10

Strategic Leadership:
Creating a Learning & an Ethical
Organization
 1 1- 2

Leadership: Three
Interdependent Activities
• Leadership is the process of transforming
organizations from what they are to what the leader
would have them become

• Leadership should be
- Proactive
- Goal-oriented
- Focused on the creation and implementation of a creative
vision
 1 1- 3

Leadership: Three
Interdependent Activities

Successful
leaders must
recognize three

interdependent
activities:

Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership

 1 1- 4

Setting a Direction

• Scan environment to develop

- Knowledge of all stakeholders
- Knowledge of salient environmental trends and events
• Integrate that knowledge into a vision of what the
organization could become
• Required capacities
- Solve increasingly complex problems
- Be proactive in approach
- Develop viable strategic options
 1 1- 5

Designing the Organization

• Difficulties in implementing the leaders’ vision and

strategies
- Lack of understanding of responsibility and accountability
among managers
- Reward systems that do not motivate individuals and
groups toward desired organizational goals
- Inadequate or inappropriate budgeting and control systems
- Insufficient mechanisms to coordinate and integrate
activities across the organization
 1 1- 6

Nurturing a Culture

• In nurturing a culture dedicated to excellence and

ethical behavior, managers and top executives must
- Accept personal responsibility for developing and
strengthening ethical behavior
- Consistently demonstrate that such behavior is central to the
vision and mission
- Develop and reinforce
• Role models
• Corporate credos
• Codes of conduct
- Reward and evaluation systems
- Policies and procedures
 1 1- 7

Overcoming Barriers to Change and the

Effective Use of Power
• Reasons why organizations and managers at all levels
are prone to inertia and slow to learn, adapt, and
change
- Vested interests in the status quo
- Systemic barriers
- Behavioral barriers
- Political barriers
- Personal time constraints
 1 1- 8

A Leader’s Bases of Power

 1 1- 9

Emotional Intelligence: A Key

Leadership Trait

Technical Cognitive Emotional

skills abilities intelligence

Accounting, Analytical reasoning, Ability to work with

business quantitative analysis, others, passion for
planning, etc. etc. work, etc.
 1 1- 10

Emotional Intelligence

• Five components of emotional intelligence

- Self-awareness
- Self-regulation
- Motivation
- Empathy
- Social skill
 1 1- 11

Five Components of Emotional

Intelligence at Work

Definition Hallmarks
Self-management • The ability to recognize • Self-confidence
skills:
• Self-awareness and understand your • Realistic self-assessment
moods, emotions, and
drives, as well as their • Self-deprecating sense of
effect on others. humor

• Self-regulation • The ability to control or • Trustworthiness and

redirect disruptive integrity
impulses and moods. • Comfort with ambiguity
• The propensity to suspend
• Openness to change
judgment—to think before
acting.
Source: Adapted from D. Goleman, “What Makes a Leader,” Harvard Business Review, October-November 1998, p. 95 (with permission)

Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work
 1 1- 12

Five Components of Emotional

Intelligence at Work

Definition Hallmarks
Self-management • A passion to work for • Strong drive to achieve
skills:
• Motivation reasons that go beyond • Optimism, even in the
money or status. face of failure
• A propensity to pursue
• Organizational
goals with energy and
Managing commitment
persistence.
Relationships:
• Empathy • The ability to understand • Expertise in building and
the emotional makeup of retaining talent
other people.
• Cross-cultural sensitivity
• Skill in treating people
according to their • Service to clients and
emotional reactions. customers

Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work
 1 1- 13

Five Components of Emotional

Intelligence at Work

Definition Hallmarks
Managing
Relationships: • Proficiency in managing • Effectiveness in leading
• Social Skill relationships and building change
networks.
• Persuasiveness
• An ability to find common
ground and build rapport. • Expertise in building and
leading teams

Source: Adapted from D. Goleman, “What Makes a Leader,” Harvard Business Review, October-November 1998, p. 95 (with permission)

Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work
 1 1- 14

Developing a Learning Organization

• Successful learning organizations

- Create a proactive, creative approach to the unknown
- Actively solicit the involvement of employees at all levels
- Enable all employees to use their intelligence and apply
their imagination
• Learning environment
- Organization-wide commitment to change
- An action orientation
- Applicable tools and methods
- Guiding philosophy
- Inspired and motivated people with a purpose
 1 1- 15

Key Elements of a
Learning Organization
 1 1- 16

Key Elements of a
Learning Organization
• Empowering employees at all levels
- Salient elements of empowerment
• Start at the bottom by understanding needs of employees
• Teach employees skills of self-management
• Build teams to encourage cooperative behavior
• Encourage intelligent risk taking
• Trust people to perform
 1 1- 17

Key Elements of a
Learning Organization
• Accumulating and sharing internal knowledge
- “Open book” management
• Numbers on each employee’s work performance and
production costs generated daily
• Information is aggregated once a week from top level to
bottom level
• Extensive training in how to use and interpret the numbers –
how to understand balance sheets, cash flows and income
statements
 1 1- 18

Key Elements of a
Learning Organization
• Gathering and integrating external information
- Awareness of environmental trends and events
• Internet accelerates the speed with which useful information
can be located
• “Garden variety” traditional sources for acquisition of
external information
• Benchmarking
• Focus directly on customers for information
 1 1- 19

Key Elements of a
Learning Organization
• Challenging the status quo and enabling creativity
- Challenging the status quo
• Create a sense of urgency
• Establish a “culture of dissent”
• Foster a culture that encourages risk taking
• Cultivate culture of experimentation and curiosity
 1 1- 20

Creating An Ethical Organization

• Organizational ethics is a direct reflection of its

leadership
• Unethical business practices
- Involves tacit, if not explicit, cooperation of others
- Reflect the values, attitudes, and behavior pattern that
define the organization’s operating culture
• Driving forces of ethical organizations
- Ethical values
- Integrity
 1 1- 21

Creating An Ethical Organization

• Ethical values
- Shape the search for opportunities
- Shape the design organizational systems
- Shape the decision-making process used by individuals and
groups
- Provide a common frame of reference that serves as a
unifying force
 1 1- 22

Integrity-Based versus Compliance-Based

Approaches to Organizational Ethics

• Essential links between organizational integrity and

individual integrity
- Cannot be high-integrity organizations without high-
integrity individuals
- Individual integrity is rarely self-sustaining
- Organizational integrity, resting on a concept of
• Purpose
• Responsibility
• Ideals
 1 1- 23

Approaches to Ethics Management

Characteristics Compliance-Based Integrity-Based

Approach Approach
Ethics Conformity with externally Self-governance according to
imposed standards chosen standards
Objective Prevent criminal Enable responsible conduct
misconduct
Leadership Lawyer-driven Management-driven with aid of
lawyers, HR, and others

Source: L. S. Paine, “Managing for Organizational Integrity,” Harvard Business Review 72, no. 2 (1994), p. 113 (with permission).
Adapted from Exhibit 11.6 Approaches to Ethics Management
 1 1- 24

Approaches to Ethics Management

Characteristics Compliance-Based Integrity-Based

Approach Approach
Methods Education, reduced Education, leadership,
discretion, auditing and accountability, organizational
controls, penalties systems and decision
processes, auditing and
controls, penalties

Behavioral Autonomous beings Social beings guided by

Assumptions guided by material material self-interest, values,
self-interest ideals, peers

Source: L. S. Paine, “Managing for Organizational Integrity,” Harvard Business Review 72, no. 2 (1994), p. 113 (with permission).
Adapted from Exhibit 11.6 Approaches to Ethics Management
 1 1- 25

Key Elements of Highly

Ethical Organizations
• These interrelated elements must be present and
constantly reinforced
- Role models
- Corporate credos and codes of conduct
- Reward and evaluation systems
- Policies and procedures
 1 1- 26

Key Elements of Highly

Ethical Organizations
• Role Models
- Leaders are role models for their organizations
- Leaders must be consistent in their words and deeds
- Values and character of leaders become transparent to an
organization’s employees
- Effective leaders take responsibility for ethical lapses
within the organization
 1 1- 27

Key Elements of Highly

Ethical Organizations
• Corporate credos and codes of conduct
- Provide a statement and guidelines for norms, beliefs and
decision making
- Provide employees with clear understanding of the
organizations position regarding employee behavior
- Provide the basis for employees to refuse to commit
unethical acts
- Contents of credos and codes of conduct must be known to
employees
 1 1- 28

Key Elements of Highly

Ethical Organizations
• Reward and evaluation systems
- Inappropriate reward systems may cause individuals at all
levels of the organization to commit unethical acts that they
might not otherwise do
- Penalties in terms of damage to reputations, human capital
erosion, and financial loss are typically much higher than
any gains that could be obtained through such unethical
behavior
 1 1- 29

Key Elements of Highly

Ethical Organizations
• Policies and procedures
- Policies and procedures can specify proper relationships
with a firm’s customers and suppliers
- Policies and procedures can guide employees to behavior
ethically
- Policies and procedures must be reinforced
• Effective communication
• Enforcement
• Monitoring
• Sound corporate governance practices