1. 11
Strategic Leadership: Creating a Learning Organization and an Ethical Organization Professor John Coy

2. Learning Objectives
After reading this chapter, you should have a good 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 the salience of power in overcoming resistance to change.
The crucial role of emotional intelligence (EI) in successful leadership as well as its potential drawbacks.
The value of creating and maintaining a “learning organization” in today’s global marketplace.

3. Learning Objectives
After reading this chapter, you should have a good understanding of:
The five central elements of a “learning organization.”
The leader’s role in establishing an ethical organization.
The benefits of developing an ethical organization.
The high financial and nonfinancial costs associated with ethical crises.

4. Leadership: Three Interdependent Activities
Leadership is the 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. Leadership: Three Interdependent Activities
Successful leaders must recognize three interdependent activities:
Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership

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
Required capacities
Solve increasingly complex problems
Be proactive in approach
Develop viable strategic options

7. Example
DuPont’s 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:

8. 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

9. 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

10. 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

11. A Leader’s Bases of Power
Exhibit 11.2 A Leader’s Bases of Power

12. Emotional Intelligence: A Key Leadership Trait
Successful traits of leaders at the highest level
Technical skills
Cognitive abilities
Emotional intelligence
Ability to work with others, passion for work, etc.
Accounting, business planning, etc.
Analytical reasoning, quantitative analysis, etc.

13. Emotional Intelligence
Five components of emotional intelligence
Self-awareness
Self-regulation
Motivation
Empathy
Social skill

14. Five Components of Emotional Intelligence at Work
Definition Hallmarks
Self-management skills:
Self-awareness
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
Self-regulation
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)
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work

15. Five Components of Emotional Intelligence at Work
Definition Hallmarks
Self-management skills:
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
Managing Relationships:
Empathy
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
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work

16. Five Components of Emotional Intelligence at Work
Definition Hallmarks
Managing Relationships:
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)
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work

17. 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

18. Key Elements of a Learning Organization

19. 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

20. Question
Do you agree with this statement by Ken Melrose, “the great leader is a great servant”?
The role of a manager should be to create an environment where your employees can flourish and reach their full potential. The old view of a manager was to simply control resources and power within an organization.

21. Key Elements of a Learning Organization
Accumulating and sharing internal knowledge
“Open book” management
Numbers on each employee’s 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 numbers – how to understand balance sheets, cash flows and income statements

22. 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

23. 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

24. 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 organization’s operating culture
Driving forces of ethical organizations
Ethical values
Integrity

25. Example
In order to avoid unethical business practices, you should never do the following:
Suppress information that might damage your reputation.
Deny charges that are relevant and factual.
Spend money for public relations or advertising to counter honest complaints.
Ignore problems with the products you sell.
Refuse to accept blame.
Source: Gerson, Vicki. “Avoiding Unethical Business Practices,” February 21, 2003.

26. 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

27. 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

28. Question
Integrity-based ethics programs combines a concern for law with an ______.
A) emphasis on the proper use of managerial power
B) emphasis on legal consequences of unethical behavior
C) emphasis on managerial responsibility for ethical behavior
D) emphasis on social responsibility for ethical behavior
Answer: C

29. Approaches to Ethics Management
Characteristics Compliance-Based Integrity-Based
Approach Approach
Ethics Conformity with externally Self-governance according to
imposed standards chosen standards
Objective Prevent criminal Enable responsible conduct
misconduct
Leadership Lawyer-driven Management-driven with aid of
lawyers, HR, and others
Source: L. S. Paine, “Managing for Organizational Integrity,” Harvard Business Review 72, no. 2 (1994), p. 113 (with permission).
Adapted from Exhibit 11.6 Approaches to Ethics Management

30. Approaches to Ethics Management
Characteristics Compliance-Based Integrity-Based
Approach Approach
Methods Education, reduced Education, leadership,
discretion, auditing and accountability, organizational
controls, penalties systems and decision
processes, auditing and controls, penalties
Behavioral Autonomous beings Social beings guided by
Assumptions guided by material material self-interest, values,
self-interest ideals, peers
Source: L. S. Paine, “Managing for Organizational Integrity,” Harvard Business Review 72, no. 2 (1994), p. 113 (with permission).
Adapted from Exhibit 11.6 Approaches to Ethics Management

31. 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

32. 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 organization’s employees
Effective leaders take responsibility for ethical lapses within the organization

33. 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 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

34. 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

35. Key Elements of Highly Ethical Organizations
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

36. 11
Strategic Leadership: Creating a Learning Organization and an Ethical Organization Professor John Coy