Strategic Leadership: Creating an Learning and

Ethical Organization

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Strategic Leadership

Strategic leadership involves:Strategic leadership involves: the ability to anticipate, envision, maintain the ability to anticipate, envision, maintain

flexibility and empower others to create strategic flexibility and empower others to create strategic changechange

multi-functional work that involves working multi-functional work that involves working through othersthrough others

consideration of the entire enterprise rather than consideration of the entire enterprise rather than just a sub-unitjust a sub-unit

a managerial frame of referencea managerial frame of reference

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SuccessfulSuccessfulStrategic ActionsStrategic Actions

Strategic Leadership and the Strategic Management Process

Effective StrategicEffective StrategicLeadershipLeadership

Strategic IntentStrategic Intent Strategic MissionStrategic Mission

shapes the formulation ofshapes the formulation of

andandinfluenceinfluence

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Strategic Leadership and the Strategic Management Process

StrategicStrategicCompetitivenessCompetitiveness

Above-Average ReturnsAbove-Average Returns

FormulationFormulationof Strategiesof Strategies

ImplementationImplementationof Strategiesof Strategies

SuccessfulSuccessfulStrategic ActionsStrategic Actions

yieldsyields

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Factors Affecting Managerial Discretion

External EnvironmentExternal Environment• Industry structure• Rate of market growth• Number and type of

competitors• Nature and degree of

political/legal constraints• Degree to which products

can be differentiated

External EnvironmentExternal Environment

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Factors Affecting Managerial Discretion

Characteristics of theCharacteristics of theOrganizationOrganization

Characteristics of the Characteristics of the OrganizationOrganization• SizeSize• AgeAge• CultureCulture• Availability of resourcesAvailability of resources• Patterns of interaction Patterns of interaction

among employeesamong employees

External EnvironmentExternal Environment

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Factors Affecting Managerial Discretion

External EnvironmentExternal Environment

Characteristics of theCharacteristics of theOrganizationOrganization

ManagerialManagerialDiscretionDiscretion

Characteristics of the Characteristics of the ManagerManager• Tolerance for ambiguityTolerance for ambiguity• Commitment to the firm Commitment to the firm

and its desired strategic and its desired strategic outcomesoutcomes

• Interpersonal skillsInterpersonal skills• Aspiration levelAspiration level• Degree of self-confidenceDegree of self-confidence

Characteristics of theCharacteristics of theManagerManager

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Exercise of Effective Strategic Leadership

EstablishingEstablishingbalancedbalancedorganizationalorganizationalcontrolscontrols

EmphasizingEmphasizingethicalethicalpracticepractice

DevelopingDevelopinghumanhumancapitalcapital

Exploiting andExploiting andmaintainingmaintainingcorecorecompetenciescompetencies

SustainingSustainingan effectivean effectiveorganizationalorganizationalcultureculture

DeterminingDeterminingstrategicstrategicdirectiondirection

Effective StrategicEffective StrategicLeadershipLeadership

Leadership: Three Interdependent Activities

Determining aDetermining adirectiondirection

Designing theDesigning theorganizationorganization

Nurturing aNurturing aculture dedicatedculture dedicatedto excellence andto excellence andethical behaviorethical behavior

Successful leaders must recognize three interdependent activitiesDetermining a direction

Designing the organization

Nurturing a culture dedicated to excellence and ethical behavior

Setting a Direction

Scan environment to developKnowledge of all stakeholdersKnowledge of salient environmental trends and events

Integrate that knowledge into a vision of what the organization could becomeRequired capacities

Solve increasingly complex problems Be proactive in approachDevelop viable strategic options

Patterns of Growth of Large Corporations

Difficulties in implementing the leaders’ vision and strategies

Lack of understanding of responsibility and accountability among managersReward systems that do not motivate individuals and groups toward desired organizational goalsInadequate or inappropriate budgeting and control systemsInsufficient mechanisms to coordinate and integrate activities across the organization

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 quoSystemic barriersBehavioral barriersPolitical barriersPersonal time constraints

A Leader’s Bases of Power

11-14Emotional Intelligence: A Key Leadership Trait

Accounting, business

planning, etc.

Analytical reasoning, quantitative analysis,

etc.

Ability to work with others, passion for

work, etc.

Successful traits Successful traits of leaders at the of leaders at the

highest levelhighest level

Technical Technical skillsskills

Cognitive Cognitive abilitiesabilities

Emotional Emotional intelligenceintelligence

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Emotional Intelligence

Five components of emotional intelligence

Self-awarenessSelf-regulationMotivationEmpathySocial skill

Emotional Emotional intelligenceintelligence

11-16Five Components of Emotional Intelligence at Work

Self-management

skills:Self-awareness

Definition Hallmarks

The ability to recognize and understand your moods, emotions, and drives, as well as their effect on others.

Self-confidence

Realistic self-assessment

Self-deprecating sense of humor

The ability to control or redirect disruptive impulses and moods.

The propensity to suspend judgment—to 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)

Self-regulation

11-17 Five Components of Emotional Intelligence at Work

motivation

Definition Hallmarks

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 the emotional 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

Self-management skills:

Managing relationships

Empathy

11-18 Five Components of Emotional Intelligence at Work

Social skill

Definition Hallmarks

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

Managing relationships

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 organizationsCreate a proactive, creative approach to the unknownActively solicit the involvement of employees at all levelsEnable all employees to use their intelligence and apply their imagination

11-20Developing a Learning Organization

Learning environmentOrganization-wide commitment to changeAn action orientationApplicable tools and methodsGuiding philosophyInspired and motivated people with a purpose

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Salient elements of empowerment

Start at the bottom by understanding needs of employeesTeach employees skills of self-managementBuild teams to encourage cooperative behaviorEncourage intelligent risk takingTrust people to perform

Four Critical Processes of Learning Organizations

Empowering employees at all

levels

11-22 Four Critical Processes of Learning Organizations

Empowering Empowering employees at all employees at all

levelslevels

Accumulating and sharing internal

knowledge

“Open book” managementNumbers on each employee’s work performance and production costs generated dailyInformation is aggregated once a week from top level to bottom levelExtensive training in how to use and interpret the numbers – how to understand balance sheets, cash flows and income statements

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Four Critical Processes of Learning Organizations

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 informationBenchmarkingFocus directly on customers for information

Empowering Empowering employees at all employees at all

levelslevels

Accumulating and Accumulating and sharing internal sharing internal

knowledgeknowledge

Gathering and integrating external

information

11-24Four Critical Processes of Learning Organizations

Empowering Empowering employees at all employees at all

levelslevels

Accumulating and Accumulating and sharing internal sharing internal

knowledgeknowledge

Gathering and Gathering and integrating external integrating external

informationinformation

Challenging the status quo and

enabling creativity

Challenging the status quoCreate a sense of urgencyEstablish 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 leadershipUnethical business practices

Involves tacit, if not explicit, cooperation of othersReflect the values, attitudes, and behavior pattern that define the organization’s operating culture

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Creating An Ethical Organization

Driving forces of ethical organizationsEthical valuesIntegrity

Ethical valuesShape the search for opportunitiesShape the design organizational systemsShape the decision-making process used by individuals and groupsProvide a common frame of reference that serves as a unifying force

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Nurturing a CultureIn nurturing a culture dedicated to excellence and ethical behavior, managers and top executives must

Accept personal responsibility for developing and strengthening ethical behaviorConsistently demonstrate that such behavior is central to the vision and missionDevelop and reinforce

Role models Corporate credosCodes of conductReward and evaluation systemsPolicies and procedures

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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 individualsIndividual integrity is rarely self-sustainingOrganizational integrity, resting on a

concept of PurposeResponsibilityIdeals

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Approaches to Ethics Management

Ethics Conformity with externally Self-governance according to

imposed standards chosen standards

Characteristics Compliance-Based Integrity-BasedApproach Approach

Objective Prevent criminal Enable responsible conductmisconduct

Leadership Lawyer-driven Management-driven with aid of lawyers, HR, and others

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Approaches to Ethics Management

Methods Education, reduced Education, leadership,discretion, auditing and accountability,

organizationalcontrols, penalties systems and decision

processes, auditing and controls, penalties

Characteristics Compliance-Based Integrity-BasedApproach Approach

Behavioral Autonomous beings Social beings guided byAssumptions guided by material material self-interest, values,

self-interest ideals, peers

11-31 Key Elements of Highly Ethical Organizations

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

These interrelated elements must be present and constantly reinforced

Role modelsCorporate credos and codes of conductReward and evaluation systemsPolicies and procedures

11-32 Key Elements of Highly Ethical Organizations

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Leaders are role models for their organizationsLeaders must be consistent in their words and deedsValues and character of leaders become transparent to an organization’s employeesEffective leaders take responsibility for ethical lapses within the organization

Role models

11-33 Key Elements of Highly Ethical Organizations

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Provide a statement and guidelines for norms, beliefs and decision makingProvide employees with clear understanding of the organizations position regarding employee behaviorProvide the basis for employees to refuse to commit unethical actsContents of credos and codes of conduct must be known to employees

Role modelsRole models

Corporate credos and codes of

conduct

11-34 Key Elements of Highly Ethical Organizations

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Inappropriate reward systems may cause individuals at all levels of the organization to commit unethical acts that they might not otherwise doPenalties 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

Role modelsRole models

Corporate credos Corporate credos and codes of and codes of

conductconduct

Reward and evaluationsystems

11-35 Key Elements of Highly Ethical Organizations

McGraw-Hill/IrwinStrategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Policies and procedures can specify proper relationships with a firm’s customers and suppliersPolicies and procedures can guide employees to behavior ethicallyPolicies and procedures must be reinforced

Effective communicationEnforcementMonitoringSound corporate governance practices

Role modelsRole models

Corporate credos Corporate credos and codes of and codes of

conductconduct

Reward and Reward and evaluationevaluationsystemssystems

Policies and procedures

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