11-1. 11-2 Strategic Leadership: Creating a Learning Organization and an Ethical Organization...

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Strategic Leadership: Creating a Learning Organization

and an Ethical Organization

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter eleven

Part 3: strategic implementation

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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.


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Learning Objectives



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.The five central elements of a “learning organization.”

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Learning Objectives


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 becomeLeadership should be

ProactiveGoal-orientedFocused on the creation and implementation of a creative vision

11-7 Leadership: Three Interdependent Activities


Determining aDetermining adirectiondirection

Designing theDesigning theorganizationorganization

Nurturing aNurturing aculture dedicatedculture dedicatedto excellence andto excellence andethical behaviorethical behavior

Successful leaders must recognize three interdependent activitiesDetermining a direction

Designing the organization

Nurturing a culture dedicated to excellence and ethical behavior

Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership

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Setting a Direction


Scan environment to developKnowledge of all stakeholdersKnowledge of salient environmental trends and events

Integrate that knowledge into a vision of what the organization could becomeRequired capacities

Solve increasingly complex problems Be proactive in approachDevelop viable strategic options

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Patterns of Growth of Large Corporations


Difficulties in implementing the leaders’ vision and strategies

Lack of understanding of responsibility and accountability among managersReward systems that do not motivate individuals and groups toward desired organizational goalsInadequate or inappropriate budgeting and control systemsInsufficient 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 behaviorConsistently demonstrate that such behavior is central to the vision and missionDevelop and reinforce

Role models Corporate credosCodes of conduct

Reward and evaluation systemsPolicies and procedures

11-11Overcoming 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 quoSystemic barriersBehavioral barriersPolitical barriersPersonal time constraints

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A Leader’s Bases of Power


Exhibit 11.2 A Leader’s Bases of Power

11-13Emotional Intelligence: A Key Leadership Trait


Accounting, business

planning, etc.

Analytical reasoning, quantitative analysis,

etc.

Ability to work with others, passion for

work, etc.

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

highest levelhighest level

Technical Technical skillsskills

Cognitive Cognitive abilitiesabilities

Emotional Emotional intelligenceintelligence

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Emotional Intelligence


Five components of emotional intelligence

Self-awarenessSelf-regulationMotivationEmpathySocial skill

Emotional Emotional intelligenceintelligence

11-15 Five Components of Emotional Intelligence at Work


Self-management

skills:Self-awareness

Definition Hallmarks

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

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)

Self-regulation

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



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

Self-management skills:

Managing relationships

Empathy




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

Managing relationships

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 organizationsCreate a proactive, creative approach to the unknownActively solicit the involvement of employees at all levelsEnable all employees to use their intelligence and apply their imagination

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Developing a Learning Organization


Learning environmentOrganization-wide commitment to changeAn action orientationApplicable tools and methodsGuiding philosophyInspired and motivated people with a purpose

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Salient elements of empowerment

Start at the bottom by understanding needs of employeesTeach employees skills of self-managementBuild teams to encourage cooperative behaviorEncourage intelligent risk takingTrust people to perform

Four Critical Processes of Learning Organizations

Empowering Empowering employees at all employees at all

levelslevels

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levelslevels

Accumulating and Accumulating and sharing internal sharing internal

knowledgeknowledge

“Open book” managementNumbers on each employee’s work performance and production costs generated dailyInformation is aggregated once a week from top level to bottom levelExtensive training in how to use and interpret the numbers – how to understand balance sheets, cash flows and income statements

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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 informationBenchmarkingFocus directly on customers for information


levelslevels


knowledgeknowledge

Gathering and Gathering and integrating external integrating external

informationinformation

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levelslevels


knowledgeknowledge

Gathering and Gathering and integrating external integrating external

informationinformation

Challenging the Challenging the status quo and status quo and

enabling creativityenabling creativity

Challenging the status quoCreate a sense of urgencyEstablish 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 leadershipUnethical business practices

Involves tacit, if not explicit, cooperation of othersReflect the values, attitudes, and behavior pattern that define the organization’s operating culture

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Creating An Ethical Organization


Driving forces of ethical organizationsEthical valuesIntegrity

Ethical valuesShape the search for opportunitiesShape the design organizational systemsShape the decision-making process used by individuals and groupsProvide a common frame of reference that serves as a unifying force

11-26Integrity-Based versus Compliance-Based Approaches to Organizational Ethics


Essential links between organizational integrity and individual integrity

Cannot be high-integrity organizations without high-integrity individualsIndividual integrity is rarely self-sustainingOrganizational integrity, resting on a

concept of PurposeResponsibilityIdeals

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Approaches to Ethics Management


Ethics Conformity with externally Self-governance according to

imposed standards chosen standards

Characteristics Compliance-Based Integrity-BasedApproach Approach

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 11.5 Approaches or Strategies for Ethics Management

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Approaches to Ethics Management


Methods Education, reduced Education, leadership,discretion, auditing and accountability,

organizationalcontrols, penalties systems and decision

processes, auditing and controls, penalties

Characteristics Compliance-Based Integrity-BasedApproach Approach

Behavioral Autonomous beings Social beings guided byAssumptions 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 11.5 Approaches or Strategies for Ethics Management

11-29 Key Elements of Highly Ethical Organizations


These interrelated elements must be present and constantly reinforced

Role modelsCorporate credos and codes of conductReward and evaluation systemsPolicies and procedures



Leaders are role models for their organizationsLeaders must be consistent in their words and deedsValues and character of leaders become transparent to an organization’s employeesEffective leaders take responsibility for ethical lapses within the organization

Role modelsRole models



Provide a statement and guidelines for norms, beliefs and decision makingProvide employees with clear understanding of the organizations position regarding employee behaviorProvide the basis for employees to refuse to commit unethical actsContents of credos and codes of conduct must be known to employees


Corporate credos Corporate credos and codes of and codes of

conductconduct



Inappropriate reward systems may cause individuals at all levels of the organization to commit unethical acts that they might not otherwise doPenalties 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



conductconduct

Reward and Reward and evaluationevaluationsystemssystems



Policies and procedures can specify proper relationships with a firm’s customers and suppliersPolicies and procedures can guide employees to behavior ethicallyPolicies and procedures must be reinforced

Effective communicationEnforcementMonitoringSound corporate governance practices



conductconduct

Reward and Reward and evaluationevaluationsystemssystems

Policies and Policies and proceduresprocedures

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