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Chapter 11 Creating A Learning Organization & An Ethical Organization

CHAPTER 11
CREATING A LEARNING ORGANIZATION & AN ETHICAL ORGANIZATION

1. What is Leadership?

Leadership is the process of transforming organizations from what they are to

what the leader would have them become. This definition implies dissatisfaction
with the status quo, a vision of what should be, and a process for bringing about
change. Leaders are change agents whose success is measured by how effectively
they formulate and implement a strategic vision and mission.

Successful leaders recognize three interdependent activities. These activities are:

i. Setting a direction
The leader is closely involved with the vision, mission, and goals of the
organization. To establish a direction, the leader must have a holistic
perspective that considers all of the organizational stakeholders, as well as
the salient environmental conditions and trends. A vision is important
because it provides a framework for problem solving and developing
strategic options. A vision is also important in communicating a clear future
direction and enhancing employee participation and commitment.

ii. Designing the organization

Leaders must be actively involved in shaping the organization by building
structures, teams, systems, and organizational processes that facilitate
implementation of their strategic vision. Failure to provide leadership in
shaping and maintaining organizational design can result in numerous
problems, including:

1. Inadequate understanding of responsibility and accountability among

managers and employees.
2. Reward systems that fail to motivate individuals toward common
objectives.
3. Poor or inappropriate budgeting and control systems.
4. Inappropriate or insufficient mechanisms to integrate and coordinate
activities across the firm.

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iii. Nurturing a culture dedicated to excellence and ethical behavior.

Leaders play a key role in developing and sustaining—as well as changing,
when necessary—an organization’s culture.

DEC 2015: QUESTION 4c (TEBRAU SDN BHD)

Discuss the three (3) interdependent activities that Firash must continually reassess
for his business to succeed.

i. Setting a direction
Firash must have a holistic understanding of its business’ stakeholders through
possessing the ability to scan the environment to develop knowledge of all its
business’s stakeholders and other salient environmental trends and events. This
knowledge must be integrated into a vision of what Tebrau could become. In essence,
it necessitates his business capacity to solve increasingly complex problems, become
proactive in approach, and develop viable strategic options. At times too, Firash
together with his management team must come up with more revolutionary visions
for their business to succeed.

ii. Designing the organization

Firash must actively be involved in building structures, teams, systems and
organizational processes that facilitate the implementation of its vision and strategies.
Otherwise, Tebrau would not be able to ensure its business strategies and appropriate
reward system is effectively implemented to drive business success.

iii. Nurturing a culture dedicated to excellence and ethical behavior

Firash must play a crucial role in changing, developing and sustaining his business’s
culture. This also means that the business culture must eliminate individualism and
promote collectivism since the boat and yacht building business requires teamwork
that is not just confine to internal business structure but externally too to create a
finished product of real beauty to exemplify what Tebrau is all about. Thus, Firash and
his managers must accept personal responsibility for developing and strengthening
ethical behavior throughout the business and its supply chain for Tebrau to succeed.
They too must consistently demonstrate such behavior, which is central to achieving
Tebrau’s vision and mission.

2. Two Elements of Effective Leadership/ 2 Capabilities by Successful

Leadership
Leaders must perform a variety of tasks, and the success of their organizations often
depends on how well they meet challenges and deliver on promises. There are 2
capabilities that are marks of successful leadership—overcoming barriers to change
and the effective use of power.

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A. Overcoming Barriers To Change

Barriers to change = characteristics of individuals and organizations that prevent a

leader from transforming an organization. Organizations at all levels are prone to
inertia and are slow to learn, adapt, and change because:
i. Many people have vested interests in the status quo = a barrier to change
that stems from people’s risk aversion.
ii. There are also systemic barriers = barriers to change that stem from an
organizational design that impedes the proper flow and evaluation of
information.
iii. Behavioral barriers = barriers to change associated with the tendency for
managers to look at issues from a biased or limited perspective based on
their prior education and experience
iv. Political barriers = barriers to change related to conflicts arising from power
relationships
v. Personal time constraints = a barrier to change that stems from people’s
not having sufficient time for strategic thinking and reflection. Leaders
must draw on a range of personal skills as well as organizational
mechanisms to move their organizations forward in the face of such
barriers. One of the most important tools a leader has for overcoming
barriers to change is his or her personal and organizational power.

B. Effective Use of Power

Successful leadership requires effective use of power in overcoming barriers to

change.

Power = a leader’s ability to get things done in a way he or she wants them to
be done. Power is the ability to influence other people’s behavior, to persuade
them to do things that they otherwise would not do, and to overcome
resistance and opposition. Effective exercise of power is essential for
successful leadership. A leader derives his or her power from several sources
or bases.

Organizational bases of power = Organizational power comes through the

leader’s formal management position. This is power that a person wields
because of his or her formal management position, and includes legitimate,
reward, coercive, and information power.

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✓ Legitimate power is derived from organizationally conferred decision-

making authority and is exercised by virtue of a manager’s position in the
organization.
✓ Reward power depends on the ability of the leader or manager to confer
rewards for positive behaviors or outcomes.
✓ Coercive power is the power a manager exercises over employees using
fear of punishment for errors of omission or commission.
✓ Information power arises from a manager’s access, control, and
distribution of information that is not freely available to everyone in an
organization.

Personal bases of power = a leader’s personality characteristics and behavior

that are the basis of the leader’s power. A leader might also be able to
influence subordinates because of his or her personal attributes or charisma,
attributes that cause subordinates to identify with the leader – referent power;
or the leader is the expert on whom subordinates depend for information that
they need to do their jobs successfully, so they rely on the leader’s expertise
and knowledge – expert power.

Successful leaders use the different bases of power, and often a combination
of them, as appropriate to meet the demands of the situation, such as the
nature of the task, the personality characteristics of the subordinates, and the
urgency of the issue.

DEC 2020: QUESTION 3c – SPORTS ACTIVE SDN BHD

Discuss the two (2) capabilities or elements that have been crucial for Mohan to
successfully implement the strategy and as marks of his effective leadership.
Mohan possess the two (2) elements of an effective leadership, overcoming barriers
to change and using power effectively that makes him to successfully implement the
strategy.
Mohan is the founder and also the managing director of SASB. His effective leadership
is one of the main factors for the SASB's excellent achievement. As a leader, Mohan
has been constructing changes in the organisation and had successfully dealt with the
associated challenges and barriers. Effective leaders will encounter barriers to change
when they implement new strategies or bring about changes to the organisation.
Frequently, employees may usually have some choices about how strongly they
support or resist a leader's change initiative. Several barriers to change includes
vested interest in the status quo, systemic barrier, behavioral barrier, political barrier
and personal time constraints. Leaders must draw a range of personal skills as well as,
organisational mechanisms to move their organisations forward in the face of such
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barriers. Building a learning organisation and building an ethical organisation provide

the kind of climate within which a leader can attain their organisation's goals. Mohan
seems to be able to successfully manage the barriers to change as despite significant
changes made by him, his leadership is marked by SASB's excellent performance
achievements.
Changing his personal and organisational power is one of the most important tools
for a leader to overcome barriers of change. Thus, the second capability, using power
effectively is essential in overcoming the barrier so that leaders can successfully
implement the strategy. SASB's achievement is always inextricably associated with
Mohan, the founder and the Managing Director (MD) of the company. Mohan
effectively use his power as a leader to influence people and overcome resistance in
the strategy. Power refers to a leader's ability to get things done in a way she or he
wants them to be done. It is the ability to influence other people's behaviour, to
persuade them to do things that they otherwise would not do, and to overcome
resistance and opposition. This power is derived from several sources such as
organizational bases and personal bases of power. From the organizational bases of
power, a leader is conferred legitimate power such as decision-making authority,
reward power, coercive power and informational power. Other than these powers, a
leader might be able to influence subordinates because of his personality
characteristics and behavior. A leader's personal attributes or charisma might
influence subordinates and make them devoted to the leader. Subordinates may also
depend on the leader because the leader is an expert on whom subordinates can
obtain information that they need to do their jobs successfully. To implement
strategies or changes is challenging as employees may not co-operate and give full
support to the leader. Therefore, abilities to overcome barriers and use power
effectively are two capabilities that leaders need to implement the formulated
strategies successfully.

DEC 2019: QUESTION 3b – BUMI HOTELS & RESORT BHD

Examine how three (3) types of organizational base of power contribute to the success
of BHRB led by Ahmad Irfan.

Successful leadership requires effective use of power in overcoming barriers to

change. Power is a leader’s ability to get things done in a way he or she wants them to
be done. Power is the ability to influence other people’s behavior, to persuade them
to do things that they otherwise would not do, and to overcome resistance and
opposition. Effective exercise of power is essential for successful leadership. An
organizational base of power is a formal management position that is the basis of the
leader’s power. This is the power that a person wields because of his or her formal
management position, and includes legitimate, reward, coercive, and information
power. As with Ahmad Irfan, he derives the power from these four types of sources.

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• Coercive

Coercive power is conveyed through fear of losing one’s job, being demoted, receiving
a poor performance review, having prime projects taken away, etc. This power is
gotten through threatening others. Ahmad Irfan introduces an effective reward
system for fair evaluation of his employees. He gain his power form applying the
reward system as he can influence employees’ behaviour with the implementation of
the system.
• Legitimate

Legitimate power comes from having a position of power in an organization, such as

being the boss or a key member of a leadership team. This power comes when
employees in the organization recognize the authority of the individual. Ahmad Irfan
gains legitimate power as he is the CEO of BHRB. As a CEO he has the power or
authority to determine the overall direction of the company and the resource needs
of the company. The position also allow him to influence, persuade and overcome
resistance and opposition.
• Reward

Reward power is conveyed through rewarding individuals for compliance with one’s
wishes. This may be done through giving bonuses, raises, a promotion, extra time off
from work, etc. Reward power can also be used to increase morale. Ahmad Irfan also
gain his power from the reward system he had introduced in BHRB. The system will
help in providing fair employee evaluation and compensation to motivate employee
to achieve organisational goals.
• Information power

Arise from manager’s access, control, and distribution of information that is not freely
available to everyone in an organization. This could be positive or negative information
that is used in decision support. Informational power is also meant possible use of
information from persuading or manipulating opinions. Informational power can be
used to measure and improve tasks, processes, and strategies. The manager could
share the information to motivate the staff. Ahmad Irfan gain informational power as
he works closely with the top management team. He is all alert of the critical
knowledge and information thus able to lead the team to pursue strategic actions such
as innovation, providing excellent services, undertaken diversification and effective
management.

JAN 2018: QUESTION 4 ([Link])

Briefly explain the effective use of personal bases of power by Zoe in overcoming
barriers to change.

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Zoe derives her power from both referent power and expert power to overcome
barriers to change. In terms of referent power, Zoe has modelled her behaviour to
demonstrate appropriate conduct and decision making to all her employees. This was
achieved based on her strong personal attributes and her charisma which managed to
effectively influence her subordinates to accept the changes that he undertakes and
make them committed to improve the company according to her way of doing things.
On the other hand, Zoe’s expert power stems from subordinate’s perception of her
possessing an extensive experience in the cosmetic and beauty industry indicating her
high level of knowledge in this fields coupled with her incisive analytical mind which
no one at the company possesses. Thus, both referent and expert powers aided Zoe
to effectively overcome the challenges faced by the company.

JUNE 2015: QUESTION 4a (PRECISION SDN BHD)

Explain briefly the effective use of personal bases of power by Dato’ Zufar in
overcoming barriers to change.
(5 marks)

Dato’ Zufar derives his power from both referent power and expert power in order to
overcome barriers to change. In terms of referent power, Dato Zufar has modelled
his behaviour to demonstrate appropriate conduct and decision making to all his
employees. This perhaps was achieved based on his strong personal attributes and his
charisma which managed to effectively influence his subordinates to accept the
changes that he undertakes and make them committed to improve the company
according to his way of doing things. On the other hand, Dato’ Zufar expert power
stems from subordinate’s perception of him possessing an extensive experience in the
automotive industry indicating his high level of knowledge in this field coupled with
his incisive analytical mind which no one at the company possess. Thus, both referent
power and expert power aided Dato’ Zufar to effectively overcome the challenges
faced by the company.

3. Valuable traits of successful leaders

Valuable traits of successful leaders can be grouped into three broad sets of capabilities:
Purely technical skills (like accounting or operations research)
Cognitive abilities (like analytical reasoning or quantitative analysis)
Emotional intelligence (like self-management and managing relationships).
Emotional intelligence = an individual’s capacity for recognizing his or her own
emotions and those of others, including the five components of self-awareness,
self-regulation, motivation, empathy, and social skills.

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4. Emotional Intelligence: A Key Leadership Trait

Goleman defines Emotional Intelligence (EI) as the capacity for recognizing one’s own
emotions and those of others. 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
Self-awareness involves a person having a deep understanding of his or her
emotions, strengths, weaknesses, and drives. People with strong social awareness
are neither overly critical nor unrealistically optimistic. Instead, they are honest
with themselves and others.

B. Self-Regulation
Self-regulation, which is akin to an ongoing inner conversation, frees us from being
prisoners of our feelings. People who have self-regulation find ways to control
feelings and even channel them in useful ways. Self-regulated people can create
an environment of trust and fairness.

C. Motivation
Motivated people show a passion for the work itself, such as seeking out creative
challenges, a love of learning, and taking pride in a job well done. Empathy is
probably the most easily recognizable component of EI.

D. Empathy
Empathy means thoughtfully considering an employee’s feelings, along with other
factors, in the process of making intelligent decisions.

E. Social Skill
Social skill may be viewed as friendliness with a purpose: moving people in the
direction you desire, whether that’s agreement on a new marketing strategy or
enthusiasm about a new product.

JUNE 2015: QUESTION 4a (PRECISION SDN BHD)

Explain three (3) components of emotional intelligence, a key leadership trait that
enabled Dato’ Zufar to perform effectively to create value for the company.
(10 marks)

The three components of EI that enabled Dato’ Zufar to perform effectively to create
value for the company are:
• Self-awareness
Dato’ Zufar was able to recognise and understand his moods, emotions and drives
besides their effects on others.
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• Self-regulation
He was also able to control and redirect disruptive impulses and moods. He too has
the propensity to suspend judgment.

• Motivation
Dato’ Zufar has the drive and passion to work for reasons other than financial
attainment or status, and to pursue goals with energy and persistence.

• Empathy
He understands the emotional makeup of his employees and possess the skill to
treat his employees based on their emotional reactions.

• Social skills
Dato’ Zufar has the proficiency in managing relationship and building networks. He is
also able to find common ground and build rapport.

Please define first what is let say self-awareness, then baru relates to Dato’ Zufar. This
is 10 marks..at least 1 point, u define, and relates to the case for 3 sentences.

5. Emotional Intelligence: Pros & Cons

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 come
across as self-obsessed, and too much empathy may cause a leader to become too
“hard to read.”

There are some potential drawbacks of EI by discussing the “flipside” of the benefits
of its essential components:

Effective Leaders Have Empathy for Others: However, they also must be able
to make the “tough decisions.” Leaders must be able to appeal to logic and
reason and acknowledge others’ feelings so that people feel the decisions are
correct, but must not overidentify with others or confuse empathy with
sympathy. This can make it more difficult to make the tough decisions.

Effective Leaders Are Astute Judges of People: A danger is that leaders may
become judgmental and overly critical about the shortcomings they perceive
in others. They are likely to dismiss other people’s insights, making them feel
undervalued.

Effective Leaders Are Passionate about What They Do, and They Show It: It’s
good to express passion as persistence in pursuing an objective or a relentless
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focus on a valued principle. However, there is a fine line between being excited
about something and letting your passion close your mind to other possibilities
or cause you to ignore realities that others may see.

Effective Leaders Create Personal Connections with Their People: Most

effective leaders take time to engage employees individually and in groups,
listening to their ideas, suggestions, and concerns and responding in ways that
make people feel that their ideas are respected and appreciated. However, if
the leader makes too many unannounced visits, it may create a culture of fear
and micromanagement. From a moral standpoint, emotional leadership is
neither good nor bad.

On the one hand, emotional leaders can be altruistic, focused on the general
welfare of the company and its employees, and highly principled. On the
other hand, they can be manipulative, selfish, and dishonest. For example, if a
person is using leadership solely to gain power; that is not leadership at all.

JAN 2018: QUESTION 4c ([Link])

Discus three (3) potential drawbacks of emotional intelligence that may derive from
the flip side of its benefits that Zoe must take into account.

Three (3) potential drawbacks of emotional intelligence:

i. Effective leaders have empathy for others.

Zoe must be able to make the ‘tough decisions’ and not easily over identify
with others or confuse empathy with sympathy. She must be able to appeal
to logic and reason and acknowledge others’ feelings so that her employees
feel the decisions made are correct.

ii. Effective leaders are astute judges of people.

Zoe must not be judgmental and overly critical about the shortcomings she
perceives in others. She must not dismiss other people’s insights, making
them feel undervalued. She must be willing to listen and to accept other
people’s thoughts and opinions.

iii. Effective leaders are passionate about what they do, and they show it.
Zoe must express her passion as persistence in pursuing an objective or a
relentless focus on a valued principle. However, Zoe must not let her passion
close her mind to other possibilities or cause her to ignore realities that
others may see.

iv. Effective leaders create personal connections with their people.

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Zoe must make time to engage employees individually and in groups, listening
to ideas, suggestions, and concerns and responding in ways that would make
them feel appreciated. However, Zoe should not overdo things as this may
create a culture of fear and micromanagement. Zoe must be able to strike a
correct balance.

DEC 2014: QUESTION 4b (MS. SARA)

Discuss three (3) potential drawbacks of emotional intelligence that may derive from
the flip side of its benefits that Sara must be cautious of.
(10 marks)

Three (3) potential drawbacks of emotional intelligence that may derive from the flip
side of its benefits that Sara must be cautious of are:

i. Effective leaders have empathy for others.

Sara must be able to make the ‘tough decisions’ and not easily overidentify
with others or confuse empathy with sympathy. She must be able to appeal to
logic and reason and acknowledge others’ feelings so that her employees feel
the decisions made are correct.

ii. Effective leaders are astute judges of people.

Sara must not be judgmental and overly critical about the shortcomings she
perceives in others. She must not dismiss other people’s insights, making them
feel undervalued. She must be willing to listen and accept other peope’s
thoughts and opinions.

iii. Effective leaders are passionate about what they do, and they show it.
Sara must express her passion as persistence in pursuing an objective or a
relentless focus on a valued principle. However, Sara must not let her passion
close her mind to other possibilities or cause her to ignore realities that others
may see.

iv. Effective leaders create personal connections with their people.

Sara must make time to engage employees individually and in groups, listening
to ideas, suggestions and concerns and responding in ways that would make
them feel appreciated. However, Sara should not overdo things as this may
create a culture of fear and micromanagement. Sara must be able to strike a
correct balance.

6. A Learning Organization
To enhance the long-term viability of organizations, leaders also need to build a
learning organization. Such an organization can adapt to change, fostering
creativity, and succeeding in highly competitive markets.

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Many organizations get so caught up in carrying out their day-to-day work that they
rarely, if ever, stop to think objectively about themselves and their businesses. They
often fail to ask the probing questions that might lead them to call into question
their basic assumptions, to refresh their strategies, or to reengineer their work
processes.

Learning organizations = organizations that create a proactive, creative approach

to the unknown; characterized by:

1. Inspiring and motivating people with a mission and purpose.

Successful learning organizations create a proactive, creative approach to the
unknown, actively solicit the involvement of employees at all levels, and
enable all employees to use their intelligence and apply their imagination. A
critical requirement of all organizations is that everyone feels and supports a
compelling purpose. Higher-level skills are required of everyone, not just those
at the top. The learning environment involves organization-wide commitment
to change, an action orientation, and applicable tools and methods. It must be
viewed by everyone as a guiding philosophy and not simply as another change
program.

2. 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 programs can help individuals develop skills
related to learning and growing from their experiences.

3. Empowering employees at all levels.

When empowering employees at all levels, a manager’s role becomes one of
creating an environment where employees can achieve their potential as they
help move the organization toward its goals. Instead of viewing themselves as
resource controllers and powerbrokers, leaders must envision themselves as
flexible resources willing to assume numerous roles as coaches, information
providers, teachers, decision makers, facilitators, supporters, or listeners,
depending on the needs of their employees. Leading-edge organizations
recognize the need for trust, cultural control, and expertise at all levels. In the
information economy, the strongest organizations are those that effectively
use the talents of all the players on the team. Empowering individuals by
soliciting their input helps an organization to enjoy better employee morale. It
also helps create a culture in which middle- and lower-level employees feel
that their ideas and initiatives will be valued.

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4. Accumulating and sharing internal knowledge.

Effective organizations must also redistribute information, knowledge (skills
to act on the information), and rewards.

In addition to enhancing the sharing of company information both up and

down as well as across the organization, leaders also must develop means
to tap into some of the more informal sources of internal information, by
listening to what their people, customers, and suppliers are telling them.

The firm shares information:

✓ Customer expectations & feedback
✓ Financial information
✓ Business goals
✓ How key value-creating activities are related to each other

The firm allocates reward based on how effectively employees used this
information.

5. Gathering and integrating external information

Recognizing opportunities, as well as threats, in the external environment is
vital to a firm’s success.

As organizations and environments become more complex and evolve

rapidly, it is far more critical for employees and managers to become even
more aware of environmental trends and events – both general and
industry-specific – and more knowledgeable about their firm’s competitors
and customers.

This external information can come from various sources:

➢ By tapping into knowledge from partners, suppliers and competitors

via participation in networks and alliances; monitoring the direct
communications from rival firms and their executives, such as press
releases and quarterly-earnings calls – these communications can
provide insight on the rival’s actions and intended actions.

➢ Benchmarking can be a useful means of employing extra information.

Benchmarking = managers seeking out best examples of a particular
practice as part of an ongoing effort to improve the corresponding

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practice in their own organization. Competitive benchmarking =

benchmarking where the examples are drawn from competitors in the
industry. Functional benchmarking = benchmarking in which the
examples are drawn from any organization, even those outside the
industry. Firms can also focus directly on customers for information.

DEC 2015: QUESTION 4b (TEBRAU SDN BHD)

Discuss three (3) ideas Firash and his managers can use to gather and integrate
external information so that their strategic direction can be well orchestrated.

The following ideas can be used to gather and integrate external information so that
Tebrau’s strategic direction can be well orchestrated. This is because using such ideas
would enable Firash and his managers to become more aware of environmental
trends and events, and more knowledgeable about their competitors and customers.

i. They can use internet to accelerate speed to track down useful information or
locate people who might have useful information pertaining to boat and yacht
building industry.

ii. Tebrau employees at all levels can use “garden variety” traditional resources to
acquire external information relating to boat and yacht building as follows:
• reading trade and professional journals, books, popular business magazines
• membership in professional or trade organizations
• attendance at meetings and conventions
• networking among colleagues inside or outside the boat and yacht building
industry

iii. They can use benchmarking (competitive and/or functional benchmarking) as a

useful means of employing external information. They need to seek out the best
examples of a particular practice as part of an ongoing effort to improve the
corresponding practice in Tebrau’s boat building business.

iv. They can focus directly on customers’ information. They can get to the end user
of their products or service to find out what they need. This can be undertaken
by working closer with their customers and even suppliers. They can discuss the
value of customer input to achieve product excellence and how best to
incorporate customer needs into their orders.

6. Challenging the status quo and enabling creativity.

Leaders face barriers when trying to bring about change in an organization:
vested interests in the status quo, systemic barriers, political barriers,
behavioral barriers, and personal time constraints.

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For a firm to become a learning organization, it must overcome such barriers

to foster creativity and enable it to permeate the firm. This becomes quite
a challenge if the firm is entrenched in a status quo mentality.
WAYS TO CHALLENGE STATUS QUO
✓ Perhaps the best way to challenge the status quo is for the leader to
forcefully create a sense of urgency. Such initiative, if sincere and
credible, establishes a shared mission and the need for major
transformations. It can channel energies to bring about both change
and creative endeavors.

✓ Establishing a “culture of dissent” can be another effective means of

questioning the status quo and serve as a spur toward creativity. Here
norms are established whereby dissenters can openly question the
superior’s perspective without fear of retaliation or retribution.
Companies that cultivate cultures of experimentation and curiosity
make sure that failure is not, in essence, an obscene word. They
encourage mistakes as a key part of their competitive advantage.

✓ Some approaches to encourage risk taking and learning from mistakes

include formalizing forums for failure by sharing lessons of failure,
moving the goalposts to create flexibility while forecasting, bringing in
outsiders to help neutralize the emotions and biases that might prop
up a flop, looking for supporting rather than countervailing evidence to
prove yourself wrong, not right. Failure can even play an important and
positive role in one’s professional development.

MARCH2016: QUESTION 4b (YUSOF - NAURAH BHD)

Discuss three (3) approaches that will encourage risk taking and learning from
mistakes in Naurah Bhd.

Formalize forums for failure - carry out time for reflection at the office for those
who have failed, therefore, people would learn from mistakes made instead of
just carrying on ignoring mistakes made.
Move the goalposts – be more flexible, revisit targets and do not afraid to make
changes to plans.
Bring in outsiders – outsiders may help neutralize the emotions and biases that
may have caused failure in the business.
Prove yourself wrong, not right - instead of proving yourself right, look for
countervailing evidence, loopholes, negative points, and disadvantages.

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Semester Oct 2020 – Feb 2021
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JUNE 2015: QUESTION 4b (PRECISION SDN BHD)

Discuss three (3) key elements of a learning organization developed by Dato’ Zufar to
ensure the company is able to adapt to change, foster creativity and remain
competitive.
(10 marks)
• Inspiring and motivating his employees with a mission or purpose.
Dato Zufar ensures that all employees share and understand the company’s
mission and its purpose, and where the direction the company is heading. He
also created a conducive environment and solicited the involvement of his
employees at all levels. He also facilitates and encourages them to use their
intelligent and apply their creativity, without which the company will not be
able to easily adapt to change, foster creativity and remain competitive.

• Empowering his employees at all levels.

Dato’ Zufar created an environment whereby the talents of the employees
regardless of their levels were effectively used to overcome challenges. This
means that each individual is empowered by soliciting his or her input to
contribute to the organizational change. Thus, employees will feel that their
inputs will be valued and enhance company’s performance.

• Challenging the status quo and enabling creativity

Dato’ Zufar created an atmosphere and an environment where employees are
encouraged to take risk and to learn from their mistakes in the company. By
doing so, employees will become more creative as they are being challenged
for example to prove them wrong instead of right, moving the goalposts and
bringing in outsiders. This eventually drove the company to remain
competitive.

DEC 2015: QUESTION 4a (ENGLISH - INDIA)

Explain to Sara two (2) key elements of a learning organization that she should view
as necessary.
(5 marks)
Two (2) key elements of a learning organization that Sara should view as necessary
are:
➢ Inspiring and motivating people with a mission or purpose
Sara should view as necessary that successful learning organizations create a
proactive, creative approach to the unknown, actively solicit the involvement
of employees at all levels, and enable all employees to use their intelligence
and apply their imagination. The learning environment should involve
organization-wide commitment to change, an action orientation and
applicable tools and methods. All in English-India should feel and support a
compelling purpose.

Prepared by: Dr Nor Azrina Mohd Yusof

Semester Oct 2020 – Feb 2021
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Chapter 11 Creating A Learning Organization & An Ethical Organization

➢ Empowering employees at all levels

Sara should view as necessary that the central key to empowerment is effective
leadership. She should create an environment where her employees can
achieve their potential as they help move English-India towards its goals. She
must create an environment that recognizes the need for trust, cultural control
and expertise at all levels instead of the rigid and cumbersome rules and
regulations in a hierarchical control.

➢ Accumulating and sharing internal knowledge

Sara should view as necessary that effective organizations must redistribute
information, knowledge and rewards. Information must be disseminated so
that employees must know the goals of English-India as well as how its key
value-creating activities are related/connected. English-India must also
allocate rewards on how effectively employees use information, knowledge
and power to improve quality and its overall performance.

➢ Gathering and integrating external information

Sara should view as necessary that it is vital for English-India to become more
alert and aware of its environmental trends and events. It must recognize
opportunities available for it and threats that may harm it in order to be
successful. This can be done through the Internet to track down useful
information or locate people with useful information, by using traditional
sources to acquire external information and by benchmarking to employ
external information.

➢ Challenging the status quo and enabling creativity

Sara should view as necessary that in order for English-India to become a
learning organization, it must overcome barriers that she may face when trying
to bring about change in it and in order to foster creativity and enable it to
permeate the business. The barriers that can be quite a challenge to English-
India can be vested interests in the status quo, systemic barriers, behavioral
barriers, political barriers and personal time constraints.

(Any 2 of the above + explanation X 2.5 marks = 5 marks)

JAN 2018: QUESTION 4b ([Link])

Explain three (3) key elements of a learning organization developed by Zoe to ensure
the company is able to adapt to change and remain competitive.

Three (3) key elements of a learning organization

i. Inspiring and motivating his employees with a mission or purpose
Zoe ensures that all employees share and understand the company’s mission
and its purpose and where the direction the company is heading. She also
created a conductive environment and solicited the involvement of her

Prepared by: Dr Nor Azrina Mohd Yusof

Semester Oct 2020 – Feb 2021
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Chapter 11 Creating A Learning Organization & An Ethical Organization

employees at all levels. She also facilitates and encourages them to use their
intelligent and apply their creativity, without which the company will not be
able to easily adapt to change, foster creativity and remains competitive.

ii. Empowering his employees at all levels

Zoe creates an environment whereby the talents of the employees regardless
of their levels were effectively used to overcome challenges. This means that
each individual is empowered by soliciting his or her input to contribute to the
organizational change. Thus, the employees will feel that their inputs will be
valued and this eventually enhance company’s performance.

iii. Challenging the status quo and enabling creativity

Zoe created an atmosphere and an environment where employees are
encouraged to take risks and to learn from their mistakes in the company. By
doing so, employees will become more creative as they are being challenged
for example to prove them wrong instead of right, moving the goalposts and
bringing in outsiders. This eventually drove the company to remain
competitive.

DEC 2018: QUESTION 4b (SUN SHINE BHD)

Discuss the following two (2) elements of learning organization that could help SSB to
remain competitive:
i. Accumulating and sharing internal knowledge
ii. Challenging the status quo and enabling creativity

Two (2) elements of learning organization that could help SSB to remain competitive
are as follows:
i. Accumulating and sharing internal knowledge
To be an effective organization, SSB must redistribute information, knowledge
(skills to act on the information), and rewards. SSB needs to disseminate
information by sharing customer expectations and feedback as well as financial
information. The employees must know about the goals of the business as well as
how key value-creating activities in the organization are related to one another.
Finally, SSB should allocate rewards based on how effectively employees use
information, knowledge, and power to improve customer service quality and the
company’s overall performance. In addition to enhancing the sharing of company
information both up and down as well as across the organization, leaders also
have to develop means to tap into some of the more informal sources of internal
information, by listening to what their people, customers, and suppliers are telling
them.

ii. Challenging the status quo and enabling creativity

Leaders face barriers when trying to bring about change in an organization: vested
interests in the status quo, systemic barriers, political barriers, behavioral
barriers, and personal time constraints. For a firm to become a learning
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Chapter 11 Creating A Learning Organization & An Ethical Organization

organization, thus, SSB must overcome such barriers in order to foster creativity
and enable it to permeate the firm. This becomes quite a challenge if the firm is
entrenched in a status quo mentality. Perhaps the best way to challenge the
status quo is for the leader to forcefully create a sense of urgency. Such initiative,
if sincere and credible, establishes a shared mission and the need for major
transformations. It can channel energies to bring about both change and creative
endeavors. Establishing a “culture of dissent” can be another effective means of
questioning the status quo and serving as a spur toward creativity. Here norms
are established whereby dissenters can openly question the superior’s
perspective without fear of retaliation or retribution. Companies that cultivate a
culture that encourages risk-taking, a culture of experimentation and curiosity,
make sure that failure is not, in essence, an obscene word. They encourage
mistakes as a key part of their competitive advantage. Some approaches to
encourage risk-taking and learning from mistakes that could be implemented by
SSB:

ENCOURAGE • Formalized forums for failure – carry out time for reflection at the office
RISK TAKING for those who have failed, therefore, people would learn from mistakes
AND LEARNING
made instead of just carrying on ignoring mistakes made.
FROM
MISTAKES • Move the goalposts – be more flexible, revisit targets and do not afraid to
make changes to plans.
• Bring in outsiders – outsiders may help neutralize emotions and biases that
may have caused failure in the business.
• Prove yourself wrong, not right – instead of proving yourself right, look for
countervailing evidence, loopholes, negative points and disadvantages.

7. Creating an Ethical Organization

Ethics = a system of right and wrong that assists individuals in deciding when an
act is moral or immoral and/or socially desirable or not. The sources for an
individual’s ethics include religious beliefs, national and ethnic heritage, family
practices, community standards, educational experiences, and friends and
neighbors.

Organizational ethics = the values, attitudes, and behavioral patterns that define
an organization’s operating culture and that determine what an organization
holds as acceptable behavior. Business ethics has everything to do with
leadership. Leaders who fail to provide proper leadership to institute proper
controls and systems that facilitate ethical conduct share responsibility with those
who conceive, execute, and knowingly benefit from corporate misleads.

A firm must have several key elements to become a highly ethical organization.
These elements are highly interrelated. For instants, reward structures and

Prepared by: Dr Nor Azrina Mohd Yusof

Semester Oct 2020 – Feb 2021
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Chapter 11 Creating A Learning Organization & An Ethical Organization

policies will be useless if leaders are not sound role models. Corporate credo = a
statement of the beliefs typically held by managers in a corporation.

8. Elements of Highly Ethical Organization

A. Ethical role models

For good or for bad, leaders are role models in their organizations. Clearly,
leaders must “walk the talk”; they must be consistent in their words and deeds.
The values as well as the character of leaders become transparent to an
organization’s employees through their behaviors.

When leaders do not believe in the ethical standards that they are trying to
inspire, they will not be effective as good role models. Being an effective leader
often includes taking responsibility for ethical lapses within the organization –
even though the executives themselves are not directly involved.

By sharing responsibility for misdeeds, the top executives – through their

highly visible action – can make it clear that responsibility and penalties for
ethical lapses go well beyond the “guilty” parties. Such courageous behavior
by leaders helps to strengthen an organization’s ethical environment.

B. Corporate credos & Code of conduct

Corporate credo = a statement of the beliefs typically held by managers in a
corporation. Corporate credos and codes of conduct are mechanisms that
provide statements of norms and beliefs as well as guidelines for decision
making. They provide employees with a clear understanding of the
organization’s policies and ethical position.

Such guidelines also provide the basis for employees to refuse to commit
unethical acts and help to make them aware of issues before they are faced
with the situation. For such codes to be truly effective, organization members
must be aware of them and what behavioral guidelines they contain.

C. Ethically based reward & evaluation systems

Inappropriate reward systems may cause individuals at all levels of an
organization to commit unethical acts that they might not otherwise do. The
penalties for such acts in terms of damage to reputations, human capital
erosion, and financial loss are usually much higher than any gains that could be
obtained through such behavior.

Prepared by: Dr Nor Azrina Mohd Yusof

Semester Oct 2020 – Feb 2021
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Chapter 11 Creating A Learning Organization & An Ethical Organization

D. Consistently enforced ethical policies & procedures

Many situations that a firm faces have regular, identifiable patterns. Leaders
tend to handle such routine by establishing a policy or procedure to be
followed that can be applied uniformly to each occurrence.

Such guidelines can be useful in specifying the proper relationships with the
firm’s customers and suppliers, i.e. through stringent global sourcing
guidelines that determine the relationship between the company and its
suppliers when awarding new contracts.

Carefully developed policies and procedures guide behavior so that all

employees will be encouraged to behave in an ethical manner. However, they
must be reinforced with effective communication, enforcement, and
monitoring, as well as sound corporate governance practices.

DEC 2018: QUESTION 4b (SUN SHINE BHD)

Explain briefly two (2) actions to reinforce an ethical organizational culture to combat
fraud and financial scandals in SSB.

Faiz can do the following actions:

• Ethical Role model - Faiz must ‘walk the talk’. “A leader can’t just talk about it,
they must demonstrate a reason to be trusted through their work and actions.”
He must show his employees that he is consistent in his words and deeds.

• Establish and communicate specific goals, and disseminate code of conduct to

all. Faiz needs to communicate the importance of ethical standards, holding
their employees accountable to those standards, and crucially design
environments in which others work and live. Always shows a positive outcome,
and to reduce the risk from many negative outcomes. Leadership may
therefore be the most important lever in an ethical system designed to
support ethical conduct.

• Use internal auditing procedures as an effective internal control.

Establish and maintain internal controls specifically designed to prevent and
detect fraud. Adopt a code of ethics for management and employees. Set a
tone at the top that the company will not tolerate any unethical
behavior. Implement an employee reporting system, such as an anonymous
hotline, to help uncover fraud.

• Create and use explicit reward system that recognizes acts of courage
(whistleblower encouraged)
Prepared by: Dr Nor Azrina Mohd Yusof
Semester Oct 2020 – Feb 2021
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Chapter 11 Creating A Learning Organization & An Ethical Organization

MARCH2016: QUESTION 4a (YUSOF - NAURAH BHD)

Explain two (2) actions Yusof can take to shape and reinforce an ethical organizat culture to
combat fraud and financial scandals.

Yusof can do the following actions:

Ethical role model – Yusof must 'walk the talk'. He must show his employees that
consistent in his words and deeds.
Establish and communicate specific goals and disseminate code of conduct to all.
Use internal auditing procedures.
Create and use explicit reward system that recognizes acts of courage (whistleblower
encouraged).

DEC 2014: QUESTION 4c (MS. SARA)

Suggest to Sara any three (3) key elements that are necessary for English-India to become a
highly ethical business.

Three (3) key elements that are necessary for English-India to become a highly ethical
business:
➢ Role Models
The leaders at all levels in English-India must be ‘good’ role models. Leaders must ‘walk
the talk’; they must be consistent in their words and deeds. The values and character of
the leaders must be transparent to the employees through their behaviors. They must
believe in the ethical standards that they are trying to inspire to be effective.

➢ Corporate Credos and codes of Conduct

These are mechanisms that provide statements of norms and beliefs as well as guidelines
for decision-making. Employees of English-India would have a clear understanding of the
organization’s policies and ethical position. These guidelines would provide the basis for
its employees to refuse to commit unethical acts and would make them aware of issues
before they are faced with the situation.

➢ Reward and evaluation systems

English-India should develop a reward and evaluation system that would take into account
whether an employee has acted in an ethical manner or unethically when faced with an
issue. A flaw in English-India’s reward structure my cause individuals to act in an
inappropriate manner if rewards are seen as being distributed on the basis of outcomes
rather than the means by which goals and objectives are achieved. Unethical behaviors
are also likely to take place when if English-India is faced with intense competition.

➢ Policies and procedures

Carefully developed policies and procedures in English-India would guide behavior so that
all its employees will be encouraged to behave in an ethical manner. Policies and
procedures can be developed to be applied uniformly to each regular, identifiable patterns
or occurence. They must, however, be reinforced with effective communication,
enforcement and monitoring as well as sound corporate governance practices.

Prepared by: Dr Nor Azrina Mohd Yusof

Semester Oct 2020 – Feb 2021