B. Using Power Effectively
Leaders derive their power from many bases. There are two primary types of power:
These sources of power are illustrated in EXHIBIT 11.2.
Effective leaders use the different bases of power as the need arises. They often use a
STRATEGY SPOTLIGHT 11.4 discusses some of the subtleties associated with power. It
centers on Siemens’ CEO. He uses peer pressure very effectively.
The following SUPPLEMENT should be of great interest to your students. It is part of an
Extra Example: Sandberg’s View on Women and the Use of Power
Question: Some have criticized you for essentially blaming women for not being “better,” even though many
of the challenges they confront are institutional. How do you respond?
Sandberg’s Response: Women face huge institutional barriers. But we also face barriers that exist within ourselves,
sometimes as the result of our socialization. For most of my professional life, no one ever talked to me about the
ways I held myself back. I’m trying to add to that side of the debate. There’s a great quote from Alice Walker “The
most common way people give up their power is by thinking they don’t have any.” I am not blaming women: I’m
helping them see the power they’ve got and encouraging them to use it.
One important way, as I write in the book is that they “leave before they leave.” That is, they take themselves out of
the running for career advancement because they want to have a family. But in some cases they’re making these
decisions years in advance—before they even have a partner. That should be a time when they lean in, not pull back.
Source: Ignatius, A. 2013. Now is our time. Harvard Business Review. 91(4): 84–88.
Discussion Question 15: Do you agree? What other strategies and tactics should women
use to have more successful careers?
Teaching Tip: The issue of power is very interesting to students. It would be interesting
to ask them to think of leaders that they have known (or read about) and what type of
power they exercised. Then ask if they were effective or ineffective—and what explained
III. Emotional Intelligence: A Key Leadership Trait
In the previous section, we focused on “what leaders do and how they do it.” In this
section, we address “who leaders are.” That is, we focus on individual attributes instead of leader
Although there have been countless studies of leader traits (e.g., integrity, maturity,
energy, intelligence), we address one that has really garnered a lot of attention in both the
Recent studies have found that effective leaders have a high level of EI and that EI is a
better predictor of life and career success than IQ (intelligence quotient). The five components of
EI are:
A. Self-Awareness
B. Self-Regulation
C. Motivation
D. Empathy
E. Social Skill
These five components are briefly summarized in EXHIBIT 11.3.
Teaching Tip: To drive home the importance of EI, it is useful to write on the board, three
types of “traits” or “resources” that all managers have to varying degrees. These could
be called “human capital” (i.e., skills, technical competencies, etc.), “social capital” (i.e.,
positive relationships with others), and “political capital” (i.e., an awareness of where
The SUPPLEMENT below addresses Daniel Goleman’s (a leading expert on EI) view on
the positive implications that EI can have for managers who are working in an international
context.
Extra Example: The Value of Emotional Intelligence (EI) in an International Context
Globalization is another reason for the increasing importance of empathy (one of the five elements of EI) for
business leaders. Cross-cultural dialogue can often result in miscues and misunderstandings. Empathy is a valuable
antidote. Managers who have it are attuned to subtleties in body language. They can hear messages beneath the
words being spoken. Further, they have a deep understanding of the existence and importance of cultural and ethnic
differences.
For example, consider the case of an American consultant whose team has just presented a proposal to a Japanese
client. When dealing with fellow Americans, the team was accustomed to being bombarded with questions after
such a proposal. However, this time it was greeted with a long silence. Most of the members of the team interpreted
the silence as disapproval and were ready to leave. However, the lead consultant gestured them to stop. Although he
was not very familiar with Japanese culture, he was able to read the client’s face and posture and sensed not
rejection but interest—even deep consideration. He was correct. When the client finally spoke, it was to award the
consulting firm with the job.
Source: Goleman, D. 1998. What makes a leader? Harvard Business Review, 76(6): 93–102.
Discussion Question 16: Think of a situation where you interacted with international
students—either at work or in the classroom. Would greater levels of empathy have changed or
improved your interactions? If so, how?
F. Emotional Intelligence: Some Potential Drawbacks and Cautionary Notes
This section serves to provide some balance to our discussion of emotional intelligence.
We first suggest that a leader could be ineffective if he/she focuses too much on one
aspect of EI. For example, too much self-awareness and a lack of empathy may make a person
We also suggest some potential drawbacks of EI by discussing the “flipside” of the
benefits of its essential components:
1. Effective Leaders Have Empathy for Others
2. Effective Leaders Are Astute Judges of People
3. Effective Leaders Are Passionate about What They Do, and They Show It
4. Effective Leaders Create Personal Connections with Their People
IV. Creating a Learning Organization
Leading-edge organizations recognize the importance of having everyone in the company
involved in the process of learning and adapting. The days when company leaders learned for the
Learning and change typically involve an ongoing questioning of an organization’s status
quo. Point out that this is simple, but easy to ignore. Most companies get caught-up in carrying
Successful learning organizations create a proactive, creative approach to the unknown,
actively solicit the involvement of employees at all levels, and enable everyone to use their
Another key role for leaders is to link learning to the organizational vision, mission, and
goals. Emphasize that inspiring and motivating people with a mission or purpose is a necessary
EXHIBIT 11.4 lists all five elements of a learning organization.
A. Inspiring and Motivating People with a Mission or Purpose
A critical requirement of all learning organizations is that everyone feels and supports a
compelling purpose. We mention that a major finding of a study was that most leaders’ greatest
B. Developing Leaders
Leadership development programs help a firm learn in two ways. First, it facilitates skill
development so that employees are better equipped for their current roles. Second, these
C. Empowering Employees at All Levels
Empowerment involves creating an environment where employees can achieve their own
potential as they help move the organization toward its goals. To achieve this balance, leaders
The SUPPLEMENT below addresses the promise and limitations of empowerment from
the perspective of learning scholar Chris Argyris. Argyris argues that empowerment requires a
delicate balance that is often hard to achieve.
Extra Example: Guidelines for Effectively Empowering Organizations and Employees
Chris Argyris, who has been writing about learning and leadership for over 30 years, has some sobering thoughts
and useful advice about how to make empowerment programs work. He suggests that effective empowerment is
difficult to achieve because it’s complex:
“The change programs and practice we employ are full of inner contradictions that cripple innovation, motivation,
and drive. At the same time, CEOs subtly undermine empowerment. Managers love empowerment in theory, but the
command-and-control model is what they trust and know best. For their part, employees are often ambivalent about
empowerment—it is great as long as they are not held personally accountable. Even the change professionals often
stifle empowerment. Thus, despite all the best efforts that have gone into fostering empowerment, it remains very
much like the emperor’s new clothes: we praise it loudly in public and ask ourselves privately why we can’t see it.”
To create empowerment programs that work, Argyris suggest a few guidelines:
1. Understand that empowerment has its limits. Know how much can be created and what can be
accomplished. Once it has been created, do not misuse it. Be clear about who has the right to change things.
2. When implementing empowerment initiatives, calculate factors such as morale, satisfaction, and even
commitment into your human relations policies, but do not make them the ultimate criteria. The ultimate
goal is performance. Individuals can be excellent performers and report low morale, yet it is performance
and not morale that is paramount.
3. Help employees understand the choices they make about their own level of commitment. One of the most
helpful things we can do in organizations—indeed, in life—is to require that human beings not knowingly
kid themselves about their effectiveness.
Source: Argyris, C. 1998. Empowerment: The emperor’s new clothes. Harvard Business Review, 76(3): 98–105.
Discussion Question 17: What are some examples of companies that have implemented
empowerment programs? Have these programs been effective?
The SUPPLEMENT below continues the theme of being careful who you empower with
a rather humorous caveat about empowerment from Rick Teerlink, former CEO of Harley-
Extra Example: A Cautionary Note about Empowerment from the CEO of Harley-Davidson
Rick Teerlink, CEO of Harley-Davidson has helped build his company into one of the most recognizable brands in
America. He has worked to create a strong organization through training and organizing his work force. He
cautioned, however, “If you empower dummies, you get dumb decisions faster.” His view is that capable
organizations come from more committed and more talented employees.
Source: Ulrich, D. 1996 The leader of the future: San Francisco: Jossey-Bass: 210–211.
Discussion Question 18: What do you think of empowering lower level employees? Is it
likely to benefit the company? Why or why not? Are there potential dangers to the
company? What are they? Explain.
STRATEGY SPOTLIGHT 11.5 discusses how some firms actively engage employees to
make better decisions.
D. Accumulating and Sharing Internal Knowledge
Employees need to understand the overall business in order to make a strong
contribution. Emphasize that effective organizations share information and give workers the
We discuss Whole Foods Market Inc., a practitioner of internal bench marking—a
The SUPPLEMENT below provides two other examples of a firm’s effective use of
Extra Example: The Benefits of Sharing Internal Information
People can contribute more effectively when they understand how their efforts fit with the organization’s mission
and strategy. Consider two examples:
Alaska Airlines has invested management time in helping employees gain a broad view of the firm’s strategy.
The 2010 Plan was launched with traditional communications but also with a months-long road show and training
classes designed to help employees share ideas. The CEO, the president, and the COO still go on the road quarterly
to gather information about the idiosyncrasies of various markets. Then they disseminate what they’ve learned. The
benefits show up in annual measures of employee pride in the company—now at an exceptional 90 percent.
At Zingerman’s, a community of food-related businesses, information is as transparent as possible. The firm has
never consciously withheld its numbers—financial information was tacked up for employees to see. However, when
cofounders Ari Weinzweig and Paul Saginaw studied open book management in the mid-1990s, they came to
believe that employees would show greater interest if they got involved in the “game.”
Source: Spreitzer, G. & Porath, C. 2012. Creating sustainable performance. Harvard Business Review, 91 (1/2):
92-99.
We also point out the importance of listening skills (which involves more than not talking
until the other person stops!). Ask:
Discussion Question 19: What do you see as some of the benefits of practicing effective
listening skills? (e.g., obtaining valuable information, developing rapport and respect,
enhancing your “personal” bases of power)
Informal information also needs to be shared for effective management. Point out that
executives who are regarded as good listeners are more likely to make good decisions and get
promoted.
E. Gathering and Integrating External Information
Recognizing opportunities and threats is vital to a firm’s success. We present three
methods that companies are using to do so in today’s economy:
1. Employees at all levels can use a variety of sources of information on competitors
and the firm’s market. Traditional sources of information such as trade and
professional journals, books, business periodicals, and published reports.
2. Benchmarking is a technique for using external information to make comparisons
to best practices in an industry. Two types are highlighted: competitive
4. Obtain information directly
from customers.
Discussion Question 20: What are some other methods companies might use to gather
and integrate useful information?
Discussion Question 21: What are some examples of companies that are using
information gathering to improve their performance?
F. Challenging the Status Quo and Enabling Creativity
Leaders can use several means to overcome the inertia of the status quo. In general,
efforts to create a learning organization help establish an environment that is receptive to change.
Fostering a “culture of dissent” is another way to challenge the status quo. Norms are
established whereby dissenters can openly question authority without fear of retaliation.
Related to a culture of dissent is a culture of risk taking in which failure is not punished.
Companies that cultivate cultures of experimentation and curiosity make sure that failure
Discussion Question 22: Are there potential disadvantages to fostering a climate of
change and experimentation? What are they? What makes them problematic?
Discussion Question 23: What are some examples of companies that encourage risk
taking and “dissent” in order to stimulate creativity, productivity, and growth?
We also provide examples of how several firms encourage risk taking and celebrate
failures.
Discussion Question 24: Do organizations you are familiar with effectively encourage
risk taking and tolerate failure? If so, how?
In the following SUPPLEMENT we present an interview with John Donahue, eBay’s
CEO, who shares his insights into how his firm maintains risk taking to spur growth.
Extra Example: How do you Cultivate and Sustain Risk-Taking as the Company Expands?
According to CEO Donahue: “By talking about it. By celebrating failure-cases where we took bold risks and things
didn’t work out exactly as we imagined, but we recognized that and made adjustments. In 2010, we introduced the
largest pricing change in eBay’s history in the United States, to make our marketplace truly balanced between
auctions and fixed price. Six or eight weeks in, I knew something wasn’t right. There was a second-order dynamic in
the marketplace that was depressing it, so over the summer we really drilled down to understand what was going on.
That was a period of anxiety, but I had no regrets. It was one of those changes where you either flip the switch and
you go for it or you don’t do it. We diagnosed the issues, we made adjustments, and we benefited in the fourth
quarter. That’s a lot of what business is today: the old ‘Ready, fire, aim.’ You’re better off moving and, if you don’t
get it exactly right, making an adjustment. That’s the only way to compete on the Internet today, because it’s moving
so fast.”
Source: Ignatius, A. 2011. How eBay developed a culture of experimentation. Harvard Business Review. 89(3): 96.
Discussion Question 25: Does Donahue’s reasoning apply only to online businesses?
Can you think of other examples?
Discussion Question 26: Are there still industries where rapid reaction might not be
necessary? What are some examples?
V. Creating an Ethical Organization
Ethics can be defined as a system of right and wrong. Ethics assist individuals in deciding
when an act is moral or immoral, socially desirable or not. There are many sources of ethics:
The SUPPLEMENT below provides an excerpt from a speech by Richard F. Syron,
Extra Example: What Ethics Really Means
“Most of us think we learn about ethics in the normal course of our lives. We learn about it from our parents,
hopefully, at an early age. We learn about it from our teachers. We learn about it from religious leaders. And we see
ethics in action in the workplace. But I think it’s very important that we consider what ethics really means in a
broader sense.”
“Ethics doesn’t mean just not doing what is wrong. It doesn’t mean just avoiding fraud or lying. Ethics means—
more and more—doing the right thing because the right thing works in the long run. Ethics also means doing the
right thing even if it’s unpopular and difficult in the short run.”
Source: Syron, R. F. 1999. Ethical imperatives for stock markets in the new millennium. Speech made at Bentley
College Center for Business Ethics, February 8.
Discussion Question 27: What other sources of ethical beliefs influence actions in the
workplace?
Discussion Question 28: Is there a conflict when business leaders apply ethical beliefs
from outside the workplace to business decisions? Why or why not?
A. Individual Ethics versus Organizational Ethics
Many leaders think of ethics as a question of personal scruples, a confidential matter
between employees and their consciences. Such leaders are quick to describe any wrongdoing as
Businesses face many types of ethical issues. In addition to lying and fraud, for example,
concerns about protecting the environment, fair employment practices, distributing unsafe
The potential benefits of an ethical organization are many, but may be indirect. Research
has shown positive relationships between ethical performance and strong organizational culture,
Discussion Question 29: Why do you think employees would prefer to work at a
company with ethical leaders?
Discussion Question 30: What are some examples of companies that build loyal ties with
their employees because of the ethical values and behaviors of its leaders?
STRATEGY SPOTLIGHT 11.6 highlights potential ethical problems at utility companies
that are trying to capitalize on consumers’ desire to participate in efforts to curb global warming.