L EADERSHIP

1
Section A - Leadership
1. Qualities of leadership
2. Leadership and organisational culture
3. Professionalism, ethical codes and the public interest
 L EA D E RS H I P
Objectives

a. Explain the role of effective leadership and identify the key

leadership traits effective in the successful formulation and
1. QUALITIES implementation of strategy and change management
OF
LEADERSHIP b. Apply the concepts of entrepreneurship and
‘intrapreneurship’ to exploit strategic opportunities and to
innovate successfully

c. Apply in the context of organisation governance and

leadership qualities, the key ethical and professional values
underpinning governance
 Leadership

“Leadership and learning are indispensable to each other.”–

John Fitzgerald Kennedy
 Leadership

Leaders:

• person who influences a group of people towards achievement of a goal.

• help themselves and others to do the right things

• set direction, build an inspiring vision, and create something new

• map out where you need to go to "win" as a team / organisation

• are dynamic and exciting.

 Leaders do the right thing; Leadership
managers do things right

Leaders

✓ Visionaries Managers
✓ Set direction ✓ Formal position
✓ Dynamic, exciting and inspiring ✓ Organisers & planners
✓ Creative & Innovative ✓ Not necessarily inspiring
✓ Passionate ✓ Not necessarily powerful
 Leadership
Involves:
• Establishing a clear vision
• Sharing that vision with others so that they follow willingly
• Providing resources / knowledge / tools to realise that vision
• Coordinating and balancing conflicting interests of stakeholders
• Stepping up in times of crisis
• Thinking and acting creatively in demanding situations.

May be learned and enhanced through coaching or mentoring.

Read the Jack Welch and Steve Jobs examples. How effective were they? Were they real
leaders or just managers? Why?
 Leadership Approaches

1. Trait approach

2. Behaviour/Style approach

3. Power-Influence approach

4. Contingency/Situational approach
(Yukl G, 2013)
 Trait Approach

Assumptions:

1. Leaders are born; not made

2. There is a ONE best leadership style

3. Leaders must possess three traits including certain physical traits

 Trait Approach

✓ Looks
Physical traits ✓ Height
✓ Physical energy Limitations
• Does not guarantee success
✓ Intuition
Personality traits ✓ Foresight • Exceptions to the rule
✓ Charisma

Social traits ✓ Persuasive power

✓ Negotiation skills
 Behaviour / Style Approach

Assumptions:

1. Leaders are not born but made

2. There is ONE best leadership style

3. No co-relation between physical traits and good leadership.

 Behaviour / Style Approach - Ashridge
Tells (Autocratic)
• Manager makes all decisions - issues instructions which must be obeyed without question
Sells (Persuasive)
• Manager still makes all the decisions but believes that team members must be motivated
to accept them to carry them out properly
Consults (Participative)
• Manager confers with team and considers their views, although he still retains final say
Joins (Democratic)
• Manager and the team members make the decision together based on consensus.
Behaviour / Style Approach – Blake & Mouton
 Behaviour / Style Approach – Blake & Mouton
Impoverished Management
• Manager makes minimum effort in either area
‘Country Club’ Management
• Thoughtful and attentive to needs of employees - creates a comfortable friendly work
atmosphere, but very little work achieved
Task Management
• Manager is only concerned with production - people concerns minimised
'Middle of the Road Management‘
• Manager can balance task in hand and motivate employees to achieve tasks
Team Management
• Manager integrates both areas to foster working together – difficult to achieve.
 Power / Influence Approach
Assumes that effectiveness of a leader depends on their level and type of power.

• Power and leadership – interconnected concepts

• Individual cannot be a leader without power

• Power: potential to influence others

• In organisations leaders need power to influence their:

o followers to achieve greater performance

o superiors / peers to make important decisions

o stakeholders to ensure vitality of organisation.

 Sources of Power – French and Raven
Power type Comments
Legitimate Formal/legitimate right to exercise authority

Referent Result of a person's charisma – natural ability to lead people

Expert Based on a person's special skill set and knowledge

Reward Result of a person's ability to compensate or reward his subordinates for

compliance

Coercive Result of a person’s ability to punish for non-compliance

Informational Result of a person's ability to control the information others need

 Contingency / Situational Approach

Assumptions:

1. Leaders are not born but made

2. There is NO one best leadership style

3. No co-relation between physical traits and good leadership

4. Leadership style should change according to the situation

Contingency / Situational Approach

Handy’s Best Fit Theory

 Strategic Leaders
Transactional Transformational

• Do not have the natural ability to influence • Can bring about transformational change
people
• Visionaries
• Good managers or administrators
• Inspiring
• Performance and short-term focused
• Empowering
• Rely on legitimate power
• Energise people to achieve long-term goals
• Unlikely to have a vision
• Charismatic
• Lack charisma
• Innovative
• May take orders from transformational leaders

• Procedural
Entrepreneurship vs Intrapreneurship
 Entrepreneurship
• Capacity and willingness to develop, organise and manage a business venture along with
any of its risks to make a profit, on his/her own

• Characterised by creativity / innovation and risk-taking

• Positive impact on economy / society – creates new employment; causes ripple effect

• Essential part of a nation's ability to achieve national competitiveness

• Entrepreneurs may also invest in community projects – example, Bill Gates - has used his
considerable wealth for education and public health initiatives.

Read Jazzercise and Ben&Jerry’s examples

 Intrapreneurship
• Employee-entrepreneur
• Does not incur risks associated with entrepreneurial activities
• Assigned by employer-company to work on a special ideas/projects
• Encouraged to develop products like an entrepreneur would
• Have resources of firm at their disposal
• Use their creativity for enhancing existing goods and services
• Can test ideas/methods within ‘protective net’ of company
• May later decide to create own company

Read the Google, 3M and ebay examples

BASIS FOR
ENTREPRENEUR INTRAPRENEUR
COMPARISON
Meaning Entrepreneur refers to a person who sets up Intrapreneur refers to an employee of the
his own business with a new idea or concept organization who is in charge of undertaking
innovations in product, service, process etc.

Approach Intuitive Restorative

Resources Uses own resources Uses resources provided by the company

Capital Raised by him Financed by the company

Enterprise Newly established An existing one
Dependency Independent Dependent
Risk Borne by the entrepreneur himself Taken by the company

Works for Creating a leading position in the market Change and renew the existing organizational
systems and culture
 Cultivating Intrapreneurship
Leads to company growth, culture and talent but needs:

• A people-centric, bottom-up approach to develop radical innovations in-house

• Senior managers to find and encourage intrapreneurs
• To permit effective rule-breaking
• A different management style
• Democratic/Delegative leaders needed to encourage intrapreneurship
Ethical & Professional Values Underpinning Governance
 L EA D E RS H I P
Objectives
a. Discuss the importance of leadership in defining and
managing organisational culture.
b. Advise on the style of leadership appropriate to manage
strategic change.
2. LEADERSHIP AND
O R G A N I S AT I O N A L c. Analyse the culture of an organisation, to recommend
C U LT U R E suitable changes, using appropriate models such as the
cultural web.
d. Assess the impact of culture on organisational purpose
and strategy.
 Organisational Culture

• ‘The way we do things here’

• The ethereal something that hangs in the air

• Influences how work gets done

• Critically affects organisation’s strategies

• Says who fits in and who doesn‘t

• Determines the overall mood of the company

 Organisational Culture

• Organisations will only get as far as their cultures take them

• Strategy is a product of an organisation’s culture

• Existing culture may need to be adapted to pursue new strategies

• Leaders critical for creating new or changing existing culture.

Organisations will only get as far as their cultures

take them
 Role of Leaders in Defining and Managing Culture
• Formally define values that reflect the company and behaviours that reflect those
values

• Model defined values and behaviours – walk the talk!

• Stay dedicated to new culture

• Transparency is key - explain why a decision was made honestly – be accountable

• Promote an ethical culture – appoint managers genuinely dedicated to upholding

high ethical standards
Handy’s Organisational Culture Types
 Handy’s Organisational Culture Types
POWER CULTURE ROLE CULTURE
• Power radiates from the top • Fixed roles and responsibilities
• Small organisation • Patterned predictable work
• Owner-managed business • Tall and hierarchical
• 1 or 2 individuals in charge • Legitimate power prevails
• 2 or 3 level organisation • Little scope for expert power
• Direct relationships • Classic bureaucracy
• Responsive and flexible • Rigid and unresponsive
• Suitable for dynamic environments • Suitable for static environments
 Handy’s Organisational Culture Types
TASK CULTURE PEOPLE CULTURE
• Team-based problem solving • People superior to the organisation
• Performance oriented • Individual the central point
• Meeting deadlines and KPIs matter • Organisation exists to serve them
• Matrix structure • Similar training and background
• High-paced and complex work • Power groups
• Flexible • Employees as shareholders
• Suitable for dynamic environments • Common in co-operatives
• Expert power prevails
Cultural Web
Cultural Web
 Cultural Web Purpose

• Developed by Johnson and Scholes in 1992

• 7 interrelated elements including the paradigm
• Helps to:
1. analyse current culture
2. think about desired/ideal culture
3. map differences between current and ideal
culture for strategy and
4. plan required changes
 Cultural Web Purpose

To:

• analyse current culture

• plan desired (future) culture

• map differences between the two

• prioritise changes and develop a plan to

address them
 Stories
Cultural Web
• Short amusing/interesting stories about who and what
company chooses to immortalise

• Told by members of organisation to each other, and to

outsiders

• Reinforce traditions and beliefs

• May include stories of successes, failures, heroes,

villains, mavericks etc.

• Emphasise what's important to the organisation

• There may be a need to retain/remove/change existing

or introduce new stories to encourage new behaviours
 Culturaland
Routines WebRituals

• Routines: day-to-day behaviour

• Rituals: special events through which organisation

emphasises what is particularly important

• Unwritten rules as to 'the way we do things here‘

• Determine what is expected to happen

• May need to retain/remove/change or introduce

new routines/rituals to encourage new behaviours
 Symbols
Cultural Web

Visual representations of particular elements of the

paradigm: logos, language, status, offices, cars, titles
etc.

• May include symbols of power, status, technology etc.

• Aspect of culture that can be seen

• Reveal underlying assumptions of culture

• May need to retain/remove/change existing or

introduce new symbols to encourage new behaviours.
 Culturalsystems
Control Web

• The way employee performance is measured and

rewarded

• E.g. sales volume or customer service?

• Shows what’s important to control

• Reinforce particular activities and behaviors

• May need to retain/remove/change or introduce new

control systems to encourage new behaviours.
 Organisational structures
Cultural Web
• The formal and informal roles, responsibilities and
relationships within an organisation

• Formal aspects represented by the organisation chart

• Reflect authority and power

• Mechanistic or organic?

• Centralised or decentralised?

• May need to retain/remove/change or introduce new

structures to encourage new behaviours.
 Power structures
• The real power and influence – operating through
resource control, position, expertise

• Not necessarily based on seniority

• Individuals/groups who influence key decisions and

strategies

• Influence organisation’s core assumptions and beliefs

• May or may not reflect in organisational chart

• May need to retain/remove/change or introduce new

power structures to encourage new behaviours.
 Paradigm
Cultural Web
• Collective fixed mindset about what the organisation is about or stands for.
• Taken-for-granted assumptions - may be very simple and straightforward.
• Examples:
o Doctors take for granted importance of professional healthcare
o Professors take for granted importance of research
o Police take for granted importance of social order
• Likely to be deeply embedded
• Changing them, if required, extremely difficult.
 Paradigm
• Set of assumptions and collective experience held in common and taken for granted

• Core aspect of culture – difficult to identify and explain

• Encapsulates and reinforces other 6 elements

• Important for organisation to operate effectively

• Informs and drives strategy

• Underpins successful strategies - sometimes constraints development of new ones

• May have to change existing paradigm to encourage new behaviours.

 Paradigm Challenge
Paradigm exercise

Bird in the Once in a Paris in the

the hand a lifetime the spring
 An example
Apple’s- paradigm
Apple’s Paradigm
• Top-notch excellence - hire only best of the best - ruthless: fire employees who do not
meet expectations – excellence in product design and development: a CSF!!!

• Creativity - especially among employees involved in product design and development

• Rapid innovation - ensures company stays relevant to changing markets

• Secrecy - to minimise theft of intellectual property – sustains competitive edge -

reinforced through policies, rules, and employment contracts

• Combativeness - challenge employees to ensure that they have what it takes to work at
Apple – aims to enhance employees’ output

• However, under Tim Cook (since 2011), changing to a more sociable, less combative
culture.
 Impact of culture on business strategy
• Strategy – strongly influenced by culture – i.e. culture informs and drives strategy
• Underpins successful strategies - sometimes constraints development of new ones
• Have to change to encourage new behaviours.
• So, strategy should align with culture because culture drives strategy.
• If powerful personalities block cultural changes, remove / reduce influence
• If backers, persuade to get on board
• Cultural changes should consider ‘informal’ rules and relationships.
 Cultural Web Purpose

To:

• analyse current culture

• plan desired (future) culture

• map differences between the two

• prioritise changes and develop a plan to

address them
 L EA D E RS H I P
Objectives
a. Critically evaluate the concept of responsible leadership and
the creation of public value by acting in the public interest.
b. Assess management behaviour against the codes of ethics
relevant to accounting professionals including the IESBA (IFAC)
3. PROFESSIONALISM, or professional body codes
ETHICAL CODES AND THE c. Analyse the QUALITIES
reasons for and resolve conflicts of interest and
PUBLIC OF
ethical conflicts
L E A D E in
R S organisation
HIP
INTEREST d. Assess the nature and impacts of different ethical threats and
recommend appropriate safeguards to prevent or mitigate
such threats
e. Recommend best practice for reducing and combating fraud,
bribery and corruption to create greater public confidence and
trust in organisations
 Public Interest
• “The net benefits derived for, and procedural rigour employed on behalf of, all society in
relation to any action, decision or policy” - IFAC (International Federation of
Accountants)

• ‘Public’ includes investors, shareholders, employees, pensioners, consumers, suppliers,

tax payers, electorates and citizens.

• Acting in public interest means making decisions in the best interests of most of the
above stakeholder groups.

• There is a fundamental need for professional accountants to act in the public interest.
 Public Interest
➢ ‘Interests’ of various stakeholder groups – accountants should:
o Improve economic certainty in marketplace

o Make sound decisions

o Produce reliable and transparent financial information

o Produce information that can be compared across different organisations and

jurisdictions.
o Ensure presence of effective and robust corporate governance

o Ensure effective performance management

o Ensure better resource allocation and utilisation

➢ Accountants must exercise social responsibility – encouraged/required to make positive

impacts on all stakeholders
 Public Interest
Professionals, as leaders, must act in public interest.

• External auditors – investors/ shareholders depend on them.

• Internal auditors – BOD, investors & shareholders need assurance of effectiveness of ICs.

• Financial accountants – must ensure efficient and effective use of economic resources.

• Professional service firms – should not promote tax avoidances schemes and own shares
in client organisations.

• Major corporations – should not be involved in corporate scandals (read textbook

examples on Rolls-Royce, Apple and Uber)
Public Interest Duties of an Accountant

Balancing responsibility between:

1. Employers
2. Workplace(employees)
3. Investors/shareholders
4. Markets/customers
5. Environment
6. Community
 Responsible Leadership
• “Responsibility” is at the heart of effective leadership - to not be responsible is not to be
effective as a leader.

• Responsible leadership: geared toward concerns of others and asks for what and to whom
leaders are responsible.

• Responsible leadership - flamed by business scandals and individual leadership failures —

prominent examples: demise of Enron and Arthur Andersen.

• A society of markets, laws, and elections not enough if rich and powerful “leaders” fail to
behave with respect, honesty, and compassion towards society and the world.
 Responsible Leadership
• Build and cultivate ethically sound relationships with different stakeholders - important
responsibility of leaders in an interconnected stakeholder society.

• Make sustainable business decisions taking into account interests of all stakeholders:
shareholders, employees, clients, suppliers, community, environment and future
generations.

• Challenge – different stakeholders demand different things – could be conflicting - have

to make tough decisions that calls for compromises.

• Dramatic external changes will alter business operations - e.g. (PESTEL changes) - finding
a balance can be difficult – impossible to fulfill all stakeholders’ expectations.
 Code of Ethics

❑ Integrity

❑ Objectivity

❑ Professional competence and due care

❑ Confidentiality

❑ Professional behaviour
 Technical Article

Read the ACCA technical article on

Ethical Decision Making

https://www.accaglobal.com/my/en/student/exam-support-resources/professional-
exams-study-resources/strategic-business-leader/technical-articles/ethical-decision-
making.html
 Resolving ethical threats and conflicts of interest
• Develop balanced disclosure policy
o All employees/board members should know what outside interests must be divulged
• Disseminate policy to relevant parties
o Make policy available to the world at large
o Encourages openness and minimises the chances of misunderstandings
• Develop policy to deal with non-compliance
o If grave, disciplinary procedure required
o Necessary to act swiftly and decisively to control damage
 Bribery and Corruption

Bribery is the act of giving or Corruption is a form of

receiving something of value in dishonesty undertaken by a
exchange for some kind of person entrusted with a position
influence or action in return. of authority.
 Bribery and Corruption

Forms of corruption
 Bribery and Corruption
Undermines government revenue
• Distorts the decision-making connected with public investment projects
Undermines foreign direct investment
• Discourages private-sector development and innovation and encourages
inefficiency
Contributes to a misallocation of human resources
• Contributes to worsening income distribution
Creates uncertainty
• Betrayal of trust, and diminishes moral stature of bureaucracy
Lead to other forms of crime
 Bribery and Corruption

Establish Publish Execute proper Implement

“Zero-Tolerance” “Corporate Code of Risk Assessment & “Whistleblowing”
policy Ethics” Internal Controls function