Download Strategic Management - McGraw Hill Higher Education

Part 3: Strategic Implementation
Strategic
Management:
creating competitive
advantages
Gregory G. Dess
G. T. Lumpkin
Marilyn L. Taylor
STRATEGIC MANAGEMENT
McGraw-Hill/Irwin
Chapter 11
Strategic
Leadership:
Creating a Learning
Organization and an
Ethical Organization
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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.
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning Objectives
• After reading this chapter, you should
have a good understanding of:
• The crucial role of emotional intelligence (EI)
in successful leadership.
• The value of creating and maintaining a
“learning organization” in today’s global
market place.
• The five central elements of a “learning
organization.
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Learning Objectives
• After reading this chapter, you should
have a good understanding of:
• 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.
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Leadership: Three Interdependent
Activities
• Successful
leaders must
recognize three
interdependent
activities
Determining a
direction
• Determining a direction
Designing the
organization
Nurturing a
culture dedicated
to excellence and
ethical behavior
• Designing the organization
• Nurturing a culture dedicated to
excellence and ethical behavior
Adapted from Exhibit 11.1 Three Interdependent Activities of Leadership
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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A Leader’s Bases of Power
Exhibit 11.2 A Leader’s Bases of Power
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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.
Ability to work with
others, passion for
work, etc.
Analytical reasoning,
quantitative analysis,
etc.
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Emotional Intelligence
• Five components of
emotional intelligence
Emotional
intelligence
• Self-awareness
• Self-regulation
• Motivation
• Empathy
• Social skill
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Five Components of Emotional
Intelligence at Work
Definition
Self-management
skills:
• Self-awareness • The ability to recognize
and understand your
moods, emotions, and
drives, as well as their
effect on others.
• Self-regulation
Hallmarks
• Self-confidence
• Realistic selfassessment
• Self-deprecating sense
of humor
• The ability to control or
redirect disruptive
impulses and moods.
• Trustworthiness and
integrity
• The propensity to
suspend judgment—to
think before acting.
• Openness to change
• Comfort with ambiguity
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Five Components of Emotional
Intelligence at Work
Definition
Self-management
skills:
• motivation
Managing
relationships
• Empathy
Hallmarks
• A passion to work for
reasons that go beyond
money or status.
• Strong drive to achieve
• A propensity to pursue
goals with energy and
persistence.
• Organizational
commitment
• The ability to
understand the
emotional makeup of
other people.
• Expertise in building
and retaining talent
• Skill in treating people
according to their
emotional reactions.
• Service to clients and
customers
• Optimism, even in the
face of failure
• Cross-cultural
sensitivity
Adapted from Exhibit 11.3 The Five Components of Emotional Intelligence at Work
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Five Components of Emotional
Intelligence at Work
Definition
Managing
relationships
•
Social skill
Hallmarks
• Proficiency in managing
relationships and
building networks.
• Effectiveness in leading
change
• An ability to find
common ground and
build rapport.
• Expertise in building
and leading teams
• Persuasiveness
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Developing a Learning Organization
• Learning environment
• Organizationwide commitment to change
• An action orientation
• Applicable tools and methods
• Guiding philosophy
• Inspired and motivated people with a
purpose
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Four Critical Processes of Learning
Organizations
Empowering
employees at all
levels
• Salient elements of
empowerment
• Start at the bottom by
understanding needs of
employees
• Teach employees skills of selfmanagement
• Build teams to encourage
cooperative behavior
• Encourage intelligent risk taking
• Trust people to perform
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Four Critical Processes of Learning
Organizations
Empowering
employees at all
levels
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Four Critical Processes of Learning
Organizations
Empowering
employees at all
levels
Accumulating and
sharing internal
knowledge
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Four Critical Processes of Learning
Organizations
Empowering
employees at all
levels
Accumulating and
sharing internal
knowledge
Gathering and
integrating external
information
• 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
Challenging the
status quo and
enabling creativity
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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 organization’s
operating culture
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Creating An Ethical Organization
• Driving forces of ethical organizations
• ethical values
• Integrity
• 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 unifying force
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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 highintegrity individuals
• Individual integrity is rarely self-sustaining
• Organizational integrity is beyond personal integrity,
resting on a concept of



Purpose
Responsibility
ideals
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Approaches or Strategies for Ethics
Management
Characteristics Compliance-Based
Approach
Integrity-Based
Approach
Ethics
Conformity with externally Self-governance according to
imposed standards
chosen standards
Objective
Prevent criminal
misconduct
Enable responsible conduct
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 11.5 Approaches or Strategies for Ethics Management
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Approaches or Strategies for Ethics
Management
Characteristics Compliance-Based
Approach
Integrity-Based
Approach
Methods
Education, reduced
discretion, auditing and
controls, penalties
Education, leadership,
accountability, organizational
systems and decision
processes, auditing and
controls, penalties
Behavioral
Assumptions
Autonomous beings
guided by material
self-interest
Social beings guided by
material self-interest, values,
ideals, peers
Source: L. S. Paine, “Managing for Organizational Integrity,” Harvard Business Review 72, no. 2 (1994), p. 113 (with
permission).
Adapted from Exhibit 11.5 Approaches or Strategies for Ethics Management
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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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
organization’s employees
• Effective leaders take responsibility
for ethical lapses within the
organization
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Key Elements of Highly Ethical
Organizations
Role models
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
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Key Elements of Highly Ethical
Organizations
Role models
Corporate credos
and codes of
conduct
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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Key Elements of Highly Ethical
Organizations
Role models
Corporate credos
and codes of
conduct
Reward and
evaluation
systems
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
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
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