Final Chapter # 5

Strategic Leadership:
Creating a Learning Organization
and an Ethical Organization

Follow the text: Strategic Management

– text and cases, 7th Edition, by Gregory
G. Dess, G. T. Lumpkin, Alan B. Eisner
& Gerry McNamara. McGraw-Hill
Education.
Dr Md Moazzam
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Learning Objectives

• After reading this chapter, you should have a

good understanding of:
- The three key activities in which all successful
leaders must be continually engaged.
- The importance of recognizing the interdependence
of the three key leadership activities, and the
salience of power in overcoming resistance to
change.
- The crucial role of emotional intelligence (EI) in
successful leadership as well as its potential
drawbacks.
- The value of creating and maintaining a “learning
organization” in today’s global marketplace.
Dr Md Moazzam
Husain
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Learning Objectives

• After reading this chapter, you should have a

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

Dr Md Moazzam
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Leadership: Three
Interdependent Activities
• Leadership is the process of transforming
organizations from what they are to what the
leader would have them become
• Leadership should be
- Proactive
- Goal-oriented
- Focused on the creation and implementation of a
creative vision

Dr Md Moazzam
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Leadership: Three
Interdependent Activities

Successful
leaders must
recognize
three
interdependent
activities:
Dr Md Moazzam Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership
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Setting a Direction

• Scan environment to develop

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

Dr Md Moazzam
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Example

• DuPont’s vision statement is “to be the world's

most dynamic science company, creating
sustainable solutions essential to a better, safer
and healthier life for people everywhere.”

Dr Md Moazzam
Source: www.dupont.com
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Designing the Organization

• Difficulties in implementing the leaders’ vision

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

• In nurturing a culture dedicated to excellence and

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

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

Dr Md Moazzam
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A Leader’s Bases of Power

Dr Md Moazzam
Exhibit 11.2 A Leader’s Bases of Power
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Emotional Intelligence: A Key

Leadership Trait
Successful traits
of leaders at the
highest level

Technical Cognitive Emotional

skills abilities intelligence

Accounting, Analytical reasoning, Ability to work with

business quantitative analysis, others, passion for
planning, etc. etc. work, etc.

Dr Md Moazzam
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Emotional Intelligence

• Five components of emotional intelligence

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

Dr Md Moazzam
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Five Components of Emotional

Intelligence at Work

Definition Hallmarks
Self-management • The ability to recognize • Self-confidence
skills:
• Self- and understand your • Realistic self-
awareness moods, emotions, and assessment
drives, as well as their
effect on others. • Self-deprecating sense
of humor
• Self-regulation • The ability to control or • Trustworthiness and
redirect disruptive integrity
impulses and moods. • Comfort with ambiguity
• The propensity to • Openness to change
suspend judgment—to
think before acting.
Source: Adapted from D. Goleman, “What Makes a Leader,” Harvard Business Review, October-November 1998, p. 95 (with permission)
Dr Md Moazzam
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work Husain
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Five Components of Emotional

Intelligence at Work

Definition Hallmarks
Self-management • A passion to work for • Strong drive to achieve
skills:
• Motivation reasons that go beyond • Optimism, even in the
money or status. face of failure
• A propensity to pursue •
Organizational
goals with energy and
Managing commitment
persistence.
Relationships:
• Empathy • The ability to • Expertise in building
understand the and retaining talent
emotional makeup of
other people. • Cross-cultural
sensitivity
• Skill in treating people
according to their • Service to clients and
emotional reactions. customers
Dr Md Moazzam
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work Husain
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Five Components of Emotional

Intelligence at Work

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

Source: Adapted from D. Goleman, “What Makes a Leader,” Harvard Business Review, October-November 1998, p. 95 (with permission)
Dr Md Moazzam
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work Husain
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Developing a Learning Organization

• Successful learning organizations

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

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

Dr Md Moazzam
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Question

Do you agree with this statement by Ken Melrose,

“the great leader is a great servant”?

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

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

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

Dr Md Moazzam
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Creating An Ethical Organization

• Organizational ethics is a direct reflection of its

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

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Example

• In order to avoid unethical business practices,

you should never do the following:
1. Suppress information that might damage your
reputation.
2. Deny charges that are relevant and factual.
3. Spend money for public relations or advertising to
counter honest complaints.
4. Ignore problems with the products you sell.
5. Refuse to accept blame.

Dr Md Moazzam
Source: Gerson, Vicki. “Avoiding Unethical Business Practices,” www.nfib.com. February 21, 2003.
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Creating An Ethical Organization

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

Dr Md Moazzam
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Integrity-Based versus Compliance-Based

Approaches to Organizational Ethics

• Essential links between organizational integrity

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

Dr Md Moazzam
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Question

Integrity-based ethics programs combines a

concern for law with an ______.
A) emphasis on the proper use of managerial
power
B) emphasis on legal consequences of unethical
behavior
C) emphasis on managerial responsibility for ethical
behavior
D) emphasis on social responsibility for ethical
behavior
Dr Md Moazzam
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Approaches to Ethics Management

Characteristics Compliance-Based Integrity-Based

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

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

Characteristics Compliance-Based Integrity-Based

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

Behavioral Autonomous beings Social beings guided by

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

Source: L. S. Paine, “Managing for Organizational Integrity,” Harvard Business Review 72, no. 2 (1994), p. 113 (with permission).
Dr Md Moazzam
Adapted from Exhibit 11.6 Approaches to Ethics Management
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Key Elements of Highly

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

Dr Md Moazzam
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Key Elements of Highly

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

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Key Elements of Highly

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

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Key Elements of Highly

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

Dr Md Moazzam
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Key Elements of Highly

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

Dr Md Moazzam
Husain