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COLLEGEOFBUSINESS,UUM

ANALYTICALPROJECTPAPER
SEMESTERJULYSESSION2011/2012

SUBJECTCODE

SUBJECTTITLE

PROGRAMME

: BPMM6043
: LEADERSHIPINORGANIZATION

: MASTEROFBUSINESS
ADMINISTRATION

STUDENTSNAME

MATRICNO.

LECTURER

LEARNINGCENTRE

: LEEYOUWAN

: 806252
: TUANHAJIBADRUDDINA.RAHMAN
: REZZEN,PENANG

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Table of Contents
TABLE OF CONTENTS ___________________________________________________________1
1.0

TITLE & ABSTRACT ________________________________________________________2

2.0

TOPIC AND RESEARCH FEASIBILITY _______________________________________3

3.0

2.1

INTRODUCTION __________________________________________________________3

2.2

CURRENT PHENOMENON ___________________________________________________5

LITERATURE SURVEY ______________________________________________________6

3.1

INTRODUCTION __________________________________________________________6

3.2

CHARACTERISTIC OR REQUIREMENT OF THE STRATEGIC LEADERSHIP ________________7

3.3

THE IMPORTANCE OF VARIABLE _____________________________________________8

3.4

CASE STUDY ____________________________________________________________9

4.0 RESEARCH PROBLEM _____________________________________________________11

5.0

THEORETICAL FRAMEWORK _____________________________________________12

6.0

METHODOLOGY __________________________________________________________15

7.0

SIGNIFICANCE OF THE STUDY_____________________________________________18

REFERENCES __________________________________________________________________19
APPENDIX _____________________________________________________________________21

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1.0

TITLE & ABSTRACT

How Important the Strategic Leadership in Strategy Implementation of an

Organization

Abstract

This paper is to examine how important the role of the top management to ensure the
effectiveness of Strategic Leadership which lead to the successfully of the strategy
implementation of an organization. There is some debate taking place where people tends to
think Leader only meant for the one who stay top in the organization; such as Chief
Executive Officer (CEO) and this argument lead to the debate that Strategic Leadership in fact
do not play an important role in Strategy Implementation. Today world, people tends to
interpret leader in a broad sense to include the multiple layers of leaders in an organization
due to the complexity and big group of organization. Therefore, we are doing a small survey
or analysis using health care system to focus on how the consistency of leadership
effectiveness across hierarchical levels influences the implementation of a strategic initiative.
There is a discussion about the findings as to how the leaders at various levels act effectively
to affect the employee performance and the success of the organization.

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2.0 TOPIC AND RESEARCH FEASIBILITY

2.1

Introduction

According to the Centre for Management and Organization effectiveness, Strategic

leadership refers to a managers potential to express a strategic vision for the organization, or
a part of the organization and to motivate and persuade other to acquire that vision. Hence, an
effective strategic leadership is a prerequisite to successfully using the strategic management
process. Strategic leadership is an ability of firms to anticipate, envision possibilities,
maintain flexibility and empower others to create strategic change (Kjelin, 2009) and this is
supported by Sydney Finkelstein. Hence, it is important to understand the effects and the
behaviour of the leader or known as top management in organization performance as they will
be the person who plays an important role in the strategy implementation. However, previous
studies of leadership only focus on a single person (e.g. the CEO or board of director) but in
today world, leaders at different organizational levels across the hierarchy are clearly
important too (Hunt, 1991). Although Berson and Avolia 2003 argue that upper-level leaders'
actions influence the ways lower level leaders translate and disseminate information about a
new strategy. The mechanisms by which leaders provide meaning about critical elements in
the work environment may influence this alignment. This is supported by (Hackman &
Wageman, 2005).

In contrary, there is argument that the roots of executive leadership are in the creation
of meaning within the organization. There must be a clear and consistency across the leaders
at different levels in order to ensure that the members fully understand the importance of the
implement strategic initiative (Cha& Edmondson, 2006; Osborn, Hunt & Jauch 2002). It
shown there is a relationship among the top management characteristics, an organization
strategies and its working performance. So, Top level manager play a critical role in the
selection and implementation of the strategies which greatly rely on their experience,
characteristic and ability to adapt to flexibility and possess an effective leadership to influence
the members which could positively contribute to the growth strategy of an organization.

As discussed above, an effective strategic leadership will help an organization to

success in using the strategic management process. As strategic leaders, top level managers

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must guide the firm in ways that result in the formation of a strategic intent and strategic
mission, facilitate the development of appropriate strategic. Therefore, the key to have an
effective strategic leadership is to have an effective leadership that will be able to shape the
formation of appropriate strategic action and the way to implement them to culminate in
strategic competitiveness and above average return. In addition to that, the leaders must have
the ability to motivate and influence all of the team to have the same mission and goals and
work toward the future together as a team. The strategy leadership and strategy management
process is shown as below;

STRATEGY LEADERSHIP AND STRATEGY MANAGEMENT PROCESS

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2.2

Current phenomenon

There is a finding that Leadership effectiveness is most visible when an organization

changes its strategy. Pfeiffer & Sutton, 2000 indicate that adopting a new strategic initiative is
distinct from implementing it. It is important to note that the new initiative will only be able
to implement the change throughout the entire organization if it is greatly supported by the
lower hierarchical level people (Lee & Miller, 1999). For example, in a study of 196
managers across 20 organizations, Wooldridge and Floyd (1990) found that the more involved
middle level leaders were in formulating their organizations strategy, the more organizations
performance improved as a result of the new strategy. This suggests that to realize
performance gains from a strategic change requires all the leader in the organization to
effectively communicate the strategy and take actions to ensure its implementation, that is, if
subordinate leaders are not committed to the strategy, implementation is at risk.

If the leadership at one level will only have the ability to implement a strategic
initiative may depend critically on the alignment of organizational leaders across hierarchical
levels then we suggest the hypothesis 1 may happen when the higher the level of its leader
support the new strategy, the stronger the likelihood that the new strategy will be
implemented in that department. If the strategic support demonstrated by leaders who do not
personally lead a department will influence to certain extent where the strategic initiative will
be implement, then hypothesis 2 where more department members perceive that their leader
support a new strategy, the stronger the likelihood that the new strategy will be implemented.

Theoretically, we understand how important the strategic leadership and the leaders in
an organization affect the performance of the organization but the questions are how we
determine who the effective leader is across the multiple layers of an organization level? Is
this theory only applied to the top person of the organization or to every leader across the
levels? Moreover, how can we put control and standardize the interaction among all the
members in the organization who have different culture, experience and thinking.

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3.0

LITERATURE SURVEY

3.1

Introduction

Activities often associated with strategic leadership include making strategic decisions;
creating and communicating a vision of the future; developing key competencies and
capabilities; developing organizational structures, processes, and controls; managing multiple
constituencies; selecting and developing the next generation of leaders; sustaining an effective
organizational culture; and infusing ethical value systems into an organizations culture
(Hickman, 1998; House & Aditya, 1997; Hunt, 1991; Ireland & Hitt, 1999; Selznick, 1984;
Zaccarro, 1996a). Hambrick (1989) argues that strategic leadership occurs in an environment
embedded in ambiguity, complexity, and informational overload. Since it is argued that the
environment that surrounds organizations is becoming increasingly hyper-turbulent
(Eisenhardt, 1989), we suggest that the essence of strategic leadership is the creation and
maintenance of absorptive capacity (Cohen & Levinthal, 1990) and adaptive capacity (Black
& Boal, 1996; Hambrick, 1989) coupled with managerial wisdom (Malan & Kriger, 1998).

Upper echelon theory (Hambrick & Mason, 1984), which suggests that organizations
are reflections of top managers cognitions and values, lead Hambrick and Finkelstein (1987)
to suggest that the amount of discretion enjoyed by top managers will moderate the
relationship between their strategic choices and organizational outcomes. The greater the
discretion, the more impact the leaders choices will have on organizational outcomes. This is
consistent with the position and arguments made by Selznick (1984), Osborn et. al. (1980),
and Stewart (1982) who discussed how choices are influenced by the demands and constraints
facing the leader. As Cannella and Monroe (1997) note, discretion is a summary variable that
incorporates environmental constraints, organizational factors, and individual differences, as
reflected by demographic and personality characteristics. As such, it is treated as an objective
phenomenon as opposed to a subjective perception. To the extent that the leader possesses
discretion but does not perceive it, however, the leader is likely to fail to take action. On the
other hand, if leaders mistakenly believe they have discretion when they do not, then actions
are likely to be met with resistance and failure. Only where objective and perceived discretion
are congruent is success likely.

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Burgelman and Grove (1996) argue that in the life trajectory of any organization are
important strategic inflection points (SIPs). These SIPs are caused by changes in fundamental
industry dynamics, technologies, and strategies that create opportunities for strategic leaders
to develop new visions, create new strategies, and move their organizations in new directions
as they traverse through the turbulence and uncertainty. This requires, they suggest, a capacity
for strategic recognition on the part of leaders at the strategic apex. We would say it requires
absorptive capacity, capacity to change, and managerial wisdom to recognize the SIP, to
understand the potential it holds and how the firm might take advantage of that opportunity,
and to take the right action at the critical moment. Much of the research interpreted as
supporting the importance of strategic leadership examines the impact of succession on
organizational performance (Yukl, 1998).

3.2

Characteristic or requirement of the strategic leadership

As defined earlier, strategic leadership is an ability of firms to anticipate, envision and

maintain flexibility and empower others to create a strategic change and a viable future of the
organization (Kjelin, 2009). It is crucial for us to understand what kind of requirement or
characteristic should be adopted by an organization that focuses on strategic leadership? It
includes absorptive capacity, adaptive capacity and managerial wisdom.

Absorptive capacity refers to the ability to accept the external knowledge to improve
their ability of firms to use and exploit their experiences to identify new information and to
integrate this information to establish practical knowledge for an existing business
engagement (Eriksson and Chetty, 2003). By utilizing this knowledge to achieve business
excellence, gain organizational competitiveness, encourage firm performance and enhance
corporate sustainability by making comparison and take what is the best can be utilize by the
company which likely to have a positive effect on organizational performance.

Adaptive capacity refers to the ability to adapt to the unpredictable or unknown

changes in environment or due to external factors such as business conditions and markets
(Stabel and Sydow, 2002). Its help firms achieve organizational to survive and sustain in
highly volatile and complex environment by given the flexibility to be ready to accept new
ideas, opportunities and variable interpretations in their business operations to fix existing

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condition. Indirectly, adaptive capacity increase the performance of the organization by

reconfigures resources and coordinate processes promptly and effectively to meet and respond
to rapid environmental changes (Zhou and Li, 2010).

Meanwhile, Managerial wisdom is the ability of firms to take the right action at a
critical moment based on an understanding of the environment changes and an effective
response (Phipps and Burbach, 2010). Organization with great managerial wisdom tend to
solve problems more effectively by the relevant information and scenarios, provide
substantial strategic flexibility and apply knowledge and for welfare reason which is
importance for complex decision making. It is a useful tool in explaining and defining firms
performance and success.

Due to the competitive markets and business environments have been volatile,
complex and uncertain, the best strategic leadership must have the three key characteristic of
absorptive capacity to continue to learn increase the value and resources to remain
competitive with its competitor, cover the risk of uncertainty by having the adaptive capacity
to cope with changes due to the turbulent market conditions and have the analytic skill and be
alert to the environment change in order to gain benefit by grabbing the opportunity and
avoid serious damages or losses to the company by taking the right action at the right time.

3.3

The importance of variable

Before a leaders start to change or set a new strategy, it is important for the leaders or

the top management in an organization to question what is factors that may affect the
implementation by taken into consideration of the environmental variable. A variable is
something that can be changed on different values or characteristic. The two common type of
variable are independent variable and dependent variable. Independent variable is the variable
that is varied or manipulated by the researcher and known as the presumed cause. In contrary,
dependent variable is the presumed effect because it reflects the response that is measured.
Therefore, all variables were differences from case to case basic depend on the survey done.
Meanwhile the organization performance is known as a dependent variable that defines as an
outcome of business operations, practices and activities. Evaluation of an organization in

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term of the level and degree of non-financial performance depend on the eefficiency,
effectiveness, management satisfaction and customer response and satisfaction.

A case study is done to investigate the relationship between leadership alignment and
strategy implementation in a large health care organization as discuss in the following
paragraph below.

3.4

Case Study
This Case study involve the plan for a new strategy to be implemented in a large

health care organization that provides comprehensive health care to well over one million plan
members. Central to the organization is a medical group of more than 3000 physicians who
work in 19 large medical clinics. All physicians in the organization do hold an equal number
of shares of stock. The governance by a board of directors that is elected by the physicians
shareholders include all of the physicians, the board, a chief executive officer (CEO) who
must be elected by the full set of physicians,. There are three levels of direct physician
management. Physician working in each centre are organized into specialty group that are
headed by a Department Chief. Department Chiefs report to the Physician in Charge (PIC)
who is responsible for the operations of the medical centre and report to the CEO of the
medical group.

Then, a new CEO had been elected and the organization was undergoing a substantial
change in its market strategy. Previously, the organization uses the advantages of its size to
provide the same quality of care as traditional fee for services providers but at a lower price
and this show success in some ways, however, the cost of this strategy was that patient
perceived the organization to be impersonal and bureaucratic and expressed a low level of
satisfaction. With the growth offer profit health maintenance organization and insurance
driven preferred provider plans, the competitive landscapes of health care shifted and new
heal care organizations were able to undercut the price advantage the medical group that had
enjoyed.

Because of this changes, the CEO and board of directors concluded that they must
change the way patients perceive them to successfully complete against the new set of low

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price providers. So, the suggested new strategy is to compete on quality and services instead
of cost. This is using differentiation theory to differentiate between their companies with other
low price providers. The ultimate goal of the new strategy is to increase patient satisfaction.

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4.0

RESEARCH PROBLEM
The major problems or challenges face by the stakeholder is difficult to be control and

standardize the interaction between physician and patient since each of the human being will
perceive a different mindset which greatly influences by their background and culture. We
may assume that the only way to close the gaps between patient-physician would more likely
result from shifts in physicians perceptions and priorities than implementing formal control
system. Changing employees attitudes and behaviours toward patients is therefore a critical
aspect of implementing the new strategy.

On top of the matter discuss in the above paragraph, this lead to the question in depend
on how the CEOs influence and work with other stakeholders to initiate changes that will
create a viable future for the organization. On the other hands, any decisions made must be
taken into consideration regarding environmental variable. Changing employees' attitudes and
behaviours toward patients is therefore a critical aspect of implementing the new strategy.

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5.0

THEORETICAL FRAMEWORK

In this case study, it is clear that the strategic mission and intent is to improve
customer satisfaction by increasing or focus on the quality and services rendered by the
organization. Klein, Dansereau and Hall (1994) characterize as a mixed determinant
intervention in which a change (a new strategy) is coupled with other predictors (individual
leader effectiveness and aggregate leadership alignment) to influence a criterion of interest
(variations in unit performance). In addition to that, a new strategy generally requires both
tangible and intangible resources and process (Ray, Barney and Muhanna, 2004). From the
research problem in section 4, the critical point that may affect the successful of this
implementation is depend on how successful the CEOs influence and work with other
stakeholders includes the employees to initiate the changes that will create a viable future for
the organization.

Before formulation and implementation of the strategies, it is best for us to identify the
existing presume intend and presume cause in the existing case study by identifying the
independent and dependant variables to achieve the outcome desired by the organization.
Based on the fact of the case study, the dependent variable would be the patients satisfaction
to the services and the independent variables would be the leaders effectiveness or leaders
support of the new strategic initiative. Therefore, we may suggest the framework of
implementation can occur in two broad or somewhat overlapping phases as the following;

1)

The first step is to focus on articulating the new strategy and allocating tangible
resources to support the change. For example: reschedule the system and redesigned
call centre were brought on line across the entire organization.

2)

Changing the nature of the interactions between patients and their physicians.

Since the top management team is the one who play a critical role in the selection and
implementation of the organizations strategies, therefore, it is important for us to study the
leadership skill of the top management such as CEO, PIC (the leader of their medical centre)
and their Chief (the leader of their medical department). This is because we need to ensure the
support from the top management that is strong enough to convince all of the members to
support the new strategy as well. A survey is done on six common items reflecting strategic

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leadings. These items included assessments of the degree to which the leader articulated a
strategy, set a vision, provided measurable objectives, rewarded progress in the change effort,
dealt with resistance, and motivated people to change.

Respondents can rate each leader on a 7-poin Liker scale from not at all to a great
deal. From the survey, the respondents were able to distinguish among the three leadership
roles such as CEO leadership. Using the result from the survey, the leadership is measure by
averaging the individual factor scores of the physician respondents within each department.

Concurrently, we also focus on the patient or customer satisfaction, the medical is

contracted with a national polling firm to survey random sample of patients regarding their
overall satisfaction with their experiences with the medical plan. The question includes;
i)

Number of visit;

ii)

Quality of the services in terms of the staff and facilities;

iii)

Foods and Cleanliness and

iv)

Summary scale scores to the medical groups management on a quarterly basis.

The engage polling firms indeed do the surveyed approximately two million visits per
year and aggregated the responses within each medical centre. The medical group
management provides the measures of the Patient Global Access Rating scale for each of the
40 departments at two points in time. These scale measures patients perceptions based on their
interaction with the staff on dimensions such as listening and level of consideration as well as
quality and accessibility of the care receive.

In addition, another survey is done to focus on the staff behaviour change which is the
important key point to be discussed, taking into consideration the two phases of
implementation discuss above, therefore, we assessed two periods that corresponded to the
second phase of the implementation which is more on the physician behavioural change. The
senior management is asked to specify the point in time which the benefits from the changed
systems would be reflected in the patient satisfaction surveys and that further changes
improve patient interactions with physicians. Two year later, we collected the survey data
again, and as a predictor, the assess changes in satisfaction over the period. It is during this
time frame that the change effort focused primarily on changing the behaviour of individual
physicians.

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On top of that, additional four control variables are used to test the hypotheses of the
accuracy of the result obtained from the above mention survey include i) size of each
department if there is a possibility that the size of the organization may complicated the
process and cause the changes difficult to be control by the top management, ii) Compute a
tenure score for each department since an individual performance may affect in the
organizational change effort and personal willingness to change; iii) two years rating is use as
comparison of the improvement or measure the successfulness of the implementation to
confirm whether there is improvement from the implementation; iv) a survey done to see how
personally the respondents support and convinced by the new strategy.

The controls variables are likelihood serve the purpose to confirm on the accuracy of
the data, the improvement and the successfulness of the implementation.

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6.0

METHODOLOGY
The previous research shows a change (a new strategic initiative) I coupled with other

predictors (individual leader effectiveness and aggregate leadership alignment) to influence a

criterion of interests (variations in unit performance). As there is multilevel nature of this
phenomenon, the issues is addressed using hierarchical linear modelling. HLM is used to
combine in a single regression equation a two level hierarchical linear random intercept model.
It is use to examine the patient satisfaction and the effects of unobserved heterogeneity that
may affect patient-satisfaction-score differences across centres. The independent variables are
being standardized to facilitate interpreting of the result.

The means, standard deviations, and correlations are shown in Table 3. The patient
ratings between 2001 and 2003 show a consistency with the strategic initiative from a mean of
56.40 to 61.54. This show that without controlling for various department and organizational
characteristics, there are no significant correlations between any of the leadership
effectiveness measures and patient ratings of service emerged. Since there are no significant
correlations on the ratings for the three levels of leader, it is fine for us to jump into
hypothesis 2 without being concerned that multicollinearity would artificially inflate our
results. From the significant correlation between CEO and Chief Leadership effectiveness,
suggest that the higher rating of CEO are more likely to support the strategy and this satisfy
hypothesis 1 where the performance of the organization increase and reflected by a change in
patient ratings between 2001 and 2003 when the leader of the organization strongly support
on this implementation. The size of the organization is arguable not to affect the outcome of
the implementation.

Meanwhile, The result in Table 4 which do not show the regression of the control
variables , including patient ratings in 2001 and employee support for the strategy, and
leadership effectiveness ratings for the CEO, PIC, and Department Chief separately on patient
global access ratings for 2003 accounting for variance between centres within the medical
group and between departments within centres show contrary result to hypothesis 1 where
only minimum effect for the Chief leadership effectiveness measure on change in patient
satisfaction ratings although relevant control variables included in the model and taking into
account the two levels of analysis.

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However, it is consistent with hypothesis 2 and this results support the idea that it is
leadership alignment across hierarchical levels that is associated with the successful
implementation of strategic change. From the result, there is significant negative between
employee support for the new strategy and change in patient ratings. This suggests that
leadership effectiveness may be potent if the employees are less commit to the change. The
overall result does show improvement in customer satisfaction.

Although the results are consistent with previous research that shown the effects of the
leadership to be moderated by numerous factors such as resources available to the leader, how
much discretion he or she has, and how much support exists among subordinate managers for
the initiative. (Dess, 1987). If this study solely focuses on the effectiveness of a single leader
(the CEO, medical center director, or department chief), we would have concluded that
leadership had no effect, hence, it should be extend to the alignment of leaders across
hierarchical levels that are associated with the successful implementation of a strategic change.
The result is apparent when the leadership and employee who support for the new strategy to
show that leadership is a perceptual phenomenon, with followers observing the words and
actions of their superiors and making inferences about their motives (Epitropaki & Martin,
2004), The variation suggesting that how employees see and interpret the behaviors of leaders
can be an important moderator of performance and this align with the argument raise by
Podolny, Khurana and Hill-Popper (2005: 47). Hence in the study, when the leaders
effectively supporting the new strategy and the followers believed the purpose and importance
of this new strategy and willing to align with the strategy mission and intent, it will indirectly
improve the patient satisfaction.

Actually, there are several limitations to this study that might be addressed in future
research. First of all is the comparatively small sample size, the 41 medical departments is
somewhat modest and future research may increase the sample size to increase the reliability
of the results obtain. Second limitation is concern to the nature of the organization.
Professional service organizations present leaders with a different set of challenges and
constraints than conventional firms (Lorsch & Tierney, 2002). Healthcare is influence by a
range of external and internal factors but these factors may reduce if these findings are done
to other types of organization. It is also important for us to studied the formal authority as
leader as to how the CEO is elected and whether are they elected from internal or external
team. If leaders are chosen from the specialty department and may return to the group after

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the leadership term end, we can use rewards or simply rely on the legitimacy of a leadership
position to change the behavior of individual physician. Third limitation is depending on how
we defined and measured leadership. In some case, leadership could mean a single leaders but
in some case especially big organization, single leader concept may not apply and we may
use the expertise from all levels to achieve the effective strategic leadership to growth the
organization performance using the three theory discuss in section 1.

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7.0

SIGNIFICANCE OF THE STUDY

The conclusion of this study is important for us to understand how strategic leadership

affect the performance of a company especially how we derived and determine the
implementation framework or plan. For example, in this case study, we can actually suggest
some motivation program or reward provided to the employees for those employees who
show their willingness and put in their commitment to align with the company strategy to
encourage the change of behaviours of the employees toward the positive side. In addition to
that, each survey or action plans done enable the top management to view and control the
implementation of the strategies by making analysis of the report to receive the feedback
which is hidden behind the screen such as the support given by the top management on the
implementation of the new strategy and what is the support or mind-set of the staff (physician
in the case study) on the new strategy and their willingness to adapt to the change.

Meanwhile, it is also can help us to understand the roles of the top management and
what is the criteria needed by the top management team to ensure in their decision making in
selection and implementation of the right strategy to ensure continued growth of the company
performance.

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APPENDIX
Table 1: Correlations among variables (N=40)

Table 2: Effects of Leadership alignment on 2003 patient global access rating