earn above-average returns.^24

As previously noted, the complex challenges facing most organizations require

the exercise of strategic leadership by a team of executives rather than by a single

individual. Using a team to make decisions about how the firm will compete also

helps to avoid another potential problem when these decisions are made by the CEO

alone: managerial hubris. Research shows that when CEOs begin to believe glowing

press accounts and to feel that they are unlikely to make errors, the quality of their

decisions suffers.^25 Top-level managers need to have self-confidence but must guard

against allowing it to become arrogance and a false belief in their own invincibility.^26

To guard against CEO overconfidence and the making of poor decisions, firms often

use a top management team to make decisions required by the strategic management

process.

Figure 12.2 Factors Affecting Managerial Discretion

Managerial

Discretion

Characteristics of

the Manager

• Tolerance for ambiguity


• Commitment to the
  firm and its desired
  strategic outcomes


• Interpersonal skills


• Aspiration level


• Degree of self-
  confidence

External Environment

• Industry structure


• Rate of market growth


• Number and type of
  competitors


• Nature and degree of
  political/legal
  constraints


• Degree to which
  products can be
  differentiated

Characteristics of the

Organization

• Size


• Age


• Culture


• Availability of
  resources


• Patterns of
  interaction among
  employees

Source: Adapted from S. Finkelstein & D C. Hambrick, 1996, Strategic Leadership: Top Executives and Their Effects on

Organizations, St. Paul, MN: West Publishing Company.