Heh 2405 Leadership and Governance

JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE & TECHNOLOGY
SCHOOL OF OPEN, DISTANCE &
eLEARNING
IN COLLABORATION WITH
SCHOOL OF HUMAN RESOURCE
HEH 2405: LEADERSHIP AND
GOVERNANCE
MANAGEMENT
DEPARTMENT OF COMMERCE
LAST REVISION ON
December 06, 2018
(elearning@jkuat.ac.ke)P.O. Box 62000,
00200
Contents
0.1 COURSE OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . 5

0.2 COURSE DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . 5
0.3 TEACHING METHODOLOGY . . . . . . . . . . . . . . . . . . 5
0.4 COURSE EVALUATION / ASSESSMENT . . . . . . . . . . . . 5
1 ORGANISATIONAL DEVELOPMENT,STRATEGY APPROACHES,STRUCTURE,OB

PERSONALITY 8
1.1 ORGANIZATIONAL DEVELOPMENT . . . . . . . . . . . . . . 8
1.2 Background of Study . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.3 Conceptual Understanding of the Organizational Development . 10
1.4 Factors that contribute to high performance . . . . . . . . . . . . 12
1.5 The Growth and Relevance of Organization Development . . . . 12
1.6 ORGANISATIONAL DEVELOPMENT STRATEGY APPROACHES 14
1.6.1 Kurt Lewins Change Model: . . . . . . . . . . . . . . . . . 14
1.6.1.1 Stage 1: Unfreezing . . . . . . . . . . . . . . . . 15
1.6.1.2 Stage 2: Moving (Changing) . . . . . . . . . . . 16
1.6.1.3 Stage 3: Refreezing . . . . . . . . . . . . . . . . 16
2 ORGANIZATIONAL LEADERSHIP 18
2.0.2 What is leadership? . . . . . . . . . . . . . . . . . . . . . 18
2.0.2.1 Creates an inspiring vision for the future. . . . . 18
2.0.2.2 Motivates and inspires people to engage with
that vision. . . . . . . . . . . . . . . . . . . . . . 18
2.1 What can you learn about leadership? . . . . . . . . . . . . . . . 20
2.2 Foundations of Leadership . . . . . . . . . . . . . . . . . . . . . . 20
2.2.0.3 Mission. . . . . . . . . . . . . . . . . . . . . . . 21
2.2.0.4 Vision. . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.0.5 Strategy and Tactics. . . . . . . . . . . . . . . . 21
2.2.0.6 Organizational Culture. . . . . . . . . . . . . . 21
2.3 Theories of leadership . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3.1 Leadership Models . . . . . . . . . . . . . . . . . . . . . . 22
2.3.1.1 The different types of leadership models . . . . . 22
2.3.1.2 Trait-Based Leadership . . . . . . . . . . . . . . 23
2.3.1.3 Trait-Based Leadership . . . . . . . . . . . . . . 23
2.3.1.4 What is a trait? . . . . . . . . . . . . . . . . . . 23
1
CONTENTS 2
2.3.1.5 Innate Leadership . . . . . . . . . . . . . . . . . 24

2.3.1.6 Leadership thinking and societal development . 25
2.4 Charismatic and Narcissistic Leadership . . . . . . . . . . . . . . 26
2.4.1 Charisma . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.4.1.1 Dangers and risks of charismatic leadership . . . 28
2.4.1.2 Charismatic leadership and presence . . . . . . . 29
2.5 Transformational vs. Transactional Leadership . . . . . . . . . . 31
2.5.1 Burns Transforming and Transactional leadership styles . 31
2.6 keys to successful transformational leadership: . . . . . . . . . . . 32
3 Team building in an organisation 34

3.1 A Leaders Role in Developing a Team . . . . . . . . . . . . . . . 34
3.1.1 Developing a Team . . . . . . . . . . . . . . . . . . . . . 34
3.2 High Performance Teams . . . . . . . . . . . . . . . . . . . . . . 35
3.2.1 Key factors in building a high-performing team. . . . . . 35
3.3 Five Dysfunctions of a Team . . . . . . . . . . . . . . . . . . . . 36
3.3.0.1 Absence of Trust . . . . . . . . . . . . . . . . . . 36
3.3.0.2 Fear of Conflict: . . . . . . . . . . . . . . . . . . 37
3.3.0.3 Lack of Commitment . . . . . . . . . . . . . . . 37
3.3.0.4 Avoidance of Accountability . . . . . . . . . . . 37
3.3.0.5 Inattention to Results . . . . . . . . . . . . . . . 37
3.3.1 Addressing the Dysfunctions . . . . . . . . . . . . . . . . 37
3.4 The Johari Window . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.5 Identifying Team Member Strengths . . . . . . . . . . . . . . . . 39
3.6 Motivating Your Team . . . . . . . . . . . . . . . . . . . . . . . . 40
3.6.1 Motivating Factors . . . . . . . . . . . . . . . . . . . . . . 40
3.7 Coaching Your Team . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.8 Emotional Intelligence in Teams . . . . . . . . . . . . . . . . . . 42
3.9 Team Briefings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.9.1 How to design and run a team briefing . . . . . . . . . . . 42
3.9.2 The Leader-Member Exchange Theory . . . . . . . . . . . 43
3.9.3 The GRPI (Goals, Roles, Processes, Interpersonal Rela-
tionships) Model . . . . . . . . . . . . . . . . . . . . . . . 43
3.9.4 The JD-R Model . . . . . . . . . . . . . . . . . . . . . . . 44
3.10 ROLE OF THE LEADER AND TEAM BUILDING . . . . . . . 45
3.10.1 Indispensable Qualities of a Leader . . . . . . . . . . . . . 45
3.11 Assessment of leadership and team building skills . . . . . . . . . 54
3.12 The Ship Model of Leadership . . . . . . . . . . . . . . . . . . . . 55
3.13 Team Development . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.13.1 Bruce Tuckmans 1965 Team-Development Model . . . . . 56
4 LEADERSHIP BEHAVIOUR LEADERSHIP BEHAVIORS 59

4.1 LEADERSHIP STYLES . . . . . . . . . . . . . . . . . . . . . . . 59
4.1.1 The Authoritarian or Autocratic Leader . . . . . . . . . . 60
4.1.2 The Democratic or Participative Leader . . . . . . . . . . 61
4.1.3 Varying Leadership Style . . . . . . . . . . . . . . . . . . 62
CONTENTS 3
4.2 THEORY OF LEADERSHIP . . . . . . . . . . . . . . . . . . . . 63

4.2.1 Charismatic Leadership . . . . . . . . . . . . . . . . . . . 63
4.2.2 Bureaucratic leadership . . . . . . . . . . . . . . . . . . . 64
4.2.2.1 Skills Theory . . . . . . . . . . . . . . . . . . . 64
4.2.2.2 Path-Goal Theory . . . . . . . . . . . . . . . . . 64
4.2.2.3 Functional theory . . . . . . . . . . . . . . . . . 65
4.2.2.4 Servant leadership . . . . . . . . . . . . . . . . 65
4.2.2.5 Contingency Theory . . . . . . . . . . . . . . . 65
4.2.2.6 Self-Leadership . . . . . . . . . . . . . . . . . . 65
4.2.2.7 Group leadership . . . . . . . . . . . . . . . . . 65
4.2.2.8 Strategic Leadership . . . . . . . . . . . . . . . 66
4.2.2.9 Facilitative Leadership . . . . . . . . . . . . . . 66
4.2.2.10 Visionary Leadership . . . . . . . . . . . . . . . 66
4.2.2.11 Level 5 Leadership . . . . . . . . . . . . . . . . . 66
4.2.2.12 Great Man Theory . . . . . . . . . . . . . . . . 67
4.2.2.13 People-oriented or relations-oriented leadership . 67
4.2.2.14 Task-Oriented leadership . . . . . . . . . . . . . 67
4.2.2.15 Neo-emergent theory . . . . . . . . . . . . . . . 67
4.3 The Coaching Leader . . . . . . . . . . . . . . . . . . . . . . . . 68
4.4 The Emergent Leader . . . . . . . . . . . . . . . . . . . . . . . . 68
4.5 The Exchange Leader . . . . . . . . . . . . . . . . . . . . . . . . 68
4.6 Narcissistic leadership . . . . . . . . . . . . . . . . . . . . . . . . 68
4.7 Toxic leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5 LEADERSHIP AND DECISION MAKING 69

5.1 Decision-Making and Problem-Solving . . . . . . . . . . . . . . . 69
5.1.1 Problem-solving and decision-making . . . . . . . . . . . . 69
5.2 WORKSHOP APPROACH. . . . . . . . . . . . . . . . . . . . . . 71
5.3 Three-option organizational decision: . . . . . . . . . . . . . . . . 74
6 CORPORATE SOCIAL RESPONSIBILITY (CSR) 76

6.1 Corporate Responsibility and Ethics . . . . . . . . . . . . . . . . 76
6.1.1 Introduction to Ethical Leadership . . . . . . . . . . . . . 76
6.1.2 Ethics and Law . . . . . . . . . . . . . . . . . . . . . . . . 81
6.1.3 Ethics and Religion . . . . . . . . . . . . . . . . . . . . . 82
6.1.4 Ethics and Public Opinion . . . . . . . . . . . . . . . . . . 85
6.2 Utilitarianism: Ethical Considerations . . . . . . . . . . . . . . . 85
6.2.1 Ethical Objectivity . . . . . . . . . . . . . . . . . . . . . . 86
7 CORPORATE GOVERNANCE 87
7.1 ENSURING THE BASIS FOR AN EFFECTIVE CORPORATE
GOVERNANCE FRAMEWORK . . . . . . . . . . . . . . . . . . 88
7.2 The rights and equitable treatment of shareholders and key own-
ership functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.3 Institutional investors, stock markets, and other intermediaries . 91
7.4 The role of stakeholders in corporate governance . . . . . . . . . 92
CONTENTS 4
7.5 Disclosure and transparency . . . . . . . . . . . . . . . . . . . . . 93

7.6 The responsibilities of the board . . . . . . . . . . . . . . . . . . 94
7.7 Factors driving corporate governance . . . . . . . . . . . . . . . . 96
7.8 Organizational Benefits for Good Corporate Governance . . . . . 98
8 UNDERSTANDING GOVERNANCE PRINCIPLES METH-

ODS AND DRIVERS OF CORPORATE GOVERNANCE 101
8.1 What is a governance operating model? . . . . . . . . . . . . . . 101
8.2 understanding of project governance . . . . . . . . . . . . . . . . 103
8.3 The 5 Principles for Good Governance . . . . . . . . . . . . . . . 104
8.3.1 Principle 1. Leading our organisation. . . . . . . . . . . . 104
8.3.2 Principle 2. Exercising control over our organisation. . . 104
8.3.3 Principle 3. Being transpare not and accountable. . . . . 104
8.3.4 Principle 4.Working effectively. . . . . . . . . . . . . . . 104
8.3.5 Principle 5.Behaving with integrity. . . . . . . . . . . . . 105
8.4 Designing the governance operating model . . . . . . . . . . . . . 105
9 Resources And Capability Of Corporate Governance 107

9.1 Resources And Capability Of Corporate Governance . . . . . . . 107
9.2 THE ROLE OF CORPORATE GOVERNANCE IN CREATION
OF KNOWLEDGE METHODOLOGY AND RESULTS OF THE
RESEARCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
9.3 The motivation and capability-related functions of the board of
directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
9.4 Corporate governance mechanisms reclassified based on a Motivation-
Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
9.5 Board size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
9.5.1 Direct And Positive Relation Between The Size Of A
Firm’S Board Of Directors And Its Level Of Competitive
Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
9.5.2 An Inverse U-shaped Relationship Between Proportion Of
Outsiders And The Level Of A Firm’S Competitive Activity.112
9.6 CEO duality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
9.6.1 Direct And Positive Relationship Between CEO Duality
And The Level Of A Firm’S Competitive Activity . . . . 113
9.7 Managerial ownership . . . . . . . . . . . . . . . . . . . . . . . . 114
10 The Ethical Influence of Leaders 115

10.1 The Trouble with Transformational Leadership: Toward a Fed-
eralist Ethic for Organizations . . . . . . . . . . . . . . . . . . . . 115
10.2 TRANSFORMATIONAL VERSUS TRANSACTIONAL LEAD-
ERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.3 Ethics, the Heart of Leadership . . . . . . . . . . . . . . . . . . . 117
10.4 ORGANIZATIONAL IMPLICATIONS . . . . . . . . . . . . . . 118
10.5 THREATS POSED BY LEADERS . . . . . . . . . . . . . . . . . 118
10.6 The Trouble with Transformational Leadership . . . . . . . . . . 119
CONTENTS 5
10.7 RIGHTS VERSUS GOALS IN ORGANIZATIONAL THEORY . 119
1.0 PURPOSE OF THE COURSE

0.1 COURSE OBJECTIVES
At the end of the course the learner should be able to:
2.1 Demonstrate the concepts and practice of organizational direction and
challenges faced
by managers in the day to day running of their administrative duties.
2.2 Describe the various forms and stages of leadership and their application
to the successful operations of an organization.
2.3 Demonstrate fully the possession of governance skills and methods of
corporate governance.
0.2 COURSE DESCRIPTION

Organizational development, strategy approaches, structure, objectives, corpo-
rate personality. Organizational leadership. Theories relevant to leadership and
team building in organization. The role of the leader and team in organiza-
tions. The knowledge, qualities and skills required for successful leadership and
team building. Assessment of leadership and team building skills. Leadership
behavior. Leadership and decision-making, resources and capability, corporate
social responsibilities CSR. Understanding governance principles, methods and
drivers of corporate governance.
0.3 TEACHING METHODOLOGY

The course will be taught using the following approaches:
3.1 Lecture to elaborate and reinforce theoretical concepts and literature
available.
3.2 Groups / class discussions.
3.3 Assignments.
3.4 Case studies.
0.4 COURSE EVALUATION / ASSESSMENT

Assessment of the students progress shall assume the following dimension:
4.1 Continuous Assessment Tests
Assignments / 10
Case analysis 10
Discussions and presentations / seminar 10
4.2 End of Trimester Exam 70 /100
CONTENTS 6
6.0 COURSE TEXTS

1. Hackman, R. J. (2002). Leading teams: Setting the stage for great per-
formances. Cambridge, MA: Harvard Business School Press.
2. Katzenbach, J. R., & Douglas, S. K. (2001). The discipline of teams: A

mindbook- workbook for delivering small group performance. New York:
Wiley . ISBN: 047138254X
3. Randall, P. S., & Mannix, E. (Eds.). (2003). Leading and managing peo-
ple in the dynamic organization (Organization and management series).
Florida: Lawrence Erlbaum.
4. Adair, J. (1973). Action-Centred Leadership. New York: McGraw-Hill.

5. Tuckman, Bruce W. (1965). Developmental Sequence in Small Groups.
Psychological Bulletin 63.6 (1965): 384-399. Web.
6. Hanlan, Marc. (2004). High Performance Teams. Westport, Conn.:
Praeger, 2004. Print.
7. Katzenbach, Jon R, and Douglas K Smith. (1993). The Wisdom of Teams.
Boston, Mass.: Harvard Business School Press, 1993. Print.
8. Kets de Vries, Manfred F. R. (2011). The Hedgehog Effect: The Secrets
of Building High Performing Teams. San Francisco, Calif.: Jossey-Bass,
2011.
9. Bakker and Demerouti, (2006). The JD-R Model.
10. Adair, J. (1973). Action-Centred Leadership. New York: McGraw-Hill.

11. Tuckman, Bruce W. (1965). Developmental Sequence in Small Groups.
Psychological Bulletin 63.6 (1965): 384-399. Web.
12. Hanlan, Marc. (2004). High Performance Teams. Westport, Conn.:
Praeger, 2004. Print.
13. Katzenbach, Jon R, and Douglas K Smith. (1993). The Wisdom of Teams.
Boston, Mass.: Harvard Business School Press, 1993. Print.
14. Kets de Vries, Manfred F. R. (2011). The Hedgehog Effect: The Secrets
of Building High Performing Teams. San Francisco, Calif.: Jossey-Bass,
2011. Print.
15. Bakker and Demerouti, (2006). The JD-R Model.

16. 1. Hackman, R. J. (2002). Leading teams: Setting the stage for great per-
formances. Cambridge, MA: Harvard Business School Press. 2. Katzen-
bach, J. R., & Douglas, S. K. (2001). The discipline of teams: A mindbook-
workbook for delivering small group performance. New York: Wiley .
CONTENTS 7
ISBN: 047138254X 3. Randall, P. S., & Mannix, E. (Eds.). (2003). Lead-

ing and managing people in the dynamic organization (Organization and
management series). Florida: Lawrence Erlbaum.
Chapter 1
ORGANISATIONAL
DEVELOP-
MENT,STRATEGY
AP-
PROACHES,STRUCTURE,OBJECTI
PERSONALITY
1.1 ORGANIZATIONAL DEVELOPMENT

This topic analyses and synthesizes the characteristics, similarities and differ-
ences, and strengths and weaknesses of four main models of organization devel-
opment, and the extent to which they can be used to create learning organiza-
tions.
The models reviewed are the three-step, action research, appreciative inquiry,
and the general planned change model. Whereas all four models overlap in
characteristics such as involving participants in the change process, important
differences including the focus and stages of change exist amongst them.
On the basis of the review, the general model of organization development
which integrates the other three models is revised and extended to address two
main gaps.
The proposed extended general organization development model comprises
six overlapping stages, including a final “empowering withdrawal “stage. It
proposes that organization development efforts should empower clients to be-
come learning organizations as an ultimate focus of the field of organization
development.
8
CHAPTER 1. ORGANISATIONAL DEVELOPMENT,STRATEGY APPROACHES,STRUCTURE,OBJE
1.2 Background of Study

In present era of cut throat competition, globalization, erasing trade barriers,
rapid innovation, advancement in new technology, reduction in product life cy-
cle and huge investment requirements to get entry into industry increase the
essence of formulating an effective strategy in an organization in order to gain
a competitive edge in market place.
It is utmost important for each and every organization to be consistently
competitive at the market place in order to save organization from entropy
and make it possible for organization to constantly grow through application of
Organizational Development concepts.
Strategy is a comprehensive plan to achieve organizational goals or strategy
is a comprehensive master plan stating how the corporation/organization will
achieve its mission and objectives. It is not only important for any firm to
develop an effective organizational strategy but also proper implementation and
control mechanism is very crucial for success. Organization strategy is the one
of element among various elements that may require organization development
interventions if not effective.
According to Burke-Litwin model, organization may require first order or
second order change or may require both (First order and Second order changes).
If organization development interventions directed toward structure, systems,
and management practice result in first order change, if interventions directed
toward mission, strategy, leadership, and organizational culture then result in
second order change (French and Bell, Jr, 1999).
Companies today are exposed to much more rapid changes than they were
decades ago. This development provides the reason to analyze approaches that
help to overcome inflexible, conservatively-managed companies and lead change
initiatives successfully. (Kotter, 1996).
Organizational Development is planned change in an organizational context.
The development of models of planned change facilitated the development of
organization development. Models and theories depict, in words or pictures, the
important features of some phenomenon, describe those features as variables,
and specify the relationships among the variables. (French and Bell, 1999).
Corporate restructuring, strategies, and development models may be based
on various factors viz. Human Resource Management, Financial revamping,
International competitive market, post-merger and acquisition etc. The glob-
alization, commercialization, privatization, and deregulation have changed the
whole scenario as such change has become significant factor in business survival.
This has brought far-reaching changes in economic structures and patterns of
organizations. The organization development is getting increasing attention as
such it plays a key role in the description of recent developments.
The institutions private or public now realize the recent trends and prospects
and have started giving priority to organization development. These organiza-
tions now adapt and act organization development at their workplace by re-
defining its role in promoting efficiency and economic growth. The organiza-
tions, particularly those without strong change element are in favor of encour-
aging the vigorous growth of organization development in corporate governance.

The organizations they do not undertake measures to enhance their capabili-
ties through planned change by employing organization development risk not
just being marginalized but also being completely bypassed in the new global
order. The organizations those face severe competition today are completely
dependent on behavioral interventions for organization improvement.
1.3 Conceptual Understanding of the Organiza-

tional Development
Organizational Development (OD) bridges an organizations need for continuity
and its need for growth. It helps the organization change to meet the changing
demands of its internal and external environments (Culbert & Reisel, 1971).
Organizational development is a theory and practice of bringing the planned
change to organization. These changes are usually designed to address an or-
ganization problem or to help an organization prepare for future. It is the one
method of quickly bringing change, which focus on human and social aspects of
the organization as a way to improve organizations ability to adapt and solve
problems.
Organizational development is both a professional field of social action and
an area of scientific inquiry. The practice of organization development covers a
wide spectrum of activities, with seemingly endless variations upon them.
Team building with top corporate management, structural change in a mu-
nicipality, and job enrichment in a manufacturing firm are all examples of or-
ganization development. (Cummings and Worley, 2005).
Different theorists have provided with their own definitions of organizational
development. Some definitions are:
Definition
Porras and Robertson (1992)
Organizational development is a set of behavioral science-based theories,
values, strategies, and techniques aimed at the planned change of the organi-
zational work setting for the purpose of enhancing individual development and
improving organizational performance, through the alteration of organizational
members on-the-job behaviors.
Cummings and Worley (1993)
Organization development is a systematic application of behavioral science
knowledge to the planned development and reinforcement of organizational
strategies, structures, and processes for improving an organizations effective-
ness.
Burke (1994)
Organizational development is planned process of change in an organizations
culture through the utilization of behavioral science technologies, research, and
theory.
French and Bell (1999)
Organizational development is a long-term effort, led and supported by top

management, to improve an organizations visioning, empowerment, learning,
and problem-solving processes, through an ongoing, collaborative management
of organization culture-with special emphasis on the culture of intact work teams
and other team configurations-using the consultant-facilitator role and the the-
ory and technology of applied behavioral science, including action research.
It has been learned from the above definitions that the primary distinguish-
ing characteristics of the organizational development are as under [French and
Bell, 1999]:
Organization development focuses on culture and processes
Specifically, organizational development encourages collaboration between
organization leaders and members in managing culture and process. Teams of
all kinds are particularly important for accomplishing tasks and are targets for
organization development activities.
Organization development focuses on the human and social side of the orga-
nization and in so doing also intervenes in the technological and structural sides.
Participation and involvement in problem solving and decision making by all
levels of the organization are hallmarks of organizational development. Orga-
nizational development focuses on total system change and views organizations
as complex social system.
Organization development practitioners are facilitators, collaborators, and
co-learners with the client system. An overreaching goal is to make the client
system able to solve its problems on its own by teaching the skills and knowledge
of continuous learning through self-analytical methods. Organization develop-
ment views organization improvement as an ongoing process in the context of a
constantly changing environment.
Organization development relies on an action research model with exten-
sive participation by client system members. Organization development takes
a developmental view that seeks the betterment of both individuals and the
organization. Attempting to create “win-win” solutions is standard practice in
OD programs.
In the 1970s, organization development evolved as separate field that applied
the behavioral sciences in a process of planned organization-wide change, with
the goal of increasing organization effectiveness. Today the concept has been en-
larged to examine how people and groups can change to a learning organization
culture in a complex and turbulent environment. Organization development is
not a step-by-step procedure to solve a specific problem but a process of funda-
mental change in the human and social systems of the organization, including
organization culture. It is a process in a sense that a process is an identifiable
interrelated event moving toward some goal or end. Organization development
is a journey, not a destination. It is an unfolding and evolving series of events.
Every organization program is unique because every organization has unique
problems and opportunities. Yet all organization development programs are
identifiable flow of interrelated events moving over time toward the goals of the
organization improvement and individual development.
Organization development is an organizational improvement strategy, which
is about how people and organization function and how to get them to func-
tion better. The field is based on the knowledge from the behavioral science
disciplines such as psychology, social psychology, sociology, anthropology, sys-
tems theory, organizational behavior, organization theory and management to
create trust, open conformation of problems, employee empowerment and par-
ticipation, knowledge and information sharing, the design of meaningful work,
co-operation and co-ordination between groups and full use of human potential.
Organizational Development can help groups and individuals improve vari-
ous aspects of organizational life necessary for success, including culture, values,
and systems and behavior. The goal of Organization development is to increase
organizational effectiveness and organizational health, through planned inter-
ventions in the organizations processes, operations, and behavior. Most often,
Organization development services are requested when an organization (or a
unit within an organization) is undergoing a process of change.
1.4 Factors that contribute to high performance

Organizational Development services can assist in having a positive impact on
most, if not all, factors that contribute to high performance. These include:
Accountability
Team interactions
Strategic planning
Skill alignment
Professional development strategies
Effective use of technology
Workplace climate
Employee morale
A primary goal of organization development is to optimize the system by
ensuring that system elements are harmonious and congruent. When organi-
zation structure, strategy, culture, and processes are not aligned, performance
suffers. Different organizations interventions focus on align the organization
with environment demands. Organizations are examples of open systems, that
is, system interacting with their environments. Many problems of organiza-
tions today emerge from rapid changes in environmental demands, threats and
opportunities.
1.5 The Growth and Relevance of Organization

Development
Organizations must adapt to increasingly complex and uncertain technologi-
cal, economic, political, and cultural changes. The rapidly changing conditions
of the past few years have shown that the organizations are in the midst of
unprecedented uncertainty and chaos, and nothing short of a management rev-
olution will save them. Three major trends are shaping change in organizations:
globalization, information technology, and managerial innovation.
First: globalization is changing the markets and environments in which orga-
nizations operate as the way they function. New governments, new leadership,
new markets, and new countries are emerging and creating a new global econ-
omy. The toppling of the Berlin Wall symbolized and energized the reunification
of Germany: entrepreneurs appeared in Russia, the Balkans, and Siberia as the
former Soviet Union evolves, in fits and starts, into separate, market-oriented
states; and China emerged as an open market and as the governance mechanism
over Hong Kong to represent a powerful shift in global economic influence.
Second: information technology is redefining the traditional business model
by changing how work is performed, how knowledge is used, and how the cost
of doing business is calculated. The way an organization collects, stores, ma-
nipulates, uses, and transmits information can lower costs or increase the value
and quality of products and services. Information technology, for example, is at
the heart of emerging e-commerce strategies and organizations. Amazon.com,
E-Trade, are among many recent entrants to the information economy, and the
amount of business being conducted on the Internet is projected to grow at
double-digit rates for well over ten years.
Moreover, the underlying rate of innovation is not expected to decline. Elec-
tronic data interchange, a state-of-the-art technology application a few years
ago, is now considered routine business practice. The ability to move informa-
tion easily and inexpensively throughout and among organizations has fueled
the downsizing, delayering, and restructuring of firms. The Internet and the
World Wide Web have enabled a new form of work known as telecommuting;
organization members can work from their homes or cars without ever going to
the office. Finally, information technology is changing how knowledge is used.
Information that is widely shared reduces the concentration of power at the top
of the organization. Organization members now share the same key information
that senior managers once used to control decision making.
Ultimately, information technology will generate new business models in
which communication and information sharing is nearly free.
Third: managerial innovation has responded to the globalization and infor-
mation technology trends and has accelerated their impact on organizations.
New organizational forms, such as networks, strategic alliances, and virtual
corporations, provide organizations with new ways of thinking about how to
manufacture goods and deliver services. The strategic alliance, for example,
has emerged as one of the indispensable tools in strategy implementation. No
single organization, not even IBM, Mitsubishi, or General Electric, can control
the environmental and market uncertainty it faces. Sun Microsystems network
is so complex that some products it sells are never touched by a Sun employee.
In addition, new methods of change, such as downsizing and reengineering, have
radically reduced the size of organizations and increased their flexibility, and new
large-group interventions, such as the search conference and open space, have
increased the speed with which organizational change can take place. Managers,
OD practitioners, and researchers argue that these forces not only are powerful
in their own right but are interrelated.

Their interaction makes for a highly uncertain and chaotic environment for
all kinds of organizations, including manufacturing and service firms and those
in the public and private sector. There is no question that these forces are
profoundly affecting organizations. Fortunately, a growing number of organiza-
tions are undertaking the kinds of organizational changes needed to survive and
prosper in today’s environment. They are making themselves more streamlined
and nimble and more responsive to external demands. They are involving em-
ployees in key decisions and paying for performance rather than for time. They
are taking the initiative in innovating and managing change, rather than simply
responding to what has already happened.
Organization Development is playing an increasingly key role in helping or-
ganizations change themselves. It is helping organizations assess themselves
and their environments, and revitalize and rebuild their strategies, structures,
and processes. Organization development is helping organization members go
beyond surface changes to transform the underlying assumptions and values
governing their behaviors. The different Organization development concepts
and methods increasingly are finding their way into government agencies, man-
ufacturing firms, multinational corporations, service industries, educational in-
stitutions, and not-for-profit organizations.
1.6 ORGANISATIONAL DEVELOPMENT STRAT-

EGY APPROACHES
Models of Organizational Development and its Effectiveness
The pace of global, economic, and technological development makes change
an inevitable feature of organizational life. Organization development is directed
at bringing about planned change to increase an organizations effectiveness. It
is generally initiated and implemented by managers, often with the help of an
OD practitioner either from inside or outside of the organization. Organizations
can use planned change to solve problems, to learn from experience, to re-frame
shared perceptions, to adapt to external environmental changes, to improve
performance, and to influence future changes.
All approaches to organization development rely on some theory about planned
change. The theories describe the different stages through which planned change
may be effected in organizations and explain the process of applying OD meth-
ods to help organization members manage change.
There are at least three planned change models that have been identified
by Cummings and Worley (1997): Lewins change model, the action research
model, and contemporary adaptations of action research.
1.6.1 Kurt Lewins Change Model:

Organizational change can occur at three levels and, since the patterns of resis-
tance to change are different for each, the patterns in each level require different
change strategies and techniques. These levels involve:

Changing the individuals who work in the organization-that is, their skills,
values, attitudes, and eventually behavior-but making sure that such individual-
behavior change is always regarded as instrumental to organizational change.
Changing various organizational structures and systems-reward systems, re-
porting relationships, work design, and so on.
Directly changing the organizational climate or interpersonal style-how open
people are with each other, how conflict is managed, how decisions are made,
and so on.
Whatever the level involved, each of the three interventions is needed to
make organizational members address the levels need for change, heighten their
awareness of their own behavioral patterns, and make them more open to the
change process.
1.6.1.1 Stage 1: Unfreezing

Three ways of unfreezing an organization are:
i. Disconfirmation
ii. Induction of guilt or anxiety
iii. Creation of psychological safety
Disconfirmation or lack of confirmation. Organizational members are not
likely to embrace change unless they experience some need for it. Embracing
change typically means that people are dissatisfied with the way things are –
quality is below standard, costs are too high, morale is too low, or direction is
unclear, for example.
Unfreezing involves reducing those forces maintaining the organizations be-
havior at its present level. Unfreezing is sometimes accomplished through a pro-
cess of “psychological disconfirmation.” By introducing information that shows
discrepancies between behaviors desired by organization members and those
behaviors currently exhibited, members can be motivated to engage in change
activities.
Induction of guilt or anxiety. This is a matter of establishing a gap between
what is current but not working well and some future goal that would make
things work better. When people recognize a gap between what is and what
would be better and more desirable, they will be motivated via guilt or anxiety to
reduce the gap. But disconfirmation and induction are not enough to accomplish
the unfreezing stage. One more process is necessary.
Creation of psychological safety. To face disconfirmation, experience guilt
or anxiety, and be able to act or move, people must believe that moving will
not bring them humiliation or loss of self-esteem. People must still feel worthy,
psychologically safe. The consultant must be concerned with people not losing
face and must take car that when people admit that something is wrong they
will not be punished or humiliated.
1.6.1.2 Stage 2: Moving (Changing)

The second step, movement, involves making the actual changes that will move
the organization to another level of response. On the individual level, we would
expect to see people behaving differently, perhaps demonstrating new skills or
new supervisory practices. On the structural level, we would expect to see
changes in actual organizational structures, reporting relationships, and reward
systems that affect the way people do their work. On the climate or inter-
personal level, we would expect to see behavior patterns that indicate greater
interpersonal trust and openness and fewer dysfunctional interactions.
There are two main processes for accomplishing this stage:
1. Identification with a new role model
2. Scanning the environment for new information
Identification with a new role model, mentor, boss, or consultant to “begin
to see things from that other persons point of view. If we see another point of
view operating in a person to whom we pay attention and respect, we can begin
to imagine that point of view as something to consider for ourselves”.
Scanning the environment for new, relevant information. In working with
the chairman of a company and the president or CEO, the consultant explored
many reasons for their conflict with one another. To help with reducing some of
this conflict, the consultant worked on clarifying roles and responsibilities. He
quotes other chairman-president/CEO models from other client organizations,
some that worked very well and some that did not.
This process was an activity of bringing to the two of them new, relevant
information that might help them to move forward with the changes needed in
the relationship.
1.6.1.3 Stage 3: Refreezing

This final stage is one of helping the client integrate the changes. This stage
involves stabilizing or institutionalizing these changes by establishing systems
(such as norms, policies, and structures) that make these behavioral patterns
“relatively secure against change”.
The refreezing stage may involve
Redesigning the organizations recruitment process to increase the likelihood
of hiring applicants who share the organizations new management style and
value system.
During the refreezing stage, the organization may also ensure that the new
behaviors have become the operating norms at work, that the reward system ac-
tually reinforces those behaviors, or that a new, more participative management
style predominates.
This stage can be seen in two parts – self and relations with others:
i. Personal refreezing
ii. Relational refreezing
1.4 Personal Refreezing
Personal refreezing is the process of taking the new, changed way of doing
things and making it fit comfortably into ones total self-concept. This process
involves a lot of practice – trying out new roles and behaviors, getting feedback,
and making adjustments until the new way of doing things feels reasonably
comfortable.
1.5 Relational refreezing
Relational refreezing is the process of assuring that the clients new behavior
will fit with significant others. In a system, when one begins to do things
differently, will this difference quickly affect others with.
Chapter 2
ORGANIZATIONAL
LEADERSHIP
2.0.2 What is leadership?

It is very hard to define the meaning of leadership, but there are certain traits
that we can attribute to good leaders. All good leaders inspire a vision amongst
their followers and set a direction for performance that they expect to be fol-
lowed. Their main skill is making people around them work hard, not because
they are told to, but because they want to. They are often described as dynamic
and inspirational and set tasks that are fun, yet challenging. Motivation is a
key skill required to be a good leader, encouraging others to work hard because
they want to work hard for their leader.
Transformational leadership is often cited as the closest model to what we
call traditional leadership. This model tells us that an effective leader has the
following attributes:
2.0.2.1 Creates an inspiring vision for the future.

Creating a vision is important as it acts as an end goal to direct and motivate
your team members. This gives direction to all actions of your team members
and can also act as a point of reference after the task is complete. The vision
created will be based on likely changes in the business environment, competitors
movements and the future behaviours of consumers. The key skills of a leader
here are to first correctly predict a likely future scenario, and then to convince
their team that reaching it will benefit everyone.
2.0.2.2 Motivates and inspires people to engage with that vision.

Creating the vision is not enough to generate hard work and passion, the vision
must inspire and motivate employees to work hard. If the vision is likely to lead
to major changes to established processes and take a long time to reach it is
18
CHAPTER 2. ORGANIZATIONAL LEADERSHIP 19
likely, at some point during the process that support for it will decrease. For
this reason, it is an important task for leaders to consistently build and maintain
support for the vision. One way of doing this is to emphasize that the vision will
bring about positive changes for the organisation, and these changes will have
positive implications for the employees themselves, such as financial rewards.
Employees will be motivated by the thought of the organisation progressing,
but also by their potential personal gains.
Is responsible for their teams delivery of that vision.
This area of leadership has many crossovers with the skill of management.
Delivering the vision involves setting out a plan of action, delegating tasks,
monitoring and rewarding progress throughout the process and assessing the
success when the goal is reached.
Coaches and mentors their team members to maximize their individual ef-
fectiveness and the effectiveness of their team.
It is unlikely a leader will already have a team of high-performing individ-
uals that complement each other to create the most effective team possible.
Therefore, it is important they develop their team members skills and build an
effective team. This may be done by delegating responsibility, transferring skills
or formal training. Regardless of the stage of the process, continuous develop-
ment of individuals and the team is key to maintaining success. Developing
leadership potential within your team is crucial for the future success of the
organisation.
Leadership is not as effective unless it is also supported by good management,
as we will discuss throughout this course.
Why is it important?
Good leadership is often cited as the key reason for organisational success. A
leader who inspires their workforce to consistently perform at the highest level
is likely to see success resonate throughout the organisation. Strong leadership
also has the power to develop more leaders. This can be very effective as it
means new leaders are developed internally, rather than hiring externally. It
also ensures the leaders who are developed understand the values and processes
within the company. Good leadership also instils a culture within the company
where everyone is willing to work hard for each other. This resonates throughout
the whole organisation and is an excellent way of ensuring performance remains
high.
Regardless of your organisations talent, model or assets, without strong lead-
ership performance can remain low. Strong leadership ties these factors together
to create a high-performance organisation. An organisation can theoretically
have the potential for success, but only leadership can put this potential into
action and deliver tangible results. Leaders can be particularly important in
times of change or weak performance. Here, they have the skills to increase
motivation and morale and guide the organisation through troubled times.
2.1 What can you learn about leadership?

Many people believe that good leaders are born with those attributes and the
skills they have cannot be taught to others. This is simply not true, learning
about theories and models, face-to-face training and experience can be combined
to develop a strong leader, regardless of their natural abilities. In fact, even the
greatest leaders are constantly learning and are likely to have learnt most of their
leadership skills from someone else. The important thing is to never believe you
have learnt all there is to know and to keep developing skills and learning from
new experiences.
Building this set of skills and becoming an effective leader can make you
a very valuable asset to any organisation and is likely to see you financially
rewarded for the skills you develop. There is no one size fits all style of leadership
and no two leaders are the same. Therefore, as you develop your own leadership
technique you should not worry that it is not straight out of the textbook.
Leadership models and styles are simply guidelines for how you should think
about developing your leadership skill-set.
The distinction between management and leadership is not either-or; rather,
its a balance. While powerful leaders are more than just excellent managers, an
essential aspect of their credibility stems from their management expertise.
As you read this table, keep in mind that the distinction between manage-
ment and leadership is not a dichotomy, but rather a blend or balance. Both
are needed in today’s knowledge-based organizations.
Leadership is an oft-used and sometimes nebulous term, particularly in the
field of health care. Although leadership is not traditionally taught in medical
schools, physicians possess many qualities that are needed to excel at leader-
ship. For example, medicine requires critical thinking skills that are analogous
to those required for effective leadership, such as assessing complex problems,
formulating diagnoses, and generating action plans.
For leadership to be effective, it must be built on a solid foundation consisting
of a clear mission, a vision for the future, a specific strategy, and a culture
conducive to success.”
As a result, health care organizations are increasingly recognizing the im-
portance of engaging physicians in their leadership teams, and this engagement
will become even more important as the health care environment becomes more
challenging. For physicians, leadership can provide an opportunity to strengthen
their organizations and positively impact the lives of thousands of people. In
this context, what does leadership mean, what are its attributes, and what tools
do physician leaders have at their disposal?
2.2 Foundations of Leadership

A simple definition of leadership is the ability and willingness to take ownership
of the organization (or the component of the organization that one is charged
with managing), combined with an intrinsic drive to do what is best for the
organization. However, for leadership to be effective, it must be built on a

solid foundation consisting of a clear mission, a vision for the future, a specific
strategy, and a culture conducive to success. New leaders need to understand
that these concepts are essential for effectiveness and personal growth.
2.2.0.3 Mission.
Simply put, the mission is the reason that an organization exists. For a hospital,
the likely mission is to provide high-quality and compassionate medical care. For
an academic health center, the mission may be expanded to include producing
new knowledge and training the next generation. Having a clear sense of mission
is crucial for guiding leadership decisions and choosing between alternatives.
2.2.0.4 Vision.
Vision is a conceptualization of a future, and hopefully better, state toward
which the leader navigates the organization. Vision should be systematically
formulated on the basis of an analysis of demographic trends, scientific ad-
vances, and technological innovations in the field. For example, in the field of
cardiology, an aging population with an increasing prevalence of calcific aortic
stenosis, coupled with innovations in trans catheter aortic valve replacement
(TAVR), should motivate a prescient leader to prepare for the introduction of
this new technology into the practice and to consider its secondary consequences
on surgical volumes, staffing needs, and hospital finances and facilities.
2.2.0.5 Strategy and Tactics.

Strategy refers to the plans that the organization follows in order to be successful
and competitive, whereas tactics refer to the specific steps that the organization
takes to achieve and implement the strategy. In other words, strategy is what an
organization will do to succeed and compete in its competitive space. A tertiary
care hospital (e.g., the Mayo Clinic) may aspire to be the preferred national
referral center for complex diseases. The strategy that it follows to achieve
this vision may include developing a team of nationally renowned physicians
who work in a multidisciplinary manner and broadly developing its reputation
(brand). The tactics it may use to achieve this goal may include providing
advanced training for its teams, developing cutting-edge treatments, demon-
strating the best quality metrics, improving patient experience, and publishing
its outcomes, among others.
2.2.0.6 Organizational Culture.

Organizational culture is a crucial component that leaders must understand to
achieve maximum effectiveness. The best leaders positively impact long-term
organizational culture and values through self-modeling of behaviors, creating
cultural expectations, and formally communicating cultural expectations. For
example, an expectation of maintaining and professing mutual respect at all
times can be set and demonstrated by leadership, even in difficult situations.

Effectively responding to instances of a breakdown in mutual respect, rather
than letting them go unaddressed, are critically important in further solidifying
a positive organizational culture.
2.3 Theories of leadership

2.3.1 Leadership Models
For more than 150 years, researchers and thinkers have developed and proposed
theoretical models of effective leadership.
Very many different models have been proposed, which has created a lot of
confusion - especially for students seeking to learn, and for new leaders seeking
to lead effectively. This section aims to summarize the main types of leadership
models in a way that can more easily be understood and applied. As with any
big collection of complex ideas, it is helpful to categorize and create sub-groups,
which is the approach you will see below. Categorizing the different models into
sub-groups makes them easier to absorb, compare and understand.
Here are the sub-groups of leadership models:
2.3.1.1 The different types of leadership models

Trait-Based The oldest type of thinking about effective leadership. Logi-
cally, Trait-Based leadership models focus on identifying the traits of successful
leaders.
Behavioural Ideals Behavioural Ideals leadership models concentrate on

what researchers believe are the most effective behaviours as a leader. The
notable model in this category is Blake and Moutons Managerial Grid.
Situational/ Contingency Situational (or Contingency) leadership models

are based on the idea that the leaders actions should vary according to the
circumstances he or she is facing - in other words, leadership methods change
according to the situation in which the leader is leading. This category includes
most notably: Kurt Lewins Three Styles model; Tannenbaum and Schmidts
Leadership Continuum model; the Fiedler Contingency model; Houses Path-
Goal theory; Hersey and Blanchards Situational Leadership® model; and Bol-
man and Deals Four-Frame model.
Functional Functional types of leadership models focus on what the leader

has to do. Unlike the Behavioural Ideals approach, Functional leadership mod-
els do not suggest ideal ways of behaving, nor do they match behaviours to
circumstances like Situational/Contingency theory. Instead, Functional leader-
ship models focus on the action areas that a leader must address to be effective.
The most notable Functional models are John Adairs Action-Centered Leader-
ship and Kouzes & Posners Five Leadership Practices.
Integrated Psychological The Integrated Psychological leadership model

is so called because it integrates the thinking behind the four other leadership
models sub-groups, while also addressing the leaders inner psychology, which
tends not to be considered in other more traditional or conventional types of
leadership models. James Scoullers Three Levels of Leadership model arguably
pioneers this category. Scoullers model can be regarded as a relatively new view
of leadership.
2.3.1.2 Trait-Based Leadership

An overview of various trait-based leadership models, including those outlined
by Carlyle and Galton; Stogdill; Kouzes and Pozner.
What is a trait?
Innate Leadership
Stodgily and challengers to trait-based theory
Leadership thinking and societal development
2.3.1.3 Trait-Based Leadership

Trait leadership - the oldest type of thinking about effective leadership - is de-
fined as integrated patterns of personal characteristics that reflect a range of
individual differences and foster consistent leader effectiveness across a variety
of group and organizational situations (Zaccaro, Kemp, & Bader, 2004). Basi-
cally, Trait-Based leadership models focus on identifying the traits of successful
leaders.
Trait-based theoretical models of effective leadership draw on the idea that
great leaders have certain common character traits. We could otherwise regard
this as a sort of personality profile of an effective leader.
2.3.1.4 What is a trait?

The word trait is defined by the Oxford English Dictionary as ...a distinguishing
quality or characteristic, typically belonging to a person...
A trait is, therefore, a characteristic or quality of human behaviour. We
might also consider traits to be aspects of attitude or personality.
Human beings possess very many personality traits, in infinite combinations.
Trait theory attempts to analyse effective combinations of human personality
traits, thereby suggesting or identifying a set of human traits that enable a
person to lead others effectively.‘
2.3.1.5 Innate Leadership

Given that personality traits tend to be quite fixed and unchanging in peo-
ple, trait-based theory has definitely helped to encourage the perception that
leadership ability is innate in leaders - that good leaders are born, not made.
The extension of this notion is that effective leaders cannot be developed or
taught.
Trait-based theory, by implication, asserts that the best leaders are born to
lead. And from a training and development standpoint, trait-based theory also
implies that if a person does not possess the right leadership traits, then he
or she will not be able to lead effectively, or certainly, will not lead as well as
a natural-born leader. Training and development can foster leadership ability
to a degree, but what really matters is possessing the appropriate traits, or
personality profile.
The ideas and implications of trait-based leadership theory - i.e., that ef-
fective leadership and potential leaders are determined by a largely predestined
and unchanging set of character traits - that good leaders are born not made -
dominated leadership thinking until the mid-20th century.
Trait-based theoretical models of effective leadership draw on the idea that
great leaders have certain character traits with the dated opinion that all suc-
cessful leaders are born leaders. According to this idea, leaders depend their
success on a largely pre-destined set of character traits.
Stogdill and challengers to trait-based theory In 1948, Ralph Stogdill

analysed data from over 100 leadership related studies and was the first to
challenge trait-based theory. He found there were too many qualities that make
up a successful leader.
David Buchanan and Andrzej Huczynski summarised this for today’s mod-
ern society with The problem is that research has been unable to identify a
common, agreed set of attributes. Successful leaders seem to defy classifica-
tion and measurement from this perspective. Therefore, a successful leaders
characteristics must be relevant to the demands of the leadership situation.
In 1987, Kouzes and Posner published the bestselling book ‘The Leader-
ship Challenge. Surveying 630 managers, they identified the qualities followers
looked for in a leader. Below are Kouzes and Posners suggested ten primary or
key leadership traits:
Honest
Forward-thinking
Inspirational
Competent
Fair-minded
Supportive
Broad-minded
Intelligent
Straightforward
Dependable
2.3.1.6 Leadership thinking and societal development

Interestingly, trait-based leadership theory from the mid-1800s onwards ar-
guably reflected the patterns and practices of the leadership of the times.
Trait-based theory, and especially the idea that leaders were born not made,
was not just a theory - it was also partly reflective of how leaders were actually
selected, trained, appointed, and regarded: Leaders rarely rose through the
ranks as they generally can do now in modern times.
Organizations and groups which needed leading were extremely slow to
change, by today’s standards. Tradition and convention were extremely power-
ful features of all organized work and governing systems. The economy, society,
industry, work and life itself, were all far less dynamic and fluid than nowadays,
or even the mid-1900s. Social mobility and the class system were far more rigid
than they were to become a century later.
Very many leaders were born into privilege and positions of authority -
especially in politics, the military, and to a great extent in industry too. In
the 1800s leaders most leaders were actually born into the role. If potentially
brilliant leaders existed elsewhere, they had little chance to emerge and lead,
compared with opportunities that grew later and which exist today.
Women, notably, were effectively barred from any sort of leadership, by
virtue of their suppression practically everywhere until the early/mid 1900s.
It is no wonder therefore, quite aside from the academic thinking of the times
that the validity of trait-based theory was not scrutinised until much later.
Conclusion The most helpful conclusion from all this is probably that:
Distinctive traits certainly arise in the profiles of effective leaders, and in
the ways that followers believe they should be led. However, crucially a reliable
and definitive list of leadership traits has yet to be established and agreed by
researchers and thinkers on leadership, and there are no signs that this will
happen. Traits can perhaps define effective leadership for a given situation, but
traits alone do not adequately explain what effective leadership is, nor how it
can be developed.
A traits-based approach can certainly assist in identifying future leaders,
and in the leadership development process, however traits are just a part of
the profile and behaviour of an effective leader. To understand and measure
leadership more fully we must broaden leadership criteria to include other factors
beyond traits.
Extending this point, James Scouller suggests constructively that: Even
though researchers cannot agree on a shortlist of key traits, we nevertheless do
see distinctive intangible qualities in the profiles of effective leaders; qualities

that make leaders attractive to their followers. This invites a conclusion that
although distinctive character traits are in the make-up of the best leaders, there
is no single set of winning traits. Therefore, it seems the best leaders have a
definite but unpredictable uniqueness about them - what some people refer to
as leadership presence...
2.4 Charismatic and Narcissistic Leadership

Understanding the differences, strengths and weaknesses of charismatic leader-
ship vs. narcissistic leadership.
2.4.1 Charisma
The word charisma comes originally from the Greek language. It meant ba-
sically gift, from the Greek kharisma and kharis, meaning grace or favour - a
favour or grace or gift given by God. The modern meaning of charisma has
altered greatly, but the original meaning resonates appealingly today, because
charismatic leaders rely on their personality gifts to influence people and shape
their future.
These gifts can include great wisdom or insight, heroism, extraordinary cer-
tainty about the future, and perhaps even the claim of a direct link to God,
by which a leader may refer to God (or a similar sense of righteousness) as
a guide/justification/judge for a difficult and controversial decision. The use
of God in such situations of course avoids a degree of personal accountability
(on the basis that Gods judgment cannot be questioned, and certainly not by
followers), and is also a very effective charismatic power technique - whether
conscious or otherwise - for a leader to appeal to a big majority of followers
by referring to a big scary mysterious force (God) that is implied to approve
of the leaders actions. The God factor is by no means central to charismatic
leadership, but it very relevantly illustrates the follower projection, which is a
crucial feature of charismatic leadership:
Charismatic leadership demands more than just a remarkable personality.
The followers must also project an image of specialness and authority onto the
leader and give the leader power over them. Charismatic leadership therefore
relies on the twin effect of a leaders personality and a strong belief by followers
that this special person is the one to lead them in their hour of need.
German sociologist and political economist Max Weber (1864-1920) too saw
charismatic leadership distinctly as a relationship between leader and followers.
In Webers view, charismatic leadership has no moral dimension; it can be a
force for good or evil. Using Webers definition, there is a single indicator of
charismatic leadership, which is: do the followers grant authority to the leader
based on their view of his or her special gifts? If the answer is yes, this is
charismatic leadership. In Webers eyes therefore, Adolf Hitler was as much a
charismatic leader as Jesus Christ.
Without separate support (such as a loyal army or secret police) charismatic

leaders can only hold power while followers continue to believe in the leaders
specialness. If the leader disappoints the followers in some way, perhaps because
previously hidden flaws are exposed, or the leader fails to deliver promises, the
followers belief tends to fade, draining charismatic leaders of their authority. For
this reason, charismatic leadership runs the risk of being unstable and short-
lived.
Charismatic leadership is greatly dependent on credibility. The leaders
power remains unless credibility is lost. When a charismatic leader loses credi-
bility, the followers seek new leadership or ways to oust the damaged leader.
To guard against this risk, charismatic leadership may involve a cult of
personality to prevent followers realizing that their leader is less impressive
than they think. Accordingly propaganda and manipulation of media is often
used to create and uphold an idealized public image of the leader, often backed
up by extreme flattery and praise. We see this in political spin and the work of
spin doctors. We also see it in certain organizations, such as Richard Bransons
Virgin Empire, by which the leaders image is very strongly managed through
intensive PR (Public Relations) activities. All large corporations employ PR
agencies to help present the corporation in a positive light in the media. For
many high profile organizations the protection and enhancement of the leaders
image is a big priority in these publicity methods.
Although charismatic leadership can be short-lived, it can also leave a lasting
legacy if the leaders policies and teachings are preserved in laws, rules and norms
and there is a bureaucracy to uphold them. You will see this long ago happening,
for example, in the major religions of the world. We are perhaps seeing the
establishment of substantial legacies in modern times too in the charisma and
reputation of recent charismatic leaders such as Nelson Mandela, the Dalai
Lama, and Fidel Castro.
Charismatic leadership can be effective in the sense that it can cause swift
change. Followers become highly mobilised and enthused. We see the potential
for action by followers on a vast scale when a particularly charismatic figure
dies. Princess Diana is a notable example. Millions of people are moved to
action, motivated by the charismatic effect of a human presence who for ex-
traordinary reasons can captivate a vast audience. The same sort of huge effect
by a charismatic person on a big group of followers is also demonstrated by the
influence of major figures in music and sport. Some charismatic people achieve
so much success that they are able to transfer their reputations and followings
to entirely different arenas, for example Imran Khan, the Pakistani politician
and former cricketing hero. Victoria Beckham, wife of footballer David Beck-
ham, has successfully migrated and developed huge following from the world of
pop music to fashion and business. Arnold Schwarzenegger, the former body-
builder and film-star became a very long-serving Governor of California. And
in December 2011 the Russian Duma lower house of parliament welcomed three
newly elected members: Playboy Russia covergirl Maria Kozhevnikova, boxer
Nikolai Valuyev, and tennis player Marat Safin.
Many of these examples are not leaders in a traditional sense, but they have
commanded/do command a significant following. They influence other peoples

behaviour and thinking. They do so largely because of their relationship with
their followers, within which the vital element and source of the leaders power
is the special quality that the followers project onto the leader.
What all this tells us is that charismatic leadership is very much depen-
dent on the perceptions and needs of followers, and especially followers who are
impressed or seduced by powerful human images of success, capability, achieve-
ment, etc. There is a need in many people to follow this sort of ideal image. The
decision to follow leaders like this has relatively lower dependence on reasoned
analysis of what the leader will do - it is far more driven by how the leader
makes the followers feel.
It is not surprising given the subjective and emotional drivers involved, that
charismatic leadership offers potentially big risks for followers, and also to other
people who may be affected by such a vast, energized, and emotionally-charged
following.
2.4.1.1 Dangers and risks of charismatic leadership

Here are examples of the risks associated with charismatic leadership:
Charismatic leadership - probably more than any other sort of leadership
style, philosophy, model, or any other leadership method - can be used for
evil or unethical purposes. Examples throughout history up to modern
times are sadly plentiful.
Charismatic leadership can create dependency among followers. This may
cause followers to assume that the leader and supporting team have all
the answers, and so followers take less responsibility for themselves and
for (perhaps vital) initiatives. This effect ironically threatens charismatic
leaders, when, lacking innovation and responsibility in the ranks of the
followers, organizational aims are increasingly missed, group effectiveness
and results reduce, and so the leaders credibility suffers, together with the
wellbeing of the dependent followers.
Charismatic leadership can encourage a belief among followers that the
leader is infallible. No one questions the leaders authority or judgment or
decisions, even when seen to be wrong. And so the group effort fails.
Charismatic leadership is more likely to produce early group/organizational
failures - because the charismatic leader is actually incapable or out of
his/her depth.
Other examples can be seen wherever a leaders power is based chiefly on a
specialness projected onto the leader by followers. These situations perhaps
teach us more about the inadequacies of followers, than the inadequacies of
charismatic leaders. The world is full of needy easily impressed people, and so
charismatic leaders will probably continue to rise to power for a very long while,
if only for relatively short periods and often with unhappy consequences.
Charisma does however have a part to play in effective leadership when we

view it as a genuinely positive quality of the leader, rather than a superficially
special quality projected by a group of followers. To understand this it is useful
to redefine charisma..
2.4.1.2 Charismatic leadership and presence

James Scouller says in The Three Levels of Leadership that charisma is not the
same as presence. He defines charisma as: A combination of outer charm, power
and persuasiveness.
Scouller points out that a leader may appear charismatic largely through
skilful acting, and describes such charisma as an outer image lacking a deeper
core. He contrasts this with presence, which he defines as: An inner sense of
wholeness with an outer reflection. Leaders with presence may be charismatic
in style, but equally, they may be quiet or contemplative... Leaders who rely on
charisma alone - that is, charisma without presence - lack the depth, resilience
and capacity for wisdom, which we see in leaders whose charisma flows from
their underlying presence.
There is obviously an overlap between the transformational leadership and
charismatic leadership styles where the transforming leader is also charismatic.
The two styles however are quite different. The transforming leaders focus is,
by definition, on positive, moral change. Charismatic leaders may not want to
change anything - they may want to preserve the status quo and, as we have seen,
they may also use their power for immoral aims. Somewhat obviously, where
a charismatic leader behaves also with narcissistic tendencies (very selfish, self-
admiring and craving admiration of others) then Charismatic leadership overlaps
or may equate to narcissistic leadership, which is explained next
Charismatic and Narcissistic Leadership Narcissism

Charisma
Charisma vs. Narcissism
Narcissism First the dictionary definition of narcissism, in a psychological

context is: Extreme selfishness, with a grandiose view of ones own talents and
a craving for admiration, as characterizing a personality type. (Oxford English
dictionary)
In fact the term is applied far more widely than this, depending on context,
from reference to severe mental disorder, ranging through many informal social
interpretations typically referring to elitism and arrogance, and at the opposite
end of the scale, to a healthy interest in ones own mind and wellbeing, related to
feelings of high emotional security - the opposite of insecurity and inadequacy.
As for narcissistic leadership, the dictionary definition of narcissism is a
good starting point, but as we shall see, the narcissistic leadership style is very
difficult to define precisely, and is arguably better viewed as a flexible scale, or
a sort of continuum.
Narcissistic leadership is a style that began to capture public attention from

2000 onwards following a flurry of articles and books by Michael Maccoby, Kets
de Vries and others.
In essence, narcissistic leadership refers to leadership by a narcissist and the
co-dependent relationship it involves between the leader and his closest circle of
followers.
Narcissism - in a negative psychological and leadership sense - stems from
an unconscious active behavioural response to deep, unrecognized feelings of
inadequacy. This means that the person is unconsciously driven by hidden feel-
ings of inadequacy, to behave in a controlling and energetic way, which enables
dominance and initiative.
The passive response to a narcissistic condition does not produce a leadership
intent, instead commonly people:
feel deeply inadequate
believe failure comes from trying new or bold things, and so
decide that its better not to take a risk
(basically people think that risk = failure = humiliation, so avoid risk and
then for sure feel inadequate, or justify avoidance by saying the risky opportu-
nity was of no value or misguided)
However, conventionally described narcissists respond to their feelings of
inadequacy in the opposite way and are more extraverted and outward in their
behaviours. They tend to strive to succeed in public, to be better than others,
to have more than others, to feel superior, and to win respect, admiration, and
acclaim from others.
The main feature of the narcissist in a leadership context is a drive to succeed,
motivated by a (usually) hidden sense of inferiority and inadequacy.
However, as already explained, narcissism varies in intensity from very mild
(basically inconsequential) to pathological conditions (referring to sickness/disease/illness).
At the pathological end is severe narcissistic personality disorder. It is tempt-
ing to suggest that some of today’s biggest corporations, and some countries,
are led by people possessing such extreme tendencies, although this might be a
slight exaggeration; hopefully you see the point. Narcissism, perhaps especially
in extreme forms, can enable and sustain leaders in significant leadership roles,
for a significant time. The situation will probably be very unhealthy for their
followers and for lots more people connected to the group, but the leader, given
extreme narcissism will not be troubled by this at all.
Charisma Conversely there are various forms and interpretations of positive

healthy narcissism. For each possible negative narcissistic characteristic there
exists a positive alternative:
An interesting paper, The long-term organizational impact of destructively
narcissistic managers (Roy Lubit, 2002) published by the Academy of Manage-
ment in 2002, highlighted examples of this positive/negative aspect of narcissism
by contrasting the positive/negative effects of certain narcissistic impulses, the
main examples summarized here:
confidence - is potentially helpful or unrealistic;

power/admiration-seeking - is potentially a healthy energy or reckless;
relationships - potentially entail concern for others, or spin and remorseless
exploitation of others
consistency/direction - potentially has values or lacks values
The variable interpretation of narcissism inevitably hinders specific definition
of narcissistic leadership. Aside from deciding whether the narcissism contains
healthy elements or not, assumptions are required as to extent of negativity.
Simply - how serious is the leaders narcissistic behaviour? Logically then we
can think of narcissistic leadership as being a flexible concept or continuum.
A very basic presentation of a narcissistic leadership continuum is offered
below. The continuum is expressed with a strong bias towards the negative
extreme because in practice this is more typical in groups where a narcissistic
leader is in charge. Also, the narcissistic leadership style would be relatively
unremarkable if the majority of narcissistic leaders were positive healthy per-
sonalities. In reality, narcissistic leadership succeeds (with limited and qualified
and sometimes disastrous effects) because of a leaders negative narcissistic ten-
dencies. These may combine constantly or occasionally with a few positive
aspects, but broadly the effects of narcissistic leadership are negative.
2.5 Transformational vs. Transactional Leader-

ship
Understanding the differences between transactional and transformational lead-
ership styles, their strengths and weaknesses and their applications.
2.5.1 Burns Transforming and Transactional leadership

styles
James Macgregor Burns, who studied political leaders like Roosevelt and Kennedy,
first described these two distinct styles of leadership in his 1978 book, Leader-
ship. He used the word transforming rather than transformational. Both terms
are used here, and they mean the same. Below are the descriptions and differ-
ences of the two styles:
Transforming Leadership Transactional Leadership
Where the leader taps into his followers higher needs and values, inspires
them with new possibilities that have strong appeal and raises their level of
confidence, conviction and desire to achieve a common, moral purpose. Where
the leader causes a follower to act in a certain way in return for something the
follower wants to have (or avoid). For example, by offering higher pay in return
for increased productivity; or tax cuts in exchange for votes.
Many political leaders demonstrate the transactional style. Mahatma Gandhi
was an exemplar (a typical example) of someone who leads using the transform-
ing or transformational style. The transformational leadership style therefore
can have an overlap with the servant leader leadership philosophy.
There are three main differences between the two styles of transformational
and transactional leadership.
1. The first involves purpose
2. The second involves morality
3. The third involves the timescale or time horizon
So, while the defining feature of transactional leadership is a two-way ex-
change (Ill give you this if you give me that), the main features of transforming
leadership are inspiration, mobilisation and moral purpose. Indeed, MacGregor
Burns summarised transforming leadership: Such leadership occurs when one or
more persons engage with others in such a way that leaders and followers raise
one another to higher levels of motivation and morality. When he talked about
morality, he meant leadership that ...can produce social change that will satisfy
followers authentic needs. Of the two styles, transforming leadership is more
likely to achieve major change than transactional leadership - mainly because,
by definition, the former goes after more ambitious goals.
2.6 keys to successful transformational leader-

ship:
Bernard Bass (author of Leadership and Performance Beyond Expectations,
1985) built on MacGregor Burns ideas. He used the term transformational
leadership instead of transforming leadership and since then most authors have
followed his lead. Bass also strengthened the idea that transformational leaders
have the greater impact when he wrote: Transactional leaders work within
the organizational culture as it exists; the transformational leader changes the
organizational culture.
Bass argued that there are four keys to successful transformational leader-
ship:
1. Trust - building a high degree of trust between leaders and followers by
setting a high moral and ethical example. He called this idealized influ-
ence.
2. Inspiration - providing a vision or goals that inspire and motivate followers
to act because they feel the direction they are going in is significant and
worthwhile. This he called inspirational motivation.
3. Creativity - giving people the big picture and a way of working that allows
them to question conventional wisdom and come up with fresh solutions
to old problems. He called this intellectual stimulation.
4. Personal growth - paying attention to followers as individuals with their
own needs and ambitions, offering them coaching and mentoring, enabling
them to grow and feel fulfilled. This he called individual consideration.
Although we are referring to two different styles of leadership, it would not
be correct to say that someone must be either a transformational leader or a
transactional leader. It is possible to combine both styles. (It is also reasonable

to suggest that no leader need be confined to one or other of these two styles,
because as we shall see, other styles certainly exist, and this is before we con-
sider the potential influence of philosophies and models upon any leaders chosen
methods and development.)
That said, while we are presently concerned with transformational and trans-
actional styles, consider this example of style switching: While leaders in trans-
formational mode would normally try to attain the backing of followers by ap-
pealing to their values and offering an inspirational vision, the leader may meet
resistance. At times like this, a leader may adopt the transactional style to
create more of a traditional exchange by trading something that the leadership
can offer (desired by followers) in return for something the leadership seeks from
the followers.
The transactional leadership style often works well - provided everyone knows
and agrees on the goals, priorities and methods. However, the transactional style
may not work when the situation calls for a big change in direction, or circum-
stances demand creative problem solving. In such a climate, a transformational
style is often required and tends to be more successful.
You will notice that the transformational leadership style overlaps

with the leadership philosophies: Authentic leadership - in its appeal
to values
Ethical leadership - in its insistence on morality, and as already mentioned
Servant leadership - in helping followers to achieve bigger aims and personal
potential
Chapter 3
Team building in an
organisation
3.1 A Leaders Role in Developing a Team

3.1.1 Developing a Team
A Leaders Role in Developing a Team A leader has an important role
in developing the performance of their team. John Adairs Action Centered
leadership model is an example of how they can achieve this. Good managers
and leaders should have full command of the three main areas of the Action
Centered Leadership model, and should be able to use each of the elements
according to the situation. Being able to do all of these things and keeping
the right balance, gets results, builds morale, improves quality, and develops
teams and productivity. This is ultimately the mark of a successful manager
and leader. But there are other aspects also to consider when developing a
team.
One way to help develop a team, particularly a struggling or newly estab-
lished one, is to look at a model by Dr Bruce Tuckman to help you identify
solutions to current issues. Tuckman published his Forming, Storming, Norm-
ing and Performing model (Group Formation Model) in 1965, adding a fifth
stage, adjourning, in the 1970s. This theory is an elegant explanation of team
development and behaviour. Tuckmans model explains that as the team devel-
ops maturity, ability and as relationships establish, the leader can then change
leadership style. Beginning with a directing style, moving through coaching,
then participating, finishing delegating and almost detached. With your role as
leader in mind, we can use Tuckmans model to help you grow an independent,
confident and proactive team. There are suggested ‘actions for you to take, but
these may not be suitable for everyone.
Using Tuckmans natural process of team development, a leader can predict
how their organisation may grow. This is not limited to, and there may be
34
CHAPTER 3. TEAM BUILDING IN AN ORGANISATION 35
circumstances that may cause a previous phase to reoccur. It is situational

to the team and organisation. But by using this as a guide, one can utilize
their leadership skills to devise a way of encouraging a prosperous working
environment.
3.2 High Performance Teams

Managing High Performance Teams All managers want to maximise
the performance of their teams, but many contradictory methods of achieving
this exist. Ultimately, the challenge is to focus, motivate and challenge your
employees in order for them to perform at the highest level and hence the
organisation succeeds in maximizing available resources. Katzenbach and Smith
(1993) investigated the driving forces behind the highest performing teams,
concluding that high-performing teams operate in a very different way to less
successful ones and their outputs are far higher than the sum of their parts.
Using this research, along with other sources, we have developed what we believe
to be the key factors.
3.2.1 Key factors in building a high-performing team.

1. Learn from past experiences – It is unrealistic to expect your team to
perform at the highest level from the off-set. Therefore, the team must
learn as it experiences success and failures to continue to improve. Failures
may come across as setbacks, in terms of the teams progress, but they are
often also the best opportunities to learn.
2. Results driven – High-performing teams, by definition, deliver results.

Therefore, it is important for them to always focus on what they are trying
to achieve. Whatever part of the task is being done, the individual should
always be aware of the end result. These results can then be assessing
against the aims of the project.
3. Support and recognition – It is not enough to set a team a task and expect
them to get on with it. Even the highest performing teams require support
throughout the project and recognition of their success at the end of it.
Support can come in the form of skill development, motivation and finance
and recognition in the form of financial reward or career progression.
4. Identify individual strengths – Aligning individual tasks to the skill-sets of

your team members is essential in maximizing team performance. Often
tasks are distributed based on team member status, rather than skills,
leading to inefficient performance.
5. Accountability – Ensuring team members are aware of their individual
responsibilities is key to maximizing performance. It aligns every individ-
uals work to the overall goal of the team and also acts as a tool to assess
what went well and what did not. Individuals that feel accountable for
their work are more likely to be motivated and produce high quality work.
6. Creating a collaborative climate – This allows individuals to utilize their

teammates strengths and experience to maximize their own performance.
An environment where team members feel free to ask for help and express
their own opinions benefits everyone.
7. Development Opportunities - Understanding that team members, how-

ever well they are performing, can always improve is crucial for continued
success. Opportunities should be given to individuals to keep expanding
their skill-set.
8. Collaborate with other departments – The importance of other depart-

ments in contributing to team performance is often underestimated. Knowl-
edge, resources and even finance can often be brought in from other de-
partments, even if the project is outside their expertise.
9. Leadership – Strong leaders are required to direct the team internally

and externally. It is not enough to simply have a strong leader directing
individuals below them, all members of the team must demonstrate certain
leadership skills.
10. Empower team member – There are a variety of different ways to empower
team members, and different individuals react differently to different meth-
ods. Regardless of what method you choose, team members should feel
empowered throughout the process.
3.3 Five Dysfunctions of a Team

Five Dysfunctions The Five Dysfunctions of a Team outlines the root
causes of politics and dysfunction on the teams where you work, and the keys to
overcoming them. Counter to conventional wisdom, the causes of dysfunction
are both identifiable and curable. However, they do not die easily. Making a
team functional and cohesive requires levels of courage and discipline that many
groups cannot seem to muster.
3.3.0.1 Absence of Trust

The fear of being vulnerable with team members prevents the building of trust
within the team. This occurs when team members are reluctant to be vulnerable
with one another and are unwilling to admit their mistakes, weaknesses or needs
for help. Without a certain comfort level among team members, a foundation
of trust is impossible.
The Role of the Leader here is to Go First.
3.3.0.2 Fear of Conflict:

The desire to preserve artificial harmony stifles the occurrence of productive,
ideological conflict. Teams that are lacking on trust are incapable of engaging
in unfiltered, passionate debate about key issues, causing situations where team
conflict can easily turn into veiled discussions and back channel comments. In
a work setting where team members do not openly air their opinions, inferior
decisions are the result.
The Role of the Leader here is to Mine for Conflict.
3.3.0.3 Lack of Commitment

The lack of clarity or buy-in prevents team members from making decisions they
will stick to. Without conflict, it is difficult for team members to commit to
decisions, creating an environment where ambiguity prevails. Lack of direction
and commitment can make employees, particularly star employees, disgruntled.
The Role of the Leader here is to Force Clarity and Closure.
3.3.0.4 Avoidance of Accountability

The need to avoid interpersonal discomfort prevents team members from holding
one another accountable for their behaviours and performance. When teams
do not commit to a clear plan of action, even the most focused and driven
individuals hesitate to call their peers on actions and behaviors that may seem
counterproductive to the overall good of the team.
The Role of the Leader here is to Confront Difficult Issues.
3.3.0.5 Inattention to Results

The pursuit of individual goals and personal status erodes the focus on collective
success. Team members naturally tend to put their own needs (ego, career
development, recognition, etc.) ahead of the collective goals of the team when
individuals are not held accountable. If a team has lost sight of the need for
achievement, the business ultimately suffers.
The Role of the Leader here is to Focus on Collective Outcomes.
3.3.1 Addressing the Dysfunctions

Like it or not, all teams are potentially dysfunctional. This is inevitable be-
cause they are made up of fallible, imperfect human beings. However, facing
dysfunction and focusing on teamwork is particularly critical at the top of an
organization because the executive team sets the tone for how all employees
work with one another.
Counter to conventional wisdom, the causes of dysfunction are both identi-
fiable and curable. However, they do not die easily. Making a team functional
and cohesive requires levels of courage and discipline that many groups cannot
seem to muster.
To begin improving your team and to better understand the level of dys-
function you are facing, ask yourself these simple questions:
Do team members openly and readily disclose their opinions?
Are team meetings compelling and productive?
Does the team come to decisions quickly and avoid getting bogged down
by consensus?
Do team members confront one another about their shortcomings?
Do team members sacrifice their own interests for the good of the team?
Although no team is perfect and even the best teams sometimes struggle with
one or more of these issues, the finest organizations constantly work to ensure
that their answers are yes. If you answered no to many of these questions, your
team may need some work.
The first step toward reducing politics and confusion within your team is to
understand that there are five dysfunctions to contend with, and address each
that applies, one by one.
The Rewards Striving to create a functional, cohesive team is one of the few
remaining competitive advantages available to any organization looking for a
powerful point of differentiation. Functional teams avoid wasting time talking
about the wrong issues and revisiting the same topics over and over again be-
cause of lack of buy-in. Functional teams also make higher quality decisions and
accomplish more in less time and with less distraction and frustration.
Successful teamwork is not about mastering subtle, sophisticated theories,
but rather about embracing common sense with uncommon levels of discipline
and persistence. Ironically, teams succeed because they are exceedingly human.
By acknowledging the imperfections of their humanity, members of functional
teams overcome the natural tendencies that make teamwork so elusive.
Exercises To build trust in your team, you may like to use the personal
histories exercise. You may also like to complete the team effectiveness exercise.
The purpose of this exercise is to give team members a forum for providing one
another with focused, direct and actionable feedback about how their individual
behaviour can improve the performance of the team.
Conclusion Teams willing to address the five dysfunctions can experience a

number of benefits. In conclusion, high performing, and cohesive teams:
Are comfortable asking for help, admitting mistakes and limitations and
take risks offering feedback
Tap into one anothers skills and experiences
Avoid wasting time talking about the wrong issues and revisiting the same
topics over and over again because of lack of buy-in
Make higher quality decisions and accomplish more in less time with fewer
resources
Put critical topics on the table and have lively meetings
Align the team around common objectives
Retain star employees
3.4 The Johari Window

The Johari Window, developed by Luft and Ingham (1995), is a model used to
assess the level of communication and awareness within a team. The diagram
shows four boxes and the size of each box acts as a measure for each variable
inside it (the variables are open, blind, hidden and unknown). The idea of the
model is to highlight areas that may be reducing cooperation and awareness
and initiate ways of improving this.
Open – This area corresponds to information about the individual that
is open to the public and the individual is aware of. This is known as
the ‘public self and an example may be that the individual has strong
technical knowledge.
Blind – This area corresponds to information that other team members
are aware of but the individual does not know. Intuitively this may seem
unusual, however many habits and traits may be picked up on by team
members, without the individual realising they are doing it.
Hidden – This area corresponds to the ‘private self. This is information

that the individual is aware of but the rest of the team are not. This may
be because the individual is choosing to keep it to themselves or simply
because it has not come up.
Unknown – This area corresponds to information that the individual and

the team are not aware of. This could be in the form of memories or
potential, for example.
The model is not static. Various methods can be used to enhance the areas in the
model in order to improve levels of communication, awareness and transparency
amongst the group.
An example of this could be a feedback session, where every individual in
the group is given feedback for their past performance. This would increase the
‘open area of the model and reduce the ‘blind area, as the individual understands
more about their output. The diagram below demonstrates how the model
would change as this occurs. You will notice the ‘hidden area has also increased.
This will be determined by whether the individual has chosen to share their
feedback with the rest of the group, in this example they have not.
3.5 Identifying Team Member Strengths

Identifying strengths of your fellow teammates helps in maximizing team per-
formance.
Before attempting to recognize and appreciate the strengths of others, you

should be able to distinguish your own strengths and weaknesses. Hopefully,
this will aid and assist your ability in detecting strengths.
This is hugely beneficial on a personal level, which will subsequently have a
knock-on effect on the team as a whole. If an employee is aware of their core
competencies it will enhance their performance and confidence.
However, employees are not always conscious of their personal strengths. A
manager is in the easiest position for picking up and identifying strengths, so
therefore a manager should take advantage of this and compliment employees
on their appare not strengths.
Delegating Tasks
Similarly, if an employee isnt aware of their strengths and you as a manager
are, then appoint them a task that enables them to use this strength successfully.
This will intensify their efficiency and productivity as it creates an opportunity
that allows them to demonstrate their strengths, boosting confidence. This lift
in self-assurance could possibly turn weaknesses into strengths and encourage
hidden strengths to surface.
Furthermore, if you are in a managerial position, conduct exercises and activ-
ities that are going to reveal team members strengths. It could simply be asking
all team members to anonymously jot down a few strengths of each other and
then discuss as a collective group in a meeting. There are many ways of doing
this formally and informally such as interviews, strengths-based questionnaires,
guided self-reflection and 360 feedback reports.
3.6 Motivating Your Team

The people of a business is the most important and most valuable resource they
have. In order to retain employees and get the most out of them, they have to
be motivated and engaged in what they do on a day to day basis. So what is
motivation? Job satisfaction, meaning and drive for outstanding performance.
3.6.1 Motivating Factors

There are evidently common denominators that prove to motivate us such as;
wages, good working conditions, team spirit and a good relationship with your
boss. However, in this modern world we live in today, these factors are more
frequently being met losing their capability to motivate us in such a way. Soci-
ety now pursues other motivational factors such as power and control, growth
opportunities, challenging and difficult work and recognition for exceeding ex-
pectations in the workplace. Each member of a team has to be motivated for the
entire team to be motivated. Every individual is driven by different stimulus,
meaning the same one technique cannot be used successfully for all employees.
As a manager, you have to understand motivational variances and establish in-
dividual drivers. A One-to-One meeting can be a good opportunity to find this
out.
Goal Setting Moreover, setting clear and precise team goals allows all mem-
bers to inclusively work together toward a collective, shared vision. Contribut-
ing to an end product motivates an employee to produce good work as they feel
like they have a purpose and responsibility. A SMART approach helps produce
effective goals. (Specific-Measurable-Achievable-Realistic-Time based) Try and
avoid boring work and getting into too much of a routine in the workplace you
manage. No matter how self-motivated one is, if the work is ‘same old - same
old, boring and poorly organised, it is hard to stay motivated. Provide a work-
ing environment employees can excel in and constantly develop new skills and
abilities to grow within the department. The office is normally a fast paced
work environment where as soon as one target is met, all eyes change focus to
the next set objective. Why not celebrate success? A richly-deserved pat on the
back contributes a feel-good factor. As they say ‘The journey of a Thousand
Miles Begins with One step – So why not acknowledge each step of success.
Furthermore, a healthy competition reward could be introduced to enhance
motivation if necessary, such as voting for ‘Employee of the Month. As a man-
ager, you are in such a powerful and meaningful position, that frequently prais-
ing and acknowledging team members good work can go a long way. Whether
this is informal praise, public recognition in front of co-workers or via email –
it does not take much to give employees the credit they deserve. It makes them
feel valued and appreciated, which in turn will motivate them to work harder.
Additionally, Managing Team Expectations effectively works as a motivator
as the more that is expected from them, the harder they will work. Another
factor that can aid motivating your team is Avoiding Micro-Management as
a manager. Constantly hovering over team members shoulders wont by any
chance motivate them to produce quality work, but trusting them to do the job,
will. Giving members a sense of authority and liberty to work will naturally
motivate them to do well as they can uniquely contribute to the organisation.
3.7 Coaching Your Team

The Harvard business review (2014) states that you cant be a great manager if
you are not a good coach. In other words, you can only be a good manager if
you are a good coach.
Benefits
There are several benefits of coaching a team;
Strengthens the bond between you and your team members
Your support encourages them to continuously develop their skills
Training boosts performance levels and helps employees to reach their peak
Feels satisfying
Coaching is a tool used for catalyzing employees growth and empowering
your team to take ownership over their learning. Coaching is a strategy that
allows you to be supportive to your team and get actively involved with your
employees. The results of these actions could be employee growth, employee
engagement and employee retention.
As we all know, a team is formed by individuals, each having their individual

strengths and weaknesses. A manager has to focus coaching individuals by using
a different approach, in order to reach maximum performance as a team.
Some managers do not believe coaching is something that is expected from
them in their role/position so they fail to dedicate time to coaching and training
their employees. However, leadership and management involves helping team
members experience progress in meaningful work.
3.8 Emotional Intelligence in Teams

Emotional Intelligence EQ varies within teams, and like personality preference,
can create natural tension lines between team members. It is important that
these lines are understood and worked on to enhance team dynamics and effec-
tiveness.
The degree of psychological effort required for someone with high decisiveness
to work with someone who is indecisive can be challenging for example. This
can create natural conflict, and your role as a team leader is to connect these
two different approaches.
The EQ is a helpful diagnostic to measure EQ tension lines in a team.
3.9 Team Briefings

3.9.1 How to design and run a team briefing
Team Briefings are used to outline the objectives of the team, assess past per-
formance and discuss any possible queries the team may have. It is also an
opportunity to communicate wider organisational messages to your team mem-
bers. Briefings should be undertaken regularly in order to stay on top of all
projects and all team members should be present. Conducting a team briefing
can be a daunting task but it is an important skill for any leader, we have set
out the important guidelines below.
Firstly, it is essential that team objectives are outlined in the briefing. This
includes the aims of the team, and how it aligns to the organisations overall
goals, as well as individual responsibilities. Once this has been done it is also
important to listen to feedback from the team about past projects and the new
objectives. Listening and reacting to the needs of the team and subsequently
tailoring future plans is the key to effective leadership.
Another key skill in these scenarios is to ensure all members are involved and
make equal contributions. It is common that some individuals will be less keen
to voice their concerns, while some may speak a lot, the skill is to distribute the
talking time across the group. Briefings can be an extremely powerful tool in
motivating your team members and aligning the organisations objectives with
your teams.
3.9.2 The Leader-Member Exchange Theory

The Leader-Member Exchange Theory (LMX) is a process that explores how
leaders and members develop relationships that can either contribute to growth
or hinder personal development.
Three Steps
This theory involves a three-step process:
1. Role Taking
2. Role Making
3. Routinization
The first step - Role Taking - takes place when a new member joins a team
and their abilities are initially assessed by the leader.
The second step - Role Making - is evidently where a role is created for
the member. Building trust is also a key factor to this stage. Additionally,
the member is classified into one of two groups; the IN-group or the OUT-
group. With reference to these groups, the manager subconsciously categorises
members into either group based on perceived similarity. Members that fall
into the IN group are trusted by the manager and will therefore receive high
risk tasks, plenty of opportunities for career and skill development and ongoing
support and guidance. Contrarily, employees that fall into the OUT group will
be given unchallenging work as the manager does not have a high level of trust
in them and consequently they will not be exposed to many opportunities for
them to develop their skills and abilities. However, a leader should strive to
get the best possible results from his/her team and therefore should aim to
eventually have the same level of trust with every member in order to work as
an entire IN-group unit.
The final stage is - Routinization - where routines, norms and expectations
are established and both parties get an insight into how you both work.
The benefits from a managers point of view are that this process enables
you to identify where you might be unfair and help you in avoiding unconscious
bias. From here, the water can be slowly tested by offering the same opportu-
nities for development. Similarly, there are numerous benefits of having a high
LMX relationship with members of your team – increased job satisfaction and
productivity, increased confidence, stronger mutual trust, increased respect and
recognition, more independence, easy and open communication and increased
commitment to the job and business.
3.9.3 The GRPI (Goals, Roles, Processes, Interpersonal

Relationships) Model
Richard Beckhards model is an approach used to increase effectiveness of team
development and a formula used for leading high-performance teams. It can
also purposely serve for identifying potential causes of team dysfunction and
raising awareness about performance issues within a team.
The four main aspects of this model are Goals, Roles, Processes and Inter-
personal Relationships.
Goals Clarity of objective, target and priorities

Full understanding by all team members
All members committed to set standards and same expectations
Precise deadlines
Goals that fit in with atmosphere and environment
Roles Clear roles and responsibilities

Individual responsibilities match team goals
All members aware of every other members individual responsibilities
Understanding of boundaries
Processes Procedures working correctly (collaboration in problem-solving,

dealing with conflict, open/good communication, effective decision making)
Clear levels of authority and coordination of workload
Interpersonal Relationships
Healthy climate of well-respected colleagues
Trust and flexibility
Culture of frequent feedback

This model can be useful for when teams are stuck and leaders need to
review aspects of teamwork. If all the sections of the pyramid (top to bottom)
have been reviewed – high-performance teams evolve from these high-impact
leadership skills. This model has a clear mission – enhance performance and
support high achievement.
However, this model has its limitations. As we can see, it is a very static
model. Its purpose refers to a specific point in time and not as useful to all
phases to a teams development Pyramid.
3.9.4 The JD-R Model

Explore the Job Demands-Resources model
The Job Demands-Resources Model (JD-R) is a model that explores em-
ployee well-being. It is used by managers to predict employee engagement and
employee burnout. The model categorizes working conditions into two groups
1) Job demands
2) Job resources/positives.
This model essentially states that when job demands are high and job re-
sources are low then factors such as stress and burnout are increased. Alterna-
tively, when job demands are high and job resources are high then factors such
as work engagement and performance levels are improved.
Job Demands Work pressure and heavy workload

Emotional, physical and psychological demands
Stress levels
Job Resources/Positives
Career and personal development opportunities

Training, mentoring and coaching
Regular feedback
Application 1. Identify Job demands

2. Address Job demands
3. Identify potential Job resources/positives
4. Address job resources/positives
HIGH DEMAND + HIGH SUPPORT = ACTIVE JOB
This is a very powerful combination in the workplace, and is the ideal situ-
ation youd want all team members to be in. Employees that are on this level
of engagement and job satisfaction – their performance allows them to gen-
erate personal resources (self-esteem, optimism, resilience, self-efficacy, multi-
skilling), which will buffer performance.
3.10 ROLE OF THE LEADER AND TEAM BUILD-

ING
Knowledge, qualities and skills for successful leadership and team building
3.10.1 Indispensable Qualities of a Leader

What makes people want to follow a leader? The key to transforming yourself
from someone who understands leadership to someone who successfully leads
in the real world is character. Your character qualities activate and empower
leadership.
Maxwell outlines qualities that he has found to be common among all great
leaders and he explains these characteristics in detail. Leadership truly develops
from the inside out. If you can become the leader you ought to be on the inside,
you will be able to become the leader you want to be on the outside. Below are
some qualities of a leader:-
A. COMMITMENT If you want to be an effective leader, you have to be

committed. True commitment inspires and attracts people. It shows them
that you have conviction. They will believe in you only if you believe in your
cause. As the Law of Buy-In states, people buy into the leader, then the vision.
Commitment starts in the heart. If you want to make a difference in other
peoples lives as a leader, look into your heart to see if you are really committed.
The only real measure of commitment is action. And there will be times when
commitment is the only thing that carries you forward. When it comes to
commitment, there are really only four types of people: cop-outs, holdouts,
dropouts and all-outs. What kind of person are you? Have you been reaching
your goals? Are you achieving all that you believe you can? Do people believe
in you and follow you readily? If your answer to any of these questions is no,
the problem may be your level of commitment. To improve your commitment,

do the following:
Measure it. Sometimes we think we are committed to something, yet our

actions indicate otherwise. Spend a few hours tallying up how you spend
your time and where you spend your money. All these things are true
measures of your commitment.
Know whats worth dying for. If it came down to it, what in life would
you not be able to stop doing, no matter what the consequences were?
Meditate on that thought, then see if your actions match your ideals.
Use the Edison method. If taking the first step toward commitment is a
problem, try doing what Thomas Edison did. When he had a good idea
for an invention, he would call a press conference to announce it. Then
hed go into his lab and invent it. Make your plans public and you might
be more committed to following through with them.
B. COMMUNICATION The success of your marriage, job and personal

relationships depends greatly on your ability to communicate. People will not
follow you if they do not know what you want or where you are going. You
can be a more effective communicator if you simplify your message and focus
on the people with whom you are communicating. As you communicate, never
forget that the goal of all communication is action. If you dump a bunch of
information on people, you are not communicating. Every time you speak to
people, give them something to feel, something to remember and something to
do. If you know in your heart that your vision is great, yet people still do not
buy into it, your problem may be an inability to communicate effectively. To
improve your communication, do the following:
Be clear as a bell. Examine a letter, memo or other item you have recently
written. Are your sentences short and direct, or do they meander? Will
your readers be able to grasp the words you have chosen, or will they have
to scramble for a dictionary? Have you used the fewest words possible?
To a communicator, your best friends are simplicity and clarity.
Refocus your attention. Pay attention to your focus when you communi-
cate. Is it on you, your material or your audience? If its not on people,
you need to change it. Think about their needs, questions and desires.
Meet people where they are, and you will be a better communicator.
Live your message. Are there any discrepancies between what you com-
municate and what you do? Talk to a few trustworthy people and ask
them whether you are living your message. Receive their comments with-
out defensiveness. Then strive to make changes in your life to be more
consistent.
C. COMPETENCE We all admire people who display high competence,

whether they are precision craftsmen, world-class athletes or successful business
leaders. But the truth is that you do not have to be Michael Jordan or Bill
Gates to excel in the area of competence. If you want to cultivate competence,
you need to show up every day, keep improving, follow through with excellence,
accomplish more than expected and inspire others. Do you attack everything
you do with fervor and perform at the highest level possible? Or is good enough
sometimes good enough for you? When you think about people who are com-
petent, you are really considering only three types of people: those who can
see what needs to happen, those who can make it happen and those who can
make things happen when it really counts. To improve your competence, do the
following:
Get your head in the game. If you have been mentally or emotionally
detached from your work, its time to reengage. Identify the source of the
problem and create a plan to resolve it.
Redefine the standard. If you are not performing at a consistently high
level, re-examine your standards. Are you shooting too low? Do you cut
corners? If so, outline more demanding expectations for yourself.
Find three ways to improve. Nobody keeps improving without being inten-
tional about it. Find three things you can do to improve your professional
skills and follow through on them.
D. COURAGE Eleanor Roosevelt acknowledged, “You gain strength, courage,

and confidence by every experience in which you really stop to look fear in the
face. You are able to say to yourself, ‘I lived through this horror. I can take the
next thing that comes along. You must do the thing you think you cannot do.”
Courage deals with principle, not perception. If you do not have the ability to
see when to stand up and the conviction to do it, You will never be an effective
leader. Your dedication to potential must remain stronger than your desire to
appease others. Whats ironic is that those who do not have the courage to take
risks and those who do, experience the same amount of fear in life. To improve
your courage, do the following:
Face the music. Go out and do something stretching simply for the sake
of growing in courage. Skydive. Perform in a play.
Talk to that person. Most people are avoiding confrontation with someone
in their lives –– an employee, a relative or a co-worker. If thats true for
you, talk to that person this week.
Take a giant step. Maybe you have been afraid to make a career move.
Take the time to really look at it.
If its the right thing to do, then do it.
E. DISCERNMENT Discernment can be described as the ability to find

the root of the matter, and it relies on intuition as well as rational thought.
Discernment is an indispensable quality for any leader who desires to maximize
effectiveness. People who lack discernment are seldom in the right place at the
right time. Although great leaders often appear to be lucky to some observers,
its more likely that leaders create their own “luck” as the result of discernment,
that willingness to use their experience and follow their instincts. Are you
able to see root causes of difficult problems without having to get every bit of
information? Do you trust your intuition and rely on it as much as you do your
intellect and experience?
To improve your discernment, do the following:
Analyze past successes. Look at some problems you solved successfully in

the past. What was the root issue in each problem? What enabled you to
succeed? If you can capture the heart of the matter in a few words, you
can probably learn to do it with future issues.
Learn how others think. Which great leaders do you admire? By learning
how other discerning leaders think, you can become more discerning.
Listen to your gut. Try to recall times when your intuition “spoke” to
you and was correct. What do those experiences have in common? Look
for a pattern that may give you insight into your intuitive ability. One
discernment-driven decision can change the entire course of your destiny.
F. FOCUS What does it take to have the focus required to be a truly effective
leader? The keys are priorities and concentration. A leader who knows his or
her priorities but lacks concentration knows what to do but never gets it done.
If he or she has concentration but no priorities, he or she has excellence without
progress. But when he or she harnesses both, he or she has the potential to
achieve great things. So the important question is: How should you focus your
time and energy? Use these guidelines to help you:
Focus 70 percent on strengths –– Effective leaders who reach their poten-
tial spend more time focusing on what they do well than on what they do
wrong.
Focus 25 percent on new things –– Growth equals change. If you want to

get better, you have to keep changing and improving.
Focus 5 percent on areas of weakness –– Nobody can entirely avoid working

in areas of weakness.
How would you rate yourself in the area of focus? Have you been majoring
in minor things?
To improve your focus, do the following:

Shift to strengths. Make a list of three or four things you do well in your
job. Devise a plan to make changes, allowing you to dedicate 70 percent
of your time to your strengths.
Staff your weaknesses. Identify three or four activities necessary for your
job that you do not do well. Determine how you can delegate the jobs to
others.
Create an edge. What would it take for you to go to the next level in your
main area of strength? Rethink how you do things.
G. GENEROSITY Nothing speaks to others more loudly or serves them

better than generosity from a leader. True generosity isnt an occasional event.
It comes from the heart and permeates every aspect of a leaders life, touching his
or her time, money, talents and possessions. Cultivate the quality of generosity
in your life by being grateful for whatever you have, do not allow the desire for
possessions to control you and develop the habit of giving. Do you continually
look for ways to add value to others? And to whom are you giving your time?
Writer John Bunyan affirmed, “You have not lived today until you have done
something for someone who can never repay you.” If you are not giving in the
small areas of your life, you are probably not as generous a leader as you could
be. To improve your generosity, do the following:
Give something away. Take something you truly value, think of someone
you care about who could benefit from it, and give it to him or her.
Put your money to work. Put your money to work for something that will
outlive you.
Find someone to mentor. Once you reach a certain level in your leadership,
the most valuable thing you have to give is yourself.
H. INITIATIVE Leaders must show initiative by always looking for oppor-

tunities and being ready to take action. What qualities do leaders possess that
enable them to make things happen? Here are four:
They know what they want.
They push themselves to act.
They take more risks.
They make more mistakes.
Are you constantly on the lookout for opportunity, or do you wait for it
to come to you? Are you willing to take steps based on your best instincts?
Or do you endlessly analyze everything? When was the last time you initiated
something significant in your life? If you have not pushed yourself lately and
gotten out of your comfort zone, you may need to jump-start your initiative.
To improve your initiative, do the following:
Change your mind-set. If you lack initiative, recognize that the problem
comes from inside, not from others. Find the source of your hesitation
and address it.
do not wait for opportunity to knock. Take stock of your assets, talents
and resources. Doing that will give you an idea of your potential. Now,
spend every day for a week looking for opportunities. Where do you see
needs? Who is looking for expertise you have?
Take the next step. Pick the best opportunity you see, and take it as far
as you can. do not stop until you have done everything you can to make
it happen.
I. LISTENING Peter Drucker, the father of American management, esti-

mated that 60 percent of all management problems are the result of faulty
communications. And the overwhelming majority of communication problems
come from poor listening. A lot of voices are clamoring out there for your at-
tention. As you think about how to spend your listening time, keep in mind
that you have two purposes for listening: to connect with people and to learn.
Are you a good listener? When was the last time you really paid close attention
to people and what they have to say? Start listening not only for words, but
also for feelings, meanings and undercurrents. To improve your listening, do the
following:
Change your schedule. Do you spend time listening to your followers, cus-
tomers, competitors and mentors? If you do not have all four groups on
your calendar regularly, you are probably not giving them enough atten-
tion.
Meet people on their turf. A key to being a good listener is to find common
ground with people. Get to know who they are and seek common ground
to build your connection with them.
Listen between the lines. As you interact with people, you certainly want
to pay attention to the factual content of the conversation, but do not
ignore the emotional content.
J. PASSION What makes it possible for people who might seem ordinary
to achieve great things? The answer is passion. Nothing can take the place
of passion in a leaders life. Passion is the first step to achievement. Your
desire determines your destiny. Think of great leaders and you will be struck
by their passion: Gandhi for human rights, Winston Churchill for freedom,
Martin Luther King Jr. for equality, Bill Gates for technology. Anyone who
lives beyond an ordinary life has great desire. Passion increases your willpower.
It is the fuel for the will. If you want anything badly enough, you can find the
willpower to achieve it. If you follow your passion instead of others perceptions
you cant help becoming a more dedicated, productive person. To increase your
passion, do the following:
Take your temperature. How passionate are you about your life and work?
Does it show? You wont become passionate until you believe passion can
be the difference maker in your life.
Return to your first love. Think back to when you were just starting out in
your career –– or even farther back to when you were a child. What could
you spend hours and hours doing? Try to recapture your old enthusiasm.
Then evaluate your life and career in light of those old loves.
Associate with people of passion. Passion is contagious. Schedule some
time with people who can infect you with it.
K. POSITIVE ATTITUDE If you desire to be an effective leader, having

a positive attitude is essential. It not only determines your level of contentment
as a person, but it also has an impact on how others interact with you. Your
attitude is a choice. No matter what happened to you yesterday, your attitude
is your choice today. Your attitude determines your actions. You can choose
your attitude, you can change it. When you meet people, do you tell yourself
they will let you down? When you face new experiences, does a voice in your
head say you are going to fail? To improve your attitude, do the following:
Feed yourself the right “food.” If you have been starved of anything posi-
tive, then you need to start feeding yourself a regular diet of motivational
material.
Achieve a goal every day. Set achievable daily goals for yourself. A pattern
of positive achievement will help you develop a pattern of positive thinking.
Write it on your wall. As incentive, people put up awards they have won,
inspirational posters or letters they have received. Find something that
will work for you.
L. PROBLEM SOLVING No matter what field a leader is in, he or she will

face problems. They are inevitable for three reasons. First, we live in a world of
growing complexity and diversity. Second, we interact with people. And third,
we cannot control all the situations we face. Leaders with good problem-solving
ability anticipate problems, accept the truth and handle one thing at a time.
They see the big picture and they do not give up a major goal when they are
down.
To improve your problem solving, do the following:
Look for trouble. If you have been avoiding problems, go out looking for
them. You will only get better if you gain experience dealing with them.
Develop a method. Some people have a hard time solving problems be-
cause they do not know how to tackle them. Try using the TEACH
process:
1. Time –– Spend time to discover the real issue.

2. Exposure –– Find out what others have done.
3. Assistance –– Have your team study all angles.
4. Creativity –– Brainstorm multiple solutions.
5. Hit it –– Implement the best solution.
Surround yourself with problem solvers. If you are not a good problem solver,
bring others onto your team who are. They will immediately complement your
weaknesses and you will also learn from them.
M. RELATIONSHIPS The ability to work with people and develop rela-

tionships is absolutely indispensable to effective leadership. People truly do
want to go along with people they get along with. And while someone can have
people skills and not be a good leader, he or she cannot be a good leader without
people skills. Never underestimate the power of relationships on peoples lives.
If your relational skills are weak, your leadership will always suffer.
To improve your relationships, do the following:
Improve your mind. If your ability to understand people needs improve-
ment, jump-start it by reading books on the subject, then spend more time
observing people and talking to them to apply what you have learned.
Strengthen your heart. Make a list of little things you could do to add
value to friends and colleagues. Then try to do one of them every day. do
not wait until you feel like it to help others.
Repair a hurting relationship. Think of a valued long-term relationship
that has faded. Do what you can to rebuild it.
N. RESPONSIBILITY Good leaders never embrace a victim mentality.

They recognize that who and where they are remain their responsibility –– not
that of their pare nots, their spouses, their children, the government, their bosses
or their co-workers. They face whatever life throws at them and give it their
best, knowing that they will get an opportunity to lead the team only if they
have proved that they can carry the ball. People who embrace responsibility
get the job done. They are willing to do whatever it takes to complete the work
needed by the organization. If you want to lead, you have got to produce.
To improve your responsibility, do the following:
Keep hanging in there. Sometimes an inability to deliver despite difficult
circumstances can be due to a persistence problem. The next time you
find yourself in a situation where you are going to miss a deadline, lose a
deal or fail to get a program off the ground, stop and figure out how to
succeed. Think outside the lines. Creativity can bring responsibility to
life.
Admit whats not good enough. If you have trouble achieving excellence,
maybe you have lowered your standards. Look for places where you have
let things slip. Then make changes to set higher standards.
Find better tools. If you find that your standards are high, your attitude is
good and you consistently work hard but you still do not achieve the way
you would like get better equipped. Improve your skills by taking classes,
reading books and listening to tapes. Find a mentor. Do whatever it takes
to become better at what you do.
O. SECURITY Insecure leaders are dangerous to themselves, their followers

and the organizations they lead because a leadership position amplifies personal
flaws. Insecure leaders have several common traits: They do not provide security
for others, they take more from people than they give, they continually limit
their best people and they continually limit the organization. In contrast, secure
leaders are able to believe in others because they believe in themselves. They are
not arrogant; they know their own strengths and weaknesses; and they respect
themselves. When their people perform well, they do not feel threatened. They
go out of their way to bring the best people together and then build them up
so that they will perform at the highest level. And when a secure leaders team
succeeds, it brings him or her great joy. Do not let insecurity prevent you from
reaching your potential.
To improve your security, do the following:
Know yourself. If you are the kind of person who is not naturally self-
aware, take time to learn about yourself. Ask people who know you well
to name your three greatest talents and your three greatest weaknesses
and then reflect on it.
Give away the credit. If you assist others and acknowledge their con-
tributions, you will help their careers, lift their morale and improve the
organization.
Get some help. If you cannot overcome feelings of insecurity on your own,
seek professional help. Get to the root of your problems not only for your
own benefit but also that of your people.
P. VISION Vision is everything for a leader. It is utterly indispensable.

Why? Because vision leads the leader. It paints the target. It sparks and fuels
the fire within, and draws him or her forward. It is also the fire lighter for
others who follow that leader. Show me a leader without vision and Ill show
you someone who isnt going anywhere. At best, he or she is traveling in circles.
When you look deep into your heart and soul for a vision, what do you see?
To improve your vision, do the following:

Measure yourself. Talk to your spouse, a close friend and key employees.
Ask them to state what they think your vision is. If they can articulate
it, then you are probably living it.
Write it down. If you have thought about your vision but never put it in
writing, take the time to do it. Once you have written it, evaluate whether
it is worthy of your life is best. Then pursue it with all you have got.
Do a gut check. If you have not done a lot of work on vision, spend the next
several weeks or months thinking about it. Consider what really impacts
you at a gut level. What makes you cry? What makes you dream? What
gives you energy? And think about what you woould like to see change
in the world around you. What do you see that is not but could be?
3.11 Assessment of leadership and team build-

ing skills
Cultivating Leadership Skills Over Time Leadership skills are grown over
time in a progressive fashion. At the start of ones career, an individual typically
works in a technical area and distinguishes himself or herself through technical
expertise, outcomes, and innovation. For example, a cardiac surgeon may dis-
tinguish himself or herself on successful outcomes, a low mortality rate, and the
introduction of new procedures.
It is important to recognize that leadership skills, like any other type of skill,
can be learned and improved. . . . More challenging, however, is the development
of the personal attributes that are necessary for effective leadership.”
The next level of leadership is operational. At that level, the individual (e.g.,
a hospital echocardiography lab director), will gain financial and operational
knowledge and quantitative skills (such as understanding costs) that are relevant
to the role. If the individual excels at that level, he or she may be tapped to
undertake higher-level roles that are more strategic in nature.
A senior leader will be required to understand the competitive environment,
macroeconomic trends affecting the practice of medicine, and upcoming regula-
tory changes. In addition, a strategic leader will need to keep a constant eye on
the competition. Positioning the organization for success in a rapidly changing
environment with fast-moving competitors is one of the primary responsibilities
of the senior strategic leader.
Learning, Improving, and Practicing Leadership Skills It is important

to recognize that leadership skills, like any other type of skill, can be learned
and improved. The knowledge-based components of a skill, such as finance or
accounting, can be acquired readily in class, online, or with self-directed learn-
ing. More challenging, however, is the development of the personal attributes
that are necessary for effective leadership. Feedback is a key tool in the devel-
opment of these attributes. The most common, but sometimes least effective,
form of feedback is the annual performance review. More effective methods are
structured 360-degree evaluations (which provide the opportunity for honest
and frank feedback) and coaching (which can be used to establish and execute
individualized developmental plans).
Practicing leadership is as much an art as it is a discipline.” Practicing

leadership is as much an art as it is a discipline. A common mistake is for leaders
to get too involved in day-to-day operational issues, thereby taking their eyes
off the ball and potentially missing new opportunities or emerging threats to
the organization. With a team-based mindset, the goal of the leader should not
be to make the best decisions for the organization, but rather to ensure that
the best decisions are being made at all levels. A leader who attempts to make
all the decisions will inevitably fail as it is impossible for one individual to be
correct all the time. A leader with an engaged team will benefit from a more
diverse analysis of challenging situations and will be more likely to make the
right call. Team-building, empowerment, and trust with a willingness to listen
to suggestions with an open mind are signs of prescient leadership.
Leadership during Constant Change Because organizations and their en-

vironments constantly change, one of the core responsibilities of leaders is ini-
tiating and managing the internal changes necessary to adapt to changing cir-
cumstances. A thorough discussion on managing change is beyond the scope of
this essay; however, it is likely true that without initiating change, one is merely
managing and not leading. The ability to effectively institute positive change
will stretch and challenge even the best leaders. The attributes discussed above
are critical to this process.
Great organizations require great leaders, and the best organizations un-
derstand that cultivating leadership skills should be intentional and not left to
chance.
3.12 The Ship Model of Leadership

A ship can be used as a conceptual model to illustrate several concepts related
to organizational behavior and leadership. In this model, the organization may
be conceived of as a ship carrying its payload (products or services) to its future
destination (vision) through waters (the competitive environment) that at times
may be still and at other times may be very choppy (uncertainty, decreasing re-
imbursements) or may even have icebergs (massive changes in the regulatory
environment). It is the responsibility of the leader to be aware of the macroeco-
nomic, government, and regulatory trends that can put the organization at risk
and to position the organization not just to avoid these icebergs but to thrive
in the future environment. Other ships (competitors) will be engaged in the
same enterprise and will compete for the same customers and resources. The
leader should have a clear view of the future, the competitive environment, and
the direct competitors and should have contingency plans in place to deal with
unanticipated events (icebergs). Thus, the primary responsibility of the captain

is to chart a pathway through the waters to reach the goal.
3.13 Team Development

3.13.1 Bruce Tuckmans 1965 Team-Development Model
Dr Bruce Tuckman published his Forming Storming Norming Performing model
in 1965. He added a fifth stage, adjourning, in the 1970s. The Forming Storm-
ing Norming Performing theory is an elegant and helpful explanation of team
development and behaviour (US spelling: behavior). Similarities can be seen
with other models, such as Tannenbaum and Schmidt Continuum and especially
with Hersey and Blanchards Situational Leadership® model, developed about
the same time.
Tuckmans model explains that as the team develops maturity and ability,
relationships establish, and the leader changes leadership style. Beginning with
a directing style, moving through coaching, then participating, finishing delegat-
ing and almost detached. At this point the team may produce a successor leader
and the previous leader can move on to develop a new team. This progression
of team behaviour and leadership style can be seen clearly in the Tannenbaum
and Schmidt Continuum - the authority and freedom extended by the leader to
the team increases while the control of the leader reduces. In Tuckmans Form-
ing Storming Norming Performing model, Herseys and Blanchards Situational
Leadership® model and in Tannenbaum and Schmidts Continuum, we see the
same effect, represented in three ways.
Tuckmans ideas and their applications.
Four Stages
The progression is:
1. forming
2. storming
3. norming
4. performing
Here are the features of each phase:
Stage 1: forming High dependence on leader for guidance and direction.

Little agreement on team aims other than received from leader. Individual roles
and responsibilities are unclear. Leader must be prepared to answer lots of ques-
tions about the teams purpose, objectives and external relationships. Processes
are often ignored. Members test tolerance of system and leader. Leader directs
(similar to Situational Leadership® Telling mode).
Stage 2: storming Decisions do not come easily within group. Team mem-
bers vie for position as they attempt to establish themselves in relation to other
team members and the leader, who might receive challenges from team mem-
bers. Clarity of purpose increases but plenty of uncertainties persist. Cliques
and factions form and there may be power struggles. The team needs to be
focused on its goals to avoid becoming distracted by relationships and emo-
tional issues. Compromises may be required to enable progress. Leader coaches
(similar to Situational Leadership® Selling mode).
Stage 3: norming Agreement and consensus largely forms among the team,
who respond well to facilitation by leader. Roles and responsibilities are clear
and accepted. Big decisions are made by group agreement. Smaller decisions
may be delegated to individuals or small teams within group. Commitment and
unity is strong. The team may engage in fun and social activities. The team
discusses and develops its processes and working style. There is general respect
for the leader and some of leadership is more shared by the team. Leader
facilitates and enables (similar to the Situational Leadership® Participating
mode).
Stage 4; performing The team is more strategically aware; the team knows
clearly why it is doing what it is doing. The team has a shared vision and
is able to stand on its own feet with no interference or participation from the
leader. There is a focus on over-achieving goals, and the team makes most of
the decisions against criteria agreed with the leader. The team has a high de-
gree of autonomy. Disagreements occur but now they are resolved within the
team positively, and necessary changes to processes and structure are made by
the team. The team is able to work towards achieving the goal, and also to
attend to relationship, style and process issues along the way. Team members
look after each other. The team requires delegated tasks and projects from the
leader. The team does not need to be instructed or assisted. Team members
might ask for assistance from the leader with personal and interpersonal devel-
opment. Leader delegates and oversees (similar to the Situational Leadership®
Delegating mode).
Diagram
Better quality diagrams are available as separate files:
Fifth stage: adjourning
Bruce Tuckman refined his theory around 1975 and added a fifth stage to the
Forming Storming Norming Performing model - he called it adjourning, which
is also referred to as Deforming and Mourning. Adjourning is arguably more of
an adjunct to the original four stage model rather than an extension - it views
the group from a perspective beyond the purpose of the first four stages. The
Adjourning phase is certainly very relevant to the people in the group and their
well-being, but not to the main task of managing and developing a team, which
is clearly central to the original four stages.
Tuckmans fifth stage, adjourning, is the break-up of the group, hopefully
when the task is completed successfully, its purpose fulfilled; everyone can move
on to new things, feeling good about whats been achieved. From an organi-
zational perspective, recognition of and sensitivity to peoples vulnerabilities in
Tuckmans fifth stage is helpful, particularly if members of the group have been
closely bonded and feel a sense of insecurity or threat from this change. Feel-
ings of insecurity would be natural for people with high steadiness attributes
(as regards the four temperaments or DISC model) and with strong routine
and empathy style (as regards the Benziger thinking styles model, right and left
basal brain dominance).
Hersey and Blanchards Situational Leadership The classic Situational

Leadership® model of management and leadership style also illustrates the ideal
development of a team from immaturity (stage 1) through to maturity (stage
4) during which management an leadership style progressively develops from
relatively detached task-directing (1), through the more managerially-involved
stages of explanation (2) and participation (3), to the final stage of relatively
detached delegation (4), at which time ideally the team is largely self-managing,
and hopefully contains at least one potential management/leadership successor.
The aim of the leader or manager is therefore to develop the team through
the four stages, and then to move on to another role. Ironically this outcome
is feared by many managers. However, good organizations place an extremely
high value on leaders and managers who can achieve this.
The model also illustrates four main leadership and management styles,
which a good leader is able to switch between, depending on the situation (i.e.,
the teams maturity relating to a particular task, project or challenge.)
Situational Leadership is a trademark of the Center for Leadership Studies,
which represents the interests and products of Dr Paul Hersey. Ken Blanchard
(who incidentally wrote The One Minute Manager) went on to develop the
Situational Leadership system into what he called Situational Leadership II,
and which now covers a range of products marketed by his organization, The
Ken Blanchard Companies.
Use of material relating to Situational Leadership and/or Situational Lead-
ership requires license and agreement from the respective companies. See more
detail in leadership theories.
Tannenbaum and Schmidt Continuum The Tannenbaum and Schmidt

Continuum also correlates in a way to the models above - essentially that man-
agement style tends to offer more freedom as the group matures.
The diagonal line loosely equates to the dotted line on the other two models.
As the team matures and becomes more self-sufficient and self-directing, so the
managers style should react accordingly, ideally becoming more detached, more
delegating, encouraging and enabling the group to run itself, and for a successor
(or if you are a good manager or a lucky one, for more than one successor) to
emerge.
Chapter 4
LEADERSHIP
BEHAVIOUR
LEADERSHIP
BEHAVIORS
Based on interviews with supervisors and clerical workers at the Prudential In-
surance Company, researchers concluded that two general classes of supervisory
behavior exist: employee-oriented behavior, which aims to meet the social and
emotional needs of group members, and job-oriented behavior, which focuses on
careful supervision of employees work methods and task accomplishment. Early
studies indicated that work attitudes were better and productivity was higher
in the groups led by supervisors who displayed employee-oriented behaviors.
Another set of early studies that relied on questionnaires rather than in-
terviews reached similar conclusions about leader behavior. After analyzing
workers responses to a questionnaire through a sophisticated statistical pro-
cedure called factor analysis, researchers concluded that most supervisory be-
haviors could be assigned to one of two dimensions: consideration or initiating
structure. The consideration dimension closely resembles the employee-centered
orientation, in that both dimensions address the individual and social needs of
workers. Similarly, the initiating-structure dimension resembles the job-centered
orientation, in that both are concerned with the clarification of work processes
and expectations.
4.1 LEADERSHIP STYLES

Leadership style refers to a leaders behavior. It is the result of the philosophy,
personality, and experience of the leader. Different situations call for different
leadership styles. The style adopted should be the one that most effectively
59
CHAPTER 4. LEADERSHIP BEHAVIOUR LEADERSHIP BEHAVIORS 60
achieves the objectives of the group while balancing the interests of its individual
members.
4.1.1 The Authoritarian or Autocratic Leader

This is often considered the classical approach. Under this style, all decision-
making powers are centralized in the leader, as with dictators. Leaders do not
entertain any suggestions or initiatives from subordinates. And they do not con-
sult employees, nor are they allowed to give any input. Employees are expected
to obey orders without receiving any explanations. The motivation environment
is produced by creating a structured set of rewards and punishments. The au-
tocratic management has been successful as it provides strong motivation to the
manager. It permits quick decision-making, as only one person decides for the
whole group and keeps each decision to him/herself until he/she feels it needs
to be shared with the rest of the group.
This leadership style has been greatly criticized during the past 30 years.
Some people tend to think of this style as a vehicle for yelling, using demean-
ing language, and leading by threats and abusing their power. This is not the
authoritarian style, rather it is an abusive, unprofessional style called “bossing
people around.” It has no place in a leaders repertoire. Some studies also say
that organizations with many autocratic leaders have higher turnover and ab-
senteeism than other organizations. Certainly Gen X employees have proven to
be highly resistant to this management style. These studies say that autocratic
leaders: Rely on threats and punishment to influence employees. Do not trust
employees. Do not allow for employee input. Yet, autocratic leadership is not
all bad. Sometimes it is the most effective style to use. These situations can
include:
a) New, untrained employees who do not know which tasks to perform or
which procedures to follow.
b) Effective supervision can be provided only through detailed orders and
instructions.
c) Employees do not respond to any other leadership style.
d) There are high-volume production needs on a daily basis.
e) There is limited time in which to make a decision.
f) A managers power is challenged by an employee.
g) The area was poorly managed.
h) Work needs to be coordinated with another department or organization.
The autocratic leadership style should not be used when: Employees become
tense, fearful, or resentful. Employees expect to have their opinions heard.
Employees begin depending on their manager to make all their decisions. There
is low employee morale, high turnover and absenteeism and work stoppage.
This style is used when leaders tell their employees what they want done
and how they want it accomplished, without getting the advice of their follow-
ers. Some of the appropriate conditions to use it are when you have all the
information to solve the problem, you are short on time, and your employees
are well motivated. The authoritarian style should normally only be used on
rare occasions. If you have the time and want to gain more commitment and
motivation from your employees, then you should use the participative style.
4.1.2 The Democratic or Participative Leader

The democratic leadership style is also called the participative style as it encour-
ages employees to be a part of the decision making. This style involves the leader
including one or more employees in the decision making process (determining
what to do and how to do it). And they also keep their employees informed
about everything that affects their work and shares decision making and prob-
lem solving responsibilities. However, the leader maintains the final decision
making authority. So this style requires the leader to be a coach who has the
final say, but gathers information from staff members before making a decision.
Using this style is not a sign of weakness, rather it is a sign of strength that
your employees will respect. Democratic leadership can produce high quality
and high quantity work for long periods of time. Many employees like the trust
they receive and respond with cooperation, team spirit, and high morale. Typ-
ically the democratic leader: Develops plans to help employees evaluate their
own performance Allows employees to establish goals Encourages employees
to grow on the job and be promoted Recognizes and encourages achievement.
Like the other styles, the democratic style is not always appropriate. It is
most successful when used with highly skilled or experienced employees or when
implementing operational changes or resolving individual or group problems the
democratic leadership style is most effective when:
The leader wants to keep employees informed about matters that affect
them.
The leader wants employees to share in decision-making and problem-
solving duties.
The leader wants to provide opportunities for employees to develop a high
sense personal growth and job satisfaction.
There is a large or complex problem that requires lots of input to solve.
Changes must be made or problems solved that affect employees or groups
of employees.
You want to encourage team building and participation.
Democratic leadership should not be used when:
There is not enough time to get everyones input.
Its easier and more cost-effective for the manager to make the decision.
The business cant afford mistakes.
The manager feels threatened by this type of leadership.
Employee safety is a critical concern.
This is normally used when you have part of the information, and your employees
have other parts. Note that a leader is not expected to know everything - this
is why you employ knowledgeable and skillful employees. Using this style is of
mutual benefit - it allows them to become part of the team and allows you to
make better decisions.
The Delegative or Free-Rein or Laissez Faire Leader A free-rein leader

does not lead, but leaves the group entirely to itself. Such a leader allows maxi-
mum freedom to subordinates; they are given a free hand in deciding their own
policies and methods. However, the leader is still responsible for the decisions
that are made. This is used when employees
Employees are highly skilled, experienced, and educated.
Employees have pride in their work and the drive to do it successfully on
their own.
Outside experts, such as staff specialists or consultants are being used
Employees are trustworthy and experienced.
This style should not be used when:
It makes employees feel insecure at the unavailability of a manager.
The manager cannot provide regular feedback to let employees know how
well they are doing.
Managers are unable to thank employees for their good work.
The manager does not understand his or her responsibilities and is hoping
the employees can cover for him or her. This is not a style to use so that you
can blame others when things go wrong, rather this is a style to be used when
you fully trust and confidence in the people below you. Do not be afraid to use
it, however, use it wisely!
4.1.3 Varying Leadership Style

A key element of leader effectiveness is choosing the right type of style, at the
right time, in the right situation. When developing your leadership skills, one
must soon confront an important practical question, What leadership styles
work best for me and my organization? While the proper leadership style de-
pends on the time and the situation, there are three other factors that also
influence which leadership style to use: The managers personal background.
What personality, knowledge, values, ethics, and experiences does the manager
have? What does he or she think will work? The employees being supervised.
Employees are individuals with different personalities and backgrounds. The
leadership style managers use will vary depending upon the individual employee
and what he or she will respond best to the company. The traditions, values,
philosophy, and concerns of the company will influence how a manager acts. A
good leader uses all three styles, depending on what forces are involved between
the followers, the leader, and the situation are able to analyze the situation and
determine what needs to be done and how to do it. You cannot do everything!
You must set priorities and delegate certain tasks This is an effective style to
use when:
4.2 THEORY OF LEADERSHIP

“The best way to have a good idea, is to have a lot of ideas.” Dr. Linus Pauling
(Two times winner of the Nobel Prize). Then you might say the best way to
lead is to have many options from which to choose. As part of your leadership
development effort, you should consider developing as many leadership theories
as possible. This paper lists 30 different leadership theories. With each theory
is a short and sweet definition designed to help highlight the essential makeup
of each leadership theory you can use.
Transactional Leadership
This style of leadership starts with the idea that team members agree to
obey their leader totally when they accept a job. The transaction is usually the
organization paying the team members in return for their effort and compliance.
The leader has a right to punish team members if their work does not meet
the pre-determined standard. Team members can do little to improve their job
satisfaction under transactional leadership. The leader could give team members
some control of their income/reward by using incentives that encourage even
higher standards or greater productivity. Alternatively, a transactional leader
could practice management by exception – rather than rewarding better work,
the leader could take corrective action if the required standards are not met.
Transactional leadership is really a type of management, not a true leadership
style, because the focus is on short-term tasks. It has serious limitations for
knowledge-based or creative work, however it can be effective in other situations.
4.2.1 Charismatic Leadership

A charismatic leadership style can seem similar to transformational leadership,
because these leaders inspire lots of enthusiasm in their teams and are very
energetic in driving others forward. However, charismatic leaders can tend to
believe more in themselves than in their teams, and this creates a risk that a
project, or even an entire organization, might collapse if the leader leaves. In
the eyes of the followers, success is directly connected to the presence of the
charismatic leader. As such, charismatic leadership carries great responsibility,
and it needs a long-term commitment from the leader.
Transformational Leadership As we discussed earlier, people with this lead-
ership style are true leaders who inspire their teams constantly with a shared
vision of the future. While this leaders enthusiasm is often passed onto the team,
he or she can need to be supported by detail people. Thats why, in many orga-
nizations, both transactional and transformational leadership are needed. The
transactional leaders (or managers) ensure that routine work is done reliably,
while the transformational leaders look after initiatives that add new value
4.2.2 Bureaucratic leadership

Bureaucratic leaders work by the book. They follow rules rigorously, and ensure
that their staff follows procedures precisely. This is a very appropriate style for
work involving serious safety risks (such as working with machinery, with toxic
substances, or at dangerous heights) or where large sums of money are involved
(such as handling cash).
Trait Theory This theory postulates that people are either born or not born
with the qualities that predispose them to success in leadership roles. That
is, that certain inherited qualities, such as personality and cognitive ability,
are what underlie effective leadership. There have been hundreds of studies to
determine the most important leadership traits, and while there is always going
to be some disagreement, intelligence, sociability, and drive (aka determination)
are consistently cited as key qualities. Behavioral Theories Behavioral theories
of leadership are based upon the belief that great leaders are made, not born.
Rooted in behaviorism, this leadership theory focuses on the actions of leaders
not on mental qualities or internal states. According to this theory, people
can learn to become leaders through teaching and observation. Situational
Theory This theory suggests that different situations require different styles of
leadership. That is, to be effective in leadership requires the ability to adapt or
adjust ones style to the circumstances of the situation. The primary factors that
determine how to adapt are an assessment of the competence and commitment
of a leaders followers. The assessment of these factors determines if a leader
should use a more directive or supportive style.
4.2.2.1 Skills Theory

This theory states that learned knowledge and acquired skills/abilities are sig-
nificant factors in the practice of effective leadership. Skills theory by no means
disavows the connection between inherited traits and the capacity to be an effec-
tive leader – it simply argues that learned skills, a developed style, and acquired
knowledge, are the real keys to leadership performance. It is of course the belief
that skills theory is true that warrants all the effort and resources devoted to
leadership training and development
4.2.2.2 Path-Goal Theory

This theory is about how leaders motivate followers to accomplish identified
objectives. It postulates that effective leaders have the ability to improve the
motivation of followers by clarifying the paths and removing obstacles to high
performance and desired objectives. The underlying beliefs of path-goal theory
(grounded in expectancy theory) are that people will be more focused and mo-
tivated if they believe they are capable of high performance, believe their effort
will result in desired outcomes, and believe their work is worthwhile.
4.2.2.3 Functional theory

Functional leadership theory is a particularly useful theory for addressing spe-
cific leader behaviors expected to contribute to organizational or unit effective-
ness. This theory argues that the leaders main job is to see that whatever is
necessary to group needs is taken care of; thus, a leader can be said to have
done their job well when they have contributed to group effectiveness and cohe-
sion. While functional leadership theory has most often been applied to team
leadership, it has also been effectively applied to broader organizational lead-
ership as well. These functions include environmental monitoring, organizing
subordinate activities, teaching and coaching subordinates, motivating others,
and intervening actively in the groups work.
4.2.2.4 Servant leadership

This term, created by Robert Greenleaf in the 1970s, describes a leader who is
often not formally recognized as such. When someone, at any level within an or-
ganization, leads simply by meeting the needs of the team, he or she is described
as a servant leader. In many ways, servant leadership is a form of democratic
leadership, because the whole team tends to be involved in decision making.
Supporters of the servant leadership model suggest that its an important way
to move ahead in a world where values are increasingly important, and where
servant leaders achieve power on the basis of their values and ideals. Others
believe that in competitive leadership situations, people who practice servant
leadership can find themselves left behind by leaders using other leadership
styles.
4.2.2.5 Contingency Theory

Conti1ngency theories of leadership focus on particular variables related to the
environment that might determine which particular style of leadership is best
suited for the situation. According to this theory no leadership style is best
in all situations. Success depends upon a number of variables, including the
leadership style, qualities of the followers and aspects of the situation.
4.2.2.6 Self-Leadership
Self-Leadership is a process that occurs within an individual, rather than an
external act. It is an expression of who we are as people
4.2.2.7 Group leadership

In contrast to individual leadership, some organizations have adopted group
leadership. In this situation, more than one person provides direction to the
group as a whole. Some organizations have taken this approach in hopes of
increasing creativity, reducing costs, or downsizing. Others may see the tradi-
tional leadership of a boss as costing too much in team performance. In some
situations, the team members best able to handle any given phase of the project
become the temporary leaders. Additionally, as each team member has the op-
portunity to experience the elevated level of empowerment, it energizes staff
and feeds the cycle of success. Leaders who demonstrate persistence, tenacity,
determination, and synergistic communication skills will bring out the same
qualities in their groups. Good leaders use their own inner mentors to energize
their team and organizations and lead a team to achieve success..
4.2.2.8 Strategic Leadership

This is practiced by the military services such as the US Army, US Air Force,
and many large corporations. It stresses the competitive nature of running an
organization and being able to out fox and out with the competition
4.2.2.9 Facilitative Leadership

This is a special style that anyone who runs a meeting can employ. Rather
than being directive, one using the facilitative leadership style uses a number of
indirect communication patterns to help the group reach consensus.
Influence Leadership Here one looks at the behaviors associated how one
exercises influence. For example, does the person mostly punish? Do they know
how to reward?
4.2.2.10 Visionary Leadership

The Roots of our Problems are: Wealth without work, Pleasure without con-
science, Knowledge without character, Commerce without morality, Science
without humanity, Worship without sacrifice, Politics without principles. –
Mohandas K. Gandhi. Its surprising who few leaders really have a clear view of
what is happening socially or economically in their industry, nation or globally.
The visionary leadership style focuses on how the leader defines the future for
followers and moves them toward it.
4.2.2.11 Level 5 Leadership

This term was coined by Jim Collins in his book Good to Great: Why Some
Company’s make the Leap and Other do not. As Collins says in his book, We
were surprised, shocked really, to discover the types of leadership required for
turning a good company into a great one. What he seems to have found is what
The Economist calls, The Cult of the Faceless Boss. .Primal Leadership
It would seem that just when you have it all sorted out, someone invents a
new set of labels. Golemans model of leadership is a relatively recent addition
to the pantheon of leadership style. In this case, it is Danel Goleman. A
psychologist who can write in more scholar English, he was one of the major
people who popularized Emotional Intelligence and then followed it up with
a book called Primal Leadership. Worth taking a look at. Its based on the
application of emotional intelligence to leadership. The six leadership styles one
can use are: coaching, pace setting, democratic, affinitive, authoritative and
coercive.
4.2.2.12 Great Man Theory

Great man theories assume that the capacity for leadership is inherent – that
great leaders are born, not made. These theories often portray great leaders as
heroic, mythic and destined to rise to leadership when needed. The term Great
Man was used because, at the time, leadership was thought of primarily as a
male quality, especially in terms of military leadership. Learn more about the
great man theory of leadership
4.2.2.13 People-oriented or relations-oriented leadership

This is the opposite of task-oriented leadership. With people-oriented lead-
ership, leaders are totally focused on organizing, supporting, and developing
the people in their teams. Its a participative style, and it tends to encourage
good teamwork and creative collaboration. In practice, most leaders use both
task-oriented and people-oriented styles of leadership.
4.2.2.14 Task-Oriented leadership

Highly task-oriented leaders focus only on getting the job done, and they can
be quite autocratic. They actively define the work and the roles required, put
structures in place, plan, organize, and monitor. However, because task-oriented
leaders do not tend to think much about the well-being of their teams, this
approach can suffer many of the flaws of autocratic leadership, with difficulties
in motivating and retaining staff.
4.2.2.15 Neo-emergent theory

The Neo-emergent leadership theory espouses that leadership is created through
the emergence of information by the leader or other stakeholders, not through
the true actions of the leader himself. In other words, the reproduction of
information or stories form the basis of the perception of leadership by the
majority. It is well known that the great naval hero Lord Nelson often wrote
his own versions of battles he was involved in, so that when he arrived home in
England he would receive a true heroes welcome. In modern society, the press,
blocs and other sources report their own views of a leader, which may be based
on reality, but may also be based on a political command, a payment, or an
inherent interest of the author, media, or leader. Therefore, it can be contended
that the perception of all leaders is created and in fact does not reflect their
true leadership qualities at all.
4.3 The Coaching Leader

A great coach is definitely a leader who also possesses a unique gifts ability to
teach and train.
The Cross-Cultural Leader Not all individuals can adapt to the leadership
styles expected in a different culture whether that culture is organizational or
national. In fact, there is some evidence that American and Asian Leadership
Styles are very different, primarily due to cultural factors.
4.4 The Emergent Leader

Contrary to the belief of many, groups do not automatically accept a new boss
as leader. Emergent leadership is what you must do when one taking over a
new group.
4.5 The Exchange Leader

Sometimes known as leader-member exchange, the style involves the exchange
of favors between two individuals. An exchange can be hierarchical between the
bosses and subordinate or occur between two individuals of equal status. For
this leadership style to work, you need to know how to develop, maintain and
repair relationships.
4.6 Narcissistic leadership

Various academics such as Kets de Vries, Maccoby, and Thomas have identified
narcissistic leadership as an important and common leadership style.
4.7 Toxic leadership

A toxic leader is someone who has responsibility over a group of people or an
organization, and who abuses the leader-follower relationship by leaving the
group or organization in a worse-off condition than when he/she first found
them.
Chapter 5
LEADERSHIP AND
DECISION MAKING
5.1 Decision-Making and Problem-Solving

Problem solving and decision-making are important skills for business and life.
Problem-solving often involves decision-making, and decision-making is espe-
cially important for management and leadership.
5.1.1 Problem-solving and decision-making

Simple processes for problem-solving and decision-making
Problem solving and decision-making are important skills for business and
life. Problem-solving often involves decision-making, and decision-making is es-
pecially important for management and leadership. There are processes and
techniques to improve decision-making and the quality of decisions. Decision-
making is more natural to certain personalities, so these people should focus
more on improving the quality of their decisions. People that are less natu-
ral decision-makers are often able to make quality assessments, but then need
to be more decisive in acting upon the assessments made. Problem-solving and
decision-making are closely linked, and each requires creativity in identifying and
developing options, for which the brainstorming techniqueproblem-solving-and-
decision-making/brainstorming-for-team-building-and-problem-solving-how-to-brainstorming
technique is particularly useful.
See also the free SWOT analysis template and examples, and PEST analy-
sis template, which help decision-making and problem-solving. SWOT analysis
helps assess the strength of a company, a business proposition or idea; PEST
analysis helps to assess the potential and suitability of a market. Good decision-
making requires a mixture of skills: creative development and identification of
options, clarity of judgement, firmness of decision, and effective implementa-
tion. For group problem-solving and decision-making, or when a consensus is
69
CHAPTER 5. LEADERSHIP AND DECISION MAKING 70
required, workshops help, within which you can incorporate these tools and
process as appropriate. Here are some useful methods for effective decision-
making and problem-solving: First a simple step-by-step process for effective
decision-making and problem-solving.
Decision-making process
1. Define and clarify the issue - does it warrant action? If so, now? Is the
matter urgent, important or both. See the Pareto Principle.
2. Gather all the facts and understand their causes.
3. Think about or brainstorm possible options and solutions. (See brain-

storming process)
4. Consider problem-solving-and-decision-making/brainstorming-for-team-building-
and-problem-solving-how-to-brainstorming process)
5. Consider and compare the pros and cons of each option - consult others
if necessary or useful - and for bigger complex decisions where there are
several options, create a template which enables measurements according
to different strategic factors (see SWOT, PEST, Porter).
6. Select the best option - avoid vagueness and weak compromises in trying
to please everyone.
7. Explain your decision to those involved and affected, and follow up to

ensure proper and effective implementation.
8. Decision-making maxims will help to reinforce the above decision-making
process whether related to problem-solving or not, for example:
9. We know what happens to people who stay in the middle of the road. They
get run down. (Aneurin Bevan) In any moment of decision the best thing
you can do is the right thing, the next best thing is the wrong thing, and
the worst thing you can do is nothing. (Attributed to Theodore Roosevelt
- more maxims on the quotes page)
There is often more than one good answers when you are faced with a complex
decision. When you have found the best solution you can find, involve others in
making it work, and it probably will.
Pros and cons and weighted decision-making methods A simple pro-

cess for decision-making is to compile a weighted scored , of pros and cons list.
Pro means for, and con means against - i.e., advantages and disadvantages.
For more complex decisions, several options can be assessed against differing
significant criteria, or against a single set of important factors. In any case,
factors/options can be weighted and scored appropriately.
The pros and cons method can be used especially for two-option problem-
solving and decision-making issues where implications need to be understood
and a decision has to be made in a measured objective sense.
Using a weighted list scoring method is especially useful in big organiza-
tional or business decisions, especially which involve lots of different strategic
considerations (as in SWOT and PEST and Porters Five Forces concept). In
such situations you can assess different options according to a single set of cri-
teria (the most important considerations), or you can allocate weighted/scored
criteria differently to each option (examples of templates are below).
Some decisions are a simple matter of whether to make a change or not, such
as moving, taking a new job, or buying something, selling something, replacing
something, etc. Other decisions involve number of options, and are concerned
more with how to do something, involving a number of choices. Use the brain-
storming process -for-team-building-and-problem-solving-how-to-brainstorming
process to identify and develop options for decision-making and problem-solving.
If involving a group in the process then running a workshop is often a good ap-
proach.
5.2 WORKSHOP APPROACH.

First you will need a separate sheet for each identified option.
On each sheet write clearly the option concerned, and then beneath it the
headings pros and cons (or advantages and disadvantages, or simply for and
against). Many decisions simply involve the choice of whether to go ahead or
not, to change or not; in these cases you need only one sheet.
Then write down as many effects and implications of the particular option
that you (and others if appropriate) can think of, placing each in the relevant
column. If helpful weight each factor, by giving it a score out of three or five
points (e.g., 5 being extremely significant, and 1 being of minor significance).
When you have listed all the points you can think of for the option concerned
compare the number or total score of the items/effects/factors between the
two columns. This will provide a reflection and indication as to the overall
attractiveness and benefit of the option concerned. If you have scored each item
you will actually be able to arrive at a total score, being the difference between
the pros and cons column totals. The bigger the difference between the total
pros and total cons then the more attractive the option is.
If you have a number of options and have complete a pros and cons sheet
for each option, compare the attractiveness - points difference between pros and
cons - for each option. The biggest positive difference between pros and cons is
the most attractive option.
N.B. If you do not like the answer that the decision-making sheet(s) re-
flect back to you, it means you have not included all the cons - especially the
emotional ones, or you have not scored the factors consistently, so re-visit the
sheet(s) concerned.
You will find that writing things down in this way will help you to see things
Figure 5.1:
more clearly, become more objective and detached, which will help you to make
clearer decisions. Using a scoring template also allows for the involvement and
contribution of other people, far more objectively, controllably and usefully,
than by general discussion without a measurement framework.
Examples This first simple example below enables the weighting of the pros
and cons of buying a new car to replace an old car. The methodology is easily
adapted for more complex decisions, such as in business strategy and consider-
ation of more complex factors (notably found within other tools such in SWOT
and PEST and Porters Five Forces). (The actual scores below are examples
and are not suggested weightings of how to make such a decision, which must
be your own ideas).
Decision-making criteria Decision-making criteria depend on your own per-

sonal situations and preferences. Criteria and weighting will change according
to time, situation, etc. Your own mood and feelings can also affect how you
assess things, which is additional justification for the need of a measurable and
robust method.
In bigger strategic business decision-making, it is often beneficial to seek
input from others as to factors and weighting scores. In such situations, a
template offers a way for people to contribute in a managed structured way.
The main template question can be whatever suits your purposes - it can be
about timing, where, who, how, and is not necessarily restricted to two columns.
The same methodology can be used to compare a series of several options. For
more complex situations, especially which entail many more rows and columns,
its sensible to use a spreadsheet.
Use whatever scoring method makes good sense to you for your situation.
The example shows a low score method, but you can score each item up to 10,
or 20 or 100, or an A/B/C or three-star scoring method - whatever works best
for you.
In the above example, on the basis of the pros and cons and the weighting
applied, there seems to be a clear overall quantifiable advantage in the decision
to go ahead and buy a new car.
Notice that with this decision-making method its even possible to include
intangible emotional issues in the pros and cons comparison, for example it will
be a load off my mind, and decisions scare and upset me. A decision-making pros
and cons list like this helps remove the emotion which blocks clear thinking and
decision-making. It enables objectivity and measurement, rather than reacting
from instinct, or avoiding the issue altogether. Objective measurement helps in
making a confident decision.
The total weighted scores are the main deciding factor rather than the total
number of pros and cons, although there is not a scientific right or wrong way
to consider the total number of pros and cons compared with the total weighted
scores. If the weighted scores are indicating a decision which makes you feel
uncomfortable, then check your weightings, and also check that you have not
missed out any factors on either side of the table.
If the decision makes you feel uncomfortable and this is not reflected in the
table, then add it as a factor and give it a score. Seeking feedback or input
from a trusted neutral friend can be helpful in confirming your factors and their
scores.
Note: The above methods are similar to - but not the same as - Force Field
Analysis, an analytical theory developed by psychologist Kurt Lewin (1890-
1947), originally to assess factors influencing group behaviour. The Lewin model
is typically shown as a simplified diagram, with horizontal arrows alongside
each factor pointing to the space between the columns. Explained above is a
different and logically developed weighted decision-making method, not Lewins
Force Field Analysis.
Heres a three-option template example: This approach enables different

criteria to be allocated to each option and weghtred accordingly.
strategic decision weighted template (state decision/issue):
option 3 score option 3 score option 3 score
totals
Heres a three option template which enables weighting/scoring across a single
set of criteria:
strategic decision weighted template (state decision/issue):
criteria opt 1 opt 2 opt 3
totals
Complex problems and decisions - tips For complex decisions and prob-
lems involving more than two possible options you can use a template with
additional columns, in which case each column represents a different option,
and the rows enable scoring according to the different weighted strategic con-
siderations.
Or establish a single set of criteria across which to score several different op-
tions. So, in using more than one two columns you can assess options according
to: differing weighted criteria for each of the options, or a single set of criteria.
Choose the method(s) which offer you the easiest approach, given the types of
options available, and whether you are involving other people in the process.
Where a team of people, or different departments, are involved in the decision-
making for lots of options/variations within a big complex situation, it can be
useful to delegate the formulation of different two-column pros and cons tem-
plates to different teams/people, and this can be a powerful aid to subsequent
group discussions. This enables options to be eliminated and filtered and a
shortlist of fewer options to be established.
In complex situations the wording of the options is important, for example,
if considering the best path for ones own career and work development the
options might be: be employed, working for a big company be self-employed,

and working as a consultant or freelancer from home start a business, with
premises and staff
A situation like this can be approached by completing three separate pros
and cons tables and then comparing the net effects (difference between weighted
pros and cons) of each one, or by completing one three-column template, and
scoring the main considerations across all three options.
5.3 Three-option organizational decision:

1. Develop a range of industrial cleaning products
2. Develop a range of industrial cleaning services
3. Develop a network of distributors for industrial cleaning products and
services
4. Criteria for weighting/scoring and thereby comparing the above three
strategic options might typically include factors such as:
a) Investment/costs required
b) Profitability (gross margin, financial contribution, etc)
c) Overhead use/demand
d) Competitive advantage
e) Ease of market access
f) Training needs
g) Speed, etc
In both of the above examples the scoring criteria can be more precisely and
relevantly established with the aid of other tools like SWOT and PEST and
Porters Five Forces. Also consider that some decisions and challenges are diffi-
cult because you do not have the necessary knowledge or experience, in which
case you need first to decide if the decision or challenge is actually appropriate
and necessary for you at this stage.
If you do not have the necessary knowledge or experience to compile a
decision-making template, then you are not in a good position to make the
decision, and you need to bring in the necessary knowledge and experience.
Some decisions have to be made when you are not ready, in which case it is all
the more important to be as measured as you can be, rather than resort purely
to instinct.
Other decisions may seem urgent and necessary, but actually - if you probe
and challenge the situation - might not actually be necessary at all. Do not be
forced into a decision if having considered the implications carefully you decide
that its not the best thing to do. The decision to do nothing is often a perfectly
good option.
Whatever you do - try to be as objective and measured as you can be,
and where its appropriate or necessary, definitely seek input from others. Well
prepared decisions are easier to make and to implement, and generally produce
the best results.
Chapter 6
CORPORATE SOCIAL
RESPONSIBILITY (CSR)
6.1 Corporate Responsibility and Ethics

Ethical decision-making and leadership are the basis of ethical organizations,
corporate social responsibility, fair-trade, sustainability, the triple bottom line,
and other similar concepts
Ethical Leadership, Decision-Making, and Organizations
6.1.1 Introduction to Ethical Leadership

Ethical decision-making and leadership are the basis of ethical organizations,
corporate social responsibility, fairtrade, sustainability, the triple bottom line,
and other similar concepts
This article introduces the concept and reasoning behind ethical leadership
and ethical organisations.
Ethical principles provide the foundations for various modern concepts for
work, business and organisations, which broaden individual and corporate prior-
ities far beyond traditional business aims of profit and shareholder enrichment.
Ethical factors are also a significant influence on institutions and public sector
organisations, for whom the traditional priorities of service quality and cost
management must now increasingly take account of these same ethical consid-
erations affecting the commercial and corporate world.
The modern concept of ethical organisations encompasses many re-

lated issues including:
corporate social responsibility (CSR) - or simply social responsibility
The triple bottom line
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CHAPTER 6. CORPORATE SOCIAL RESPONSIBILITY (CSR) 77
Ethical management and leadership

Fairtrade
Globalization (addressing its negative effects)
Sustainability
Corporate governance
Social enterprise
Mutual, cooperatives, employee ownership
Micro-finance, and
Well-being at work and life balance, including the Psychological Contract.
Any other aspects of good modern leadership, management and organisations
which relate to ethics, could be added to the list. Ethics is a very broad area.
You will see very many different definitions and interpretations of the concept,
and you should feel free to develop your own ideas about ethics in terms of
meaning, composition, methods and implications.
There are no universally agreed rules of ethics, no absolute standards or
controls, and no fixed and firm reference points. This is fascinating given how
hugely important ethics have now become in modern life and society.
What is ethical? This explanation attempts to go deeper than the usual

descriptions of ethical organisations, because ethics in work and business are
both a reflection of and influenced by ethical aspects of life and the wider world.
The aim of this article not to tell you whats ethical and whats not. The aim is to
help you to determine better for yourself what is ethical and what is unethical.
What is ethical anyhow? The short answer is that there isnt an answer.
There is no absolute rule of what is ethical and what isnt.
Defining what ethical and unethical mean is only a little easier. A simpler
broad definition of the word ethical is fair. And fair to fair-minded people,
especially those affected by the situation. This is not a scientifically robust
definition, but as you will see, when we peel back the layers of what is ethical,
its very difficult to be scientific and firm about what it all means.
New UK Consumer Protection Regulations became effective on 26 May 2008.
Businesses selling consumer products/services should be aware of the implica-
tions of these new regulations. These practices were previously unethical; now
they are illegal. The modern Oxford English Dictionary says: Ethical - Relating
to moral principles or the branch of knowledge dealing with these...
Interestingly the definition continues by way of example: ...Morally correct:
Can a profitable business ever be ethical?
N.B. This is merely an example of the word in use - its not an opinion -
nevertheless its an example which reflects modern attitudes and the context
in which ethical questions now arise which would not readily have done so a
generation or two ago.
Morals and morality appear commonly in attempts to define what ethical
means, although given the difficulties of defining the word morality without
using quite subjective terms, this is not terribly helpful. Morality incidentally
is defined in the OED as ...principles concerning the distinction between right
and wrong or good and bad behaviour... See what I mean? Not especially firm
or scientific.
More helpfully the OED adds some extra explanation about ethics, summa-
rized thus:
Western ethical philosophy can be divided roughly into three types:
1. Virtues such as justice, charity and generosity benefit the person and the
persons society. (Largely based on Aristotles ideas.)
2. Ethics are central to morality - a human duty - based on rational peoples
respect for other rational people. (Notably supported by Kant.)
3. The guiding principle is based on conduct which produces the greatest
happiness or benefit to the greatest number of people. (Referred to as
utilitarianism - this might be also be considered the greater good concept.)
A single precise definition of ethical is not easy to agree.

Moreover to show how ideas change over time, the 1933 Oxford English
Dictionary says first of ethics (when seemingly the word ethic was used as an
adjective like today’s use of the word ethical):
1. Relating to morals 1581.
2. Treating of moral questions or of moral science 1589.
3. Characterized by ethos 1848.
This significant definition of ethos is offered, since it suggests the relative
component within ethics:
The prevalent tone of sentiment of a people or community...
Extending this theme, in a practical sense, aside from what is covered by
law or other clear standards, whether something is considered to be ethical by
people (markets, customers, media, etc) is generally a matter of opinion. The
same might be said of morality. Both concepts - ethics and morality - are
subjective and a reflection of society and civilization, which of course implies
that precise meanings will change. Both are relative in time and situation.
Certain ethical issues are represented in law, and in this respect are firm,
to a point. Ethics which are not covered clearly by law are usually a matter of
subjective judgment, especially, but not exclusively, by the reasonable majority,
whose view is significant in deciding whether something is ethical or not. Such
a vague way of judging whether something is ethical is not to diminish the
importance of ethical factors. On the contrary.
In work and life, opinion - especially large scale opinion - can be more influ-
ential than rules and law, notably in relation to markets, publicity, and peoples
attitudes, which manifest especially in the behaviour of customers and employ-

ees.
The law can actually have a theoretical or marginal effect, whereas large
scale opinion is an unavoidable powerful reality.
For example it is unlawful to drive a little faster than the speed limit. But
the vast majority of people consider it to be acceptable, and so do it. The
UK poll tax of the 1980s was lawful, yet public reaction (much of it unlawful)
against it caused the law to be changed. Ultimately peoples attitudes are more
powerful than law. Law is a reflection of public tolerance and views, not a cause
of them (unless to produce a reaction against the law of course).
So do not for a moment underestimate the importance of ethical considera-
tions on the basis that they could be subjectively judged and difficult to define
in law. Popular public opinion is the sternest most unforgiving measurement of
all.
Ethical Business and Investment As previously stated, the purpose of

this article is not to define or describe ethical business in an absolute sense.
The explanation thus far should demonstrate why such a pronouncement is
impossible. Ethical business - as other ethical issues - are a matter of individual
and collective judgement. It is possible to go so far only in outlining ethical
considerations, and to give some modern examples of interpretation which seem
generally to be accepted.
Ethical investment is a useful aspect for considering ethical business, since
large scale investment is ultimately subject to market forces, which largely reflect
public opinion. As such ethical investment criteria and examples tend to be a
good guide towards ethical attitudes of large sections of people and society,
rather than the expert views of leaders and gurus. Ethical investment has been
a growing aspect of business investment since the 1970s, although arguably the
first types of ethical businesses can be traced back to the Quaker and Methodist
movements of the 1800s. Then as now ethical business and investments regard
socially responsible activities and aims with far greater priority and emphasis
than the traditional profit and free market business approach.
Traditional profit-based business models, which arose and came to dominate
global commerce from the beginnings of industrialization, inherently do not
require a socially responsible element, other than compliance with the law, and
a reflection of public reaction for pragmatic marketing (and ultimately profit)
purposes.
Ethical business or investment is concerned with how profit is made and
how much profit is made, whereas traditional profit-centred free-market based
business is essentially only concerned with how much profit is made.
Traditional profit-centred business seeks to maximise profit and return on
investment with no particular regard for how the profits are made and what the
social effects of the business activities are.
The ethical approach to business and investment seeks to maximise profit
and return on investment while minimising and avoiding where possible negative
social effects.
In this context social and socially responsible include related factors

such as:
1. The environment
2. Sustainability
3. Globalization effects - e.g., exploitation, child-labour, social and environ-
mental damage anywhere in the world
4. Corruption, armed conflict and political issues
5. Staff and customers relations - for instance education and training, health
and safety, duty of care, etc
6. Local community
7. And other social impacts on peoples health and well-being
Typically the above are interpreted within ethical investment so as to regard

the following sectors and activities as being difficult to reconcile with profit and
investment. As with other perspectives on this page, this is not a definitive list
or set of absolute criteria. Its a set of examples to illustrate typical (modern
Western) concerns of ethical investors and ethical business people:
tobacco
armaments
nuclear power
animal experimentation
oppressive or corrupt national regimes
This is not an exhaustive list and is subject to change - as the world changes.
As stated, this is not a pronouncement of whats unethical. Its a reflection
of current attitudes, which you can use in your own way alongside the other
information on this page to develop your own ideas as to whats ethical and
whats not.
Also as stated, things change with time and situation. For example if tech-
nology is developed enabling nuclear power to be safer and less impactful on
the future then obviously concerns in this area would reduce and the ethical
implications would decrease or disappear.
Standards of what is considered ethical change over time, and generally
these standards become more humane as humankind develops greater tolerance,
awareness, and capacity for forgiveness and compassion.
Humankinds - or any societys - capacity for ethical behaviour increases with
its own safety and confidence of survival and procreation.
Hence the human tendency to become less ethically flexible when under
threat.
Thus ethical behaviour is a relative judgement, as well as a subjective one.

We cannot impose one societys moral code onto another society with different
needs and demands.
Interestingly what is considered unethical in present times, commonly be-
comes unlawful in the future. The leading ethical thinking of any time tends to
pioneer social and civilization change.
And so here lies substantial advantage for corporations and other groups
and bodies which anticipate such changes. They adapt quicker, and are seen
generally to lead rather than follow. They also manage change more successfully,
since they have time to do it.
Organisations and institutions which fall behind public ethical expectations
find catching up a lot more difficult.
6.1.2 Ethics and Law

Many believe that the word ethical equates to lawful, and that by being lawful
an organisation or activity is automatically ethical. This is not so. While many
things that are unethical are also unlawful, ethics do not equate to law. Many
unethical things are entirely lawful (although some can only be tested when/if
they get to court). Moreover sometimes the law (of any land) can produce
extremely unethical effects.
In fact while most unlawful actions will also tend to be unethical, certain
situations can contain a strong ethical justification for breaking the law, or
changing the law.
Notable examples are situations in which the law, or the way law is applied,
is considered unethical (wrong is the typical description) by sufficient numbers
of people to pressure the legal system to change. You can perhaps think of
examples when this has happened, and such cases are examples of an ethical
viewpoint being ultimately more powerful than the law.
Examples of this happening through (Western) history illustrate the ten-
dency for ethical considerations to drive the law: womens suffrage (womens
right to vote); the abolition of slavery; and modern human rights and equality
legislation are examples of ethical pressures causing change in law. The inde-
pendence of nations and the break-up of colonial rule are further examples of
ethical pressures overwhelming the force of law.
Unlawful acts are not always unethical. Ethical acts are not always lawful.
Lawful therefore does not equate to ethical, and unethical does not equate to
unlawful.
Interestingly, the UK Consumer Protection Regulations effective on 26 May
2008 are a good example of unethical business practices becoming prohibited in
law. For example it has always been unethical to mislead customers into buying
products or services. Now it is illegal to do so (in respect of consumers - here
are the implications of the regulations).
6.1.3 Ethics and Religion

For many people, ethics and ethical judgements are based on a religious belief.
However, religion is not a basis for arriving at consistent standards of ethics,
any more than the law is. To illustrate the point: A particularly dangerous
implication arising from mixing decision-making with religion is the one which
provides the decision-maker with a sort of safety net if everything goes wrong.
God will be my judge... For people who are not religious, or who have a
different religious faith to decision-maker, these words are a little disturbing in
the context of ethical decision-making.
Whose god? Your god? My god? Their god? All gods? The good gods?
The collective gods committee?
And when? When will (the whatever chosen) god be judging this deci-
sion? While the decision is being made? Before the decision is implemented?
Immediately after the decisions implementation (when on Earth some serious
monitoring, checking and managing needs to be happening)? Far into the future
when the decision-maker has expired and gone to whatever version of heaven
his (its generally a man) particular faith promises him?
The inference is the latter of course. A bit bloody late in other words. And
by what criteria will (the whatever chosen) god be judging the decision? To
whose and with precisely what standards are we being asked to agree here?
And what will be the results of (whatever chosen) gods decision, especially if
its a mighty god-like thumbs down? What are (the whatever chosen) gods
contingencies for putting it all straight again?
Its anyones guess Do you see how religion is not a brilliant aid for decision-
making? Religion is a personal matter. It has no place in decision-making
affecting other people. Worse, using religion as a personal safety net for serious
decision-making is a reckless desertion of leadership responsibility.
Right-minded people want leaders to take ultimate full absolute responsibil-
ity for decisions. They do not want a leader to seek refuge or personal salvation
in (whatever chosen) god or heaven or a confession box.
This is an additional reason for not mixing religion with leadership and eth-
ical decision-making: too many people simply do not accept the basic premise
that a leader can delegate responsibility in such a very strange and unaccount-
able way. Aside from anything else, if religion were useful in leadership and
decision-making then all human organisations would be run by the clergy. Civ-
ilization tried that a few thousand years ago and it does not work.
Please note: If you are religious and believe that religion has a place in
leadership and decision-making then you might disagree with this section. If
so please understand that I am not berating religion or religious people. I ac-
cept that through human kinds existence - especially in the last few hundred
years - religion in various forms has often provided an essential code (of ethics
arguably) for civilizations and societies to live positively, harmoniously, gener-
ously, peacefully, lovingly, etc. I am making a different point, namely: reference
to religion, and especially a strong personal faith, is not generally very helpful
towards achieving great objectivity, which is vital for ethical decision-making.
Moreover, religion of certain types can be extremely divisive, which is obviously

not useful for decision-making entailing diverse groups of people, as commonly
arises in today’s increasingly diverse world.
Unethical Behaviours, Activities, Policies
Instead of trying to arrive at a standard or all-encompassing rule of what is
ethical, it is helpful to illustrate the depth and variety of ethics through suitable
examples.
This is an extension of the ethical business investment items listed above,
and goes into far greater detail of different behaviours which might often be
regarded as unethical.
The first category might seem obvious and clear-cut, and actually its a rea-
sonable starting point for the vast majority of ethical decisions, but this one
point cannot be applied exclusively in assessing whether something is ethical or
not:
Anything unlawful in the territory or area covered by such law - is probably
unethical. Not always - see ethics and law.
Conversely, and more importantly, very many legal activities and be-
haviours can be extremely unethical. For example, behaviours that are not
necessarily unlawful but which are generally considered to be unethical to
the society would now typically include:
Dishonesty, withholding information, distortion of facts
Misleading or confusing communications or positioning or advertising
Manipulation of peoples feelings
Deception, trickery, kidology, rule-bending, fooling people
Exploitation of weakness and vulnerability
Excessive profit
Greed
Anything liable to harm or endanger people
Breach of the Psychological Contract - the Psychological Contract rep-
resents trust and expectations between people in a relationship - notably
within employer/employee relationships, extending to other organizational
relationships too - (aside from Psychological Contract theory, specialized
theory within Transactional Analysis helps explain this aspect of trust and
expectations in human relationships)
Avoidance of blame or penalty or payment of compensation for wrong-
doing
Inertia-based approvals and agreements (in which action proceeds unless
objected to)
Failing to consult and notify people affected by change
Secrecy and lack of transparency and resistance to reasonable investigation
Coercion or inducement
Harming the environment or planet
Unnecessary waste or consumption
Invasion of privacy or anything causing privacy to be compromised
Recklessness or irresponsible use of authority, power, reputation
Nepotism (the appointment or preference of family members)
Favoritism or decision-making based on ulterior motives (e.g., secret affil-

iations, deals, memberships, etc)
Alienation or marginalization of people or groups
Conflict of interests (having a foot in two or more competing camps)
Neglect of duty of care
Betrayal of trust
Breaking confidentiality
Causing suffering of animals
By standing - failing to intervene or report wrong-doing within area of

responsibility (this does not give license to interfere anywhere and every-
where, which is itself unethical for various reasons)
Unfairness
Unkindness
Lack of compassion and humanity
You will perhaps think of other examples of behaviours or activities which are
not necessarily unlawful, but which a reasonable majority of people (especially
those directly affected by the activities) would consider to be unfair, unjust or
simply wrong and therefore effectively unethical.
Most of the above are subject to extent or degree, whereby serious exten-
sive examples are more likely to be unethical than minor transgressions and
negligible effects.
6.1.4 Ethics and Public Opinion

Ethical considerations are not wholly determined by majority view, just as they
are not wholly defined by law or religion.
Ethics are not a matter of a referendum or vote.
Popular opinion alone is an unreliable measurement of what is ethical for
several reasons:
A poorly informed majority of people - or anyone poorly informed - is not
able to make an informed decision about the ethics of a particular decision. The
extent to which people are helped to understand longer-term consequences of a
situation is also a limiting factor in the value of majority opinion.
Democratic decision-making is vulnerable to whim and herding instincts -
especially if the national press and other mainstream media have anything to
do with it.
Leadership - as a function within civilizations - features in the organisation
of human systems and societies because people generally accept that many sorts
of complex and large scale decision-making are best made by full-time experts
working in the areas concerned, rather than such decisions being left to the
vagaries of popular inexpert view. This is not to say that people have no right
to consultation or a vote on crucial issues (in fact generally people need more
involvement in decisions which affect them) - it is more to illustrate that major-
ity view, especially when coloured with apathy or misinformation or prejudice
for whatever reason, is not the only basis for deciding whats ethical or not.
Popular opinion is a significant factor in the consideration of what is eth-
ical, but it is not the only factor, and the significance of popular opinion in
determining ethical decisions will vary according to the situation.
6.2 Utilitarianism: Ethical Considerations

A significant influence on ethical judgement is the flip-side of whatever situa-
tion is under question: the effects of the ethical decision. Upholding an ethical
principle might not be sensible if the effect of doing so causes a wider or greater
disadvantage. This sort of justification when used for unethical actions and poli-
cies, etc., is often referred to as being for the greater good. Such a viewpoint
is associated with a utilitarianism approach to ethics. Looking at the flip-side
and assessing the greater good implications can be helpful, ideally leading to
the facilitation of a compromise solution. Considering the flip-side (or sides) is
actually necessary for relatively straight-forward uncontroversial decisions and
actions, especially when opinions on all sides can be aired, debated, and under-
stood.
However the greater good approach can be a risky angle if used subjectively
and proactively, not least because it tempts the decision-maker to play god, and
to attempt a god-like appreciation of a wide and complex situation, instead of
adopting a less personal and more detached approach.
The combination of the following factors in ethical decision-making is rarely

effective:
a) Risk
b) Proactivity (decision-maker instigated)
c) Borderline ethical/unethical
d) Affecting lots of people.
The greater good argument is commonly used to support actions containing
these elements, when usually a less risky and aggressive stance is best.
Remember a significant inescapable part of ethical actions are the views and
needs of the rational majority, of the people affected by the action or deci-
sion. If you do not know reliably what these (views and needs) are then you
do not understand the flip-side enough to justify anything, let alone a risky
borderline decision. Beware of this greater good dimension also when you see it
used by others, because the defense of an unethical decision as being ...for the
greater good... is often used cynically and dishonestly. The greater good can
be a big trap - especially for anyone prone to subjective high-minded thinking.
The greater good angle also illustrates the dilemma aspect within many ethical
decisions.
Ethics are not clear-cut, especially on a large scale. corporate gover-

nance in the face of big ethical decisions is characterized by wisdom and objec-
tivity, not by subjective personal belief, worse still when it protected by control
mechanisms and the recklessness which often accompanies emotional insecurity,
or a strong personal faith or power delusion.
Beware the leader for whom the personal victory of the decision appears to
be more important than the decisions outcome, whatever the scale and situation
- and recognize these tendencies in yourself if they arise. Objectivity is the key
to ethics, not personal belief or religion or personal power.
Leaders who make decisions subjectively and personally for reasons of build-
ing power, reputation and wealth, entirely miss the point about ethics, and their
fundamental philosophy (or lack of) effectively prevents any real ethical objec-
tivity. If the motive is wrong, then everything else will be too.
6.2.1 Ethical Objectivity

So, law alone is not a basis for ethical decision-making. Nor is religion. Nor is
the greater good. And even the rational views and needs of the affected majority
are not a basis alone for ethical decision-making.
Chapter 7
CORPORATE
GOVERNANCE
Corporate governance involves a set of relationships between a company man-

agement, its board, its shareholders and other stakeholders. Corporate gover-
nance also provides the structure through which the objectives of the company
are set, and the means of attaining those objectives and monitoring performance
are determined.
The Principles do not intend to prejudice or second-guess the business judg-
ment of individual market participants, board members and company officials.
What works in one company or for one group of investors may not necessarily
be generally applicable to all of business or of systemic economic importance.
The Principles recognize the interests of employees and other stakeholders
and their important role in contributing to the long-term success and perfor-
mance of the company. Other factors relevant to a Company’s decision making
processes, such as environmental, anti-corruption or ethical concerns, are con-
sidered in the Principles but are treated more explicitly in a number of other
instruments including the OECD Guidelines for Multinational Enterprises, the
Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions, the UN Guiding Principles on Business and Human
Rights, and the ILO Declaration on Fundamental Principles and Rights at Work,
which are referenced in the Principles.
The revised Principles maintain many of the recommendations from earlier
versions as continuing essential components of an effective corporate governance
framework. They also introduce some new issues and bring greater emphasis or
additional clarity to others. While some of the Principles may be more appropri-
ate for larger than for smaller companies, it is suggested that policymakers may
wish to raise awareness of good corporate governance for all companies, includ-
ing smaller and unlisted companies. The Principles provide guidance through
recommendations and annotations across six principles as highlighted below.
87
CHAPTER 7. CORPORATE GOVERNANCE 88
7.1 ENSURING THE BASIS FOR AN EFFEC-

TIVE CORPORATE GOVERNANCE FRAME-
WORK
The corporate governance framework should promote transpare not and fair
markets, and the efficient allocation of resources. It should be consistent with
the rule of law and support effective supervision and enforcement.
Effective corporate governance requires a sound legal, regulatory and insti-
tutional framework that market participants can rely on when they establish
their private contractual relations. This corporate governance framework typi-
cally comprises elements of legislation, regulation, self-regulatory arrangements,
voluntary commitments and business practices that are the result of a countrys
specific circumstances, history and tradition. The desirable mix between legis-
lation, regulation, self-regulation, voluntary standards, etc., will therefore vary
from country to country. The legislative and regulatory elements of the corpo-
rate governance framework can usefully be complemented by soft law elements
based on the “comply or explain” principle such as corporate governance codes
in order to allow for flexibility and address specificities of individual companies.
What works well in one company, for one investor or a particular stakeholder
may not necessarily be generally applicable to corporations, investors and stake-
holders that operate in another context and under different circumstances. As
new experiences accrue and business circumstances change, the different pro-
visions of the corporate governance framework should be reviewed and, when
necessary, adjusted.
Companies seeking to implement the Principles should monitor their corpo-
rate governance framework, including regulatory and listing requirements and
business practices, with the objective of maintaining and strengthening its con-
tribution to market integrity and economic performance. If these conditions are
met, the corporate governance framework is more likely to avoid over-regulation,
support the exercise of entrepreneurship and limit the risks of damaging conflicts
of interest in both the private sector and in public institutions.
The corporate governance framework should be developed with a view to
its impact on overall economic performance, market integrity and the in-
centives it creates for market participants and the promotion of transpare
not and well-functioning markets.
The legal and regulatory requirements that affect corporate governance
practices should be consistent with the rule of law, transpare not and
enforceable.
The division of responsibilities among different authorities should be clearly

articulated and designed to serve the public interest.
Stock market regulation should support effective corporate governance.

Supervisory, regulatory and enforcement authorities should have the au-

thority, integrity and resources to fulfil their duties in a professional and
objective manner. Moreover, their rulings should be timely, transpare not
and fully explained.
Cross-border co-operation should be enhanced, including through bilateral
and multilateral arrangements for exchange of information.
7.2 The rights and equitable treatment of share-

holders and key ownership functions
The corporate governance framework should protect and facilitate the exercise
of shareholders rights and ensure the equitable treatment of all shareholders,
including minority and foreign shareholders. All shareholders should have the
opportunity to obtain effective redress for violation of their rights.
Equity investors have certain property rights. For example, an equity share
in a publicly traded company can be bought, sold, or transferred. An equity
share also entitles the investor to participate in the profits of the corporation,
with liability limited to the amount of the investment. In addition, ownership of
an equity share provides a right to information about the corporation and a right
to influence the corporation, primarily by participation in general shareholder
meetings and by voting.
A. Basic shareholder rights should include the right to:

1. Secure methods of ownership registration;
2. Convey or transfer shares;
3. Obtain relevant and material information on the corporation on a timely
and regular basis;
4. Participate and vote in general shareholder meetings;
5. Elect and remove members of the board; and
6. Share in the profits of the corporation.
B. Shareholders should be sufficiently informed about, and have the

right to approve or participate in, decisions concerning fundamental
corporate changes such as:
1. Amendments to the statutes, or articles of incorporation or similar gov-
erning documents of the company;
2. The authorization of additional shares; and
3. Extraordinary transactions, including the transfer of all or substantially
all assets, which in effect result in the sale of the company.
C. Shareholders should have the opportunity to participate effectively

and vote in general shareholder meetings and should be informed
of the rules, including voting procedures that govern general share-
holder meetings:
1. Shareholders should be furnished with sufficient and timely information

concerning the date, location and agenda of general meetings, as well
as full and timely information regarding the issues to be decided at the
meeting.
2. Processes and procedures for general shareholder meetings should allow

for equitable treatment of all shareholders. Company procedures should
not make it unduly difficult or expensive to cast votes.
3. Shareholders should have the opportunity to ask questions to the board,
including questions relating to the annual external audit, to place items
on the agenda of general meetings, and to propose resolutions, subject to
reasonable limitations.
4. Effective shareholder participation in key corporate governance decisions,
such as the nomination and election of board members, should be facil-
itated. Shareholders should be able to make their views known, includ-
ing through votes at shareholder meetings, on the remuneration of board
members and/or key executives, as applicable. The equity component of
compensation schemes for board members and employees should be sub-
ject to shareholder approval.
5. Shareholders should be able to vote in person or in absentia, and equal

effect should be given to votes whether cast in person or in absentia.
6. Impediments to cross border voting should be eliminated.
D. Shareholders, including institutional shareholders, should be al-

lowed to consult with each other on issues concerning their basic
shareholder rights as defined in the Principles, subject to exceptions
to prevent abuse.
E. All shareholders of the same series of a class should be treated

equally. Capital structures and arrangements that enable certain
shareholders to obtain a degree of influence or control dispropor-
tionate to their equity ownership should be disclosed.
1. Within any series of a class, all shares should carry the same rights. All
investors should be able to obtain information about the rights attached
to all series and classes of shares before they purchase. Any changes in
economic or voting rights should be subject to approval by those classes
of shares which are negatively affected.
2. The disclosure of capital structures and control arrangements should be

required.
F. Related-party transactions should be approved and conducted in

a manner that ensures proper management of conflict of interest and
protects the interest of the company and its shareholders.
1. Conflicts of interest inherent in related-party transactions should be ad-
dressed.
2. Members of the board and key executives should be required to disclose to
the board whether they, directly, indirectly or on behalf of third parties,
have a material interest in any transaction or matter directly affecting the
corporation.
G. Minority shareholders should be protected from abusive actions

by, or in the interest of, controlling shareholders acting either directly
or indirectly, and should have effective means of redress. Abusive
self-dealing should be prohibited.
H. Markets for corporate control should be allowed to function in an

efficient and transpare not manner.
1. The rules and procedures governing the acquisition of corporate control
in the capital markets, and extraordinary transactions such as mergers,
and sales of substantial portions of corporate assets, should be clearly
articulated and disclosed so that investors understand their rights and
recourse. Transactions should occur at transpare not prices and under
fair conditions that protect the rights of all shareholders according to
their class.
2. Anti-take-over devices should not be used to shield management and the
board from accountability.
7.3 Institutional investors, stock markets, and

other intermediaries
The corporate governance framework should provide sound incentives through-
out the investment chain and provide for stock markets to function in a way
that contributes to good corporate governance.
In order to be effective, the legal and regulatory framework for corporate gov-
ernance must be developed with a view to the economic reality in which it is to
be implemented. In many jurisdictions, the real world of corporate governance
and ownership is no longer characterized by a straight and uncompromisable
relationship between the performance of the company and the income of the
ultimate beneficiaries of shareholdings. In reality, the investment chain is often
long and complex, with numerous intermediaries that stand between the ulti-
mate beneficiary and the company. The presence of intermediaries acting as
independent decision makers influences the incentives and the ability to engage
in corporate governance.
Institutional investors acting in a fiduciary capacity should disclose their

corporate governance and voting policies with respect to their investments,
including the procedures that they have in place for deciding on the use
of their voting rights.
Votes should be cast by custodians or nominees in line with the directions

of the beneficial owner of the shares.
Institutional investors acting in a fiduciary capacity should disclose how

they manage material conflicts of interest that may affect the exercise of
key ownership rights regarding their investments.
The corporate governance framework should require that proxy advisors,
analysts, brokers, rating agencies and others that provide analysis or ad-
vice relevant to decisions by investors, disclose and minimize conflicts of
interest that might compromise the integrity of their analysis or advice.
Insider trading and market manipulation should be prohibited and the
applicable rules enforced.
For companies who are listed in a jurisdiction other than their jurisdiction
of incorporation, the applicable corporate governance laws and regulations
should be clearly disclosed. In the case of cross listings, the criteria and
procedure for recognizing the listing requirements of the primary listing
should be transpare not and documented.
Stock markets should provide fair and efficient price discovery as a means
to help promote effective corporate governance.
7.4 The role of stakeholders in corporate gover-

nance
The corporate governance framework should recognize the rights of stakehold-
ers established by law or through mutual agreements and encourage active co-
operation between corporations and stakeholders in creating wealth, jobs, and
the sustainability of financially sound enterprises.
A key aspect of corporate governance is concerned with ensuring the flow of
external capital to companies both in the form of equity and credit. Corporate
governance is also concerned with finding ways to encourage the various stake-
holders in the firm to undertake economically optimal levels of investment in
firm-specific human and physical capital. The competitiveness and ultimate suc-
cess of a corporation is the result of teamwork that embodies contributions from
a range of different resource providers including investors, employees, creditors,

customers and suppliers, and other stakeholders. Corporations should recognize
that the contributions of stakeholders constitute a valuable resource for building
competitive and profitable companies. It is, therefore, in the long-term interest
of corporations to foster wealth-creating co-operation among stakeholders. The
governance framework should recognize the interests of stakeholders and their
contribution to the long-term success of the corporation.
The rights of stakeholders that are established by law or through mutual
agreements are to be respected.
Where stakeholder interests are protected by law, stakeholders should have
the opportunity to obtain effective redress for violation of their rights.
Mechanisms for employee participation should be permitted to develop.
Where stakeholders participate in the corporate governance process, they

should have access to relevant, sufficient and reliable information on a
timely and regular basis.
Stakeholders, including individual employees and their representative bod-
ies, should be able to freely communicate their concerns about illegal or
unethical practices to the board and to the competent public authorities
and their rights should not be compromised for doing this.
The corporate governance framework should be complemented by an effec-
tive, efficient insolvency framework and by effective enforcement of credi-
tor rights.
7.5 Disclosure and transparency

The corporate governance framework should ensure that timely and accurate
disclosure is made on all material matters regarding the corporation, including
the financial situation, performance, ownership, and governance of the company.
The Principles support timely disclosure of all material developments that
arise between regular reports. They also support simultaneous reporting of
material or required information to all shareholders in order to ensure their
equitable treatment. In maintaining close relations with investors and market
participants, companies must be careful not to violate this fundamental principle
of equitable treatment.
A. Disclosure should include, but not be limited to, material infor-

mation on: 1. The financial and operating results of the company.
2. Company objectives and non-financial information.
3. Major share ownership, including beneficial owners, and voting rights.
4. Remuneration of members of the board and key executives
5. Information about board members, including their qualifications, the

selection process, other company directorships and whether they are regarded
as independent by the board.
6. Related party transactions.
7. Foreseeable risk factors.
8. Issues regarding employees and other stakeholders.
9. Governance structures and policies, including the content of any corporate
governance code or policy and the process by which it is implemented.
B. Information should be prepared and disclosed in accordance with

high quality standards of accounting and financial and non-financial
reporting.
C. An annual audit should be conducted by an independent, compe-

tent and qualified, auditor in accordance with high-quality auditing
standards in order to provide an external and objective assurance to
the board and shareholders that the financial statements fairly rep-
resent the financial position and performance of the company in all
material respects.
D. External auditors should be accountable to the shareholders and

owe a duty to the company to exercise due professional care in the
conduct of the audit.
E. Channels for disseminating information should provide for equal,

timely and cost-efficient access to relevant information by users.
7.6 The responsibilities of the board

The corporate governance framework should ensure the strategic guidance of
the company, the effective monitoring of management by the board, and the
boards accountability to the company and the shareholders.
Board structures and procedures vary both within and among countries.
Some countries have two-tier boards that separate the supervisory function and
the management function into different bodies. Such systems typically have a
“supervisory board” composed of non-executive board members and a “manage-
ment board” composed entirely of executives. Other countries have “unitary”
boards, which bring together executive and non-executive board members. In
some countries there is also an additional statutory body for audit purposes.
The Principles are intended to apply to whatever board structure is charged
with the functions of governing the enterprise and monitoring management.
A. Board members should act on a fully informed basis, in good faith, with
due diligence and care, and in the best interest of the company and the share-
holders.
B. Where board decisions may affect different shareholder groups differently,

the board should treat all shareholders fairly.
C. The board should apply high ethical standards. It should take into ac-
count the interests of stakeholders.
D. The board should fulfill certain key functions, including:
1. Reviewing and guiding corporate strategy, major plans of action, risk man-
agement policies and procedures, annual budgets and business plans; set-
ting performance objectives; monitoring implementation and corporate
performance; and overseeing major capital expenditures, acquisitions and
divestitures.
2. Monitoring the effectiveness of the Company’s governance practices and
making changes as needed.
3. Selecting, compensating, monitoring and, when necessary, replacing key
executives and overseeing succession planning.
4. Aligning key executive and board remuneration with the longer term in-
terests of the company and its shareholders.
5. Ensuring a formal and transpare not board nomination and election pro-
cess.
6. Monitoring and managing potential conflicts of interest of management,
board members and shareholders, including misuse of corporate assets and
abuse in related party transactions.
7. Ensuring the integrity of the corporations accounting and financial re-
porting systems, including the independent audit, and that appropriate
systems of control are in place, in particular, systems for risk manage-
ment, financial and operational control, and compliance with the law and
relevant standards.
The Board should demonstrate a leadership role to ensure that an effective
means of risk oversight is in place. Ensuring the integrity of the essential report-
ing and monitoring systems will require the board to set and enforce clear lines
of responsibility and accountability throughout the organisation. The board will
also need to ensure that there is appropriate oversight by senior management.
Normally, this includes the establishment of an internal audit system directly
reporting to the board. It is considered good practice for the internal auditors
to report to an independent audit committee of the board or an equivalent body
which is also responsible for managing the relationship with the external audi-
tor, thereby allowing a coordinated response by the board. It should also be
regarded as good practice for this committee, or equivalent body, to review and
report to the board the most critical accounting policies which are the basis for
financial reports. However, the board should retain final responsibility for over-
sight of the Company’s risk management system and for ensuring the integrity
of the reporting systems. Some jurisdictions have provided for the chair of the
board to report on the internal control process. Companies with large or com-
plex risks (financial and non-financial), not only in the financial sector, should
consider introducing similar reporting systems, including direct reporting to the
board, with regard to risk management.
8. Overseeing the process of disclosure and communications.
E. The board should be able to exercise objective independent judg-

ment on corporate affairs.
Boards should consider assigning a sufficient number of non-executive
board members capable of exercising independent judgment to tasks where
there is a potential for conflict of interest. Examples of such key responsi-
bilities are ensuring the integrity of financial and non-financial reporting,
the review of related party transactions, nomination of board members
and key executives, and board remuneration.
Boards should consider setting up specialized committees to support the
full board in performing its functions, particularly in respect to audit,
and, depending upon the Company’s size and risk profile, also in respect
to risk management and remuneration. When committees of the board are
established, their mandate, composition and working procedures should be
well defined and disclosed by the board.
Board members should be able to commit themselves effectively to their
responsibilities.
Boards should regularly carry out evaluations to appraise their perfor-
mance and assess whether they possess the right mix of background and
competences.
F. In order to fulfil their responsibilities, board members should have

access to accurate, relevant and timely information.
G. When employee representation on the board is mandated, mech-

anisms should be developed to facilitate access to information and
training for employee representatives, so that this representation is
exercised effectively and best contributes to the enhancement of board
skills, information and independence.
7.7 Factors driving corporate governance

Since the late 1900s several factors enabled a marked increase in the frequency
and scale of corporate disasters and scandals. These factors include notably:
Globalisation - markets are global, and connected as never before; natural
boundaries and limits that existed before globalisation no longer exist, so
problems can reach and spread far wider than in earlier times.
Technology - the vast modern scale of technologies, and the sheer size of
things that organizations now create and process, in every sector, increases
the scale of potential damage of corporate wrong-doing. For example
consider the enormous scale of manufacturing, production, commodities,
machinery, transport, construction, IT, the web, etc., compared with a
generation ago. The maxim: The bigger they are, the harder they fall is
very apt. When something goes wrong in modern times, the impacts are
potentially bigger than ever in history.
Population - volumes and densities of populations everywhere have in-
creased dramatically since the late 1900s. Where corporate scandals and
disasters happen, the potential to affect vast numbers of people has never
been greater.
Free Market - since the late 1900s the fondness of (mainly western) govern-
ments for free market capitalist economics (basically the view that market
forces should be kept free from interference) has encouraged the develop-
ment of unregulated major risk-taking in organizational governance - and
this style of running organizations has now become deeply embedded into
corporate attitudes. Most corporations are run in an extremely selfish
and greedy manner. Short-term gain, and the enrichment of directors and
senior staff continues to drive corporate strategy and decision-making ev-
erywhere. Combined with the other factors, this creates a potent recipe
for disasters of all kinds.
Given that these factors are likely to persist in offering progressively greater
potential for the negative impact of corporate activity on societies, economies,
environment, etc., sensible people are increasingly calling for substantially im-
proved visibility and controls in Corporate Governance.
Organisational Culture and Performance Organisational culture defines

the way employees complete tasks and interact with each other in an organi-
zation. The cultural paradigm comprises various beliefs, values, rituals and
symbols that govern the operating style of the people within a company. Cor-
porate culture binds the workforce together and provides a direction for the
company. In times of change, the biggest challenge for any organization may be
to change its culture, as the employees are already accustomed to a certain way
of doing things.
Types
The dominant culture in organizations depends on the environment in which
the company operates, the organizations objectives, the belief system of the
employees and the Company’s management style. Therefore, there are many
organizational cultures. For example, highly bureaucratic and well-structured
organizations typically follow a culture with extensive controls. Employees fol-
low standard procedures with a strict adherence to hierarchy and well-defined
individual roles and responsibilities. Those in competitive environments, such
as sales, may forgo strict hierarchies and follow a competitive culture where
the focus is on maintaining strong relationships with external parties. In this

instance, the strategy is to attain competitive advantages over the competition.
The collaborative culture is yet another organizational way of life. This culture
presents a decentralized workforce with integrated units working together to
find solutions to problems.
Advantages Strong corporate cultures indicate that employees are like-minded

and hold similar beliefs and ethical values. When these beliefs and ethical values
align with business objectives, they can prove to be effective in building teams
because rapport and trust quickly ensues. The bonds that the teams build help
them avoid conflicts and focus on task completion. Strong corporate cultures
ease communication of roles and responsibilities to all individuals. Employees
know what is expected of them, how management assesses their performance
and what forms of rewards are available.
Effect on Performance Organizational cultures can have varying impacts

on employee performance and motivation levels. Oftentimes, employees work
harder to achieve organizational goals if they consider themselves to be part
of the corporate culture. Different cultures operating in one company can also
impact employee performance. For example, if the organization maintains a
reserved “talk when necessary” culture, employees may work accordingly; how-
ever, if the organization allows one area, say the sales team, to be outspoken and
socially active, the organization may experience rivalries among areas. Thus,
allowing an area to set up their own culture can affect the performance of the
employees deployed elsewhere in the company.
Integration of Performance and Culture Organizations must structure

their recruitment processes to attract and engage incumbents with the same
beliefs and values that constitute the organizations culture. This ensures the
new employees assimilation to the company and further strengthens corporate
culture. Companies should also ensure that they align corporate culture with
performance management systems. When culture and management systems are
not aligned, management must redirect them so that employee behaviour results
in the achievement of organizational goals.
7.8 Organizational Benefits for Good Corporate

Governance
Significant organizational benefits arise from adopting and applying good cor-
porate governance and ethically leadership.
Businesses and other services organizations derive substantial advantage,
and avoid serious risks, by acting correctly, with humanity, compassion, and with
proper consideration. Corporate governance is a crucial foundation in achieving
these aims because it provides a framework for the organizations leadership.
Competitive advantage - customers are increasingly favouring providers

and suppliers who demonstrate responsibility and ethical practices. Fail-
ure to do so means lost market share, and shrinking popularity, which
reduces revenues, profits, or whatever other results the organisation seeks
to achieve.
Better staff attraction and retention - the best staff want to work for truly
responsible and ethical employers. Failing to be a good employer means
good staff leave, and reduces the likelihood of attracting good new-starters.
This pushes up costs and undermines performance and efficiency. Aside
from this, good organisations simply cant function without good people.
Investment - few and fewer investors want to invest in organisations which

lack integrity and responsibility, because they do not want the association,
and because they know that for all the other reasons here, performance
will eventually decline, and who wants to invest in a lost cause?
Morale and culture - staff who work in a high-integrity, socially respon-

sible, globally considerate organisation are far less prone to stress, attri-
tion and dissatisfaction. Therefore they are happier and more productive.
Happy productive people are a common feature in highly successful or-
ganisations. Stressed unhappy staff are less productive, take more time
off, need more managing, and also take no interest in sorting out the
organisations failings when the whole thing implodes.
Reputation - it takes years, decades, to build organisational reputation
- but only one scandal to destroy it. Ethical responsible organisations
are far less prone to scandals and disasters. And if one does occur, an
ethical responsible organisation will automatically know how to deal with
it quickly and openly and honestly. People tend to forgive organisations
who are genuinely trying to do the right thing. People do not forgive, and
are actually deeply insulted by, organisations who fail and then fail again
by not addressing the problem and the root cause. Arrogant leaders share
this weird delusion that no-one can see what they are up to. Years ago
maybe they could hide, but now there’s absolutely no hiding place.
Legal and regulatory reasons - soon there will be no choice anyway - all
organisations will have to comply with proper ethical and socially respon-
sible standards. And these standards and compliance mechanisms will
be global. Welcome to the age of transparency and accountability. So it
makes sense to change before you are forced to.
Legacy - even the most deluded leaders will admit in the cold light of day
that they’d prefer to be remembered for doing something good, rather
than making a pile of money or building a great big empire. Its human
nature to be good. Humankind would not have survived were this not
so. The greedy and the deluded have traditionally been able to persist
with unethical irresponsible behaviour because there’s been nothing much
stopping them, or reminding them that maybe there is another way. But
no longer. Part of the re-shaping of attitudes and expectations is that
making a pile of money, and building a great big empire, are becoming
stigmatized. Whats so great about leaving behind a pile of money or a
great big empire if its been at the cost of others well-being, or the health
of the planet? The ethics and responsibility zeitgeist is fundamentally
changing the view of what a lifetime legacy should be and can be. And
this will change the deeper aspirations of leaders, present and future, who
can now see more clearly what a real legacy is.
Chapter 8
UNDERSTANDING
GOVERNANCE
PRINCIPLES METHODS
AND DRIVERS OF
CORPORATE
GOVERNANCE
8.1 What is a governance operating model?

A governance operating model is the mechanism used by the board and man-
agement to translate the elements of the governance framework and policies into
practices, procedures, and job responsibilities within the corporate governance
infrastructure. In developing the governance operating model, the board bal-
ances competing goals (such as the pursuit of growth and the preservation of
assets), defines responsibilities (such as those of a business manager and those
of a risk manager), and allocates resources to implementing governance.
Exhibit 1 depicts the major components of a governance operating model and
their relationship. This high-level view shows the major components—structure,
oversight responsibilities, talent and culture, and infrastructure—and their key
subcomponents. The nuts and bolts of the model (layers below the sub compo-
nents in this depiction) include process flows, procedures, and reporting mech-
anisms that implement governance at the level of job responsibilities. Board
and management choices regarding each component should define how the gov-
ernance operating model will be implemented by management.
In practice, a governance operating model should:
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CHAPTER 8. UNDERSTANDING GOVERNANCE PRINCIPLES METHODS AND DRIVERS OF COR
Organize operational, financial, risk management, and reporting processes

such that the board receives the information it requires to effect good
governance and management and the business units can conduct their
activities in ways that comply with regulations and serve strategic ends
Bring the organizations governance framework down to the level of roles,
responsibilities, reporting lines, and communications to bridge the gap
between the governance framework (discussed in the following section)
and operational realities
Help people to answer questions such as, “Why are we doing this?” “Is this
okay?” “Whose call is this?” and “Who do we need to tell about this?”
and to know when to ask such questions
Sustain governance by creating a feedback loop in which the board and
management can identify and respond to new business, operational, com-
petitive, and regulatory needs
A governance operating model may contribute to solving the common problem
of “management by memo” in governance. It is rarely enough for the board or
management simply to articulate principles and issue policies, no matter how
clearly and forcefully they do so. They should also see to it that people have
the understanding, motivation, and means
Exhibit 1 Encircling all elements of the framework is the corporate gover-

nance infrastructure. The governance infrastructure is the collection of gover-
nance operating models—the people, processes, and systems—that management
has put in place to govern day-to-day organizational activities. This infrastruc-
ture also includes the processes used to gather and report information to the
board and external stakeholders, as well as to management.
The boards role in various elements of the governance infrastructure ranges
from overseer to active participant in the actual processes. The top half of
the framework above depicts areas where the boards responsibility is typically
heightened. In these areas, it is generally not considered adequate for the board
only to understand and monitor the Company’s operating models; in addition,
the board will be expected to play a role in developing the components and
participating in the activities. These areas include governance (here meaning
the boards structure and composition), strategy, performance, integrity, talent,
and risk governance. In these areas, due to legal or regulatory requirements
or stakeholder expectations, the board is an active party in the structures and
processes, and in decisions and duties that cannot be delegated to management,
which vary by organization.
The bottom half of the framework depicts areas where the boards respon-
sibility can be described more as active monitor. Here, the board understands
the operating models, ascertains that they are adequately developed and re-
sourced, and monitors results of business activities and any issues identified in
the process. For many companies, the areas in this category align to planning,
operations, compliance, reporting, and risk management.
8.2 understanding of project governance

The first challenge to gaining an understanding of project governance is that
few of those who combine the words “governance” and “project” into the term
“project governance” define what they mean. Furthermore, the term “gover-
nance” is used in a variety of ways and, as a consequence, has a multiplicity of
meanings (Rhodes, 1996; Stoker, 1997). This causes significant confusion; so, in
order to reduce this confusion, it is necessary to investigate the definitions for
governance and project governance.
The word governance derives from the Greek verb which gave rise to “gu-
bernare” in Latin, which means “to steer.” The Oxford English Dictionary de-
fines governance as the “action, manner or fact of governing” and “the function
or power of governing,” whereas “govern” is inter alia, defined as “rule with
authority, conduct the policy, actions, and affairs of (a State, subjects).”
The United Nations defines “good governance” as the process of decision
making and the process by which decisions are implemented (or not imple-
mented). Furthermore, the United Nations suggests that there are eight char-
acteristics of good governance (Exhibit 1) and these are:
1. Participatory - Participation is a key cornerstone of good governance and
as such needs to be informed and organized.
2. Consensus oriented - There are several actors and as many viewpoints.
Good governance requires mediation of the different interests.
3. Accountable - Who is accountable to who varies, depending on whether
decisions or actions taken are internal or external to an organization. In
general, an organization is accountable to those who will be affected by
its decisions or actions.
4. Transpare not - Transparency means that decisions taken and their en-
forcement are done in a manner that follows rules and regulations. It
also means that information is freely available and directly accessible to
those who will be affected by such decisions and their enforcement. It
also means that enough information is provided and that it is provided in
easily understandable forms and media.
5. Responsive - Good governance requires that institutions and processes try
to serve all stakeholders within a reasonable timeframe.
6. Effective and efficient - Good governance means that processes and insti-
tutions produce results that meet the needs of stakeholders while making
the best use of resources at their disposal.
7. Equitable and inclusive - A society’s well-being depends on ensuring that
all its members feel that they have a stake in it and do not feel excluded
from the mainstream of society. This requires all groups, but particularly
the most vulnerable, have opportunities to improve or maintain their well-
being.
8. Follows a rule of law - Good governance requires fair legal frameworks

that are enforced impartially.
8.3 The 5 Principles for Good Governance

8.3.1 Principle 1. Leading our organisation.
1. Agreeing our vision, purpose and values and making sure that they remain
relevant;
2. Developing, resourcing, monitoring and evaluating a plan to make sure

that our organisation achieves its stated purpose.
3. Managing, supporting and holding to account staff, volunteers and all who
act on behalf of the organisation.
8.3.2 Principle 2. Exercising control over our organisa-

tion.
1. Identifying and complying with all relevant legal and regulatory require-
ments;
2. Making sure that there are appropriate internal financial and management
controls;
3. Identifying major risks for our organisation and deciding ways of managing
the risks.
8.3.3 Principle 3. Being transpare not and accountable.

1. Identifying those who have a legitimate interest in the work of our organ-
isation (stakeholders) and making sure that there is regular and effective
communication with them about our organisation;
2. Responding to stakeholders questions or views about the work of our or-
ganisation and how we run it;
3. Encouraging and enabling the engagement of those who benefit from our
organisation in the planning and decision-making of the organisation.
8.3.4 Principle 4.Working effectively.

1. Making sure that our governing body, individual board members, com-
mittees, staff and volunteers understand their: role, legal duties, and del-
egated responsibility for decision-making.
2. Making sure that as a board we exercise our collective responsibility

through board meetings that are efficient and effective.
3. Making sure that there is suitable board recruitment, development and

retirement processes in place.
8.3.5 Principle 5.Behaving with integrity.

1. Being honest, fair and independent;
2. Understanding, declaring and managing conflicts of interest and conflicts
of loyalties;
8.4 Designing the governance operating model

Each component of a governance operating model consists of subcomponents
comprised of activities, only a sampling of which are listed in Exhibit 3 by way
of illustration. A governance operating model can provide substantial detail re-
garding the ways in which activities will be conducted to implement governance.
Indeed, one of the main reasons to create a governance operating model is to
define and document the processes, procedures, and reporting mechanisms that
will constitute governance, along with the training, IT, and other resources that
will be needed.
Illustrative activities in designing the governance operating model
Components Subcomponents Description
Structure
Committee structure and charters
Organizational structure and reporting lines
Control and support functions roles Outlines board and management

committee structures, mandates, membership, and charters
Establishes design of governance framework
Delineates organizational structure, reporting lines, and relationships
Highlights role and independence of control and support functions from

business owners
Oversight responsibilities Committees authorities and responsibilities
Management accountability and authority
Board oversight and responsibilities
Reporting, escalation, and veto rights Outlines the type of committees

(board and management) and associated responsibilities
Specifies functional accountabilities for day-to-day management of busi-
ness practices across the enterprise
Delineates board and management approved policies supporting delega-

tion of authority (decision rights) including reporting, escalation, and veto
rights
Talent & culture Business and operating principles
Core beliefs and risk culture
Leadership development and talent programs performance
Management and incentives Aligns governance with operating and busi-

ness principles
Articulates core beliefs and foundation for culture
Highlights characteristics of risk culture
Outlines leadership succession, assessment, and development responsibili-

ties
Aligns performance management, approach, measures and responsibilities

to compensation and incentive plans
Infrastructure
Policies and procedures
Reporting and communication
Technology
Establishes design and content of policy manuals and associated proce-

dures
Outlines type and frequency of internal reporting and communications
Defines scorecards, measures, and metrics to track performance
Aligns technology and governance requirements

Chapter 9
Resources And Capability

Of Corporate Governance
9.1 Resources And Capability Of Corporate Gov-

ernance
As in many definition of leadership, all issues in any organization must be known
and acted on by the designated leader of that organization. This in turn, denotes
a high degree of responsibility as the leader must be aware of all issues in the
organization and thus must plan for the effectiveness and betterment of every
aspect. He or she is responsible for the people, process and also the vision and
policy that should drive the organization forward. He is the policy maker and
he is also the ultimate HR man especially in the current world work climate
where people usually work for the highest bidder. He must take care or the
organization and also the people that work for it. The leader must also have
the right knowledge, skills and attitude to plan for challenges and overcome
shortfalls. He must be in the know and thus must possess enough resources to
be referred to by his or her subordinates when the crunch time comes knocking.
A responsible leader might and should delegate responsibilities but is ultimately
responsible for the results achieved by the organization; good or bad. If a
leader is responsible the way the definition stated it, then the leader would be
a good cog in any organization. The leader would be the pillar that the whole
organization can depend on. He or she would the captain of the ship who would
be the first to fend off danger and the last one out when the heat is on. If we
have someone responsible at the helm, which is it not than logical to believe that
good leadership will ensure good governance? If the leader is knowledgeable and
with the right experience and attitude like Dato Idris Jala the CEO of MAS,
would it not than lead to the creation of good governance as what we now can
plainly see in MAS. Mind boggling at times, the issues people nowadays talk
about. But when you allow ridiculous charges like the one against Karpal Singh
107
CHAPTER 9. RESOURCES AND CAPABILITY OF CORPORATE GOVERNANCE108
to be brought to court, what more can we say. Just slide away sheepishly and
hope that not a soul saw you there.
9.2 THE ROLE OF CORPORATE GOVERNANCE

IN CREATION OF KNOWLEDGE METHOD-
OLOGY AND RESULTS OF THE RESEARCH
We think that the number of board members and their age structure is basi-
cally an acceptable starting point of the composition of the board in terms of
the prerequisites for good corporate governance, while the gender structure in
this regard could be improved. A disturbing fact is that the average number
of non-executive board members compared to the number of the executive ones
is two times lower. We can conclude that the role of board members in the
improving decision-making process is satisfactory, in the sense that it is above
the reported average marks, that their role is clearly defined, that they bring
valuable skills, knowledge and experience to the company, that they come to
the meetings prepared and that they make decisions on the basis of an argu-
mentative and constructive discussion. The boards of directors have expressed
awareness that good corporate governance is an obligation for successful compe-
tition in today’s markets. The achievement of the key functions of management
boards is on average well-rated, which indicates that this is an area where, it
would be good to work on in practice, especially in terms of raising awareness
about the fact that the members of the board and the board as a whole must
put the interest of the company above their own interests, in 110 making deci-
sions; furthermore, that it is necessary to constantly refine the procedures that
improve the system of internal information and reporting, as well as the policies
related to the development of talents that reflect the needs of companies. A
stand has been made, in terms of the observations of the key benefits of good
corporate governance, that there is almost a complete lack of realization of how
important it is to improve relations with stakeholders. Hence, we have to con-
clude that a key element is missing, the element that would decide to accept
the stakeholder governance, as a serviceable concept of corporate governance,
according to which long-term interests of the company, as well as the efforts
to accommodate the interests of all stakeholders in the business venture, are a
priority. For this reason, we express concern that managers might not be en-
couraged to invest neither in the resources that the company would use in the
long run, nor in the knowledge specific to the company. If we add the unsatis-
factory involvement of non-executive directors in the composition and operation
of boards, we see that one of the key correctives is missing, the one that could
contribute to the overcoming of the problem. Both the stakeholder theory and
the service theory provide a wider service area representation of the different
types of organizational learning, hence we are under the impression that one of
the key reasons for inefficiency, poor competitiveness and lack of competitive ad-
vantage in the market, lies in our companies. This is underlined by the low level
of understanding of the importance of the socially responsible behavior of com-

panies. Regarding the capability of the board to manage knowledge, despite the
reported satisfactory average ratings, the companies should endeavor to improve
the processes of integration of the various forms and sources of knowledge, team
work (which can contribute to the optimization of decision making by people of
different knowledge and experience), and communication between management
and staff and direct cooperation with stakeholders.
9.3 The motivation and capability-related func-

tions of the board of directors
The motivation and capability-related functions of the board of directors Mace
(1986) documents that boards play at least three major roles:
(1) Serving as a source of discipline;
(2) Providing advice and counsel; and
(3) Taking action in crisis situations.
The disciplinary role is largely consistent with the monitoring function sug-
gested by agency theory. With regard to the advice and counsel provision role,
the following examples provide useful insights: J. He, J.T. Mahoney and H.C.
Wang Several years ago the president of a large insurance company came on
our board and began looking over our financial operations. After one of his
early board meetings he stopped by my office and observed that our stock was
rather low in price, that we had some convertibles that were going to mature,
that maybe a good thing to do would be to buy out some of our own stock. We
followed his suggestion and saved, I think, over $7 million. If he never does one
more thing for this company, he deserves directors’ fees for the rest of his life.
Clearly he was of enormous help to me, and to our financial people, and the
company . . . [Also], one of my outside directors is a real pro on acquisitions, and
he has been most helpful to me. He does not know much about our operations
or our problems, but he does know a lot about the process of identifying and ac-
quiring other companies. Also he knows the people involved, and this is useful.
There is a lot of stuff on acquisitions that is common in all acquisitions. He has
been through a bundle of them and has helped me through some rough spots –
in negotiating, for example (Mace, 1986, pp.18 & 22). The above examples illus-
trate the processes through which board directors improve the firm’s capability
in perceiving and implementing strategies. Such non-motivational and coopera-
tive roles of the board of directors are conceptualised more formally in the social
capital research literature3 (Granovetter, 1985). Social capital theory consid-
ers the significance of firm relationships (including board interlocks) with other
entities as a resource for social action (Nahapiet and Ghoshal, 1998). Social cap-
ital is largely informational (Koka and Prescott, 2002) and opportunity oriented
(Burt, 1992), thus facilitating effective firm actions. Specifically, directors and
their social networks serve as uniquely important conduits of information flow
due to their high social status and closeness to the core of firm-level decision-
making bodies (Mizruchi, 1996). In addition, dynamic relations between social

capital and firm resource accumulation may signal a firm’s resource position as
well as its pattern of resource flow.
9.4 Corporate governance mechanisms reclassi-

fied based on a Motivation-Capability
Corporate governance mechanisms reclassified based on a Motivation-Capability
view as indicated in the call for multi-theoretic approaches (Hillman and Dalziel,
2003), corporate governance should not be viewed merely as an agency remedy
for at least two reasons:
(1) The interactive effects between economic incentive systems and firm-level
capability and
(2) The direct information and resource flows from governance structure.
Particularly, among various governance mechanisms, the board of directors
constitutes an information-exchanging mechanism and a source for supplemental
capability.
Therefore, what is unique about the board of directors is that it simultane-
ously functions as
(1) a motivational mechanism through outsiders’ monitoring of managerial
behaviour,
(2) a resource (including information) acquisition or securing mechanism
through social capital generated by directors themselves and their social con-
tacts, directorship by key suppliers (of raw material, capital, technology as well
as legitimacy), and directors’ immediate involvement in a firm’s strategy per-
ception and implementation.
Accordingly, it is necessary to re-classify the various governance mechanisms
to reflect each mechanism’s actual role in affecting a firm’s motivation and
capability to undertake competitive actions. Except for the dual-purpose board,
all other governance mechanisms such as institutional ownership, market for
corporate control and executive compensation are a bundle (Rediker and Seth,
1995) aimed to better align managers’ personal interests with those of firm
owners. Furthermore, each of these mechanisms can be classified into one of the
three categories: inducement, direct external enforcement and external pressure
for self-enforcement
9.5 Board size

Quite frequently, board reform advocates have called for reduced board size
to improve board effectiveness (see Kesner and Johnson, 1990). Hermalin and
Weisbach (2003) maintain an agency logic to explain the empirical finding that
board size and firm-level economic value are negatively correlated. This logic,
however, raises some puzzling questions: why, if large boards are destructive
to firm-level economic value, do we see large boards and why does the mar-
ket permit large boards to exist? J. He, J.T. Mahoney and H.C. Wang Using a
meta-analysis of 131 samples, Dalton et al., (1999) provided systematic evidence
of positive estimates of board size-performance relationships. Such contradic-
tory findings in the research literature suggest a need to disentangle competing
forces embodied in board size. The current paper posits that agency-based ef-
fects of board size are related to the firm’s motivation to undertake competitive
actions as the effectiveness of board monitoring can affect managers’ willing-
ness to engage the firm in aggressive behaviours. Yet, on the other hand, social
capital theory provides justification for the existence of supplemental capability
of the board, which can enhance a firm’s own capability. Thus, board size can
simultaneously have both direct and indirect (moderating) effects on firm com-
petitive behaviour. In terms of direct effects, the board provides direct assets
that can enrich those already possessed by the firm. Increased number of direc-
tors is likely to improve both the volume and diversity of board supplemental
capability (cf. Haleblian and Finkelstein, 1993). Adding a member to the board
provides potentially useful information and resources. Thus, increasing board
size directly enhances the firm’s capability to undertake competitive actions:
9.5.1 Direct And Positive Relation Between The Size Of

A Firm’S Board Of Directors And Its Level Of Com-
petitive Activity
There will be a direct and positive relation between the size of a firm’s board
of directors and its level of competitive activity. As to effective monitoring of
managerial decision-making by the board, it usually requires timely and cohesive
efforts by the directors. Communication and coordination problems commonly
associated with large groups (Haleblian and Finkelstein, 1993) may complicate
and delay the process for the board to approve or disapprove certain firm-
level actions recommended by managers. Also, when the board becomes too
big, problems such as director free-riding increase (Lipton and Lorsch, 1992;
Jensen, 1993b). In all, the board may not perform the monitoring role effec-
tively but ‘become more symbolic and less a part of the management process’
(Hermalin and Weisbach, 2003, p.7). In such cases, the CEO has strong de
facto control over the board. As active engagement in competitive activity re-
quires substantial investment and may post a negative sign on CEO capability
measured by short-term performance, the CEO may thus have an economic
incentive to reduce the firm’s investment in competitive activities. Such reduc-
tion in competitive activities signifies inadequate utilisation of firm capability.
Hence, Proposition 2: Large board size will weaken the positive relationship
between a firm’s capability and level of competitive activity. 4.3 Outsiders (vis-
-vis insiders) A board that has a majority of outsiders provides viable links with
different sectors of the external environment (Pfeffer and Salancik, 1978; Zahra
and Pearce, 1989). Outsiders can be crucial in securing essential resources for
the firm. Moreover, an increased number of outsiders are likely to bring in
more heterogeneous perspectives and skills. Empirically, however, researchers

have not been able to observe any systematic and significant effect of outsiders’
representation on firm financial performance (Dalton et al., 1998). Therefore,
we need to investigate this issue first from capability-related perspectives at an
even finer level, anticipating limits regarding the types of resources that out-
side directors can provide (Aguilera, 2005). Harris and Shimizu (2004) suggest
that outsiders serve different but complementary roles on the board to insiders.
Outsiders Firm capability, corporate governance and competitive behaviour can
bring in different information to the management and offer new insights (Mace,
1986). However, outside directors may not have specific knowledge of the focal
industry and the focal firm and their ability in providing service and advice to
the firm is thus limited (Hillman and Dalziel, 2003) even though these outside
directors might be strongly motivated to do so. However, outsiders are more
likely to help the firm realise new, explorative opportunities and directly supply
some resources that are needed for commercialising such opportunities. In con-
trast, insiders provide the firm with a different set of knowledge-based assets.
Their knowledge of daily operations of the firm (Baysinger and Hoskisson, 1990)
and their ability in integrating intra-firm functions (Hill and Snell, 1988) help
them make more concrete contributions to technical or operational aspects of
firm activity. The knowledge and skills possessed by insiders may be more likely
to help the firm better exploit its existing capability than engage in explorative
activities (March, 1991). In sum, dominance by either outsiders or insiders has
some negative implications for the firm’s pursuit of competitive activity. An
optimal board composition – purely from the capability point of view – may
require a viable combination of both insiders and outsiders:
9.5.2 An Inverse U-shaped Relationship Between Propor-

tion Of Outsiders And The Level Of A Firm’S Com-
petitive Activity.
There will be an inverse U-shaped relationship between proportion of outsiders
and the level of a firm’s competitive activity. However, for the motivational
point of view, the primary suggestion derived from agency theory is a board of
directors dominated by outsiders (Lorsch and MacIver, 1989; Zahra and Pearce,
1989). With no conflict of interest in evaluating managers’ performance, outside
directors can maintain their independence, ensure adequate supervision of man-
agerial decisions, and increase board objectivity. Thus, the control or monitoring
role of the board is likely to be effectively performed only by outside directors.
Given the motivational function of monitoring vis--vis capability-related func-
tions, outside directors can ensure the firm to be sufficiently assertive when it
comes to inter-firm competition and that outside directors can use their power
of ratification and monitoring (Fama and Jensen, 1983b) to reduce managers’
under-investment in key strategic areas that have long-term influences on firm-
level competitive advantage (e.g. Makadok, 2003). Therefore, Proposition 3:
Increased proportion of outsiders will strengthen the positive relation between
a firm’s capability and level of competitive activity.
9.6 CEO duality

Some researchers have suggested CEO duality (i.e. CEO also holding the po-
sition of chairperson of the board) as ‘a double-edged sword’ (Finkelstein and
D’Aveni, 1994). Expectations about the positive effects of CEO duality emerge
from the capability side (Finkelstein and D’Aveni, 1994; Harris and Helfat,
1998), as the most frequently cited reason for maintaining CEO duality is the
so-called ‘unit of command’ (Finkelstein and D’Aveni, 1994). Strong leadership
represented by duality can issue commands or orders to lower levels so that criti-
cal strategic decisions can be implemented as directed (Barnard, 1938; Andrews,
1987; Finkelstein and D’Aveni, 1994). Also, having one person holding the two
positions can avoid internal political struggles between the CEO and the board,
further enhancing the firm’s capability in implementing strategies (Baliga et al.,
J. He, J.T. Mahoney and H.C. Wang 1996). Such a view is also consistent with
the general belief of stewardship theory (Davis et al., 1997). As Boyd (1995,
p.304) states: ‘duality would increase chief executive discretion by providing a
broader power base and locus of control, and by weakening the relative power
of other interest groups’. Absent agency problems, such as increased executive
discretion can be interpreted as a plus to the firm’s capability by making it
easier to carry out necessary competitive actions. Accordingly,
9.6.1 Direct And Positive Relationship Between CEO Du-

ality And The Level Of A Firm’S Competitive Ac-
tivity
There will be a direct and positive relationship between CEO duality and the
level of a firm’s competitive activity. When the CEO and chairperson positions
are held by the same individual, the monitoring function of the board is in po-
tential jeopardy (Beatty and Zajac, 1994; Finkelstein and D’Aveni, 1994; Zajac
and Westphal, 1996; Sundaramurthy et al., 1997). Allocating both roles to the
same person not only presents a conflict of interest but also opens up oppor-
tunities for management entrenchment because of the removal of some checks-
andbalances mechanisms (Finkelstein and D’Aveni, 1994). Therefore, the sepa-
ration of CEO and chair of the board can help align the interests of managers
and shareholders better and possibly prevent firm-level resources from being di-
verted from necessary strategic investments or towards inefficient applications,
thus improving firm performance (Kosnik, 1987; Baysinger and Hoskisson, 1990;
Seth, 2004). CEO duality eliminates a key mechanism of external enforcement
and can weaken the monitoring function of the board in regard to strategic in-
vestments in competitive actions. Empirical results, in general, support such
an agency-based view (Daily and Dalton, 1994; Sundaramurthy et al., 1997).
Thus, consistent with previous propositions predicting moderating effects of
agency-based, motivational mechanisms, the following proposition about the
moderating effects of CEO duality is put forth: Proposition 4: CEO duality

will weaken the positive relationship between a firm’s capability and its level of
competitive activity.
9.7 Managerial ownership

The logic employed throughout this paper suggests that the motivational mech-
anisms of corporate governance moderate the relationships between firm capa-
bility and firm competitive behaviour. Predictions about the directions of mod-
erating effects are grounded in agency theory. Table 2 summarises the various
motivational mechanisms that can be deployed by a firm to align its managers’
interests with those of the owners. Being an ‘inducement’ mechanism, man-
agerial ownership is an effective goal-aligning technique (Morck et al., 1990),
and numerous empirical studies have included managerial ownership as a key
construct (for recent reviews see Dalton et al., 2003; Daily et al., 2003a; Daily
et al., 2003b). The key agency logic is that high managerial equity holdings
should bond managerial actions to shareholder interests (Jensen and Murphy,
1990) and thus problems created by the separation of ownership and control
are mitigated (Fama and Jensen, 1983b). Ownership can motivate managers
to compete with rivals and invest in strategic areas that have long-term ben-
efits to the firm. Thus, the motivational obstacles hindering full utilisation of
firm capability are more likely to be removed. Managers are expected to have
less economic incentive to divert the firm’s resources for non-productive activ-
ities Firm capability, corporate governance and competitive behaviour such as
managerial perquisites. Particularly, many researchers suggest the increased
managerial incentives to engage the firm in more R&D activities (Hansen and
Hill, 1991; Johnson and Greening, 1999). Thus, the following are proposed:
Proposition 5: Managerial ownership will strengthen the positive relation-
ship between a firm’s capability and level of competitive activity.
Chapter 10
The Ethical Influence of

Leaders
10.1 The Trouble with Transformational Lead-

ership: Toward a Federalist Ethic for Or-
ganizations
Following the American War of Independence, a variety of local conflicts broke
out within the loosely united states. New York taxed ships bound for New
Jersey, which retaliated by levying lighthouse fees. Maryland fishermen fought
Virginians over oysters taken from the Chesapeake Bay. Moneyless farmers
in Massachusetts banded together to stop courts from convening and sending
debtors to prison. Such events brought state delegates to Philadelphia in the
summer of 1787 to plan a new organization: a federal government to coordinate
their joint affairs and protect their individual rights. The resulting plan, the
Constitution of the United States, was shaped in large part by James Madison,
who set the stage for the Philadelphia convention with a speech about a clas-
sic organizational problem. Madison told the delegates that all societies were
divided into different interest groups, or factions: ”rich and poor, debtors and
creditors, 180 Ethics, the Heart of Leadership the landed, the manufacturing,
the commercial interests, the inhabitants of this district, or that district, the
followers of this political leader or that political leader, the disciples of this
religious sect or that religious sect (June 6, 1787).”1 He went on to observe
that throughout history different factions have tried to take advantage of one
another: ”In Greece and Rome the rich and poor, the creditors and debtors, as
well as the patricians and plebeians alternately oppressed each other with equal
unmercifulness .... We have seen the mere distinction of color made in the most
enlightened period of time, a ground of the most oppressive dominion ever exer-
cised by man over man.” Madison concluded that a key problem in designing a
system of government was how to manage factional tensions, given the readiness
115
CHAPTER 10. THE ETHICAL INFLUENCE OF LEADERS 116
of groups to pursue their own interests at others’ expense. Over 200 years later,
this is still a key problem in the management of governments, corporations, and
organizations of all sorts. The general issue is how to deal with the diverse
interests that are prevalent in any complex social system: How, for example, to
reconcile the expectations of various lobbies, lawmakers, taxpayers, and other
constituents of public agencies; how to satisfy the frequently competing claims
of investors, employees, customers, dealers, and other stakeholders of private
firms; how, more specifically, to control in-fighting among corporate divisions,
to gain union cooperation in meeting foreign competition, to contain executive
salaries and perks, to keep insiders from exploiting privileged information, and
so on. Lately, management writers have voiced real concern about such things.
In both popular and academic reports, a common complaint is that many of our
organizations are going to ruin because those in charge have let private interests
(their own included) run amok. Zaleznik, for instance, contends that ”business
in America has lost its way” because of mediocre management whose major
fault has been complicity in self-serving organizational politics as opposed to
productive work.
1. John Gardner adopts a Madisonian perspective and sees ”the mischiefs
of faction” throughout the fabric of American society, which is at best
”loosely knit, at worst completely unraveled”; to Gardner, ”it is a mystery
that [this society] works at all,” as group after group pursues parochial
aims and grievances in a ”war of the parts against the whole.
2. From a global standpoint, Bennis and Nanus argue ”a chronic crisis of

governance-that is, the pervasive incapacity of organizations to cope with
the expectations of their constituents-is now an overwhelming factor world-
wide.
3. The Trouble with Transformational Leadership 181 What is interesting
about recent attempts to deal with the problem of faction is that these
writers, and many others, offer a cure that Madison in 1787 considered
worse than the disease. The suggested remedy is a type of leadership
that transforms self-interest and unites social systems around common
purposes ( often termed transformational leadership). So opposed was
Madison to this prescription that he insisted on constitutional devices
to counteract it in the American system of government. The American
experiment was to be a government of laws, not of men or women or
charismatic leaders. Perhaps Madison was shortsighted; perhaps his con-
cerns have little applicability to nongovernmental organizations; perhaps
they are no longer relevant at all. But possibly he recognized something
important that has been overlooked by modern leadership theorists. The
purpose of this chapter is to compare Madison’s views and emerging the-
ories of leadership, especially as these bear on the problem of controlling
self-interested organizational behavior.
10.2 TRANSFORMATIONAL VERSUS TRANS-

ACTIONAL LEADERSHIP
Much of the current interest in transformational leadership stems from a study of
governmental leaders by political scientist-historian James MacGregor Burns.
Burns differentiates two sorts of leadership: transactional and transforming.
The more common, he notes, is transactional leadership. This involves the
exchange of incentives by leaders for support from followers-in politics, for in-
stance, jobs for votes or subsidies for campaign contributions. The object of
such leadership is agreement on a course of action that satisfies the immediate,
separate purposes of both leaders and followers. Transforming leadership, in
contrast, aims beyond the satisfaction of immediate needs. According to Burns,
”the transforming leader looks for potential motives in followers, seeks to satisfy
higher needs, and engages the full person of the follower.”6 Here, the object is
to turn individual’s attention toward larger causes (political reform, revolution,
national defense, etc.), thereby converting self-interest into collective concerns.
The distinguishing feature of transforming leadership is a common goal; the
purposes of the leader and followers, ”which might have started out as separate
but related, as in the case of transactional leadership, become fused.
10.3 Ethics, the Heart of Leadership

Burns goes on to develop the basic normative theme of the paradigm: Trans-
forming leadership is generally superior to transactional indeed, the latter is
hardly leadership at all. For Burns, transforming leadership is motivating, up-
lifting, and ultimately ”moral in that it raises the level of human conduct and
ethical aspiration of both leader and led.”8 A textbook example is Gandhi’s
elevation of the aspirations and life chances of millions of Indians who followed
him toward independence. Transactional leadership, on the other hand, is char-
acterized as immobilizing, self-absorbing, and eventually manipulative in that it
seeks control over followers by catering to their lowest needs. Burns’s examples
of transactional figures include Tammany Hall bosses bent on trading political
favors for preservation of the status quo. In Burns’ s view, transactional politi-
cians are questionable leaders because they focus on mutually tolerable behavior,
rather than jointly held goals-on means, rather than ends and leadership is noth-
ing if not linked to collective purpose.This line of analysis has been extended
to organizations by a number of theorists. Bass finds elements of transactional
leadership at the root of popular organizational theories (such as exchange, ex-
pectancy, and path-goal models) and common management practices (such as
contingent reinforcement and management-by-exception).10 These theories and
practices imply that organizations consist of agreements between managers and
subordinates to fulfill specific obligations for mutual advantage; they further
imply that leaders should make these agreements even more specific to increase
subordinate’s satisfaction and performance. Bass argues, however, that any
satisfaction or performance gains from transactional leadership are apt to be
small. He claims that transformational leaders produce much larger effects on

followers.
10.4 ORGANIZATIONAL IMPLICATIONS

Warren Bennis, a veteran observer of organizational leadership, sounds a fa-
miliar theme. Asking Why Leaders Can’t Lead, Bennis points 192 Ethics, the
Heart of Leadership to increasing selfishness in American society and organi-
zations. He notes that ”everyone insists on having his or her own way now,”
from young urban professionals, to corporate executives, to the president of the
United States. The trouble is that there is no agreement or commitment to the
public good, no common vision, no mutual purpose: As the world has divided
into factions, so has America, and so consensus is harder and harder to come
by. Each faction marches stubbornly to its own drummer, has its own priorities
and agenda, and has nothing in common with any other faction-except the un-
bridled desire to triumph over all the others. The Peruvians call this arribismo.
It means, ”You’ve got yours, Jack, and now I’m going to get mine.” It means
”making it,” carried to the nth power. This fragmentation and fracturing of the
common accord occurred for good reason, because, in America, those on top
have traditionally tried to keep everyone else down, but it makes leadership a
chancy undertaking at any level. Bennis’s solution: ”People in authority must
develop the vision and authority to call the shots. Huh? Entrust those greedy
individuals on top with even greater power to pursue ”the common good” as
they envision it? In fairness to Bennis, there’s a bit more to his argument,
but it is difficult, in theory, to get from selfish public and corporate officials to
selfless transformational leadership-perhaps even harder, in practice. Madison
foresaw this. Moreover, his view is just as applicable to private organizations as
to governmental ones, since the same problems arise in their design. Among the
most fundamental are problems of controlling factions .and ambitious leaders.
10.5 THREATS POSED BY LEADERS

Madison suggests to us that, in any kind of social system, inspired leadership
can do as much harm as good. Lately, journalists and insiders have documented
ample damage done by corporate folk-heroes once hailed as transformational
leaders. Some advocates of transformational leadership allow that there is dark
side, that the risks can be as large as the promises. Yukl remarks that his-
tory is full of charismatic leaders who caused death, destruction, and misery or
who ruled over firms like tyrants and egomaniacs. However, Madison remains
exceptional in taking the matter seriously. In proposing social structures that
would impact people’s daily lives, Madison recognized a responsibility to build
in protections.
10.6 The Trouble with Transformational Lead-

ership
Against abuses of power. Contemporary leadership theorists are more inclined
to shrug off the issue-and to depict protective devices (i.e., checks and balances
and right-conferring rules) as bureaucratic hindrances that reduce the autonomy
and transforming potential of leaders. Bass, for example, grants that some trans-
formational leaders have ”authoritarian tendencies,” that ”some fulfill grandiose
dreams at the expense of their followers,” yet he still prescribes more ”flex-
ible” organizational structures to encourage determined leadership.40 Others
offer timid advice to treat transformational leadership with caution. Roberts
and Bradley compare charisma to an unpredictable genie in a bottle; they ask
whether it should be set free to transform organizations; then, they leave the
question hariging.Howell and Avolio go a bit further and urge top managers
to screen corporate leaders more carefully to weed out unethical charismatics,
but they fail to indicate just what to screen for, how to control those doing the
screening, or what to do about opportunists who slip through the net. Howell
and Avolio hold out a lot of hope for voluntary ethical codes and executives
who function as positive role models.Although such things are not necessarily
worthless, Madison knew enough not to rely on them. He felt that flesh-and-
blood persons who might suffer from misconduct by public officials deserved
better than parchment barriers and hypothetical defenses. Persons vulnerable
to corporate officials do, too. But Madison’s challenge goes far beyond showing
the dangers of charismatic leaders or the moral obligation to control them. It
cuts to the very heart of transformational leadership theories, to the value of
collective goals. Individuals are at risk, Madison argues, not only from self-
interested leaders but also from self-interested majorities acting in the name of
some ”common purpose.” In modern organizations, no less than in the colonial
assemblies of Madison’s experiences, focused groups can act in ways that their
members would not dream of, alone in their closets.
10.7 RIGHTS VERSUS GOALS IN ORGANI-

ZATIONAL THEORY
Many ordinary people might agree wholeheartedly with proposals to secure basic
individual interests and freedoms against infringement in the workplace. Many
might welcome, for example, guarantees of rights to due process in termination
decisions (rights that tenured faculty members, of both public and private insti-
tutions, take for granted). Leadership theorists, on the other hand, express much
less enthusiasm about protecting individual rights that could conflict with orga-
nizational goals. Things like freedom in the factory, unions, and constitutional
checks on corporate policies are not generally what theorists have in mind when
speaking of worker empowerment. In the leadership literature, the meaning of
the term is more like the interpretation at Ethicon-New Mexico: a Hegelian no-
tion of freedom to serve the goals of the organization. 48 Charles A. Reich’s idea
of empowering workers to seek their own goals in organizations is apt to seem
a little too, well,free.49 In such ethical matters, however, the opinions of Reich,
Madison, and ordinary people may be better guides than traditional theories of
organization. Organizational theorists have historically found individual rights
and freedoms less appealing than collective goals, not only in organizations but
in society at large. On the heels of the American and French Revolutions, a
pioneering organizational theorist, Henri de Saint-Simon, criticized Madisonian
tendencies in the French Cons ti tu tion: [Lack of collective purpose] is the
great gap in the Charter. It begins, as do all the constitutions dreamed up
since 1789, by putting forward the ’rights of Frenchmen, which can only be
clearly determined when the purpose of society is established in a positive way,
since the rights of every associate can only be based upon the abilities which he
possesses and which contribute toward the common goal.so It cannot too often
be repeated that society needs an active goal, for without this there would be
no political system. The maintenance of individual freedom cannot be the goal.
People do not band together to be free. Savages join together to hunt, to wage
war, but certainly not to win liberty
Revision Questions
1. Q1) Summarise the main principles relevant to corporate governance in
the public sector.
2. SUGGESTED ANSWER This question is looking for answers that dis-

cussed Nolans principles of corporate governance in the public sector. As
there are seven of them, candidates would have had time to write only
very briefly about these principles. They are: o Selflessness - holders of
public office should take decisions in the public interest, not for personal
benefit. o Integrity - holders of public office should not place themselves
under any obligation to another person, who might use this obligation
to exert influence. o Objectivity - decisions should be made for rational
reasons, and selections/choices made on merit. o Accountability - holders
of public office should be accountable to the public for their actions. o
Openness - holders of public office should be as open as possible about
the decisions they make. o Honesty - they should also act honestly. o
Leadership - they should promote the other principles through leadership
and by setting an example. o Q2) Outline the benefits of corporate social
responsibility (CSR) for companies.
3. SUGGESTED ANSWER
4. A brief definition of CSR would have been useful. CSR is responsibility

shown by a company for the broader interests of society as a whole, and
for stakeholders other than shareholders. It includes concern for the en-
vironment, employees and society in general. It has been suggested that
companies with CSR policies tend to be better managed and more success-
ful commercially, although there is no conclusive evidence of this. From a
business case perspective, improving CSR improves corporate reputation
among stakeholders of the company. By improving reputation and stake-
holder relations, the company is likely to perform better over the medium
to long-term. Some institutional investors are required to report on the
extent to which they take socially responsible investment into considera-
tion when making investment decisions. There is a stronger probability of
support from the investment community for a company with good CSR
policies. Paying attention to CSR is important in terms of risk manage-
ment. There are many risks related to poor CSR, including environmental
and human rights-related risks. Such risks can destroy reputation and im-
pact on share value. CSR is also associated with conducting business in
an ethical way. A compan business might benefit from the trust between
suppliers and customers that comes from ethical dealing. Cynical can-
didates may also have commented that CSR policies give companies an
opportunity for favourable public relations, which is an aspect of market-
ing.
5. Q3) Management research shows that investors are willing to pay more
for a company with good corporate governance practices. Many investors
look beyond the balance sheet for evidence of corporate social responsi-
bility (CSR). (a) Define corporate governance, and briefly analyse this
definition using examples. (b) Define CSR, and briefly analyse this defi-
nition using examples. (c) Briefly discuss how corporate governance may
enhance corporate social responsibilities.
6. Q4) Coaching is “the process of giving motivational feedback to maintain

and improve Performance” (Lussier & Achua 2013). (a) It is important to
provide coaching when employee performance falls below expected levels.
Based on the coaching model, discuss how managers can help employees
improve performance. (b) In giving coaching feedback, managers should
also keep in mind some guidelines. For example, one guideline can be that
managers focus on the behaviour not on the person. Please list five (5)
guidelines and briefly explain why these guidelines are important.
7. Q5) Advocates of stewardship and servant leadership view the leader as

a steward and servant of the people. They believe that leadership has
less to do with directing other people and more to do with serving people
by placing others needs ahead of the leaders” (Lussier & Achua 2013).
(a) Explain attributes of an effective steward leader. In addition, based
on your own experience (e.g., think about a leader in your or others real
work settings), provide an example to show how this leader meets or does
not meet these attributes for effective stewardship. (b) Explain attributes
of an effective servant leader. In addition, based on your own experience
(e.g., think about a leader in your or others real work settings), provide an
example to show how this leader meets or does not meet these attributes
for effective servant leadership.
8. Q6) Emotional intelligence (EI) has been extensively studied in leadership
research. Researchers argue that leadership can be inspired by EI. The
literature also suggests that EI tends to be positively related to leadership
effectiveness, leadership development, and leadership emergence etc (Ct,
Lopes, Salovey & Miners 2010). (a) Contrast ability EI and trait EI. (b)
Discuss how EI can inspire or influence effective leadership. At least four
(4) components/dimensions of EI should be discussed.
9. Q7) Process motivation theories relate to understanding how people choose
behaviour to fulfil their needs” (Lussier & Achua 2013). These theories
attempt to “understand the following: why people have different needs,
why their needs change, how and why people choose to try to satisfy needs
in different ways, the mental processes people go through as they under-
stand situations, and how they evaluate their need satisfaction” (Lussier
& Achua 2013). (a) Based on equity theory, discuss how managers can
motivate employees through ensuring fairness in the organisation. (b) Ex-
plain expectancy theory. Provide examples to discuss how managers can
motivate employees applying this theory.
10. Q8) Transactional leadership and transformational leadership are two im-
portant leadership styles in the literature (Lussier & Achua 2013). The im-
pacts of these two leadership styles on effectiveness of followers have been
extensively investigated. (a) Contrast transactional leadership with trans-
formational leadership. (b) Transformational leaders are usually brought
into an organisation experiencing decline or when major changes are re-
quired. They are expected to transform The organisation and put it on
a path to prosperity. Critically discuss how transformational leaders may
lead a successful transformation. (6 marks)
11. Q9) Credibility and trust have long been considered important compo-
nents of leadership effectiveness. Leaders pursue these attributes through
a number of avenues, for example, through attempting to influence per-
ceptions of their competence to serve the groups mission and attempting
to influence perceptions of their allegiance to the interests of their pro-
fessional constituencies (Leeds, 2012). (a) Discuss how leaders can gain
credibility. You may focus on Kouzes and Posners six disciplines of credi-
bility. (b) Define trust. Discussion how leaders can build trust.
12. Q10) “Leadership style is the combination of traits, skills, and behav-
iors leaders use as they interact with followers” (Lussier & Achua 2013).
Although a leadership style is based on traits and skills, the important
component is the behaviour, because it is a relatively consistent pattern
of behaviour that characterises a leader. (a) Discuss the similarities and
differences between the University of Michigan and Ohio State Univer-
sity leadership models. (b) Discuss Blanchards four leadership styles (i.e.,
directing, coaching, supporting, and delegating) and provide relevant ex-

amples for each style.
13. Q11) Transactional leadership and transformational leadership have been

extensively studied in the literature. The impacts of these two leadership
styles on effectiveness of followers have been extensively investigated. (a)
Contrast transactional leadership with transformational leadership. (b)
Transformational leaders are usually brought into an organisation experi-
encing decline or when major changes are required. They are expected to
transform the organisation toward a positive direction. Critically discuss
how leaders can lead a successful transformation process.
14. Q12) “An effective strategic leader seeks the participation of a broad coali-
tion of employees throughout the strategic management process because
followers who participate in the process take ownership in it and are more
committed to its success” (Lussier & Achua 2013). (a) Define strate-
gic leadership. (b) Discuss how a leader can successfully deal with the
strategic management process. You may identity the five major decision
categories (or steps) in the strategic management process.
15. Q13) what is the role that leadership plays to a manager? A leaders role
is to communicate with clarity to the strategic vision to the management
team. This vision must be able to be in the form of a clear direction and
plans. There should be clear priories, objectives timeliness, accountability,
and performance measures.
16. Q14) Participative leadership is best viewed as a combination of which

two approaches for studying leadership? a. trait and behavior b. power-
influence and trait c. behavior and power-influence d. trait and situational
17. Q15) How Can Boards deliver improved Accountability and Transparency
Expected by Stakeholders?
18. Q16) Explain major leadership styles in organisation development.

19. Q17) Explain major qualities of a successful leader in organisation devel-
opment,
20. Q18) Whats the boards role in corporate governance — and how does that
differ from managements role?
21. Q19) Why should boards change their approach now?
22. Q20) How does the boards role in oversight of risks factor in?
23. Q21) How can the board influence the corporate risk culture?
24. Q22) How can companies evaluate the boards effectiveness?

25. Q23) Saxophone Enterprises Co (Saxophone) has been trading for 15 years
selling insurance and has recently become a listed company. In accordance
with corporate governance principles Saxophone maintains a small internal
audit department. The directors feel that the team needs to increase
in size and specialist skills are required, but they are unsure whether
to recruit more internal auditors, or to outsource the whole function to
their external auditors, Cello & Co. Saxophone is required to comply
with corporate governance principles in order to maintain its listed status;
hence the finance director has undertaken a review of whether or not
the company complies. Bill Bassoon is the chairman of Saxophone, until
last year he was the chief executive. Bill is unsure if Saxophone needs
more non-executive directors as there are currently three non-executive
directors out of the eight board members. He is considering appointing
one of his close friends, who is a retired chief executive of a manufacturing
company, as a non-executive director. The finance director, Jessie Oboe,
decides on the amount of remuneration each director is paid. Currently
all remuneration is in the form of an annual bonus based on profits. Jessie
is considering setting up an audit committee, but has not undertaken
this task yet as she is very busy. A new sales director was appointed nine
months ago. He has yet to undertake his board training as this is normally
provided by the chief executive and this role is currently vacant. There
are a large number of shareholders and therefore the directors believe
that it is impractical and too costly to hold an annual general meeting of
shareholders. Instead, the board has suggested sending out the financial
statements and any voting resolutions by email; shareholders can then
vote on the resolutions via email. Required: In respect of the corporate
governance of Saxophone Enterprises Co: (i) Identify and explain FIVE
corporate governance weaknesses; and (ii) Provide a recommendation to
address each weakness.
26. Q24) The foundation to governance is the action of the individual. These
actions are guided by a persons moral stance. In reference to the above
statement elaborate the characteristics that are important in the develop-
ment of appropriate moral stance.
27. Q25) Each internal stakeholder has an operational role within the company
that promotes corporate governance. Explain.
28. Q26) There are various kinds of principal agent conflict with appropriate
corporate firm examples. Expound on these types of conflicts.
29. Q27) Transaction cost theory and agency theory essentially deal with the
same issues and problems, where agency theory focuses on three individ-
ual agent transaction cost theory focuses on the individual transaction.
Discuss
30. Q28) Summarize the key provision of the code of corporate governance on
the following issues.
31. The board Chairman and chief executive Information and professional
development Performance evaluation
32. Q29) The board of Directors roles and responsibilities contribute a lot to
promotion of corporate governance. Discuss

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JOMO KENYATTA UNIVERSITY

December 06, 2018

(elearning@jkuat.ac.ke)P.O. Box 62000,

0.1 COURSE OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . 5

1 ORGANISATIONAL DEVELOPMENT,STRATEGY APPROACHES,STRUCTURE,OB

2.3.1.5 Innate Leadership . . . . . . . . . . . . . . . . . 24

3 Team building in an organisation 34

4 LEADERSHIP BEHAVIOUR LEADERSHIP BEHAVIORS 59

4.2 THEORY OF LEADERSHIP . . . . . . . . . . . . . . . . . . . . 63

5 LEADERSHIP AND DECISION MAKING 69

6 CORPORATE SOCIAL RESPONSIBILITY (CSR) 76

7.5 Disclosure and transparency . . . . . . . . . . . . . . . . . . . . . 93

8 UNDERSTANDING GOVERNANCE PRINCIPLES METH-

9 Resources And Capability Of Corporate Governance 107

10 The Ethical Influence of Leaders 115

10.7 RIGHTS VERSUS GOALS IN ORGANIZATIONAL THEORY . 119

1.0 PURPOSE OF THE COURSE

0.2 COURSE DESCRIPTION

0.3 TEACHING METHODOLOGY

0.4 COURSE EVALUATION / ASSESSMENT

6.0 COURSE TEXTS

2. Katzenbach, J. R., & Douglas, S. K. (2001). The discipline of teams: A

4. Adair, J. (1973). Action-Centred Leadership. New York: McGraw-Hill.

10. Adair, J. (1973). Action-Centred Leadership. New York: McGraw-Hill.

15. Bakker and Demerouti, (2006). The JD-R Model.

ISBN: 047138254X 3. Randall, P. S., & Mannix, E. (Eds.). (2003). Lead-

1.1 ORGANIZATIONAL DEVELOPMENT

1.2 Background of Study

aging the vigorous growth of organization development in corporate governance.

1.3 Conceptual Understanding of the Organiza-

Organizational development is a long-term effort, led and supported by top

1.4 Factors that contribute to high performance

1.5 The Growth and Relevance of Organization

in their own right but are interrelated.

1.6 ORGANISATIONAL DEVELOPMENT STRAT-

1.6.1 Kurt Lewins Change Model:

change strategies and techniques. These levels involve:

1.6.1.1 Stage 1: Unfreezing

1.6.1.2 Stage 2: Moving (Changing)

1.6.1.3 Stage 3: Refreezing

2.0.2 What is leadership?

2.0.2.1 Creates an inspiring vision for the future.

2.0.2.2 Motivates and inspires people to engage with that vision.

2.1 What can you learn about leadership?

2.2 Foundations of Leadership

organization. However, for leadership to be effective, it must be built on a

2.2.0.5 Strategy and Tactics.

2.2.0.6 Organizational Culture.

times can be set and demonstrated by leadership, even in difficult situations.

2.3 Theories of leadership

2.3.1.1 The different types of leadership models

Behavioural Ideals Behavioural Ideals leadership models concentrate on

Situational/ Contingency Situational (or Contingency) leadership models

Functional Functional types of leadership models focus on what the leader

Integrated Psychological The Integrated Psychological leadership model

2.3.1.2 Trait-Based Leadership

Stodgily and challengers to trait-based theory

Leadership thinking and societal development

2.3.1.3 Trait-Based Leadership

2.3.1.4 What is a trait?

2.3.1.5 Innate Leadership

Stogdill and challengers to trait-based theory In 1948, Ralph Stogdill

2.3.1.6 Leadership thinking and societal development

confidence - is potentially helpful or unrealistic;

Retain star employees

Hidden – This area corresponds to the ‘private self. This is information

Unknown – This area corresponds to information that the individual and

Goals Clarity of objective, target and priorities

Roles Clear roles and responsibilities

Processes Procedures working correctly (collaboration in problem-solving,

Job Demands Work pressure and heavy workload

Career and personal development opportunities

Measure it. Sometimes we think we are committed to something, yet our

To improve your discernment, do the following:

Analyze past successes. Look at some problems you solved successfully in

Focus 25 percent on new things –– Growth equals change. If you want to

Focus 5 percent on areas of weakness –– Nobody can entirely avoid working