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Learning Topic

Strategic Leadership

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Strategic leadership is concerned with managing a company's resources, including its strategy-making process, to create and sustain competitive advantage. An increased interest in strategic leadership reflects the need to understand how executives respond to rapid technological and social change and increasing international competition to lead their companies and outperform competition.

There are three important responsibilities for strategic leadership in an organization: (1) monitoring the external environment to identify threats and opportunities, (2) formulating strategy, and (3) implementing the strategy for the future prosperity of the organization. (Narayanan, Zane, & Kemerer, 2011; Porter, 1980).

The following guidelines are based on research and practitioner insights (Bennis & Nanus, 1985; Kotter, 1996; Nanus, 1992; Narayanan, Zane, & Kemerer, 2011; Wall & Wall, 1995; Worley, Hitchin, & Ross, 1996):

· Determine long-term objectives and priorities.

· Learn what clients and customers need and want.

· Learn about the products and activities of competitors.

· Assess current strengths and weaknesses.

· Identify core competencies.

· Evaluate the need for a major change in strategy.

· Identify promising strategies.

· Evaluate the likely outcomes of a strategy.

· Involve other executives in selecting a strategy.

These guidelines focus on understanding the environment that determines need for strategic change, the performance determinants, and ways leaders can influence these performance determinants (Cannella & Monroe, 1997). "The theory and research on leadership has long recognized that effective leaders empower others to participate in the process of interpreting events, solving problems, and making decisions" (Argyris, 1964; Likert, 1967).

Events and industry trends are often not well defined. They pose multiple alternatives and choices. Successful strategic leadership, therefore, requires ability to manage ambivalence and to give an organization a sense of direction. Leaders create a clear and compelling vision of where the organization should go, and energize people by eloquently communicating this vision to make it a part of the organization culture (Wesley & Mintzberg, 1989).

References

Argyris, C. (1964).  Integrating the individual and the organization. New York: John Wiley.

Bennis, W. G., & Nanus, B. (1985).  Leaders: The strategies for taking charge. New York: Harper & Row.

Cannella, A. A., Jr., & Monroe, M. J. (1997). Contrasting perspectives on strategic leaders: Toward a more realistic view of top managers.  Journal of Management, 23(3), 213–237.

Kotter, J. P. (1996).  Leading change. Boston: Harvard Business School Press.

Likert, R. (1967).  The human organization: Its management and value. New York: McGraw-Hill.

Nanus, B. (1992).  Visionary leadership: Creating a compelling sense of direction for your organization. San Francisco: Jossey-Bass.

Narayanan, V. K., Zane, L. J., & Kemerer, B. (2011). The cognitive perspective in strategy: An integrative review.  Journal of Management, 37, 305–351.

Porter, M. E. (1980).  Competitive strategy. New York: Free Press.

Wall, S. J., & Wall, S. R. (1995).  The new strategists: Creating leaders at all levels. New York: Free Press.

Worley, C. G., Hitchin, D. E., & Ross, W. L. (1996).  Integrated strategic change: How OD builds competitive advantage. Reading, MA: Addison-Wesley.

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Learning Topic

Perspectives in Leadership Theory and Research

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It can be useful to classify leadership theories according to the type of variables that are relevant for understanding leadership effectiveness. These variables include the following:

· characteristics of leaders

· characteristics of followers

· characteristics of the situation

Most leadership theories emphasize one category more than the others as the primary basis for explaining effective leadership. Over the past half-century, leader characteristics have been given the greatest emphasis.

Leadership theories are often classified into the following five approaches:

· trait approach—Emphasizes attributes of leaders such as personality, motives, values, and skills.

· behavior approach—Examines how managers cope with demands, constraints, and role conflicts in their jobs.

· power-influence approach—Examines influence processes between leaders and other people. It takes a leader-centered perspective with an implicit assumption that causality is unidirectional (leaders act and followers react).

· situational approach—Emphasizes the importance of contextual factors that influence leadership processes. Major situational variables include the characteristics of followers, the nature of the work performed by the leader’s unit, the type of organization, and the nature of the external environment.

· integrative approach—Includes two or more types of leadership variables in the same study.

Another way to classify leadership theories is in terms of the “levels of conceptualization,” or the type of constructs used to describe leaders and their influence on others. Leadership can be described as the following:

· an intra-individual process

· a dyadic process

· a group process

· an organizational process

The levels can be viewed as a hierarchy, as depicted in the figure below:

Leadership Levels of Conceptualization

The important variables in play at different levels of conceptualization for leadership are shown in the table below.

Variables at Different Levels of Conceptualization for Leadership
Intra-Individual theories	Dyadic theories	Group-level theories	Organizational-level theories
· How leader traits and values influence leadership behavior · How leader skills are related to leader behavior · How leaders make decisions · How leaders manage their time · How leaders are influenced by role expectations and constraints · How leaders react to feedback and learn from experience · How leaders can use self-development techniques	· How a leader influences subordinate motivation and task commitment · How a leader facilitates the work of a subordinate · How a leader interprets information about a subordinate · How a leader develops a subordinate’s skills and confidence · How a leader influences subordinate loyalty and trust · How a leader uses influence tactics with a subordinate, peer, or boss · How a leader and a subordinate influence each other · How a leader develops a cooperative exchange relationship with a subordinate	· How different leader-member relations affect each other and team performance · How leadership is shared in the group or team · How leaders organize and coordinate the activities of team members · How leaders influence cooperation and resolve disagreements in the team or unit · How leaders influence collective efficacy and optimism for the team or unit · How leaders influence collective learning and innovation in the team or unit · How leaders influence collective identification of members with the team or unit · How unit leaders obtain resources and support from the organization and other units	· How top executives influence members at other levels · How leaders are selected at each level (and implications of the process for the firm) · How leaders influence organizational culture · How leaders influence the efficiency and the cost of internal operations · How leaders influence human relations and human capital in the organization · How leaders make decisions about competitive strategy and external initiatives · How conflicts among leaders are resolved in an organization · How leaders influence innovation and major change in an organization
Source: Adapted from Yukl, G. (2013).  Leadership in organizations. 8th ed. Upper Saddle River, NJ: Prentice Hall.

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Learning Topic

Management of Change and Trust

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Even with a well-crafted strategy, leading an organization to gain and sustain competitive advantage is an arduous process. Change can occur in many areas of an organization and can be deliberate or accidental, incremental or sudden, local or global, and focused or broadly applied across an organization. Regardless of the type or magnitude of change, change management involves people.

Central to human nature is the need to be in a state of control and predictability (Thiétart & Forgues, 1995). Discomfort with change is, in part, a result of a perceived or real loss of control and the related fear that an unknown or unpredictable outcome might be harmful or run counter to one’s norms and values. The level of trust within an organization is an important descriptor of the unease experienced during change.

Trust, or the state of reduced uncertainty and undesirable conduct, favors the comfort of a predictable, steady state. Resistance to change is implicit in the desire for certainty and predictability, regardless of whether that steady state is, in fact, the state that will help the organization stay competitive in the face of changing circumstances.

According to Lewicki, McAllister, and Bies (1998) trust is the “positive expectation regarding another’s conduct” (p. 444). If a person trusts another, social complexity and uncertainty have been reduced by having removed specific undesirable conduct. Trust is developed and modified both on an individual basis and through group affiliation (Lewin, 1975).

The change-trust relationship is not necessarily linear. For example, increasing communication increases trust and decreases resistance. These influencing factors make trust seem elastic: trust is enhanced by influencing factors that mitigate uncertainty.

Many organizational practitioners claim to have identified factors that reduce uncertainty and package these as a remedy. However, leaders should however be aware that each situation is unique, and applying the plan developed for a previously successful change initiative will not guarantee success, even within the same company and involving the same group of individuals. This is because nothing really remains unchanged (Orlikowski & Holman, 1997).

Thiétart and Forgues (1995) account for this phenomenon through the application of chaos theory to organizations. A change-trust model might be able to describe a current change initiative at a particular point in time. But unless it takes into account the effect of the continuously changing variables, it can never be accurately used to predict future success and its application to other groups and situations will be limited.

References

Lewicki, R. J., McAllister, D. J., & Bies, R. J. (1998). Trust and distrust: New relationships and realities.  Academy of Management Review, 23(3), 438–458. Retrieved from http://web.ebscohost.com.ezproxy.umgc.edu

Lewin, K. (1975).  Field theory in social science. Westport, CT: Westwood Press, Publishers.

Orlikowski, W. J. & Hofman, D. J. (1997). An improvisational model for change management: The case of Groupware technologies.  Sloan Management Review, 38(2), 11–21. Retrieved from http://web.ebscohost.com.ezproxy.umgc.edu

Pietersen, W. (2002). The Mark Twain dilemma: The theory and practice of change leadership.  Journal of Business Strategy, 23(5), 32–37. Retrieved from http://web.ebscohost.com.ezproxy.umgc.edu

Thiétart, R. A., & Forgues, B. (1995). Chaos theory and organizations.  Organizational Science, 6(1), 19–31. Retrieved from http://web.ebscohost.com.ezproxy.umgc.edu

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All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity of information located at external sites.

Learning Topic

Resilience

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The COVID-19 pandemic has shown how vulnerable individuals, organizations, and countries at all levels of development are to disasters.

Experience of adversity and unforeseen situations are common to individuals, organizations and societies at large. In coping with forces beyond the control of an organization, resilience is an essential for continuity and sustainable growth. The McKinsey management and consulting group's study of the 2008 economic crisis noted that some companies were hurt but recovered more quickly than others. "By 2009, the earnings of the resilient companies had risen 10 percent, while that of the nonresilients had gone down almost 15 percent (Sneader & Singhal, 2020).

This note looks at resilience with a view to understand the factors that foster or hinder resilience.

The questions resilience seeks to answer: Why do some organizations experiencing operational and financial stress succumb while others prove resilient and even thrive? What are the key attributes that contribute to resiliency?

The search for competitive advantage is relentless following a crisis. Strategic leadership requires an understanding of how the resilience operates at different levels and their linkages to effectively cope with changes.

What Is Resilience?

Resilience, as defined by Hamel and Välikangas, "refers to a capacity for continuous reconstruction. It requires innovation with respect to those organizational values, processes, and behaviors that systematically favor perpetuation over innovation" (2003).

The concept of resilience has been examined from various perspectives. Ecologists such as Holling (1973) and Perrings (2001) have defined it as the capacity to absorb stress and shocks. Tinch (1998) notes characteristics such as stability, persistence, resistance, nonvulnerability, and stochastic return time.

An integral part of resilience is a  business continuity plan (BCP) that identifies major risks of business interruption, plans to mitigate or reduce the impact of the identified risks, and tests the plan to ensure its effectiveness. Business continuity equals revenue continuity (Ruettgers, 2003).

Knowing what to secure, assessing risks, and developing business recovery policies is central to business continuity.

The challenge for individuals, organizations, and societies is to build their capacity to absorb or recover from change without draining resources. As part of the larger social fabric, organizational resilience is understood in the context of the communities and the society they operate in.

Why Resilience Matters

Organizations that fail to adjust to their changing environment soon lose their relevance as they go out of business or get acquired. While new entrants, takeovers, and bankruptcies are part of sustaining competitiveness, they cannot address the resilience problem. First, there are organizations that are not open to takeovers, such as privately owned companies, national service organizations such as the Red Cross, and government agencies. Lack of resilience would lead to their inability to serve their objectives. Failure of organizations means their intellectual capital disintegrates and may take years to recover. Nonadaptive organizations lead to gross underuse of society's resources. The reason to care about institutional resilience is that it improves its capacity for continual renewal.

Events such as the financial crisis of 2008, Hurricane Katrina in New Orleans in August 2005, the tsunami earthquake in the Indian Ocean in December 2004, the Fukushima Daiichi nuclear disaster in March 2011, terror attacks of September 2001, and the Chernobyl reactor failure in Ukraine in 1986 highlight the world's vulnerability to disasters. The devastating effects of the global COVID-19 pandemic have affected countries across the globe. In planning for the future, we must expect that all disasters are possible, assume the worst, plan for the impact, and lay the foundation for speedy recovery.

Upheavals profoundly change management practices. The Great Depression irrevocably transformed management theory which had until then relied on mechanical input-output measurements, giving rise to the human relations movement. The global financial crisis of 2008-10 led companies to shift from permanent employment. This eventually prompted individuals to take on multiple jobs, now referred to as the "gig" economy.

And the latest of these upheavals, COVID-19, will have a lasting impact on organizations and leadership styles. Supply chains will be relooked; companies will restructure as more work is done from home. As we become more digitally connected and more physically disconnected, trust may become more important and more fragile. Organizations have to step up to address such issues.

The degree of psychological and economic losses that individuals, organizations, and societies suffer depends upon their resilience. Resilience goes beyond survival; it is the ability to bounce back and even become stronger in spite of the threats to survival. Preventive and predictive actions may reduce our vulnerability. However, it is our ability to reduce loss through resilience that determines how well and how fast we return to normalcy.

Carver (1998) describes potential outcomes of adverse events as succumbing, surviving with impairment, recovery (resilience) and thriving. "A shared passion to be successful is a crucial ingredient in creating resilient enterprises" (Sheffi, p. 15).

To understand the role of strategic leadership in ensuring that organizations bounce back with speed in the face of adverse events, let us examine how resilience is developed.

Putting Resilience to Work

The environmental changes in recent years have created a keen interest in both management scholars and practitioners to understand how individuals and organizations cope with these changes. Psychiatrists have explored the factors that enable individuals perform well under stress and to recoil from setbacks. For business leaders, therefore, the focus is on both the individual and the organizational resilience.

According to Larry Mallak (1998), there are seven resilience principles that organization leaders can put in place to ensure a resilient organization.

1. Perceive experiences constructively.

2. Perform positive adaptive behaviors.

3. Ensure adequate external resources.

4. Expand decision-making boundaries.

5. Practice bricolage.

6. Develop tolerance for uncertainty.

7. Build virtual role systems.

Why do many organizations succumb when adversity strikes them? Dalziell and McManus (2004) point out that the traditional approach was to make systems less vulnerable to hazards. However, system resilience can be increased by increasing the speed of the system to re-bounce from adverse events. The failure lies in their inability to execute (Charan & Colvin, 1999).

Individual Resilience

The indivisible element in coping with change is the individual. The reaction of the individual—

as a subordinate or a leader—determines how the organization would react to its changing internal and external demands. Dalziell and McManus (2004) say that a key in system resilience is the ability of the system to respond and recover from an event, but as they note, "recover to what?" is also important.

 Charles Carver (1998) cites four potential consequences when adversity strikes.

· first, the downward slide in which the individual succumbs,

· second, where the individual survives but with capabilities weakened,

· third, when the individual bounces back to the original level, and

· fourth, where the individual surpasses previous levels of functioning.

Resilient individuals carve out coping strategies that may be either positive (resilient or thriving) or negative (surviving with impairment or succumbing). Resilience in individuals comprises of developing self-efficacy that consists of confidence in one's own ability to perform and its execution in the face of adversity (Mallak, 1998). They develop an innate ability to move forward and succeed.

According to Bandura (1989), individuals effect changes in themselves and their situations through their own efforts, including controlling thought processes, motivation, and actions. Through empirical tests, Bandura shows that persons make "causal contribution to their own motivation and action" within a system of what he calls "reciprocal causation (Bandura, 1989).

Individual self-efficacy beliefs affect thought patterns that Bandura terms "self-aiding or self-hindering" (1989). According to this social cognitive theory, much human behavior is regulated by cognized goals and self-appraisal of capabilities. As Bandura (1989) states, "The stronger their perceived self-efficacy, the higher the goals people set for themselves and the firmer their commitment to them." While short-term help is important for recovery, Bandura states the key to building personal resilience is to avoid dependency and therefore loss of control.

As organizations face unprecedented changes, they face a growing "boundarylessness" of their organizations. Baruch (2004) notes that DeFillippi and Arthur (1994) argue that "a major consequence of boundaryless organizations is the emergence of boundaryless careers." As careers become multidirectional, individual resilience in a turbulent environment demands that they retain a sense of their personal security through continuity of their jobs. The blurring of boundaries has demolished static career systems—"they have become more diverse and less controlled by employers" according to Baruch (2004), who notes that managing individual careers requires qualities that differ considerably from those in the past.

Baruch (2001) suggests that although the idea of employability is beneficial, it is impractical for organizations to use it as a substitute for loyalty and trust-based relationships. The multidirectional career model suggested by Baruch (2004) takes into account the full scale of what he calls "landscapes" in which the individual "can climb the mountain, opt for another mountain, take some hills instead, or wander along the plains" as a way of illustrating options. The focus of most scholarly work on individual resilience is on self-efficacy and self-navigation.

For a strategic leader, development of individual resilience is a first step to developing organizational resilience.

Organizational Resilience

The model of a resilient organization is based on interaction between the individual and the environment. Dalziell and McManus (2004) use the term resilience to describe "the overarching goal of a system to continue to function to the fullest possible extent in the face of stress to achieve its purpose, where resilience is a function of both the vulnerability of the system and its adaptive capacity." They point to the "need to focus not only on the vulnerability of our systems to failure, but also on our ability to manage and minimize the impact of any failures (Dalziell & McManus, 2004).

The resiliency audit model for organizations developed by Hind et al. (1996) suggests that a critical dimension of the interaction between the individual and organization is the "psychological contract" based on a reciprocal relationship of individual's commitment and trust in exchange of the organization providing job satisfaction, job security and promotion prospects (Hind et al., 1996). Resilient organizations score high on the factors in resiliency audit and ensure that the risk of violating the "psychological contract" in periods of change is minimized. They do this through helping individuals regularly assess their skills and interests and support their life-long learning and career development to ensure their employability in times of downturns.

Peter Senge (2005) explains that rapid changes require organizations to be flexible and adaptable to stay competitive. The five disciplines that Senge identifies converging to innovate learning organizations are:

1. systems thinking

2. personal mastery

3. mental models

4. building shared vision

5. team learning

Resilient organizations encourage and nurture a shift of mind, according to Senge, "from seeing parts to seeing wholes, from seeing people as mere reactors to becoming active participants in creating the future" (Senge, 2005).

Bricolage

Bricolage is the creation of solutions from whatever happens to be available. In times of rapid change, formal organizational roles systems often collapse but need not result in failure if the individuals retain the whole picture in their minds and assume whatever role is vacated. Faced with unforeseen situations, according to Weick (1993), leaders know they don't understand what is happening because they have never had to confront such an event. "Extreme confidence and extreme caution both destroy what organizations most need in changing times, namely, curiosity, openness, and complex sensing" (Weick, 1993).

When formal organizational structure is inadequate to meet with changes or it collapses, the individual and social interactions developed in the organizations have to come in play to counteract vulnerability.

Weick (1993) suggested a structure of organizational resilience by analyzing the Mann Gulch fire in 1949, made famous in Norman Maclean's  Young Men and Fire, which resulted in the death of 13 men. He identified bricolage,  virtual role systems, the attitude of wisdom, and respectful interaction as factors in organizational resilience.

The concepts of psychological contract, the learning organization, resiliency audit, and distributive leadership cut across all organizations, large or small, and situations brought about by change, gradual or sudden, and even in organizations where attention to routine working is critical to their safety and survival.

Societal Resilience

"Societal" resilience is our adaptive response to unforeseen events and takes place at the level of the individuals, private and public organizations, families, local communities and the county, state and federal governments. Rose (2004) shows economic resilience to disasters can be seen as dimensions of resilience. He also proposes a "general equilibrium model" for analyzing the behavior of individuals, businesses, and markets.

The measurement of resilience and its audit are important, Rose says, because they "enable us to evaluate strategy for reducing economic losses" from external changes (2004). Inclusion of resilience in policy-making helps react to adversity and reduce losses.

Reich (2006) provides a psychological perspective and incorporation of three principles of resilience in disaster planning: control, coherence, and connectedness. Disaster responses should focus on reducing uncertainty through extensive communications and understanding to generate cognitive clarity. Providing structure and coherence in interactions helps people understand how the events in their lives are going to be impacted. Reich notes: "The individual's need for social connectedness is probably never greater than in times of disaster" (2006). The value of an integrative model, according to Reich, "is that it provides a conceptual framework for understanding human resilience" (2006).

A resilient community is based on resilient individuals. The resilience at individual, organizational, and societal levels are interwoven, and any model of resilience should reflect this interconnectedness. See Appendix.

Metrics for Evaluating Resilience

In light of events that show the vulnerability of countries throughout the world to disasters, metrics are needed to measure and benchmark the resilience of organizations.

The 2019 FM Global Resilience Index Annual Report by Pentland Analytics provides ranked scores for 130 countries by combining the 12 core drivers of resilience (FM Global, 2019):

Factors	Economic	Risk Quality	Supply Chain
Drivers	Productivity	Exposure to Natural Hazards	Control of Corruption
	Political Risk	Natural Hazard Risk Quality	Quality of Infrastructure
	Oil Intensity	Fire Risk Quality	Corporate Governance
	Urbanization Rate	Inherent Cyber Risk	Supply Chain Visibility

The structure of the index enables business executives to identify the sources of strength and vulnerability in a country's resilience.

BSI explores organizational resilience best practices by tracking how confident business leaders

feel in the ability of their organizations to adapt to change. The BSI Organizational Resilience Benchmark tool focuses on 16 elements in building and developing organizational resilience, and its website allows a user to create a "spider diagram" for an organization (BSI, 2020):

Leadership	People	Process	Product
Leadership	Culture	Governance and Accountability	Horizon Scanning
Vision and Purpose
Reputational Risk	Community Engagement	Business Continuity	Innovation
Financial Management	Awareness Training and Testing	Supplier Management
Resource Management	Alignment	Information and Knowledge	Adaptive Capacity

Organizational resilience results help to review how an organization's strengths and vulnerabilities in leadership, people, processes, and product categories based on the 16 key elements compare against other organizations.

References

Bandura, A. (1989). Human agency in social cognitive theory.  American Psychologist ,  44(9) , 1175–1184.

Baruch, Y. (2001). Employability: a substitute for loyalty?  Human Resource Development International,  4 (4), 543–566.

Baruch, Y. (2004). Transforming careers: From linear to multidirectional career paths - organizational and individual perspectives.  Career Development International. 9(1), 58–73

BSI. (2020). Organizational resilience index: Third annual report. https://www.bsigroup.com/globalassets/localfiles/en-us/organizational-resilience/index-report-2019.pdf

Carver, C. (1998). Resilience and thriving: Issues, models and linkages.  Journal of Social Issues, 54(2), 245–266.

Charan, R., & Colvin, G. (1999, June 21). Why CEOs fail.

Dalziell, E., & McManus, S. (2004). Resilience, vulnerability and adaptive capacity: Implications for systems performance. International Forum on Engineering Decision Making. 1–17.

DeFillippi, R. J., & Arthur, M. B. (1994). The boundaryless career: A competency-based prospective.  Journal of Organizational Behavior,  15(4), 307–324.

FM Global. (2019). 2019 resilience index annual report. https://www.fmglobal.com/research-and-resources/tools-and-resources/~/media/AB230A1E308247D9B4863EF7FEFDD517.ashx

Hamel, G., & Välikangas, L. (2003). The quest for resilience.  Harvard Business Review, 81(9), 52–63.

.Hind, P., Frost, M., & Rowley, S. (1996). The resilience audit and the psychological contract.  Journal of Managerial Psychology,  11(7), l8–31.

Holling, C. (1973), Resiliency and stability of ecological systems.  Annual Review of Ecological Systems,  4, 1–24. 

Mallak, L. (1998). Putting organizational resilience to work.  Industrial Management, 40(6), 8–.

Perrings, C. (2001). Resilience and sustainability. In H. Folmer, H. L. Gabel, S. Gerking, & A. Rose (Eds.).  Frontiers of Environmental Economics. Edward Elgar.

Reich, J. W. (2006). Three psychological principles of resilience in natural disasters. Disaster Prevention and Management, 15(5).

Rose, A. (2004). Defining and measuring economic resilience to disasters.  Disaster Prevention and Management,  13(4).

Ruettgers, M. (2003). Business continuity for global enterprises: The importance of protecting and managing information assets.  The Fletcher Forum of World Affairs, 27(2), 279–287.

Senge, P. (2005) The fifth discipline: A shift of mind. In J .M. Shafritz, J. S. Ott, & Y.S. Jang  Classics of Organizational Theory (6th ed.). Thompson, Wadsworth Publishers, pp. 441–449.

Sheffi, Y. (2005). The resilient enterprise: Overcoming vulnerability for competitive advantage. The MIT Press.

Sneader, K., & Singhal, S. (2020). The future is not what it used to be: Thoughts on the shape of the next normal.  McKinsey.com. https://www.mckinsey.com/featured-insights/leadership/the-future-is-not-what-it-used-to-be-thoughts-on-the-shape-of-the-next-normal

Tinch, R. (1998), Resilience and Resource Management Under Risk, School of Environmental Science, University of East Anglia, Norwich.

Weick, K. E. (1993). The collapse of sensemaking in organizations: The Mann Gulch disaster.  Administrative Science Quarterly, 38 (4), 628–652.

Appendix: Resilience Culture

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All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity of information located at external sites.

Learning Topic

Circular Economy

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The ramifications of COVID-19 will go beyond the short-term worldwide health and financial effects. Aside from a need for a more coordinated response from governments and corporation, the coronavirus has exposed the fragile state of the world economy.

"The 'coronacrisis' has demonstrated the fragility and unsustainability of our current model of economic growth" (Dixson-Declève et al., 2020). Without economic change, future worldwide crises are likely to trigger similar upheaval.

Economists worldwide are pointing to an old idea – the circular economy – as an alternative. The circular economy is "an idea where we move away from the old linear way of consumption – produce, use, discard – and towards … an economy where what we use is produced with the purpose of being reused, recycled, or repurposed" (Lyche, 2020). The conceptual framework has been with us for over 40 years but was seen as an expensive move and hard to justify when the current framework was viable. 

But as entire nations went into lockdown, sustainability of resources got a closer look, and the role of strategic leadership in developing and implementing policies to minimize waste and use of our resources becomes critical. 

Life Cycle Thinking Framework

Built-in obsolescence of a product is often incorporated by companies at the design stage to render it obsolete or nonfunctional after a certain period to stimulate consumer demand.  

The practice of continuously replacing, rather than repairing, products creates more waste, uses more resources, and is being increasingly challenged by the customers. The issue of forced obsolescence goes beyond ecological consideration of waste disposal and resource intensity. Software companies stop supporting older technologies to force users to purchase new products.   

That said, the dominant forces behind product obsolescence are technology and innovation. The  pace of innovation, which was shown years ago by Kondratieff in his "long waves" theory (1935), has been accelerating giving rise to rapid product obsolescence (e.g., 5¼ inch floppies to 3½ inch floppies to CDs to DVDs to solid state memory storages):  

Kondratieff's Long Waves

Source:  Rursus (2009).

Whether obsolescence is planned or driven by technology changes, an evaluation of a product's entire life cycle needs to be part of enterprise strategy of  cradle-to grave evaluation (Rainey, 2006, pp. 507–551) that includes upstream supply network management and manufacturing, and downstream aspects of product sale, use, and end-of-life considerations. 

Sonntag (2000) points out that the sustainability focus in the past has been on limiting the ecological impact of production on a per unit of activity. This approach has been used in the  life cycle assessment that provides a framework for measuring the environmental footprint of a product (Finnveden et al., 2009). 

However, with faster product cycles and competition, this generates newer products and faster product obsolescence, and we find competition promotes an overall increase in consumption. So, despite a decreasing ecological impact per unit, when viewed in totality, we see greater ecological impact due to an overall increase in consumption driven by faster product cycles driven by competition. This impact is exacerbated with standards of living rising around the world and the increasing demand for consumer goods.

The importance of  full recycling recovery of products has accelerated. In fact, this trend is evident as regulations seek to make companies responsible for "cradle to grave" products. In the UK, embedded planned obsolescence in products is a breach of customer rights, enforced by the Office of Fair Trading.

The Conceptual Framework

The circular economy model synthesizes several major schools of thought.  

The environmental movement that began roughly in the 1960s brought about reform legislation in several countries, but the idea of sustainable growth was highlighted in an economic light by a Club of Rome report, "The Limits to Growth." The lead author of that report, Donella Meadows, cowrote a 1992 book,  Beyond the Limits (Dixson-Declève et al., 2020).

Meadows noted years ago that "humanity's future will be defined not by a single emergency but by many separate yet related crises stemming from our failure to live sustainably" (Dixson-Declève et al., 2020). By using "resources faster than they can be restored, and by releasing wastes and pollutants faster than they can be absorbed," (Dixson-Declève et al., 2020), disastrous consequences can result. The Club of Rome warning about resources remains valid in terms of the need to reevaluate exploitative attitudes toward use of natural resources.  

Nearly 50 years after the UN Conference on the Human Environment at Stockholm (1972), 23 years after the World Commission on Environment and Development (Brundtland Commission) defined  sustainable development as "a development which meets the needs of the present without compromising the ability of the future generations to meet their own needs" (1987), and 26 years after the Earth Summit at Rio (1992), the concept has inspired many scholars and practitioners to seek ways to include sustainability in corporate strategy and develop tools to measure and evaluate sustainability in company operations.  

The  Blue Economy is an open-source movement featuring case studies provided to the Club of Rome by Gunter Pauli, a former CEO of Ecover and a Belgian businessman (Ellen MacArthur Foundation, n.d.). The Blue Economy calls for solutions being determined by the local environment and promotes physical/ecological characteristics, emphasizing gravity as an energy source. The movement's initial report includes "100 innovations that could create 100 million jobs within the next 10 years" (Ellen MacArthur Foundation, n.d.). 

Schmidheiny (1992), with business leaders in the Business Council for Sustainable Development, developed the concept of " eco-efficiency," which would allow companies to achieve higher efficiency while preventing pollution. Elkington (1998) coined the term " triple bottom line" (TBL) to enable companies look not merely at the economic (profit) outcome of their business, but also the environmental at social costs. Basically, the term provides a framework to measure and report corporate performance against economic, social, and environmental parameters. In a broader sense, TBL embraces a wide spectrum of values, issues, and processes companies must address to minimize any harm resulting from their activities and to create economic as well as social and environmental value.  

Transitioning to a circular economy, however, is not confined to "adjustments aimed at reducing the negative impacts of the linear economy. Rather, it represents a systemic shift that develops long-term sustainability, creates new economic opportunities, and provides societal benefits" (EcoGlobal Foundation, n.d.). 

Walter Stahel and Genevieve Reday presented a 1976 report to the European Commission on their vision of what they called "an economy in loops" (Product-Life.org., n.d.) and effects on jobs, economic competitiveness, resource savings, and waste prevention. The report, "The Potential for Substituting Manpower for Energy," was published in 1982 as a book,  Jobs for Tomorrow: The Potential for Substituting Manpower for Energy.  

Today these factors are commonly referred to as the three pillars of sustainable development: ecologic, economic, and social compatibility (Product-Life.org, n.d.). Many have credited Stahel with the phrase "cradle to cradle," and his Product Life Institute supports those goals, including "the importance of selling services rather than products."

Stahel worked at developing a "closed loop" approach to production processes. That approach pursues four main goals: product-life extension, long-life goods, reconditioning activities, and waste prevention. It also advocates the importance of selling services rather than products, now popularly known as the "performance economy" (Ellen MacArthur Foundation, n.d.). 

The concept of harm, counterintuitive to development model of profit maximization, extends to nonhuman life. Naess (1973) and Devall and Sessions (1985) provide the  deep ecology perspective to sustainability that includes biocentric equality and emphasizes the intrinsic right of all species to exist.  

Benyus (1977) describes  the biomimicry principles focusing on nature's attributes and illustrating the lessons from evolutionary experiences. Nature optimizes resources by using only the energy it needs, recycles everything, and curbs excesses from within. Nature's optimization is in contrast to the waste in manufacturing, inefficient use of nonrenewable energy, and excessive consumption in industrialized societies. 

Biomimicry relies on three key principles (Ellen MacArthur Foundation, n.d.): 

1. Nature as model: Study nature's models and emulate these forms, process, systems, and strategies to solve human problems.

2. Nature as measure: Use an ecological standard to judge the sustainability of our innovations.

3. Nature as mentor: View and value nature not based on what we can extract from the natural world, but what we can learn from it.  

As a business case for sustainability, Arnold and Day (1998) point out that businesses pursue sustainable development for three reasons: 

· morality – based on the assumption that business owes to society to improve people's lives and the environment in exchange for the privilege to operate 

· compliance  – driven by the threat of regulations

·  opportunity  – the result of seeing a chance of increased revenues and profits

Willard (2002) presents quantifiable evidence that investing in sustainable development pays off with bottom-line benefits. Hawken, Lovins, and Lovins (1999) show that the use of eco-design and eco-measures enhance resource productivity and give rise to a new set of practices.  

In a book by Paul Hawken, Amory Lovins, and L. Hunter Lovins,  Natural Capitalism: Creating the Next Industrial Revolution, the authors discuss "interdependencies that exist between the production and use of human-made capital and flows of natural capital (MacArthur Foundation, n.d.)

 The following four principles underpin  natural capitalism (Ellen MacArthur Foundation, n.d.):

1. increase the productivity of natural resources by increasing the life of products

2. shift to biologically inspired production models and materials; model closed-loop production systems where every output is either returned to the ecosystem as a nutrient, or becomes an input for another manufacturing process

3. move to a "service-and-flow" business model that aligns the interests of providers and customers in a way that rewards resource productivity

4. reinvest in natural capital  

The circular economy of cradle-to-cradle is based on the design philosophy that considers all material involved in industrial and commercial processes to be nutrients, technical, and biological (Ellen MacArthur Foundation, n.d.).  

Circular Economy: From Cowboy Economy to Spaceship Economy

Boulding in 1966 discussed a shift from what he called the "cowboy economy," characterized by endless resources and an option to move on, leaving problems behind to the "spaceship economy," where resources needed to be reused to keep life support viable (EASAC, 2015).

The concept has since been developed by many authors such as Smith (1972), Mäler (1974), and Dasgupta and Heal (1979), according to a report on circular concepts by the European Academies' Science Advisory Council (EACAC, 2015).  

Before we can understand the circular economy, it helps to define the linear economy. Most organizations today operate in the linear economy, which is based on a "take, make, and dispose" model. Companies take raw materials and make them into products, which are purchased by consumers. Those consumers eventually throw away the products and create waste.  

The Linear Economy

The circular economy is not about just recycling the products. In a circular economy, the manufacturer maintains ownership of the products, much like leasing a car. The model looks more like this: make, use, reuse, remake and recycle. 

The Circular Economy

Example

In a linear economy, consider the use of a light bulb. Once the light bulb burns out, the customer disposes of it and neither the seller nor the customer will see that bulb again. The resources to make the bulbs, such as glass or metal, are also not seen by the seller or customer again. In this linear economy model, the light bulb company buys materials at the lowest cost to sell as many bulbs as possible. This model assumes there are infinite resources, like glass or metal, in the world (Leonard, 2018).

By contrast, in the circular economy, you would lease light, just as you would a car or an apartment. 

The financial shock of 2008 reignited the idea of "resource productivity and efficiency"—doing more with less, and subsequently, the European Commission (EC) presented a "Resource Efficient Europe" in 2011 (EASAC, 2015). The EC eventually compiled proposals in 2014 for a road map to a circular economy, after studies that showed that "improving resource efficiency along value chains" could significantly reduce material inputs (EASAC, 2015).  

The European Union (EU) adopted an action plan (European Academies, 2015) aiming to make supply chains more circular. This includes everything from production to consumption, repair and manufacturing, and waste management. One report (European Commission, 2020) estimates a shift toward the circular economy in the EU could increase GDP by an additional 12 percentage points by 2050.  

The benefits of the circular economy are seen as (EASAC, 2015):  

· improved competitiveness by controlling rising costs 

· reducing raw materials and energy dependency

· opportunities for new businesses

· reducing environmental impact of resource extraction and waste disposal

· reducing greenhouse gas emissions  

In spite of compelling evidence of the benefits of the circular economy, the reasons why the economies stay locked in the linear economy include (EASAC, 2015):  

· Costs associated with the company's environmental and social impacts of its operations are not captured though they are a direct consequence of the company's activities 

· Ignoring the potential impact on resource depletion, pollution, and climate change on the company itself. 

· Priorities for short-term profits and dividends to shareholders. This avoids the perspective required for investments into resource efficiency.  

A 2015 report on the circular economy by the European Academies Science Advisory Council notes: "If the true cost of the circular economy model were compared with the true cost of the linear economy model, which currently excludes most externalities, then a proper comparison of the costs for pursuing a circular economy over a linear economy could be made" (EASAC, 2015)  

The report also states that economic indicators based on traditional national accounts such as GDP do not measure how efficiently resources are used, and new indicators are still "being evolved" (EASAC, 2015). 

Case Studies of Circular Economy  

A 2014 report from the World Economic Forum illustrated some examples of companies taking part in initiatives that promote the circular economy (World Economic Forum, 2014). Information was provided by the companies.

Philips – The lighting equipment company offers "lighting as a service" by keeping ownership of the equipment. Philips says it can reach more customers and those customers don't pay "high upfront costs." The company also works with organizations that dispose of bulbs containing mercury.

Vodafone – Vodafone offers "buy back" programs and is a partner in a "reverse cycle network" to collect devices to send to secondary markets in Hong Kong and China. 

H&M – H&M's UK retailers allow customers to bring in old clothing in exchange for a voucher. The company works with an apparel "reverse logistics" provider that handles the sorting for reuse, recycling, or even energy generation. 

Ricoh – Ricoh's "GreenLine" brand represents its effort to design and manufacture copies and printers to be recyclable or be reused. For productions that cannot be reused or recycled, the company "harvests" components and materials. 

References

Arnold, M., & Day, R. (1998).  The next bottom line: Making sustainable development tangible. The World Resources Institute.  

Benyus, J. M. (1997).  Biomimicry: Innovation inspired by nature. HarperCollins Publishers.  

Dasgupta, P., & Heal, G. (1979).  Economic theory and exhaustible resources. Cambridge University Press.  

Devall, B., and Sessions, G. (1985).  Deep ecology: Living as if nature mattered. Peregrine Smith Books, Gibbs Smith.  

Dixson-Declève, S., Lovins, H., Schellnhuber, H. J., & Raworth, K. (2020, March 24). A green reboot after the pandemic. https://www.project-syndicate.org/commentary/covid19-green-deal-by-sandrine-dixson-decleve-et-al-2020-03

EcoGlobal Foundation. (n.d.). Ellen MacArthur Foundation. https://www.ecoglobalfoundation.org/campaigns/ellen-macarthur-foundation/?cv=1

Ellen MacArthur Foundation. (2012). Towards the circular economy: Economic and business rationale for an accelerated transition. https://web.archive.org/web/20121030114721/http://www.thecirculareconomy.org/uploads/files/032012/4f6360009d31c6098f000006/original/Exec_summary_single.pdf?1331912704

Ellen MacArthur Foundation. (n.d.). Schools of thought. https://www.ellenmacarthurfoundation.org/circular-economy/concept/schools-of-thought?cv=1

Elkington, J. (1998).  Cannibals with forks: The triple bottom line of 21st century business. New Society Publishers.

Esposito, M., Tse, T., & Soufani, K. (2018). Introducing a circular economy: New thinking with new managerial and policy implications.  California Management Review, 60(3), 5–19. https://doi-org.ezproxy.umgc.edu/10.1177/0008125618764691  

European Academies Science Advisory Council (EASAC). (2015). Circular economy: A commentary from the perspectives of the natural and social sciences. https://easac.eu/fileadmin/PDF_s/reports_statements/EASAC_Circular_Economy_Web.pdf

European Commission. (2019). European Green Deal Road Map. https://ec.europa.eu/info/sites/info/files/european-green-deal-communication-annex-roadmap_en.pdf   

European Commission. (2020).  A new circular economy action plan. https://eur-lex.europa.eu/legal-content/EN/TXT/DOC/?uri=CELEX:52020DC0098&from=EN  

Finnveden, G., Hauschild, M. Z., Ekvall, T., Guinée, J., Heijungs, R., Hellweg, S., Koehler, A., Pennington, D., & Suh, S. (2009) Recent developments in life cycle assessment.  Journal of Environmental Management,  91(1), 1–21. https://doi.org/10.1016/j.jenvman.2009.06.018.  

Hawken, P., Lovins, A., & Lovins, L. H. (1999).  Natural capitalism: Creating the next industrial revolution.   Little, Brown and Company.  

Kondratieff, N. D. (1935). The long waves in economic life.  Review of Economic Statistics,  17(6).  

Leonard, C. (2018, November 6). What is the circular economy and how does it affect us [Blog post]. https://ca.kaizen.com/blog/post/2018/11/06/what-is-the-circular-economy-and-how-does-it-affect-us.html

Lyche, H. (2020, March 24). Might a disaster trigger a new circular-economy? https://www.hkstrategies.com/might-a-disaster-trigger-a-new-circular-economy/

Mäler, K. (1974).  Environmental economics. University Press.  

Meadows, D. H., Meadows, D. L., Randers, J., & Behrens III, W. W. (1972).  The limits to growth. Chelsea Green Publishing.  

Meadows, D. H., Meadows, D. L., & Randers, J. (1992).  Beyond the limits. Chelsea Green Publishing.  

Naess, A. (1973). The shallow and the deep, long-range ecology movements: A summary.  Inquiry, 6, 95–100.  

Product-Life.org. (n.d.). Cradle to cradle. http://product-life.org/en/cradle-to-cradle

Rainey, D. L. (2006).  Sustainable business development: Inventing the future through strategy, innovation, and leadership. Cambridge University Press. 

Schmidheiny, S. (1992).  Changing course: A global business perspective  on development and the environment. The MIT Press.  

Smith, V. (1972). Dynamics of waste accumulation: Disposal versus recycling.  Quarterly Journal of Economics, 86, 601–616. 

Sonntag, V. (2000). Sustainability - in light of competitiveness.  Ecological Economies, 34(1), 101–112. 

Stahel, W., & Reday-Mulvey, G. (1981). Jobs for tomorrow: The potential for substituting manpower for energy. http://www.product-life.org/en/cradle-to-cradle

Sustainability Illustrated. (2020).  Circular economy: Definition & examples. [Video]. https://www.youtube.com/watch?v=X6HDcubgxRk  

Sustainability Illustrated. (2014).  Triple bottom line (3 pillars): Sustainability in business. [Video]. https://www.youtube.com/watch?v=2f5m-jBf81Q  

United Nations Conference on Environment and Development (UNCED). (1992).  Agenda 21, the Rio Declaration on Environment and Development, the Statement of Forest Principles, the United Nations Framework Convention on Climate Change and the United Nations Convention on Biological Diversity. Rio de Janeiro.  

United Nations. (1972).  United Nations Conference on Human Environment (UNCHE). United Nations.  

Willard, B. (2002).  The sustainability advantage: Seven business case benefits of a triple bottom line. New Society Publishers.  

World Commission on Environment and Development (WEDC). (1987).  Our common future. Oxford University Press. 

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Learning Topic

Managing Ambivalence

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"Ambivalence can be understood as a phenomenon characterized by conflicted desires pertaining to a choice and one's actions" (Simon, 2006, p. 92). Ambivalence can arise from a conflict between two or more strategic plans or the competing factors that determine workforce reductions. When a situation arises in which a leader is faced with ambivalence, he or she can still act and make a decision. There is a difference between ambivalence and indecisiveness. Indecisiveness is the in ability or failure to make a decision when faced with conflicting factors.

Ambivalence is central to strategic leadership because evaluating alternatives is "an essential part of the strategic decision making process and approach—avoidance conflicts are inseparable from a decision making process" (Simon, 2006, p. 92). Ambivalence is created when a decision maker remains open to information, leaving them vulnerability to discovering that their decision is incorrect. A leader should retain the ability to keep an open mind to new information during the decision-making process, as the situation might change and influence the appropriate direction to take.

One of the chief expectations of a strategy leader is to make key decisions on behalf of the stakeholders to create and sustain the competitive advantage of the organization. The resulting alternatives could result in constraints for the organization. Generating alternatives (e.g., inventing, developing, and designing products) is a laborious and costly process, and there are many potential alternatives (Simon, 2007, p. 156). A successful leader must be adept at generating, evaluating and analyzing alternatives for any course of action in order to ensure that the best course of action is taken.

References

Simon, A. (2006). Leadership and managing ambivalence.  Consulting Psychology Journal, 58(2), 91–105.

Simon, H. A. (1997).  Administrative behavior (4th ed.). New York: The Free Press.

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Learning Topic

Shared and Distributed Leadership

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Traditional approaches to leadership emphasize the empowerment of subordinates to make an individual leader more effective. With this approach, the focus is on the process by which leaders enable others to share responsibility for leadership functions. This model assumes that distributed leadership and power sharing are inevitable in organizations, and the organizations cannot be understood by focusing solely on the decisions and actions of individual leaders. Namely, strategic leadership "empowers others to participate in the process of interpreting events, solving problems, and making decisions" (Argyris, 1964; Likert, 1967).

This perspective recognizes that the actions of any individual leader are less important than the collective leadership provided by many members of the organization (Day, Gronn, & Salas, 2004). Viewing leadership in terms of reciprocal, recursive influence processes among multiple leaders is different from studying unidirectional effects of a single leader on subordinates.

"Distributed leadership involves multiple leaders with distinct but interrelated responsibilities. If the various leaders are unable to agree about what to do and how to do it, performance of the team or organization is likely to suffer" (Mehra, Smith, Dixon, & Robertson, 2006).

References

Argyris, C. (1964).  Integrating the individual and the organization. New York: John Wiley.

Day, D. V., Gronn, P., & Salas, E. (2004). Leadership capacity in teams.  Leadership Quarterly, 15, 857–880.

Likert, R. (1967).  The human organization: Its management and value. New York: McGraw-Hill.

Mehra, A., Smith, B., Dixon, A., & Robertson, B. (2006). Distributed leadership in teams: The network of leadership perceptions and team performance.  Leadership Quarterly, 17, 232–245.

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Learning Topic

Relational Leadership

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Traditional approaches to leadership focus on how an individual leader can develop and maintain cooperative relationships. An alternative view of leadership describes it as part of the evolving social order that results from interactions, exchanges, and influence processes among many people in an organization. Relationships are acknowledged as an important aspect of leadership in much of the literature on the subject.

According to this alternative perspective, leadership can be understood as a part of the dynamics of the social system in which it occurs (Dachler, 1992). Instead of the traditional focus on a single leader, this approach posits that social processes and patterned relationships can explain how collective activity can accomplish shared objectives. Organizations and other social entities, such as teams, coalitions, and interest groups, are defined more by the web of interpersonal relationships than by formal charters, structures, policies, and rules. These relationships are continually being modified as changing conditions elicit adaptive responses.

Strategic leaders consistently influence relationships and are expected by others to have this influence (Hosking, 1988). They interpret events, explain cause-effect relationships in a meaningful ways, and influence people to modify their attitudes, behavior, and goals. Individuals develop and use social networks to gather information and build coalitions to increase their influence over decisions (Balkundi & Kilduff, 2005).

References

Balkundi, P., & Kilduff, M. (2005). The ties that lead: A social network approach to leadership.  Leadership Quarterly, 16(6), 941–961.

Dachler, P. (1992). Management and leadership as relational phenomena. In M. V. Cranach, W. Doise, & G. Mugny (Eds.),  Social representations and social bases of knowledge (pp. 169–17). Lewiston, NY: Hogrefe and Huber.

Hosking, D. M. (1988). Organizing, leadership, and skillful process.  Journal of Management Studies, 25, 147–166.

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Learning Topic

Complexity Theory of Leadership

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Traditional leadership models that are effective for organizations based on physical production are often not well suited for a more knowledge-oriented economy. Complexity leadership theory focuses on enabling learning, creativity, and adaptive capacity in complex adaptive systems (CASs) within the context of knowledge-producing organizations. It expands the locus of leadership from the isolated, role-based actions of individuals to the innovative, contextual interactions that occur across an entire social system (Lichtenstein et al., 2006).

This conceptual framework includes three entangled leadership roles that reflect a dynamic relationship between the bureaucratic, administrative functions of the organization and the informal dynamics of CASs (Uhl‐Bien, Marion, & McKelvey, 2007):

· Administrative leadership involves actions and decisions by formal leaders who are responsible for planning and coordinating activities for the organization.

· Adaptive leadership occurs when people with different knowledge, beliefs, and preferences interact in an attempt to solve problems and resolve conflicts.

· Enabling leadership facilitates the process by increasing the interdependence among people, supporting the value of dissent and debate, increasing access to necessary information and resources, and helping to get innovative ideas implemented in the organization.

Complexity theory involves emergent processes and adaptive outcomes that are often unpredictable in advance.

References

Lichtenstein, B. B, Uhl-Bien, M., Marion, R., Seers, A., Orton, J. D., & Schreiber, C. (2006). Complexity leadership theory: An interactive perspective on leading in complex adaptive systems.  Emergence: Complexity and Organization, 8,  2–12. Retrieved from http://digitalcommons.unl.edu/managementfacpub/8

Uhl-Bien, M., Marion, R., & McKelvey, B. (2007). Complexity leadership theory: Shifting leadership from the industrial age to the knowledge era.  Leadership Quarterly, 18(4), 298–318.

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All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity of information located at external sites.