Responsible Leadership Systems: An Empirical Analysis of Integrating Corporate Responsibility into Leadership Systems (Markt- und Unternehmensentwicklung Markets and Organisations)

Several global crises such as climate change, the global financial breakdown and corporate corruption scandals have diminished the legitimacy of business. One possible answer to this situation is the concept of corporate responsibility (CR), a voluntary approach aiming at the integration of economic with social, ethical and environmental goals. Erik G. Hansen addresses this gap. Rooted in literature on CR and formal leadership systems he develops a conceptual "Responsible Leadership Systems" framework structuring leadership instruments and tools into seven interconnected key areas. The framework is applied in qualitative multi-case studies in seven of the largest German stock corporations. The results show that leading companies increasingly make CR part of their strategies, structures, management instruments and tools. Cover 1 Responsible Leadership Systems: An Empirical Analysis of Integrating Corporate Responsibility into Leadership Systems 4 Copyright 5 9783834923868 5 Foreword 8 Acknowledgements 10 Brief Table of Contents 12 Table of Contents 14 Figures 20 Tables 24 Abbreviations 28 1 Point of Departure 30 2 Research Gap and Research Objective 32 3 Outline of Thesis 34 Part I. FOUNDATIONS OF CORPORATE RESPONSIBILITY 36 4 An Introduction to Corporate Responsibility 37 4.1 Overview 37 4.2 Corporate Social Responsibility 38 4.2.1 Categories of Responsibilities 39 4.2.2 Corporate Community Involvement 41 4.3 Stakeholder Theory 45 4.3.1 The Stakeholder Model of the Firm 45 4.3.2 Stakeholder Identity 47 4.4 Sustainable Development and Corporate Sustainability 49 4.5 Terminology Used in Present Work 53 4.6 Issues of CR 54 5 Motivation for CR 57 5.1 A Meta-Analysis of Drivers and Barriers for CR 57 5.1.1 Barriers of CR 57 5.1.2 Drivers for CR 58 5.2 Moral Case and Business Case 60 5.2.1 The Moral Case 61 5.2.2 The Business Case 61 5.2.3 Drivers of the Business Case 62 5.2.3.1 Markets, Innovation, and Competitiveness 62 5.2.3.2 Employee Satisfaction and Talent Attraction 63 5.2.3.3 Pressure Groups and License to Operate 64 5.2.3.4 Reputation and Risk Management 65 5.2.3.5 Financial Performance 65 5.2.3.6 Capital Markets 67 5.2.4 Critique of the Business Case Perspective 68 6 Organisational Learning for CR 69 7 Summary of Part I 72 Part II. TOWARDS A RESPONSIBLE LEADERSHIPSYSTEMS FRAMEWORK 74 8 The Interface of CR, Leadership, and Organisational Culture 75 8.1 CR and Leadership 75 8.2 Leadership Context as Enabler for CR 78 8.3 The Generic Leadership Systems Framework 81 9 Core Fields of the RLS Framework 85 9.1 Leadership as a Day-to-Day Interactive Process 85 9.1.1 Values Statements 86 9.1.1.1 The Role of Value Statements 86 9.1.1.2 The Content of Values 86 9.1.2 Business Codes 89 9.1.2.1 Business Level 89 9.1.2.2 Meso and Macro Level 91 9.1.3 Communication and Dialogue 94 9.1.3.1 Internal and External Communication 94 9.1.4 Goal Setting and Decision Making 99 9.1.4.1 Organisational Goal Setting 99 9.1.4.2 Individual Goal Setting 100 9.1.4.3 Decision-making Rules and Tools 102 9.1.5 Summary 103 9.2 Leadership Metrics 103 9.2.1 Performance Metrics on the Organisational Lev 104 9.2.1.1 Individual Performance Indicators 107 9.2.1.2 Overall Performance Indicators 110 9.2.2 Strategic Performance Measurement Systems 118 9.2.2.1 Balanced Scorecard Approaches 118 9.2.2.2 EFQM Excellence Model 120 9.2.3 Performance Metrics on the Individual Level 122 9.2.4 Summary 125 9.3 Leadership Deployment 126 9.3.1 Monetary Incentives and Compensation 127 9.3.1.1 Incentives and Compensation Based on CR Metrics 127 9.3.1.2 Long-term Incentives 129 9.3.2 Non-Monetary Incentive and Reward Systems 129 9.3.2.1 Award Schemes 130 9.3.2.2 Leadership Groups 131 9.3.2.3 Employee Community Involvement 131 9.3.2.4 Career Planning 134 9.3.3 Compliance Mechanisms 135 9.3.4 Summary 137 9.4 Selection of Leaders and Leadership Development 138 9.4.1 The Selection Subsystem: Selecting Responsible Leaders 138 9.4.1.1 Recruiting and Selection 138 9.4.1.2 Induction 139 9.4.2 The Development Subsystem: Developing Responsible Leaders 139 9.4.2.1 Horizontal Development 144 9.4.2.2 Vertical Development 146 9.4.2.3 Service Learning 149 9.4.3 Provider of Development Programmes 153 9.4.3.1 Overview 153 9.4.3.2 CR Development by Educational Institutions 154 9.4.4 Summary 156 10 Contextual Fields of the RLS Framework 158 10.1 Strategy 158 10.1.1 Formal Instruments of Strategy 159 10.1.1.1 Vision and Mission Statements 160 10.1.1.2 Strategy Hierarchy 162 10.1.2 Challenges 164 10.1.3 Summary 165 10.2 Structure 165 10.2.1 Organisational Structures 166 10.2.1.1 Executive Board Level 168 10.2.1.2 Corporate Level 169 10.2.1.3 Functional Level 171 10.2.2 Challenges 172 10.2.3 Summary 173 10.3 Culture 174 10.3.1 Corporate Culture 174 10.3.2 Challenges 178 10.3.3 Summary 179 11 Summary of Part II 181 Linkages Between Contextual Fields and Core Fields 182 Linkages Within Each Level 182 Linkages Between Overall Framework and Individual Leaders 182 Part III. RESPONSIBLE LEADERSHIP SYSTEMS IN MULTINATIONAL CORPORATIONS 184 12 Method 185 12.1 Research Design 185 12.2 Selection of Sample 187 12.2.1 Pilot Cases 187 12.2.2 Final Cases 188 12.3 Data Collection 190 12.3.1 Documentary Analysis 190 12.3.2 Semi-structured Interviews 191 12.4 Data Analysis 193 12.4.1 Qualitative Data Analysis 193 12.4.2 Data Evaluation and Scoring 193 13 Results 197 13.1 Overview of Results 197 13.2 Core Fields of Responsible Leadership Systems 200 13.2.1 Leadership as a Day-to-Day Interactive Process 200 13.2.1.1 Values and General Guidelines 201 13.2.1.2 Business Codes 202 13.2.1.3 Communication 203 13.2.1.4 Goal Setting and Decision Making 206 13.2.2 Leadership Metrics 208 13.2.2.1 Organisational Metrics 209 13.2.2.2 Strategic Performance Measurement Tools 215 13.2.2.3 Individual Performance Evaluation 218 13.2.3 Leadership Deployment 219 13.2.3.1 Monetary Incentives and Rewards 219 13.2.3.2 Non-monetary Incentives and Rewards 221 13.2.3.3 Compliance 223 13.2.4 Selection of Leaders and Leadership Development 224 13.2.4.1 Selection of Leaders 225 13.2.4.2 Horizontal Leadership Development 226 13.2.4.3 Vertical Development and Service Learning 229 13.2.5 Summary of Core Fields 232 13.3 Contextual Fields of Responsible Leadership Systems 233 13.3.1 Strategy 233 13.3.1.1 Vision and Mission Statements 234 13.3.1.2 Formulated Strategies 235 13.3.2 Structure 240 13.3.2.1 Main Organisational Structures 241 13.3.2.2 Additional Organisational Structures 246 13.3.3 Culture 247 13.3.4 Summary of Contextual Fields 248 13.4 Overall Responsible Leadership Systems 249 13.4.1 Interdependencies Between the Core Fields 249 13.4.2 The Relation between Contextual Fields and Core Fields 252 13.4.3 Responsible Leadership Systems and CR Performance 254 13.4.4 Pathways to Responsible Leadership Systems 257 13.4.5 Most Important Future Trends 259 14 Discussion 262 14.1 Core Fields 262 14.1.1 Interactive Process 262 14.1.2 Leadership Metrics 263 14.1.3 Leadership Deployment 265 14.1.4 Selection of Leaders and Leadership Development 265 14.2 Contextual Fields 267 14.2.1 Raising Integration of Strategy and CR 267 14.2.2 Critical Aspects of Portfolio Strategies 268 14.2.3 Organisational Structures 269 14.3 Overall Systems 271 14.3.1 Relationships 271 14.3.2 Scope of Solutions 273 Part IV. SUMMARY AND OUTLOOK 276 15 Summary and Major Findings 277 16 Implications for Theory 280 The Responsible Leadership Systems Framework 280 Distinguishing Performance Metrics on Individual and Organisational Level 280 Distinguishing Horizontal and Vertical Development 280 Strategy Follows Structure 281 Using Qualitative Research Methods 281 17 Implications for Management 283 RLS Performance is Linked to CR Performance and Competitive Advantage 283 Leveraging the RLS Toolbox 283 Balancing the Elements of the RLS Framework 286 Nurturing Cross-Functional and Cross-Business Collaboration 287 Improving Collaboration of CR and HR Functions 287 18 Limitations and Further Research 288 18.1 Methodological 288 18.2 Conceptual 289 Core Fields 289 Contextual Fields 289 Concept of CR 291 18.3 A Map for Research in Responsible Leadership Systems 291 Micro Levels (Core Fields) 291 Meso Level (Contextual Fields) 292 Macro Level 292 18.4 Embarking Towards New Research Fields 294 Systems and Individuals 295 Sustainability-Oriented Innovation 295 CR Ontology 296 19 Outlook 297 References 298 Annexes 342 A.1 Overview of Interviews Conducted 342 A.2 Interview Guideline for CR managers 344 Index 352 9783834923868 Cover......Page 1 Responsible Leadership Systems: An Empirical Analysis of Integrating Corporate Responsibility into Leadership Systems......Page 4 9783834923868......Page 5 Foreword......Page 8 Acknowledgements......Page 10 Brief Table of Contents......Page 12 Table of Contents......Page 14 Figures......Page 20 Tables......Page 24 Abbreviations......Page 28 1 Point of Departure......Page 30 2 Research Gap and Research Objective......Page 32 3 Outline of Thesis......Page 34 Part I. FOUNDATIONS OF CORPORATE RESPONSIBILITY......Page 36 4.1 Overview......Page 37 4.2 Corporate Social Responsibility......Page 38 4.2.1 Categories of Responsibilities......Page 39 4.2.2 Corporate Community Involvement......Page 41 4.3.1 The Stakeholder Model of the Firm......Page 45 4.3.2 Stakeholder Identity......Page 47 4.4 Sustainable Development and Corporate Sustainability......Page 49 4.5 Terminology Used in Present Work......Page 53 4.6 Issues of CR......Page 54 5.1.1 Barriers of CR......Page 57 5.1.2 Drivers for CR......Page 58 5.2 Moral Case and Business Case......Page 60 5.2.2 The Business Case......Page 61 5.2.3.1 Markets, Innovation, and Competitiveness......Page 62 5.2.3.2 Employee Satisfaction and Talent Attraction......Page 63 5.2.3.3 Pressure Groups and License to Operate......Page 64 5.2.3.5 Financial Performance......Page 65 5.2.3.6 Capital Markets......Page 67 5.2.4 Critique of the Business Case Perspective......Page 68 6 Organisational Learning for CR......Page 69 7 Summary of Part I......Page 72 Part II. TOWARDS A RESPONSIBLE LEADERSHIPSYSTEMS FRAMEWORK......Page 74 8.1 CR and Leadership......Page 75 8.2 Leadership Context as Enabler for CR......Page 78 8.3 The Generic Leadership Systems Framework......Page 81 9.1 Leadership as a Day-to-Day Interactive Process......Page 85 9.1.1.2 The Content of Values......Page 86 9.1.2.1 Business Level......Page 89 9.1.2.2 Meso and Macro Level......Page 91 9.1.3.1 Internal and External Communication......Page 94 9.1.4.1 Organisational Goal Setting......Page 99 9.1.4.2 Individual Goal Setting......Page 100 9.1.4.3 Decision-making Rules and Tools......Page 102 9.2 Leadership Metrics......Page 103 9.2.1 Performance Metrics on the Organisational Lev......Page 104 9.2.1.1 Individual Performance Indicators......Page 107 9.2.1.2 Overall Performance Indicators......Page 110 9.2.2.1 Balanced Scorecard Approaches......Page 118 9.2.2.2 EFQM Excellence Model......Page 120 9.2.3 Performance Metrics on the Individual Level......Page 122 9.2.4 Summary......Page 125 9.3 Leadership Deployment......Page 126 9.3.1.1 Incentives and Compensation Based on CR Metrics......Page 127 9.3.2 Non-Monetary Incentive and Reward Systems......Page 129 9.3.2.1 Award Schemes......Page 130 9.3.2.3 Employee Community Involvement......Page 131 9.3.2.4 Career Planning......Page 134 9.3.3 Compliance Mechanisms......Page 135 9.3.4 Summary......Page 137 9.4.1.1 Recruiting and Selection......Page 138 9.4.2 The Development Subsystem: Developing Responsible Leaders......Page 139 9.4.2.1 Horizontal Development......Page 144 9.4.2.2 Vertical Development......Page 146 9.4.2.3 Service Learning......Page 149 9.4.3.1 Overview......Page 153 9.4.3.2 CR Development by Educational Institutions......Page 154 9.4.4 Summary......Page 156 10.1 Strategy......Page 158 10.1.1 Formal Instruments of Strategy......Page 159 10.1.1.1 Vision and Mission Statements......Page 160 10.1.1.2 Strategy Hierarchy......Page 162 10.1.2 Challenges......Page 164 10.2 Structure......Page 165 10.2.1 Organisational Structures......Page 166 10.2.1.1 Executive Board Level......Page 168 10.2.1.2 Corporate Level......Page 169 10.2.1.3 Functional Level......Page 171 10.2.2 Challenges......Page 172 10.2.3 Summary......Page 173 10.3.1 Corporate Culture......Page 174 10.3.2 Challenges......Page 178 10.3.3 Summary......Page 179 11 Summary of Part II......Page 181 Linkages Between Overall Framework and Individual Leaders......Page 182 Part III. RESPONSIBLE LEADERSHIP SYSTEMS IN MULTINATIONAL CORPORATIONS......Page 184 12.1 Research Design......Page 185 12.2.1 Pilot Cases......Page 187 12.2.2 Final Cases......Page 188 12.3.1 Documentary Analysis......Page 190 12.3.2 Semi-structured Interviews......Page 191 12.4.2 Data Evaluation and Scoring......Page 193 13.1 Overview of Results......Page 197 13.2.1 Leadership as a Day-to-Day Interactive Process......Page 200 13.2.1.1 Values and General Guidelines......Page 201 13.2.1.2 Business Codes......Page 202 13.2.1.3 Communication......Page 203 13.2.1.4 Goal Setting and Decision Making......Page 206 13.2.2 Leadership Metrics......Page 208 13.2.2.1 Organisational Metrics......Page 209 13.2.2.2 Strategic Performance Measurement Tools......Page 215 13.2.2.3 Individual Performance Evaluation......Page 218 13.2.3.1 Monetary Incentives and Rewards......Page 219 13.2.3.2 Non-monetary Incentives and Rewards......Page 221 13.2.3.3 Compliance......Page 223 13.2.4 Selection of Leaders and Leadership Development......Page 224 13.2.4.1 Selection of Leaders......Page 225 13.2.4.2 Horizontal Leadership Development......Page 226 13.2.4.3 Vertical Development and Service Learning......Page 229 13.2.5 Summary of Core Fields......Page 232 13.3.1 Strategy......Page 233 13.3.1.1 Vision and Mission Statements......Page 234 13.3.1.2 Formulated Strategies......Page 235 13.3.2 Structure......Page 240 13.3.2.1 Main Organisational Structures......Page 241 13.3.2.2 Additional Organisational Structures......Page 246 13.3.3 Culture......Page 247 13.3.4 Summary of Contextual Fields......Page 248 13.4.1 Interdependencies Between the Core Fields......Page 249 13.4.2 The Relation between Contextual Fields and Core Fields......Page 252 13.4.3 Responsible Leadership Systems and CR Performance......Page 254 13.4.4 Pathways to Responsible Leadership Systems......Page 257 13.4.5 Most Important Future Trends......Page 259 14.1.1 Interactive Process......Page 262 14.1.2 Leadership Metrics......Page 263 14.1.4 Selection of Leaders and Leadership Development......Page 265 14.2.1 Raising Integration of Strategy and CR......Page 267 14.2.2 Critical Aspects of Portfolio Strategies......Page 268 14.2.3 Organisational Structures......Page 269 14.3.1 Relationships......Page 271 14.3.2 Scope of Solutions......Page 273 Part IV. SUMMARY AND OUTLOOK......Page 276 15 Summary and Major Findings......Page 277 Distinguishing Horizontal and Vertical Development......Page 280 Using Qualitative Research Methods......Page 281 Leveraging the RLS Toolbox......Page 283 Balancing the Elements of the RLS Framework......Page 286 Improving Collaboration of CR and HR Functions......Page 287 18.1 Methodological......Page 288 Contextual Fields......Page 289 Micro Levels (Core Fields)......Page 291 Macro Level......Page 292 18.4 Embarking Towards New Research Fields......Page 294 Sustainability-Oriented Innovation......Page 295 CR Ontology......Page 296 19 Outlook......Page 297 References......Page 298 A.1 Overview of Interviews Conducted......Page 342 A.2 Interview Guideline for CR managers......Page 344 Index......Page 352 Not all managers in multinational corporations can be exceptional leaders. Hence, corporations provide their managers with a broad set of instruments, methods and tools to support them in achieving outstanding leadership. These instruments stem from various functions like human resources, controlling, corporate communication, strategic management, and knowledge management and present the building blocks of so called leadership systems. A key question is how leadership systems can be aligned with corporate strategy to reach “leadership excellence” — a question that has been subject to empirical research in the recent years. In 2003, a study at my institute at Technische Universität München has shown that most leadership systems are indeed “excellent” in the way they are derived from the overarching corporate strategy; however, the results have also indicated that leadership systems have only weak ties to topics such as values, ethics, and social responsibilities. The major ethical and environmental crises which many of the multinational corporations have been facing motivated the author to revisit the topic of leadership systems. He roots his understanding in new management concepts such as corporate social responsibility (CSR), corporate sustainability and, more generally, corporate responsibility (CR) and has argued that leadership systems need to go beyond purely economic aspects to also integrate social and environmental aspects. Such a holistic leadership system, the author terms “Responsible Leadership System”. In 2007, the author designed an empirical study labelled “CSR Leadership Study”, whose results are at the core of the present research. Based on literature in corporate responsibility and formal leadership systems Erik G. Hansen develops a conceptual "Responsible Leadership Systems Framework" structuring leadership instruments and tools into seven interconnected key areas. The framework is applied in qualitative multi-case studies in seven of the largest German stock corporations.