SBL Module 3: Leadership

Contents
Qualities of Leadership................................................................................................................ 2
MANAGEMENT AND LEADERSHIP ........................................................................................... 2
INSPIRATIONAL VS TRANSACTIONAL LEADERS ....................................................................... 2
SETTING THE TONE .................................................................................................................. 2
FIVE APPROACHES TO LEADERSHIP (JUKL) .............................................................................. 3
STRATEGIC VS MIDDLE MANAGERS ........................................................................................ 3
ENTREPRENEURSHIP ................................................................................................................ 3
INTRAPRENEURSHIP ................................................................................................................ 3
INTRAPRENEURSHIP EXAMPLE: DREAMWORKS ANIMATION................................................. 4
EXAM FOCUS............................................................................................................................ 4
Leadership and Organisational Culture....................................................................................... 5
DEFINING CULTURE ................................................................................................................. 5
INFLUENCES ON CULTURE ....................................................................................................... 5
THE CULTURAL WEB ................................................................................................................ 5
CHANGE MANAGEMENT ......................................................................................................... 6
FIVE STYLES OF CHANGE MANAGEMENT (BALOGUN AND HOPE HAILEY) ............................. 6
EXAM FOCUS............................................................................................................................ 7
Professionalism, Ethical Codes and Public Interest .................................................................... 8
Tuckers 5 Question Approach ................................................................................................. 8
Ethical frameworks .................................................................................................................. 8
ACCA’s Ethical Framework....................................................................................................... 8
Threats to ethical behaviour ................................................................................................... 9
The public interest ................................................................................................................... 9
Fraud ...................................................................................................................................... 10
Bribery and corruption .......................................................................................................... 10

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Qualities of Leadership
MANAGEMENT AND LEADERSHIP

Management and leadership are not the same thing.

Management involves getting things done through other people and is focused on action. It is
about ‘doing things right’.

Leadership means to create a vision that people can buy into by inspiring and motivating people.
It is about ‘doing the right things’

Leaders inspire and influence people to achieve the objectives; managers take action (such as
ensuring resources are available, ensuring action is producing results, and taking corrective
action) to ensure the objectives are met.

INSPIRATIONAL VS TRANSACTIONAL LEADERS

Different situations call for different types of leaders.

An inspirational (charismatic/visionary/transformational) leader is particularly important in

challenging times or periods of change.

This type of leader uses motivation and support as their mechanisms of control.

Transactional (instrumental) leaders are more suited to stable times. The mechanisms of
control used by these leaders are supervision and structure, and reward and punishment. This
type of leader performs a role which is similar to that of high level management.

SETTING THE TONE

Leaders set the tone and culture of organisations. As such they have an ethical responsibility to
be an example to others. They must behave and be seen to behave in an ethical manner and
embody the values of the organisation. They must set this example if the rest of the
organisation is to follow.

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FIVE APPROACHES TO LEADERSHIP (JUKL)

1. Trait approach: Suggests good leaders possess certain characteristic. However, research
on this has been inconclusive and this approach has been mostly discredited
2. Behaviour approach: looks at how leaders cope with the demands and constraints of
their job and how appropriate their reaction is on the resulting behaviours.
3. Power/influence approach: determines effectiveness of a leader by looking at how
much power they have and how they exercise that power to help the organisation reach
its goals
4. Situational/contingency approach: the skills, characteristics and behaviour required of
a leader will be dependent on the situation
5. Integrative approach: combination of two or more of the above

STRATEGIC VS MIDDLE MANAGERS

Strategic managers:

 Set the strategic direction of the organisation

 Create a vision
 Communicate the vision
 Motivate the workforce and ensure their personal objectives align with the vision
 Ensure resources are available

Middle managers:

 Implement the vision

 Lead their local teams to help the organisation meet its overall goals

ENTREPRENEURSHIP

Entrepreneurs are people who are skilled at identifying and then exploiting opportunities by
acquiring and directly resources effectively and creatively.

This means that they are able to identify a need that is not currently met, and developing ways
in which that need could be met.

INTRAPRENEURSHIP

Intrapreneurship is the term used to describe environments in large organisations which allow
entrepreneurial activity to be developed within that organisation.

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Organisations can achieve this by:

 Increasing autonomy
 Allowing employees to take flexible and varied approaches to their work
 Accepting a degree of failure to allow new ideas to be trialled
 Rewarding risk taking

This encourages innovation within the company which can be beneficial in allowing it to quickly
respond to changes in the environment.

Problems can arise however where there is disagreement or courses of action are taken which
are in conflict with each other.

INTRAPRENEURSHIP EXAMPLE: DREAMWORKS ANIMATION

Dreamworks Animation encourages intrapreneurship by offering free classes to their

employees covering many aspects related to the business such as drawing, animation, script
development and ideas pitching.

The employees are actively encouraged to pick their ideas to the real executive team of the
company who will not only listen to their ideas by will even put them into development if the
required standards are met.

Google and Facebook are other examples of well-known organisations that actively encourage
intrapreneurship. Further information can be found online if you wish to see more examples of
how this can be achieved in the real world.

EXAM FOCUS

In the exam you may need to determine the appropriateness of the style of leadership that is
currently in place and suggest ways in which this could be improved to better meet the needs
of the organisation.

Jukl’s perspectives can be a helpful tool in analysing the leader and leadership style currently in
place.

Knowledge of intrapreneurship, and how this can assist a company in its response to changing
external environments, can help you to decide if the company could benefit from taking a
looser approach in its management style.

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Leadership and Organisational Culture
DEFINING CULTURE

Culture is defined as “The way we do things around here”. The culture of an organisation
reflects what it is like to work there and the values and principles that guide it. Culture and
strategy are closely linked and one will often influence the other.

INFLUENCES ON CULTURE

Organisational culture is influenced by a wide variety of factors:

 The country in which the organisation operates

 The priorities and values of the founding members
 The history of the organisation
 The attitude of the current leaders
 The structure of the organisation

THE CULTURAL WEB

Routines &
rituals

Power
Control systems
structures

Paradigm

Organisational Symbols
structure

Stories & myths

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Paradigm: Assumptions, beliefs and priories of the organisation. It summarises and reinforces
the rest of the cultural web.

Control systems: Organisations are controls through numerous systems such as financial
systems, quality systems, rewards and disciplinary procedures. The priorities of the
organisation can be demonstrated by considering what areas are controlled closest.

Routines and rituals: daily behaviour and actions that are considered ‘acceptable’ as well as
celebrations and other office gatherings.

Symbols: logos, offices, dress codes, language and titles.

Stories and myths: the people and past events talked about in an organisation often illustrate
the values of the organisation and the behaviour it encourages

Organisational structure: The way the organisation is physically structured, such as functions,
departments and divisions. The organisational structure often reflects the power structure.

Power structures: considers who holds the real power in the organisation. This often follows
hierarchy, but there are exceptions. Talent, experience and expertise can also give significant
power to others within an organisation

CHANGE MANAGEMENT

Times of change present the greatest challenges for organisational leaders. A change management style will
need to be adopted which reflects the specific circumstances in which the change is being made.

FIVE STYLES OF CHANGE MANAGEMENT (BALOGUN AND HOPE HAILEY)

Education and communication: explaining why change is needed

Collaboration and participation: involving employees in determining solutions. If done

correctly, this should lead to an increased sense of ownership, with employees more likely to
buy into the change

Intervention: bringing in a change agent from outside the company to lead the change process

Direction: Management impose the change on the workforce with no collaboration. While this
approach can create employee resentment, it is sometime necessary if change is imposed on an
organisation externally, for example by a regulator.

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Coercison: Forcing change through threats. This approach is not recommended unless it is the
only option in the circumstances.

Usually a combination of two or more of these approaches will be adopted, and the most
relevant approach may differ at various points in the change process.

EXAM FOCUS

In the exam you may need to apply the cultural web model to assess the culture in the
organisation. Alternatively, you might use elements of it to back up assertions you otherwise
make in relation to culture.

You may need to determine which styles of change management would be best in the situation
described in the case study.

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Professionalism, Ethical Codes and Public Interest
Ethics is involved with right and wrong.

When faced with an ethical dilemma in the exam, application of ethical framework can help you
form your conclusions.

Tuckers 5 Question Approach

1. Is it profitable? – if a course of action will not be profitable, it should not be pursued

2. Is it legal? – illegal actions should be dismissed immediately
3. Is it fair for all involved? – how will the various stakeholders be affected? Is it unfairly
weighted towards one stakeholder?
4. Is it right? – is the course of action inherently right or wrong?
5. Is it sustainable? – does the course of action compromise the future?

Ethical frameworks

Can be either rules or principles based.

Rules based: specific set of rules that must be complied with.

Principles based: offer broad concepts that can be applied in all circumstances.

ACCA’s Ethical Framework

All members and students of the ACCA are bound by this principles-based ethical code.

Principle Explanation
Integrity Carrying out your work in an honest and straightforward manner
Objectivity Acting without bias
Unless there is a legal obligation, or disclosure is in the public
Confidentiality interest, information that you have become aware of through the
course of your work should not be disclosed to others.
Professional
Only taking on work for which you are suitably qualified and
competence and due
experienced
care
Behaving professionally and courteously and not acting in such a
Professional manner that it brings the profession into disrepute. Acting in the
behaviour public interest is also part of the professional behaviour required of
accountants.

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Threats to ethical behaviour

Threat Explanation Safeguard

Supporting the position of a client, e.g.
promoting a client that is about to float on
Advocacy the stock exchange, therefore potentially
compromising future (real or perceived)
objectivity.
Reviewing your own work, e.g. an internal
Self-review auditor reviewing a system they helped to
implement
Being in a position where you are personally
impacted by decisions, for example being a
Self-interest
major shareholder in a supplier to your
business.
Being threatened, e.g. your manager
threatening to dismiss you if you do not
undertake action you know to be wrong.
Intimidation
Auditors may be intimidated if they are
threatened with not being reappointed if
they do not issue an unqualified report
Being linked to a client organisation in some
way that may compromise your objectivity,
Familiarity
such as your brother being the finance
director of a client you are auditing.
Avoiding acting as an advocate
of a client.
Using different teams to carry
out the work to preserve
independence
Declaring the self-review threat
and declining to undertake
such work
Disclosure of any potential
threats (register of interests)
Dispose source of threat (e.g.
sell shares)
Ensure you have no dealings
with the party with whom you
have an interest (not being
involved in decisions relating to
that supplier)
Whistleblowing process
Register of interests
Ensuring the work is carried
out by a different member of
the team.

The public interest

Accountants have a duty to act in the public interest.

The IFAC definition of the public interest is the “collective wellbeing of community of people
and institutions”.

If an accountant becomes party to some information that it would be in the public interest for it
to be known, it is appropriate for the professional ethic of confidentiality to be broken and this
information disclosed.

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This should only be done following legal advice and/or guidance from the professional body.

Fraud

Fraud is a deliberate and dishonest action carried out to create an advantage for the
perpetrator.

In order for fraud to occur, three conditions must be in place:

Opportunity: The chance has to present itself, for example weak controls

Pressure: The perpetrator needs to be under some kind of pressure (eg financial pressure) to
make them consider acting in a way they would otherwise not consider (ie illegally)

Rationalisation: The perpetrator will convince themselves that they are not doing anything
wrong; they will justify it to themselves (eg they deserve it for treating me badly)

In order to prevent/minimise fraud, action should be taken to reduce the chances of these
conditions arising, such as establishing strong controls, screening new starters properly, and
treating and paying staff fairly.

Organisations should clearly state in their fraud policy the action that will be taken against staff
found to have committed fraud.

Bribery and corruption

Bribery: offering, or accepting, inducements to obtain inappropriate influence. Note that the
person being bribed, is also guilty of bribery, not just the party offering the bribes.

Corruption: carrying out business dishonestly and abusing power.

For the purposes of the exam, bribery and corruption are not acceptable.

There are two elements to preventing/minimising bribery and corruption:

Culture and environment: ensuring the right people are employed within an organisation via
robust recruitment and training, supported by a clear, well communicated code of conduct

Establishing procedures such as whistleblowing and regular reviews of controls to help both
prevent and detect fraud, bribery and corruption.

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