MASTERS OF BUSINESS ADMINISTRATION (MBA)

UUM/REZZEN KL
COLLEGE OF BUSINESS
UNIVERSITI UTARA MALAYSIA

BPMN 6043

FINALS – TAKE HOME EXAM

Name : BASKAR RAMACHANDRAN (803772)

Subject : LEADERSHIP IN ORGANIZATION

Lecturer : Dr. HAIM HILMAN ABDULLAH

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Leadership and Corporate Crisis: Discuss

The characteristics of a corporate crisis are defined by (Ogilvy PR Worldwide) as:

1. Surprise
2. Insufficient Information
3. Escalating Flow of Events
4. Loss of Control
5. Intense Scrutiny from Outsiders/Insiders
6. The Beginning of the Siege Mentality
7. Panic
among others. This very much sums up an organization undergoing a crisis, or which is just coming
out of one. Corporate crisis is not new; business history is strewn with classics like the Enron oil
spill, Johnson and Johnson’s Tylenol, Jet Blue’s last minute cancellations due to bad weather,
among others. How they turned it around are folk tales in business case studies in corporate social
responsibility. Further examples highlight some or all the points above in how companies reacted or
responded to crisis :
Nike, faced an extensive consumer boycott after the New York Times and other media outlets
reported abusive labor practices at some of its Indonesian suppliers in the early 1990s.
Shell Oil’s decision to sink the Brent Spar, an obsolete oil rig, in the North Sea led to Greenpeace
protests in 1995 and to international headlines.
Nestlé, the world’s largest supplier of bottled water, has become a major target in the global debate
about access to fresh water, despite the fact that Nestlé’s bottled water sales consume just
0.0008% of the world’s fresh water supply.

One common trend in these cases is that external stakeholders, i.e., customers,
governments, pressure groups and other non governmental organizations hold companies
accountable for social issues and highlight the potentially large financial risks for any firm whose
conduct is deemed unacceptable.
While most come out unscathed, either by owning up and taking action, or hiding behind
regulations and legal defenses, they have one thing in common, a reactive or responsive
leadership. Whether the company takes an ethical ground or otherwise, there seem to be a glorified
hero worship for a leader that turns-around companies in crisis. Even so, most common corporate
response has been neither strategic nor operational but cosmetic: public relations and media
campaigns, the centerpieces of which are often glossy corporate reports that showcase companies’

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social and environmental good deeds. Hence, the need to reassess the generally accepted view of
leadership in corporate crisis. Is there a better, more proactive approach that could become a
model depicting a more effective leadership ?
We will take up the case of Intel under Andy Grove as a showcase of both reactive as well
as strategic approach to leadership and corporate crisis. Grove started his career in 1963 in
Fairchild Semiconductor. He later joined Intel when it was formed (as Integrated Electronics ) in
1968, following his boss from Fairchild, Gordon Moore.
During the last four decades, Intel has been one of the most successful companies in the
world. Grove was CEO of Intel from 1987 to 1998 - during these period, starting from the point he
helmed Intel to his ascension to chairman, the company’s sales and profits (Robert Burgelman,
2002) are as follows :

Year Revenue Profit

1987 US$ 1.9 billion US$ 246 million
1998 US$ 26.3 billion US$ 6.1 billion

This translates to a compound annual growth rate of 42 percent, with a total increase of
4500 percent – a performance any CEO in the future will find hard to better. Though one of the
most successful companies ever, Intel and Andy had it’s share of crisis. We’ll pick one of the more
famous – the “bug in the Pentium FPU”.
The issue started with a harmless e-mail from a Professor Nicely, a mathematician in
Virginia, to a few people that “ the Pentium FPU is returning erroneous values for certain division
operations” (Harvard Business School Case, 1996).Bugs were not new in computer related
technology, and even today, some of the mistakes are discovered only after the product is already
in the market as it is not possible for a supplier to do all the “unhappy path” testing. In the case of
Pentium, Intel had continued to do trillions of random mathematical operations in search of bugs
(Unseem and Badaracco). Professor Nicely discovered the problem : multiplying 824633702441.0
with 1/824633702441.0 should equal 1; however, his Pentium powered PC gave out
0.999999996274709702 which cannot be mistaken as 1. This was almost simultaneously, but
independently discovered by Intel’s engineers, who also discovered the root cause. However, Intel
chose to fix it in the next version of the chip ,and also chose to not mention this to its customers and
distributors – they took the problem to be so small, compared to bugs in previous chip releases.
Professor Nicely, however, chose to dig further for four months and came to a conclusion
that the bug was inherent in the Pentium itself. He called his retailer (who didn’t know anything

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about it), and then communicated with Intel technical support directly. They responded, six days
later that they could not help him. Intel did not have their tech support report any external complaint
about the bug, that could be handled in a special manner (Unseem and Badaracco).He then sent
out his email to a number of individuals and organizations. This was in turn exposed in a few
internet forums and created a domino effect for others to try and confirm the error. An Intel
spokesperson explained in an article on the topic that it was a very rare condition and happened
only once in 9 to 10 billion operations, and then misquoted that the fix has already been done in the
next version. Meanwhile, Intel continued to ship the flawed chips. However, the complaints were still
quite scarce.
Andy Grove addressed the COMDEX trade show as a keynote speaker that year, and
neither he nor the press addressed this issue. However, the heat started when CNN picked up the
news and interviewed Intel engineers in their home turf. Intel was still defensive and claimed that it
was too minute and that there was only one complaint. Intel ended the first CNN meeting with “ If a
customer wanted a replacement chip, Intel will decide if they really needed one”. ((Unseem and
Badaracco). This created a reaction both in the media and the internet. Intel was still trying to butter
its way out through thinly apologetic mails which did not promise any tangible action.
Towards the end of the year, IBM, one of Intel’s major customers, issued a press release
that it was halting shipments of Pentium based PCs. The same day , Intel’s stock shot down by
almost 10 US$. Then, all hell broke loose. “ …I felt we were under siege – under unrelenting
bombardment “ ( Andy Grove, 1996)
One week later, Intel changed its policy completely. They replaced anybody’s chip who
wanted it replaced – a no questions asked product replacement program. Without working out the
details of manufacturing and logistics, and the cost of replacement, Andy Grove went ahead and
responded decisively on the issue. However, the way Intel extended its olive branch was neither
charming nor sincere. It still held on to its former statements, but somehow, it was willing to give in
to the customer and the customer’s customer. As Andy himself said “ What was hardest to take was
the outside world’s view on us”.
In this case, IBM flagged its products because, among other reasons, Intel had started the
Intel Inside advertising campaign, where all its OEM customers displayed this sign on their
hardware devices. With the Pentium saga ongoing, it makes it painfully obvious what is inside the
PC, and no one would actually want to purchase it.
To surmise, A crisis can be divided into a number of stages:
(1) Detection.
(2) Prevention/preparation.

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 (3) Containment.
(4) Recovery.
(5) Learning (Fearn-Banks, 1996).
Intel went wrong in all first three steps. When the flaw was detected, Intel could very well
have announced it, adding its reasons for postponing the fix to the next generation, This would not
have created that much flak in the tech community. Knowing the problem, they were also not
prepared to respond to any users or customers who may have discovered it. This may point to a
certain amount of arrogance in “ we know better than the users” and justifies the fury with which the
user community reacted in the media and the internet. Third, even after the problem was
highlighted, Intel chose to ignore it, rather than take the opportunity to contain it. And we would
have thought that everyone else would have learned the lesson, especially after the internet had
made its debut. Mercedes Benz repeated almost the same mistake and had to dish out about 300
million Deutsch Marks to contain the Mercedes A class debacle ( Heiki Puchan, 2001). Leaders can
have selective amnesia when they want to.

On the other hand, Andy and team were masterful in how they dealt with another, greater
looming crisis, and successfully navigated Intel out if it.
Intel began as a memory company. They soldiered on, carved out a decent market share
and became comfortable, until 1980, that is. Then, a new competition in the form of the Japanese
entered the market.
They (the Japanese) were actually complementing Intel earlier in the 1970s, when Intel
could not keep up with the demand. It was quite a happy relationship. However, they seem to have
suddenly transformed into “scary” competitors overnight. Actually, it should be oversight, as the
case with many other American industries that underestimated or completely ignored the Japanese.
Apart from very low cost of capital and huge capacities, they rubbed salt with a product quality that
was suddenly superior. (Andy Grove, 1996). Thus, the Japanese were really into the memory
market in a big way, with full backing from the government controlled banking sector. Traditional
customers like Hewlett Packard started reporting that the Japanese memories were “consistently
and substantially better. …quality levels…. were beyond what we thought were possible. Our first
reaction was denial.” (Andy Grove, 1996). Andy may not have realized it at that time, but the term
“The Climate of an Organization is a Reflection of the Leader” rang true at Intel – everyone else at
Intel reflected his mode.
But the fact was, the Japanese were conquering the world memory market. Intel responded
with quality improvement and cost down initiatives. However, the Japanese came back with higher

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quality memories with absurdly low prices. Intel tried everything from focus on a niche of the market
segment, special purpose memories and advanced technologies, trying to earn prime pricing in a
market they could not compete on price. Intel was also working on another device, called
microprocessors, on parallel, though the focus of research and development was still on memories.”
Our priorities were formed by our identity: after all, memories were us” ( Andy Grove, 1996). Here,
Intel’s senior leadership were let down by their lack of self assessment in the wake of this
challenge, and let the matter drag further. They were emotionally attached to the memory business,
which created an identity, a sense of self in them, that made them blind to the obvious.
However, there still seemed to be no cause for alarm as orders were still piling up and
whatever was produced was still in short supply. Then, in 1984, it all came to an abrupt change.
The memory business for Intel suddenly started to slide down. Intel could not put the brakes on
production quick enough to stop inventory build. Meetings upon meetings to find a way out were in
conclusive. The whole year was a frustrating time, spent in losing more money.
The break came when Andy was discussing the scenario with Gordon Moore, Intel’s
chairman and CEO at that time. “If we get kicked out and the board brought a new CEO, what do
you think he would do ? “ Gordon answered, “He would get us out of the memories. “ Andy
responded, “ Why shouldn’t you and I walk out of the door, come back and do it ourselves ?” (Andy
Grove, 1996).
Then the difficult part of telling this to his associates at Intel began. At first, it was also
difficult for Andy to get the words out of his mouth, as memory was Intel’s core business. It was a
question of tearing yourself away from your identity. It was made more difficult with memories
having been Intel’s “technology drivers” and the usual “full product line” (having the complete range
of products) that was required for easier selling. Andy ran into natural law # 3 of communication
channels – that this new vision will not be accepted overnight and it will take some time (even for
Andy) before Intelliers are able to internalize it.
The whole of Intel was against any migration from memories, and most of their arguments
were dogmatic on the two ideas in the paragraph above. Andy had to replace senior managers in
order to get his message across and executed. When the time came to tell their customers, some of
their customers retorted with “ It sure took you a long time ( to decide)” ( Andy Grove, 1996). When
there is no emotional stake in a decision, it seemed to be so clear what the choice was. It was then
that Intel decided to go all out into the microprocessor business, and the rest is history. Intel is still
one of the leading microchip producers in the world right now.
However, it was through this lesson that Andy coined the famous “strategic inflection
point”. It is a force that is ten time bigger than what a business is accustomed to face when

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something fundamental in the business changes. This means, that most of everything a leader
does, has to change as the point of reference for most decisions has shifted. The strategic inflection
point, (see diagram below) however, is preceded by a slow, silent trend that is mostly not visible to
any but the most alert leader. And most of the time, it is the leader who is last to know, if he doesn’t
take the effort to see everything independently.

Strategic Inflection Point Beyond salvation

The frontline people, the ones dealing with suppliers, customers and the product first hand,
usually get a feel of this long before the leader; however, a company culture that is top down, with
the strategy being driven by a few leaders in the top, does not support news that will shake the very
foundation of the organization. In Intel’s case, because of quite a lot of autonomy the middle
managers enjoy, they saved a lot of time in executing the new direction in microprocessors because
the lower level had started to divert to micro-processor lines early through their own decision
making structure – to move away from low capacity, unprofitable business to increasing volume,
money making products. The lower level dealt with the tasks in an objective manner, while the
senior management was busy defending entrenched beliefs.
In hindsight, researchers suggest that business leaders build a strategic transformation
framework (Gary Stockport, 2000).

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 The figure shows there is no starting or ending point and all parts of the framework are very
important. This tool intends to be of practical use to managers. These questions/statements are:
. Market and financial data that shows a slowing in the rate of growth in sales provides a
signal that your market may be changing. This data needs to be analysed in market segment
categories. The more up-to-date and quicker the data becomes available to senior managers, the
more useful it will be. The company should implement information systems that capture data at
point-of-sale.
The lessons in leadership are myriad in nature. The leader of the 21st century has to always
work with a paradigm of change as the only constant. This is especially true in technology business.
For example, the semiconductor business which affects all the ancillary businesses, used to have a
fairly steady trend : two years up followed of one year of slowing down in the beginning of 2000.
However, the spikes became narrower with alternate slow downs until it reached unpredictability in
2008. A leadership that has no inkling of strategic inflection point had better not be leading a
technology business, as they will be wiped out very quickly, when a crisis looms.
In comparing the ability of managing against leadership, it is better to take Grove’s own
words “…there is an implicit value judgment that leadership is better than management. In reality,
you need both capabilities. …. The same person should be able to do transactional jobs when
those are needed and transformational jobs when those are needed….A tennis player has both
forehand and backhand…..we don’t; talk about backhand and forehand players”, (Richard Tedlow,
2006). As such, both the abilities are called forth in a crisis situation.

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 The correct response to this level of change involves breakthrough change with totally new
products, services, processes, systems, structures, or business models. Since breakthroughs
cannot come from what people already know, a deliberate and systematic effort to create
knowledge and innovative action is absolutely the approach of choice here.( Jay L. Abraham,
Daniel J. Knight, 2001) In terms of creating, supporting and facilitating innovation and change,
Grove fits in the bill – in his capability in leading effective teams during the crisis, and in displaying
the characteristics of innovation, namely creativity, being an idea incubator, displaying true
corporate entrepreneurship and championing the idea of change.
In terms of leadership evolution, Intel was blessed with structures that helped it through the
crisis much more effectively. Its hybrid organization ( cross functional teams), a high performance
culture, and a shared vision across the board as drivers of “technology revolution” were its assets
when handling corporate crisis.
Grove’s own personality trait, as a practical intellectual (he has a doctorate in chemical
engineering) may also indicate his approach in handling the crisis. He was called the “Best
Manager in the world” by Fortune magazine. He is said to be in his element when it comes to critical
threats to Intel. “Goading, challenging, bullying, shouting, he never relaxes the pressure for results
or for relevance. Grove’s driving, ambitious, take no prisoners personality is ideal for the highly
combative climate in Silicon Valley. …without unremitting vigilance and strenuous action, success
will corrode into failure.” ( Robert Heller, 2001)
While Grove was high on most personal characteristics of leaders, he falls short on the tact
and diplomacy section, that does not quite make up his social characteristics. However, this did not
stop him from going down to the trenches to convince Intel folks to get out of the memory business.
Grove also has a classic contingency approach to leadership. While he has a somewhat
autocratic approach as far as visions, values and goals are concerned, and has a somewhat
combative style, he is flexible and is able to demolish sacred cows when the situation demands it by
changing tasks, systems and structures to facilitate change.
Intel has a very aggressive, intense, and confrontational work culture. They thrive on
challenge and intellectual rigor and are internally and externally combative. Power is not derived
from seniority or authority, but from intellectual integrity and the ability to argue a point and make a
case….company is the personification of the intense competitiveness of its leader. They have been
fashioned for combative behavior and the fact that the companies they deal with and strive against
are not so fashioned explains much about why Intel dominate its industry. Their strategies are
manifestations of the rigor in their internal environments and the sense of leverage and conflict that

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permeates their cultures.( Alexander S. Theodhosi , 2000). This same culture, that is derived from
its leadership style, also helps it recover quickly from the crises that it faces.
What Grove has given us with the strategic inflection point, is a proactive model of
leadership, which an astute and agile leader should use as a radar to continuously track the
beginnings of shifts in his or her industry, which may even remotely affect the business. In this way,
the leader will be able to avert an impending crisis, or at the very least, ride it more effectively when
it hits the organization

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Leadership and the Challenge of managing in a toxic environment: Discuss

What is a toxic environment ? The clip below pretty much defines it.
When Steve Jones was just two years from retirement, he quit his job as vice-president of
human resources at one of Canada's largest banks, walking away not only from a high salary but
also from a fat pension. He'd spent his entire career in banking, and had no idea what to do next. A
change of management two years earlier had replaced a people-friendly way of doing business with
one more cutthroat and focused on the bottom line -- an approach diametrically opposed to what
Jones believed in. The new leaders systematically dismantled programs he'd put in place. The level
of pressure he experienced at work went through the roof. Not only was he sleeping badly, he'd
developed diabetes, which he says may have been triggered by high stress. He'd tried,
unsuccessfully, to get laid off. "I was a 53-year-old, overweight white guy," says Jones, who asked
that his real name not be used, "and I figured, if worst comes to worst, I can always deliver pizza."
You know things are bad when delivering pizza beats hanging in for another 24 months.
Besides, Jones had a high-paying job -- he was making $180,000 a year as a corporate exec with a
swish office in a downtown high-rise. But realizing "there wasn't much value in a pension if I was
dead," he knew he couldn't stay. "I felt absolutely out of step," he says. "There'd be conversations in
meetings that made me feel I was in a foreign country where I didn't understand the rules or the
principles. (Katherine Macklem, 2005)
The toxic work environment is a new term, coined by human resource experts on the effects
of people working in organizations where they are psychologically affected by stress caused by :
• Heavy workload – affecting more than half (52 percent) of American workers, several of
whom say they’ve covered for colleagues on maternity leave.
• Unreasonable boss – 37 percent of the U.S. working population, claiming they are
expected to work when ill.
• Disorganization – 43 percent suffer from disorganization in the company, with lack of
prioritization that makes them overwhelmed and unable to cope.
• Unrealistic targets – Approximately one-third (32 percent) have been given unattainable
sales goals and overly ambitious productivity aims.
• Short deadlines – affecting 31 percent of worker bees in the U.S. Examples include having
too little time or notice to complete a task. (David Lewis, 2005)
These contributing factors are not limited to the US, though data from other regions is
difficult to find. First, let us examine leadership, or the lack of which, gives rise to a toxic
environment.

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 It is common for a toxic environment to happen in organizations which are in era one or two
in the leadership evolution. This is especially true in great person leadership, which usually
happens in a business start up. It is when an entrepreneur creates a business, and organizes
everything around fulfilling the demands of the customer. He calls all the shots, and everyone does
everything to meet the deadlines. The energy and enthusiasm of the owner / leader motivates
everyone to do their best.
However, as the organization grows, the entrepreneur has to focus more on business
strategies and funding and loses touch with the day to day operations. His second in command(s)
usually take over key portfolios, such as operations, quality, finance, human resources and sales.
These are people who had been comfortable taking orders from the boss, but who suddenly find
themselves in position of leadership. The CEO, who is self made, usually pooh-poohs leadership
development theories because he himself made it without any of them.
The senior managers are expected to manage the top and bottom line and what pleases
the boss most is any cost down activity. In this environment, human psychological well being is
usually at the bottom of the ladder, even though the company may have fabulous slogans such as “
employees are our greatest assets “ ( even though you do not see that reflected in the balance
sheet ) and “respect for the individual”. This often leads to manipulation, deceit, favoritism,
downright hostility based on ethnicity, gender, and personal bias. Everything that kills off whatever
motivation the worker has intrinsically is done, either consciously or otherwise, to make the senior
manager look good in the eyes of the boss. Sadly, these were the facts found during my tenure as a
consultant for the Human Resources Development Fund sponsored training needs analysis on
SMEs in Malaysia. What I learnt is that blind devotion to economic output, at the expense of
customers and appropriate stakeholders is another reason for most business manager’s bad
decisions – which ultimately impacts the company’s long term survival (de Geus 1997).
The CEO or MD usually expects discipline or training to solve problems which are inherently
related to motivation, and seem to have selective listening when told by third parties, like
consultants, on what the problem really is, which is a severe lack of leadership capabilities and
competencies in the management team. Most will naturally take on autocratic style, and can be
dumped in the “boss centered” leadership in the leadership continuum.
It has been my own experience that my superiors in local organizations were most of the
time very focused on fulfilling what his superior wants, which is usually the top and bottom line
results for the next quarter, even though it may be at odds with customer needs or totally
misaligned with a previously agreed upon strategy. This usually creates an extra dose of stress to
me and my subordinates, not to say the whole organization. This can eventually affect the

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organization’s health. Companies that are focused on short term shareholder value maximization
eventually get into trouble (Weil, 2003). The top management will then take various actions to
improve financial performance and specify certain goals to achieve - however, these goals are not
recognizable by people in most parts of the organization, because they are not specific and
actionable. People will look for fast, easy solutions to systems level issues within their functions.
The company comes to rely on, and reward heroes, and undermines efforts that promote teamwork.
A profile of most managers in this environment will show a consistent low in concern for
people, irrespective of the concern for results. They are typically Theory X practitioners, and are apt
to quote “ it’s a dog eat dog world out there, so you’ve got to the be the first dog to eat, or be eaten”
, as one of my acquaintances who is a self made business man usually tells me. If they were tested
on the four domains of emotional intelligence, they’ll probably fail. What happens to the level of
trustworthiness if your superior were to take your idea and sell it to his boss like it was his own ?
But when things go bad, you take the rap. One of the worst impact to an employee when working in
a toxic environment is the loss of trust, which is not easily regained even when the employee joins
another organization. This is apparent when training employees on soft skills like giving feedback,
and encouraging them to be open, and all the horror stories come out. The unfortunate result of this
is “skilled incompetence” (Argyris, 1986), where leaders are good at doing things that result in
undesirable outcomes.
So, toxic environments are here to stay, so long as we have bosses or leaders who do not
know or care about the psychological well being of people who work for them. But is there a
guideline on what leaders can do, or at least a framework to find out if they are unconsciously
creating a toxic workplace ? Especially middle managers, who find themselves sandwiched
between an “unenlightened” superior and subordinates who really need to “breathe” freely in order
to perform to their full potential. Stephen R. Covey (1991) has highlighted how personal tendencies
of leaders are carried over into the organization – translating individual problems into chronic
organizational problems which ultimately contributes to a toxic organization. This is as true today,
as it was when Dr Covey shared this insight almost twenty years ago.
The first problem to look at is there is no shared vision and values, either written or a
commitment to it at all levels of the organization (Stephen Covey ,1991).Most modern organizations
do have a vision, mission and values statements. The problem, however, is how it came about and
how it is deployed and instituted into every one in the organization. In my consulting days, I usually
get very funny answers to the question, how the company’s vision / mission statement were
created. Answers will range from “a consultant wrote it for us”, to “a few senior managers sat in a
meeting, brainstormed and wrote it down”. And what is worse, when you request to see the

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statement, it is sometimes in the drawer of the CEO or the Human Resources Manager. One can
almost predict the issues the organization is going through. Benjamin Franklin spent more than five
years in understanding the Iroquois Indians’ “federalism” before he came up with a framework for
the American constitution, and most companies try to whip one out in a day or two. So the basis of
all that the company does, or where it is going, is formalized in the vision and values. Even if it is
not deployed well, as it is the norm in most SMEs in Malaysia, the middle manager can formulate a
“mini” vision for his team (which does not go against the vision of the company as a whole) and can
start to integrate his team with the vision. Dr Covey further suggests that this vision embrace the
four basic human needs : economic or money need; social or relationship need; psychological or
growth need; and spiritual or contribution need. (Stephen Covey, 1991). These can be further
devolved to equitableness in monetary compensation, a win-win outcome in relationships, a sense
of freedom in establishing psychological growth for each individual, and commitment to a set of
universal values in dealing with employees, suppliers, customers and shareholders. Taking a page
from Toyota which abides by balance, mutual co-existence, co-prosperity, and harmony between
social and economic interests as important principles that guide management decision-making,
without losing sight of the importance of generating profits ( Toyota, 2001 ).
The second problem is a poorly developed strategy which doesn’t express the objective of
the vision, or which does not take into account the current reality of the organization or it’s
environment. Most organizations are lost in very lofty visions. The company I worked for had this : “
To be a Leading Malaysian Technology based, global company”, yet if one were to look at the R &
D spending yearly, it does not reach even 0.5% of revenue. How do you sell this vision to the
people ?
On the other hand, there are companies who have solid visions but fail to read current
reality clearly. They fail to see what exactly is happening in the organization, in terms of its people,
systems, processes, and outcomes and the underlying causes to them. In a manufacturing
company that I worked earlier, human resources and production managers were pressured to
“hunt” for more direct labor to meet the ramp in production, while the operator turnover rate kept
hitting the roof with tight deadlines, long hours and a militant environment. This spilled over to
support organizations like operations training, quality control and material procurement; resulting in
increasing turnover in these departments as well.
Both will lead to the establishment of an erroneous or weak strategy, which will elicit wrong
structures systems and behaviors – thus we go to the third problem, which is poor alignment
between structure and values and vision. Structure influences behavior : different people in the
same structure tend to produce qualitatively similar results. Structure in an organization is the basic

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interrelationship that controls behavior. ( Peter Senge, 1994 ). One of the most interesting
experience I had was when we played “The Beer Game”, which is a production / distribution
system, that was developed y MIT in the 1960s. This game allows everyone in it to clearly see the
consequences of ones decisions and whether one’s learning improves as they get to the next round
– if one were to manage with a given goal : to maximize one’s own profit. This type of structure
creates a similar behavior among all the participants, even though each participant has a different
learning and leadership style.
If a leader were to find security in only a certain type of structure, then he will fail when the
structures change due to forces inside or outside the organization. One example is competition.
Many companies are used to being managed with a span of control on one to six or seven. Then
one gets hit by a flat organization, most probably a Japanese or Korean one, where the span is one
to sixty that drives a different price structure. The organization has no choice but to restructure, and
what we get as a result is a leadership mayhem. The leader goes bananas and drives everyone
around him insane. Or worse, the company decides to downsize, or more politely, right-size, and
the people who are left behind are expected to carry the extra burdens of the folks who left. Instead
of creating structures that support team work and interpersonal relations, the leaders often complain
about poor relationship among workers and departments and tend to get a quick fix through two day
training programs or a quick salary raise. This flows into the fourth problem, leadership style.
A leader often brings her style from her previous organization – or from a very strong
influence from her psychological environment, a dominant father or mother. And in the new
organization may not be a right fit for her leadership style. As the saying goes, it is often difficult for
an old dog to learn new tricks. An organization can tolerate many different styles as long as people
are anchored in the same vision. ( Stephen Covey, 1991). However, as was highlighted earlier,
most organizations do not live by a guiding vision, if they have one in the first place. A leader in an
organization lacking proper vision, strategies and structures will often flow towards being a high
task low relationship style to compensate. Her time spent on task orientation would leave little to
build the relationship aspect of an effective leadership style, even if she wants to. Sometimes, the
leaders want to change her style, but does not have the skill or knowhow.
This leads to the sixth problem : mismatch between style and skills. A high task-high
relationship oriented leader has to have coaching as one of his core skill set. He also needs to
understand the nature of delegation and how it is related to tasks, i.e., the CUA factor. CUA stands
for complexity, uncertainty and ambiguity and assigns a certain ranking for each to a specific nature
of the task. Conducting effective meetings, developing subordinates and understanding situational
leadership is part of essential skills that a leader in this setting must have. However, in a toxic

15
environment, the ongoing day to day pressure for time will most likely ensure that the focus will be
on firefighting and not on strategic actions like training – this will lead to further deterioration of the
toxicity – a natural vicious cycle.
Which leads to the final problem of trust and integrity. Trust determines the quality of the
relationship, (Stephen Covey). Building trust is a complete affair; you can’t start to build trust in one
compartment while being distrustful in another. A leader is wasting his time in speaking about
openness, meritocracy and bold visions to wipe out corruption when he at the same time cannot be
transparent himself, e.g., have an open tender system instead of closed bidding. But this is what
most leaders do unconsciously : do what I tell, not what I do. Trust is gained by walking the talk, not
by talking too much. But that’s what a lot of people in leadership position do. A study ought to be
done whether there is an inverse relationship between the amount of “talk / preaching / lectures” in
an organization in ration to the issues. Authentic leaders, like Gandhi speak little , but let their very
being speak for what they stand. In fact, Gandhi himself has spelt out his seven things that will
destroy a human being (Mohandas K Gandhi, 1925), which incidentally applies to leaders as well.
These are also perfect recipes to create a toxic environment.
• Wealth without work
• Pleasure without conscience
• Knowledge without character
• Commerce ( business ) without morality ( ethics)
• Science without humanity
• Religion (values) without sacrifice ( service )
• Politics (leadership) without principles
Parentheses denotes application in a business scenario.

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The view from the top: The Board of Directors: Discuss

The role of the Board of Directors are to ensure that management of the firm is conducted in
an ethical and responsible manner, in accordance with the M & A of the company. Their fiduciary
duty is to ensure that they act with integrity with the best interests of the shareholders, and thus,
the company. In short, the Board is responsible for the corporate governance of the organization.
In order for them to fulfill the first obligation above, there are laws that govern the conduct of the
Board.
In Malaysia, the rules are indicated in the Companies Act,1965. For example, S.122(2) –
QUALIFICATIONS & DISQUALIFICATIONS OF DIRECTORS states that he be human and of full
age & capacity ( no other positive qualifications are prescribed ).
Further common law indicates that “A director need not exhibit in the performance of his
duties a greater degree of skill than may reasonably be expected from a person of his knowledge &
experience”. – [1925] 1 Ch Re City Equitable Fire Insurance Co Ltd 407.
Another case supports this with “ A director does not have to possess any particular skill for
the job & the fact that he is unskillful is not a breach of his duty to the company.” “However
ridiculous & absurd their conduct might seem, it was the misfortune of the company that
they chose such foolish directors” Per Lord Hartherley LCJ in Turquand v Marshall
In the US and Canada, the famous Sabarnes Oxley Act, 2002, that governs standards for all
U.S. public company boards, management and public accounting firms. This does not, however,
cover the private limited companies.
The main thrust of this discussion is how can the board perform their role effectively. The
examples of common law and the formalities of statue law, in Malaysia at least, do not seem to
create a structure solid enough to ensure the Board performs to its best. Research has suggested
that the formal structures of
o size,
o composition (proportion of outside directors),
o separation of CEO and board chair positions and
o board independence
alone does not guarantee that the Board performs. (Rookmin Maharaj, 2008). (Van den Berghe and
Levrau, 2004 ) also suggest that the knowledge base or experience of each board member has to
be considered in order to make the Board more effective. With their restrictive view from the top,
encumbered by time and first hand information, there must be some process that will make the

17
Board more effective. This is essential as the Board, for all effects, are the top level of a
corporation’s hierarchy (Hansell, 2003).
It is a well known fact that management can and does through “creative finance” manipulate
accounting-based measures to suit their purposes. For example, earnings for a quarter may not be
declared but “hedged” as a buffer to compensate for future slow-downs. The amount is usually
depicted as provision for bad debts or depreciation. Non industry directors will find it difficult to
understand what a true provision should be. As such, there is research to inquire into other
processes that may give a truly better view from the top. One such research (Rookmin Maharaj,
2008) suggests three objectives that are required for effective decision-making were developed
about:

o knowledge;
o motivation; and
o transmission channels/internal control

A key in the process is to have the ability to look for an opportunity gap, while knowing
whether it needs a quick fix or whether it can be delayed. One example is when a company has
ventured into a new product range, e.g. aerospace in which it has never been before. During the
board meeting, except for the CEO, there will most probably be a gap in the knowhow in this field.
The CEO cannot be fully counted upon as he has a vested interest in showing good managerial
performance.
The gap gives an opportunity to the directors to ensure prior know how is passed on to them
or in having a third party consultant present if necessary. This also plays into the motivation of the
directors on whether they really want to drill down into unchartered areas, beyond their expertise.
Hence, another question comes to mind ? Do we require a board with expertise in a narrow
field, but in depth, or do we need someone who knows a little about everything ? Or is there an
optimal mix ? It depends. In an overtly technology driven organization, it makes sense to have at
least part of the board to consist of tech savvy people from both upstream and downstream of the
product range. On the whole, this has to be examined within the context of the board being
responsible for guiding the strategic oversight capabilities of corporations. In other words, the board
evaluates and approves the organization’s strategic direction. One way is of course to populate the
board with directors who are providing strategic direction in another organization, so that this
capability is tapped.

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 However, the crux of the matter is still ethics. In the light of Enron, WorldCom and many
others where corruption went right up to the board level, the public has lost faith in the integrity of
the board. Though it is difficult to ensure that all members of the board be ethical, there is a tool that
can be used to determine the ethical climate. The organizational values dealing with ethical issues,
those that determine what is considered ethically correct make up the ethical climate of an
organization (Victor and Cullen, 1987).
A questionnaire, called ECQ ( Ethical Climate Questionnaire) can be used to measure the
ethical climate of a group. It basically defines many events, procedures and practices that require
ethical criteria in making a decision.

The ECQ generates six possible ethical climates :

(1) Professional.
Workers follow the rules and guidelines set out by their professional order, or the laws set out by
the government. They look outside the organization for cues concerning how to behave ethically.
(2) Caring.
In a caring climate, employees within the organization are genuinely interested in the welfare of
others, both within and outside their organizations. The actions of a group demonstrating this
climate would show a concern for all those affected by their decisions.
(3) Rules.

19
In the rules climate, employees are expected to strictly follow the rules of their department or
organization.
(4) Instrumental.
In the instrumental climate, members of an organization look out for their own self interests, often
at the benefit of others.
(5) Efficiency.
In this climate, the right way to do things within the organization is the most efficient.
(6) Independence.
In the independence climate, employees are strongly guided by their own sense of right and wrong
(Victor and Cullen, 1987).
Later research confirmed that among the six, instrumental climate was the most related to
unethical behavior. (Wimbush et al, 1997) In addition, women, longer tenure, better education and
age also seem to be more prone towards ethical behavior.
Though this by no means will eliminate unethical cases in boards, it will act as a radar, an
indicator that helps in making the view from the top more effective.

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At the helm: What CEOs and Business Unit and country managers must do: Discuss
In view of the increasingly dynamic and volatile business environment, the roles of a CEO
and Business Unit / Country Mana
Managers have shifted. I will use LKT Group, where I was the
Business Unit Manager for the automation division, as a case to discuss this question.
Background
The core of an automation house is design and development. Without continuous
development of new products and solutions, the equipment automation company will cease to exist.
The design process itself is supported by the tripods of design tools, engineering methodologies
and development processes. Adherence to the fundamentals of these three aspects gives the
designers a better opportunity of success in turning specs into products.
LKT Automation is a subsidiary of LKT Group, with core competencies in Design &
Development of Industrial Automation Equipment., The company also has as supporting operati
operations
in Project Management, Procurement, Assembly, Quality Assurance, Stores, Spares, Service,
Training and Documentation.
The account (business unit) management has a key role in integrating these functions to
successfully complete development and subsequ
subsequent projects.
LKT Automation had, until recently, specialized in the design and development of
equipments and peripheral support for back end semiconductor processes. While the company had
grown tremendously since its inception in the late 1980s, and is llisted
isted in the first board in Bursa
Saham Kuala Lumpur, it had reached a plateau in 2007, when the semiconductor industry was hard
hit with a global meltdown. This kept continuing into 2008 as well ( see table below).

The business we were in, semiconduc

semiconductor
tor automation, also was bleak.( see table )

21
 In the midst of this situation, we had a change of owners from Singapore, and a new CEO
stepped in. One of the first few things we did, as a management team, was to disseminate the
information on the current reality, to the folks on the ground. This included the economic slowdown,
its impact to LKT in terms of cash
cash-flow,
flow, in some cases a complete pause in customer orders, the
impact to LKT’s cash flow, and what probable steps LKT was going to take to keep aflo
afloat. The
immediate actions were defined into three broad area of focus, namely :
1. To unify and intensify marketing force to increase revenue
2. To be prudent in cost and cash management
3. To improve people capability and operating systems.
While these actions were
re painful, as we had to let a number of people go and as
leaders, take salary cuts, the company survived the bad weather and came through unscathed.
To compensate for the frequent cyclical changes in the semiconductor industry, the CEO
brought in the aerospace
erospace business from the Singapore parent company. (see table below)

22
 At the same time, as CEO and business unit managers, we quickly began to rebuild the
company, taking a long term view.. LKT first looked at the 3 core aspects of the business :
1. The core
re competencies
2. Strategic direction
3. People development
Both the actions can be surmised into a table :
Increase revenue Cost control Improve
People capability &
Operating systems
Core



competencies
Strategic



Direction
People



Development

The area of focus (
), became clear to all managers. While maintaining a tight cash control
over all other areas, we still spent in building our core compete
competencies
ncies and people development. A

23
needs assessment quickly revealed gaps in large format machining, and deep welding, while
software and applications related to building design competencies were lacking.
In the strategic direction aspect, we went back to basics and reviewed the vision and values
that was written and what we should have. Under the previous CEO, a consummate technopreneur,
each division was considered a separate business units and even competed on price and resource
when we needed them. For example, the automation division may require a special tooling piece,
while the metal-works division may also require a tooling resource from the tooling and machining
division at the same time. We will thus cut corners in the procedures, or trade favors to get the
resource. This led to intense competition between divisions. While this structure went alright during
the good season, it was hurting us during the slowdown.
As a group, we decided to integrate vertically, and work as a team to represent us as one
LKT. Costing structures, once sacred cows of each division, became open books.. Changes were
done to performance measures of divisions, abolishing bottom line figures of separate divisions,
only looking at overall LKT performance as a whole. The change that resulted did not come easily.
It was facilitated ably by the CEO, who is a turnaround specialist.
He did this by first being open and transparent to all. Secondly, he flattened the organization
by getting us, the business unit managers into the management team, together with the Vice
Presidents. We were party to all discussions, and we also had to present to him directly our weekly
reports on what we were doing.
Secondly, he brought along two world class consultants to facilitate a one an d a half year
organizational learning for the management team. This facilitation was based on Peter Senge’s
Learning Organization model consisting of :
• Systems thinking
• Personal mastery
• Mental models
• Building shared vision
• Team learning
We went through 3 day classes every 6 months and had to work out the outcome
of each class, continuously presenting to the CEO. One of the most beautiful things that happened
was of the team slowly building a shared vision, one block at a time. This was built with each action
that subscribes to the shared vision, e.g., cross selling each other’s business to one’s own client
base without looking for a return. We understood the power of mental models, that allowed us to
see our own prejudices while looking at another. We also experienced, first hand, how a team of
committed managers with individual IQs above 120 can have a collective IG of 60? (Peter Senge);

24
and discovered the magic of team learning. In short, these lessons over the months gave us tools to
use for a lifetime of leading, some of which are enumerated below :
Discipline Key Learning Leadership Impact
Systems Thinking The connection between Better understanding of current reality –
seemingly invisible to see further into the horizon of what is
elements that are actually causing a present success or
interrelated in a systemic crisis
whole – learning to think
in system loops
Personal Mastery Committed to one’s own Taking up MBA;
lifelong learning deepening personal vision;
developing patience;
seeing reality objectively
Mental Models Surface and challenge Reflective skills;
one’s own or another’s Balancing inquiry with advocacy – while
deep lying assumptions putting forward an idea, also asking the
other’s point of view
Pure seeing
Building Shared Vision Moving from need to to Turning personal vision into shared
want to vision;
Getting genuine commitment from others
Team Learning Moving from arguments Thinking together;
discussion  dialogue Generative communication
Innovation

The combined action and leadership learning helped us bring LKT to our desired position
(see table)

25
 This experience thought us the real job of the CEO and business unit managers in the 21st
century : to be adapt in leading an organization, we need the capacity to :
• Learn and unlearn
• Continuously
ly innovate
• Create high performing teams ( which are autonomous)
• Become tech savvy ( in core competencies )
• Devote oneself to continuous improvement
• Act with integrity
ntegrity always
• Collaborate horizontally and vertically
A quick scan of the disciplines against current popular leadership thoughts ( where possible,
below) reveals that the preferred disciplines tend to gravitate
itate towards charismatic and
transformational theories of leadership.
Discipline Trait theories Behavioral / Charismatic Transformational
Situational theories / Transactional
theories theories
Learn / unlearn X X X
Innovate X X
High P Teams X X X
Tech Savvy
C Improvement X X

26
Integrity X X X
Collaborate X

However, in the absence of an overriding acceptance of a predominant leadership theory,

there is a need to look at these from a new lens. An emerging viewpoint (Malcolm Higgs, 2003 )
that looks at a two pronged model which encompasses the new perspective with emotional
intelligence (EI). As it combines both personality and skills, the approach is both based on right
selection and development, with the right measurement metrics to ensure a feedback system for
leadership effectiveness. This has elements of what was uncovered at LKT, and is generic enough
for both a business unit manager and a CEO.

The answer is, not only what a CEO and the business unit manager do, but what they
should be first, before they are able to act effectively.

27
BIBLIOGRPHICAL REFERENCES

Question 1

Al Tortorella, Ogilvy Public Relations Worldwide http://www.ogilvypr.com/en/expert-view/what-

corporate-crisis May 12, 2008

Robert . A. Burgelman, Strategy Is Destiny : How Strategy Making Shapes a Company’s Future
(New York Free Press, 2002), p 134. ( This source uses 1997 as the last year – official Intel source
sites 1998 as the year Andy retired ).

Harvard Business School Case No 395-246, rev June 11, 1996 ( Boston : HBS Publishing), pp5-6.

Unseem and Badaracco, “comp.sys.intel (A), “pp.3, 13-14 – an online newsgroup.

Grove, Andy Only The Paranoid Survive pp.14-15, 85-86, 88-89, 92 Doubleday : Currency
Publishing

Fearn-Banks, K. (1996), Crisis Communications: A Casebook Approach, Lawrence Erlbaum,

Mahwah,NJ.

Heiki Puchan, Corporate Communications: An International Journal Volume 6 . Number 1 . 2001 .

pp. 42±46

Stockport, Gary, J., European Journal of Innovation Management Volume 3 . Number 1 . 2000 . pp.
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Tedlow,S. Richard, Andy Grove, The Live and Times of a Business Icon, p. 200 Penguin Books
Limited, 2006

Jay L. Abraham, Daniel J. Knight, (2001) "Strategic innovation:: leveraging creative action for more
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Heller, Robert, Andrew Grove, The Innovator whose methods supercharged the Silicon
Revolution., pp 9-11, Dorling Kindersley Publication ,2001

Alexander S. Theodhosi, (2000) "May the worst man win", Strategy & Leadership, Vol. 28 Iss: 3,
pp.28 – 31

Question 2

Katherine Macklem, (2005) http://www.macleans.ca/article.jsp?content=20050131_99562_99562

Lewis, David, Dr,. (2005) http://www.directiveanalytics.com/pdf/WorkPlaceStressStudy.pdf

de Geus, A (1997) ”The Living Company” , Harvard Business Review, March – April, pp 51-59

Weil, J. (2003) ”Prosecutors outline practices behind HealthSouth charges” , The Wall Street
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Argyris,C. (1986) ”Skilled Incompetence” , Harvard Business Review, September-October, pp 74-79

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Covey, Stephen (1991), Principal Centered Leadership, Simon and Schuster, pp165-172,

Toyota. (2001) ”The Toyota Way 2001” , Internal Document, Toyota Motor

Senge, Peter ( 1994 ) The Fifth Discipline : The Art and Practice of The Learning Organization,
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Collected Works of Mahatma Gandhi Vol. 33 (PDF) p. 135

Question 3.

Companies Act, Malaysia 1965 S122.2,

Sabarnes Oxley Act , 2002

Maharaj, Rookmin, View from the top: what directors say about board process CORPORATE
GOVERNANCE VOL. 9 NO. 3 2009, pp. 326

Van den Berghe, L.A.A. and Levrau, A. (2004), ‘‘Evaluating Boards of directors: what constitutes a
good corporate Board?’’, Corporate Governance: An International Review, Vol. 12 No. 4, pp. 461-
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Hansell, C. (2003), What Directors Need to Know: Corporate Governance, Thomson Carswell,
Toronto,Ontario.

Victor, B. and Cullen, J.B. (1987), ‘‘A theory and measure of ethical climate in organizations’’,
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Wimbush, J. and Shepard, J. (1994), ‘‘Toward an understanding of ethical climate: its relationship to
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Question 4

Senge, Peter ( 1994 ) The Fifth Discipline : The Art and Practice of The Learning Organization,
Currency Doubleday Publication, p9

Higgs, Malcolm (2003), Leadership and Organizational Development Journal 24/5, pp273-284

29