Management That Transforms – READ ALL OF THESE INSTRUCTIONS FIRST!

READ ALL OF THESE INSTRUCTIONS FIRST!

If you make use of published materials in forming your responses, remember to include an appropriate citation. Use APA style. 

DO NOT use Wikipedia or a Google Search for your answers. Please use attached files. 

If it asks for a response, “In your own words,” do not copied from any source. 

Questions:

1. Referring to the course materials and only the course materials, describe the difference between efficiency and effectiveness in a business.

Response:

Citation: 

2. Choose one business with which you have some familiarity and describe the division of labor within that business. Name the business. Describe at least three different roles in that business. 

Response:

3. How might you improve the division of labor in the business mentioned?

Response:

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4. Explain why management might take these two different approaches (Theory X and Theory Y) in managing a workforce.

Response:

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5. Describe Michael Porter’s Five Forces Model.

Response:

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6. Describe five organizational structures that management might use to organize a corporation.

Response:

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7. Describe Equity Theory and Expectancy Theory.

Response:

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8. Imagine you are the manager of a hotel. You employ 20 people divided into four teams to clean the room. One team comprises four older women and one young man. The women are experienced and making well above minimum wage. The man is inexperienced and making minimum wage. The four women come to you and complain that the man is not pulling his weight (shirking). What actions would you take? Be specific. If you offer actions that violate U. S. law, your score will be reduced.

Response:

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9. Situation: A firm must hire a new programmer. Two candidates have applied—a white male and an Asian female. The white male is clearly more qualified, but the firm’s workforce is underrepresented by Asians and females (although no legal action is pending).  The firm decides to hire the Asian female. Is this the correct business decision? Is this action ethical? Defend your position.

Response:

10. According to the course materials, what is the basis of a manager’s power?

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11. According to the course materials, what is the basis of a leader’s power?

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12. What is organizational culture?

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13. Other than firing everyone and hiring a new workforce, how does management change an organization’s culture? I want specific actions, not theory.

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Extra questions: 

What is the basis of business ethics? Be specific.

What is the basis of business ethics? Be specific.

Define plagiarism and give an example.

Which leadership style do you consider the best? Why?

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*Corresponding Author www.ijmrr.com 761

INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH

AND REVIEW

BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Dr. Manoj M. Pimple* 1

1 Assistant professor, Mahtma Jyotiba Phule Arts, Commerce & Science College, Bhatkuli,

Amravati.

ABSTRACT

Is there a difference between business ethics and corporate social responsibility? Are the two

compatible or mutually exclusive? This paper raises questions about the overlap and

reciprocally supportive interface between business ethics and corporate social responsibility,

as well as about their mutual exclusivity. It isolates several specific ethical and corporate

social responsibility topics for further exploration.

Business ethics imply a system of moral principles and rules of conduct applied to business

so that the business should be conducted according to certain self-recognised moral

standards. This is with a view that the interests of society and of the business sector itself

should not suffer. The ethics are the same as those, which every individual in society and

society as a whole should abide by.

Corporate social responsibility is a form of corporate self-regulation integrated into

a business model. It is also called as corporate conscience, corporate citizenship, social

performance, or sustainable responsible business. CSR policy functions as a built-in, self-

regulating mechanism whereby business monitors and ensures its active compliance with the

spirit of the law, ethical standards, and international norms.

Keywords: Business Ethics, Self regulation, Social performance

INTRODUCTION

Business ethics can be defined as written and unwritten codes of principles and values that

govern decisions and actions within a company. In the business world, the organization's

culture sets standards for determining the difference between good and bad decision making

and behavior. In the most basic terms, a definition for business ethics boils down to knowing

the difference between right and wrong and choosing to do what is right. The phrase 'business

ethics' can be used to describe the actions of individuals within an organization, as well as the

organization as a whole.

CSR-focused businesses would proactively promote the public interest (PI) by encouraging

community growth and development, and voluntarily eliminating practices that harm the

public sphere, regardless of legality. CSR is the deliberate inclusion of PI into

corporate decision-making, that is the core business of the company or firm, and the

honouring of a triple bottom line: People, Planet, Profit. The goal of CSR is to embrace

responsibility for the company's actions and encourage a positive impact through its activities

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on the environment, consumers, employees, communities, stakeholders and all other

members of the public sphere.

Understanding the landscape of business ethics can be problematic. The field is vast, often

encompassing such concerns as corporate governance, reputation management, accurate

accounting, fair labor practices and environmental stewardship to name but a few. In fact, the

field addresses the entire scope of responsibilities that a company has to each of its

stakeholders: those who have a vested interest in the decisions and actions of a company, like

clients, employees, shareholders, suppliers and the community. Depending upon the company

in question, one may even be able to identify additional stakeholders.

The field of business ethics is further complicated by the fact that many terms exist to refer to

corporate offices and programs intended to communicate, monitor, and enforce a company’s

values and standards. In theory, one can make some rough distinctions among the various

domains related to business ethics, e.g., corporate responsibility, social responsibility,

corporate compliance, etc. In practice, however, such distinctions blur because corporate

offices of compliance established in the 1970s may now function similarly to offices of

corporate and social responsibility.

For the purpose of clarity, definitions will be provided for each of the terms that can be

understood as related to the goal of improving the conduct of business, namely, business

ethics, corporate compliance, corporate governance, corporate responsibility, CSR, and

corporate sustainability. Please note that these definitions are not being offered as official

definitions, but only to impart how they are commonly used in the business ethics industry.

Business Ethics

Business ethics is a form of applied ethics. It aims at inculcating a sense within a company’s

employee population of how to conduct business responsibly. Because the term “ethics” can

pose problems in an international context, i.e., the term does not translate well and it can be

difficult to find a common understanding of the term, some organizations choose to recast the

concept of business ethics through such other terms as integrity, business practices or

responsible business conduct.

Corporate Compliance

U.S. business scandals that occurred in the 1980s – particularly related to government

contracts – gave rise to corporate compliance, which is most often narrowly focused on

complying with national and local laws and regulations. Corporate compliance officers and

programs have been criticized for falling short of respecting the spirit of the law in favor of

the letter of the law. It should, however, be noted that corporate offices of compliance may

now function in much broader contexts.

Corporate Governance

Corporate governance refers to the broad range of policies and practices that stockholders,

executive managers, and boards of directors use to (1) manage themselves and (2) fulfill their

responsibilities to investors and other stakeholders. Over the past decade, corporate

governance has been the subject of increasing stakeholder attention and scrutiny. These

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concerns have given rise to a powerful shareholder movement. Shareholder activists,

composed primarily of large multi-billion-dollar pension funds, religious and socially

responsible investment groups, and other institutional investors, are now using a variety of

vehicles to influence board behavior, including creating corporate governance standards of

excellence and filing shareholder resolutions. These investors are concerned with such topics

as board diversity, independence, compensation, and accountability, as well as a broad range

of social issues, e.g. employment ethics practices, environmental policies, and community

involvement.

Corporate Responsibility

Corporate responsibility refers to fulfilling the responsibilities or obligations that a company

has toward its stakeholders. When examining a particular corporate practice, like profit

versus environmental protection, corporate responsibility can help distinguish between a

stakeholder expectation and a corporate obligation, i.e., is the company obligated to provide

absolute environmental protection at all costs or is it obligated to maximize profits for its

investors at the cost of damaging the environment?

Corporate Social Responsibility (CSR)

CSR can be understood in terms of corporate responsibility, but with greater stress upon the

obligations a company has to the community, particularly with respect to charitable activities

and environmental stewardship. Corporate and social responsibility is sometimes described as

being a tacit contract between business and a community, whereby the community permits

the business to operate within its jurisdiction to obtain jobs for residents and revenue through

taxation. Additionally, the community expects the business to preserve the environment and

to make the community a better place to live and to work through charitable activities.

Ethics and Social Responsibility

It is clearly impossible to do a one-on-one comparison between ethical standards and social

responsibility principles if, for no other reason, than there are twelve ethical standards and

seven principles for social responsibility. Nevertheless, a side-by-side look at the standards

and principles provides the opportunity to make some initial comparisons and begin to

question their compatibility or mutual exclusivity:

Ethical Standards Social Responsibility Principles

Perceived impropriety Community

Responsibilities to the employer Diversity

Conflict of interest Environment

Issues of influence Ethics

Confidential and proprietary information Financial responsibility

Supplier relationships Human rights

Reciprocity Safety

Applicable laws

Small, disadvantaged and minority-owned businesses

Professional competence

National and international supply management conduct

Responsibilities to the profession

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Buying organizations have the ability to influence and/or demand both ethical behavior and

social responsibility from their suppliers, but should they? When it comes to ethics, an

implicit agreement of long-standing exists that ethical behavior is not only desirable but

required in domestic business transactions. Any debate stems from doing business globally

wherein the ethics standard recommends being “especially sensitive to customs and cultural

differences with respect to social and business behavior and issues of influence.”

Influencing or demanding social responsibility from suppliers has no such caveat and poses

such questions as:

• Is it ethical to influence the social responsibility of suppliers?

• Is it ethical to demand, by way of contract language, socially responsible behavior

from

suppliers?

Ethics

Perhaps, the first thing that becomes apparent in comparing the ethics standards and the

social responsibility principles is that “ethics” are embedded in the social responsibility

principles. Under ethics,

“Abide by your organization’s code of conduct”

Diversity

The ethical standard for small, disadvantaged and minority-owned businesses seems to relate

to the social responsibility principle of diversity. The commentary for the ethical standard,

“encourage support for small, disadvantaged and minority-owned businesses,”

The social responsibility principle includes:

• Proactively promote purchasing from, and the development of, socially diverse

suppliers

• Encourage diversity within your own organization

• Proactively promote diverse employment practices throughout the supply chain

Because the social responsibility principle is much broader than the ethical standard, a direct

relationship is not as well defined as that concerning ethics and questions begin to emerge.

• Is this ethical standard compatible only with the first item under the social

responsibility principle?

• Are the second two items of the social responsibility principle mutually exclusive?

• Can you be ethical and demand, as a condition of a contract, that a supplier ensure

diversity within its organization?

• Can you go beyond encouraging diversity and demand, as a condition of a contract,

that a supplier have a diversity-supplier program in place?

• If mandates such as these are placed in contracts, how does this square with the

ethical standard on supplier relationships that demands impartiality?

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CONCLUSION

Understanding the importance of ethics in business is the key to success. Customers,

management, and employees all appreciate honest and ethical practices. Business ethics are

important because they help maintain a clean reputation and they ultimately benefit everyone

involved. Ethically the business should also have social responsibility towards shareholders,

employees, customers, community & government. Corporate responsibility is a phrase

heavily used in the business world. Often mentioned to enhance the image of an organization,

corporate responsibility does have a true meaning. Businesses that use energy efficient

lighting and offer their employees a fair pay rate are practicing corporate responsibility.

Corporate responsibility is an integral part of business ethics and should be practiced by all

entities, whether large or small. Corporate responsibility simply means that each individual

within a company is practicing personal and professional responsibility in a way that will

benefit him and others. Clearly, it is extremely difficult to create a set of strict guidelines that

will work for every organization, across each standard and principle, in every situation, and

in every country within which it may conduct business.

REFERENCES

Garriga E, Mele D. Corporate Social Responsibility Theories: Mapping the Territory.

Journal of Business Ethics 2004; 53: 51–71.

Marquez A, Fombrun CJ. Measuring Corporate Social Responsibility. Corporate Reputation

Review 2005; 7: 304–308.

Post JE, Lawrence AT, Weber J. Business and Society. 10th ed. Boston: McGraw-Hill, 2002.

Business for Social Responsibility. (2004, March 30). BSR News Monitor summary of

articles fromEthical Corporation. Retrieved April 5, 2004, from www.ethicalcorp.com and

www.prweek.com

Consumer protection & Business Ethics, Kayande, Gangadhar & Khanolkar Smita, Chaitnya

Publication.

More E, Webley S. Does Business Ethics Pay? London: Institute of Business

Ethics.Northrop Grumman Corporation. (2004). Frequently Asked Questions About

Northrop.Retrieved on April 9, 2004, from

http://www.northropgrumman.com/about_us/noc_faqs.html

ISM Principles and Standards of Ethical Supply Management Conduct with Accompanying

Guidelines, published by the Institute for Supply Management, Inc., Tempe, AZ,

www.ism.ws, 2002.

ISM Principles of Social Responsibility, published by the Institute for Supply Management,

Inc., Tempe, AZ, www.ism.ws, 2003

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

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Some Reflections on Business Ethics and Corporate Social Responsibility

Richa Sharma Research Scholar in Management Sciences

JECRC University, Jaipur

Malvika Sharma Assistant Professor of Political Science

Khandelwal Girls College, Jaipur

Abstract

This paper is based majorly on the works of Sorab Sadri in India between 1991 and 2013. He has

argued along with Jayashree Sadri (in various works spanning two decades) that social responsibility

and business ethics are often regarded by American scholars as the same concepts. However, the social

responsibility movement is but one aspect of the overall discipline of business ethics. The social

responsibility movement arose particularly during the 1960s with increased public consciousness about

the role of business in helping to cultivate and maintain highly ethical practices in society and

particularly in the natural environment.

Keywords: Business Ethics, CSR

Introduction

Business ethics under Goodpastor, Donaldson and Buccholz flourished simultaneously no doubt but

their approach was intrinsically based on moral philosophy and sociological constructs. They could be

seen has having fanned the fire of belief that the two terms are similar. However, working from a

rationalist-positivist angle, Jayashree et al (2008), Sadri and Jayashree (2011) and Sadri and Jayashree

(2012) vehemently disagree. To them business ethics forms the basis of good corporate governance.

Good corporate governance enables organizational excellence and this leads to business sustainability.

But for this strategic planning and strategic intervention are critical. Corporate social responsibility to

them is the link between business being an ethical entity and the corporation being a socially

responsible citizen. For them the two terms are dialectically related but do not mean the same thing.

Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship,

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responsible business, sustainable responsible business (SRB), or corporate social performance is a form

of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a

built-in, self-regulating mechanism whereby business would monitor and ensure its adherence to law,

ethical standards, and international norms. Business would embrace responsibility for the impact of its

activities on the environment, consumers, employees, communities, stakeholders and all other members

of the public sphere. Furthermore, business would proactively promote the public interest by

encouraging community growth and development, and voluntarily eliminating practices that harm the

public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into

corporate decision-making, and the honoring of a triple bottom line: People, Planet, Profit.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong

business case for CSR, in that corporations benefit in multiple ways by operating with a perspective

broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from

the fundamental economic role of businesses; others argue that it is nothing more than superficial

window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a

watchdog over powerful multinational corporations. Corporate Social Responsibility has been

redefined throughout the years. However, it essentially is titled to aid to an organization's mission as

well as a guide to what the company stands for and will uphold to its consumers.

Development Business ethics is one of the forms of applied ethics that examines ethical principles and

moral or ethical problems that can arise in a business environment. In the increasingly conscience-

focused marketplaces of the 21st century, the demand for more ethical business processes and actions

(known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business

ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a

career specialization, the field is primarily normative. In academia, descriptive approaches are also

taken. The range and quantity of business ethical issues reflects the degree to which business is

perceived to be at odds with non-economic social values. Historically, interest in business ethics

accelerated dramatically during the 1980s and 1990s, both within major corporations and within

academia. For example, today most major corporate websites lay emphasis on commitment to

promoting non-economic social values under a variety of headings (e.g. ethics codes, social

responsibility charters). In some cases, corporations have re-branded their core values in the light of

business ethical considerations (e.g. British Petroleum’s “beyond petroleum" environmental tilt).

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The term CSR came in to common use in the early 1970s, after many multinational corporations

formed, although it was seldom abbreviated. The term stakeholder, meaning those on whom an

organization's activities have an impact, was used to describe corporate owners beyond shareholders as

a result of an influential book by R Freeman in 1984. ISO 26000 is the recognized international

standard for CSR (currently a Draft International Standard). Public sector organizations (the United

Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that CSR adheres

to similar principles but with no formal act of legislation. The UN has developed the Principles for

Responsible Investment as guidelines for investing entities. Some commentators have identified a

difference between the Continental European and the Anglo-Saxon approaches to CSR. And even

within Europe the discussion about CSR is very heterogeneous. An approach for CSR that is becoming

more widely accepted is community-based development projects, such as the Shell Foundation's

involvement in the Flower Valley, South Africa. Here they have set up an Early Learning Centre to help

educate the community's children, as well as develop new skills for the adults. Marks and Spencer is

also active in this community through the building of a trade network with the community –

guaranteeing regular fair trade purchases. Often alternative approaches to this is the establishment of

education facilities for adults, as well as HIV/AIDS education programmes. The majority of these CSR

projects are established in Africa. JIDF For You, is an attempt to promote these activities in India. A

more common approach of CSR is through the giving of aid to local organizations and impoverished

communities in developing countries. Some organizations do not like this approach as it does not help

build on the skills of the local people, whereas community-based development generally leads to more

sustainable development.

Procurement of Fair Trade tea and coffee has been adopted by various businesses: KPMG CSR

manager commented, "Fair trade fits very strongly into our commitment to our communities." Another

approach that is garnering increasing corporate responsibility interest is called Creating Shared Value,

or CSV. The shared value model is based on the idea that corporate success and social welfare are

interdependent. A business needs a healthy, educated workforce, sustainable resources and adept

government to compete effectively. For society to thrive, profitable and competitive businesses must be

developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy.

CSV received global attention in the Harvard Business Review article Strategy & Society: The Link

between Competitive Advantage and Corporate Social Responsibility by Michael E. Porter, a leading

authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard

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Business School; and Mark R. Kramer, Senior Fellow at the Kennedy School at Harvard University and

co-founder of FSG Social Impact Advisors. The article provides insights and relevant examples of

companies that have developed deep linkages between their business strategies and corporate social

responsibility. Many approaches to CSR pit businesses against society, emphasizing the costs and

limitations of compliance with externally imposed social and environmental standards. CSV

acknowledges trade-offs between short-term profitability and social or environmental goals, but

focuses more on the opportunities for competitive advantage from building a social value proposition

into corporate strategy.

A CSR programme can be an aid to and retention, particularly within the competitive graduate student

market. Potential recruits often ask about a firm's CSR policy during an interview, and having a

comprehensive policy can give an advantage. CSR can also help improve the perception of a company

among its staff, particularly when staff can become involved through payroll giving, fundraising

activities or community volunteering. See also Corporate Social Entrepreneurship, whereby CSR can

also be driven by employees' personal values, in addition to the more obvious economic and

governmental drivers. Managing risk is a central part of many corporate strategies. Reputations that

take decades to build up can be ruined in hours through incidents such as corruption scandals or

environmental accidents. These can also draw unwanted attention from regulators, courts, governments

and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these

risks.

In crowded marketplaces, companies strive for a unique selling proposition that can separate them from

the competition in the minds of consumers. CSR can play a role in building customer loyalty based on

distinctive ethical values. Several major brands, such as The Co-operative Group, The Body Shop and

American Apparel [

are built on ethical values. Business service organizations can benefit too from

building a reputation for integrity and best practice. Corporations are keen to avoid interference in their

business through taxation or regulations. By taking substantive voluntary steps, they can persuade

governments and the wider public that they are taking issues such as health and safety, diversity, or the

environment seriously as good corporate citizens with respect to labour standards and impacts on the

environment. Many universities in Jaipur for instance, are actively involved in five areas of research in

CSR and Ethics. Research of the authors is geared towards the following issues:

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 CSR: how to strengthen the business case for CSR? How to reach the bottom of the pyramid

through socially responsible distribution? How much is enough? How society views what

business should do to reach their objectives?

 Business and marketing ethics from a normative perspective: what is the right thing to do?

How to make ethical marketing business decisions?

 Ethical consumerism: how do consumers track CSR behaviours of firms? How do they act

through ethical consumerism (through boycotts or bycotts)?

 Ethics of defaults: consumers are more likely to retain the default package they buy, until what

point should marketing exploit their vulnerability?

 The opening of firm boundaries: how companies should manage this challenge? How should

they manage their internal and external workforce?

This brings us to Ethics Training. The rise of ethics training inside corporations, some of it required by

government regulation, is another driver credited with changing the behaviour and culture of

corporations. The aim of such training is to help employees make ethical decisions when the answers

are unclear. Tullberg believes that humans are built with the capacity to cheat and manipulate, a view

taken from (Trivers 1971, 1985), hence the need for learning normative values and rules in human

behaviour (Tullberg 1996). The most direct benefit is reducing the likelihood of "dirty hands" (Grace

and Cohen 2005), fines and damaged reputations for breaching laws or moral norms. Organizations

also see secondary benefit in increasing employee loyalty and pride in the organization. Caterpillar and

Best Buy are examples of organizations that have taken such steps (Thilmany 2007). Increasingly,

companies are becoming interested in processes that can add visibility to their CSR policies and

activities. One method that is gaining increasing popularity is the use of well-grounded training

programs, where CSR is a major issue, and business simulations can play a part in this. One relevant

documentary is The Corporation, the history of organizations and their growth in power is discussed.

Corporate social responsibility, what a company does to in trying to benefit society, versus corporate

moral responsibility (CMR), what a company should morally do, are both important topics to consider

when looking at ethics in CSR. For example, Ray Anderson, in The Corporation, takes a CMR

perspective in order to do what is moral and he begins to shift his company's focus towards the

biosphere by utilizing carpets in sections so that they will sustain for longer periods. This is Anderson

thinking in terms of Garret Hardin's "The Tragedy of the Commons," where if people do not pay

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attention to the private ways in which we use public resources, people will eventually lose those public

resources.

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30. Sadri S and Hegde D S (2003) ‘India’s Experiment with Globalization: a dispassionate examination of the period 1991-96’, Shaping Management in the 21

st century, (eds) S Dhar & U

Dhar ; Papers presented at the National Conference of the Indore Management Association,

February.

31. Sadri S (2003) ’Identifying the Character of an Organization in a Transition Economy’, International Journal of Human Resources Development and Management, vol. 3

32. Sadri S (1989) Was the Stock Market Crash a Crisis of Capitalism? in International Social Science Review, Toledo, Ohio

33. Sadri S, Guha B S and Jayashree S (2011): Manifestations of Excellence in Management, (forthcoming)

Volume 3 Issue 2 June 2014 ISSN 2277-8098 APJMER

Asia Pacific Journal of Management & Entrepreneurship Research (APJMER) 96 | P a g e

34. Sadri S and Jayashree S (2011): Business Ethics and Corporate Governance: towards organisational excellence, Agra, Current Publications

35. Sadi S and Jayashree S (2012): Human Resources Management in Modern India,(concepts and cases) Himalaya Publications, Mumbai

36. Sadri S and Makkar U (2013): (eds) Future Directions in Management, Bharati Publications, New Delhi

37. Sen, Amartya (2001) ‘Two Dorab Tata Memorial Lectures’, Mumbai and Delhi, March.

38. Senge P, Scharmer C O, Jawosky J and Flowers B S, Presence, (2005) Nicholas Brealey Publishers, London,

39. Senge P.M. (1990), The Fifth Discipline: The Art and Practice of the Learning Organization, Bantam Doubleday Dell. New York.

40. Senge, P.M., (1990) "The Leaders' New Work: Building Learning Organizations", Sloan Management Review, Vol. 32 No. 1.

Gratitude with the usual disclaimers is extended to Dr Sorab Sadri of JECRC for his

academic assistance in writing this paper.

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

In Defense of Social Responsibility of Business

V. Sivarama Krishnan Assistant Professor (Finance)

University of Central Oklahoma [email protected]

ABSTRACT

Milton Friedman wrote in 1971 that the social responsibility of business is to increase its profits. Ever since, economists and finance academics have convincingly argued, generally to other economists, finance academics and captive students, that maximizing shareholder wealth is good not only for the shareholders but also for the society. The firm creates wealth when it maximizes shareholder value and the society benefits from the increased wealth. Others have argued that corporations have a social responsibility and should look beyond simply maximizing shareholder wealth. Corporate social responsibility has now been accepted by managers and corporations regularly proclaim their achievements in this regard. While what constitutes social responsibility depends on who defines it, more and more managers are willing to consider it as part of their management responsibility. Some of the formal views on social responsibility have come together under the rubric of what is loosely known as stakeholder theory. This paper provides an economic rationale as to why social responsibility may be good not only for the society but also for the corporation and its shareholders. Economic justification for social responsibility may lie in situations where the market imperfections make the corporation the best provider of certain services.

I. INTRODUCTION

Milton Friedman, in his much acclaimed and oft-quoted piece (Friedman (1971)) suggested

that the only social responsibility a corporation has is to increase profits and make the owners/shareholders wealthy. This has been the accepted wisdom for many economists as well finance academics, who have argued that shareholder wealth maximization should be seen as the normative and ideal goal on which all business decisions should be based. Shareholder wealth maximization is seen as the desirable goal not only from the shareholders' perspective, but also as for the society. Support for this view comes from, among others, Sternberg (1999) and Jensen (2001). According to this view, firm wealth maximization leads to the maximization of society’s wealth as well.

A very different view comes from the proponents of corporate social responsibility (CSR). CSR has now become an accepted part of managers’ vocabulary (See for example, Fombrun (2005) and Davis (2005)) around the world and companies as diverse as Hewlett Packard and Tata Motors of India proudly proclaim their CSR initiatives. There is growing support for CSR among at least a section of business school academics that see CSR as part of stakeholder interests and management responsibility. Much of the views heard under the broad rubric of what is loosely termed stakeholder theory can be applied to the debate on CSR.

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While there is no general agreement as to what constitutes good CSR, it is seen generally as going beyond the classic economic paradigm, a-la Friedman, of profit/shareholder-wealth maximization. While the proponents of CSR, as well as the broader stakeholder theory, differ widely in terms of the details, there is a general consensus among them in the rejection of the primacy of owners or shareholders. This flies directly in the face of the classic profit maximization and shareholder wealth maximization (SWM) paradigm and challenges the perceived wisdom of in financial economics.

This paper attempts to identify the source of the differences between the proponents of CSR and the supporters of SWM and then present an economic rationale for supporting CSR in some situations. The paper is organized as follows. The first section presents an overview of the prevailing view of the supporters of CSR and stakeholder theory. This is followed by a summary of the SWM paradigm. The next section presents our attempts at finding a meeting ground between the two views. We then extend the arguments of Amalric and Hauser (2005) and suggest that it is possible to find situations where CSR not only makes economic sense but can seen as adding value for the firm and its shareholders. The last section offers concluding comments.

II. CSR and THE STAKEHOLDER THEORY

The intellectual underpinning for the corporate social responsibility view rests on the stakeholder theory, which in turn has its academic roots in research related to business ethics and business and society. CSR view has now branched off on its own and has a number of proponents and a host of consultants, practitioners and non-governmental organizations (NGO) espousing its benefits as well as making it a corporate imperative (Fombrun (2005) and Davis (2005). The role of NGOs in the popularization of CSR and making it more acceptable in the corporate world cannot be overstated. Fombrun (2005) reviews the evolution of CSR in different countries and reports that various standard setting initiatives have developed, particularly in Europe where regulatory actions on the part of pan-European authorities have played a key role. Much of the initiatives in the US have come voluntarily from corporations. Davis (2005) suggests that corporations have responded partly under pressure from NGOs and could actually benefit from pro-active strategies which anticipate the issues that shape the social context of business. He suggests that, while shareholder value is the critical measure of success, companies will benefit if CEOs were to articulate the purpose of business as “the efficient provision of goods and services that society wants.”

Freeman (1984) is regarded as the original proponent of the stakeholder concept, which can also be seen as providing the conceptual framework for the social responsibility view. Freeman argued that corporate management should look beyond shareholders and proposed a stakeholder perspective in managing the firm. Since then, a number of books and articles have been written on what is purported to be the stakeholder theory. There is little consensus on all the essential features of the theory including who the stakeholder is. Jones and Wicks (1999) have a provided a good review of the current research and also attempt a synthesis of the extant research into a “convergent” theory. Phillips, Freeman, and Wicks (PFW) (2003) give a critical account of what the stakeholder theory is and is not.

Jones and Wicks (1999) attempt to develop a convergent stakeholder theory using the taxonomy suggested by Donaldson and Preston (1995) as the starting point. The three classes proposed by Donaldson and Preston are: instrumental, descriptive and normative. The instrumental version of the theory implies that certain actions by managers would result in certain outcomes. In

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the CSR context, this would simply imply that managers should attend to CSR and stakeholders as a means to achieving shareholder value. The descriptive version is about the actual managers’ behavior. The normative version suggests that managers should behave in certain ways. Jones and Wicks further classify the normative version as ethics based and the instrumental and descriptive as social science based theories.

Current empirical studies of actual managerial behavior, at least in the US, do not lend much support to the descriptive version (Jones and Wicks (1999), Margolis and Walsh (2003)). Jones and Wicks find the instrumental stakeholder theory more promising; managers accept CSR in the belief that it is good for profits. Post, while skeptical, calls these the “business case for CSR” and lists reputation, worker productivity, and market opportunity as the possible benefits of CSR. PFW (2003) note that a general version of this would be found acceptable even by (Jensen (2001) and Sternberg (1999), who hold shareholder wealth maximization to be the primary goal.

The normative version emphasizes the “moral and ethical” arguments for the stakeholder perspective of looking at the firm and its objectives. This view would clearly reject the shareholder wealth maximization as the primary goal for the firm. This implies some sort of absolute responsibility to society above and beyond what is called for legal business behavior.

The following could be seen as the key elements of the stakeholder theory and therefore social responsibility view (see Jones and Wicks (1999), PFW (2003) and Freeman and Phillips (1999)):

 Intrinsic worth in the claims of all legitimate stakeholders and not just shareholders.  No single objective function like SWM can do justice to the complexity of the firm.  Rejection of the primacy of shareholders.  Compatibility of morality and capitalism.  Firm as a nexus of relationships, not contracts.  Rewards should be related to contribution.

It appears that an overriding concern for most of the stakeholder theorists is that the management of the firm may exclude the stakeholders other than shareholders from legitimate rewards as well as participation in key decisions concerning the future of the firm and their own future. PFW (2003) argue “an organization that is managed for stakeholders will distribute the fruits of organizational success (and failure) among all legitimate stakeholders.” Questions seldom asked in the stakeholder and CSR literature include:

– Why this – failure to distribute organizational fruits of success among organizational stakeholders in proportion to their contribution – would happen in a competitive market place?

– Would the stakeholders be willing to take on the fruits of failure? – Would the stakeholders (or which stakeholders) be willing to share the risk of the

business and give up their explicit claims? III. PROFITS/SWM PARADIGM

The SWM paradigm puts shareholder wealth maximization as the primary goal of corporate management and is built upon the classic competitive markets assumption. It is assumed that all participants who have transactions with a firm – employees, suppliers, customers, lenders, etc. – are seen as willing participants in free and competitive markets and are fully compensated at fair market prices for their services/supplies or get fairly valued products/services for the prices they pay. The

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shareholders are unique because they are residual claimants and they do not have prior, explicit or implicit claims. They can add to their wealth only after satisfying all the prior claims of every other participant. They bear all the risk of failure and therefore it is only fair that they get the rewards. The model also assumes that there are no externalities or any harm or damage done to any non-participant in the transactions. Given these assumptions, shareholder wealth maximization is good for not only the shareholders and but also the society because the shareholders’ wealth comes from wealth created by the firm after fully compensating everyone involved and the society for all the resources used.

The shareholder wealth maximization paradigm is seen as moral and ethical (Friedman (1971), Jensen (2001), Sternberg (1999), Coelho, McClure and Spry (2003)) by its proponents. Any legal market transaction where all participants are free and willing participants is considered moral. This is seen as the foundation of the free market system. Jensen (2001), Sternberg (1999) and Coelho, McClure and Spry (2003) all argue that Stakeholder theory is incompatible with substantive objectives, which are needed to run businesses effectively.

IV. AN ECONOMIC RATIONALE FOR CSR

The essential difference between the stakeholder theory/CSR view and the SWM paradigm lies in the assumptions, explicit and implicit, which are built into the respective analytical frameworks or models. The SWM paradigm assumes that the different stakeholders are not only free and voluntary players but are also able to get their fair reward or compensation because they interact with the firm through free and competitive markets. There is no externality, no one is a weak or incompetent player and the governments are fully capable of addressing externalities and protecting weak or incompetent players. Any market imperfection or failure is the exception rather than the rule. The stakeholder theorists, on the other hand, seem to go the other way and assume that firms cannot take free and competitive markets for granted and firms have to take specific actions to ensure fair rewards and compensation for all the stakeholders and also provide benefits to society beyond their goods and services. A dialogue between the two camps is possible only after we acknowledge these fundamental differences between them.

Signs of compromise may be emerging as evidenced by changing attitudes of at least some of the supporters of SWM. Jensen (2001) while rejecting most of the claims of the stakeholder theory concedes that a firm cannot maximize value if it ignores interests of its stakeholders. He proposes what he calls “enlightened value maximization” or its identical twin, the enlightened stakeholder theory. Long-term value maximization is specified as firm’s objective. This objective can, of course, be satisfied only with the cooperation and support of all relevant stakeholders. Management’s role is critical in motivating all the stakeholders and ensuring this cooperation. Enlightened value maximization, in short, says that a firm cannot maximize value if it ignores or mistreats any important stakeholder group. By the same token, the enlightened stakeholder theory implies that firm value is the goal, but the processes and the audits suggested by the stakeholder theorists should form the basis of action towards motivating all the key stakeholders. Jensen’s enlightened value maximization or stakeholder theory resembles very closely the instrumental version of the stakeholder theory and perhaps would satisfy many of the main stream supporters of CSR.

It should be noted that while the SWM paradigm assumes competitive markets and no market imperfections, finance theory has evolved over time to include effects of some market imperfections. These, however, relate to imperfections in the financial markets or the transactions among

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shareholders, lenders, and managers. Two areas of extensive research and model development include agency relationships and information asymmetry. It is interesting to note that PFW (2003) quote a legal opinion to argue that managers should be considered as agents of not just shareholders but for the entire firm and therefore all stakeholders. PFW argue that the “… corporation is not coextensive with the shareholders.”

While Jensen and Sternberg will convince most economists, it does not appear to convince ardent stakeholder theorists. PFW (2003) while pleased that both Jensen and Sternberg accept the instrumental version of the theory, also feel that most of the characterization by the critics of the stakeholder theory are either unjust or are the result of misinterpretation of what the theory stands for. PFW attempt to answer the criticisms made by Jensen and Sternberg. However, careful reading of all the papers involved would give the distinct impression that the two groups are talking over the heads of each other. Clearly, given the assumptions of free exchange by voluntary players in a competitive market environment, most if not all of the arguments made by Jensen and Sternberg would be vindicated. Stakeholder theory supporters appear to have something else in mind. While competitive markets are taken for granted in the finance paradigm, stakeholder theorists seem to shy away from the concept. In other words, stakeholder theory implicitly assumes market imperfections and firms have power over the different stakeholders. The stakeholder theorists also seem to believe that in the real world, no stakeholder except perhaps stockholders would get a fair shake if he/she is left to market transactions.

The key question is to what extent the assumption of fair and competitive markets is valid for the different stakeholders. One wishes the stakeholder theorists would explicitly spell this out. In any case, the fear seems to be real and the important question that is not raised by either side is how valid are the assumptions of free and competitive markets. For examples do some firms have power over employees or suppliers as is commonly believed by many in the media in the case of companies like Wal-Mart? Do some firms have monopoly powers over customers? Of course, in order to justify the stakeholder view, one should not only see market failures or imperfections, but also lack of governmental regulations or legal restrictions on the firm.

Amalric and Hauser (2005) attempt to provide economic justification for CSR by pointing out that under various conditions of market imperfections, firms can use CSR to increase demand, boost reputation, and reduce regulatory risk. Similar views are also seen in Davis (2005). While these arguments are not new (see Post (2006)), Amalric and Hauser seem to clearly imply that CSR makes sense only under market imperfections. They also, perhaps, imply that in the real world, market imperfections are all too common.

Our view is that one does not have to be a hard-core CSR fanatic to agree that there are instances of market imperfections when the assumptions built into the SWM paradigm do not hold. This justifies a clear role for CSR. Examples of these imperfections are rather easy to find in lesser developed countries in Africa or Latin America or Asia where market failures are occasionally compounded and made worse by government failures are incompetence. Such situations, be it in Africa or Latin America or the occasional Katrina in the US or the immigrant conditions in France, provide opportunities for CSR, in the best sense of the term, for corporations. These are also the situations where the CSR activities should enhance value for the firm’s shareholders. An extension to the general case is when a company finds itself with a competitive advantage in providing a good or service beyond its normal products and services. A multinational oil company in Nigeria may be in the best position to provide not only schools for the local village children, but also drinking water

2011 Mustang Journal of Business & Ethics

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and other basic amenities. One may be walking a fine line here, but the long-term economic value could easily be identified perhaps in contrast to the short-term discounted cash flow net-present- value, both in societal terms and from the narrower corporate perspective. It is not surprising that some corporations actually take this approach. An example closer to home is the extension of services by Wal-Mart and Home Depot during the near break down of government services.

V. SUMMARY This is paper attempts to the bridge the gap between two competing views on the role of corporations and their social responsibility. We compared and contrasted CSR/stakeholder theory views with the traditional wealth maximization paradigm, which puts shareholder wealth maximization as the primary corporate goal. It appears that the proponents on either side of this highly contentious debate, to the extent there is a debate, fail to understand the other side’s perspective. This is mainly because each side starts from very different assumptions about the state of the markets and competition. We suggest that it is possible to find situations where markets are less than perfect and corporations may be best positioned to provide goods and services beyond their normal products and services. This could be seen as CSR with economic value to the society and the firm.

REFERENCES Amalric, Frank and Jason Hauser. 2005. Economic Drivers of Corporate Social Responsibility

Activities. Journal of Corporate Citizenship, Winter 20: 27-38. Coelho, Philip R.P., James E. McClure, and John A. Spry. 2003. The Corporate Responsibility of

Corporate Management: A Classical Critique. Mid-American Journal of Business 18(1): 15- 24.

Davis, Ian. 2005. What is the Business of Business? McKinsey Quarterly 3: 104-113. Donaldson, Thomas and L. Preston.1995. The Stakeholder Theory of the Corporation: Concepts,

Evidence, and Implications. Academy of Management Review 24(2): 237-241. Donaldson, Thomas. 1999. Making Stakeholder Theory Whole. Academy of Management Review

24(2): 237-241. Freeman, Edward R. and Robert A. Phillips. 1999. Stakeholder Theory: A Libertarian Defense.

Paper presented at the Society for Business Ethics Annual Meeting at Chicago. Available for download from the Social Science Research Network Electronic Paper Collection at: http://papers.ssrn.com/abstract=263514.

Freeman, R. Edward. 1984. Strategic Management: A Stakeholder Approach (Boston: Pitman Publishing Inc.)

Freeman, R. Edward. 1999. Divergent Stakeholder Theory. Academy of Management Review 24(2): 222-227.

Friedman, Milton. 1971. The Social Responsibility of Business is to Increase its profits. The New York Times Magazine. September 13.

Fombrun, Charles. J. 2005. Building Corporate Reputation through CSR Initiatives: Evolving Standards. Corporate Reputation Review 8(1): 7-11.

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Jensen, Michael C. 2001. Value Maximization, Stakeholder theory, and the Corporate Objective Function, Amos Tuck School of Business, Dartmouth College Working paper No. 01-09. Available for download from the Social Science Research Network Electronic Paper Collection at: http://papers.ssrn.com/abstract=220671.

Jones, Thomas. M and Andrew C. Wicks.1999. Convergent Stakeholder Theory. Academy of Management Review 24(2): 206-221.

Margolis, Joshua D. and Walsh, James P. 2003. Misery Loves Companies: Rethinking Social Initiatives by Business. Administrative Science Quarterly 48: 268-305.

Phillips, Robert, A. 2003. Stakeholder Theory and Organizational Ethics. Berrett-Kohler, San Francisco.

Phillips, Robert, R. Edward Freeman, and Andrew C. Wicks. 2003. What Stakeholder Theory is Not. Business Ethics Quarterly 13(4): 479-502.

Post, Issac. 2006. Is CSR OK? National Review Online. March 3. Sternberg, Elaine. 1999. The Stakeholder Concept: A Mistaken Doctrine. Foundation for Business

Responsibilities (UK) working paper. Available for download from the Social Science Research Network Electronic Paper Collection at: http://papers.ssrn.com/.

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Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

© 2014, 2016 David E. Frick.

All rights reserved.

Management 515

Leadership

© 2014, 2016 David E. Frick.

All rights reserved.

Management 515

Effective Groups and Teams

52� African�Business�|�February�2013

FOCUS Corporate Social Responsibility

their operations an ethnic or environmental veneer, in a process known as ‘green wash- ing’. They fund adverts showing their prod- ucts against a backdrop of happy children, green meadows and clear water. They provide grants to worthwhile causes and use more space on their websites to describe their role in these projects than to their core economic activities. CSR officers are employed and even whole departments created to oversee their ‘do-gooding’.

Yet CSR is about much more than philan- thropy, although this can play a part. Cor- porate social responsibility should permeate every aspect of a company’s activities and not be sidelined or neatly cordoned off, in the same way that some history academics discuss black or women’s history as if they were minor extensions to the mainstream story of human- kind. Green washing can, however, play a role. In seeking to appear more ethical, businesses may begin to adopt some of the best practices employed by those firms that genuinely wish to make a wider positive impact.

CSR was originally taken to be the avoid- ance of negative activity. Workers in Zam- bian copper mines, for example, should be entitled to international standards of health and safety. South African factories should be designed to avoid silicosis –a devastat- ing lung disease that is common in poorly ventilated factories. Angolan oil pipelines should be secure enough to avoid soil and water pollution, while Nigerian gas should not be flared at source, thereby contributing to global warming. In the same vein, toys produced in Ghanaian workshops should not utilise paint that is poisonous to their end consumer: children around the world.

Now, however, those with a genuine inter- est in CSR argue that companies should seek to do good as well as avoid harm. This can mean investing in renewable energy projects, rather than merely avoiding heavily polluting coal fired plants.

It could mean providing training courses for workers that both help the company and help the individual, while also seeking to support local organisations that provide that training. It can also involve investment in water, power and transport infrastructure that can benefit the company as well as the local community.

As a result, supporters of CSR would argue that the approach can be good for profits as well as people. The positive PR generated by genuine CSR can also boost the bottom line.

Many companies now adopt a position of positive engagement in order to bridge the

Ethical business is better business

Corporate�Social�Responsibility� (CSR)�is�one�of�the�most�commonly� heard�phrases�in�the�international� business�world�today.�But�is�it�a� new�way�of�doing�business,�or�yet� another�box�that�has�to�be�ticked� by�executives�keen�to�get�on�with� the�business�of�making�money?� Many�international�firms�operating� in�Africa�have�comprehensive� CSR�policies�and�now�the�practice� is�being�taken�up�by�African� companies�themselves.�What�does� it�really�mean�and�what�are�the� implications�for�the�continent?� Report�by�Neil Ford

Economic enterprises cannot solely be judged by their balance sheets and the contribution that they make to GDP. Definitions of CSR vary widely in theory and in practice, but the World Busi- ness Council for Sustainable Development provides the following sound definition in its Making Good Business Sense report: “Corpo- rate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development, while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

It should encompass sustainable devel- opment and fair treatment for employees, suppliers, customers and host communities both by the company itself and any compa- nies with which they trade.

In practice, many companies seek to give

AB0213.indb 52 19/01/2013 13:51

A combination of the stick and the carrot is better than merely excluding non-complying firms. Such an approach is surely only applicable where no potential bidder for a contract can offer the CSR standards expected by a bidder

FOCUS Corporate Social Responsibility

Opposite: Gas flaring in Nigeria and, left, diamond processing in Botswana.

gap between different levels of social and environmental consideration in different parts of the world.

In China, for instance, many Western companies work alongside suppliers over many years to improve working conditions, environmental regulation and social coop- eration step by step. Some argue that a com- bination of the stick and the carrot is better than merely excluding non-complying firms. Such an approach is surely only applicable where no potential bidder for a contract can offer the CSR standards expected by a bidder.

The African angle CSR is often regarded as a western phenom- enon and only relevant to Africa with regard to the activities of international companies operating on the continent. Some feel that companies have enough of a challenge oper-

ating in many African states without placing yet more obstacles in their way. Yet embracing CSR can help to ensure that Africa and its people derive more benefit from the economic activity that they host, while minimising the social and environmental downside. Moreo- ver, it would be totally wrong to market Af- rican states as locations where international firms can avoid the kind of social, economic

and environmental obligations that are taken for granted elsewhere in the world.

South Africa is probably the most suc- cessful African country at promoting CSR. Its empowerment legislation is designed to encourage companies to have a more posi- tive impact on the society within which they operate. In addition, companies listed on the Johannesburg Stock Exchange are now required to produce annual CSR reports listing their “social, transformation, ethical, safety, health, and environmental manage- ment policies and practices”.

Under changes to the New Companies Act that were introduced in 2008, the government now seeks to “reaffirm the concept of the company as means of achieving economic and social benefits”.

Panasonic of Japan has formulated a CSR policy for Africa based on the protection of labour rights, human rights and the environ- ment. A company spokesperson said: “In the procurement of articles and services, we base our evaluation and selection of suppliers on compliance with laws and regulations and accepted standards of behaviour and agree- ment with our business philosophy and code of conduct.” In other words, suppliers must sign up to Panasonic’s ethical guidelines on doing business.

The diamond industry has sought to im- prove its image because of international fu- rore over blood or conflict diamonds. De Beers, for instance, now has more than 8,500 organisations, including retailers and mines, participating in its Best Practice Principles Assurance Programme.

The policy states: “Although the Kimberley Process Certification Scheme and the World Diamond Council System of Warranties had been launched in 2003 to address the issue of Conflict Diamonds, no single stand- ard existed to evidence full ethical practices throughout the diamond pipeline addressing social, employment, business, health and safety and environmental issues.”

De Beers says: “We saw an opportunity to leverage our leadership position in the diamond pipeline to establish a benchmark for best practice not only within the diamond mining sector, but also to drive best-practices standards through the cutting, polishing and jewellery manufacturing pipeline.”

All participants are required to maintain online CSR workbooks covering a wide range of topics, some of which are then assessed

African�Business�|�February 2013� 53

‘We saw an opportunity to leverage our leadership position in the diamond pipeline to establish a benchmark for best practice not only within the diamond mining sector, but also to drive best- practices standards through the cutting, polishing and jewellery manufacturing pipeline’ – De Beers

United Nations CSR guidelines

Human Rights Principle 1 Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2 Make sure that they are not complicit in human rights abuses.

Labour Principle 3 Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4 The elimination of all forms of forced and compulsory labour;

Principle 5 The effective abolition of child labour; and

Principle 6 The elimination of discrimination in respect of employment and occupation.

Environment Principle 7 Businesses are asked to support a precautionary approach to environmental challenges;

Principle 8 Undertake initiatives to promote greater environmental responsibility; and

Principle 9 Encourage the development and diffusion of environmentally friendly technologies.

Anti-corruption Principle 10 Businesses should work against corruption in all its forms, including extortion and bribery.

Source: United Nations Global Compact Office.

AB0213.indb 53 19/01/2013 13:51

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FOCUS

by a third party auditor. Where a material breach is raised, the group is considered to be non-compliant with the BPP Programme and the sight-holder may face termination of its contract.

The jewellery industry has become a test case for CSR, partly because of attempts to tackle blood diamonds, but also because of the sheer reach of the industry. A single item can contain metals and gemstones from a dozen different countries, many of them in Africa, while many components are trans- ferred to other centres for processing and polishing. Many items are then assembled in East Asia before being marketed elsewhere in the world. Pressure is now being put on firms to account for the provenance of their raw materials. The US Patriot Act and similar legislation in other Western states requires the diamond, gold and coloured gemstones sector to monitor and report ‘suspicious’ transactions.

Moving on from the Kimberley Process, the World Jewellery Confederation (CIBJO) is now encouraging member companies to have a positive role in the societies within which they operate, as well as avoiding having a negative impact. CIBJO president Gaetano Cavalieri concedes that this is partly in order to “To defend the industry from the various challenges that could threaten our reputation and integrity”.

However, he also wants the industry: “To function as a positive influence, serving as a means for sustainable economic and social development in the communities and coun- tries in which we are active” and “To be fully transparent in the way we operate our busi- nesses and about what we sell.”

Many talk about CSR as if it is an entirely new innovation. Yet CSR is related to the fair trade movement, the Extractive Indus- tries Transparency Initiative (EITI) and the Publish What You Pay Campaign, in that it encourages ethical behaviour.

It also follows from the Quaker belief, developed in the UK in the 17th and 18th cen- turies, that the main aim of private enterprise is to add value to society and not just to make a profit. It is part of the age-old struggle be- tween the state, individuals and private en- terprise to promote their own needs.

Few now argue against the benefits of capitalism but its direction of travel can be adjusted. A balance of power is needed in the relationship between host communities and corporations in order to create a more just society for all.

Human Rights Impact Assessments The African Institute of Corporate Citizen- ship (AICC) seeks to promote the use of Hu- man Rights Impact Assessments (HRIAs) by stakeholders as a means of assessing a company’s performance.

It argues that an HRIA “helps a company to gain a thorough understanding of the im- pact of corporate activities, a better under- standing of the stakeholders’ perspectives, and ways to manage corporate impacts in a process that benefits all involved.” n

AICC lists the following benefits: n Maintaining a good company and

product reputation; n Effective risk identification and

management; n Improvement of stakeholder relations; n Creating a legal and social licence to

operate; n Increased motivation and productivity

of workers; n Understanding the society in which the

company works; n Creating an attractive investment

climate; n Contribution to CSR and sustainable

development.

However, it is vital that assessments are carried out at regular intervals in order to examine changes over time. A variety of human rights indicators are used in the assessment: n Indicators are based on and linked to

human rights standards; n They measure the extent to which duty

bearers are fulfilling their obligations and right holders enjoying their right;

n Indicators need to be accurately for- mulated and must be appropriate to the context of the business activity;

n Indicators are a means to identify changes and measure short and long term impacts;

n They assist in the identification of risks and warn of potential violations;

n Indicators can be divided in policy, pro- cess and performance indicators;

n Policy indicators determine the status of corporate strategies, policies and codes of conduct;

n Process indicators measure the effects of procedures to implement the strategies and policies on human rights;

n They include qualitative and quantita- tive indicators.

Canadian Business for Social Responsibility’s community checklist

1. Make an explicit community commitment (a) Business basics: Meet community demands for cost effective products and services (b) Philanthropy: Meet community needs without apparent business benefit (c) Commercial Initiatives: Partner with community based organisations that support business success (d) Community Investment:: Engage in long term strategic community partnerships

2. Donate 1% of pre-tax profits

3. Prioritise local employment and suppliers

4. Incorporate social values into purchasing decisions

5. Consider local/regional employment and training needs in human resources strategy

6. Have a board and management team that understands community interests

7. Conduct social and environmental impact assessments

8. Gather and promptly respond to community complaints

9. Involve community stakeholders in: (a) Programme Definition (b) Performance Indicator Development (c) Program Evaluation

Diamond mining in Sierra Leone: gemstones are a test case for CSR.

AB0213.indb 54 19/01/2013 13:51

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

Tuckman’s Model

Forming

Storming

Norming

Performing

Adjorning

Learn about the task and each other

Continue work and battle for status

Establish acceptable behavior

Majority of work and conclusion

Group disbands

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Equal Opportunities International Vol. 25 No. 4, 2006 pp. 236-250 # Emerald Group Publishing Limited 0261-0159 DOI 10.1108/02610150610706230

The role of leadership theory in raising the profile of women in management

Uma D. Jogulu and Glenice J. Wood School of Business, University of Ballarat, Ballarat, Victoria, Australia

Abstract

Purpose – To consider how leadership theories have helped or hindered raising the profile of women in management and leadership roles. Design/methodology/approach – This paper traces the earlier leadership theories through to the contemporary research on transactional and transformational leadership styles and offers a viewpoint on how each theory has contributed, or otherwise, to an awareness and acceptance of women in management and leadership roles. Findings – In 1990, research began to report gender differences in leadership styles with female managers being seen in positive terms as participative, democratic leaders. More recent work reports that women are believed to exhibit more transformational leadership style than their male colleagues, and this is equated with effective leadership. Research limitations/implications – All of the earlier theories on leadership excluded women and this exacerbated the problem of women not being seen as an appropriate fit in a management or leadership role. Recent findings clearly describe that the transformational qualities of leadership that women exhibit are required by the flatter organisational structures of today. Therefore, a more positive outcome for women advancing to senior roles of management or leadership may be observed in the future. Originality/value – The paper reviews the major leadership theories, and links these to a timeframe to illustrate how women were not visible in a management context until relatively recently. Such an omission may have contributed to the continuing low numbers of women who advance to senior management and leadership roles.

Keywords Leadership, Women, Careers

Paper type Conceptual paper

Early research by Burns (1978) concluded that ‘‘leadership is one of the most observed and least understood phenomena on earth’’ (Burns, 1978, p. 3). The quest to enhance our understanding of leadership has led to an enormous body of research and literature which has spanned centuries. This chapter will critically review the early theories of leadership through to current leadership research on transformational and transactional leadership styles, with a view to considering if previous theoretical approaches have played a role in raising the profile of women in management. It will also discuss how the current findings on leadership are likely to impact on the career advancement of women in leadership roles in the future.

Leadership defined The word ‘‘leadership’’ was originally used in the early 1800s in writings about the political influence and control of the British Parliament during the first half of the 19th century (Bass, 1990). In this period, leadership was ‘‘based on inheritance, usurpation or appointment’’ and was considered to occur most frequently in Anglo-Saxon countries (Bass, 1990, p. 11). Early definitions of leadership recognised the importance of the ability to influence others, for example, ‘‘any act of influence on a matter of organizational relevance’’ (Katz and Kahn, 1966, p. 334). Tannenbaum et al. (1961) expanded on the importance of influence and defined leadership ‘‘as an interpersonal

The current issue and full text archive of this journal is available at www.emeraldinsight.com/0261-0159.htm

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influence, exercised in situations and directed, through the communication process, toward the attainment of a specified goal or goals’’ (p. 24). As recently as 1990, Michener et al. (1990) described leadership ‘‘as a process that takes place in groups in which one member influences and controls the behaviour of the other members towards some common goal’’ (cited in Denmark, 1993, p. 343), suggesting that the control of employees was a necessary element of effective leadership.

However, more recently, the GLOBE Study of 62 societies has elaborated on this definition by describing leadership as ‘‘the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organizations of which they are members’’ (House et al., 2004, p. 56). Here the focus extends beyond influence to include motivation and enabling of others to help achieve the goals of the organisation. Furthermore, the ability to control others is given no prominence in this recent definition of leadership. A brief review of early through to contemporary theories will be explored and consideration will be given as to the role each theory may have played in raising the profile of women in management or leadership roles.

Early leadership theories In the 18th and 19th centuries, philosophers suggested a theory of leadership which was termed the ‘‘Great Man’’ theory (Denmark, 1993). This theory assumed that personal attributes of the great man ‘‘determined the course of history’’ (Denmark, 1993, p. 344). The great man was believed to have unique and exceptional features and qualities that distinguished him from his followers (Bass, 1990). Only very few people were thought to have such abilities, which were believed to be innate, i.e. leaders were bornwith these qualities (Denmark, 1993).

In this body of literature, women were not taken into account as possible leaders. The name given to encapsulate this theory illustrates that women were not perceived as leaders in any capacity at this time, and leadership research during this period related solely to males. Therefore, it is proposed that the Great Man theory cannot be claimed to have attributed anything towards raising the profile of women in management, as the theory was constructed as a male model at a time when women were not visible in paid employment.

One of the off shoots of the great man theory was a spawning of new research and theoretical propositions which focused on the traits or characteristics believed to distinguish leaders from non-leaders (Bass, 1990). The focus was on the unique and exceptional abilities and traits of certain individuals (Spotts, 1976). Trait theories were prominent in the literature from 1904 up to 1947 (Bass, 1990). Originally large lists of traits believed to be possessed by leaders were proposed in this theory (Spotts, 1976), however, the list was distilled to include self-confidence, need for achievement, the ability to have motives to carry out an action, and self-monitoring (Ellis, 1988). Once again, these traits were thought to be inborn, and unique to leaders.

Trait theories were fundamentally describing traits in masculine terms, and these characteristics were considered vital for successful leadership. In the 1900s, small numbers of women began to enter into the workforce with some women filling ‘‘helping roles’’ in organisations such as secretaries or assistants. However, only very small proportions of women took up management positions in the 1940s. For example, only 4 per cent of management roles were occupied by women in 1940 (Parker and Fagenson, 1994). More typically, women were seen as carers, assistants, teachers, or nurses rather than leaders during this period of time (see Koziara et al., 1987).

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Therefore, the caring and nurturing characteristics ascribed to females were not seen as appropriate in the role of leadership.

The importance bestowed on male characteristics or traits in leadership was confirmed in influential research which described the ‘‘think manager-think male’’ phenomenon (Schein, 1973). Schein’s early research was carried out with male middle- line managers in the USA, who reported that successful middle managers possessed attitudes, characteristics, and temperaments that were aligned to male rather than female characteristics. Therefore, it is reasonable to assume that there was no support drawn from the trait theories which would have had the effect of raising the profile of women in management. In fact, Schein’s ongoing studies (Schein, 1973, 1975, 1992, 1994, 1996; Schein et al., 1989) have highlighted the pervasive perceptions that the ‘‘think manager-think male’’ attitudes continue to be found in many cultures, especially in male subjects. Strong managerial sex typing has been reported in British, Chinese, Japanese, German as well as US male management students, leading to this sobering observation: ‘‘Despite the many historical, political, and cultural differences that exist among these five countries, the view of women as less likely than men to possess requisite management characteristics is a commonly held belief among male management students around the world’’ (Schein, 2001, p. 683).

Soon after the 1940s, researchers began to propose that traits alone were not adequate to explain effective leadership, and that the interaction of leaders and followers, as well as other situational factors, may be a significant factor in effective leadership. At this stage, leaders were no longer considered to possess universal inborn characteristics and abilities (McGregor, 1976). Gardner (1989) proposed a new way of conceptualising leadership:

Many dismiss the subject with the confident assertion that ‘‘leaders are born not made.’’ Nonsense! Most of what leaders have that enables them to lead is learned (Gardner, 1989, p. xv).

This philosophy underpinned the birth of the behavioural theories of leadership in the 1930s and the perspective began to move from a belief in the inborn characteristics of leaders, to a focus on behaviour which could be acquired or learned.

There were four main behavioural studies. Firstly, the University of Iowa researchers isolated three behavioural dimensions; these were the democratic, autocratic, and laissez-faire styles (Lewin and Lippitt, 1938). Among these dimensions, the democratic style was believed to be most effective (Bass, 1990). Secondly, a study by Ohio State University in the 1940s and 1950s advanced this body of thought by dividing the behavioural theories into two dimensions which they termed ‘‘consideration’’ and ‘‘initiating structure’’ (Kerr et al., 1974). Consideration was explained as being considerate of followers’ ideas and feelings. Initiating structure referred to structuring work relationship to meet job goals. The third study by the University of Michigan described ‘‘employee oriented’’ and ‘‘production oriented’’ dimensions (Kahn and Katz, 1960). The findings of the third study concluded that employee-oriented employers fostered high group productivity and job satisfaction amongst their employees (Kahn and Katz, 1960).

These concepts were extended in 1964, when Blake and Mouton proposed a Managerial Grid, using behavioural dimensions which included ‘‘concern for people’’ and ‘‘concern for production’’ as the two dimensions of assessing leadership behaviours (Blake and Mouton, 1964). The idea that there is one best leadership style was explored, and the researchers proposed that by incorporating the two dimensions of concern for

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people and concern for production the most effective way of leading could be achieved (Blake and Mouton, 1964). All these behavioural theories were proposed in the 1930s, but achieved prominence in the 1960s at a time when the number of women in positions of power or authority in organisations were still low.

In fact, the proportion of women in management roles in the USA in 1970, ten years after the behavioural theories reached their widest acceptance, was only 16 per cent. Furthermore, this percentage of women involved in a management role was reported to be constant for over a decade (Powell, 1999). Hence, the behavioural theories can be viewed as limited in raising the profile of women in management. However, during this period of research, there was an emerging recognition of the importance of a concern for people in the behavioural theories as being an effective leadership quality. A concern for people could be seen as a behaviour more typically associated with feminine characteristics.

Subsequently, the leadership literature moved on to embrace both individual traits and situational aspects of leadership simultaneously (Bass, 1990). Successful leadership was considered to be reliant on the leader’s judgment and consideration of situational factors in order for an appropriate leadership style to be chosen to cope with each situation. Situational theories suggested that leadership is a matter of situational demands. Therefore, situational factors will play a role in determining who will emerge to take up a leadership role (Bass, 1990). Although situational leadership began to be studied in the 1930s, these theories did not achieve prominence until 1970 when empirical research was carried out focussing on the individual traits of a person as well as the situation the individual found themselves in (Hollander and Julian, 1970). These theories are also known as contingency theories of leadership.

This body of literature was published at a time when it was still uncommon for women to be in positions of management within organisations. As mentioned previously, Powell estimates that the proportion of women in management positions in the USA in the year 1970 was only 16 per cent (Powell, 1999) and, therefore, leadership roles for womenwere still unusual. When womenwere employed in organisations, they were more likely to be found in roles of support, rather than management positions which held any responsibility for leadership (Kanter, 1977).

Therefore, situational theories would have predominantly been seen as applying to males in management or leadership roles because of the low profile of women in management at this time, and it can be assumed that the profile of women inmanagement would not have been advanced in any significant way from this body of literature.

Additional theories began to be published which focused on the specific leadership styles of leaders, in an attempt to increase understanding of what constituted effective leadership. These concepts relating to leadership styles were introduced in 1938 by Lewin and Lippitt, but reached prominence during the 1960s and 1970s. This body of research suggested that leaders vary in the way they led in organisations. Three styles of leadership were proposed.

Firstly, ‘‘autocratic leaders’’ were originally described as leaders who used their power to force, or their ability to persuade in leading their followers. A powerful autocratic leader influenced followers because of the power of the leader’s position, or the power of the leader as a person made others expect that the leader would reward them for compliance or punish them for rejection (Bass, 1960, 1990). An autocratic leader was also defined as a person who used power to be strict rather than lenient, to supervise closely, and to ensure adherence to procedures (Blau and Scott, 1962). At the same time, an autocratic leader was also described as a directive leader. Traditionally

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in early studies these concepts described leadership as work related or person related behaviour which seemed to align with autocracy at one extreme end of the spectrum and democracy at another (Bass, 1990). As mentioned previously, very few women were occupying leadership roles during this period, and the autocratic style of leadership was not one which would have been associated with female gender stereotypical characteristics.

The second leadership style was termed ‘‘democratic leadership’’, which was explained as a style whereby the leader pursued an open, trusting, and follower- oriented relationship. Leaders who adopted this style encouraged followers to establish their own policies, provided them with a perspective by explaining in advance the procedures for accomplishing the goals, and granted the followers independence to commence their own tasks and congratulating them in an objective manner. According to Bass (1990), this leadership style originated from America, and leaders adopting this style were described as caring, considerate, and easy to compromise and they also had a sense of responsibility and attachment to their followers.

This is the first body of research where it could be argued that the description of leadership, particularly in relation to the democratic style of leading was seen to be more favourably aligned to feminine characteristics as compared to masculine characteristics. However, as outlined previously, during the period when leadership style theories reached prominence, womenwere still not holding leadership positions in any significant numbers. As research on gender difference in leadership styles did not occur until 1990 (e.g. Eagly and Johnson, 1990), it would seem that the theories on leadership styles would have been written to describe male behaviour in leadership roles. Nevertheless, it could be argued that the theories on leadership styles began to raise the profile of women in management. This early leadership research may have changed perceptions about the suitability of women in management, as a democratic style of leadership could be attributed to both male and female managers.

A third leadership style was described as ‘‘laissez-faire’’ leadership. The term laissez-faire means to let others act without interference, and according to the early studies of Stogdill (1974) laissez-faire refers to the extent that leadership is either avoided or attempted (Bass, 1990). Laissez-faire leaders were thought to have less confidence in their supervisory duties, or in their capability to manage, often avoiding meeting with their subordinates (Bass, 1990). Similar to previous theories, this body of literature was studied in a male context, probably because of the small numbers of women in management roles at the time. Leadership was still seen as a male domain and this perspective is summed up by Bass as follows:

Democratic and authoritarian leadership was compared with laissez-faire leadership by adults who were instructed how to lead boy’s clubs (Bass, 1990, p. 545).

Hence, all of the above theories on leadership styles were achieving recognition as explanations to understand what constitutes effective leadership at a time when few women were in management positions or leadership roles. Leadership continued to be defined in male terms and was seen to be a natural ‘‘fit’’ for men. Thus in addition to earlier work on leadership theories, this body of literature on leadership styles does not appear to have raised the profile of women in management significantly.

In conclusion, the early leadership studies defined leadership in a male context. Recent research (Cames et al., 2001; Schein, 2001) provides us with an understanding of the pervasiveness of the belief that men, in particular, continue to view males, moreso than females, as more likely to possess the characteristics required to be an effective

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manager or leader. All of the theories reviewed depicted leadership implicitly or explicitly as a male prerogative, and the minimal numbers of women in management during the respective periods confirms that the role of management was largely seen as a male domain. These two factors could account for the lack of women or feminine characteristics being included in the leadership theories between 1940s and 1980s.

Not surprisingly, all the researchers and writers on early leadership were men and hence the years of leadership research reflect a male dominance. That is men practised leadership, and men wrote about it. The first edition of Stodgill’s Handbook of Leadership in 1974 underscores this view. It ignored any gender theme in its review of leadership, and womenwere simply overlooked as having any potential as leaders.

Such an omissionwas recognised by Denmark (1993), who reflected that ‘‘by ignoring gender as a variable in studying leadership, researchers created many blanks in theoretical and research design’’ (Denmark, 1993, p. 345). However, gender began to be a consideration in the literature in the late 1970s. This gender difference research began to report on differences in behaviour, attitudes, and skills between males and females in general andwas subsequently extended to consider abilities such as leadership.

Gender difference theories As outlined in the previous section, all the early leadership studies developed theories which emanated from the Great Man theory. Thus, the theories described men and male leaders. This had the effect of excluding women from being seen in the role of a leader. At this time, men and women were considered to have very different behaviours, skills, and attitudes, and these ‘‘differences’’ were thought to handicap women in their career advancement (Morrison and Von Glinow, 1990).

In the 1970s, a literature on gender differences began to be published that set out to explore the extent of differences in men’s and women’s behaviour. This research into gender differences had at its base a desire to understand whether males and females differed on a variety of traits and behaviours because of their biological determination, the implication being that differences in behaviour between men and women are innate or acquired from very early socialisation. At this time, the perspective seemed to be that women were different to men and that difference appeared to be equated with deficiency (Fagenson, 1990).

The early work into gender differences by Maccoby and Jacklin (1974) focused mainly on children. Sex differences in various studies into social behaviour, cognition, and temperament were reviewed, and the conclusion was that there were very few sex differences between these groups. Similarities between the groups were found in many areas of functioning.

However, sex differences were reported in the following areas: girls were found to have greater verbal ability than boys, whereas boys were found to be superior in tasks requiring visual-spatial and mathematical ability. Furthermore, boys were found to be more aggressive, both physically and verbally. In addition, some findings were reported to be ambiguous; in areas of tactile sensitivity, fear and anxiety, levels of activity, competitiveness, dominance, compliance and maternal behaviour, the results were mixed.

In summary, this early work on gender differences reported both differences and similarities in the social behaviours, cognition, and temperament of the children in this meta-analytical study (Maccoby and Jacklin, 1974). It is interesting to note that the results of this review were widely reported as a finding of ‘‘no differences’’ in the behaviour of adults. However, more recent research into gender differences have

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reported that differences in behaviour, attitudes, and skills do exist in samples of adults, and that these differences may have implications for women and men at work.

Differences in the specific work-related behaviours, attitudes, and skills of men and women in management have been reported, particularly in the area of leadership. A large scale meta-analytical review of 162 studies on gender and leadership style compared the leadership styles of women and men and concluded that some differences existed. Eagly and Johnson (1990) found that male and female leaders performed similarly in both interpersonally oriented and task-oriented styles in studies conducted in organisations. That is, women were found to be equally capable of leading in a task- oriented fashion, and men were equally capable of leading in an interpersonal manner. However, women exhibited a more participative or democratic style, and men exhibited a more directive, autocratic style (Eagly and Johnson, 1990).

Following this work, a meta-analysis of 54 studies on gender and the emergence of leaders was conducted (Eagly and Karau, 1991). This review examined research on leader emergence in groups that were initially without a leader. Findings suggested that men emerged as task-oriented leaders more than did women, although such an event was most likely in short-term groups where the tasks set involved a relatively superficial level of social interaction. On the other hand, women were found to emerge as social leaders more frequently than men. That is, women engaged more often in leadership behaviour which showed agreement with other members and solidarity of views. Therefore, gender differences in leadership styles were proposed.

Eagly and Karau (1991) concluded that because of men’s tendency to specialise in task-oriented behaviours, there is a socially accepted tendency for men to take up roles of leadership. It can be assumed that senior management roles would be seen as requiring task-oriented behaviour. According to Eagly and Karau (1991), ‘‘men’s specialization relative to women in strictly task-oriented behaviors is one key to their emergence as group leaders’’ (p. 705). Thus, menwere seen as a better fit thanwomen in the role of leader.

In terms of gender differences in management capabilities, the attributes that could be presumed to impact on a manager’s performance are primarily task-oriented leadership, and males were seen as exhibiting this style of leadership more than women. Therefore, the behaviours exhibited by males appear to equip them more comfortably to fill the role of manager, as it was defined at this time. According to Fielden and Davidson (1999), the ‘‘successful manager is aggressive, competitive, independent and self-reliant’’ (p. 74). Characteristics which include acting non-aggressively, being concerned for others welfare and having artistic qualities – attributes more readily associated with females – are seen as ‘‘non-related management traits’’ (Orser, 1994, p. 11).

As can be seen from the above, the literature over the past three decades appears to have focused on what gender differences exist between males and females in general, as well as in terms of managerial qualities, including leadership abilities. The early research into gender differences underpinned a view that women were inappropriate in the role of management.

However, from the early 1990s, the literature began to tie together leadership styles with specific behaviours attributed to women. Not until this time was there a shift in the literature in terms of the valuing given to female characteristics in relation to leadership, such as the finding that women exhibited a more participative or democratic style in their leadership of others (e.g. Eagly and Johnson, 1990; Rosener, 1990).

As the proportion of women in management was increasing at this time (39 per cent in 1990: Powell, 1999), and women were achieving higher visibility, it is presumed that

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a greater recognition of women’s characteristics and a greater valuing of what women could bring to a leadership role began to occur. Hence, the gender difference literature introduced a new perspective, as women were ‘‘seen’’ as managers and leaders, with different leadership styles to men, but nevertheless with qualities that were believed to be of benefit to employees, and that could ‘‘increase an organization’s chances of surviving in an uncertain world’’ (Rosener, 1990, p. 120). Hence, the gender difference literature in this period could be seen as contributing towards women’s career advancement in management. Women at last were visible in a management forum. The next section will further explore the recent theories of leadership, and evaluate if these make a further contribution to the recognition of the skills and attributes of women in management or leadership roles.

Contemporary theories The beginning of the gender difference theories marked a shift in the leadership literature, as the behaviour, skills, and attitudes of women were considered, recognised, and evaluated. In turn, leadership styles were evaluated through the perspective of gender differences, and the focus began to shift to a desire to understand how men and women led their subordinates. This focus was made possible because of early work by Burns (1978) which described two very different types of leadership.

In the late 1970s, Burns developed a comprehensive theory to explain the differences between the behaviour of political leaders by using the terms ‘‘transactional’’ and ‘‘transformational’’ leadership. He defined transactional leaders as people who emphasized work standards, assignments and had task-oriented aims. Therefore, these leaders’ focal points were believed to be on finishing tasks, with rewards or disciplining of followers intended to influence …

Lucjan Klimsza

Business Ethics Introduction to the Ethics of Values

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Lucjan Klimsza

Business Ethics Introduction to the Ethics of Values

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Business Ethics: Introduction to the Ethics of Values This text was translated from the Czech language by Slavomíra Klimszová. 1st edition © 2014 Lucjan Klimsza & bookboon.com ISBN 978-87-403-0690-3

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Contents

Contents

Part One Theoretical studies 9

1 Introduction 10 1.1 The basic question of ethics 10 1.2 Why we have to study ethics 11 1.3 Other reasons for studying ethics 12 1.4 The reasons for studying business ethics 12

2 Introduction to Ethics 13 2.1 The meaning of the word ‘ethics’ 13 2.2 Ethics in the ethos 16 2.3 Ethics in morality 17 2.4 Autonomous, heteronomous, theonomous 18 2.5 Definition of ethics 19 2.6 Goals of ethical study 21

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Contents

3 Ethics by Recognition Aims 25 3.1 System classification of ethics 25 3.2 Descriptive ethics 25 3.3 Normative ethics 27 3.4 Meta-ethics 29 3.5 Graphical depiction 30

4 Normative Ethics Schools 31 4.1 Ancient hedonism 31 4.2 Utilitarianism 32 4.3 Empiristic ethics 33 4.4 Ethics by norms or principles 36 4.5 Casuistic ethics 37 4.6 Situation ethics 38 4.7 Ethics of reckoning 41 4.8 Deontological ethics 42 4.9 Ethics of responsibility 44

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5 Ethics by Orientation 46 5.1 Applied ethics 46 5.2 Anthropological orientation 47

6 Business Ethics 52 6.1 Values in business ethics 52 6.2 Freedom 53 6.3 Justice 56 6.4 Responsibility 57 6.5 Trust 60 6.6 Progress 61 6.7 Prosperity 62 6.8 Sustainability 64 3.9 Rationality 64

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Contents

Part Two Case studies 65

7 Introduction to Case studies 66 7.1 Case study 66 7.2 Definition of the case study for ethics 69

8 Case: Students‘ thesis 71 8.1 Introduction 71 8.2 Case analysis from different schools of normative ethics perspective 72

9 Case: Loyal employee 79 9.1 Introduction 79 9.2 Analysis of the case from the perspective of different schools of normative ethics 79

10 Literature 87

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Part One Theoretical studies

Motto of the practical part of the book.

“Nothing great in the world was accomplished without passion.” – G.W.F. Hegel, Enzyklopädie der philosophischen Wissenschaften.

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Introduction

1 Introduction The intention of this book is to serve as a compendium which contributes to a better understanding of major ethical terminology and basic ethical systems orientated towards business ethics. Business ethics are part of applied ethics. It means that this book will focus on ethical questions only. Topics like social responsibility or corporate responsibility will be considered only partially as a moral phenomena. We do not want to confuse these topics with ethics. We would like to analyze these phenomena from the perspective of ethics.

This compendium should help those who lead their own career or lead other people’s career from the ethical perspective. We will talk about business life in the light of the ethics of values. This book is divided into two parts. The first part is theoretical in which survey of main ethical terminology and the most important ethical systems are presented. The second part of this book focuses on applied ethics in which a few cases are analyzed from the position of normative ethics.

1.1 The basic question of ethics

We are searching for answers good enough to be declared the most fundamental for every human being, questions that nobody can escape from because their future depends on the answers. This is not ethics in the purely academic sense of the word, but ethics that everyone who enquirers into questions of their own existence will have an urgent need to be interested in. It needs to be added that searching for those answers becomes very difficult without a certain level of academic erudition.

It was Immanuel Kant (Kant: Critique of Pure Reason) who paved the way here by formulating four basic questions that each man has to face:

– What can I know? – What should I do? – What can I believe in? – Who is man? Or, who am I?

These four fundamental questions serve as a foundation for ethics. Although each is bound to a different discipline, they can be considered, in the broadest sense, the basic starting points of ethics.

Example: Children must answer important Kant’s question: ”What should I do?” when they decide to choose a secondary school and consider how much they must prepare for exams if they choose a particular school. The truth is that their family helps them, especially their parents, but they must make this decision and also do something more by studying hard.

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Business Ethics: Introduction to the Ethics of Values

11

Introduction

The major ethical question: What should I do?

This is the fundamental ethical question, but we still don’t know how important it is to study ethics. We have to give the right answer to the question “what should I do?”, or the question of why we do what we do. So we look for a justification for our decisions.

The major ethical function: Justification of everyday decisions.

1.2 Why we have to study ethics

There was once a man looking for a colour. The colour was to be used in a painting and the subject of the painting was a supper. For a very long time, the man did nothing else but search for the right shade of blue. He wrote a note about the conditions for the right shade of blue (Richter 1888). When he finally found it, he finished his incredible masterpiece. You can ask why he did not simply pick from among the myriad of blue shades available or those that were easier to reach. Why lose so much time looking for the right blue? The answer can be found in his artistic legacy, The Last Supper. The man was Leonardo Da Vinci (Bandello, Matteo in Boorstin 1996).

A human being is not eternally encased in this world that, as it seems, can only be his temporary home. Once gone, the only things left are his thoughts, deeds and his hands’ creations, from musical masterpieces, through wonderful poems, to sculptures and paintings with values that grow with time. If only those pieces of art witnessed the greatness of the spirit, it would be easy to call life meaningful and good.

However, the same goes for the dark side of the human soul. Holocaust, wars, genocides and corruption startle mankind with the same vigour as all things spiritual elevate it to the heights. All values we create tend to form the impression of being virtuous, but time proves them wrong. An important question arises from that dichotomy of mankind and its urgency cannot be trivialised. Therefore, the question of ethics, as prominent twentieth – century moralist – Emmanuel Levinas puts it, is the question that stands at the forefront of human thinking (Levinas 1994).

Example: The history of the twentieth century teaches us that every decision by humankind has consequences, with an impact on people.

Now, we know the first and fundamental ethical question: What should I do? Also, we know that every decision leads us to consequences. Everybody knows it. So is there really just one important reason to study ethics? We think there are more reasons why we must do so.

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Introduction

1.3 Other reasons for studying ethics

Robert Solomon identifies four reasons for studying ethics (Solomon 1984, pp. 2–3). He says that:

– we live in a continually changing world; – we live in a pluralistic world, with pluralistic cultures and pluralistic societies that have

different values, rules and beliefs; – our ethics involve choice, – ethical values are often in conflict with each other.

This fourth reason can be summarised as having four causes:

– a changing world; – a pluralistic world; – the possibility of choices, – ethical dilemmas.

Now we can define the major goals in the study of business ethics.

1.4 The reasons for studying business ethics

Many books that deal with business ethics indicate that it is important to study ethics because of huge corruption scandals or defraudation. Many books specify ethical issues as a major priority for the twenty- first century, but we identify the reasons for studying business ethics in a few steps:

– because it forms part of applied ethics; – as I am a human being, it is not irrelevant to how I live; – I need to know what I must do in my professional life; – my professional life depends on a changing and pluralistic world with the possibility of

choices and ethical dilemmas.

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Introduction to Ethics

2 Introduction to Ethics People have always tried to understand the world around them, themselves and their own role within it. Thanks to these urges, a new discipline was born that is concerned with all aspects of human action. This discipline is called ‘ethics’. Although ethics applies to all people, not everyone knows what it is and only few really know what this word conceals. In spite of this fact ethics is still used by those who do not trust it could work. It is therefore essential to come to terms with the word ‘ethics’ and its many alternative meanings.

2.1 The meaning of the word ‘ethics’

Aristotle is generally considered a founder of ethics in philosophy. The ancient philosopher wrote many books recognised as the first works that dealt with ethics. These books are Nicomachean Ethics, Eudemian Ethics and Magna Moralia. The last work is a compilation of the first two. These were however not the first books that just looked at the issues of right and wrong. This topic is even older and precedes all philosophical literature, dating back to the sixth century BC.

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Introduction to Ethics

The subject of ethics was already present in the first records of human civilisation. These records are really ancient works in the form of mythological narratives, showing deep ethical roots. The Epic of Gilgamesh from Mesopotamia serves as one example and Sinuhe the Egyptian as another. The most significant mythological European works of this kind are Homer’s Iliad and Odyssey.

All of these works are preoccupied with the same question: What is the right way for humans to act? The question is not only a highly abstract expression of the existentialist mood of the earlier generations, but highlights a logical need to find ways of acting in various areas of human co-existence that could be considered good or at least helpful in shaping of good life.

Ethical questions relate to all aspects of human life and there has always been a relationship between ethics and everyday life that is strongly underlined by the etymology of two Greek words: OIKOS and ETHOS.

The English word ECONOMY originally came from the Greek word OIKODOMEO, which in a literary sense is the manager of a house who attempts to find the best ways to look after the household. These people tried to manage the home space in a way that was of maximum benefit to all inhabitants. If you now ask what ethics has to do with this domestic type of management, it exists because of this mutual relationship.

The word ETHOS is Greek as well. In a similar way to OIKODOMEO, it refers to a man who is at home at a certain place, or more precisely who was domesticated at a certain point, envisaging somebody who searches for rules that enable him to manage his own life in a certain environment. This kind of effort has been documented by the ancient historian Thoukidides, who pointed to the fact that people attempted to invent customs and rules long before the first cities were built.

Effective household management has been tightly connected to customs and rules since ancient times, from handing out tasks to distributing material wealth. OIKODOMEO (household management) was subordinated to certain types of ETHOS, or customs that societies in a particular geographical space regarded as good and virtuous. Aristotle described that mutual symbiosis by saying that every citizen of the Athenian POLIS had adopted an exact specified set of duties defined by their profession. Household management became a basic element of a healthy, functioning community.

Everyone contributed to the good administration of the whole city, within his or her means. Aristotle provides a whole list of activities that they carried out, including The supply of food and drink, trades, arts and crafts, military, religious and law services, philosophy and education. This all took place in Athens in the fourth century BC.

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Introduction to Ethics

With the arrival of philosophy, ethics based purely on customs became unsustainable. The first significant conflict between the ethics of customs and of free consciousness was one of Socrates with the Athenian community. This conflict is part of both, philosophical tradition and ethical thinking. There is a question though: Why do we need to know the history of ethics at all? Do we need to know it in depth? Do we need to know it to understand when we are acting ethically and when we are not? The answer is simple: There is no need to know this history to act ethically.

What is however important and what history (not only the history of ethics, but history in general) can capture in teaching is all kinds of border situations that shaped whole societies. These were situations that fundamentally changed trends in ethical discourse. Knowing those precise moments in human history contributes to a better understanding of mechanisms that right or wrong are examined. These are also the main questions in ethics, which is why this book cannot do without a passing summary of the evolution of ethical thinking. This is all the more the case because economics as a scientific discipline, including labour theory, was part of philosophy and more precisely moral philosophy – or what ethics is also known as.

Work-related topics had already been taken up by Hesiod in his mythological poem, Works and Days. Philosophers of the day were consumed by the moral urgency of work. Prodicus of Ceos and his work, Horai, is another example. Plato also pointed to the importance of distributing duties and the role of work in the proper running of the whole of society.

It was Aristotle who described rules for creative and artistic work that were later applied throughout the Middle Ages. The reason? Aristotle defined ethics as practical philosophy. Only the arrival of the Enlightenment much later brought about a radical change in understanding economics. This was most prominent in Adam Smith’s The Wealth of Nations, which was published in 1776 and is regarded as the fundamental proposition of economics.

Economics became a separate science thanks to Adam Smith. On the other hand work ethics or economical ethics are rather ethical disciplines applied to specific activity areas. Yet even these will not make do without a certain share of philosophy and history of ethics. They use terms and methodological techniques that have developed over many centuries.

This is not to say that all who specialise in economical or work ethics must know a detailed list of medieval virtues and their differences as viewed by Saint Thomas Aquinas versus Aristotle. It is only to say that a basic knowledge of the area does not hurt. We will examine the main ethical systems known from mythology to the present time and the way the paradigms of looking at right and wrong have changed in practical reflections on human life. There will also be room for the main concepts used in ethics.

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Introduction to Ethics

Like any other trade, ethics uses tools. A carpenter who knows how to handle his tools can make beautiful furniture. It is the same for those who want to deal with ethics professionally. Such people need to know basic concepts, as with the tools in the carpenter’s hands. In this case the trade is intellectual rather than manual, but all the more responsibility lies at the shoulders of these people. As German philosopher Peter Wust put it shortly before World War II, every thought sooner or later will find ways to eventually happen (Wust 1937).

2.2 Ethics in the ethos

An explanation of the basic concepts in ethics starts with distinguishing MORALITY from ETHOS. In normal parlance, those two words are almost identical in meaning. In specialised usage and practical philosophy they must be clearly set apart. The reason is simple: they are not synonyms, but two very different ideas. The first person known to have made this distinction was Immanuel Kant (Anzenbacher 1985).

We already know that thinking and action were originally driven by customs or customary law, so righteous or wrongful behaviour was assessed according to how society stuck to certain rules. Aristotle noticed that these moral regulations are twofold: in Greek, NOMOI GRAFOI KAI NOMOI AGRAFOI – ‘they can be written or unwritten’. Moral code is inseparable from every culture and typical of every era of human existence. The question is how the written moral code and rules are spread.

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Introduction to Ethics

These can be passed on through traditional scripts, customs, commandments or even as part of religious liturgy. A myth, story or religious commandment can all become mediums that carry a moral message. Philosophy and philosophical essays are also capable of this. Today there are new ways of communication, especially social networks, which create their own ethos within a communications universe.

Kant took notice of morality within its content. For instance, the ethos of Thou shalt not kill as an imperative are given from inside and apply to individuals and the whole of society. We are talking about heteronomous ethics that Kant calls Sittlichkeit. Ethical behaviour adheres to generally accepted laws, norms and rules. The law is a motive for thinking, talking and acting, be it in a written or unwritten form.

A very good example of moral ethics is the Ten Commandments in Judaism. This is a written ethos that has been passed on by both scripts and religious liturgy. Another example of a well-preserved written ethical code comes from the time of the Sumerian Empire and is more than five thousand years old. It is very precious because it reveals working relations in a civilisation that ceased to exist two thousand years BC.

There are also examples of unwritten moral norms and laws, passed on from generation to generation in oral form. These are mythical narratives of African or Polynesian tribes that worship animistic entities.

With the invention of philosophy, Western civilisation nevertheless arrives not only at strengths of ethos but also at moral weaknesses. Due to their heteronomous character, weaknesses might commit humans to ethical behaviour, but create ethical conflicts. At the beginning of the second chapter we mentioned that ethics in terms of morality was gradually becoming getting in stark contradiction to the freedom of humans. The first freedom-related conflict recorded in philosophical literature was the dispute between Socrates and the Athenian city council. This represents the ethical dilemma between ethos and morality.

2.3 Ethics in morality

The first thing that comes to mind when trying to live according to certain prescribed customs, norms or laws is whether they limit your own freedom. In other words, is ethics ordered by customs and traditions still ethics in the literal sense of the word? Should ethics not rather come from a decision made by a free-thinking individual? If society recognises a certain virtue as the only virtue possible, is sticking to the law that determines this good in itself? Has it simply become an act that everybody has to abide by? All such customs may be later converted into keeping the law without understanding the rules. We call this legality.

Legality means that although all orders or customs are formally respected, their former purpose is denied. Obeying the rules becomes the aim, not the means to themselves. However it is righteousness that should be the aim and not the law. The situation where the law becomes the objective of human behaviour without leading to righteousness and virtue was exactly what Socrates criticised in the fifth century BC.

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Introduction to Ethics

The whole critique can be put into the following words: If customs and traditions are good because they lead to righteousness and virtue, they must be followed. However, when the customs and norms of a certain point in history do not lead to righteousness and virtue in another epoch, they are not regarded as good and are to be replaced. Socrates was referring to DAIMONION, his own conscience.

Apart from the moral principle that binds people to strive for virtue, there is also a personal urge for individual virtue. Immanuel Kant describes the urge as Moralität. Morality is what an individual’s conscience regards as good. The individual’s very conscience creates beliefs about what is right and wrong. Thinking, talking or acting is regarded as moral as long as it is in harmony with the individual’s conscience. Therefore, ethics based on morality is generally known as autonomous ethics.

Susan Quinn, Associate Professor, Bissett School of Business

Management Basics

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Susan Quinn

Management Basics

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Management Basics 1st edition © 2010 Susan Quinn & bookboon.com ISBN 978-87-7681-717-6

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Contents

Contents

Management basics 8

1 Management basics – Calm Seas case 9

2 The Manager’s job 12 2.1 Management functions 12 2.2 Management roles 13 2.3 Management skills 14 2.4 Not-for-profit note 15 2.5 Questions for the manager’s job: 17

3 Planning – Calm Seas case 18

4 Planning in the organization 20 4.1 Competitive advantage 20 4.2 Strategic planning process 21 4.3 SWOT analysis 22

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Contents

4.4 Stakeholders 22 4.5 Factors inside the organization 23 4.6 Factors outside the organization 24 4.7 Grand Strategy 25 4.8 Mission statements 26 4.9 Action/implementation plan 28 4.10 Not-for-profit note 29 4.11 Strategic planning diagram 30 4.12 Questions for organizational planning section: 31

5 Organizing – Calm Seas case 32

6 Organizing the organization 33 6.1 Structure follows strategy 33 6.2 Bureaucracy 34 6.3 Authority – staff and line 34 6.4 Bureaucratic structures 37 6.5 “Rules” of a bureaucracy 41 6.6 Disadvantages of a bureaucracy 42 6.7 Changing the bureaucratic structure 43

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6.8 The rise of the “group” structure 45 6.9 Not-for-profit note 46 6.10 Checklist for Team or Group Effectiveness 47 6.11 Questions for organizing section: 47

7 Leading – Calm Seas case 49

8 Leading in the organization 51 8.1 Leader vs. manager 51 8.2 Leadership theories 51 8.3 Knowing what kind of manager/leader to be 53 8.4 Motivation Theories and Concepts 53 8.5 Content Theories of motivation 55 8.6 Process Theories of motivation 55 8.7 Maslow 56 8.8 Expectancy Theory of Motivation explained in simple terms 57 8.9 Equity Theory explained in simple terms 57 8.10 What do employees want? 58 8.11 Motivation summary 59 8.12 Not-for-profit note 60

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8.13 Motivation exercise 61 8.14 Questions on leadership/motivation section: 62

9 Control – Calm Seas case 63

10 Control in the organization 64 10.1 What does “control” mean? 64 10.2 What kinds of controls? 64 10.3 Measure what matters 65 10.4 What will we monitor? 66 10.5 Flowcharting 66 10.6 Critical path planning 67 10.7 Not-for-profit note 69 10.8 Questions on the controlling function: 70

11 For further reading 71

12 Definition of terms 73

13 Endnotes 75

.

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Management basics

Management basics Susan Quinn is an Associate Professor at the Bissett School of Business at Mount Royal University.

The running case in this book is a fictional case. The name of the company and the location are fictional. It is a case that is based on a real industry, so that readers, instructors and students can research the industry to apply the concepts and expand the application of the material contained in this text.

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Management basics – Calm Seas case

1 Management basics – Calm Seas case

Tasneem Khan is the General Manager for Calm Seas, a small ocean kayak manufacturing company in western Canada. It is the end of the day in mid-October. Tasneem is wondering where the day went. She has gotten nothing done on the “to-do” list that she had with her when she started her day. And yet, she had been busy from the moment she walked in until now. She shrugs her shoulders and starts to tackle some of the work piled up on her desk. Everyone else has left the building by now. Perhaps she can get in a couple of hours of uninterrupted work before she goes home.

Tasneem had been promoted to General Manager almost two years ago. She had been the Sales Manager before that for 3 years and had worked in sales for another company for 3 years before that. As she sat at her desk, she thought that the job of General Manager was certainly challenging.

Being a manager was tough. There was always something going on to eat up her time and keep her busy. Tasneem wondered sometimes how she ever got anything done. She knew how to do her job – that wasn’t the problem. It was trying to get things finished! She thought back over her day to try to figure out what happened.

Her day had started before she even got to the office. Her cell phone had rung when she was driving to work. The caller was one of her sales staff who was on his way to a client’s office, but his car had broken down. A car was essential for the sales person’s job and he had an important client visit to make that morning. He had tried to contact the Sales Manager, but he was on a plane and couldn’t answer his phone. She promised to see what she could do about it when she got to the office.

As she walked through the parking lot, she saw the sign on the wall of their building, advertising for two more production assistants. That sign looked as though it had been up there for ever. They were always looking for production assistants. Tasneem made a mental note to ask their Human Resource Administrator about that.

When she walked into the office, Tasneem asked her Administrative Assistant to arrange for a rental car company to take a car out to their sales person, stranded on the side of the road.

Tasneem turned her computer on, knew it would take awhile to start and decided to go to the employee lounge for a coffee. She chatted for a few minutes to a couple of other employees who were there, flipped through the morning paper, glanced at the notices on the bulletin board and returned to her office.

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Management basics – Calm Seas case

She opened up her e-mail and watched all of the new e-mails enter her inbox. She shook her head and wondered how she could have so many new ones. She had checked her e-mail from home last evening and had gotten caught up. Now, she had 60 new e-mails! How was that even possible? She looked more closely and realized that half of them were e-mails that she had been copied on, but didn’t necessarily need to see. She was tempted to delete a lot of them, but then thought she might miss out on some information that she needed to know. She sighed and opened up her calendar to see what was scheduled.

She had appointments that day with the company lawyers to go over the papers to buy a small piece of land beside their office so that they could build an extension of their building. They needed more production capability and they were delighted when this land came up for sale. She got it for a fairly good price and the expansion could start at the end of the month.

In addition, there was an appointment scheduled with the contractors to review the designs for the new building. This was the first meeting for them to get together and they needed to really get detailed on their requirements and budget for the construction.

Just as she had returned to look at her e-mail, her Administrative Assistant had come in to her office, complaining that she couldn’t get the numbers to reconcile on the sales reports. The Assistant was responsible for ensuring all of the sales figures submitted by the sales staff matched the invoices. Usually she had no problem with this, but they had just installed a new software program and this month, the numbers didn’t work out. Tasneem sat down with her and spent the next thirty minutes trying to figure it out. Finally, one of their delivery people, who was good at computers, came along and gave them some ideas for trouble-shooting. Fifteen minutes later, they solved it.

As Tasneem walked back to her office, the sales staff with the car problem phoned back to say his rental car still had not arrived and he was getting anxious about his upcoming client visit. They talked for a few minutes and as he was talking, the car arrived. Tasneem got off the phone.

The meeting with the lawyers came next. These were lawyers they had used on a number of occasions before for legal issues, so after the legal matters had been taken care of, they visited with one another and chatted over more coffee. The meeting lasted an hour.

After the lawyers left the building, the Production Supervisor waved at Tasneem and asked her to come into the production room. There was a problem with the finish surface on four of the kayaks that were being completed. The finish on the kayaks looked bumpy, which was unusual and spoiled the look of the kayak. This had not happened before and the kayaks could not be shipped to customers in that condition!

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Management basics – Calm Seas case

Tasneem asked the Production Supervisor to call the Production Manager, the production operator and the buyer, who was also a chemist, for a meeting to figure out this problem. An hour and a half later, the bumpiness on the surface was gone and the finish looked perfect.

Tasneem next drove to the bank. She had an appointment there to discuss the financial arrangements that they needed for the expansion. As she drove there, she called the friend she was supposed to have lunch with, and cancelled. No time for lunch today. She rummaged around in her briefcase for an energy bar. She made a mental note to grab a sandwich later.

The afternoon just sped by. Tasneem had the meeting with the contractors, got reports from the sales staff containing recommendations on pricing structures, had a conversation with the Sales Manager for some new product ideas and talked to accounting about some budget projections that she had to present at Calm Seas next Executive meeting. She asked her Administrative Assistant to run out and buy her a sandwich.

Finally she caught up with the Human Resource Administrator before he left for the day and they discussed the problem they were having finding good production assistants. Tasneem wondered if the Human Resource Administrator was having trouble doing his job. She had hired him only two months ago and thought that she’d have to check in more often to see how he was doing with his responsibilities.

That brought Tasneem to the end of the day. The building was quiet now. Most people had left for the day. She looked at her computer and sighed. Over 100 e-mails! She opened up her sandwich and settled in to examine her messages. Another busy day.

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The Manager’s job

2 The Manager’s job The job of a manager is extremely difficult to describe. Job descriptions exist, and all will be different. One of the major challenges for managers is exactly what is outlined above with Tasneem – the job is fragmented and constantly changing, even as the day progresses. Planning can be difficult with so many interruptions. As shown with Tasneem’s day, it can be difficult to get done what needs to get done. On top of that, if the manager is “fighting fires” and dealing with crises and unforeseen events, then getting tasks done becomes even more of a problem.

The job description for a manager also changes depending on what industry they are in, what type of “organizational culture” they are part of and whether they are junior or senior in the organization. It can also depend on factors including how the manager gets rewarded, their own personality and whether they work in a for-profit or not-for-profit organization.

The term “manager” can be used in relation to all the various levels of management in the company. Most of the time, the term “manager” is used to describe someone who supervises others. Some examples of manager job titles are:

– Team or area leader – Front-line supervisor – Mid-level manager – Department head – Vice-President – President – Officer, Chief Officer – Managing Director – Deputy Officer

If we look at the question, “what does a manager do?” the answer is not straightforward!

2.1 Management functions

Managers are involved in four main functions that form the basis of this text. These functions are planning, organizing, leading and controlling.1

Planning – managers have to plan what they want to accomplish and develop specific actions in order to reach those goals.

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The Manager’s job

Organizing – managers must figure out how many people are needed to get the jobs and tasks done. They also determine how the job flow happens (who does what). Generally, we talk about what kind of structure will be put in place to get these tasks done.

Leading – managers must supervise, lead, motivate, train, coach, guide, hire and assess employees. There are a lot of ways that these can be done.

Controlling – managers must monitor what’s going on in their area, to make sure that the goals or objectives are going to be met. If the goals are not going to be met, then corrective action can be taken. The earlier the corrective action is taken, the easier it is to correct.

2.2 Management roles

One of the most important pieces of research into the job of a manager comes from Henry Mintzberg. He is a Canadian academic and researcher who has studied management for years. He believes that a manager’s work is never really done!

He was the person who categorized the various roles that a manager plays in the organization. The following chart outlines Mintzberg’s categories and roles. It also gives brief examples of the roles.

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The Manager’s job

When looking at the roles in the chart, you can see that Tasneem, in her one day outlined above, acted in almost all of those roles. If we describe the manager as wearing different “hats” representing the different roles they are doing, then we can see that Tasneem has indeed worn many hats during the day.

Different levels of managers will play these roles to a different extent. For instance, a front-line (junior) supervisor will likely be a resource allocator and a disturbance handler to a far greater extent than they will act as a figurehead. A Chief Executive Officer likely will act as a spokesperson and perhaps an entrepreneur more than they will act as a monitor.

2.3 Management skills

Management texts talk about different skills needed to be a manager. The skills are conceptual, technical and human skills.2

Conceptual – be able to see the “big picture” of the situation. Ability to arrive at ideas, create a vision and plan for the future.

Technical – possess specific knowledge or have a specialized expertise.

Human – be able to work well with others both individually and in a group setting.

According to management writings, all managers need to have all three skills, but they need them in different amounts, depending on their position in the organization. So, for instance, a senior level manager will need to have and use more conceptual skills, while a lower level manager will likely use more technical skills. All levels will use human skills.

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The Manager’s job

Mintzberg’s roles of the manager

Category Role Activity

Informational Monitor Look for and receive information, review papers and reports, maintain interpersonal contacts and networks.

Disseminator Pass information on to others by phone, in meetings, memos.

Spokesperson Represent the area or organization to people outside the area or organization in speeches and reports. Deal with the media. Make presentations at professional or community events.

Interpersonal Figurehead Perform ceremonial and symbolic duties inside the organization, receive visitors. Give presentations/awards to employees.

Leader Supervise direct subordinates, including recruiting, selecting, motivating, training and leading them.

Liaison Be the conduit (the in-between person) for information flowing in and out of the organization.

Decisional Entrepreneur Initiate change. Plan new projects, spot opportunities, identify areas of business development.

Disturbance handler Take corrective action during crises or operational breakdowns, resolve conflicts amongst staff, adapt to external changes.

Resource allocator Decide who gets resources, sets the schedule, budget, set priorities

Negotiator Represent department during negotiations with unions, suppliers, and generally defend interests.

Table 2.1 http://www.provenmodels.com/88/ten-managerial-roles/henry-mintzberg/

It is for this reason that a person who is a good front-line supervisor will not necessarily be a good middle manager or be successful as a senior manager. The skills needed for the various positions in management will be different. The good organization recognizes this and will offer training and development opportunities, perhaps linked to career development programs and excellent performance management and appraisal programs. In this way, the individual is supported in their movement from one type of management position to another within the organization.

2.4 Not-for-profit note

The roles of a manager or supervisor in the not-for profit organization are in large part very similar to those described above. Two additional challenges exist in the not-for-profit organization. One is that they deal with volunteers who contribute their work to the organization. This generally is not something that occurs in a for-profit organization. It requires different management skills to utilize and recognize volunteer contributions of time, energy and task performance.

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The Manager’s job

The second challenge is that the funding in a not-for-profit comes from very different sources than a for-profit. In a for-profit company, revenue comes from sales of a good or a service. In the not-for-profit world, revenue comes in as a result of fund-raising and/or it comes from government sources or other funding groups. Generating revenue in this way requires unique skills in order to organize events to solicit money and requires talent and time to liaise with government or funding groups and write proposals to raise both on-going and project funding.

When I first began to study management, during and immediately after World War II, a manager was defined as ‘someone who is responsible for the work of subordinates’. A manager, in other words, was a ‘boss’, and management was rank and power… But by the early 1950s, the definition had already changed to ‘a manager is responsible for the performance of people’. Now we know that this also is too narrow a definition. The right definition is ‘a manager is responsible for the application and performance of knowledge’.

A quote from Peter Drucker http://newlearningonline.com/new-learning/chapter-3-learning-for-work/peterdrucker-on-

the-new-knowledge-manager/

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Planning – Calm Seas case

2.5 Questions for the manager’s job:

1. Review the management functions, roles and skills. Which ones can you apply to Tasneem at Calm Seas?

2. Review the management functions, roles and skills. Relate these to a manager you know. 3. Review the management functions, roles and skills. Which ones are skills that you have?

Which ones do you need to work on? 4. Do you agree that “a manager is responsible for the application and performance of

knowledge” as Drucker says? Why or why not? 5. Do you think that management functions, roles and skills are different depending on the

industry? Give some examples. 6. When you examine the management functions, roles and skills of a manager in a not-for-

profit organization, how would they differ from a manager in a for-profit organization?

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Planning – Calm Seas case

3 Planning – Calm Seas case Calm Seas is a small Canadian manufacturer of ocean kayaks. They also sell kayaking accessories including paddles, bilge pumps and other essentials. They are located in Nelson, B.C., where they have both their plant and their administrative office. They have about 60 employees in total and have been in operation for over 20 years.

They sell their products to retail stores in North America and to distributors in Japan, Germany, Greenland, Norway, New Zealand and Australia. They also sell directly to outfitting and tour companies, to groups that teach people how to kayak and to educational institutions and sports organizations.

Calm Seas makes ocean kayaks out of 2 very different materials. One is called “composite”. These materials are fibreglass, kevlar or graphite laminates. The other type of material is rotationally molded polyethylene (plastic). Very different production methods and materials must be used in the making of these two different types of kayaks. Calm Seas has different types of models in both materials (for example, double or single seating, smaller day kayaks, bigger kayaks for longer, multi-day trips).

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Planning – Calm Seas case

The kayaking industry is competitive. Manufacturers must develop, test and market at least one new model every year. Since there are both national and international competitors in the industry, it is also very important for Calm Seas to maintain and expand their network of retail stores and distributorships.

Production is also a very important process at Calm Seas, since they pride themselves on making the best-quality kayaks possible, through continuous quality improvements. Calm Seas has an excellent reputation for quality. Their prices are fairly competitive, although they are a bit higher than their two main competitors. Feedback from clients generally indicates that customers will buy the Calm Seas product at a higher price because they can be assured of a good quality product that is also shipped out by the agreed-upon time. Calm Seas ships their products to their various clients around the world.

There are a few competitors in the world, but two main ones. One is located in Australia and one in the United States. These other companies offer very similar products to the products from Calm Seas. A client looking to buy a kayak or a number of kayaks, will balance price, quality, company reputation and sales representative relationship in their purchase decision.

Business has been steadily growing over the past 10 years, as more and more people are getting interested in kayaking. It is both a sporting and a leisure activity. For a person who wants to get out paddling on the water, and who doesn’t have much technical skill, …

Neil Ritson

Strategic Management

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Neil Ritson

Strategic Management

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Strategic Management 2nd edition © 2013 Neil Ritson & bookboon.com ISBN 978-87-403-0506-7

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Contents

Contents

1 Introduction 7

2 Why Strategy? 8

3 The Formulation of Strategy 9

4 Schools of strategy 11

5 Levels of strategy 13

6 Process of strategy 16

7 Types of Strategy 24

8 Stakeholder theory 29

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Contents

9 External Analysis 33

10 Internal Analysis 39

11 Integration 44

12 Human resources management HRM 47

13 Culture 51

14 SWOT Analysis 63

15 Generic Strategy 66

16 Managing change 72

17 Growth and Decline 81

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18 Globalization and International Strategy 90

19 The Basis of Strategy: Structure 98

20 References 113

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Introduction

1 Introduction This compendium provides a comprehensive overview of the most important topics covered in a strategict course at the Bachelor, Masters or MBA level. The intention is to supplement renowned strategy textbooks.

This compendium is designed such that it follows the structure of a typical strategy course.

Throughout this compendium theory is supplemented with examples and illustrations.

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Why Strategy?

2 Why Strategy? In ancient Greek, ‘stratos’ was the term for the army and so in military terms, ‘strategy’ referred to ‘the act of the general’.

So, the origins of ‘strategy’ – the ‘art of the general’ – comes from the military arena – from China came “The Art of War” by Sun Tzu, from Prussia came “On War’ by Carl von Clausewitz.

In recent times the defeat of the Nazi regime in Germany was arguably due to a dire strategy by the leader of fighting a war on two fronts – West (USA, UK) and East (Russia) – so while the armed forces were highly skilled and had technological superiority the strategy was a huge mistake.

Strategy nowadays is ‘big stuff ’ – the top levels of the organisation are generally involved in preparing plans for the future – for finance, and growth by acquisitions, innovation in products, developing new markets and increasing internal efficiency. The recent rise of Apple is due to a combination of these factors.

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The Formulation of Strategy

3 The Formulation of Strategy Introduction

There is a need in modern times for strategies to achieve agreed goals and objectives, giving a sense of purpose and direction to the organisation, because of recent technological and social changes and competition from rival organisations.

So a strategy is some sort of future plan of action, usually understood as being undertaken by senior management at a high level of abstraction. Note this is not always the best definition of strategy, as we will see later when we discuss levels of strategy.

Different Definitions

A strategy is

“The art of war*, especially the planning of movements of troops and ships etc., into favourable positions; plan of action or policy in business or politics etc.”

(Oxford Pocket Dictionary)

We don’t usually use dictionaries in academic work – but this is the history of the word. *You can refer to The Art of War by Sun Tzu

Here are some alternative definitions:

Hofer and Schendel define it as “the mediating force or ‘match’ between the organisation and the environment.”

(Hofer and Schendel 1979)

Alfred Chandler Jr. suggests:

“the determination of the basic-long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”. Chandler (1962) (Alfred Chandler Jr. is one of the most famous researchers in strategy)

Porter relates strategy to the success or failure of a company “obtaining a competitive position or series of competitive positions that lead to superior and sustainable financial performance”. Michael E Porter (1991)

(Porter is even more famous than Chandler now – see “Positioning School” later)

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The Formulation of Strategy

Quinn stresses integration:

“the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive whole…strategy helps marshal and allocate

an organization’s resources into a unique and viable posture.” James Brian Quinn, Strategies for Change: Logical Incrementalism (1980).

Andrews stresses the “raison d’être”, the reason for being:

“the pattern of objectives, purposes, or goals and the major policies and plans for achieving these goals, stated in such a way as to define what business the

company is in or is to be in and the kind of company it is or is to be.” Kenneth Andrews, The Concept of Corporate Strategy (1971)

Walt Disney’s Peter Pan

• Lost Boy: “Injuns! Let’s go get ’em!” • John Darling: “Hold on a minute. First we must have a strategy.” • Lost Boy: “Uhh? What’s a strategy?” • John Darling: “It’s, er…It’s a plan of attack.” –

(from Grant 2004)

(Robert Grant is famous for the “Resource-based school” and for his work on the oil industry. He quotes Peter Pan in a lighter vein!)

Mintzberg and Waters (1985) suggested there are several major ways to look at strategy, and identified nine types of strategy. Mintzberg and others increased these by one to 10 in later books. We don’t need to bother about them now.

However, a major distinction Mintzberg and Waters made is that strategies can ‘emerge’ over time by a series of actions which are related by some internal managerial culture or paradigm. This is not about strategy being flexible, but invisible! This is discussed later.

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Schools of strategy

4 Schools of strategy Introduction – Definition – there are three ‘schools’ of strategy

Through the debate three ‘schools’ of strategy were born:

• The ‘planning’ school • The ‘positioning’ school • The ‘resource based’ school

The ‘planning’ school

Andrews, 1971, Ansoff, 1965

• Achieves a ‘fit’ between the organisational strategy and the environment in which it operates. • Requires detailed and inflexible planning not suitable in turbulent markets. • Uses ‘Product Life Cycle’ and other marketing theories • Based on past trends, forecasts and stable structures and environments eg mature industries,

public sector • Uses a very bureaucratic and rational process

Present

New

Existing product New product

Expansion ie, increase in market

Market development

(sometimes called ‘exploration’)

Product development or innovation

Diversification

market

market

penetration

Fig 4.1 The Ansoff Matrix

Example: used in mature, stable markets and industries, public sector.

The ‘positional’ school

• Focuses on a rational, analytical approach of making strategy • Attempts to place the organisation and its products in a favourable market or environment. • Based on performance measurement and decision making tools. • Emphasises competitive advantage

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Schools of strategy

Examples include:

– Porter’s (1980) work: ‘Five forces’ model of industries Internal ‘value chain’ ‘Generic’ strategies

– Boston Consulting Group Matrix – BCG – of four cells – cash cows, stars dogs and problem children, based on income from market share and on potential market growth

High

High Low Low

Market growth

Problem child

Star Cash cow

Dog

Market share

Fig 4.2 The BCG Matrix

The ‘resource based’ school

Robert Grant 1998, Jay Barney 1991

• Looks to the internal environment instead of the market • Incorporates the ‘core competence’ approach of Prahalad and Hamel, 1994 • Based on an ‘inside-out’ approach suggesting that the competitive advantage of an

organisation is based on its own distinctive resources, capabilities and competences.

However

• Danger of ignoring the external environment. • Grant and others do not consider culture and HRM.

Key points

These schools are not important in individual analysis but in theoretical essays and assignments

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Levels of strategy

5 Levels of strategy Most academics classify strategies into three levels:

• Corporate • Business – • Functional/Operational –

Corporate strategy

Business strategy

Corporate level

Business level

Functional level

Planning stage

Actions stage

Manufacturing Plants

Retailing Companies

International Affiliates

Finance sources and accounting

controls

Fig 5.1 Levels of Strategy

Corporate level – finance

• Few books go into the way in which financial strategies are adopted, yet this is important, if not vital.

• Businesses fail ultimately for lack of cash, caused by poor decisions of course, but also by the lack of a solid relationship with banks and/or shareholders, particularly institutional ones, who may put pressure on the Board and even revolt at the Annual General Meeting.

Corporate strategy – what business are we in, or hope to be in? what business or businesses the firm should be in?

It relates to the future formula and structure of the company, and affects the rationale of the company and the business in which it intends to compete.

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Levels of strategy

Example Racal Electronics’ decision to float off Vodafone as a separate company.

• Competitive or business strategy – Strategic Business Units (SBUs) are a part of an organisation for which there is a distinct external market for goods or services how each business attempts to achieve its mission within its chosen area of activity.

Here strategy is about which products or services should be developed and offered to which markets and the extent to which the customer needs are met whilst achieving the objectives of the organisation. A term that is often used in relation to business strategy is SBU, or strategic business unit. SBU means a unit within the overall corporate entity for which there is an external market for its goods and services, which is distinct from that of another SBU.

• Johnson and Scholes (2002) place Porter’s ‘generic strategies’ here, at the business level: this is because the SBU concept has different markets to address and so different resources and operational strategies will be needed.

• In brief, Porter says businesses – but not the Corporate level – must choose between ‘cost- leadership’ and so compete on price, and ‘differentiation’ and so compete on quality.

• Remember Profit = Volume × Margin so cost leaders need high volume

We will discuss Generic strategies again later.

.

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Levels of strategy

Example: Ford’s Motor Co’s car division – an SBU – launched its Mondeo model, aimed at fleet car buyers, who had not favoured the Sierra, its predecessor.

Operational or functional strategies – departmental level – accounting, HR, manufacturing, marketing – how the different functions of the business support the corporate and business strategies. They are concerned with how the various functions of the organisation contribute to the achievement of strategy

It examines how the different functions of the business (marketing, production, finance etc.) support the corporate and business strategies. Such corporate planning at the operational level is means oriented and most activities are concerned only with the ability to undertake directions.

Example: revising delivery schedules and drivers’ hours to improve customer service or recruiting a German-speaking sales person to assist a UK company’s sales drive in Europe.

However, the boundaries between the three categories are very indistinct and much depends upon the circumstances prevailing and the kind of organisation. Overall, corporate planning is concerned with the scope of an organisation’s activities and the matching of these to the organisation’s environment, its resource capabilities and the values and expectations of its various stakeholders.

• These are not really considered by most text books! Simplistically, a strategy here can be considered to be any forward-looking plan.

• We can debate how far HR and Marketing to take two obvious examples, can be considered ‘functional’ as they are so important.

• At this level however we can see that detailed reward policies or marketing communication plans are not Corporate-level activities.

Examples:

• Manufacturing – increase yield, decrease waste, accelerate throughput, monitor quality to reduce warranty clams , organise and train employees in cross-functional teams to enable flexible response.

• HR – use benchmarking such as salary surveys to check labour market, introduce audits of training and recruitment, suggest plans to increase employee commitment – to reduce turnover & absenteeism.

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Process of strategy

6 Process of strategy Strategic management is the organised development of the resources of the functional areas: financial, manufacturing, marketing, technological, manpower etc., in the pursuit of its objectives. It is the use of all the entity’s resources,

The complex nature of many large organizations has led to the splitting of strategies into inter-related (we hope) levels comprising the hierarchy of process:

Fig 6.1 The hierarchy of process

Mission

Objectives

Strategies

Tactics

Actions, programmes and rules

Another conception is of a linear chain:

Strategy Deployment ofresources Desired

objectives

The process is a set of policies adopted by senior management, which guides the scope and direction of the entity. It takes into account the environment in which the company operates.

A sequence of developing plans that move from general to specific and intent to action would create several levels of planning, which could be illustrated in the triangle above.

• ‘Vision’ and ‘mission’ are often used interchangeably:

Vision is broader and future looking.

• Conveys the unique purpose of a company • Delimits the scope of activities that the company is, or will be, undertaking

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Process of strategy

Every organisation will have a purpose for its continued existence. A mission statement expresses their purpose and can therefore be a brief statement. It also links with the idea of Vision – how managers interpret the Mission for their colleagues.

Mission statements can be long or short. A statement should include the basic function or tasks of an organisation, particularly why it exists, the nature of the businesses it is in, and the customers or clients it seeks to satisfy. A formal mission statement provides a driving force behind the organisation’s other plans and more specific objectives. A mission statement is a formal commitment to the vision that incorporates the company’s strategy.

So a good way to see if an organization has a deliberate strategy is to see if it has a Mission Statement and what that says about its raison d’etre and direction for the future. Check out its website and/or Accounts

Mission statements contain two main elements:

– A declaration of the overall mission – An articulation of key organisational goals

(see Fortune/Mission) http://www.missionstatements.com/fortune_500_mission_statements.html

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Process of strategy

Examples

ConocoPhillips (oil)

“Use our pioneering spirit to responsibly deliver energy to the world” [my emphasis]

Harley-Davidson (motor-bikes)

“We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.” [my emphasis]

Avis (car hire)

‘we try harder’

How about these visions?

BP ‘beyond petroleum’ – what is beyond petroleum??

Virgin – Pacific Blue, Virgin Credit Card, Virgin Trains, Virgin Records – what is Branson’s ‘vision’.

Coca-Cola: my vision for Coke – seeing Vladimir Putin, President of Russia, drinking it out of a can on TV.

Goals, Objectives and Strategies

Goals: General statement of aim or purpose

Objectives: Quantification if possible or more precise statements of the goal.” Objectives do not only represent the end point of planning but are the ends towards which management activities and resource usage is directed. They therefore provide a sense of direction and a measure of success achievement. (Johnson and Scholes 2002)

In a way, objectives are easier as they are nearer ‘now’ and can be seen at the bottom levels – such as “reduce absenteeism by 5% by end-year”. These are often ‘SMART’ – Specific, Measureable, Achievable, Relevant/Realistic and Time-bound.

Strategies – relate to broad areas of an enterprise’s operations. Their purpose is to furnish a framework for more detailed tactical planning and action.

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Process of strategy

Tactics – are actions carried out to put into effect the details of a strategic decision – tactics can therefore be seen as the detailed implementation of a strategy. In addition, some tactical decisions will be made in response to changing circumstances.

Actions, programmes and rules – are the operational practices that will translate the intention of the tactics into action by individuals and are therefore detailed, short term and subject to immediate control.

Goals

Formulating appropriate goals is a vital component of the process of strategic planning and decision- making. The ‘goal model of effectiveness’ stresses external achievement. Organisational goals are important because they provide a sense of direction and help to focus management decision-making; they also provide a standard against which progress can be evaluated.

Usually goals are thought of as more long-term or higher level abstractions, than objectives. Such goals may be derived for functional activities and departments – to create a more efficient factory, or implement a better management information system for example. Also, there may be more general performance goals such as ‘to increase the return on assets’, or ‘to raise productivity’. These are desired results linked to particular timescales.

Problems of goal identification

If the concept of organisational goals is examined carefully a number of important theoretical and practical problems begin to emerge. It is useful to list these in summary form and then go on to explain each one.

• Whether organisations have goals at all. • Whose goals to take into account. • Whether official and actual goals are the same. • What relationship exists between goals at different levels within the organisation? • How to establish priorities among goals.

Individuals

Within the organisation people too have goals, and, as a result, identifying overall organisational goals cannot be achieved simply by adding together every individual’s personal goals. This leads us to the second problem: whose goals to take into account.

What senior managers want the organisation to achieve and what other people in the organisation actually do are not inevitably the same thing. Goals at different levels of the organisation have to be compared, to establish whether overall goal congruence exists.

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Process of strategy

Identifying the goals of a particular organisation certainly requires inputs from those in charge. In owner-managed business organisations this group is clearly identified. However, in a large public limited company, or a public sector organisation, the identification is much more difficult. The process will be made easier where there is a formal written statement of the organisation’s goals.

Formal goals are an essential starting point, but they will not necessarily reflect in every respect the goals that are actually pursued in the everyday management of the organisation. These actual goals may only be discovered by talking to a much wider group of members of the organisation, or by participating in the making of key decisions.

An environmental analysis of opportunities and threats should include a stakeholder analysis because profitability and other external measures are evaluated by this powerful group and in terms of the organisation’s goals or mission, a miscalculation of the expectations of stakeholders could prove disastrous for the management.

The goal model of effectiveness

‘Originating in traditional measures of performance used in accounting, the goal model…is unquestionably the most commonly used and widely discussed approach for assessing effectiveness’ (Bedeian, 1984, p. 144).

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Process of strategy

External measures of these goals might include any or all of the following:

• profit; • growth/turnover; • market share; • delivery time; • time-to-market; • reputation.

The popularity of the goal model stems from its apparent simplicity, but it is also important to be aware that this simplicity is apparent rather than real. The key assumption underpinning the goal model is that the goals of an organisation can be clearly established, and that the necessary human and material resources can then be managed to achieve these objectives.

The discussion in the previous section indicates that the identification and prioritisation of organisational goals may be more difficult than is recognised by a simple goal model. A further complication concerns the period of time to be taken into account when assessing performance using this approach. Organisations are dynamic entities, and a measurement of goal attainment at any one time may not give a complete picture of organisational performance.

The system resource model

The interdependence between an organisation and its environment provides the starting point for the system resource model of organisational effectiveness. When considering a systems approach to organisations earlier in the chapter, the concept of an organisation as a processing sequence was introduced: this highlights the fact that organisations depend on being able to acquire inputs from their environment, to be processed and returned as outputs to others in the environment who …

Sarah Simpson

The Styles, Models & Philosophy of Leadership

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Sarah Simpson

The Styles, Models & Philosophy of Leadership

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The Styles, Models & Philosophy of Leadership © 2012 Sarah Simpson & bookboon.com ISBN 978-87-403-0295-0

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Contents

Contents

1 Introduction 6

2 Leaders vs. Managers 7

3 Leadership Styles 9 3.1 Transformational Leadership 9 3.2 Transactional Leadership 11 3.3 Autocratic 13 3.4 Bureaucratic 13 3.5 Charismatic 14 3.6 Democratic 14 3.7 Laissez Faire 14 3.8 Task Orientated 15

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5

Contents

4 Leadership Models 16 4.1 Behavioral 16 4.2 Functional 19 4.3 Integrated 22 4.4 Situational 23 4.5 Trait based 33

5 Leadership Philosophy 35 5.1 Authentic Leadership 35 5.2 Ethical Leadership 35 5.3 French and Raven – Sources of Power 39 5.4 Servant Leadership 40 5.5 Value-based leadership 41

6 Conclusions 42

7 References 43

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The Styles, Models & Philosophy of Leadership

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Introduction

1 Introduction Leadership is defined simply as ‘the action of leading a group of people or organization, or having the ability to do this’

Peter Drucker is quoted as saying “The leaders who work most effectively, it seems to me, never say “I.” And that’s not because they have trained themselves not to say “I.” They don’t think “I.” They think “we”; they think “team.” They understand their job to be to make the team function. They accept responsibility and don’t sidestep it, but “we” gets the credit…. This is what creates trust, and enables you to get the task done”

We will all have experienced leaders who inspire, enthuse, motivate and get the very best out of their team, whilst not having to watch their every move. Conversely many of us will have had leaders or managers that adopt tight control, planning and lack of consultative conversation. Or those with a complete ‘hands off ’ approach.

This book is designed to introduce and bring together the; theories, models, styles and philosophies of leadership. This will enable you to appreciate and gain an insight into the need to constantly adapt your leadership style and approach to match and anticipate ever changing situations and environments.

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Leaders vs. Managers

2 Leaders vs. Managers “Management is the skill of getting people to do something that you want them to do because you want them to do it and leadership is the art of getting people to do something you want them to do because they want to do it”

Sal F. Marino

Although leadership and management are often interchangeable they are not the same thing or are always congruent in nature. A manager (in title) may lack the inspirational and motivational features of a leader and a leader may lack the planning, coordinating and budget concerns of a manager. The optimal state is therefore to be and have people who if in a position of management or leadership have the skills, tools and techniques to be a great leader in any given situation.

Manager – does things right Leader – does the right thing

Manages change Creates change

Control Commitment

Focused on rules Focused on outcome

Conforms Innovates

Transactional Transformational

Concerned with stability Concerned with energizing

Execution Ideas

Problems are problems Problems are opportunities

Likes control Is comfortable with risk

Works in the system Works on the system

Coordinates efforts Inspires and energises

Follows orders People follow them

Detail Direction

Tells Sells

Results focus Achievement focus

Uses established paths Creates new paths

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Leaders vs. Managers

Manager – does things right Leader – does the right thing

Provides resources and goals Provides vision

Processes People

Formal authority Personal charisma

Subordinates Followers

“what” “why”

Organises people Aligns people

Control Passion

Initiates Originates

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The Styles, Models & Philosophy of Leadership

9

Leadership Styles

3 Leadership Styles “leadership is a combination of strategy and character”

General H. Norman Schwarzkopf

Leadership style relates to a specific behavior and will be influenced by the leaders aims and personality as well as their relationship and interaction with the team.

The two most commonly seen and used leadership styles are:

• Transformational • Transactional

As well as looking at these we will also examine :

• Autocratic • Bureaucratic • Charismatic • Democratic • Laissez Faire • Task Orientated

3.1 Transformational Leadership

“A good leader inspires confidence in the leader, a great leader inspires peoples’ confidence in themselves”

Unknown

The concept of transformational leadership was introduced by James Burns in 1978 in his description of political leaders. He described it as a process in which “leaders and followers help each other to advance to a higher level of morale and motivation”. A transformational approach is capable of creating a significant change in both individuals and the wider organization by realigning; expectations, aspirations, perceptions and values. It is heavily reliant on a leaders personality, character, vision, challenge and example setting. Transformational leaders are focused on the ‘greater good’ rather than in their individual ‘power base’.

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Leadership Styles

In 1985 the earlier work of Burns was enhanced by Bernard M. Bass who examined the psychological underpinning of transformational leaders as well as its impact on motivation and performance. People with these leaders will often feel a desire to work harder than would ordinarily be expected. They also exhibit feelings of; trust, respect, loyalty and admiration. This process is congruent in nature and followers develop ways to change environments, challenge current practice and provide mutual team support.

There are four main elements of transformational leadership:

3.1.1 Individualized Consideration

Recognizing that each person has specific needs, desires and concerns. Leaders show support and empathy and challenge their team, but can also recognize an individuals contribution to overall goals. Followers in turn thrive on self development and self motivation.

3.1.2 Intellectual Stimulation

The team is involved in decisions and they are encouraged to be creative and innovative in identifying solutions. Leaders nuture and develop their team through questioning, seeking to learn at every opportunity and independent thinking. People are encouraged to see the bigger picture and ideas are not belittled or criticized.

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Leadership Styles

3.1.3 Inspirational Motivation

Confidence and a sense of belonging and motivation are woven throughout the whole team. Leadership communication is key as messages, vision and mission are disseminated to all. Energy levels are kept high as direction, an optimistic outlook and a leaders belief in everyones abilities are regularly expressed. This is a ‘glass half full not half empty’ approach which produces a ‘can do’ attitude.

3.1.4 Idealized Influence

Transformational leaders are charismatic and act as role models. They have a strong sense of conviction, value and principle. This gives the group pride and they gain respect and trust for each other.

3.2 Transactional Leadership

This style of leadership is more ‘traditional’ and managerial in nature. Staff ‘obey’ the leader and in return are paid (the transaction). They have little or no say in their rewards except that which is determined by the leader. They can also be subject to ‘punishment’ if tasks are not thought to have been carried out correctly. The focus is on short term tasks and goals and the opportunity for creativity, self development and expression are severely limited.

There are four main elements of transactional leadership.

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Leadership Styles

3.2.1 Contingent reward

The work that must be done is clarified and rewards and/or incentives are used in order to get things accomplished.

3.2.2 Active management by exception

Work is closely monitored and corrective measures are employed to ensure accepted standards are met.

3.2.3 Passive management by exception

Performance that is deemed unacceptable or has deviated from standards is met with correction or punishment.

3.2.4 Laissez faire

Transactional leaders possess a hands-off indifferent approach to the team. They do not respond to their needs or problems or seek to gain their opinion.

Other leadership syles include:

• Autocratic • Bureaucratic • Charismatic

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Leadership Styles

• Democratic • Laissez Faire • Task Orientated

3.3 Autocratic

These leaders exhibit the following characteristics:

• As the leader they believe that they have total authority and control • Their focus is on goal completion • They adopt a dictatorial approach when allocating tasks • They shows little concern for the opinion of their team, even if these would be beneficial • They think of themselves as being the sole decision maker

The perceived benefit of this style of leadership is that decisions are made quickly and efficiently and work is done efficiently.

This type of leadership is most often seen in:

• Military • Manufacturing • Construction

3.4 Bureaucratic

These leaders exhibit the following characteristics:

• They follow rules and procedures to the letter and without deviation • If they are unsure of what to do they defer ‘up the chain’ of command • They act as an enforcer rather than leader

The bureaucratic leader works well in situations such as:

• For work involving high levels of health and safety concerns e.g. Height, toxicity or machinery

• When outine tasks are performed over and over • Safety or security

This style of leadership does not work in organizations that require staff to be creative, innovative or flexible.

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Leadership Styles

They are often promoted to leader because of rule following rather than qualifications or expertise and this can produce a culture of resentment.

3.5 Charismatic

Charismatic leaders are linked to the transformational leadership we examined earlier.

These leaders exhibit the following characteristics:

• They inspire and enthuse staff • They instill motivation, excitement and commitment • There is an ‘air of invinsibility’ about them and they can believe they can do no wrong even

when warned by their team • The team can become reliant on this one person and so can collapse if they leave –

establishing this position as ‘top dog’ ensures that it is highly unlikely they would be challenged for position

• They are adept at using body language and verbal language and can tailor their actions and words to suit a given situation or person

• Persuasion is central • Their well developed social skills help gain them followers

3.6 Democratic

Democratic leaders are open in nature and want to get the opinions of everyone. This free information sharing ensures the teams talents and skills are all utilized rather than expecting conformity. The end decision however still sits with them.

These leaders exhibit the following characteristics:

• Team members are included in decision making but the final say is made by the leader • Team involvement results in high productivity • These teams have highly developed people skills • Due to the inclusive nature of these leaders decisions can be delayed as everyones thoughts

are sought (including those who may not have the skill and knowledge to provide high quality input)

• They are highly suited to teams that need to work together and where the need for quality outweighs the need for high levels of productivity

• They make their staff feel empowered

3.7 Laissez Faire

This ‘leave it be’ style of leader can either be seen as allowing people to work independently, or that they may be unable to control their staff.

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Leadership Styles

These leaders exhibit the following characteristics:

• The team is given complete control over their work and deadlines • The leader doesn’t get involved with people other than to provide resources and advise if

required • A need to give regular feedback is essential

This style of leadership works with highly motivated, skilled ‘starter – finisher’ staff, where autonomy increases motivation, productivity and job satification. It does not work well with staff who are poor at self motivation or who don’t have the skills, knowledge or motivation to work independently

3.8 Task Orientated

These leaders exhibit the following characteristics:

• A narrow focus on ‘getting the job done’ • They define the roles and work involved and put structures and processes in place • They monitor and organise peoples work • They ensure deadlines are met

These leaders work well with staff who can not self manage their time but due to their focus on the job in hand their teams well being is not central. This can lead to motivation and staff turnover concerns.

.

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Leadership Models

4 Leadership Models Leadership models help us to understand why leaders act the way they do and give you a framework or process in which you can apply your learning. They also highlight how you can adapt to changing situations, organizations or staff.

4.1 Behavioral

These models look at a leaders most effective behaviors. The managerial grid model was developed in 1964 by Blake and Mouton and in it they identify 5 kinds of leadership behavior:

• Team leader (sound) • Country club (accommodating) • Impoverished (indifferent) • Middle-of-the-road (status quo) • Produce or perish (dictatorial)

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Leadership Models

Concern for people

This is the level to which a manager or leader considers peoples; interests, personal development and needs when accomplishing a task.

Concern for production

This is the level to which a manager or leader emphasizes; organizational efficiency, productivity and firm objectives when accomplishing a task.

4.1.1 Team leader (sound) – high productivity / high concern for people

Blake and Mouton described this as being the pinnacle of leadership. People who choose this style encourage commitment and teamwork. This style requires that staff feel that they are constructive parts of the organization. It is a style that is closely linked to McGregor’s theory Y (participative management style).

4.1.2 Country club (accommodating) – high concern for people/low concern for productivity

The basic principle behind this approach is that as long as people are happy and secure they will work hard. This produces a very relaxed working culture with plenty of fun. The downside is a loss of productivity due to low direction and control.

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Leadership Models

4.1.3 Impoverished (indifferent) – low concern for people and productivity

Someone adopting this style is trying to avoid being blamed for any mistakes. Innovation and creativity are stiffled and they evade and elude. The result is an environment which does not motivate or satisfy and disharmony, disorganization and dissatisfaction are the order of the day.

4.1.4 Middle-of-the-road (status quo) – mid scale balance of people and productivity

These managers and leaders attempt to balance the needs of the staff with that of the organization. They aim for medium or average performance, but by robbing Peter to pay Paul the result is neither high productivity or people whose needs are met fully.

4.1.5 Produce or perish (dictatorial) – low concern for people / high concern for productivity

Staff needs are viewed as unimportant – they are paid a salary and and in turn they are expected to perform. Rules, punishment and sanctions are used in order to ensure goals are met and this style can be common in situations where there is a sense that the organization may fail. This style is seen in cases of crisis management and it is linked to McGregors theory X (theory Y being linked to the sound team leader approach above).

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Leadership Models

4.2 Functional

This style focuses on what the leader has to do to be effective – they do not address behavior.

The most common models are:

• Kouzes & Posner’s Five Leadership Practices • John Adair’s Action Centered Leadership

4.2.1 Kouzes & Posner’s Five Leadership Practices

Kouzes & Posner suggested that leadership is a collection of behaviors and practices as opposed to a position. It is these practices that allow the job to get done, or in their words “to get extraordinary things done”.

1. Model the way 2. Inspire a shared vision 3. Challenge the process 4. Enable others to act 5. Encourage the heart

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Leadership Models

4.2.2 John Adair’s Action Centered Leadership

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Leadership Models

John Adair’s Action Centered Leadership symbolizes the three main simultaneous, integrated and overlapping responsibilities of a leader

The task

This after all is why a team or group exists – to achieve a task, aim or goal and a leader is often the person charged with ‘getting the job done’. Many leaders therefore focus on this element at the expense of the needs of the individual or team building.

Building the team

If this need is meet the team will:

• Be supportive of each other • Understand their contribution and expectations • Take shared responsibility for reaching the ‘goal’

This approach ensures that the greater good of the team comes before that of any individual.

Develop individuals

Even within a group or team the needs of the individual is recognized – respect, praise, £, safety, status etc.

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Leadership Models

4.3 Integrated

The main model in this leadership approach was defined by James Scouller in his ‘Three Levels of Leadership’.

This model was designed to summarize what leaders have to do – not only to lead their group or team but to develop themselves in both a psychological and technical capacity.

The outer levels consist of public and private leadership, where public leadership are the behaviors involved in influencing two or more people and private leadership the behaviors involved in influencing on a one-to-one basis. Scouller identified these behaviors as the ‘Four Dimensions of Leadership’ (see below for model).

1. Collective unity / team spirit 2. Action, progress and results 3. Individual motivation & selection 4. A shared purpose and vision

The inner level is concerned with a leaders presence, skill and know how. Scouller identified the three elements as being:

1. Psychological mastery 2. Developing your own skills and knowhow 3. Developing the right attitude towards others

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Leadership Models

4.4 Situational

These leadership models are also called contingency and they are based on the principle that behavior is determined and influenced by the situation you find yourself in. The main models in this group are:

• Bolman & Deals 4 Frame Model • Hersey and Blanchard’s Situational Leadership Model • Kurt Lewin’s 3 Styles Model • Path-Goal Theory • Tannenbaum & Schmidt’s Leadership Behavior Continuum Model • The Fiedler Contingency Model • Vroom-Yetton Leadership Model

4.4.1 Bolman & Deals 4 Frame Model

Bolman & Deal (1991) said that leaders should approach the organization from the view of 4 frames:

Structural Political Human Resources Symbolic

These frames can be used individually or in combination and the idea is that leaders should change their ‘frame’ or ‘view’ in order to prevent becoming ‘stuck’.

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Leadership Models

Most organizations use the structural framework at the expense of the other 3. This may be due to lack of awareness or rigid thinking.

4.4.2 Hersey and Blanchard’s Situational Leadership Model

This model is based around the idea that there is not one optimum style of leadership, but that effective leaders adopt their style to the maturity of the group or team and the task that needs to be accomplished. They defined leadership style (S1–S4), maturity level (M1–M4) and development levels (D1–D4).

Leadership style – ‘S’

Hersey and Blanchard defined leadership style in terms of:

• Telling S1 • Selling S2 • Participating S3 • Delegating S4

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Leadership Models

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Leadership Models

Behavior S1–S4 Description

Telling (S1) The leader defines roles One way communication Leader is prescriptive in telling; how, what, why, when and how

Selling (S2) Two way …

Leadership sixth edition

To Laurel, Scott, Lisa, and Madison

Peter G. Northouse Western Michigan University

Leadership Theory and practice • Sixth Edition

To Laurel, Scott, Lisa, and Madison

Peter G. Northouse Western Michigan University

Leadership Theory and practice • Sixth Edition

Copyright © 2013 by SAGE Publications, Inc.

All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.

Printed in the United States of America

Library of Congress Cataloging-in-Publication Data

Northouse, Peter Guy.

Leadership : theory and practice / Peter G. Northouse. — 6th ed.

p. cm. Includes bibliographical references and index.

ISBN 978-1-4522-0340-9 (pbk.)

1. Leadership. 2. Leadership–Case studies. I. Title.

HM1261.N67 2013 303.3′4–dc23 2011049043

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Contents

Preface xiii Special Features xiv Audience xiv

Acknowledgments xvii

1. Introduction 1 Leadership Defined 2

Ways of Conceptualizing Leadership 4 Definition and Components 5

Leadership Described 6 Trait Versus Process Leadership 7 Assigned Versus Emergent Leadership 8 Leadership and Power 9 Leadership and Coercion 11 Leadership and Management 12

Plan of the Book 14 Summary 14 References 16

2. Trait Approach 19 Description 19

Intelligence 23 Self-Confidence 24 Determination 25 Integrity 25 Sociability 26 Five-Factor Personality Model and Leadership 26 Emotional Intelligence 27

How Does the Trait Approach Work? 28 Strengths 29 Criticisms 30 Application 32

Case Studies 32 Case 2.1 Choosing a New Director of Research 33 Case 2.2 A Remarkable Turnaround 34 Case 2.3 Recruiting for the Bank 36

Leadership Instrument 37 Leadership Trait Questionnaire (LTQ) 38

Summary 40 References 41

3. Skills Approach 43 Description 43

Three-Skill Approach 44 Skills Model 47

How Does the Skills Approach Work? 57 Strengths 58 Criticisms 59 Application 60 Case Studies 61

Case 3.1 A Strained Research Team 61 Case 3.2 A Shift for Lieutenant Colonel Adams 63 Case 3.3 Andy’s Recipe 65

Leadership Instrument 67 Skills Inventory 69

Summary 71 References 72

4. Style Approach 75 Description 75

The Ohio State Studies 76 The University of Michigan Studies 77 Blake and Mouton’s Managerial (Leadership) Grid 78 Paternalism/Maternalism 81 Opportunism 82

How Does the Style Approach Work? 83 Strengths 84 Criticisms 85 Application 86 Case Studies 87

Case 4.1 A Drill Sergeant at First 87 Case 4.2 Eating Lunch Standing Up 88 Case 4.3 We Are Family 89

Leadership Instrument 92 Style Questionnaire 93

Summary 95 References 96

5. Situational Approach 99 Description 99

Leadership Styles 101 Development Levels 102

How Does the Situational Approach Work? 103 Strengths 105 Criticisms 106 Application 109 Case Studies 110

Case 5.1 What Style Do I Use? 110 Case 5.2 Why Aren’t They Listening? 111 Case 5.3 Getting the Message Across 113

Leadership Instrument 114 Situational Leadership 116

Summary 119 References 120

6. Contingency Theory 123 Description 123

Leadership Styles 123 Situational Variables 124

How Does Contingency Theory Work? 126 Strengths 127 Criticisms 128 Application 130 Case Studies 130

Case 6.1 No Control Over the Student Council 131 Case 6.2 Giving Him a Hard Time 131 Case 6.3 What’s the Best Leader Match? 132

Leadership Instrument 133 Least Preferred Coworker (LPC) Measure 134

Summary 135 References 136

7. Path–Goal Theory 137 Description 137

Leader Behaviors 139 Subordinate Characteristics 141 Task Characteristics 142

How Does Path–Goal Theory Work? 143

Strengths 145 Criticisms 145 Application 147 Case Studies 148

Case 7.1 Three Shifts, Three Supervisors 148 Case 7.2 Direction for Some, Support for Others 150 Case 7.3 Marathon Runners at Different Levels 152

Leadership Instrument 154 Path–Goal Leadership Questionnaire 155

Summary 157 References 158

8. Leader–Member Exchange Theory 161 Description 161

Early Studies 161 Later Studies 164 Leadership Making 165

How Does LMX Theory Work? 168 Strengths 169 Criticisms 170 Application 172 Case Studies 173

Case 8.1 His Team Gets the Best Assignments 174 Case 8.2 Working Hard at Being Fair 175 Case 8.3 Taking on Additional Responsibilities 177

Leadership Instrument 179 LMX 7 Questionnaire 180

Summary 182 References 183

9. Transformational Leadership 185 Description 185

Transformational Leadership Defined 186 Transformational Leadership and Charisma 187 A Model of Transformational Leadership 189 Other Transformational Perspectives 196

How Does the Transformational Approach Work? 199 Strengths 200 Criticisms 202 Application 204 Case Studies 205

Case 9.1 The Vision Failed 206 Case 9.2 An Exploration in Leadership 207

Case 9.3 Her Vision of a Model Research Center 209 Leadership Instrument 211

Sample Items From the Multifactor Leadership Questionnaire (MLQ) Form 5X-Short 213

Summary 214 References 215

10. Servant Leadership 219 Description 219

Servant Leadership Defined 220 Historical Basis of Servant Leadership 220 Ten Characteristics of a Servant Leader 221 Building a Theory About Servant Leadership 223

Model of Servant Leadership 225 Antecedent Conditions 226 Servant Leader Behaviors 227 Outcomes 230 Summary of the Model of Servant Leadership 232

How Does Servant Leadership Work? 232 Strengths 233 Criticisms 234 Application 235 Case Studies 236

Case 10.1 Anonymous Servant Leaders 237 Case 10.2 Doctor to the Poor 239 Case 10.3 Servant Leadership Takes Flight 241

Leadership Instrument 243 Servant Leadership Questionnaire 245

Summary 248 References 249

11. Authentic Leadership 253 Description 253

Authentic Leadership Defined 254 Approaches to Authentic Leadership 255

How Does Authentic Leadership Theory Work? 266 Strengths 267 Criticisms 269 Application 270 Case Studies 270

Case 11.1 Am I Really a Leader? 271 Case 11.2 A Leader Under Fire 274 Case 11.3 The Reluctant First Lady 276

Leadership Instrument 278 Authentic Leadership Self-Assessment Questionnaire 280

Summary 282 References 283

12. Team Leadership 287 Susan E. Kogler Hill

Description 287 Team Leadership Model 289

How Does the Team Leadership Model Work? 303 Strengths 305 Criticisms 306 Application 307 Case Studies 308

Case 12.1 Can This Virtual Team Work? 308 Case 12.2 They Dominated the Conversation 309 Case 12.3 Starts With a Bang, Ends With a Whimper 310

Leadership Instrument 311 Team Excellence and Collaborative Team Leader

Questionnaire 313 Summary 315 References 315

13. Psychodynamic Approach 319 Ernest L. Stech

Description 319 Eric Berne and Transactional Analysis 322 Sigmund Freud and Personality Types 325 Social Character and a Shift in

Leadership Perspective 328 Carl Jung and Personality Types 330 Types and Leadership 333

How Does the Psychodynamic Approach Work? 338 Strengths 338 Criticisms 339 Case Studies 340

Case 13.1 Not the Type Who Sees the Big Picture 341

Case 13.2 Staff Meeting Problems 342 Case 13.3 Unexpected Reactions 343

Leadership Instrument 344 Psychodynamic Approach Survey 345

Summary 347 References 348

14. Women and Leadership 349 Crystal L. Hoyt

Description 349 Gender, Leadership Styles, and

Leadership Effectiveness 350 The Glass Ceiling Turned Labyrinth 352

Strengths 363 Criticisms 364 Application 365 Case Studies 366

Case 14.1 The “Glass Ceiling” 366 Case 14.2 Lack of Inclusion and Credibility 367 Case 14.3 Pregnancy as a Barrier to Job Status 368

Leadership Instrument 369 The Gender–Leader Implicit Association Test 370

Summary 374 Note 375 References 375

15. Culture and Leadership 383 Description 383

Culture Defined 384 Related Concepts 384 Dimensions of Culture 386 Clusters of World Cultures 390 Characteristics of Clusters 391 Leadership Behavior and Culture Clusters 395 Universally Desirable and Undesirable

Leadership Attributes 403 Strengths 404 Criticisms 405 Application 407 Case Studies 407

Case 15.1 A Challenging Workplace 408 Case 15.2 A Special Kind of Financing 410 Case 15.3 Whose Hispanic Center Is It? 411

Leadership Instrument 414 Dimensions of Culture Questionnaire 415

Summary 420 Notes 421 References 422

16. Leadership Ethics 423 Description 423

Ethics Defined 424 Ethical Theories 424 Centrality of Ethics to Leadership 428 Heifetz’s Perspective on Ethical Leadership 429 Burns’s Perspective on Ethical Leadership 429 Principles of Ethical Leadership 430

Strengths 437 Criticisms 438 Application 439 Case Studies 439

Case 16.1 A Struggling Company Without Enough Cash 440

Case 16.2 How Safe Is Safe? 441 Case 16.3 Reexamining a Proposal 443

Leadership Instrument 444 Perceived Leader Integrity Scale (PLIS) 446

Summary 448 References 449

Author Index 453

Subject Index 463

About the Author 483

About the Contributors 485

xiii

Preface

T his sixth edition of Leadership: Theory and Practice is written with the objective of bridging the gap between the often-simplistic popu- lar approaches to leadership and the more abstract theoretical approaches. Like the previous editions, this edition reviews and analyzes a selected number of leadership theories, giving special attention to how each theo- retical approach can be applied in real-world organizations. In essence, my purpose is to explore how leadership theory can inform and direct the way leadership is practiced.

New to this volume is a chapter on servant leadership, which examines the nature of servant leadership, its underpinnings, and how it works. The chapter presents both a definition and a new evidence-based model of servant leadership. In addition, the strengths and weaknesses of the servant leadership approach are examined, and a questionnaire to help readers assess their own levels of servant leadership is provided. Three case studies illustrating servant leadership are presented at the end of the chapter.

This edition retains many special features from previous editions but has been updated to include new research findings, figures and tables, and everyday applications for many leadership topics including leader–member exchange theory, transformational and authentic leadership, team leader- ship, the labyrinth of women’s leadership, and historical definitions of leadership. The format of this edition parallels the format used in earlier editions. As with previous editions, the overall goal of Leadership: Theory and Practice is to advance our understanding of the many different approaches to leadership and ways to practice it more effectively.

xiv LEADERSHIP THEORY AND PRACTICE

SPECIAL FEATURES

Although this text presents and analyzes a wide range of leadership research, every attempt has been made to present the material in a clear, concise, and interesting manner. Reviewers of the book have consistently commented that clarity is one of its major strengths. In addition to the writing style, several other features of the book help make it user-friendly.

• Each chapter follows the same format: It is structured to include first theory and then practice.

• Every chapter contains a discussion of the strengths and criticisms of the approach under consideration, and assists the reader in deter- mining the relative merits of each approach.

• Each chapter includes an application section that discusses the prac- tical aspects of the approach and how it could be used in today’s organizational settings.

• Three case studies are provided in each chapter to illustrate com- mon leadership issues and dilemmas. Thought-provoking questions follow each case study, helping readers to interpret the case.

• A questionnaire is provided in each of the chapters to help the reader apply the approach to his or her own leadership style or setting.

• Figures and tables illustrate the content of the theory and make the ideas more meaningful.

Through these special features, every effort has been made to make this text substantive, understandable, and practical.

AUDIENCE

This book provides both an in-depth presentation of leadership theory and a discussion of how it applies to real-life situations. Thus, it is intended for undergraduate and graduate classes in management, leadership studies, business, educational leadership, public administration, nursing and allied health, social work, criminal justice, industrial and organizational psychol- ogy, communication, religion, agricultural education, political and mili- tary science, and training and development. It is particularly well suited as a supplementary text for core organizational behavior courses or as an overview text within MBA curricula. This book would also be useful as a text in student activities, continuing education, in-service training, and other leadership-development programs.

Preface xv

Instructor Teaching Site

Instructor Resources are available on the password-protected section of the book’s companion website. Test banks include multiple choice and true/false ques- tions to test comprehension of fundamental material, as well as essay questions that ask students to apply the material. An electronic testbank, compatible with PCs and Macs through Diploma software, is also available. Chapter-specific resources include PowerPoint slides, study and discussion questions, suggested exercises, full- text journal articles, video links, audio links, and full-text reference articles. General resources include course-long projects, sample syllabi, and film resources. Printable PDF versions of the questionnaires from the text are included for instruc- tors to print and distribute for classroom use. The companion site also features information on how to use social media with Leadership, 6th edition, including instructions for creating wikis, blogs, and Twitter feeds to accompany the text and specific topics to discuss using these different technologies. Go to www.sagepub. com/northouse6e to access the companion site.

Student Study Site

To maximize students’ comprehension of this material, student resources are available on the open-access portion of the book’s companion website. Resources include web quizzes, SAGE journal articles with discussion questions, video links, audio links, handbook and encyclopedia articles, and other study aides and resources. Students can go to www.sagepub.com/ northouse6e to access the site.

Media Icons

Icons appearing at the bottom of the page will direct you to online media such as videos, audio links, journal articles, and reference articles that correspond with key chapter concepts. Visit the Student Study Site at www.sagepub.com/northouse6e to access this media.

Video Icon

Audio Icon

Journal Icon

Reference Article Icon

xvii

Acknowledgments

M any people directly or indirectly contributed to the development of the sixth edition of Leadership: Theory and Practice. First, I would like to acknowledge my editor, Lisa Shaw, and her talented team at SAGE Publications (Mayan, MaryAnn, Helen, Sarah, and Maggie) who have contributed significantly to the quality of this edition and ensured its suc- cess. For their very capable work during the production phase, I would like to thank copy editor Melinda Masson, and senior project editor Eric Garner. In his or her own unique way, each of these people made valuable contributions to the sixth edition.

For comprehensive reviews of the sixth edition, I would like to thank the following reviewers:

Meera Alagaraja, University of Louisville

S. Todd Deal, Georgia Southern University

Carol McMillan, New School University

Keeok Park, University of La Verne

Harriet L. Schwartz, Carlow University

Kelli K. Smith, University of Nebraska-Lincoln

Danny L. Talbot, Washington State University

Robert L. Taylor, University of Louisville

John Tummons, University of Missouri

David E. Williams, Texas Tech University

Sharon A. Wulf, Worcester Polytechnic Institute School of Business

xviii LEADERSHIP THEORY AND PRACTICE

For their exceptional work creating content for the leadership profile tool that accompanies the interactive eBook version of this text, I would like to thank John Baker (Western Kentucky University), Isolde Anderson (Hope College), and Eleanor Dombrowski (University of Toledo).

I would also like to thank the following people, who updated and cre- ated the excellent resources that appear on the Instructor Teaching Site and the Student Study Site:

Isolde Anderson, Hope College

Andrea Markowitz, Write for Your Business

Lizz Mathews, Western Michigan University

Mary Mathews, Western Michigan University

Rebecca G. McBride, Old Dominion University

Trey Patrick Mitchell, Western Michigan University

Lisa J. Northouse, Western Michigan University

Anita Pankake, University of Texas–Pan American

A special acknowledgment goes to Laurel Northouse for her insightful critiques and ongoing support. In addition, I am grateful to Marie Lee, for her exceptional editing and guidance throughout this project. For his review of and comments on the servant leadership chapter, I am indebted to Robert Liden (University of Illinois at Chicago).

Finally, I would like to thank the many undergraduate and graduate students whom I have taught through the years. Their ongoing feedback has helped clarify my thinking about leadership and encouraged me to make plain the practical implications of leadership theories.

1

1 Introduction

L eadership is a highly sought-after and highly valued commodity. In the 15 years since the first edition of this book was published, the public has become increasingly captivated by the idea of leadership. People continue to ask themselves and others what makes good leaders. As individuals, they seek more information on how to become effective leaders. As a result, bookstore shelves are filled with popular books about leaders and advice on how to be a leader. Many people believe that leadership is a way to improve their personal, social, and professional lives. Corporations seek those with leadership ability because they believe they bring special assets to their organizations and, ultimately, improve the bottom line. Academic institutions throughout the country have responded by providing programs in leadership studies.

In addition, leadership has gained the attention of researchers worldwide. A review of the scholarly studies on leadership shows that there is a wide variety of different theoretical approaches to explain the complexities of the leader- ship process (e.g., Bass, 1990; Bryman, 1992; Bryman, Collinson, Grint, Jack- son & Uhl-Bien, 2011; Day & Antonakis, 2012; Gardner, 1990; Hickman, 2009; Mumford, 2006; Rost, 1991). Some researchers conceptualize leader- ship as a trait or as a behavior, whereas others view leadership from an infor- mation-processing perspective or relational standpoint. Leadership has been studied using both qualitative and quantitative methods in many contexts, including small groups, therapeutic groups, and large organizations. Collec- tively, the research findings on leadership from all of these areas provide a picture of a process that is far more sophisticated and complex than the often- simplistic view presented in some of the popular books on leadership.

This book treats leadership as a complex process having multiple dimensions. Based on the research literature, this text provides an in-depth

1.1 Emerging Practices 1.2 Leadership in Nursing

2 LEADERSHIP THEORY AND PRACTICE

description and application of many different approaches to leadership. Our emphasis is on how theory can inform the practice of leadership. In this book, we describe each theory and then explain how the theory can be used in real situations.

LEADERSHIP DEFINED

There are many ways to finish the sentence, “Leadership is. . . .” In fact, as Stogdill (1974, p. 7) pointed out in a review of leadership research, there are almost as many different definitions of leadership as there are people who have tried to define it. It is much like the words democracy, love, and peace. Although each of us intuitively knows what we mean by such words, the words can have different meanings for different people. As Box 1.1 shows, scholars and practitioners have attempted to define leadership for more than a century without universal consensus.

Box 1.1 The Evolution of Leadership Definitions

While many have a gut-level grasp of what leadership is, putting a definition to the term has proved to be a challenging endeavor for scholars and practitioners alike. More than a century has lapsed since leadership became a topic of academic introspection, and definitions have evolved continuously during that period. These definitions have been influenced by many factors from world affairs and politics to the perspectives of the discipline in which the topic is being studied. In a seminal work, Rost (1991) analyzed materials written from 1900 to 1990, finding more than 200 different definitions for leadership. His analysis provides a succinct history of how leadership has been defined through the last century:

1900–1929

Definitions of leadership appearing in the first three decades of the 20th century emphasized control and centralization of power with a common theme of domination. For example, at a conference on leadership in 1927, leadership was defined as “the ability to impress the will of the leader on those led and induce obedience, respect, loyalty, and coopera- tion” (Moore, 1927, p. 124).

1.1 Development of Leadership

Chapter 1 Introduction 3

1930s

Traits became the focus of defining leadership, with an emerging view of leadership as influence rather than domination. Leadership is also identi- fied as the interaction of an individual’s specific personality traits with those of a group, noting that while the attitudes and activities of the many are changed by the one, the many may also influence a leader.

1940s

The group approach came into the forefront with leadership being defined as the behavior of an individual while involved in directing group activities (Hemphill, 1949). At the same time, leadership by persuasion is distinguished from “drivership” or leadership by coercion (Copeland, 1942).

1950s

Three themes dominated leadership definitions during this decade: •• continuance of group theory, which framed leadership as

what leaders do in groups; •• leadership as a relationship that develops shared goals,

which defined leadership based on behavior of the leader; and •• effectiveness, in which leadership is defined by the ability to

influence overall group effectiveness.

1960s

Although a tumultuous time for world affairs, the 1960s saw harmony amongst leadership scholars. The prevailing definition of leadership as behavior that influences people toward shared goals was underscored by Seeman (1960) who described leadership as “acts by persons which influence other persons in a shared direction” (p. 53).

1970s

The group focus gave way to the organizational behavior approach, where leadership became viewed as “initiating and maintaining groups or organiza- tions to accomplish group or organizational goals” (Rost, 1991, p. 59). Burns’s (1978) definition, however, is the most important concept of leadership to emerge: “Leadership is the reciprocal process of mobilizing by persons with certain motives and values, various economic, political, and other resources, in a context of competition and conflict, in order to realize goals indepen- dently or mutually held by both leaders and followers” (p. 425).

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1.3 Perspectives of Leadership 1.4 Followership

4 LEADERSHIP THEORY AND PRACTICE

1980s

This decade exploded with scholarly and popular works on the nature of leadership, bringing the topic to the apex of the academic and public consciousnesses. As a result, the number of definitions for leadership became a prolific stew with several persevering themes:

•• Do as the leader wishes. Leadership definitions still predomi- nantly deliver the message that leadership is getting followers to do what the leader wants done.

•• Influence. Probably the most often used word in leadership defi- nitions of the 1980s, influence is examined from every angle. In an effort to distinguish leadership from management, however, schol- ars insist that leadership is noncoercive influence.

•• Traits. Spurred by the national bestseller In Search of Excellence (Peters & Waterman, 1982), the leadership-as-excellence move- ment brought leader traits back to the spotlight. As a result, many people’s understanding of leadership is based on a trait orientation.

•• Transformation. Burns (1978) is credited for initiating a move- ment defining leadership as a transformational process, stating that leadership occurs “when one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality” (p. 83).

Into the 21st Century

After decades of dissonance, leadership scholars agree on one thing: They can’t come up with a common definition for leadership. Debate continues as to whether leadership and management are separate pro- cesses, while others emphasize the trait, skill, or relational aspects of leadership. Because of such factors as growing global influences and generational differences, leadership will continue to have different mean- ings for different people. The bottom line is that leadership is a complex concept for which a determined definition may long be in flux.

SOURCE: Adapted from Leadership for the Twenty-First Century, by J. C. Rost, 1991, New York: Praeger.

Ways of Conceptualizing Leadership

In the past 60 years, as many as 65 different classification systems have been developed to define the dimensions of leadership (Fleishman et al., 1991). One such classification system, directly related to our discussion, is

(Continued)

1.1 Leadership and Power 1.5 Leadership in Organizations

Chapter 1 Introduction 5

the scheme proposed by Bass (1990, pp. 11–20). He suggested that some definitions view leadership as the focus of group processes. From this per- spective, the leader is at the center of group change and activity and embodies the will of the group. Another set of definitions conceptualizes leadership from a personality perspective, which suggests that leadership is a combination of special traits or characteristics that some individuals pos- sess. These traits enable those individuals to induce others to accomplish tasks. Other approaches to leadership define it as an act or a behavior—the things leaders do to bring about change in a group.

In addition, some define leadership in terms of the power relationship that exists between leaders and followers. From this viewpoint, leaders have power that they wield to effect change in others. Others view leader- ship as a transformational process that moves followers to accomplish more than is usually expected of them. Finally, some scholars address leadership from a skills perspective. This viewpoint stresses the capabilities (knowl- edge and skills) that make effective leadership possible.

Definition and Components

Despite the multitude of ways in which leadership has been conceptu- alized, the following components can be identified as central to the phe- nomenon: (a) Leadership is a process, (b) leadership involves influence, (c) leadership occurs in groups, and (d) leadership involves common goals. Based on these components, the following definition of leadership is used in this text:

Leadership is a process whereby an individual influences a group of individuals to achieve a common goal.

Defining leadership as a process means that it is not a trait or character- istic that resides in the leader, but rather a transactional event that occurs between the leader and the followers. Process implies that a leader affects and is affected by followers. It emphasizes that leadership is not a linear, one-way event, but rather an interactive event. When leadership is defined in this manner, it becomes available to everyone. It is not restricted to the formally designated leader in a group.

Leadership involves influence. It is concerned with how the leader affects followers. Influence is the sine qua non of …