Question:
Effective leadership, decision making and ethical management are linked both in theory and in practice.How may leaders ensure organisational decisions are made ethically? Use examples to illustrate your argument from organisations with which you are familiar..
Leadership is all about creation of a vision, ensuring that the created vision is effectively communicated, living by values, influencing individual behaviour and making tough decisions as and when required (Armstrong & Stephens, 2005). Effective communication, inherit charisma, positive attitude, motivation, problem solving and tough decision making are some of the characteristics that define an effective leader. Ethics and decision making is at the heart of leadership and it’s essential to ensure that they go hand in hand. An organisation that lacks values and ethics fails to build a culture where individuals can grow both professionally and personally.
Leadership is not only associated with powers and authorities it also brings with it ethical burdens because while making ethical decisions it is important to ensure that leaders cast light not shadow (Bass & Bass, 2009). In order to get an-depth understanding of ethics it is important to analyse the values of the organisation as a whole which include both its leaders as well as followers. Effective leaders and managers have clear understanding for their morals, values, ethical system and decision making. Ethical leaders are characterised by good character and integrity.
This assignment conduct an in-depth analysis of the vital role played by leadership, ethics and decision making that help ensuring organisations achieve their desired goals and performance objective. Ethical leaders are responsible for created an ethical organisation which always tend to perform better because they have the capability to attract, maintain and retain right talent which is essential for performing right task at right time (Beerel, 2009). People are considered the most precious asset of an organisation and ethical leadership ensures that this asset is retained and continuously improved (Ferrell, Fraedrich, & Ferrell, 2012). This assignment studies the various aspects of leadership, ethics and decision making in relation to three leading organisations that have been voted among top ten ethical organisations of the world namely; Starbucks, McDonalds and Zappos. It shows how ethical leaders play a vital role in ensuring organisational decisions are made ethically.
Trust, integrity, relationships and transparency are the four key elements of ethical leadership that lead to the creation of an ethical organisation (Bass & Bass, 2009). It is based on six pillars of character namely; trustworthiness, respect, responsibility, fairness, caring and citizenship (Adair, 2009). It is important to adhere to these six pillars of character in day-to- day decision making in order to ensure that an ethical workplace environment is created and employees are influenced to follow ethical values of the organisation. Ethical environment forms the base of a knowledge sharing culture that is characterised by creativity and innovation (Fisher & Lovell, 2006).
Starbucks founded in year 1971 is the world’s premier roaster and retailer of speciality coffee which today has around 21,000 stores in more than 35 countries (Starbucks, 2015). Starbucks is recognised worldwide for its high quality coffee and the global supply chain network that help them serve hot coffee to around 60 million people every week. Under the effective leadership of Howard Schultz Starbucks has achieved remarkably unmatched growth and brand recognition. Howard Schultz displays the use of transformational leadership style wherein he possesses high compassion and commitments towards his customers and employees equally (Gallo, 2013). Transformation leadership focuses on bring change by developing vision, communicating it, empowering people to innovate and take risks. According to this leadership style leaders cannot inspire other unless they are themselves inspired. Leadership is all about having a passion and sharing that passion whenever an opportunity arrives (Kelley, 2007). According to the Ethisphere Institute Starbucks for the eighth year in a row has been recognised as the one of the world’s most ethical companies.
Howard Schultz is the key force behind the development of an ethical culture within Starbucks. He has been awarded Stanley C. Pace Award for leadership in ethics in year 2013 by Ethics Resource Centre (Ethics Resource Center, 2014). Established in year 2000 The Pace Award was created to honour individuals that possessed unwavering integrity. He recognised worldwide for his effective leadership, tough decision making and ethical management. He is a practitioner of utilitarian theory of ethics wherein the consequence of an action decided whether the action is right or wrong. He exhibits moral vision and possess the abilities required to convert those visions into specific goals. Being an ethical leader his effective ethical management and decision making helped him develop a value-based organisation that delivers high quality products and services to customers, gives back the community and respects humanity. According to Starbucks values striving to do right things and conducting business ethically are two important aspects of a successful organisation. Starbucks has a Business Ethics and Compliance program in place which help supporting its mission and protecting their culture and reputation in a way that they can provide their partners with enough resources so that they can make ethical decisions at work.
One of the best example of Howard Schultz effective leadership, ethical management and decision making was his decision to urge his fellow American CEOs to stop donating money to politicians until they take up their responsibility and start running the government as a successful business (Gallo, 2013). He was the force behind the Create Jobs for USA program where customer donations were combined with loans provided from microlenders to provide financial helps to small businesses in America. His participative leadership style and ethical decision making not only enabled him achieve his career goals but also organisational goals.
McDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants with a global presence in 119 countries where they serve more than 68 million customers every day from their 35,000 outlets (McDonald’s, 2015). Started in year 1948 the company in year 2012 has reported annual revenue of $27.5 billion. It is the world’s second largest private employer (Wal-Mart being the first) with 1.9 million employees including those working for franchises. McDonalds owes its remarkable success to its people. McDonalds has Jim Skinner as its Chief Executive Officer under whose leadership McDonalds has witnessed rapid growth and expansion. Jin Skinner displays the use of transactional leadership style which helped him manage a giant company like McDonalds while ensuring that all business processes are conducted in an ethical manner. Transactional leadership focuses on directing and motivating individuals by appealing to their own self-interest (Hood, 2007). It is based on give and take theory where clear performance expectations and goals are defined and rewards or punishments are decided based on achievement of targets.
McDonalds is recognised as one of the world’s most ethical organisations and its CEO Jim Skinner has been honoured with awards like ‘Most Respected CEO’ and ‘Executive of the year’. Jim Skinner has developed his leadership skills through years of hard work and industry experience. He possesses all the characteristics of an ethical leader and is recognised for his ethical decision making. He has made McDonald’s a highly customer-oriented organisation that lives by its core values. As an ethical leader Jim Skinner has articulated and embodied the values and purpose of the organisation (Howell, 2012). His ethical management has helped him keep the interest of organisations stakeholders and community over self-interest. He is concerned about the growth and development of his employees and provide them ample opportunity to realise their full potential. He was the key decision maker behind the National Hiring Day program wherein 60,000 Americans were offered much-needed jobs.
Jim Skinner was a practitioner of deontological theory of ethics wherein he adhered to his obligations and duties while making ethical decision. This ethical principle helped him ensure that customer needs are satisfied in the most effective manner whatever be the situation. His tough decision making has supported McDonalds overcome different challenges while serving the community. Jim Skinner through his ethical management helped ensuring that decisions at McDonalds are made in most ethical manner.
Trust, integrity, relationships and transparency are the key elements of ethical leadership which is perfectly visible culture of Zappos which is created by its CEO Tony Hsieh. Started in year 1999 by Nick Swinmurn Zappos in year 2001 had quadrupled its yearly sales making it to $8.6 million. The company is based in Las Vegas, Nevada and is an online retailer of shows and clothes. Tony Hsieh is the key force behind the remarkable success if the company and development of an ethical culture with Zappos. Tony Hsieh is an excellent example of authentic leadership which is a relational process developed by leaders and followers. Authentic leadership comprises of leaders who know and understand themselves, are aware for their values and believes and lives by their values through honest and open communication with followers (Hellriegel & John W. Slocum, 2011). Authentic leaders use their good character to win trust and respect from their followers. Their ability to build credibility and skill to encourage and respect diverse viewpoints make them people leader (Fox, 2007). They can use both autocratic and participative leadership style as demanded by the situation. Primary focus of authentic leaders like Tony Hsieh is to foster collaborative and relation of trust with employees, customers, stakeholders and shareholders. Tony Hsieh through his effective leadership has not only been able to increase sales figures exponentially but has also developed an organisational culture that has secured Zappos a high position on the Best Companies to Work For list published by Fortune magazine every year (PennState, 2013). Tony Hsieh is recognised worldwide as the most successful CEO whose complete focus is on vision and not money.
Ethics is all about deciding what is right and what is wrong (Keen, 2012). A number of ethical theories have been formulated owing to rapid evolution in ethics education. All ethical theories can be divided into two brand categories namely; teleological theories that are related to consequence of an action and deontological theories which are related to obligations and duties (Rezaee, 2009). Teleological theories further comprises of three ethical approached based on which consequences are viewed as ethical or not. Ethical egoism wherein leader is concerned about his own interest, utilitarianism wherein leader is concerned about his own interest as well as interest of large number of people and altruism where leader is ready to compromise his own interest in order meet the interest of other individuals (Murithi, 2009). Tony Hsieh is an example of altruism wherein he is always been ready to compromise his own interest in order to ensure that an ethical culture is retained within the organisation. He is a people-oriented leader who is greatly concerned about the growth and development of his employees and thus provides them ample opportunities to realise their full potential.
It owes to his strong decision making skills and ethical management that Zappos today considered among some of the world’s most ethical organisations. As an effective leader his complete focus was to use all his powers associated with his position of a CEO to ensure that his entire employee, customers and other stakeholders are happy. He the founder of company named Delivering Happiness which help people identify their passion and convert them into profitable businesses. Zappos under the effective leadership, ethical management and tough decision making skills of Tony Hsieh is famous for an unmatched great employee culture that enable them deliver high quality customer service. Thus, Zappos is another example of an organisation where ethical leaders play a vital role in ensuring that decisions are made ethically. An organisation cannot succeed without four pillars of leadership, ethics, people and decision making. Effective leaders must ensure that all these four success elements are in place and work effectively to achieve desired goals and objectives.
Conclusion
Ethical behaviour within an organisation cannot be promoted by implementing any ideal solution rather it is only possible by continuous positive approach by its ethical leaders. Ethical behaviour is developed when they are practised by leaders and modelled by their followers. It is important to ensure that ethical decision making is adequately rewarded and acknowledged. Ethical leadership focuses on leading employees based on trust and respect so that good relationships are developed. They are not only concerned about the growth of the organisation but about the growth of the organisation as a whole. It is important to ensure that ethical leaders live by the values they wish to communicate. Howard Schultz, CEO Starbucks; Jim Skinner CEO McDonald’s and Tony Hsieh, CEO Zappos are some of the best examples of ethical leaders who not only had the power to live by ethical values but also the inherit charisma to influence their followers to live by ethical values shown by them.
They have not only enabled their respective organisations achieve remarkable success and emerge as market leaders in their respective industry of business but have also ensured that they perform their duties most ethically towards their customer, employees and the society they live in. They have ensured that all their decisions are made keeping the interest of their stakeholders and community in mind. These leaders possess all the characteristics displayed by ethical leaders and thus serve as an example for other leaders and their actions are followed by other world leaders. Effective leadership, ethics and ability to make tough decisions have enabled them create an organisational culture that itself serve as a competitive advantage against rivals and help them retain their market position.
References
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Armstrong, M., & Stephens, T. (2005). A Handbook of Management and Leadership: A Guide to Managing for Results. London: Kogan Page Publishers.
Bass, B. M., & Bass, R. (2009). The Bass Handbook of Leadership: Theory, Research, and Managerial Applications. New York: Simon and Schuster.
Beerel, A. (2009). Leadership and Change Management. London: Sage.
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Ferrell, O. C., Fraedrich, J., & Ferrell. (2012). Business Ethics: Ethical Decision Making & Cases. New York: Cengage Learning.
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Gallo, C. (2013). What Starbucks CEO Howard Schultz Taught Me About Communication And Success. Retrieved 2015, from Forbes: https://www.forbes.com/sites/carminegallo/2013/12/19/what-starbucks-ceo-howard-schultz-taught-me-about-communication-and-success/
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