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Business managent Importance of Leadership

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Business managent Importance of Leadership

  1. 1. Chapter One Leadership
  2. 2. The Importance of Leadership as a Fundamental Management Activity  Whilst many people use the terms „managers‟ and „leaders‟ interchangeably, there is a distinction that must be made between managers and leaders:  Managers are appointed, and thus have „legitimate‟ power that allows them to reward and to punish. Their influence over others is based on formal authority inherent in their positions.  Leaders may be appointed, or may emerge within groups; leaders can influence others to perform beyond the actions dictated by formal authority.  Leadership can therefore be defined as influencing and directing the behaviour of individuals and groups in order that they work willingly to pursue the goals and objectives of the organisation.
  3. 3. 1.2 Nature and Composition of Leadership  Leadership is the process of directing the behaviour of others towards the accomplishment of the organisation‟s goals.  It involves translating plans and reaching objectives.  It is a difficult concept to define since it entails influencing people, giving orders, motivating employees, managing conflict, and communicating with subordinates.  Leadership can be described as the activity that drives an organisation and its resources.  On a technical note, it involves formulating the organisation‟s mission, objectives and plans, and explaining them to employees.  It also encompasses supervising work, disciplining, and dealing with conflict. This is all completed within the sphere of higher productivity, profits, and market share.
  4. 4. 1.3 Differences between Managers and Leaders
  5. 5.  Leadership can be defined as bringing about change, envisioning a new future for the organisation, and impassioning people to commit and dedicate themselves to new directions.  Management can be defined as being more directed toward maintaining the status quo and availing the sustained effort needed to maintain new directions.
  6. 6. 1.4 The Theoretical Foundations of Leadership  1) Leadership characteristics or traits  If you ask any person what comes to mind when thinking of leadership, they will say things like intelligence, charisma, decisiveness, integrity, self- confidence, courage, physical stature, and appearance.  After the many thousands of studies conducted to establish a list of leadership traits that distinguished leaders from non-leaders, still no progress has been made to construct a leadership model of traits.  However, leadership traits do include qualities such as intelligence, assertiveness, above-average height, a good vocabulary, attractiveness, self- assurance, and an extrovert personality. Researchers did find that these traits alone did not „make‟ a good or effective leader, since the interactions of leaders and subordinates, and situational factors, were ignored.  Raymond Cattell, (www.sba.gov/managing/leadership/traits) a pioneer in the field of personality assessment, developed the Leadership Potential Equation in 1954. This equation, which was based on a study of military leaders, is used today to determine the traits that characterise an effective leader. The traits of an effective leader include the following: :
  7. 7.  Emotional stability. Good leaders must be able to tolerate frustration and stress. Overall, they must be well adjusted and have the psychological maturity to deal with anything they are required to face.  Dominance. Leaders are often-times competitive and decisive and usually enjoy overcoming obstacles. Overall, they are assertive in their thinking style as well as their attitude in dealing with others.  Enthusiasm. Leaders are usually seen as active, expressive, and energetic. They are often very optimistic and open to change. Overall, they are generally quick and alert and tend to be uninhibited.
  8. 8.  Conscientiousness. Leaders are often dominated by a sense of duty and tend to be very exacting in character. They usually have a very high standard of excellence and an inward desire to do one's best. They also have a need for order and tend to be very self-disciplined.  Social boldness. Leaders tend to be spontaneous risk-takers. They are usually socially aggressive and generally thick-skinned. Overall, they are responsive to others and tend to be high in emotional stamina.  Social boldness. Leaders tend to be spontaneous risk-takers. They are usually socially aggressive and generally thick-skinned. Overall, they are responsive to others and tend to be high in emotional stamina.
  9. 9.  Tough-mindedness. Good leaders are practical, logical, and to-the-point. They tend to be low in sentimental attachments and comfortable with criticism. They are usually insensitive to hardship and overall, are very poised.  Self-assurance. Self-confidence and resiliency are common traits among leaders. They tend to be free of guilt and have little or no need for approval. They are generally secure and free from guilt and are usually unaffected by prior mistakes or failures.
  10. 10.  Compulsiveness. Leaders were found to be controlled and very precise in their social interactions. Overall, they were very protective of their integrity and reputation and consequently tended to be socially aware and careful, abundant in foresight, and very careful when making decisions or determining specific actions.  Beyond these basic traits, leaders of today must also possess traits that will help them motivate others and lead them in new directions. Leaders of the future must be able to envision the future and convince others that their vision is worth following.
  11. 11.  To do this, they must have the following personality traits:  High energy. Long hours and some travel are usually a prerequisite for leadership positions, especially as your company grows. Remaining alert and staying focused are two of the greatest obstacles you will have to face as a leader.
  12. 12.  Intuitiveness. Rapid changes in the world today combined with information overload result in an inability to "know" everything. In other words, reasoning and logic will not get you through all situations. In fact, more and more leaders are learning to the value of using their intuition and trusting their "gut" when making decisions.
  13. 13.  Maturity. To be a good leader, personal power and recognition must be secondary to the development of your employees. In other words, maturity is based on recognising that more can be accomplished by empowering others than can be by ruling others.  Team orientation. Business leaders today put a strong emphasis on team work. Instead of promoting an adult/child relationship with their employees, leaders create an adult/adult relationship which fosters team cohesiveness.  Empathy. Being able to "put yourself in the other person's shoes" is a key trait of leaders today. Without empathy, you can't build trust. And  without trust, you will never be able to get the best effort from your employees.
  14. 14.  Charisma. People usually perceive leaders as larger than life. Charisma plays a large part in this perception. Leaders who have charisma are able to arouse strong emotions in their employees by defining a vision that unites and captivates them. Using this vision, leaders motivate employees to reach toward a future goal by tying the goal to substantial personal rewards and values.
  15. 15. 2) The behavioural approach to leadership  Leadership research from the 1940s to the 1960s concentrated on the behavioural styles demonstrated by leaders, in other words, was there something unique about what leaders did?  The latest hypotheses suggest that the actions of successful leaders differ from those of unsuccessful ones. Thus, managers who are trained in the right behaviour can become successful.  Furthermore, it is also believed that leadership is not necessarily effective in different situations.  Studies define two types of leadership behaviour, namely task-oriented leader behaviour and employee-oriented leader behaviour.
  16. 16.  Task-oriented leadership revolves around the leader ensuring that subordinates perform their allotted tasks to the best of their ability. Getting the job done is a higher priority than the feelings and welfare of employees.  This style implies emphasis on employees being tools to complete tasks. Employee-oriented leadership occurs when the leader applies less control and more motivation to get the job done. This style focuses on people and their needs and progress.  Below is a summary of the major Leader Behaviour Dimensions studies, and the conclusions of each:
  17. 17.  University of Iowa Studies  This research explored three leadership styles:  1.1) Autocratic – describes a leader who typically tends to centralise authority, dictates work methods, makes unilateral decisions, and limits employee participation.  1.2) Democratic – describes a leader who tends to involve employees in decision-making, delegates authority, encourages participation in deciding work methods and goals, and uses feedback as an opportunity to coach employees.  1.3) Laissez-faire – generally gives the group complete freedom to make decisions and complete their work.  Conclusion: The Democratic style was most effective, although later studies showed mixed results.
  18. 18. Ohio State Studies  These studies identified two important dimensions of leadership behaviour:  2.1) Consideration: The extent to which a leader had job relationships characterised by mutual trust and respect for followers‟ ideas and feelings.  2.2) Initiating Structure: The extent to which a leader was likely to define and structure roles of followers in the search for goal attainment. Conclusion: A leader high in Consideration and high in Initiating Structure was likely to achieve higher subordinate performance and satisfaction, but not in all situations.
  19. 19. University of Michigan Studies  This research identified the behavioural characteristics of leaders that were related to performance effectiveness. This resulted in two dimensions of behaviour: Employee-oriented and Production-oriented.  1) Employee-oriented: These leaders emphasised interpersonal relations and took a personal interest in the needs of employees, while also accepting individual differences among group members.  2) Task or Production-oriented: These leaders emphasised the technical or task aspects of the job, and were mainly concerned with accomplishing the group‟s tasks, while regarding group members as a means to this end.  Conclusion: Researchers strongly favoured employee-oriented leaders: these were associated with higher group productivity and higher job satisfaction.
  20. 20. The contingency (situational) approach to leadership  This theory involves the identification of specific factors in each situation that influence the effectiveness of leadership. It was found that no single trait or style is equally effective, so good leadership is the result of additional variables.  Leadership success can, therefore, be partly attributed to certain traits and behavioural patterns and how good these traits are in satisfying the needs of their subordinates and the situation.  Various models were developed to explain the contingency approach as follows:
  21. 21. a) Fiedler’s contingency theory of leadership  This theory is based on the assumption that the leader‟s effectiveness depends on how well his or her style fits in with the situation.  A manager can maintain the fit between style and situation by:  understanding their style of leadership (task or employee oriented),  analysing the situation to determine the level of effectiveness of the style, and  finally, matching the style and the situation so that the latter is compatible with the style.
  22. 22. b) Hersey and Blanchard’s model  This model presupposes that the most effective management style for a particular situation is determined by the maturity of the subordinates.  This so-called maturity is defined as the need for achievement, willingness to accept responsibility, and task-related ability and experience.  This model presupposes four leadership styles:  Telling: The leader defines roles and people what, when, where, and how to do various tasks.  Selling: The leader provides both directive and supportive behaviour.  Participating: The leader and follower share in decision-making. The leader‟s main role is facilitating and communicating  Delegating: The leader provides little direction and support.  As followers reach higher levels of maturity, the leader responds by reducing control over, and involvement with, the employees.
  23. 23. 4) Path-Goal Theory  This is a contingency model of leadership that extracts key elements from the Ohio State research, and the Expectancy theory. The essence of this theory is that it is the leader‟s job to assist followers in attaining goals, and provide necessary support and direction to ensure that their goals are compatible with the overall goals of the group, or organisation.  Effective leaders clarify the path to help followers achieve their goals, and make the journey easier by reducing pitfalls, hence the name path-goal theory.
  24. 24.  Four leadership behaviours identified are:  1. Directive leader behaviour: This leader lets employees know what is expected of them; gives specific guidance on how work is to be completed.  2. Supportive behaviour: This leader shows concern for the needs of employees.  3. Participative behaviour: This leader consults with employees; uses their suggestions before making decisions.  4. Achievement-oriented behaviour: This leader sets challenging goals; expects employees to perform at their highest level.  The trait, behavioural and situational approaches have contributed much to the theory of leadership but all have their shortcomings. It is because of these that research into leadership continues.
  25. 25. 5) Full Range Leadership  In 1985, Bass created the Full Range Leadership model (FRL) [http://www.findarticles.com/]. FRL fully accepts the trait, functional and situational theories, but goes on to identify skills, attitudes and behaviours that support different leadership needs within an organisation. Different phases of an organisation's evolution require different leadership skills. For example, a business in long-term sales decline with no real vision will need Transformational Leadership to address not just the immediate issue but to research and sell a longer- term strategy.  On the other hand, a business running smoothly with further organic growth opportunity has a different need for its leaders. This business needs to be more Transactional and grow the margins in the business with effective control and targeted performance. FRL ago accepts that strong leadership is required in roles where the task is more management by exception where auditing or health and safety requirements are the primary function of the role.
  26. 26.  FRL also recognises that some leaders are avoidant of their responsibility, so as to provide a measurement for ineffective leadership. It also provides a sensible development structure recognising that leaders need time to develop skills as they gain the appropriate experience. In the earlier stages of a career these will almost always be got at different levels within culturally and mechanically different organisations-- all of whom may have very different leadership development priorities and needs.
  27. 27. Four Features  It seems therefore that the FRL model has four distinct features:  Firstly, the model matches leadership types with appropriate skills allowing chief executives to more clearly define the specific needs for their individuals or teams and align the development lessons to the business objectives.  Secondly, this structure makes the measurement of leadership development possible through the Multifactor Leadership Questionnaire. It is a 360- degree tool that allows industry to bridge the gap between development costs and perceived returns.  The model appears to provide the first all-inclusive glue for leadership development. It can deal with the different needs of the business cycle, all levels and parts of the organisation and be a common platform for personal growth.
  28. 28.  FRL works best when organisations have a sustainable human capital strategy that is aligned to the vision. It therefore tends to promote and prove that well-defined targeted investment in people creates significant returns.  The FRL model possibly provides the best solution for organisations to get best value from leadership development. It allows Situational and Functional leadership methods to thrive whilst providing the framework for appropriate definition, measurement and alignment activity.
  29. 29.  As always though, success in leadership or team development does also rely on:  A belief that human capital development is a corner stone of sustainable organisational growth.  Development objectives and togs that are easily understood and aligned to the vision of the organisation.  Mature individuals who are ready to take on responsibility.  Simple, continual and measured activity.  Transformational leadership in itself.
  30. 30. Leadership Components  The components that emerge are:  1) Power  The types of power are:  Legitimate power – The authority granted to a particular position. Legitimate power is essentially the same as authority.  The power of Reward – The power to give or withhold rewards, like a salary increase, bonus, recognition, or interesting assignments.  Coercive power – The power to force compliance through fear, either psychological or physical, e.g. Fear of dismissal, or social exclusion.  Referent power – An abstract concept. Subordinates follow their leader because they like, or respect, or identify with, the leader. The leader has a certain charisma.  Expert power – The power based on possessing knowledge that others need or want.
  31. 31.  A manager that possesses all 5 kinds of power is a strong leader. However, not only managers have power, subordinates do too e.g. managers depend on them for information, to perform a specific task, or to have social influence over someone whose co-operation is needed.  Effective managers use their leadership or power in a way that maintains a healthy balance between their own power and that of their subordinates.  2) Influence  This is the ability to apply authority and power to ensure that followers take specific action. Followers are often influenced to make personal sacrifices for the organisation.
  32. 32.  3) Responsibility  All leaders have a responsibility to perform a task according to orders, and have a duty to account for their specific actions, and the actions of their followers or employees.  4) Delegation  This involves the subdividing of a task and passing smaller parts of it on to a subordinate, together with the necessary authority to execute and complete that task.
  33. 33.  Strategic Leadership and Decision-making  Strategic leadership refers to the ability to articulate a strategic vision for the company, or a major part of a company, and to motivate others to buy into that vision.  Characteristics of Good Leadership:  1) Vision, Eloquence, and Consistency  One of the key tasks of leadership is to give the organisation a sense of direction. Strong leaders seem to have a vision of where an organisation should go. They are also eloquent enough to communicate this vision to other in the organisation in terms that can energise people, and consistently articulate this vision until it becomes part of the organisational culture, e.g. John F. Kennedy, and Martin Luther King Jr.
  34. 34.  2) Commitment  Strong leaders often demonstrate commitment to their particular vision, often leading by example. An example is the CEO who preaches reducing costs in the organisation, and who then flies economy class, and does not enjoy other expensive „luxuries‟ that may be costly and extravagant.  3) Being well-informed  Good leaders develop a network of formal and informal sources of information that keep them well-informed about what is going on within their organisations.  Using informal ways of gathering information (e.g. seeing sites first-hand) avoids gatekeepers and special interest groups that occur in formal structures, who may hinder the passage of information.
  35. 35.  4) Willingness to Delegate and Empower  Good leaders are able to delegate to avoid becoming over-loaded with responsibilities. They also realise that empowering employees is a good motivational tool. They will, however, not delegate those tasks that they judge to be critical to the future of the organisation.  5) Astute Use of Power  Good leaders build consensus for their ideas, rather than use their authority to push ideas through. They act as democratic leaders rather than as dictators. Rather than try to implement larger plans which may encounter objections, good leaders tend to break them down into smaller more achievable goals, and push through the ideas a piece at a time.
  36. 36.  6) Emotional Intelligence  This is the term used to describe a bundle of psychological attributes that many strong leaders exhibit.  These include:  self-awareness (the ability to understand one‟s own moods),  self-regulation (the ability to control or redirect disruptive impulses or mood),  motivation (a passion and energy for work that goes beyond money or status),  empathy (understanding the feeling and viewpoints of others), and  social skills (friendliness with a purpose).
  37. 37.  7) Exerting Strategic Leadership  A strategy manager has many different roles to play: visionary, chief entrepreneur and strategist, chief administrator and strategy implementer, culture builder, resource acquirer, process integrator, coach, crisis solver, task-master, spokesperson, negotiator, motivator, arbitrator, consensus builder, policy maker, policy enforcer, and mentor! Many change efforts have to be vision driven and led from the top. Six leadership roles dominate the strategy implementer‟s action agenda:
  38. 38.  1. Staying abreast of what is happening and how well things are progressing: the manager needs to develop a broad network of contacts and sources of information within the organisation.  2. Promoting a culture in which the organisation is energised to accomplish strategy and perform at a higher level: the manager‟s time is best spent personally leading the change efforts and promoting cultural adjustments.  3. Keeping the organisation responsive to changing conditions, alert for new opportunities, generating new ideas, and ahead of rivals in developing competencies and capabilities.  4. Building consensus, containing „power struggles‟, and dealing with the politics of creating and implementing strategy.  5. Enforcing ethical standards  6. Pushing corrective actions to improve strategy execution and overall organisational performance.
  39. 39. Strategic Leadership and Organisational Culture  Every company has its own unique culture, made distinctive by its business philosophy and principles, its own way of approaching problems and making decisions, its own embedded pattern of „how things are done around here‟.  The root of organisational culture lies in the organisation‟s beliefs and philosophy about how its affairs should be conducted – the reasons why it does things the way it does. The culture is manifested in the values and principles that management preaches and practises, in its ethical standards and official policies, relationships with stakeholders, traditions, supervisory practices, and employees‟ attitudes.
  40. 40.  Once established, organisational cultures can be perpetuated in many ways: continuity of leadership, screening and selection of new group members according to how well their values fit in, systematic indoctrination of new members, the telling and retelling of company legends, and regular ceremonies.
  41. 41. The Power of Culture  A tight culture-strategy alignment acts in two ways to channel behaviour and influence employees to do their jobs in a strategy- supportive fashion:  1) A work environment where the culture matches well with the conditions for good strategy execution provides a system of informal rules and peer pressure regarding how to conduct business and do one‟s job effectively. These cultures shape the mood, temperament, and motivation of the workforce, positively affecting organisational energy, work habits, and operating practices.  2) A strong strategy-supportive culture nurtures and motivates employees to do their jobs in ways conducive to effective strategy execution; it provides structure, standards, and a value system in which to operate, and it promotes strong employee identification with the organisation‟s vision, targets, and strategy.
  42. 42. Creating a Fit between Strategy and Culture  The strategy-maker is responsible for selecting a strategy that is compatible with the prevailing organisational culture. The strategy-implementer is responsible for changing whatever facet of the culture is hindering the effective execution of the strategy.  Managerial actions to tighten the strategy-culture fit need to be both symbolic and substantive:  Symbolic actions send signals about the behaviour and performance that management wish to encourage. Top management‟s actions are the most important, by leading by example.
  43. 43.  Another type of symbolic action includes ceremonies and events to honour employees whose actions and performance exemplify what the culture requires.  Substantive actions complement talk and plans: the actions have to visible, credible, and an indication of management‟s commitment to any new strategic initiatives and cultural changes.  The strongest signs that management is committed to creating a new culture include:
  44. 44.  Replacing „old-culture‟ managers with „new breed‟ managers,  Changing long-standing policies and operating procedures that are dysfunctional and impede new initiatives,  Undertaking major re-organising moves that bring strategy into better alignment with strategy,  Tying compensation incentives directly to the new measures of strategic performance, and  Shifting substantial resources from „old-strategy‟ projects to „new-strategy‟ projects and programs. Also, chief strategy-implementers must be careful to lead by example.
  45. 45. Leadership The following are some of the more modern leadership models:  a. Transactional leadership:  Transactional leaders do what managers do: they clarify roles, initiate structures, provide rewards, and conform to organisational norms and values. Their style is characterised by objectives and standards, and evaluation and correction of performance, policies, and procedures. Transactional leadership is characteristic of stable, ongoing situations.
  46. 46.  b. Charismatic leadership  Charismatic leaders have the capacity to motivate people to do more than is expected of them, they create an atmosphere of change, and have an emotional impact on subordinates, e.g. Bill Gates from Microsoft.  c. Transformational leadership  Transformational leaders bring about innovation and change, are able to make changes in vision and mission, goals and strategies. This style is most appropriate in dynamic (ever- changing) environments, such as South Africa. Examples of such leaders are F.W. de Klerk and Nelson Mandela.  d. Female leadership  Women tend to be more interactive in their leadership style in that they are open and inclusive, concerned with building consensus, encourage participation, and are more caring than their male counterparts.
  47. 47. e. Dynamic engagement  Researchers tried to establish how these leaders were able to get „extraordinary‟ things done.  Five fundamental practices and ten behaviours have been identified:  Challenging the process - search for opportunities  - experiment and take risks : Inspiring a shared vision - envision the future  - enlist others : Enabling others to act - foster collaboration  - strengthen others :Modelling the way - set the example  - plan small wins : Encouraging the heart - recognise the individual contribution  - celebrate accomplishments
  48. 48. Is Leadership Always Important?  Data from numerous studies demonstrate that, in many situations, any behaviours that a leader exhibits are irrelevant. Certain individual, job, and organisational variables can act as "substitutes for leadership," negating the influence of the leader.  Characteristics of employees such as experience, training, "professional" orientation, or need for independence, can neutralise the effect of leadership. Jobs that are inherently unambiguous and routine or that are intrinsically satisfying may place fewer demands on the leadership variable.  Organisational characteristics as explicit formalised goals, rigid rules and procedures, or cohesive work groups can act in the place of formal leadership.
  49. 49. Building Trust: The Essence of Leadership  Trust is a positive expectation that another will not act opportunistically. The two most important elements in this definition are familiarity and risk. Trust is a history-dependent process based on relevant but limited samples of experience. It takes time to form, building incrementally and accumulating. Trust involves making oneself vulnerable. By its very nature, trust provides the opportunity for disappointment. But trust is not taking risk per se; rather it is a willingness to take risk.  What are the key dimensions that underlie the concept of trust? Recent evidence has identified five: integrity, competence, consistency, loyalty, and openness.  Integrity refers to honesty, conscientiousness, and truthfulness. This one seems to be most critical when someone assesses another's trustworthiness.  Competence encompasses an individual's technical and interpersonal knowledge and skills.
  50. 50.  Consistency relates to an individual's reliability, predictability, and good judgement in handling situations.  Loyalty is the willingness to protect and save face for another person. The final dimension of trust is openness.  Trust appears to be a primary attribute associated with leadership. Part of the leader's task is to work with people to find and solve problems, but whether leaders gain access to the knowledge and creative thinking they need to solve problems depends on how much people trust them. When followers trust a leader, they are willing to be vulnerable to the leader's actions.
  51. 51.  Honesty consistently ranks at the top of most people's list of characteristics they admire in their leaders. Now, more than ever, managerial and leadership effectiveness depends on the ability to gain the trust of followers. In times of change and instability, people turn to personal relationships for guidance; and the quality of these relationships is largely determined by the level of trust.  Moreover, contemporary management practices such as empowerment and the use of work teams require trust to be effective.
  52. 52. The Three Types of Trust  Deterrence-based trust: The most fragile relationships are contained in deterrence-based trust. This is based on fear of reprisal if the trust is violated. It works only to the degree that punishment is possible, consequences are clear, and the punishment is actually imposed if the trust is violated. Most new relationships begin on a base of deterrence. In a new manager-employee relationship, the bond that creates this trust lies in the authority held by the boss and the punishment that the manager can impose.
  53. 53. Knowledge-based trust:  Most organisational relationships are rooted in knowledge- based trust. Trust is based on the behavioural predictability that comes from a history of interaction. Knowledge of the other party and predictability of his or her behaviour replaces the contracts, penalties, and legal arrangements more typical of deterrence-based trust.  This knowledge develops over time, largely as a function of experience. The more communication and regular interaction you have with someone else, the more this form of trust can be developed and depended upon. Most manager-employee relationships are knowledge-based.
  54. 54. Identification-based trust:  The highest level of trust is achieved when there is an emotional connection between the parties. It allows one party to act as an agent for the other and substitute for that person. This mutual understanding is developed to the point that each can effectively act for the other. The best example of identification-based trust is a long-term, happily married couple. You see identification-based trust occasionally in organisations among people who have worked together for long periods of time and have a depth of experience that allows them to know each other inside and out. This is also the type of trust that managers ideally seek in teams.
  55. 55. Leadership and Business Ethics  According to Kenneth Blanchard and Norman Vincent Peale (authors of The Power of Ethical Management), (www.sba.gov/managing/leadership/ethics.)  there are three questions you should ask yourself whenever you are faced with an ethical dilemma.  Is it legal? In other words, will you be violating any criminal laws, civil laws or company policies by engaging in this activity?  Is it balanced? Is it fair to all parties concerned both in the short-term as well as the long-term? Is this a win-win situation for those directly as well as indirectly involved?
  56. 56.  Is it right? Most of us know the difference between right and wrong, but when push comes to shove, how does this decision make you feel about yourself? Are you proud of yourself for making this decision? Would you like others to know you made the decision you did? Most of the time, when dealing with "grey decisions", just one of these questions is not enough. But by taking the time to reflect on all three, you will often find that the answer becomes very clear.
  57. 57. According to Blanchard and Peale, you can base your policy on five fundamental principles:  Purpose: A purpose combines both your vision as well as the values you would like to see upheld in your business. It comes from the top and outlines specifically what is considered acceptable as well as unacceptable in terms of conduct in your business.  Pride: Pride builds dignity and self-respect. If employees are proud of where they work and what they are doing, they are much more apt to act in an ethical manner.  Patience: Since you must focus on long-term versus short- term results, you must develop a certain degree of patience. Without it, you will become too frustrated and will be more tempted to choose unethical alternatives.
  58. 58.  Persistence. Persistence means standing by your word. It means being committed. If you are not committed to the ethics you have outlined, then they become worthless. Stand by your word.  Perspective. In a world where there is never enough time to do everything we need or want to do, it is often difficult to maintain perspective. However, stopping and reflecting on where your business is headed, why you are headed that way, and how you are going to get there allows you to make the best decisions both in the short-term as well as the long-term.  A company policy is a reflection of the values deemed important to the business. As you develop your ethics policy, focus on what you would like the world to be like, not on what others tell you it is.
  59. 59. Strategic Management and Business Ethics  For an organisation to display consistently high ethical standards, the CEO and those in top management must be openly and clearly committed to ethical and moral conduct. Top management can communicate its commitment in a code of ethics, in speeches and company publications, in policies detailing the consequences of unethical behaviour, and in management‟s deeds and actions.  1) Management must set an excellent ethical example in its own behaviour.  2) Managers and employees must be educated about what is ethical behaviour and what is not.  3) Top management must regularly restate its clear support of the company‟s code of ethics.  4) Top management must take swift action against those who are guilty of violations.
  60. 60.  A well-developed program to ensure compliance with the ethical standards set by top management include:  1) An oversight committee of the board of directors, usually made up of external directors.  2) A committee of senior managers to direct on-going training, implementation, and compliance.  3) An annual audit of each manager‟s efforts to uphold ethical standards, and formal reports on the actions taken by managers to correct bad conduct.  4) Periodically requiring people to sign documents certifying compliance with ethical standards.
  61. 61. Building Ethical Standards and Values into the Culture  A strong corporate culture founded on ethical business principles and moral values is a vital force behind continued strategic success. Ethics and values programs are undertaken to create an environment of strongly held values and to make ethical conduct a „way of life‟.  Implementing the values and code of ethics encompasses several actions:  Incorporating the statement of values and code of ethics into employee training and educational programs.  Explicit attention to values and ethics in recruitment to screen out applicants who lack compatible character traits.  Communication of the values and ethics code to all employees, and explaining compliance procedures.  Management involvement and oversight, at all levels.  Strong endorsements from the CEO.  Word-of-mouth indoctrination.
  62. 62.  Line managers at all levels must give serious and continuous attention to the task of explaining how the values and ethical code apply in their areas. In general, instilling values and insisting on ethical conduct must be looked on as a continuous culture-building, culture nurturing exercise.
  63. 63. Creating a Spirit of High- performance into the Culture  One of the most valuable strategy-implementing skills is the ability to instil strong individual commitment to strategic success and create an atmosphere in which there is constructive pressure to perform. Companies with a spirit of high performance are typically people- oriented, and these companies reinforce their concern for individual employees on every conceivable occasion.  What makes a spirit of high performance come alive is a complex network of practices, words, symbols, styles, values, and policies pulling together that produces extraordinary results with ordinary people. The drivers of the system are a belief in the worth of the individual, strong organisational commitment to job security and promotion from within, management practices that encourage employees to exercise individual initiative and creativity in their jobs, and pride in doing the „small‟ things right.
  64. 64. Contemporary Leadership Issues  1) Team Leadership  With the trend increasingly toward the use of teams, many leaders are not equipped to handle this change, because the command and control type things they were encouraged to do no longer apply. Thus, they have to learn the patience to share information, the ability to trust others, and to give up authority. Also, they need to learn when to intercede, and when to leave the team alone.  Team leaders are liaisons with external constituencies: These include upper management, other teams, customers, and suppliers. The leaders are responsible for acquiring resources, gathering information from the outside, sharing information with team members, and representing the team to the constituencies.
  65. 65.  Team leaders are also trouble-shooters: Team leaders sit in on meetings and help to resolve problems. The leader is most likely to contribute by asking penetrating questions, helping the team talk through problems, and acquiring resources from external constituencies.  Team leaders are conflict managers: Team leaders help to process the conflict: What is the source of conflict? Who is involved? What are the issues?  Team leaders are coaches: Team leaders clarify expectations and roles, teach, and offer support.
  66. 66. 2) National Culture‟s Effect on Leadership  National culture affects leadership style because leaders cannot choose their styles at will: they are constrained by the cultural conditions that their followers have come to expect.  Korean leaders are expected to be paternalistic toward employees.  Arab leaders who show kindness or generosity without being asked to do so are seen by other Arabs as weak.  Japanese leaders are expected to be humble and speak infrequently.  Scandinavian and Dutch leaders who single out individuals with public praise are likely to embarrass those individuals rather than energise them.  Most leadership theories were developed in the United States, using U.S. subjects. They emphasise follower responsibilities rather than rights; assume hedonism rather than commitment to duty or altruistic motivation; assume centrality of work and democratic value orientation; and stress rationality rather than spirituality, religion, or superstition.
  67. 67.  END OF CHAPTER ONE