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CEO MANAGEMENT STYLES FOR STRATEGIC DECISION MAKING
___________________
Corporations may take many approaches to arrive at strategic decisions. However, four
general approaches, to be taken by chief executives, have been identified as appropriate
in different types of organizational structures.
Small organizations with
Single lines of business
Most businesses are relatively small and owned by their managers, either as sole
proprietorships or partnerships. Typically, these firms’ owners make most, if not all,
strategic decisions. Since there are few employees, owner-managers tend to give
employees direct instructions. Subordinate supervisors tend not to make “strategic”
decisions which remain the sole province of owner- managers. This style of strategic
decision-making in small firms with single lines of business is called the “top down”
approach.
Large organizations with
Single lines of business
Many large corporations are devoted to single lines of business. Industries where such
firms often are found include chemical companies, basic metals corporations, coal
companies, petroleum companies forest products corporations and other natural resources
firms all of which are devoted to single lines of business even though they may be quite
large. Illustrations include Dow Chemical Corp., Chevron Corp., US Steel Corp., Nucor
Steel Corp., Alcoa Inc., Peabody Coal Corp., and Potlatch Corp.. However, all large
corporations with single lines of business are not limited to natural resource industries.
Many semiconductor companies and other “high technology” companies also pursue very
limited lines of business. For example, consider Intel, Microsoft and Cisco Systems Inc.
These companies’ organizations can grow to be quite large and complex. Specialized
sub-organizations emerge to perform different functions — such as manufacturing,
engineering, research & development, marketing and sales, accounting, finance,
information systems, etc.. Typically, a general manager or corporate vice president is
placed in charge of each functional organization — e.g., Vice President of Operations,
Vice President-Finance, Controller, Vice President-Marketing and Sales, etc.. In such
organizations, chief executives make strategic decisions in concert with senior corporate
executives who have the specialized functional knowledge to clarify strategic and tactical
alternatives. After such clarification, chief executives make the ultimate strategic
decisions. Senior functional executives then are responsible for communicating strategic
decisions to the entire organization. This style of strategic decision-making in large firms
with single lines of business is called, the “top management team” (TMT) approach.
Small organizations with
Multiple lines of business
Small organizations with multiple lines of business are relatively rare. However, they do
exist. An example might include a small holding company formed by an entrepreneur
who has been successful with a single business and decides to invest in other, related
businesses. Thus, the owner of a successful lodging franchise might decide to open a
restaurant and, later, a gas station. With further success, this entrepreneur might add
more motels, restaurants and gas stations. Another successful operator of an auto
dealership similarly might expand into distribution of recreational vehicles, boats,
construction equipment and farming machinery. In such cases, a chief executive may be
the corporation’s owner or a professional manager. In either case, strategic decisions
could be made by taking a TMT approach. However, another alternative is the “bottom
up” approach.
When each group of small businesses (for example motels, restaurants and filling
stations) is managed independently, by a separate executive, the corporate CEO
frequently will request that each group executive submit proposed plans of business for
his or her respective group (e.g., motels, restaurants and filling stations). Assuming that
each group acts like an independent company — perhaps with its own franchise -negotiations between group executives and the chief executive may produce final,
strategic decisions regarding issues such as construction of new sites, financing,
marketing themes, etc.. This is the “bottom up” approach.
Large organizations with
Multiple lines of business
Corporations which appear most often in the business press are large organizations,
engaged in multiple lines of business. A classic illustration of this type is General
Electric. GE is engaged in numerous industries including Lighting, Appliances, Jet
Engines, Plastics, Medical Equipment, Locomotives and Industrial Finance. In large,
complex corporations such as GE, a TMT approach may be taken. But, more often, a
“hybrid” approach is taken in which both a bottom-up and a top-down approach are
employed.
The hybrid approach begins with announcement of planning assumptions and priorities
by the chief executive with the assistance of a corporate planning staff. Such
announcements might include economic and market forecasts, criteria for acceptance of
capital projects and other financing proposals among a number of other guidelines.
Limitations on availability of capital for such proposals also might be included.
Estimates of interest rates to be paid by the corporation — and used in division budgets -also are provided. In response to those corporate guidelines, groups of divisions and
subsidiaries prepare statements of proposed strategic objectives including the conceptual
nature of corresponding strategies and capital expenditures. Meetings then are held
between corporate and division executives. In those meetings, negotiations are held to
iron out differences between corporate and division expectations. Some proposals are
accepted while others are not; and some requests for refinements of proposals may be
made.
Ultimately, the chief executive and corporate staff officers communicate decisions to
division executives with respect to strategic objectives and projects that should be
included in division plans that qualify for corporate approval. With those instructions,
division executives proceed to prepare strategic plans for their organizations using any
combination of top-down, bottom up and/or TMT approaches. Then, completed plans are
submitted to corporate executives for final review and (hopefully) approval. This is the
“hybrid” approach.
Case Study & Assignment
You will find an exhibit which depicts the four general approaches to strategic decisionmaking for chief executives attached to this document. Also attached to this document
are three articles that appeared in Business Week . One article is about James McNerney,
chief executive of 3M Corp. and his management style. The other two articles are about
Scott McNealy, chief executive of Sun Microsystems Corp. and his management style.
Read these articles closely and then answer the following questions:

Describe McNerney’s management style in terms of strengths and weaknesses.
Would you like to work for him?

Describe McNealy’s management style in terms of strengths and weaknesses.
Would you like to work for him?

Referring to the attached Management Style Matrix, is McNerney’s style
appropriate for 3M? Where do you find this style on the matrix? Explain your
answer.

Is McNealy’s style appropriate for Sun Microsystems? Where do you find his
style on the matrix? Explain your answer.
After completing the above tasks, you should be able to draw specific conclusions about
the appropriateness, and correctness, of these two management styles. In a very few
sentences, describe your conclusions from this analysis.

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