1. Strategic Leadership: Creating a Learning Organization and an Ethical Organization
Chapter Eleven
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
After reading this chapter, you should have a good understanding of:
LO11.1 The three key interdependent activities in which all successful leaders must be continually engaged.
LO11.2 Three elements of effective leadership: integrative thinking, overcoming barriers to change, and the effective use of power.
LO11.3 The crucial role of emotional intelligence (EI) in successful leadership as well as its potential drawbacks.

3. Learning Objectives
LO11.4 The value of creating and maintaining a learning organization in today’s global marketplace. LO11.5 The leader’s role in establishing an ethical organization. LO11.6 The difference between integrity-based and compliance-based approaches to organizational ethics. LO11.7 Several key elements that organizations must have to become an ethical organization.

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

5. Three Interdependent Activities of Leadership
Exhibit 11.1

6. Setting a Direction Scan environment to develop
Knowledge of all stakeholders
Knowledge of salient environmental trends and events
Integrate that knowledge into a vision of what the organization could become

7. Setting a Direction Required capacities
Solve increasingly complex problems
Be proactive in approach
Develop viable strategic options

8. Setting a Direction Benefits clear future direction
a framework for the organization’s mission and goals
enhanced employee communication, participation, and commitment.

9. 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.

10. 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

11. QUESTION
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
Answer: B. Designing the organization

12. Nurturing an Excellent and Ethical Culture
Excellent and ethical organizational culture
an organizational culture focused on core competencies and high ethical standards

13. The Ambicultural Approach
“Ambicultural” perspective on leadership
leaders can benefit by taking the best of different philosophies and business practices while avoiding the negatives
challenge for managers is to utilize the thinking and orientations of respective cultures in order to understand, identify with, and benefit from them
Each society has particular strengths and weaknesses as they apply to business practice.
The challenge for managers is to utilize the thinking and orientations of both cultures
in order to understand, identify with, and benefit from each of them

14. Integrative Thinking Integrative thinking
Process of reconciling opposing thoughts by generating new alternatives and creative solutions rather than rejecting one thought in favor of another.
In his book The Opposable Mind, Martin contends that people who can consider two conflicting
ideas simultaneously, without dismissing one of the ideas or becoming discouraged
about reconciling them, often make the best problem solvers because of their ability to
creatively synthesize the opposing thoughts.

15. Integrative Thinking: The Process of Thinking and Deciding
Exhibit 11.2

16. Overcoming Barriers to Change
Reasons why organizations are prone to inertia and slow to change
Vested interests in the status quo
Systemic barriers
Behavioral barriers
Political barriers
Personal time constraints
1. Many people have vested interests in the status quo. People tend to be risk averse
and resistant to change. There is a broad stream of research on “escalation,” wherein
certain individuals continue to throw “good money at bad decisions” despite negative
performance feedback. 12
2. There are systemic barriers. The design of the organization’s structure, information
processing, reporting relationships, and so forth impede the proper flow and evaluation
of information. A bureaucratic structure with multiple layers, onerous requirements
for documentation, and rigid rules and procedures will often “inoculate” the
organization against change.
3. Behavioral barriers cause managers to look at issues from a biased or limited perspective
due to their education, training, work experiences, and so forth. Consider
an incident shared by David Lieberman, marketing director at GVO, an innovation
consulting firm:
4. Political barriers refer to conflicts arising from power relationships. This can be the
outcome of a myriad of symptoms such as vested interests, refusal to share information,
conflicts over resources, conflicts between departments and divisions, and petty
interpersonal differences.
5. Personal time constraints bring to mind the old saying about “not having enough
time to drain the swamp when you are up to your neck in alligators.” Gresham’s law
of planning states that operational decisions will drive out the time necessary for
strategic thinking and reflection. This tendency is accentuated in organizations experiencing
severe price competition or retrenchment wherein managers and employees
are spread rather thin.

17. The Effective Use of Power
a leader’s ability to get things done in a way he or she wants them to be done.
Organizational bases of power
A formal management position that is the basis of a leader’s power.

18. A Leader’s Bases of Power
Exhibit 11.3

19. Emotional intelligence
Emotional intelligence (EI)
an individual’s capacity for recognizing his own emotions and those of others,
including the five components of self awareness, self regulation, motivation, empathy, and social skills.

20. Five Components of Emotional Intelligence at Work
Exhibit 11.4

21. Key Elements of a Learning Organization
Exhibit 11.5

22. Inspiring and Motivating People with a Mission or Purpose
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

23. Inspiring and Motivating People with a Mission or Purpose
A Learning environment involves:
Organization-wide commitment to change
An action orientation
Applicable tools and methods
Guiding philosophy
Inspired and motivated people with a purpose

24. QUESTION The "top down" perspective of empowerment
 Encourages intelligent risk-taking 
Trusts people to perform
Encourages cooperative behavior
Delegates responsibility
Answer: D. Delegates responsibility

25. Empowering Employees at All Levels
Top-down perspective
Start at the top.
Clarify the organization’s mission, vision, and values.
Clearly specify the tasks, roles, and rewards for employees.
Delegate responsibility.
Hold people accountable for results.

26. Empowering Employees at All Levels
Bottom-up View
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

27. Accumulating and Sharing Internal knowledge
Effective organizations must also redistribute information, knowledge and rewards
The company needs to disseminate information by sharing customer expectations and feedback as well as financial information.
The employees must know about the goals of the business as well as how key value-creating activities in the organization are related to each other

28. Gathering and Integrating External Information
Internet accelerates the speed with which useful information can be located
Employees can use “garden variety” traditional sources to acquire external information
Benchmarking
Focus directly on customers for information

29. Challenging the Status Quo and Enabling Creativity
Create a sense of urgency
Establish a “culture of dissent”
Foster a culture that encourages risk taking
Cultivate culture of experimentation and curiosity

30. Best Practices: Learning from Failures
Exhibit 11.6

31. Creating an Ethical Organization
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.

32. Creating An Ethical Organization
Ethical orientation
the practices that firms use to promote an ethical business culture,
Includes ethical role models, corporate credos and codes of conduct, ethically-based reward and evaluation systems, and consistently enforced ethical policies and procedures.
Organizational ethics is a direct reflection of its leadership
Unethical business practices
Involves tacit, if not explicit, cooperation of others
Reflect the values, attitudes, and behavior pattern that define the organization’s operating culture
Driving forces of ethical organizations
Ethical values
Integrity

33. 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

34. Example: Wal-Mart Ethics for Managers
Meet with your direct reports as a group periodically to review the Guiding Principles and this Statement of Ethics.
Where there is a conflict between our ethics and business objectives, our ethics must always come first.
Lead by example, and encourage your associates to act with integrity in all dealings to avoid even the appearance of a violation of our business standards.
If an ethics issue arises with one of your associates, make sure other associates in your area are not making the same mistake.
Source: walmartstores.com

35. Integrity-Based versus Compliance-Based Approaches
Compliance-based ethics programs
programs for building ethical organizations that have the goal of preventing, detecting, and punishing legal violations.
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

36. Integrity-Based versus Compliance-Based Approaches
Integrity-based ethics programs
programs for building ethical organizations that combine a concern for law with an emphasis on managerial responsibility for ethical behavior,

37. Integrity-based Ethics Programs
Integrity-based Ethics Programs include:
Enabling ethical conduct;
Examining the organization’s and members’ core guiding values, thoughts, and actions
Defining the responsibilities and aspirations that constitute an organization’s ethical compass.

38. Approaches to Ethics Management
Exhibit 11.8

39. Key Elements of Highly Ethical Organizations
Role models
Corporate credos and codes of conduct
Reward and evaluation systems
Policies and procedures
Role Models
Leaders are role models for their organizations
Leaders must be consistent in their words and deeds
Values and character of leaders become transparent to an organization’s employees
Effective leaders take responsibility for ethical lapses within the organization
Corporate credos and codes of conduct
Provide a statement and guidelines for norms, beliefs and decision making
Provide employees with clear understanding of the organizations position regarding employee behavior
Provide the basis for employees to refuse to commit unethical acts
Contents of credos and codes of conduct must be known to employees
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
Policies and procedures
Policies and procedures can specify proper relationships with a firm’s customers and suppliers
Policies and procedures can guide employees to behavior ethically
Policies and procedures must be reinforced
Effective communication
Enforcement
Monitoring
Sound corporate governance practices

40. Johnson & Johnson’s Credo
Exhibit 11.10