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    Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinStrategic Management: Text and Cases, 4e

    11

    Strategic Leadership:

    Creating a Learning Organizationand an Ethical Organization

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    Learning Objectives

    After reading this chapter, you should have agood understanding of:

    - The three key activities in which all successful

    leaders must be continually engaged.- The importance of recognizing the interdependence

    of the three key leadership activities, and thesalience of power in overcoming resistance tochange.

    - The crucial role of emotional intelligence (EI) insuccessful leadership as well as its potentialdrawbacks.

    - The value of creating and maintaining a learning

    organization in todays global marketplace.

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    Learning Objectives

    After reading this chapter, you should have a

    good understanding of:

    - The five central elements of a learning

    organization.

    - The leaders role in establishing an ethical

    organization.

    - The benefits of developing an ethical organization.

    - The high financial and nonfinancial costs associated

    with ethical crises.

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    Leadership: Three

    Interdependent Activities

    Leadership is theprocess of transforming

    organizations from what they are to what the

    leader would have them become

    Leadership should be

    - Proactive

    - Goal-oriented

    - Focused on the creation and implementation of acreative vision

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    Leadership: Three

    Interdependent Activities

    Successfulleaders must

    recognize three

    interdependent

    activities:

    Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership

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    Example

    DuPonts vision statement is to be the world's

    most dynamic science company, creating

    sustainable solutions essential to a better, safer

    and healthier life for people everywhere.

    Source: www.dupont.com

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    Designing the Organization

    Difficulties in implementing the leaders vision

    and strategies

    - Lack of understanding of responsibility and

    accountability among managers

    - Reward systems that do not motivate individuals and

    groups toward desired organizational goals

    - Inadequate or inappropriate budgeting and control

    systems

    - Insufficient mechanisms to coordinate and integrate

    activities across the organization

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    Nurturing a Culture

    In nurturing a culture dedicated to excellence and

    ethical behavior, managers and top executives must

    - Accept personal responsibility for developing and

    strengthening ethical behavior- Consistently demonstrate that such behavior is central

    to the vision and mission

    - Develop and reinforce

    Role models Corporate credos

    Codes of conduct

    - Reward and evaluation systems

    - Policies and procedures

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    Overcoming Barriers to Change and

    the Effective Use of Power

    Reasons why organizations and managers at all

    levels are prone to inertia and slow to learn,

    adapt, and change

    - Vested interests in the status quo

    - Systemic barriers

    - Behavioral barriers

    - Political barriers

    - Personal time constraints

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    A Leaders Bases of Power

    Exhibit 11.2 A Leaders Bases of Power

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    Emotional Intelligence: A Key

    Leadership Trait

    Successful traits

    of leaders at the

    highest level

    Technical

    skills

    Cognitive

    abilities

    Emotional

    intelligence

    Accounting,business

    planning, etc.

    Analytical reasoning,quantitative analysis,

    etc.

    Ability to work withothers, passion for

    work, etc.

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    Emotional Intelligence

    Five components of emotional intelligence

    - Self-awareness

    - Self-regulation

    - Motivation

    - Empathy

    - Social skill

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    Five Components of Emotional

    Intelligence at Work

    Definition Hallmarks

    Self-managementskills:

    Self-awareness

    The ability to recognize

    and understand your

    moods, emotions, anddrives, as well as their

    effect on others.

    Self-confidence

    Realistic self-

    assessment

    Self-deprecating sense

    of humor Self-regulation The ability to control or

    redirect disruptive

    impulses and moods.

    The propensity to

    suspend judgmentto

    think before acting.

    Trustworthiness and

    integrity

    Comfort with ambiguity

    Openness to change

    Source: Adapted from D. Goleman, What Makes a Leader,Harvard Business Review, October-November 1998, p. 95 (with permission)

    Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work

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    Five Components of Emotional

    Intelligence at Work

    Definition Hallmarks

    ManagingRelationships:

    Empathy

    Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work

    Self-managementskills:

    Motivation

    A passion to work for

    reasons that go beyond

    money or status.

    A propensity to pursue

    goals with energy and

    persistence.

    Strong drive to achieve

    Optimism, even in the

    face of failure

    Organizational

    commitment

    The ability to

    understand theemotional makeup of

    other people.

    Skill in treating people

    according to their

    emotional reactions.

    Expertise in building

    and retaining talent

    Cross-cultural

    sensitivity

    Service to clients and

    customers

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    Five Components of Emotional

    Intelligence at Work

    Definition Hallmarks

    Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work

    ManagingRelationships:

    Social Skill

    Proficiency in managing

    relationships and

    building networks.

    An ability to find

    common ground and

    build rapport.

    Effectiveness in leading

    change Persuasiveness

    Expertise in building

    and leading teams

    Source: Adapted from D. Goleman, What Makes a Leader,Harvard Business Review, October-November 1998, p. 95 (with permission)

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    Developing a Learning Organization

    Successful learning organizations- Create a proactive, creative approach to the unknown

    - Actively solicit the involvement of employees at all

    levels- Enable all employees to use their intelligence and

    apply their imagination

    Learning environment

    - Organization-wide commitment to change- An action orientation

    - Applicable tools and methods

    - Guiding philosophy

    - Inspired and motivated people with a purpose

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    Key Elements of a

    Learning Organization

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    Key Elements of a

    Learning Organization

    Empowering employees at all levels

    - Salient elements of empowerment

    Start at the bottom by understanding needs of

    employees Teach employees skills of self-management

    Build teams to encourage cooperative behavior

    Encourage intelligent risk taking

    Trust people to perform

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    Question

    Do you agree with this statement by Ken Melrose,

    the great leader is a great servant?

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    Accumulating and sharing internal knowledge

    - Open book management

    Numbers on each employees work performance and

    production costs generated daily Information is aggregated once a week from top level to

    bottom level

    Extensive training in how to use and interpret the

    numbershow to understand balance sheets, cashflows and income statements

    Key Elements of a

    Learning Organization

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    Key Elements of a

    Learning Organization

    Gathering and integrating external information

    - Awareness of environmental trends and events

    Internet accelerates the speed with which useful

    information can be located Garden variety traditional sources for acquisition of

    external information

    Benchmarking

    Focus directly on customers for information

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    Key Elements of a

    Learning Organization

    Challenging the status quo and enabling

    creativity

    - Challenging the status quo

    Create a sense of urgency

    Establish a culture of dissent

    Foster a culture that encourages risk taking

    Cultivate culture of experimentation and curiosity

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    Creating An Ethical Organization

    Organizational ethics is a direct reflection of its

    leadership

    Unethical business practices

    - Involves tacit, if not explicit, cooperation of others

    - Reflect the values, attitudes, and behavior pattern that

    define the organizations operating culture

    Driving forces of ethical organizations- Ethical values

    - Integrity

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    Example

    In order to avoid unethical business practices,

    you should never do the following:

    1. Suppress information that might damage your

    reputation.

    2. Deny charges that are relevant and factual.

    3. Spend money for public relations or advertising to

    counter honest complaints.

    4. Ignore problems with the products you sell.

    5. Refuse to accept blame.

    Source: Gerson, Vicki. Avoiding Unethical Business Practices, www.nfib.com. February 21, 2003.

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    Creating An Ethical Organization

    Ethical values

    - Shape the search for opportunities

    - Shape the design organizational systems

    - Shape the decision-making process used by

    individuals and groups

    - Provide a common frame of reference that serves as a

    unifying force

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    Integrity-Based versus Compliance-Based

    Approaches to Organizational Ethics

    Essential links between organizational integrity

    and individual integrity

    - Cannot be high-integrity organizations without high-

    integrity individuals

    - Individual integrity is rarely self-sustaining

    - Organizational integrity, resting on a concept of

    Purpose

    Responsibility

    Ideals

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    Approaches to Ethics Management

    Characteristics Compliance-Based Integrity-BasedApproach Approach

    Ethics Conformity with externally Self-governance according to

    imposed standards chosen standards

    Objective Prevent criminal Enable responsible conductmisconduct

    Leadership Lawyer-driven Management-driven with aid oflawyers, HR, and others

    Source: L. S. Paine, Managing for Organizational Integrity, Harvard Business Review72, no. 2 (1994), p. 113 (with permission).

    Adapted from Exhibit 11.6 Approaches to Ethics Management

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    Key Elements of Highly

    Ethical Organizations

    These interrelated elements must be present and

    constantly reinforced

    - Role models

    - Corporate credos and codes of conduct

    - Reward and evaluation systems

    - Policies and procedures

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    Key Elements of Highly

    Ethical Organizations

    Role Models

    - Leaders are role models for their organizations

    - Leaders must be consistent in their words and deeds

    - Values and character of leaders become transparent

    to an organizations employees

    - Effective leaders take responsibility for ethical lapses

    within the organization

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    Key Elements of Highly

    Ethical Organizations

    Corporate credos and codes of conduct

    - Provide a statement and guidelines for norms, beliefs

    and decision making

    - Provide employees with clear understanding of theorganizations position regarding employee behavior

    - Provide the basis for employees to refuse to commit

    unethical acts

    - Contents of credos and codes of conduct must beknown to employees

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    Key Elements of Highly

    Ethical Organizations

    Reward and evaluation systems

    - Inappropriate reward systems may cause individuals

    at all levels of the organization to commit unethical

    acts that they might not otherwise do- Penalties in terms of damage to reputations, human

    capital erosion, and financial loss are typically much

    higher than any gains that could be obtained through

    such unethical behavior

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    Key Elements of Highly

    Ethical Organizations

    Policies and procedures

    - Policies and procedures can specify proper

    relationships with a firms customers and suppliers

    - Policies and procedures can guide employees tobehavior ethically

    - Policies and procedures must be reinforced

    Effective communication

    Enforcement Monitoring

    Sound corporate governance practices