The Strategic Leader’s role in Contributing to High Firm Performance

Introduction

This essay explores the importance of strategic leaders for organisations and what factors enable strategic leaders to impact positively or negatively on firm’s financial growth, leading competition in market and align overall firm performance. Additionally, a business dissertation help guide in knowing the relationship between characteristics of the strategic leaders as a contributing factor, like Intellectual Capacity. relationship between strategic leaders’ characteristics as contributing factors, such as Intellectual Capacity, SL’s Demographics, Leadership Structure and Executives’ Pay Gap Compensation will be evaluated in light of literature by consolidating different views of theorists and practitioners.

Strategic Leader and High Performance

Michael Porter (2006) stated that, the organizational CEO is laying a crucial role in developing strategic decision for the benefits of the organization. The CEO has the highest ranking extenuative in a company whose primary decision is to make major companies decision, managing the overall organisational practice and activities by developing the strategies. Hereby, the CEO of the company is the leader who lead the man agree and the employees for achieving the future organisational success. The roles of the CEO are the leader of the company and the CEO is also known as visionary, manager, and board developer and decision maker. The CEO makes the decision for the organisation and develops further strategic planning for the business to fulfil its aim and objectives. According to Porter (2006), the CEO is also responsible for enhancing the internal communication and maximizes collaborative working practice to make the cooperative decision for the organisational success. In addition to this, the broad members and chairman are also in the second position under CEO who also takes active part in making the organisational decision. Belghitar (2018) stated that, the organisations depend on the chairman, whose roles and responsibilities are such as, leading the board, share accurate and time information, maximising the contribution of NEDs, setting the agenda communicating with all the shareholders and stakeholders in the organization and acknowledging others perspectives for better decision making behaviour for the organization. Hence, the chairman is also playing crucial role in conducting the planning for the firm and taking effective decision for the betterment of the companies in near future. Michael Porter (2006) claims in one of his academic article that great strategies serve as causes for chief, thus he/she is bound to lead those causes to turn it into actions, after which “The Chief” becomes a “Chief Strategist”. Because of the striking link that exists between a great strategy and strong leader, it is imperative to conclude that chiefs are strategists (Porter, 2006). Based on the assumption of a relationship between strategic leader and firm performance, there is a need to identify firm performance and how it is measured. According to a study conducted Strategic Leader 3 on measure of total firm performance, shareholders’ wealth maximisation has always been a mainstream measure of firm performance and primary corporate objective for strategic leaders in traditional theory. Where measure of firm performance is actual firm performance, the higher the shareholder’s wealth, the higher will be firm performance (Jensen and Meckling, 1976).

Role of Strategic Leader towards High Performance

Jensen and Meckling (1976) opined that, strategic leaders are most often also known as the change makers in the organisations. Therefore, the roles and responsibilities they carry are viewed critically as they play a crucial role on the future of organisations. By giving the weight age to best solution, and by implementing the best suitable strategies, the strategic leaders tend to achieve numerous goals in a firm manner. Therefore, Sharma (2014) stated that, the main concern and various goals of strategic leaders include scope of workings, working in a competitive manner in marketplace, defining boundaries for the employees, improving employee performance, designing the strategies of value added services to the customers. In addition, the role of strategic leaders towards attaining the high performance also includes improving firm’s working cycles and setting the best boundaries of organisation to specify its operations. In order to ensure and achieve the high performance, the strategic leaders tend to deal in developing effective decision and implementing changes in the workplace, taking final decisions for creating long-term effect, and irreversible and solid commitments towards all the stakeholders of the business. According to Sims et al. (2015), as high performance is linked with building the high levels of morale among employees, the strategic leaders also introduce work practices which are flexible and enable the employees to stay both intrinsically and extrinsically motivated which further helps the organisational leader, CEO and chairman to lead the employees with their high performance activities. As stated by, Jensen and Meckling (1976), it is a common belief of the successful and influential strategic leaders that giving their high performance and in return, taking high performance from the employees drives the organisation towards higher level of success. Hence, the major role of the CEO is to maximise the organisational performance by enhancing creativity and innovation through making favourable decision.

Leadership Structure, CEO Duality and Firm Performance

Monetary fits of commotion influencing organisations all inclusive, pushed organisations to acquire modification its corporate administration structure where the double job of organisation's CEO as a Chairman decided a noteworthy connection between the capacities of CEO to contribute towards firm performance. According to Rechner and Dalton (1991), the CEO is the main strategic leader contributing in the organisational workplace for better performance management and knowledge management of the staff members to increase the capabilities of the companies for fulfilling the strategic vision. CEO duality shows up when executive from the board is qualified for play out the obligations of CEO. Pandya, (2011) found that, corporate administration structure has direct effect on CEO's or Chairman's capacity to contribute towards higher firm performance. According to Patricia and Joseph (2013), the CEO aims at developing strong corporate bonding and satisfying all the stakeholders engaged with the business whole making creative decision for maximising the firm’s performance. Hence, as per the opinion by Jensen (1993), the creativity, skill of the CEO as well as the problem solving and decision making skill further influence the CEO to reallocate the organisational resources and fulfil the aim of the organisation by acting as major strategic leader. Office hypothesis contend, that CEO power is expanded over the board, if its job has been multiplied with title of Chairperson, which turns into a deterrent for the autonomy among board and the administration, that is basically required to check administrative advancement in the association and resultantly decrease the association performance by influencing it adversely (Jensen, 1993). Contrastingly, the board and expert methodology which depends on stewardship hypothesis (Donaldson and Davis, 1991) and asset based hypothesis (Pfeffer and Salancik, 2003) bantered over positive results of CEO duality, which advances the point of view that CEO duality empowers CEO to have progressively cantered methodology and let him/her receive adaptable leadership, encouraging towards authoritative viability and expanded firm performance, gave the business is working in conceivably unique condition (Yanga and Zhaob, 2014). There has been broad research studies directed to gauge CEO duality influence for a CEO's performance as commitment towards firm performance in the scholarly community and among business network and professionals (DALTON et al., 1998). Regardless, Dalton et al. (2019) opined that, there have been not critical experimental confirmations to gauge the degree to which CEO duality can empower CEO or Chairman to lift firm performance and demonstrate a generous and methodical connection between both. CEO duality works in increasingly unique business condition with positive hierarchical results by ensuring high performance working activities.

Strategic Leaders Attribute and firm performance

(González-Rodrígueza 2015) found that the relation between SL’s characteristics and firm performance has a positive correlation and expresses the extent indicating more the strategic leaders reflect characteristics of being futuristic, visionary and risk averse, higher will be firm performance. Davies and Davies (2004) stated that, the strategic leaders have several attributes through which the high performance workplace is ensured in the organisation. Articulate and strategic thinkers are the major activities of the strategic leaders where the CEO tries to communicate the organisational goals and vision with effective clarity as well as think before acting and seeking in front of the followers in the organisation. According to González-Rodrígueza (2015), compulsive behaviour and the skill of emotional intelligence and interpersonal skill are also the major attributes which contribute efficiently to develop effective strategic decision and create the high performance workforce. Motivator, self awareness, fair decision maker, open minded and creative skill are also the attributes of the strategic leader who is efficient to make fair decision for the benefits of the organisations.

Strategic Leadership’ Statistic and firm performance

Hambrick and Mason (1984) demonstrated through the upper echelon perspective that, top Management Team and Executives matter, and the composition based on demographics for this team is significantly relevant to firm high performance because of the power they posses to make decisions through strategy. In addition, Stephan and Mary (2015) argued that, top Management Teams and Executives’ demographic composition strongly influences its role to contribute in increasing return on asset as they have honed their skills, abilities, critical thinking and experiences which contributes in high performance working activities. Another study conducted empirically on a large sample of Philippines holding companies for organisational demographic study, investigated the relationship between TMT’s and executives’ demographic composition and positive outcomes of organisations One study discovered through regressing higher compositional differences keeping team member’s functional background, experience and age parallel, have highly negative impact on return on equity and concluded that TMT’s composition matters. Yet, Regina (2014) argued that, results has a study ascertained the adoption of cautious measures for team selection which should be weighted as general cautions towards selection of top team’s composition. Additionally, Stephan Kagwathi (2018) discovered that, higher compositional differences impacts organisation performance with a decline in company’s revenue, ROE (return on equity) and ROA (return on asset). Henceforth, suggested to compose team thoughtfully and carefully. Phillips and O'Reilly (1998) argued in a Review of 40 Years of Research on Demography and Diversity in Organisations that the extent of impact on firm’s performance based on strategic leader’s team composition regarding their demographics or functional background could not be determined accurately through studies in research, in term of exact percentage to confirm the size of impact.

Strategic Leader’s Pay Gaps and Firm Performance

Strategic leaders pay and firm performance has a significant direct relation as per however, theories underlying the assumptions of pay gaps which can specifically determine SL’s efforts to improve shareholders’ wealth reveal different results (Lin, ChouYeh and Shih, 2013). Additionally,(Leonard 1990) discovered in one of his studies for executive pay for more than 20000 executives from U.S since 1981 till 1985, that most of the researches on executive compensation are restricted for CEO’s and verify pay gaps have a positive impact on firm. Agency theory is about identifying executive pay gaps, where theory believes in a reward system which is pay-performance oriented. Employers compensate employees with higher pay when they perform better and in turn improve firm performance which also diminishes the conflict of interest problems within organisations supporting the concept of higher pay for higher performance (Brenes, Madrigal and Requena, 2009).

Strategic Leaders Intellectual Capital and Firm Performance

Allam (2018) discovered through his study conducted for two Gulf Cooperation Council Countries from large sample of businesses of 198 firms, that intellectual capital has three dimensions, human resources, structural capital and relational capital, where human resources IC witnesses a significant positive relation with firm performance unlikely with other two dimensions. González-Rodrígueza (2015) stated that, there is strong relationship between the strategic leader and the firm performance where the attributes and skill set of the leader contributes efficiently in managing high performance workplace and leading the employees successfully. The creative decision making behaviour of the CEO of the firms, who is the main strategic leader of the corporate companies develop suitable strategic planning for running the organisational operations and maintaining good relationship with the stakeholders for better performance and innovative solutions to meet the strategic objectives, developed by the strategic leader. Hambrick & Mason (1984), argued that, possessing great power as a governing alliance, for planning, formulating and executing great strategies, require IC for high level corporate performance. Overall, research determines the importance of TMT’s IC as an antecedent for improved organisational performance in knowledge based firms. Irina, Berzkalne, (2013) argued that, the extent of impact of TMT’s IC on firm may vary and cannot be accurately measured because TMT’s IC is comprised of all non-financial assets and do not reflect in any of Strategic Leader 9 firm’s balance sheet as a tangible expense. However, it was found in a research paper by Rehman and Zahid (2011) that, the relevance of TMT’s IC for increasing the firm performance attributed as an essential intangible asset for the business and denoted as fundamental strength in specific industries which are characterized for their knowledge capital and perform in an advanced technology sector.

Conclusion

From the above detailed discussion, it can be stated that, the attribute of the strategic leaders are mandatory for the firms to maximise the performance where the strategic leader plays a crucial role in the company to strategise the whole business process, engage the stakeholders, embower the management team, board members and shareholders as well as encourage their for better creativity to make innovative decision. These variables require further assessment to advance the idea and to gauge the extent of effect these elements may have on firm execution in connection to Strategic Leaders.

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