Strategic management oversees assigning employees to the proper departments and positions inside a firm for that corporation to achieve its objectives. The knowledge gap has been identified within the scope of internal knowledge creation, which adversely affects a firm’s performance. Regarding new product development and research, a company’s CEO is responsible for creating the most efficient organisational structure possible. Executives and other top managers should design efficient methods to decrease costs, foster growth, create a good organisational culture while enabling other structural improvements to take place efficiently. Strategic leaders serve an essential capacity in the development of new ideas and in creating an overall vision for the company. Senior executives such as CEOs and CFOs focus on the long-term strategy and employee empowerment while also focusing on the organisation’s long-term plan.
In certain companies, the strategic managers are the ones that might be holding the company back from expanding or being successful owing to their egotistical pursuits or a lack of adequate control. In this view, strategic leadership would be the deciding factor in whether a company is successful. An important factor in a company’s capacity to attain high levels of performance is the degree to which a person is involved in the process of making strategic choices, as discussed in this paper. According to Cortes and Herrmann (2021), a person who can influence other members of the organisation to make decisions that will improve the organisation’s prospects and ensure financial stability is a strategic leader. In other words, a strategic leader can steer the organisation in a positive direction. As discussed by Mansaray (2019), strategic leaders create an atmosphere inside an organisation in which all its members can concentrate on making decisions that are in line with the organisation’s mission and vision. In addition, those in charge of strategic planning make it a point to ensure that the company follows the standards set by the industry even as it strives to become more sustainable and competitive. In addition to this, strategic leaders are responsible for making decisions that will assist the business in providing an appropriate response to external circumstances. These external elements can include but are not limited to alterations in technology, climate change, and economic risk factors. Incorporations’ ability to make sound decisions is hampered by a lack of understanding of how internal information is generated. This article suggests that knowledge gap related to internal knowledge creation directly affects the decision-making process of a company. There are many reasons as to why researchers study strategic leadership, management, strategic leaders and organisations. Mainly, they study that because processes may be streamlined with the support of strategic leadership, which also increases strategic productivity and fosters innovation. The staff are able to be productive, autonomous, and contribute fresh ideas when this leadership is in place.
Leaders’ Impact on a Company
Several academics have conducted studies on the impact that CEOs and other high-level managers have on an organisation’s overall success. The essential thing that CEOs, chairpersons of corporate boards, and directors are responsible for is gathering resources for an organisation to fulfil the obligations it has made to its customers (do Adro and Leitão, 2020). According to Gutterman (2020), the responsibility of approving long-term strategies in the day-to-day operations of an organisation are both responsibilities that fall under the perspective of the board of directors in an organisation. On the other hand, the founders of an organisation, who are typically its directors and key shareholders, have a more in-depth understanding of the organisation. They are better able to communicate its vision to other members of the organisation so that it may be successful in achieving its goals.
Consequently, a company’s CEO and top management teams provide the connection between the long-term corporate plan and the daily operational strategies that are implemented. As a result, other members of the company are able to implement the corporation’s overall organisational strategy on their own. To build a strategy that can gain support and be implemented, strategic leaders must find a balance between business analysis and the human element. According to Pessima and Dietz (2019), the CEOs and other organisational leaders need to involve other organisation members in strategy conversation to facilitate the rapid definition, implementation, adjustment, and adaptation of strategy. Leaders in strategy should encourage organisational learning and innovation since these are essential to the organisation’s ability to realise its specified goal (Odor, 2018). A strong sense of vision and mission is the sole thing that great strategy executives should provide their companies, according to Nicolaides (2019). The leadership of this type not only recognises but also seizes upon potential possibilities.
Factors that affect Leaders
The culture of an organisation and the individual’s traits are two factors that influence both the conduct and performance of strategic leaders toward achieving organisational success. According to Hobfoll et al. (2018), strategic leaders behave differently based on the cultures in which they operate because the situations with which they are confronted are likewise unique. Three fundamental aspects will decide whether an individual can guide a business down the route that leads to achievement. These aspects include the competencies and attributes of the company’s executives and the company’s culture and business plan. Meanwhile, natural qualities that promote exceptional leadership are essential for a strategic leader to have. For instance, the strategic leader should have a firm grasp on the situational aspects and be able to transform these factors into advantages that are inherently beneficial to the organisation. Strategic leaders should be experienced planners who can leverage the organisation’s resources and use them in a timely and sustainable way to meet new and present opportunities.
It is possible that the power imbalance between the board of directors and shareholders allows managers to pursue their own interests while relegating the board to an advising role, according to managerial dominion theory. However, those in charge of strategy make this advantage work to the organisation’s advantage by integrating workers as well as other parties involved in the process of formulating competitive tactics (Bordean and Borza, 2017). It is the belief of the Upper Echelons Theory that the experiences, values, and personalities of a firm’s top executives will have a substantial influence on the corporation. It is mainly felt in an individual’s interpretations of the various challenges that an organisation must overcome (Mohammed et al., 2017); the effect that these challenges have on the decisions they make.
In this scenario, to comprehend an organisation’s behaviours, one needs to understand the prejudgments and tendencies of the influential players or critical decision-makers within the company. According to Campbell’s definition, performance is any behaviour or behaviours that are pertinent to achieving the organisation’s goals (Alromaihi, Alshomaly and George, 2017). Therefore, performance refers to both the actions taken by the executive and the outcome performed. How an organisation moves performance from an abstract state to a concrete one might provide insight into the conduct of an individual member of the organisation. However, behaviours are not just a cause of a given performance but also an effect of that performance. Suppose strategic leaders want to impact the organisation’s performance significantly. In that case, they need to consider not just the conduct but also the result of the activities they do.
Establishing a connection between strategic leadership and the company’s success is a relationship that is fraught with challenges. If CEOs believe their companies are on a recovery path, it is less probable that their performance will improve. Case studies have shown this, and it is the case regardless of whether the executives are correct. On the other hand, Adoli and Kilika (2020) demonstrated that the abilities, expertise, culture, and vision of a firm’s leadership have a significant impact on the organisation’s success. The fact that performance is impacted by the type and number of allotted resources and several other factors can be attributable to the widespread misconception that exists regarding the connection between strategic leadership and performance. For instance, Alhawamdeh and Alsmairat (2019) emphasised that the quality of the decisions that CEOs and workers make in creating and implementing the strategy might be the deciding factor in whether the strategy is successful. However, the corporation’s organisational structure is determined by strategic executives such as the CEO and the Chairman of the Board. It’s possible to trace the financial or market success of the company back to the strategic decisions taken by the firm’s top executives. Therefore, strategic leaders should rearrange the organisation’s structure so that they can make judgments, which will result in an increase in innovation over time.
Significance of Decisions made in a Company
A company’s performance is dependent not only on the possibilities and dangers that are available in the market but also on the strengths and weaknesses of the company itself. According to Christensen, Robinson and Simons (2018), for executive managers to make successful adjustments, the first step should be to audit the firm’s previous decisions and the market environment. In order for the management and any other stakeholders to better understand the series of decisions that are crucial to the success of the corporate plan, an audit is needed. Determine how to carry out plans in the most efficient manner in order to obtain maximum value from them. According to the findings of Jaleha and Machuki (2018), if the executive of an organisation aligns the organisation’s structure with the strategic decisions that it makes, then the structure will be more efficient and effective. This ultimately leads to an improvement in the organisation’s overall performance.
There is a considerable correlation between the decisions taken by management and the success of the organisation. From a study done by Bain and Company in 2008, the research surveyed executives from across the world who worked for firms with more than $1 billion in revenue (Qehaja, Kutllovci and Pula, 2017). The study’s purpose was to understand better the efficiency with which these companies make and carry out their crucial decisions. From the quality of the findings, the speed at which judgments were made, and the resources invested in such evaluations using the responses were evaluated from the survey. A correlation was found between executive decision-making efficiency and financial outcomes, according to the conclusions of the assessment. This is equal to or greater than 95% in all the nations. It was also discovered that the firms in the sample that were more effective at strategic decision-making earned at least 6 per cent higher in shareholder returns than the less effective companies. This was in comparison to the less effective companies. On the other hand, this study concluded no connection between the organisational structure and performance. In this instance, it was determined that the organisation’s structure was not an appropriate predictor of the efficiency with which choices were implemented and the outcomes they produced financially.
According to the results of a case study conducted on BP, the highest levels of the organisation defer to the judgments of those leaders who are most prepared to make choices. Waiting for such permissions can, as a result, contribute to delays in decision-making, as stated by Koffarnus and Kaplan (2018). On the other hand, removing obstacles that stand in the way of middle management and moving the process of decision-making to a centralised location would, in the end, result in choices being reached swiftly. This can be accomplished by adopting a straightforward organisational structure in which decision rights are returned to the appropriate person. Decisions are made more effectively, and the firm performs better when the structure of the organisation is simplified, but it is difficult to measure the effects of this decision. Changes in decision-making roles, incentives, information flow, performance metrics, and process flows were observed as well by Bonacchi and Perego (2019). Strategic leaders and executives should create an environment that encourages the development of abilities and talents in order to improve the speed and quality with which decisions are made (Ahmad and Ghavifekr, 2017). Rapid decision-making that is also of high quality has a favourable impact on the overall performance of an organisation.
The decision-making process for strategic leaders is very complicated since it involves the participation of a wide variety of stakeholders and processes from within the business. The leaders of organisations should have the ability to predict a variety of events and respond in a way that will make the most of the changes that are already available and improve the performance. An investigation of how an organisation’s success may be influenced by the actions of its employees has been the goal of this study. To assist firms in staying ahead of the curve, strategic leaders may ensure that the organisation prepares and develops its staff in line with its vision and skills. According to the arguments made in this article, knowledge gap has been identified – there is inconsistency in terms of the creation of internal knowledge that directly affects the decision-making process of a company. A strategic leader’s ability to influence a company’s performance is difficult to pin down, but the study’s findings show that strategic leaders can get their firms ahead of the curve when it comes to innovation.
Strategic leaders invest in their people by providing them with a greater level of insight. They want their employees to use this specific level of understanding proactively to respond to the firm’s requirements successfully (Soleas, 2020). In this scenario, many businesses implement a variety of strategies to inspire their staff members, with the aim of fostering behaviour that is in line with the organisation’s objectives and the adoption of best practices. Finally, for businesses to beat their rivals, an effective strategic leadership program must be in place. This program should strive to manage personnel and enhance employees’ skills.
Adoli, H.L. and Kilika, J.M. (2020) Conceptualizing the role of leadership strategy in the context of strategic management process: A review of literature. Journal of Economics and Business [online], 3 (4), pp.57-83. Web.
Ahmad, R.H. and Ghavifekr, S. (2017) School leadership for the 21st century: A conceptual overview. MOJEM: Malaysian Online Journal of Educational Management [online], 2 (1), pp.48-61.
Alhawamdeh, H.M. and Alsmairat, M.A. (2019) Strategic decision making and organization performance: A literature review. International Review of Management and Marketing [online], 9 (4), p.95.
Alromaihi, M.A., Alshomaly, Z.A. and George, S. (2017) Job satisfaction and employee performance: A theoretical review of the relationship between the two variables. International Journal of Advanced Research in Management and Social Sciences [online], 6 (1), pp.1-20. Web.
Bonacchi, M. and Perego, P. (2019) Customer Analytics for Internal Decision-Making and Control. Customer Accounting [online], pp.37-66.
Bordean, O.N. and Borza, A. (2017) Boards’ attributes and company performance: the Romanian experience. Economics & Sociology [online], 10 (2), p.61.
Christensen, P.H., Robinson, S.J. and Simons, R.A. (2018) The influence of energy considerations on decision making by institutional real estate owners in the US. Renewable and Sustainable Energy Reviews [online], 94, pp.275-284.
Cortes, A.F. and Herrmann, P. (2021) Strategic leadership of innovation: a framework for future research. International Journal of Management Reviews [online], 23 (2), pp.224-243.
do Adro, F.J.N. and Leitão, J.C.C. (2020) Leadership and organizational innovation in the third sector: A systematic literature review. International Journal of Innovation Studies [online], 4 (2), pp.51-67.
Gutterman, A. (2020) Organizational Design and Sustainability, SSRN [online], pp.1-42.
Hobfoll, S.E., Halbesleben, J., Neveu, J.P. and Westman, M. (2018) Conservation of resources in the organizational context: The reality of resources and their consequences. Annual Review of Organizational Psychology and Organizational Behavior [online], 5, pp.103-128.
Jaleha, A.A. and Machuki, V.N. (2018) Strategic leadership and organizational performance: A critical review of literature. European Scientific Journal [online], 14 (35), pp.124-149.
Koffarnus, M.N. and Kaplan, B.A. (2018) Clinical models of decision making in addiction. Pharmacology Biochemistry and Behavior [online], 164, pp.71-83.
Mansaray, H.E. (2019) The role of leadership style in organisational change management: A Literature Review. Journal of Human Resource Management [online], 7 (1), pp.18-31.
Mohammed, N.F., Sanusi, Z.M. and Alsudairi, F.S., 2017. Corporate governance and Malaysian politics: Theoretical framework for accounting quality. International Journal of Economics and Financial Issues [online], 7 (2), pp.188-195. Web.
Nicolaides, A. (2019) Ethical leadership in a morally driven hospitality organisational culture. African Journal of Hospitality, Tourism and Leisure [online], 8 (5), pp.1-14. Web.
Odor, H.O. (2018) A literature review on organizational learning and learning organizations. International Journal of Economics & Management Sciences [online], 7 (1), pp.1-6.
Pessima, J.D. and Dietz, B. (2019) Global strategic planning. The Wiley Handbook of Global Workplace Learning [online], 2 (1), pp.141-154.
Qehaja, A.B., Kutllovci, E. and Pula, J.S. (2017) Strategic management tools and techniques usage: a qualitative review. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis [online], 65 (2), pp.723-785. Web.
Soleas, E.K. (2020) Leader strategies for motivating innovation in individuals: a systematic review. Journal of Innovation and Entrepreneurship [online], 9 (1), pp.1-28.