Evaluating Strategic Leadership in Org Transformations

Leadership
http://lea.sagepub.com The More Things Change, the More They Remain the Same? Evaluating Strategic Leadership in Organizational Transformations
Kalle Pajunen Leadership 2006; 2; 341 DOI: 10.1177/1742715006066025 The online version of this article can be found at: http://lea.sagepub.com/cgi/content/abstract/2/3/341
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Leadership
The More Things Change, the More They Remain the Same? Evaluating Strategic Leadership in Organizational Transformations
Kalle Pajunen, University of Tampere, Finland
Abstract This study considers what has changed in strategic leadership during the last century and if we could learn something from the past. These questions are addressed through an historical case analysis of a Finnish pulp and paper industry leader, Gsta Serlachius. The ndings show that at the surface level the world of strategic leadership is likely to be transient and contingent, but at the deeper level it seems to be based on much more stable elements. A correct combination of absorptive and adaptive capacities merged with managerial wisdom provided the basis for effective strategic leadership at the beginning of the 20th century in a similar way as today. Indeed, the more things change, the more crucial is the combination of these basic elements matching with the organizational environment. It is concluded that historical studies can add substantially to the future strategic leadership research. Keywords historical analysis; organizational transformations; qualitative inquiry; strategic leadership; turnarounds
Introduction
During and especially after radical organizational transformations, the successful performance of rms is often linked to the personalities of strategic leaders. They are assumed to possess unique behaviours which are utterly different from and preferable to those of predecessors and crucial for organizational survival (Hegele & Kieser, 2001). As a result, the academic and managerial literature has examined what kind of demographic, personal, behavioural, or contextual factors relate to the realization of successful strategic leadership in continuously transforming organizations (for a review see, e.g. Boal & Hooijberg, 2000; Canella & Monroe, 1997; House & Aditya, 1997). Earlier research, however, has not critically considered (a) if strategic leadership has truly changed during the last century of the modern industrial corporation; and (b) if we could learn something from the strategic leadership of the past. This study
Copyright 2006 SAGE Publications (London, Thousand Oaks, CA and New Delhi) Vol 2(3): 341366 DOI: 10.1177/1742715006066025 www.sagepublications.com
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seeks to examine these two questions through a historical case analysis of a Finnish pulp and paper industry leader, Gsta Serlachius (18761942), and his activities during the successful turnaround processes of the Kangas Paper Mill in 19048 and the Kymi Corporation in 190812. The rationale for Serlachius being the research subject is simple: he was a strategic, top-level leader in two big rms in a dominant industrial sector in Finland at the beginning of the 20th century, and his actions in both turnaround cases under analysis were successful. In general, strategic leadership focuses on the people who have overall responsibility for the organization as a whole (Hambrick, 1989). Contrary to supervisory theories of leadership, that consider task- and person-oriented behaviours of leaders interacting with their subordinates in organizations, theories of strategic leadership focus on the leadership of organizations (Boal & Hooijberg, 2000; Storey, 2005). Visioning, strategic decision making, development of organizational key capabilities and, more broadly, the creation of meaning and purpose for the organization are the key activities often associated with strategic leadership (Boal & Hooijberg, 2000; Cyert & March, 1963; Finkelstein & Hambrick, 1996; House & Aditya, 1997). According to recent research, in order to be successful in these activities, strategic leaders as their basic elements should have absorptive and adaptive capacities combined with managerial wisdom (Boal & Hooijberg, 2000) or the right combination of intelligence, creativity and wisdom (Sternberg, 2003). This study seeks to approach the strategic leadership of Serlachius in four phases. First, a three-part explorative research framework is outlined and research methodology and data described. Second, the accounts of the main events of the turnaround processes of Kangas and Kymi are given. Third, the strategic leadership of Serlachius is analysed from the three perspectives provided by the framework. Finally, these ndings are discussed in the light of more profound elements of strategic leadership.
Research framework
According to Pettigrew (1985, 1992), theoretically sound and practically useful research on change should involve simultaneous analyses of the context, content, and process of change. Building on the idea that an understanding of strategic leadership also requires a holistic analysis, it is anticipated that Pettigrews three-part framework can be modied for leadership research and especially for the analysis of an individual strategic leader in organizational transformation. Therefore, an exploratory research framework is proposed that focuses on the organizational environment (context), a leaders demographic and personality variables (content), as well as a leaders actual behaviour during a given period of time (process). These three elements constitute an integrated whole, but to understand such an inclusive phenomenon as strategic leadership it must rst be divided into manageable parts.
The perspective of organizational environment

The purpose of context analysis is to give a picture of the prevailing organizational environment in which the leader performs. While contextual inuences have often been neglected in leadership research, they have recently attracted increasing attention (e.g. Beyer & Browning, 1999; Denis et al., 1996; Osborn et al., 2002;
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Pawar & Eastman, 1997; Shamir & Howell, 1999; Waldman et al., 2001). Indeed, as Osborn et al. (2002) state, leadership is always embedded in its context. Nevertheless, there is no generally accepted set of contextual factors that should be included in such an analysis. Not all factors that may have an effect can be included, nor can the choices always be made by following strictly predened, objective rules. Thus, a more profound understanding of contextual inuences calls for detailed qualitative case studies and process analyses (Bryman & Stephens, 1996; Hunt & Ropo, 1995). To structure the analysis of the organizational environment, the context element can be divided according to Pettigrews (1987) suggestions into outer and inner components. The outer component outlines the prevailing world view and the wider business environment. The inner component, in turn, concentrates on clarifying the immediate environment of a rm by studying the prevailing power- and resourcedependency relationships using resource-dependency theory (Pfeffer & Salancik, 1978). This internal context usually has a direct inuence on managements scope for action and thus requires careful attention.
The perspective of demographic and personality characteristics

The second part of the exploratory framework focuses on the strategic leaders personality and demographic characteristics and their potential inuence on organizational outcomes. This has been a popular theme in studies on strategic leadership. Variables underlying the investigations have most often been a managers age, tenure in a rm or in an industry, education, language skills, reputation, and motivation. Several scholars have argued that age may indicate a managers exibility and risk-taking propensity (Child, 1974; Hambrick & Mason, 1984; Taylor, 1975). Grimm and Smith (1991), for instance, argued that older managers often prioritize their career safety and the constancy of the organizations modes of operation. Younger managers, on the contrary, have been found to be more growth and risk oriented and to pursue novel and innovative strategies to seize perceived opportunities (Brouthers et al., 2000). The level of formal education, in turn, has been viewed as an indicator of managers cognitive orientations. A generally accepted argument has been that educational level reects an individuals openness to change and propensity to identify and evaluate newer alternatives. Wiersema and Bantel (1992), for example, found a positive relationship between the educational level of managers and the amount of innovation and strategic change in their organizations. Rajagopalan and Datta (1996), however, did not nd a positive link between levels of education and managers orientation to pursue product differentiation strategies. Thus, formal qualications alone may not tell much of a persons competencies. Instead, studying abroad and interacting with people from different cultures is seen to be very important for managers in global business (Kumar & Usunier, 2001) and managers should see learning as a permanent way of being that is not restricted to mere formal institutions and courses (Vaill, 1996). In other words, strategic leaders may need a broad educational background but, more importantly, they need a receptive attitude to lifelong learning. Extensive research has also focused on executive tenure. The general opinion has been that long-tenured managers tend to avoid making strategic changes in their
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organizations (Finkelstein & Hambrick, 1990; Hambrick & Fukutomi, 1991). In addition, it has been suggested that managers who have spent their whole career in the same company or industry may have a limited knowledge base and little desire to search for new strategies or pursue new ideas (Katz, 1982; Rajagopalan & Datta, 1996). Age, education and tenure are not the only demographic and personal attributes utilized in strategic leadership research. High motivation, that is, the willingness to expend effort and persevere at an activity (e.g. OReilly & Chatman, 1994), are likely be equally crucial characteristics for a successful leader as is the case with trustworthiness. Indeed, there is a widespread agreement on the importance of trust in interpersonal relationships (see, e.g. Hosmer, 1995; Sheppard & Sherman, 1998; Williams, 2001).
The perspective of strategic behaviour

The third component of the exploratory framework focuses on a strategic leaders realized behaviour. As Granovetter (1985) argues, most behaviour is closely embedded in networks of interpersonal relations and that is likely also to be the case in strategic leadership. Personal information from trusted informants is usually cheaper, richer, and reliable. Geletkanycz and Hambrick (1997) suggest that managers extra-industry ties especially contribute information that complements other forms of managerial information and experience. According to Boal and Hooijberg (2000), a wide social network indicates a leaders social intelligence and managerial wisdom, thus improving the understanding of the wider context within which the rm operates. Vision is also seen as an important component of the leadership process (Bass, 1985; Conger & Kanungo, 1989). It refers to some future goal that the leader wants the organization to achieve. Visions may include boundary-breaking content as well as the view that it is preferable to maintain an organizations status quo (Berson et al., 2001). A practicable vision may be very simple: concentrating on the basics and making these things right. In fact, effective leaders may emphasize both instrumental and inspirational topics in their visions, since not grounding a vision in some level of practicality can lead followers to view it as Utopian (Berson et al., 2001). In addition to the networking and visioning, the core activities of a strategic leader focus on the strategy process. As Mintzberg (1989) argues, strategy can be understood as a pattern, that is, consistency in behaviour over time. In the strategy process, there may be intentions that are fully realized as well as fully unrealized strategies. In addition, the strategy may emerge. Operational measures that are taken one by one converge over time into some sort of consistency or pattern. However, hardly ever is the realized strategy solely deliberate or solely one which emerges; rather, it is deliberately emerged. The focus on strategy formation, instead of strategy formulation, leads us to study the dynamic and contextual processes of leadership (Leavy, 1996). From this perspective strategic leadership is needed to steer the strategy-formation process. Strategic leaders should adapt the organization to comply with their intended strategic direction. In this, as emphasized by Markides (1999: 56), strategic leaders should answer three basic questions: Whom should the company target as
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customers? What products or services should the company offer the targeted customers? How can the company do this efciently?. Leaders inability to make explicit choices on these three dimensions is a common cause of strategic failure. Conversely, strategic innovation occurs when leaders identify new ways of answering these questions and these new intentions are successfully realized (Markides, 1997). Thus, a successful strategy-formation process requires that the strategic leaders are not only capable of consistent and comprehensive behaviour, but are also innovative and motivated towards continuous adaptation.
Method and data

This study of Gsta Serlachius can be considered as an interpretive historical case analysis (Miles & Huberman, 1994). Using Stakes (1994) classication, the case is instrumental: Serlachius is examined to provide insight into strategic leadership. Like case studies in general, this study is not generalizable to populations, but generalizations may focus on a theory. Such studies are seen to be especially appropriate for supporting the development of theories in new topic areas and for providing new insights on topics already researched (George & Bennett, 2005) and may elucidate in novel ways phenomena as complex as leadership (Conger, 1998). In the actual research process deductive and inductive logic worked together. The study was deductive because the exploratory framework provided guidelines for analysis and it was inductive because it sought to advance the understanding of existing theory on the basis of empirical ndings. In other words, the framework that is built on theoretical knowledge of previous studies shows what factors it may be relevant to look for (Ragin, 1994). Without explicit concepts it is impossible to make sense of the complex nature of leadership and the innite amount of information that can be collected from a single case.
Data collection and analysis

The basic requirement for historical analysis is the availability of research data. Sometimes there are no data or the data available may be inadequate. A common problem is also that researchers access to archives is limited. Fortunately, these problems did not occur in the present study. The essential endeavour and starting point in the data collection and analysis was to include all possible material providing information on the processes and Serlachiuss behaviour. In so doing, it became possible to collect information of the same issue from different perspectives, to obtain more detailed knowledge of the processes, and to evaluate the value of the information relayed by different sources. More generally, data triangulation involves using independent pieces of information to obtain a better grasp of something that is only partially known or understood (Denzin, 1978). If only one source of information regarding a particular issue was available, the importance of that information was evaluated using other means such as situating the individual piece of evidence within a larger context of origin and function (see Bryant, 2000). Of course, such assessments were included in the process of data collection and analysis whether or not there was abundant information. The archives provided four main sources of research data (see Appendix). The rst
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source was the minutes of the board of directors meetings, which also includes appendices concerning the issues discussed. This was a particularly valuable source of data regarding the Kymi Corporation. While it is probable that the records do not provide information on all the issues and events occurring in the organization, or may not record all the opinions expressed in the meetings, they provide surprisingly detailed information on the decisions and reasons why a decision or suggestion was made. What is more, the minutes always report the person who made the suggestion or presented the information. Accordingly, the evidence provided by the minutes can be accepted to be at least approximately correct. The second main source of the research data in the company archives was the minutes of the creditors and owners meetings. While these meetings were only occasionally arranged, the minutes offer another perspective on the issues discussed in the board as well as novel information on the main stakeholders. This material also includes appendices with, among other things, cost estimates, letters and reports as well as other internal documents. Since the material was only meant for internal use in the organization, there is no predetermined reason to suppose that the facts described in the documents are not correct. Of course, each piece of evidence again merits its own appraisal. The third main source of evidence was the company and managerial correspondence. Company correspondence as research data are somewhat asymmetric in respect of the amount and information conveyed by the material. As a whole the correspondence consists of thousands of letters (both dispatched and received). Most of them, however, are only short documents regarding business transactions with little detailed information. Accordingly, the amount of correspondence with a stakeholder, for example, cannot be seen as a direct indicator of the nature of the relationship; rather, inferences have to be based on the content of the correspondence. Managerial correspondence, in turn, was more detailed in respect of the major issues in and around the organization. Moreover, the managerial correspondence offers opportunities to compare information relayed between different individuals which also facilitate the source criticism. The fourth class of the research data consists of annual reports as well as nancial and production accounts. At the beginning of the 20th century the annual reports were not intended for public distribution. Of course, the participants of the annual shareholder meetings obtained copies of the reports and thereby the information diffused. In all, the annual reports provided the ofcial description of the organizations performance, which meant that the facts suggested needed to be particularly critically evaluated by the researcher. The detailed nancial and production accounts, however, were only intended for the internal use of the organization. Therefore, there is no specic reason to doubt their accuracy. In addition to the company archives, the primary research data were also collected from other archives. While the correspondence material in the company archives was useful in supplementing the information offered by the minutes, even more intimate information was provided by the personal correspondence of Gsta Serlachius. This material is located in the archives of the Gsta Serlachius Art Museum. In these letters the managers openly discuss and share information regarding various issues. Thus, the correspondence, besides providing unique information, supplements the evidence obtained from more formal sources.
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The literature on Kangas and Kymi was used to reect the evidence provided by the archives (Ahvenainen, 1972a, 1972b, 1975; Hoving, 1947; Norrmn, 1928; Talvi, 1979; Tuuri, 1999). The literature did not offer signicant evidence that the archival material did not show. This is understandable, since the histories of the rms can only provide relatively short descriptions of the crises. I also consulted the histories of banks, other organizations, and bibliographical information on each actor-related process if that was available. Moreover, I examined how the leading nancial magazine (Mercator) reported on the rms. Finally, I used the ofcial statistics of Finland and separate research reports (e.g. Hjerppe, 1996) concerning the growth of the economy and development of foreign trade in order to dene the economic and institutional contexts of the processes. All documents related to Serlachius were identied and categorized according to their information. These documents were then further analysed using data triangulation and, nally, the case study on Serlachius was documented. Indeed, the wide range of primary and secondary sources made it possible to analyse Serlachiuss characteristics and behaviour from different perspectives and thus to increase the reliability and validity of the analysis.
Strengths and limitations of the study

The study is subject to the limitations generally connected with historical research but also has some specic limitations. First, the analysis concerns a single and successful turnaround leader in the Finnish pulp and paper industry. It would be useful to study a larger sample including leaders from different businesses, nations, and eras. Focusing on in-depth analysis of one strategic leader at the beginning of the 20th century, however, provided access to sources with precise information about the details of the leaders behaviour and made it possible to examine holistically how he dealt with the two separate turnaround processes. Having access to the leaders correspondence also provided an opportunity to examine the turnaround processes from the leaders perspective. This point of view contributed substantially to data triangulation and resolved some of the concerns regarding retrospective data (Golden, 1992). While this study is not statistically generalizable to other leaders, a study such as this that moves from surface observations towards the underlying structures, also moves from description to explanation, and thus towards better theory (Pentland, 1999). An in-depth interpretative historical analysis can thus be seen as a relevant way to explain and comprehensively understand the complexity of strategic leadership.
Turnaround processes
Kangas Paper Mill
The Kangas Paper Mill is one of the oldest paper manufacturers in Finland. It was established in 1873 and is still operating at the same location. The mill was originally a specialized producer of high-quality paper. After the retirements of competent paper engineers, the knowledge needed in the manufacturing of these grades of paper vanished. Therefore, during the 1890s the mill also turned to the bulk
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production of grades such as newsprint. In the last years of the 19th century the rm had several unprotable years. Financial problems were usually solved through loans and by increasing equity capital. In 1903 the rm was again in severe difculties. These problems originated in part from the bankruptcy of a major customer in 1901 that also caused nancial loss for Kangas. The creditors were no longer willing to cover the loss by providing extra nance. Instead, they required that the rm should be declared bankrupt, a new joint stock company founded, and their claims changed into privileged shares in the new company. This was done. Kangas underwent a change of ownership, got new managers and new credit. However, the performance did not improve and the rm was soon in serious nancial difculties. This time, the main creditor and the biggest owner, a commercial bank, Nordbanken (NB), was no longer willing to put off the inevitable by simply providing extra nance. The main creditors decided to put the rm into liquidation and conduct a thorough appraisal of the rms future prospects. This investigation was conducted by a group of three experts (Gsta Bjrgenheim, Albert Snellman, and Anton Fredrikson) and the results were two-fold. They found that Kangas was in an unsatisfactory condition in several respects, but they still believed that the rm had the basic elements for successful performance in the future. After the creditors, together with the main owners, had considered various options, they decided to implement a turnaround. The investigators had pointed out that one obvious reason behind the crisis had been incompetent management. Thus, in October 1904 new top managers, Gsta Serlachius, Albert Snellman and Yrj Pulkkinen were hired to manage the turnaround. Serlachius was appointed CEO, and Snellman and Pulkkinen were to assist him. The managers mandate was short and simple: the rm had to become protable. Because the creditors and owners understood how difcult the situation was, they supported the change and gave the managers an almost free hand to manage the rm. This already shows that the actual operational as well as strategic power in the organization was devolved on Serlachius. In 1904 the production results had been poor and the overall situation in the mill was rather upsetting. For example, only one of the two paper machines was operational. Conversely, Serlachius had a free hand to act and the stakeholders mindset made the change possible. In an industrial organization of the early 20th century the production process had a prominent position. Therefore, Serlachius also focused his rst thoughts on the Kangass production. His conclusion, in December 1904, was that the mill should focus on the area of manufacturing that would best suit the potential of the rm. They could not manufacture all grades of paper at a competitive price. Serlachius decided that they should continue manufacturing those paper grades that seemed to be most protable, such as parchment paper, but stop the production of other bulk products. Most importantly, Serlachius saw that the future of Kangas was in the production of high-quality paper. This restructuring could not be implemented instantly. It required technical improvements, practical experiments and training for the engineers. The change in the production process started gradually, but in the spring of 1905 one machine was already successfully manufacturing tobacco paper. Serlachius underlined that they should be able to full all the requirements and special needs of the customers, which
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called for careful product-development work. Tobacco paper manufacturing started to show positive nancial results in 1906 and 1907. Conversely, this meant that during 1905 and 1906 they also had to concentrate resources on the production of silk and parchment paper that had fairly well-established markets. In order to improve the quality and performance in the manufacturing of these grades, Serlachius made several machinery investments in 1905. Concentrating on high-quality paper seemed to be very successful since by the end of 1906 they systematically declined orders for cheaper qualities. While the production process had a prominent position, the turnaround may not have been possible without changes and innovations in other areas of the business. One such area was sales and marketing. At the end of 1904 Serlachius and Snellman already started to reconstruct the agency network of the company in Finland. As a result, the sales in Finland were concentrated in the hands of two sales agents. In Russia the main sales agent was Anton Lindebergs company in St Petersburg. All in all, Kangas was dependent on the Lindebergs connections, and therefore the new management tried to strengthen this relationship. While Russia was the main market area, Serlachius also tried to nd new markets from the UK and other parts of Western Europe as early as in December 1904. However, they could not achieve competitive prices from those areas and decided to focus on the markets of Russia and Eastern Europe. This also entailed personal travel by managers to these areas. In February 1905 Serlachius started fairly extensive sales promotion through an advertising campaign in the Finnish press and at the beginning of 1906 this campaign was expanded to the new nancial journal, Mercator. In 1905 the main message of the advertisements in order to move the old stocks was the competitive price of the paper, but in 1906 the advertisements were already fully focused on high quality. Interestingly, Kangas was the only paper manufacturer to advertise in Finland. In addition to public promotion, Serlachius sent personal letters to existing and potential customers with information and samples of their paper. The third area of change, namely cutting costs, started in the beginning of 1905. The basis of the cost cutting was in the new cost-accounting and protabilitycalculation systems that were also closely connected to the new production strategy. These ideas were progressive, since not until the 1920s were these methods presented in the Finnish accounting textbooks. Most likely, Serlachius had adopted these methods when travelling around the USA and visiting various industrial corporations during 19034. In addition, Serlachius actively discussed and exchanged opinions on these calculations with the managers of Mntt Paper Mill. The protability calculations and advertisement campaigns were closely linked to the ofoading of the stockpiled paper at the end of 1904 and the beginning of 1905, and were thereafter used to control the size of the stocks and to manufacture orders just in time. The creditors had promised that they would provide additional nancial support in 1905. However, in the autumn of that year, in his letter to Gsta Bjrkenheim, Serlachius stated that while the situation was far from stable, they had no need for additional credit. In 1906 the rm already showed prot and this development continued during the following years. ROI and other nancial indicators also showed improved results. In the summer of 1907 Serlachius reported to Lindeberg that the order book was
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full for over three months and, in practice, they could get almost any price for the paper they wished. Serlachius emphasized that they had been able to make their paper fashionable. Moreover, in 1907 they were ready to make the rst substantial repayments of the loan. This trend continued in 1908. Thus, regarding both nance and production, the organization had managed to complete a successful turnaround.
Kymi Corporation
The Kymi Corporation was formed in 1904 as a result of a merger of three pulp and paper companies: the Kymi, Voikkaa, and Kuusankoski mills. The rm was the biggest industrial enterprise in the country. Although each of these three factory combinations had its own managers, the chairman of the board of directors and the biggest owner of the rm, Rodolf Elving, had full control over all decisions in the corporation. One of the main reasons for the merger had been to achieve economies of scale in production. Elving immediately continued this expansive ideology and started a major investment programme including, among other things, three new paper machines. These investments were mainly nanced by bank loans, but also personally by the main owners. In 1906 re destroyed the paper machines of the Kymi mill. The burned mill was quickly repaired. The insurance compensated some of the damage, but the rm had to borrow considerable sums of money and arrange a privileged subscription of shares. In the autumn of 1907, new machines were operational, but at the time the rm was already facing new problems including declining paper markets. A poor harvest in Russia caused difculties throughout the country. This, among other things, led the Russian government to strengthen the policy of censorship and to close down several newspapers. Regardless of the deteriorating situation, the rm did not instantly reduce its manufacturing volume. The paper stocks in Russia increased day after day. This would not have caused problems if the business cycle had soon changed, but no quick recovery came about. Not until December 1907 was the decision made to discontinue paper production in the Kymi factory and to reduce pulp production. The rm received a loan from the banks. However, it was used up as early as in the beginning of 1908. Negotiations continued with the different banks, but did not lead to any solution. As the crisis deepened, the biggest banks were no longer willing to keep the Kymi Corporation aoat with extra nance. In January 1908 a question arose if all the operations of the rm should be closed down. In the beginning of February 1908, Albert Snellman, as a representative of the creditors asked if Gsta Serlachius would be willing to be involved in the investigation of the Kymi Corporation situation together with Snellman and Gsta Bjrkenheim. Serlachiuss response was positive. After the turnaround of Kangas, Kymi provided a second challenging arena to apply his skills. The results of the thorough investigation of the rms conditions and future prospects showed that Kymi was in serious difculties, but also that it had prospects for protable production and that it deserved the support of the banks. Therefore, on 3 March 1908, the creditors decided to take charge of the rm and ofcially declared that all its payment transactions should be discontinued. The creditors intervention included an extensive rescheduling programme of the
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old loans and payments as well as new credit to keep the business going. While the representatives of the Bank of Finland were not totally satised with the arrangement, they accepted the contract without further negotiations and clarications because such events might endanger the existence of the organization and lead to severe social and economic conicts. According to the creditors and shareholders decision, Gsta Bjrkenheim, Gsta Serlachius, and Gustaf Langenskild were appointed to manage the rm. Bjrkenheim became chairman of the board of directors and Serlachius vice chairman. The new management team was given a free hand to manage the rm. The only predened instructions were that they would not be allowed to construct new mills and that they should be most frugal in their activities. None had predetermined roles in the management team. In practice, Langenskild concentrated on legal matters while Bjrkenheim and Serlachius were responsible for other matters. It soon became clear that the rm needed a CEO who would bear the responsibility for the management of all the mills. This assignment was offered to Serlachius, but he was not willing to take on it because of his other responsibilities. The nancial arrangements with the banks were the main issue during March, but already in April the members of the management team were able to fully concentrate their efforts on the other questions. The investigation had already shown that the accounting system of the rm suffered from serious deciencies. Serlachius decided that they had to reorganize the entire system. The new system improved the ability to evaluate what the most economical qualities of paper were for different machines. These changes promptly improved the efciency of the manufacturing process. Moreover, Serlachius had already paid attention to the raw material costs and introduced the heating by coal. The managers explicitly stated that their intention was to reduce the number of factory workers to a minimum. The job cuts were substantial in 1908 and 1909, when almost 1000 workers lost their jobs. They were not totally inhuman since the dismissed workers were allowed to continue living in company housing if they were already living there. This also served the companys purposes as a form of a labour force reserve. From 1909 the rm began to systematically improve the services and living conditions of the workers. A third series of events also started in April 1908 with the aim of renegotiating the contracts with sales agents both in Finland and abroad as well as reorganizing the sales districts in order to make the sales system more controllable. During the negotiations with the agents in the summer of 1908, the managers emphasized that they could not afford to take excessively big risks and that the agents should work as carefully as possible. The basic lines of their future sales policy included, rst of all, ofoading of the stockpiled paper, an increase in the sales volume, accurate and fast payments and, nally, a gradual increase in prices. The last of these is particularly interesting, since they did not try to beat down the prices. This, of course, did not mean that they would not sell the paper from stock at a reduced price. The fourth broad issue that Serlachius and Bjrkenheim started to consider in April 1908 was possible cooperation or the formation of a common price agreement with other Finnish paper mills selling paper to Russia. First, however, a contract with other newsprint producers about the sales quotas on the Finnish markets was renewed. The agreement concerning the Russian markets was more complicated and
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did not lead to such a straightforward solution. In any case, this was a start for forthcoming negotiations. In addition, technical improvements were started in the mills during the summer of 1908. However, the biggest open issue was what they should to do with the closed Kymi mill. The managers were convinced that they should try to restart the whole mill as soon as possible. This, of course, necessitated an increase in order volume. According to Bjrkenheim, they should monitor the development of the paper markets in Russia very closely and gradually restart the machines. Most importantly, they could no longer produce paper to be held in stock. The agents were likewise ordered to accept only direct orders so that the managers could control the manufacturing processes more carefully. After the negotiations with the agents and the creditors, the rst of Kymis paper machines was nally started in September. The issue of a competent CEO was resolved in November 1908, when Serlachius started in this position. He negotiated an agreement that allowed him to continue in his other leading positions in the paper mills of Mntt, Kangas, and Leppkoski. These connections were not considered to be obstacles because Serlachius asserted that the rms were not direct competitors of the Kymi Corporation despite the obvious fact that some of them actually produced similar grades of paper. Even supposing that this was not a problem in 1908, it became one of the main reasons why Serlachius left Kymi in 1912. As the CEO Serlachius focused not only on the production processes, but also on sales and marketing. In February 1909, he made a personal visit to St Petersburg, Moscow, and Rostow to meet the important customers and inspect the paper stocks of the agents. In his report, Serlachius describes the customers wishes and complaints in detail. The development and future prospects of the Russian economy and the political situation inuencing the prevailing state of affairs on the paper markets were also closely addressed. Russia continued to be the main market area for paper, but Serlachius had a clear aim to extend the rms clientele to more stable areas, namely Britain. The idea was to nd new customers for newsprint. The price of newsprint in Britain was lower than in Russia, but focusing on a restricted sales area is risky for a bulk products manufacturer. Therefore, the extension can be seen as a farsighted strategic decision. The demand for paper began to increase early in 1909 and the second of the Kymi factorys paper machines was started up. In July a decision was taken to restart the third machine. An interesting point is also that Serlachius tried to make the rm more coherent so that Kymi, Voikkaa and Kuusankoski would be in equal positions. In January 1910, for example, a common engineering ofce was founded that would serve the needs of all mills. Signicant changes in production processes were also introduced. Moreover, in the summer of 1909, Serlachius presented an idea of a collective logging company to be founded together with the other four forest industry rms operating in the Kymi River area. The main purposes of the logging company were to acquire the timber needed for its members, reduce the cost of acquisitions, and at the same time avoid internecine competition. The year 1910 also saw some changes. Concrete results were achieved by installing innovative bre recovery units in the paper machines, introduced by Serlachius. The rms nancial situation and order volume improved during the spring of 1910 and nally in April a reimbursement plan was introduced.
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Bjrkenheim stated that, if the creditors accepted the plan the rm could be considered saved. Of course, there were many risks. Radical changes in the Russian customs or unfavourable decisions by the banks could change the situation. However, the creditors were satised with the plan and it was approved in May 1910. The year 1911 followed the same lines: improvements were made in all areas and statistics. A collusive contract with the other Finnish newsprint producers for Russian markets was also nally concluded and the reorganization of the agencies in Russia continued. Altogether, the state of Kymi, both regarding nance and production, was secure in 1912. The organization had managed to achieve a successful turnaround, though the formal decision to end the creditors administration was not made until June 1914, just before the outbreak of the First World War.
The three perspectives on the strategic leadership of Serlachius

Organizational environments
At the beginning of the 20th century Finland was an autonomous grand duchy under the rule of the Russian Tsar. Finland had, among other things, its own parliament, laws, and a strong national identity, even though the country was under the pressure of Russication. Finlands trade focused on both Russia and Western Europe. Russia was the main market area, primarily because the export duties for Finnish products were lower than those for the products of other countries. This was a notable advantage especially for paper manufacturers like Kangas and Kymi. Russias domestic policy, however, was rather unstable. Thus, relying entirely on the Russian markets was not an ideal situation in the long run (Kuisma, 1993). At a national level, Finlands economic development was mainly positive. During the years 190212, gross domestic production (GDP) increased at an average annual rate of 2.3 per cent, but the range of uctuation was wide, between 0.65 and 5.6 per cent, with GDP only declining by 0.33 per cent in 1908. This was also the most difcult year for the Kymi Corporation. The gross production of the pulp and paper industry paralleled GDP, with 1908 the only negative year (Hjerppe, 1996). The business environment of the pulp and paper industry as a whole was clearly competitive, though there were already some preliminary signs of forthcoming cooperation. As in Germany (cf. Chandler, 1990), commercial banks played a key role in providing funds for capital-intensive industries. As in Kangas and Kymi, representatives of banks sat on the boards of several enterprises and had a notable inuence on their decision making as well as the formation of possible cooperative relationships. Kangas concentrated more on ne paper manufacturing, whereas Kymi was clearly a mass-producer of newsprint. Thus, they were not direct competitors. On the domestic market, they had some Finnish competitors. Since both Kangas and Kymi exported a major part of their production, their main competitors were in most cases paper manufacturers from Sweden, Russia, the UK, and Central Europe. The government did not circumscribe competition, but as a legislative force, it had the full potential to raise customs tariffs, which would have had a critical inuence on export earnings. As a whole, business activity at the beginning of the 20th century was not as
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chaotic, hectic, and extensive as today. In managerial work, the doctrines of scientic management and its predecessors were starting to exert an effect even in Finland. Salaried full-time managers were already common and managerial hierarchies were developing (cf. Chandler, 1990). These trends were also evident at Kangas and Kymi. Regarding the implementation of leadership activities in the industrializing society, the outer context may also have had an inuence as a form of uctuating political situation that culminated eventually in 1917 with Finland gaining its independence. First of all, as a result of Russication actions by imperial Russia around the turn of the century, the parliament of Finland lost to some extent its appeal as a forum for the development of Finnish society. Industrial corporations and business life in general, which were not controlled as tightly by the Russian Tsar as the political organs, were seen to be more promising arenas in which to exert inuence in societal questions, too. Thus, several competent political leaders tried to nd positions in Finnish business life (Polvinen, 1989). In other words, the importance of rms and their managers generally increased in society. Second, the defeat of Russia in the Russo-Japanese War (19045) and the subsequent general strike opened the general political discussion and enabled the organization of the labour movement, but at the same time the unrest increased among the workers. In fact, it has been claimed that the mental attitude among the working population was occasionally almost anarchistic (Kuisma, 1993). As a result of all these matters, including the fact that the top manager had a patriarchal position in most of the industrial organizations, the need and potential for the implementation of leadership activities was favourable. An explicit way to approach the prevailing inner organizational environment during the turnaround processes is to analyse the ownership and debt relationships. The ownership of Kangas was divided among several groups and individuals. There were no majority stockholders. On the other hand, NB (40 per cent) and the Bank of Finland (20 per cent) together constituted such a coalition. The main issue, however, was that the main owners were also the main creditors. In that respect, NBs position as the biggest creditor and owner was especially important. Furthermore, two forest industry companies as well as two individuals (Anton Lindeberg and Gsta Bjrkenheim) were important stockholders and creditors. Other minority stockholders and creditors claims relative to the previous groups were so low that Kangas was not, de facto, dependent on them. Using the terms of resource dependence theory (Pfeffer & Salancik, 1978), it can be seen that the rm was heavily dependent on liquid assets as its central resources. Thus, NB, as the main holder of this resource, possessed signicant power over the rm. Without NBs contributions, the survival of Kangas would have been unlikely. However, as the biggest owner, NB was also at substantial risk of suffering signicant losses in case of bankruptcy, even though its liabilities were preferential. The Kymi Corporation had a fragmented ownership structure. In contrast to Kangas, the banks held almost no company shares and no major owners existed. The biggest creditors were NB, the Bank of Finland, and Privatbanken. NBs share of the total sum of the demands was about 30 per cent. The Bank of Finlands share comprised about 25 per cent and Privatbanken held nearly 20 per cent. Consequently, this group of three banks was responsible for a major part of the Kymi Corporations nancing and possessed signicant power over the rm. The claims of other
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creditors relative to these banks were marginal. The situation of the banks was thus similar to NBs situation with Kangas. They were at risk of suffering signicant losses in case of bankruptcy, and therefore opted to save the rm. Overall, in addition to the fact that the outer context of both turnaround processes was rather favourable, or at least did not hamper the successful strategic leadership of Serlachius, the internal organizational environments can be seen to be fairly advantageous for the successful strategic leadership, too. The governing organizational groups had understood that the changes were necessary and their nancial support also enabled the implementation of needed actions. Moreover, they gave the managers sufcient freedom of action.
Demographic and personality characteristics

Gsta Serlachius was 28 years old when he accepted the position of CEO at Kangas, and he was still young when he was appointed to the Kymi Corporation four years later. The average age for the appointment of industrial managers in Finland was 42 years at beginning of the 20th century and the recruitment age was lower in the rst half of the 20th century than in the second half (Fellman, 2001). Consequently, managers ages at the beginning of the 20th century contrast with those of managers today. However, even in his own day, Serlachius was clearly younger than the average CEO. With respect to age, Serlachius was thus a good example of a potential turnaround leader. At the beginning of the 20th century, the levels and degrees of formal education were rather different from those of today and the general standard of education was relatively low in Finland. There was no formal management education at all and only one institute for engineering studies, one university, and a cadet school (Fellman, 2000). Thus, practical experience was often the most important teacher, even though the sons of wealthy families were able to obtain higher scientic education in continental Europe or the United States. Pure one-to-one comparison between the beginning and the end of the 20th century, however, is not feasible. Gsta Serlachius matriculated from high school in 1895. He subsequently studied two years of law at the university, but did not graduate. Nor did he have a formal engineering education. However, Serlachius travelled to the UK in 1897 for a long period of study and training. In 19023, he studied paper technology and machine industry at the Technologisches Gewerbe-Museum of Vienna in Austria. Serlachius also travelled around the United States in 19034, where he gained further new ideas and worthwhile skills from the paper industry and business management (Ahvenainen, 1975). During these periods, he had also acquired excellent language skills. He communicated uently in English, German, and Swedish. These were the languages also needed in Kangass and Kymis businesses. In addition, Serlachius had familiarized himself with different industrial organizations, the most modern ideas, and a vast number of important people. Personal relations were, indeed, crucially important when competing in international markets. All in all, because formal education for managers was not available in Finland, Serlachius obtained the diverse skills and knowledge needed by a leader through practical experience and study both in Finland and abroad. This international, modern, and wide educational background, albeit
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mostly informal, provided him with a good basis for work as a CEO and especially as a turnaround leader. It also provides an excellent example for modern management training of how important working and studying in other cultures can be in the global business environment. Because of his youth, Serlachiuss working experience in industry was relatively short. In 1898, he began to practise paper mill management in his uncles rm in Mntt, Finland. He worked there for a period of four years. His assignment in Kangas was, thus, only his second full-time position and his rst position as a CEO (Ahvenainen, 1975). By the time of his assignment to the Kymi Corporation, Serlachius had already acquired much experience in the industry as well as recent merits as a turnaround leader. In Finland, managers average employment before their rst CEO assignments was typically 19 years at the beginning of the 20th century (Fellman, 2000). Thus, Serlachiuss tenure was noticeably shorter than that of the average CEO. Comparison between the results of modern leadership research and Serlachius indicates that in the case of employment, too, Serlachius is a good example of a successful strategic leader in a turnaround situation. Serlachiuss motivation to lead was evident. First of all, extensive studies abroad and familiarity with modern ideas are usually the qualities that are connected with a motivated person. Second, when Serlachius heard about the problems at Kangas, he immediately offered to manage the crisis company (Norrmn, 1928). He had a clear desire to apply his skills and knowledge in practice, and Kangas offered an excellent opportunity to demonstrate his abilities. All in all, Serlachius was an ambitious young leader. After the turnaround at Kangas, he had the option to either continue his work or to return to the Mntt Paper Mill. Instead, he chose a much more challenging assignment at Kymi. This clearly indicates that Serlachiuss ambition and motivation were still high. Serlachiuss personal correspondence with other managers, and especially with Gsta Bjrkenheim in 1912, reects the importance of trust and honesty in the relationships between the managers as well as in general business life. As shown in the following analysis of Serlachiuss social and professional networks, he considered trust and openness to be important in dealings with stakeholders.
Strategic behaviour
Since constructing a wide social and professional network is a time-consuming process, younger managers are often at a disadvantage. However, Serlachiuss position was in this respect already relatively good when he started at Kangas. Because of his family background, Serlachius had a name that was well-known and respected among the small industrial elite of Finland. This was clearly an advantage. During his assignment at the Mntt Paper Mill, he became acquainted with the rms management and stakeholders. In Mntt, Serlachius also befriended Albert Snellman, a bank manager, who subsequently became his fellow manager and rst direct link to the world of nance. In addition, during his studies and tours abroad, he had established business relationships with many paper traders and various machine manufacturers. The correspondence between them indicates that Serlachius also maintained these relationships. He was, for example, the Northern European
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representative of an American rm that manufactured water meters and hydraulic controllers for paper factories. Serlachiuss appointment in Kangas offered him a unique opportunity to build and expand his social network. He became, of course, acquainted with all the important stakeholders of Kangas. In addition, he made contacts with the nancial institutions and representatives of the forestry industry in Finland and abroad. Serlachius was particularly active in his professional correspondence with the Mntt Paper Mill and the Kaukas Corporation. Inside the organization, he enjoyed excellent relations with the other managers. In fact, the working relationship between Serlachius and Snellman developed into a deep friendship that lasted until the unexpected death of Snellman in 1912. At the beginning of his assignment at Kangas, Serlachius had a good reputation and certain merits, but within only a few years he was able to convince wider industrial spheres and to acquire concrete experience in turnaround management. The governing groups of the Kymi Corporation were almost the same as those at Kangas. Thus, the respect and trust of these groups elevated Serlachius to the top management of the biggest industrial corporation in Finland. During his assignment with the Kymi Corporation, his social network expanded further. Already at Kangas Serlachius had targeted the potential market areas and at Kymi he continued the same policy to establish further personal connections. At Kangas, Serlachius orientated himself by tracing the rms history, establishing when the rm had been protable and when it had been making losses. There is no ofcial statement of Serlachiuss vision, but he explicitly emphasized that the rm had to concentrate on the area of business that would be the most advantageous for its existing potential. Thus, Serlachiuss vision for Kangas was clear and grounded in reality. Although it is difcult to nd an explicit vision in the case of the Kymi Corporation, Serlachius clearly had a similar idea as at Kangas to maximize the potential of Kymi. In both cases the predened basic vision was that the rms had to be saved. Altogether, Serlachius believed that the managers and all important stakeholders should have a consensual view of the rms future. The main events of the strategy processes were described in the detailed accounts of the turnaround processes. Briey, at Kangas the vision of Serlachius was realized as a strategic decision to completely discontinue the production of newsprint, concentrate more on ne paper, and invest in the quality of the paper. Successful implementation of these changes called not only for alterations to the paper machines but also required great perseverance and continuous development work. Slowly but surely, these changes were nally realized. Moreover, Serlachius introduced and applied new accounting cost-management methods that also improved the implementation of cost reductions. Such actions are usually urgent if expenses exceed income, as was the case at Kangas. However, it was not enough for Serlachius to merely introduce new ideas; they had to be constantly developed and consistently implemented. The third series of actions in the strategy formation of Kangass turnaround process was the development of sales and marketing, both in Finland and abroad. Taken together, these ndings show that Serlachius responded to basic strategic questions regarding customers, products, and the overall efciency of the organizations and consistently implemented innovative operational moves. The umbrella strategy of the Kymi Corporation, conversely, had already been in
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use for some time before the difculties began to appear in increasing the overall production capacity and nding economies of scale. Even the paper machines were geared to bulk production. A rapid change into a completely new line of production would have been very time consuming or even impossible to implement. Consequently, Serlachius, together with his co-managers, decided to purposefully continue to develop the existing production system, even though they also left the door open for the possible production of new grades. Nevertheless, the basic goal or vision was to make the production more effective, more economical, and better quality. As had occurred earlier at Kangas, cost-minimization measures were the rst steps taken in the realization of Kymis turnaround process. Serlachius also introduced comprehensive cost- and protability-accounting systems similar to those used at Kangas. The strategy formation of Kymi also included considerable changes in sales and marketing. Overall, Serlachius had again successfully responded to the basic strategic questions. Despite the rather all-inclusive nature of Kymis turnaround process, however, the strategic position of the rm did not change fundamentally. Kymi was mainly competing in newsprint markets where economies of scale and cost efciency were still crucial requirements for success. To sum up, in both cases, as a result of consistent and analytical operational behaviour leading to the realization of comprehensive strategies, the turnaround processes were successful. Such strategies have been found to be typical in uncertain environments (Miller & Toulouse, 1998), which characterize turnaround situations (e.g. Barker & Duhaime, 1997; Robbins & Pearce, 1992). It has to be emphasized that in both cases Serlachius explicitly responded to the basic strategic questions (Markides, 1999) and analytically guided the strategy-formation processes. Of course, Serlachius could not manage these turnarounds without the unreserved cooperation of other managers. At Kangas, he was obviously the driving force in the process, but the assistance of Albert Snellman was important. Similarly, in the case of Kymi, other members of the top management team, especially Gsta Bjrkenheim, had signicant roles. Thus, the management of the turnarounds and the formation of the strategies were not purely playgrounds for Serlachius, but rather interactive processes involving several individuals and groups.
Discussion: the deeper level of Serlachiuss strategic leadership

After the case descriptions and the exploration of Serlachiuss strategic leadership from the three perspectives, we now consider what these ndings reveal about the more fundamental determinants or essence of strategic leadership and in so doing provide answers to the research questions: (a) has strategic leadership changed radically during the last century; and (b) can we learn something from the strategic leadership of the past? According to recent research, the essence of strategic leadership lies in the ability to learn, the ability to change, and managerial wisdom (Boal & Hooijberg, 2000) or the right combination of intelligence, creativity and wisdom (Sternberg, 2003). These elements are often highlighted in organizational transformations when the managers, trying to create meaning and purpose for the organizations, may need to revitalize or even signicantly change the business model on which the whole organizational effort is based, to take advantage of emerging strategic opportunities and threats, and
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to monitor and balance the needs of different stakeholders (Storey, 2005). Altogether, the examination of these deeper elements of strategic leadership necessitates a longitudinal perspective similar to that provided by the analysis of Serlachius, enabling us to consider and compare his activities during the periods of pre-Kangas, Kangas, and Kymi.
Absorptive capacity
The ndings presented in the previous sections reveal Serlachiuss ability to learn in many respects. First of all, through his broad, international educational background he acquired knowledge of the state of the art of paper-making technology and machinery as well as new production and cost-accounting methods. Moreover, he acquired a knowledge of different cultures and strong language skills, and built up personal connections with foreign organizations, which were (and still are) extremely important capabilities for the top manager of a pulp and paper industry company. Serlachiuss ability to acquire this knowledge already tells something about his ability to absorb important knowledge, but his capacity becomes more evident given that he was also able to utilize and apply that knowledge. Both at Kangas and Kymi the management of turnaround processes and the refocusing of the rm strategies were greatly enhanced by Serlachiuss innovative mind and technical knowledge. He was able to manage the technical development of the production processes and utilize the most modern ideas and machines with which he had become acquainted on his travels. During the turnarounds he also actively searched for information and new ideas outside the direct environments of the organizations through discussions with the managers of other rms and by meeting existing and potential customers. If we more closely compare Serlachiuss activities at Kangas and Kymi, we see that he applied similar ideas, though in a slightly modied form, in both rms. However, he was also able to see that something that did not work at Kangas provided better changes for Kymi, as was the case, for example, in the expansion of the market areas. As already suggested by Cohen and Levinthal (1990: 136) regarding absorptive capacity, prior knowledge permits the exploitation of new knowledge [and] some portion of that prior knowledge should be very closely related to the new knowledge to facilitate assimilation, and some fraction of that knowledge must be fairly diverse, although still related, to permit effective, creative utilization of the new knowledge. This quotation describes Serlachiuss situation in both organizations fairly accurately, although at Kymi his closely related prior knowledge had increased considerably. Altogether, Serlachiuss absorptive capabilities were obvious.
Adaptive capacity
The ndings of the analysis also enable us to consider Serlachiuss ability to change. In general, the adaptive capacity may closely relate to a persons ability to learn, since learning always entails that something will, or is allowed to, change. Thus, the basis for successful absorption and adaptation is largely in openness to new things. Serlachiuss openness, or almost eagerness, to change was evident in his personal life already before he started at Kangas. One reection of this was his genuine
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enthusiasm for a CEO assignment in an organization that was in the depths of a crisis. Most obviously, however, despite the fact that Serlachius was ready to make changes, the implementation of these changes necessitated that the inner environments of the organizations, that is, the main stakeholders, allowed the rapid changes to happen. If we consider Serlachiuss activities during the turnarounds of Kangas and Kymi separately, we may conclude that many or even most of his decisions and actions seemed to be fairly operational. However, as the above ndings show, not only did these actions successfully respond to the urgent need to create cash ow for the organizations, they also in combination substantially redirected the rm strategies. Indeed, one of the most interesting ndings was that Serlachius clearly responded to the basic questions of strategic management concerning customers, products, and the overall efciency of the organizations. He refocused the production strategies in terms of the products and their attributes, he charted the needs of existing and potential customers, and he searched for new market opportunities and areas. The simultaneous implementation of the strategic changes in all these areas, so that these changes also supported each other, serves as convincing proof of Serlachiuss adaptive capabilities.
Managerial wisdom
Managerial wisdom or wisdom in general results from a combination of several components. In the context of strategic leadership, according to Boal and Hooijberg (2000), the critical and interrelated components of managerial wisdom include the ability to understand social actors and their relationships (also known as social intelligence), the ability to perceive variation in the environment, and the ability to take the right action at the right time. Serlachiuss ability to construct and maintain social and professional networks is one example of his social intelligence. Both at Kangas and Kymi, his understanding of the various claims of stakeholders and close communication with these actors enhanced the support of the stakeholders and increased his own managerial freedom. Of course, Serlachius had his own interests too, but he understood that these interests were tied to the long-term success of the organizations and their main stakeholders. Thus, maintaining the consensus of long-term goals with the co-managers and important stakeholders was a critical task for him. In addition, Serlachius had an understanding of the wider context in which the rms were embedded. His travel reports from Russia and the UK show that he followed and tried to predict how the political environments developed. The customs policies of these countries had a direct inuence on prot margins. In addition, in Russia the unstable political situation raised other concerns. For example, the level of censorship had a direct effect on the number of newspapers published, which in turn had a direct effect on the future newsprint orders from the customers. In retrospect, it would be easy to say that Serlachius did the right things at the right time. Nevertheless, he also made mistakes. At Kymi, for example, he decided to start tobacco paper manufacturing. It had been a success at Kangas and Serlachius probably expected that it would be a success at Kymi, too. Unfortunately, this experiment opped. However, Serlachius was wise enough to stop production at the right time, before it began to show loss an important facet of managerial wisdom.
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Altogether, the components of managerial wisdom were manifest in Serlachiuss leadership.
Strategic leadership
Managerial wisdom, the ability to learn, and the ability to change may be the basic elements of strategic leadership. However, they are only elements. In order for strategic leadership to be realized successfully, these elements need to be correctly combined. In other words, in addition to having many of these capabilities and managerial wisdom, their combination should also match the organization and the broader environment. The three steps of this analysis, from the main events of the two turnaround processes through the three perspectives to Serlachiuss leadership and, nally, to the discussion of these ndings in terms of the deeper level of strategic leadership have shown that, indeed, the basic elements of strategic leadership may not have changed much during the last century. Serlachius possessed personal attributes and clearly implemented courses of action that were similar to those claimed in the literature to be typical for todays successful strategic leadership in organizational transition. Most importantly, at the deeper level where the essence of leadership is suggested to lie, Serlachius can be seen as an example of the ideal compatibility of the combination of capabilities and managerial wisdom with the organizational contexts. He had new and creative ideas that were feasible in the prevailing organizational situation. He had strategic exibility to implement these ideas, and he had wisdom to keep the crucial stakeholders convinced of these ideas and the future performance of the rms. Such successful strategic leadership, however, is not the rule today, which is partly why strategic leaders of organizations are equally surrounded by myths, though at the deeper level they may not be so different from the leaders of the past. While these results suggest that the deeper elements of strategic leadership have remained much the same during the last century, we may not conclude that the actions and decisions arising from these basic elements are similar in all situations. On the contrary, strategic leadership may assume a very different form in different contexts. A correct combination of absorptive and adaptive capabilities together with managerial wisdom only provides the bases enhancing the likelihood of the realization of effective leadership. In the light of these results, we may conclude that historical studies can add to the strategic leadership research at least in two critical ways. First, as this study has shown, they may help us to uncover the deeper levels of strategic leadership and thereby to better understand the essence of the phenomenon. Second, historical studies allow us to consider how strategic leadership develops in one context and what changes in the leadership activities when the context changes. In particular, historical studies provide a perspective extending across several years that is often necessary in order to observe processual and structural aspects of leadership. As Lawrence (1984: 311) states, a historical perspective pushes thinking about alternative explanations for phenomena, helps identify more and less stable concepts, and expands research horizons by suggesting new ways of studying old questions and controlling for longitudinal, cohort, and period effects. Accordingly, the answer to the second research question is positive.
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Conclusion
Strategic leadership research is clearly an ongoing process. This study has tried to provide further perspectives on this endeavour by considering what has truly changed in the phenomenon known as strategic leadership. The answer to this question turned out to be two-fold. If we consider the level of leadership activities, that is, what strategic leaders should do in a particular context in order to be effective, the world is likely to be transient and contingent. The behaviour of a strategic leader that has been connected to the successful performance of an organization in the past may lead to the opposite results if followed in other circumstances. However, if we move to the deeper level, to the essence of the phenomenon, strategic leadership seems to be based on much more stable elements. The right combination of absorptive and adaptive capacities, combined with managerial wisdom, provided the basis for effective strategic leadership at the beginning of the 20th century similarly as it is suggested to do today. Indeed, the more things change, the more crucial is the combination of these basic elements matching the organizational context. Findings from a single case study are not, of course, statistically generalizable. A rich case analysis, however, is especially appropriate for challenging conventional thinking as well as building deep structural explanations and theories (Langley, 1999; Pentland, 1999; Ragin, 1994; Tsoukas, 1989). Thus, this study seeks essentially to expand the research horizons and encourage further studies to focus on the issues of change and relative stability as well as surface and deep structures that surround and underlie the strategic leadership phenomenon. Different businesses, nations, and eras provide fruitful viewpoints to consider these issues. The extensive use of archival material can also contribute to leadership research and especially to research that seeks to examine the deep structures. In addition, the history of strategic leadership offers excellent examples of success stories, but it is also full of failures from which we can learn. To conclude, this article should also motivate researchers with interests other than strategic leadership to look beyond the rapidly changing surface of visible phenomena to look more extensively for deep-level structures and mentalities that may not change with every year or decade. For example, a management fad of the 1980s may not have been useful for a rm in the 1990s, but in the new millennium the same rm may nd it more than relevant. It may not be fashion, but it works for the rm. The time has changed, but the deeper structures have remained the same.
Acknowledgements
An earlier version of this article received the Paul Hersey Award for Best Paper on Leadership in the Academy of Management 2005 meeting. I gratefully acknowledge nancial support received from the Academy of Finland and TEKES.
References
Ahvenainen, J. (1972a) Kankaan paperitehtaan historia I. Jyvskyl: Sis-Suomen Kirjapaino. Ahvenainen, J. (1972b) Kymin osakeyhti vuosina 19181939. Helsinki: Oy Tilmann Ab. Ahvenainen, J. (1975) Kankaan paperitehtaan historia II. Jyvskyl: Sis-Suomen Kirjapaino.
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Appendix
Archival references
Finnish Archives of Business Records The archives of the Kangas Paper Mill:
I I
company correspondence 19049; records of creditors and owners meetings 190412 (also includes annual reports, cost estimates, and other internal documents); share certicate books.
Provincial Archives of Jyvskyl The archives of the Jyvskyl Judicial District:

I
records of court sessions 15 September 1904 and 18 November 1904.
The Central Archives of UPM-Kymmene The archives of the Kymi Corporation:

I I I
records of managers meetings 190813 (includes also appendices); company correspondence 190813; management documents (includes annual reports and records of creditors meetings); nancial statements 190416 (also includes lists of creditors and share certicates).
The Archives of the Gsta Serlachius Art Museum

I
Personal correspondence of Gsta Serlachius 190414.
Kalle Pajunen received his PhD in strategic management. He also holds an MA in economic history. His research interests include research methodologies, decline and turnaround processes, stakeholder theory, strategic leadership and business ethics. His recent articles have appeared (or are forthcoming) for instance in Advances in Strategic Management, Human Relations, Journal of Business Ethics, and Journal of Management Studies. [email: kalle.pajunen@uta.]
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Leadership

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The perspective of organizational environment

Evaluating Strategic Leadership Pajunen

The perspective of demographic and personality characteristics

The perspective of strategic behaviour

Evaluating Strategic Leadership Pajunen

Method and data

Data collection and analysis

Evaluating Strategic Leadership Pajunen

Strengths and limitations of the study

Evaluating Strategic Leadership Pajunen

Evaluating Strategic Leadership Pajunen

Evaluating Strategic Leadership Pajunen

The three perspectives on the strategic leadership of Serlachius

Evaluating Strategic Leadership Pajunen

Demographic and personality characteristics

Evaluating Strategic Leadership Pajunen

Discussion: the deeper level of Serlachiuss strategic leadership

Evaluating Strategic Leadership Pajunen

Evaluating Strategic Leadership Pajunen

Altogether, the components of managerial wisdom were manifest in Serlachiuss leadership.

Provincial Archives of Jyvskyl The archives of the Jyvskyl Judicial District:

records of court sessions 15 September 1904 and 18 November 1904.

The Central Archives of UPM-Kymmene The archives of the Kymi Corporation:

The Archives of the Gsta Serlachius Art Museum

Personal correspondence of Gsta Serlachius 190414.

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