Discussion

kmisty_36

Chapter11.StrategicLeadershipCreatingaLearningOrganizationandanEthicalOrganization.pptx

Home >Business & Finance homework help >Management homework help >Discussion

CHAPTER 11

Strategic Leadership: Creating a Learning Organization and an Ethical Organization

Learning Objectives

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

11-1 The three key interdependent activities in which all successful leaders must be continually engaged.

11-2 Two elements of effective leadership: overcoming barriers to change and using power effectively.

11-3 The crucial role of emotional intelligence (EI) in successful leadership, as well as its potential drawbacks.

11-4 The importance of creating a learning organization.

11-5 The leader’s role in establishing an ethical organization.

11-6 The difference between integrity-based and compliance-based approaches to organizational ethics.

11-7 Several key elements that organizations must have to become ethical organizations.

©McGraw-Hill Education.

Strategic Leadership

Consider . . .

To both create and implement proper strategies, firms must have strong and effective leadership.

What are the activities that leaders engage in, and what practices and capabilities enable leaders to be effective at sustaining a competitive advantage for their firms?

To what degree does ethical leadership matter?

©McGraw-Hill Education.

To both create and implement proper strategies, firms must have strong and effective leadership, and this leadership must be strategic in managing, adapting, and coping in the face of increased environmental complexity and uncertainty. In order to be successful at creating and sustaining a competitive advantage, leaders must engage in several activities, utilizing key capabilities, one of which is emotional intelligence, and the other of which is an awareness of how to create and maintain an ethical organization. Effective leaders play an important and often pivotal role in creating an organizational culture that pursues excellence while adhering to high standards of ethical behavior.

Strategic Leadership Definition

Leadership is the process of transforming organizations from what they are to what the leader would have them become.

Successful leaders are:

Proactive – dissatisfied with the status quo

Goal oriented – visualizing successful futures

Focused on the creation & implementation of a creative vision – understanding the process

©McGraw-Hill Education.

Leadership is proactive, goal oriented, and focused on the creation and implementation of a creative vision. Leadership = the process of transforming organizations from what they are to what the leader would have them become. This definition implies dissatisfaction with the status quo, a vision of what should be, and a process for bringing about change. Leaders are change agents whose success is measured by how effectively they formulate and implement a strategic vision and mission.

Strategic Leadership Model

Exhibit 11.1 Three Interdependent Leadership Activities

©McGraw-Hill Education.

Successful leaders recognize three interdependent activities that must be continually reassessed for organizations to succeed. These activities are (1) setting a direction, (2) designing the organization, and (3) nurturing a culture dedicated to excellence and ethical behavior. The interdependent nature of these three activities is self-evident. Consider an organization with a great mission and a superb organizational structure, but a culture that implicitly encourages shirking and unethical behavior. Often, failure of today’s organizations can be attributed to a lack of equal consideration of these three activities. The imagery of the three-legged stool is instructive: it will collapse if one leg is missing or broken.

Question (1 of 3)

XYZ’s CEO scrapped the company’s commission-based reward system because it was rewarding employees for inappropriate behavior. This is an example of

setting a direction.

designing the organization.

unethical behavior.

failure to maintain the status quo.

©McGraw-Hill Education.

Answer: B. Although setting a direction for the organization is important, the organization’s control systems must be designed so they are consistent with the direction and the culture the CEO is trying to enable. Remember the discussion from chapters 9 & 10: changing the reward system is an example of designing the organization.

Strategic Leadership: Setting a Direction

Setting a direction requires the ability to scan the environment for knowledge about:

All stakeholders

Salient environmental trends & events

Then integrate that knowledge into a strategic vision of what the organization could become:

A clear future direction

A framework for the firm’s mission & goals

Leading to enhanced employee communication, participation, & commitment

©McGraw-Hill Education.

Setting a direction = a strategic leadership activity of strategy analysis and strategy formulation. In order to set a direction for the organization, the leader needs a holistic understanding of the firm’s stakeholders, as well as an awareness of other salient environmental trends and events. This knowledge must be integrated into a vision of what the organization could become. This leadership activity requires the capacity to solve increasingly complex problems, become proactive in approach, and develop viable strategic options. A strategic vision provides many benefits: a clear future direction; a framework for the organization’s mission and goals; and enhanced employee communication, participation, and commitment. In order to do this, leaders sometimes need more creative solutions than incremental ones. They must come up with bold visions.

Strategic Leadership: Designing the Organization

Designing the organization requires building mechanisms to implement the leader’s vision and strategies through:

Structures & teams

Systems & processes

Lack of appropriate design could cause problems:

Managers who don’t understand their responsibilities

Reward systems that are not motivating

Inappropriate financial control systems

Insufficient integrating mechanisms

©McGraw-Hill Education.

Designing the organization = a strategic leadership activity of building structures, teams, systems, and organizational processes that facilitate the implementation of the leader’s vision and strategies. Leaders have an important role in creating systems and structures to achieve desired ends. For instance, without appropriately structuring organizational activities, a firm would generally be unable to obtain an overall low-cost advantage. It would be unable to closely monitor its costs through detailed and formalized cost and financial control procedures. Leadership must make sure systems and structures are compatible with the chosen strategy. For instance, with regard to corporate strategy, an unrelated diversification strategy would rely on financial or objective indicators of performance, whereas a related diversification strategy would necessitate reward systems that emphasize behavioral measures. At times, almost all leaders have difficulty implementing their vision and strategies. Such problems may stem from a variety of sources: (1) a lack of understanding of responsibility and accountability among managers; (2) reward systems that do not motivate individuals (or collectives such as groups and divisions) toward desired organizational goals; (3) inadequate or inappropriate budgeting and control systems; (4) insufficient mechanisms to integrate activities across the organization.

Strategic Leadership: Nurturing a Culture

Nurturing an excellent and ethical organizational culture is a key leadership activity, requiring that managers & leaders:

Accept personal responsibility for developing & strengthening ethical behavior

Consistently demonstrate that such behavior is central to the mission & vision of the firm

Develop & reinforce ethical behavior via:

Role models

Corporate credos & codes of conduct

Reward & evaluation systems, policies & procedures

©McGraw-Hill Education.

Excellent and ethical organizational culture = an organizational culture focused on core competencies and high ethical standards. Organizational culture can be an effective means of organizational control. Leaders play a key role in changing, developing, and sustaining an organization’s culture. Managers and top executives must accept personal responsibility for developing and strengthening ethical behavior throughout the organization. They must consistently demonstrate that such behavior is central to the vision and mission of the organization. Several elements must be present and reinforced for a firm to become highly ethical, including role models, corporate credos and codes of conduct, reward and evaluation systems, and policies and procedures. Doing this requires leaders to overcome barriers to change and effectively use their power.

Strategic Leadership: Overcoming Barriers to Change

Leaders must overcome barriers to change.

Organizations are prone to inertia, slow to learn, adapt, & change because of:

Vested interests in the status quo

Systemic barriers

Behavioral barriers

Political barriers

Personal time constraints

©McGraw-Hill Education.

The success of the leader’s organization often depends on how he or she meets challenges and delivers on promises. This requires a leader to overcome barriers to change. Barriers to change = characteristics of individuals and organizations that prevent a leader from transforming an organization. Organizations at all levels are prone to inertia and are slow to learn, adapt, and change. Many people have vested interests in the status quo = a barrier to change that stems from people’s risk aversion. There are also systemic barriers = barriers to change that stem from an organizational design that impedes the proper flow and evaluation of information; behavioral barriers = barriers to change associated with the tendency for managers to look at issues from a biased or limited perspective based on their prior education and experience; political barriers = barriers to change related to conflicts arising from power relationships; personal time constraints = a barrier to change that stems from people’s not having sufficient time for strategic thinking and reflection. Leaders must draw on a range of personal skills as well as organizational mechanisms to move their organizations forward in the face of such barriers. One of the most important tools a leader has for overcoming barriers to change is his or her personal and organizational power.

Strategic Leadership: Effective Use of Power

Leaders must make effective use of power to:

Influence other people’s behavior

Persuade them to do things they otherwise would not do

Overcome resistance & opposition

Sources of power:

Organizational bases of power

Legitimate, reward, coercive, information

Personal bases of power

Referent, expert

©McGraw-Hill Education.

Successful leadership requires effective use of power in overcoming barriers to change. Power = a leader’s ability to get things done in a way he or she wants them to be done. Power is the ability to influence other people’s behavior, to persuade them to do things that they otherwise would not do, and to overcome resistance and opposition. Effective exercise of power is essential for successful leadership. A leader derives his or her power from several sources or bases. Organizational bases of power = a formal management position that is the basis of the leader’s power. This is power that a person wields because of his or her formal management position, and includes legitimate, reward, coercive, and information power. Personal bases of power = a leader’s personality characteristics and behavior that are the basis of the leaders power. A leader might also be able to influence subordinates because of his or her personal attributes or charisma, attributes that cause subordinates to identify with the leader – referent power; or the leader is the expert on whom subordinates depend for information that they need to do their jobs successfully, so they rely on the leader’s expertise and knowledge – expert power.

Strategic Leadership: A Leader’s Bases of Power

Exhibit 11.2 A Leader’s Bases of Power

Jump to Appendix 1 for long description.

©McGraw-Hill Education.

Organizational power comes through the leader’s formal management position. Legitimate power is derived from organizationally conferred decision-making authority and is exercised by virtue of a manager’s position in the organization. Reward power depends on the ability of the leader or manager to confer rewards for positive behaviors or outcomes. Coercive power is the power a manager exercises over employees using fear of punishment for errors of omission or commission. Information power arises from a manager’s access, control, and distribution of information that is not freely available to everyone in an organization. A leader might also be able to influence subordinates because of his or her personality characteristics and behavior. These are personal bases of power and include referent power or a subordinate’s identification with the leader. Using referent power, a leader’s personal attributes or charisma might influence subordinates and make them devoted to that leader. The source of expert power is the leader’s expertise and knowledge. The leader is the expert on who subordinates depend for information that they need to do their job successfully. Successful leaders use the different bases of power, and often a combination of them, as appropriate to meet the demands of the situation, such as the nature of the task, the personality characteristics of the subordinates, and the urgency of the issue. Persuasion and developing consensus are often essential, but so is pressing for action. At some point stragglers must be prodded into line.

Strategic Leadership: Emotional Intelligence

Valuable traits of successful leaders:

Technical skills –accounting, operations research

Cognitive abilities –analytical reasoning, quantitative analysis

Emotional intelligence –self-management, managing relationships with others

Self-awareness, self-regulation, motivation, empathy, social skills

©McGraw-Hill Education.

Valuable traits of successful leaders can be grouped into three broad sets of capabilities: purely technical skills (like accounting or operations research), cognitive abilities (like analytical reasoning or quantitative analysis), or emotional intelligence (like self-management and managing relationships). Emotional intelligence = an individual’s capacity for recognizing his or her own emotions and those of others, including the five components of self-awareness, self-regulation, motivation, empathy, and social skills.

Strategic Leadership: Emotional Intelligence at Work

Exhibit 11.3 The Five Components of Emotional Intelligence at Work

Jump to Appendix 2 for long description.

©McGraw-Hill Education.

Psychologist/journalist Daniel Goleman defines emotional intelligence (EI) as the capacity for recognizing one’s own emotions and those of others. Recent studies of successful managers have found that effective leaders consistently have a high level of EI. Although IQ and technical skills are necessary for attaining higher-level managerial positions, EI, on the other hand, is essential for leadership success. Self-awareness involves a person having a deep understanding of his or her emotions, strengths, weaknesses, and drives. People with strong social awareness are neither overly critical nor unrealistically optimistic. Instead, they are honest with themselves and others. Self-regulation, which is akin to an ongoing inner conversation, frees us from being prisoners of our feelings. People who have self-regulation find ways to control inner feelings and even channel them in useful ways. Self-regulated people are able to create an environment of trust and fairness. Motivated people show a passion for the work itself, such as seeking out creative challenges, a love of learning, and taking pride in a job well done. Empathy is probably the most easily recognizable component of EI. Empathy means thoughtfully considering an employee’s feelings, along with other factors, in the process of making intelligent decisions. Social skill may be viewed as friendliness with a purpose: moving people in the direction you desire, whether that’s agreement on a new marketing strategy or enthusiasm about a new product.

Strategic Leadership: Emotional Intelligence, Pros & Cons

Effective leaders should:

Have empathy for others

Be astute judges of people

Be passionate, persistent about pursuing objectives

Create personal connections with people, take time to engage employees individually & in groups

Be altruistic, focused on the firm’s general welfare, highly principled

Effective leaders should NOT:

Over-identify, confuse empathy with sympathy

Become overly critical

Allow passion to close their minds to other possibilities

Make too many announced visits, creating a culture of fear & micromanagement

Be manipulative, selfish, dishonest, use leadership solely to gain power

©McGraw-Hill Education.

Effective Leaders Have Empathy for Others: However, they also must be able to make the “tough decisions.” Leaders must be able to appeal to logic and reason and acknowledge others’ feelings so that people feel the decisions are correct, but must not overidentify with others or confuse empathy with sympathy. This can make it more difficult to make the tough decisions. Effective Leaders Are Astute Judges of People: A danger is that leaders may become judgmental and overly critical about the shortcomings they perceive in others. They are likely to dismiss other people’s insights, making them feel undervalued. Effective Leaders Are Passionate about What They Do, and They Show It: It’s good to express passion as persistence in pursuing an objective or a relentless focus on a valued principle. However, there is a fine line between being excited about something and letting your passion close your mind to other possibilities or cause you to ignore realities that others may see. Effective Leaders Create Personal Connections with Their People: Most effective leaders take time to engage employees individually and in groups, listening to their ideas, suggestions, and concerns and responding in ways that make people feel that their ideas are respected and appreciated. However, if the leader makes too many unannounced visits, it may create a culture of fear and micromanagement. From a moral standpoint, emotional leadership is neither good nor bad. On the one hand, emotional leaders can be altruistic, focused on the general welfare of the company and its employees, and highly principled. On the other hand, they can be manipulative, selfish, and dishonest. For example, if a person is using leadership solely to gain power; that is not leadership at all.

Question (2 of 3)

Complete the following sentence. “Inspiring and motivating people with a mission or purpose are a ____________ for developing an organization that can learn and adapt.”

necessary and sufficient condition

necessary, but not a sufficient condition

goal, but not a necessary condition

goal and a required pre-condition

©McGraw-Hill Education.

Answer: B. Inspiring and motivating people with a mission or purpose is a necessary but not sufficient condition for developing an organization that can learn and adapt to a rapidly changing, complex, and interconnected environment. Inspiration alone is not enough.

Strategic Leadership: A Learning Organization

To enhance the firm’s long-term viability, leaders also need to build a learning organization.

Capable of adapting to change

Able to foster creativity

Willing to question basic assumptions, refresh strategies, reengineer work

Be ready to ask the probing questions that will lead to success in highly competitive markets

©McGraw-Hill Education.

To enhance the long-term viability of organizations, leaders also need to build a learning organization. Such an organization is capable of adapting to change, fostering creativity, and succeeding in highly competitive markets. Many organizations get so caught up in carrying out their day-to-day work that they rarely, if ever, stop to think objectively about themselves and their businesses. They often fail to ask the probing questions that might lead them to call into question their basic assumptions, to refresh their strategies, or to reengineer their work processes. Learning organizations = organizations that create a proactive, creative approach to the unknown; characterized by (1) inspiring and motivating people with a mission and purpose, (2) developing leaders, (3) empowering employees at all levels, (4) accumulating and sharing internal knowledge, (5) gathering and integrating external information, and (6) challenging the status quo and enabling creativity.

Key Elements of a Learning Organization

Five key elements of a learning organization.

Necessary, but not sufficient.

Inspiring and motivating people with a mission or purpose

Empower employees at all levels

Accumulating and sharing internal knowledge

Gathering and integrating external information

Challenging the status quo and enabling creativity

From Exhibit 11.4 Key Elements of a Learning Organization

©McGraw-Hill Education.

Learning and change typically involve the ongoing questioning of an organization’s status quo or method of procedure. This means that all individuals throughout the organization must be reflective. Many organizations get so caught up in carrying out their day-to-day work that they rarely, if ever, stop to think objectively about themselves and their businesses.

Successful Learning Organizations Motivate People

Successful learning organizations motivate people with a mission or purpose.

Create a proactive, creative approach to the unknown.

Actively solicit the involvement of employees at all levels.

Enable all employees to use their intelligence & apply their imagination.

A learning environment involves:

An organization-wide commitment to change

An action orientation, applicable tools & methods

©McGraw-Hill Education.

Successful learning organizations create a proactive, creative approach to the unknown, actively solicit the involvement of employees at all levels, and enable all employees to use their intelligence and apply their imagination. A critical requirement of all organizations is that everyone feels and supports a compelling purpose. Higher-level skills are required of everyone, not just those at the top. The learning environment involves organization-wide commitment to change, an action orientation, and applicable tools and methods. It must be viewed by everyone as a guiding philosophy and not simply as another change program.

Successful Learning Organizations Empower Employees

Successful learning organizations empower employees at all levels.

The leaders/managers roles involve:

Becoming coaches, information providers, teachers, decision-makers, facilitators, supporters, or listeners

Soliciting individuals’ input, valuing others’ ideas & initiatives

Providing for trust, cultural control, & expertise at all levels

©McGraw-Hill Education.

When empowering employees at all levels, a manager’s role becomes one of creating an environment where employees can achieve their potential as they help move the organization toward its goals. Instead of viewing themselves as resource controllers and powerbrokers, leaders must envision themselves as flexible resources willing to assume numerous roles as coaches, information providers, teachers, decision makers, facilitators, supporters, or listeners, depending on the needs of their employees. Leading-edge organizations recognize the need for trust, cultural control, and expertise at all levels. In the information economy, the strongest organizations are those that effectively use the talents of all the players on the team. Empowering individuals by soliciting their input helps an organization to enjoy better employee morale. It also helps create a culture in which middle- and lower-level employees feel that their ideas and initiatives will be valued.

Successful Learning Organizations Share Internal Knowledge

Successful learning organizations accumulate & share internal knowledge.

The firm develops a culture that encourages:

Employee involvement

Widespread sharing from various sources

Identifying opportunities, experimentation

Collaborative decision making

Sharing of best practices

The firm utilizes technology to facilitate this.

©McGraw-Hill Education.

Effective organizations must also redistribute information, knowledge (skills to act on the information), and rewards. In addition to enhancing the sharing of company information both up and down as well as across the organization, leaders also have to develop means to tap into some of the more informal sources of internal information, by listening to what their people, customers, and suppliers are telling them.

Successful learning organizations gather & integrate external information.

Firms must recognize opportunities & threats, both general & industry-specific.

By using a variety of sources to acquire external information:

Participation in networks and alliances, communications from rival firms

By doing both competitive & functional benchmarking

By asking customers

Successful Learning Organizations Gather External Knowledge

©McGraw-Hill Education.

Recognizing opportunities, as well as threats, in the external environment is vital to a firm’s success. As organizations and environments become more complex and evolve rapidly, it is far more critical for employees and managers to become even more aware of environmental trends and events – both general and industry-specific – and more knowledgeable about their firm’s competitors and customers. This external information can come from various sources: by tapping into knowledge from partners, suppliers and competitors via participation in networks and alliances; monitoring the direct communications from rival firms and their executives, such as press releases and quarterly-earnings calls – these communications can provide insight on the rival’s actions and intended actions. Benchmarking can be a useful means of employing extra information. Benchmarking = managers seeking out best examples of a particular practice as part of an ongoing effort to improve the corresponding practice in their own organization. Competitive benchmarking = benchmarking where the examples are drawn from competitors in the industry. Functional benchmarking = benchmarking in which the examples are drawn from any organization, even those outside the industry. Firms can also focus directly on customers for information.

Successful Learning Organizations Challenge the Status Quo

Successful learning organizations challenge the status quo & enable creativity.

Leaders must bring about useful change.

Forcefully create a sense of urgency

Establish a “culture of dissent”

Foster a culture that encourages risk taking & learning from mistakes

Formalize forums for failure; move the goalposts; bring in outsiders; prove yourself wrong, not right

Do the “right thing”

©McGraw-Hill Education.

Leaders face barriers when trying to bring about change in an organization: vested interests in the status quo, systemic barriers, political barriers, behavioral barriers, and personal time constraints. For a firm to become a learning organization, it must overcome such barriers in order to foster creativity and enable it to permeate the firm. This becomes quite a challenge if the firm is entrenched in a status quo mentality. Perhaps the best way to challenge the status quo is for the leader to forcefully create a sense of urgency. Such initiative, if sincere and credible, establishes a shared mission and the need for major transformations. It can channel energies to bring about both change and creative endeavors. Establishing a “culture of dissent” can be another effective means of questioning the status quo and serve as a spur toward creativity. Here norms are established whereby dissenters can openly question the superior’s perspective without fear of retaliation or retribution. Companies that cultivate cultures of experimentation and curiosity make sure that failure is not, in essence, an obscene word. They encourage mistakes as a key part of their competitive advantage. Some approaches to encourage risk taking and learning from mistakes include formalizing forums for failure by sharing lessons of failure, moving the goalposts to create flexibility while forecasting, bringing in outsiders to help neutralize the emotions and biases that might prop up a flop, looking for supporting rather than countervailing evidence to prove yourself wrong, not right. Failure can even play an important and positive role in one’s professional development.

Strategic Leadership: Creating an Ethical Organization

Ethics has everything to do with leadership.

Ethics deals with right and wrong.

Ethical beliefs come from religion, ethnic heritage, family practices, community standards, educational experiences, friends & neighbors.

Organizational ethics promote an operating culture & determine acceptable behavior.

Ethical beliefs come from the values, attitudes, & behavioral patterns of leadership.

Unethical business practices involve the tacit, if not explicit, cooperation of others.

©McGraw-Hill Education.

Ethics = a system of right and wrong that assists individuals in deciding when an act is moral or immoral and/or socially desirable or not. The sources for an individual’s ethics include religious beliefs, national and ethnic heritage, family practices, community standards, educational experiences, and friends and neighbors. Organizational ethics = the values, attitudes, and behavioral patterns that define an organization’s operating culture and that determine what an organization holds as acceptable behavior. Business ethics has everything to do with leadership. Seldom does the character flaw of a lone actor completely explain corporate misconduct. Instead, unethical business practices typically involve the tacit, if not explicit, cooperation of others and reflect the values, attitudes, and behavior patterns that define an organization’s operating culture. Ethics is as much an organizational as a personal issue. Leaders who fail to provide proper leadership to institute proper controls and systems that facilitate ethical conduct share responsibility with those who conceive, execute, and knowingly benefit from corporate misleads.

Strategic Leadership: Ethical Orientation

The ethical orientation of the leader is a key factor in promoting ethical behavior.

Integrity & ethical values:

Shape behaviors

Provide a common frame of reference

Act as a unifying force

Have a positive effect on employee commitment & motivation to excel

Can create value & a competitive advantage

Ethical orientation = the practices that firms use to promote an ethical business culture, including ethical role models, corporate credos and codes of conduct, ethically-based reward and evaluation systems, and consistently enforced ethical policies and procedures. Ethical leaders must take personal, ethical responsibility for their actions and decision making. Leaders who exhibit high ethical standards become role models for others and raise an organization’s overall level of ethical behavior. The ethical organization is characterized by a conception of ethical values and integrity as a driving force of the enterprise. Ethical values shape the search for opportunities, the design of organizational systems, and the decision-making process used by individuals and groups. They provide a common frame of reference that serves as a unifying force across different functions, lines of business, and employee groups. Organizational ethics help to define what a company is and what it stands for. The advantages of a strong ethical orientation can have a positive effect on employee commitment and motivation to excel. This is particularly important in today’s knowledge-intensive organizations, where human capital is critical in creating value and competitive advantages.

Strategic Leadership: Ethical Frameworks

Ethical frameworks for integrity include:

Compliance-based ethics program

Prevents, detects, & punishes legal violations

Integrity-based ethics program

Enables ethical conduct

Examines organizational members’ core guiding values, thoughts, & actions

Defines responsibility & aspirations for ethical conduct

There cannot be high-integrity organizations without high-integrity individuals. However, individual integrity is rarely self-sustaining. Organizational integrity rests on a concept of purpose, responsibility, and ideals for an organization as a whole. An important responsibility of leadership is to create this ethical framework and develop the organizational capabilities to make it operational. There are two approaches that can be used to create this ethical framework. Faced with the prospect of litigation, several organizations reactively implement compliance-based ethics programs = programs for building ethical organizations that have the goal of preventing, detecting, and punishing legal violations. But being ethical is much more than being legal, and an integrity-based approach addresses the issue of ethics in a more comprehensive manner. Integrity-based ethics programs = programs for building ethical organizations that combine a concern for law with an emphasis on managerial responsibility for ethical behavior, including (1) enabling ethical conduct; (2) examining the organization’s and members’ core guiding values, thoughts, and actions; and (3) defining the responsibilities and aspirations that constitute an organization’s ethical compass.

Strategic Leadership: Approaches to Ethics Management

Characteristics	Approach	Actions
Ethos	Compliance-based	Conformity with externally imposed standards
Ethos	Integrity-based	Self-governance according to chosen standards
Objective	Compliance-based	Prevent criminal misconduct
Objective	Integrity-based	Enable responsible conduct
Leadership	Compliance-based	Driven by legal office
Leadership	Integrity-based	Driving by management, with input from functional staff
Methods	Compliance-based	Reduced discretion, training, controls, audits, and penalties
Methods	Integrity-based	Education, leadership, accountability, decision processes, auditing, and penalties
Behavioral Assumptions	Compliance-based	Individualistic, self-interested actors
Behavioral Assumptions	Integrity-based	Social actors, guided by a combination of self-interest, ideals, values, and social expectations

Exhibit 11.5 Approaches to Ethics Management

Compliance-based approaches are externally motivated – that is, based on the fear of punishment for doing something unlawful. On the other hand, integrity-based approaches are driven by personal and organizational commitment to ethical behavior. A corporate counsel may play a role in designing and implementing integrity strategies, but it is managers at all levels and across all functions that are involved in the process. Once integrated into the day-to-day operations, such strategies can prevent damaging ethical lapses, while tapping into powerful human impulses for moral thought and action. Ethics becomes the governing egos of an organization and not burdensome constraints.

Question (3 of 3)

Proactive measures to prevent organizational ethics problems include all of the following except

instituting a reward system which considers outcomes as its primary criterion.

using leaders as role models of ethical behavior.

issuing statements describing the organization’s commitment to certain standards of behavior.

using the organization’s information systems as a control system.

Answer: A. If rewards are given on the basis of outcomes rather than the means, it may cause employees to perform in an inappropriate manner.

Strategic Leadership: Elements of an Ethical Organization

Interrelated elements of a highly ethical organization include:

Ethical role models

Corporate credos & codes of conduct

Ethically-based reward & evaluation systems

Consistently enforced ethical policies & procedures

A firm must have several key elements to become a highly ethical organization. These elements are highly interrelated. For instant, reward structures and policies will be useless if leaders are not sound role models. Corporate credo = a statement of the beliefs typically held by managers in a corporation.

Strategic Leadership: Ethical Organization Role Models

Ethical role models

Must be consistent in their words & deeds

Values & character must become transparent to an organization’s employees

Responsibility for ethical lapses within the organization

Courageous behavior by leaders helps to strengthen an organization’s ethical environment.

For good or for bad, leaders are role models in their organizations. Clearly, leaders must “walk the talk”; they must be consistent in their words and deeds. The values as well as the character of leaders become transparent to an organization’s employees through their behaviors. When leaders do not believe in the ethical standards that they are trying to inspire, they will not be effective as good role models. Being an effective leader often includes taking responsibility for ethical lapses within the organization – even though the executives themselves are not directly involved. By sharing responsibility for misdeeds, the top executives – through their highly visible action – can make it clear that responsibility and penalties for ethical lapses go well beyond the “guilty” parties. Such courageous behavior by leaders helps to strengthen an organization’s ethical environment.

Strategic Leadership: Ethical Organization Corporate Credos

Corporate credos & codes of conduct

Provide a statement & guidelines for norms, beliefs & decision making

Provide employees with clear understanding of the organization’s position regarding behavior

Provide the basis for employees to refuse to commit unethical acts

Contents of credos & codes of conduct must be known to employees

Corporate credo = a statement of the beliefs typically held by managers in a corporation. Corporate credos and codes of conduct are mechanisms that provide statements of norms and beliefs as well as guidelines for decision making. They provide employees with a clear understanding of the organization’s policies and ethical position. Such guidelines also provide the basis for employees to refuse to commit unethical acts and help to make them aware of issues before they are faced with the situation. For such codes to be truly effective, organization members must be aware of them and what behavioral guidelines they contain.

Strategic Leadership: Ethical Organization Reward Systems

Reward & evaluation systems can either support or undermine an ethical orientation.

Support by creating an evaluation system that rewards ethical thinking

Actions consistent with words; follows through on commitments; readily admits mistakes

Undermine by rewarding results regardless of how they were achieved

Intense competition encourages falsification of data.

It is entirely possible for a highly ethical leader to preside over an organization that commits several unethical acts. How? A flaw in the organization’s reward system may inadvertently cause individuals to act in an inappropriate manner if rewards are seen as being distributed on the basis of outcomes rather than the means by which goals and objectives are achieved. Unethical or illegal behaviors are also more likely to take place when competition is intense. Therefore, many companies have developed reward and evaluation systems that evaluate whether a manager is acting in an ethical manner. See the example of Raytheon’s “Leadership Assessment Instrument.”

Strategic Leadership: Ethical Organization Policies

Carefully developed policies & procedures can help guide ethical behavior.

By specifying proper relationships with customers & suppliers

Through global sourcing guidelines to identify conflicts of interest

By encouraging employees to behave ethically

Through effective communication, enforcement, & monitoring

Through sound corporate governance practices

Compliance with Sarbanes-Oxley Act of 2002

Many situations that a firm faces have regular, identifiable patterns. Leaders tend to handle such routine by establishing a policy or procedure to be followed that can be applied uniformly to each occurrence. Such guidelines can be useful in specifying the proper relationships with the firm’s customers and suppliers, i.e. through stringent global sourcing guidelines that determine the relationship between the company and its suppliers when awarding new contracts. Carefully developed policies and procedures guide behavior so that all employees will be encouraged to behave in an ethical manner. However, they must be reinforced with effective communication, enforcement, and monitoring, as well as sound corporate governance practices. In addition, the Sarbanes-Oxley Act of 2002 provides considerable legal protection to employees of publicly traded companies who report unethical or illegal practices.

ADA APPENDICES

Description of Images

Appendix 1 Strategic Leadership: A Leader’s Bases of Power

Return to slide.

The graphic classifies the bases of power.

Organizational power is broken down into legitimate power, reward power, coercive power, and informational powers.

Personal power is divided into referent and expert power.

Appendix 2 Strategic Leadership: Emotional Intelligence at Work

Return to slide.

The graphic depicts the elements of emotional intelligence.

Self-awareness. The ability to know your own emotions, drives, values, and goals as well as recognize their impact on others.

Self-regulation. The ability to control or redirect disruptive emotions and impulses and adapt to changing circumstances.

Empathy. The ability to see and consider other people’s feelings especially when making decisions.

Social Skill. The ability to build and manage relationships to move people in the desired direction.

Motivation. Being driven to achieve for the sake of achievement, not simply for money or status.