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Strategic Leadership: Creating a Learning Organization

and an Ethical OrganizationProfessor John Coy

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Learning Objectives

• After reading this chapter, you should have a good understanding of:

- The three key activities in which all successful leaders must be continually engaged.

- The importance of recognizing the interdependence of the three key leadership activities, and the salience of power in overcoming resistance to change.

- The crucial role of emotional intelligence (EI) in successful leadership as well as its potential drawbacks.

- The value of creating and maintaining a “learning organization” in today’s global marketplace.

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Learning Objectives

• After reading this chapter, you should have a good understanding of:

- The five central elements of a “learning organization.”- The leader’s role in establishing an ethical organization.- The benefits of developing an ethical organization.- The high financial and nonfinancial costs associated with

ethical crises.

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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

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Leadership: Three Interdependent Activities

Successful leaders must recognize three interdependent activities:

Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership

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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

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Example

• DuPont’s vision statement is “to be the world's most dynamic science company, creating sustainable solutions essential to a better, safer and healthier life for people everywhere.”

Source: www.dupont.com

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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

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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

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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

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A Leader’s Bases of Power

Exhibit 11.2 A Leader’s Bases of Power

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Emotional Intelligence: A Key Leadership Trait

Successful traits Successful traits of leaders at the of leaders at the

highest levelhighest level

Technical Technical skillsskills

Cognitive Cognitive abilitiesabilities

Emotional Emotional intelligenceintelligence

Accounting, business

planning, etc.

Analytical reasoning, quantitative analysis,

etc.

Ability to work with others, passion for

work, etc.

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Emotional Intelligence

• Five components of emotional intelligence- Self-awareness- Self-regulation- Motivation- Empathy- Social skill

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Five Components of Emotional Intelligence at Work

Definition Hallmarks

Self-management skills:

• Self-awareness

• The ability to recognize and understand your moods, emotions, and drives, as well as their effect on others.

• Self-confidence

• Realistic self-assessment

• Self-deprecating sense of humor

• Self-regulation • The ability to control or redirect disruptive impulses and moods.

• The propensity to suspend judgment—to think before acting.

• Trustworthiness and integrity

• Comfort with ambiguity

• Openness to change

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

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Five Components of Emotional Intelligence at Work

Definition Hallmarks

Managing Relationships:

• Empathy

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

Self-management skills:

• Motivation

• A passion to work for reasons that go beyond money or status.

• A propensity to pursue goals with energy and persistence.

• Strong drive to achieve

• Optimism, even in the face of failure

• Organizational commitment

• The ability to understand the emotional makeup of other people.

• Skill in treating people according to their emotional reactions.

• Expertise in building and retaining talent

• Cross-cultural sensitivity

• Service to clients and customers

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Five Components of Emotional Intelligence at Work

Definition Hallmarks

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

Managing Relationships:

• Social Skill

• Proficiency in managing relationships and building networks.

• An ability to find common ground and build rapport.

• Effectiveness in leading change

• Persuasiveness

• 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)

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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

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Key Elements of a Learning Organization

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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

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Question

Do you agree with this statement by Ken Melrose, “the great leader is a great servant”?

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• 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

Key Elements of a Learning Organization

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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

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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

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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

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Example

• In order to avoid unethical business practices, you should never do the following:1. Suppress information that might damage your reputation.

2. Deny charges that are relevant and factual. 3. Spend money for public relations or advertising to counter

honest complaints.

4. Ignore problems with the products you sell. 5. Refuse to accept blame.

Source: Gerson, Vicki. “Avoiding Unethical Business Practices,” www.nfib.com. February 21, 2003.

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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

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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

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Question

Integrity-based ethics programs combines a concern for law with an ______.

A) emphasis on the proper use of managerial power

B) emphasis on legal consequences of unethical behavior

C) emphasis on managerial responsibility for ethical behavior

D) emphasis on social responsibility for ethical behavior

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Approaches to Ethics Management

Characteristics Compliance-Based Integrity-BasedApproach Approach

Ethics Conformity with externally Self-governance according to imposed standards chosen standards

Objective Prevent criminal Enable responsible conductmisconduct

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

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Approaches to Ethics Management

Characteristics Compliance-Based Integrity-BasedApproach Approach

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

Methods Education, reduced Education, leadership,discretion, auditing and accountability, organizationalcontrols, penalties systems and decision

processes, auditing and controls, penalties

Behavioral Autonomous beings Social beings guided byAssumptions guided by material material self-interest, values,

self-interest ideals, peers

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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

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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

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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

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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

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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

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Strategic Leadership: Creating a Learning Organization

and an Ethical OrganizationProfessor John Coy