In this discussion, you will explain how effective leaders apply insight and for

Question

In this discussion, you will explain how effective leaders apply insight and foresight effectively in making ethical leadership decisions when confronted by an information gap.

According to R.K. Greenleaf, effective leaders have a “sense for the unknowable” and “foresee the unforeseeable.” These attributes will also benefit your team as it completes the course group project.

a. How does an effective leader apply insight and foresight to decision-making?

b. What are the roles of trust and ethics in those decisions a leader makes when confronted by an information gap? (An information gap is the chasm between information needed to make a decision and information that is cost-effectively available for that purpose.)

c. How can you apply insight and foresight to help your team assess a public company’s investment merits and creditworthiness?

Explanation / Answer

a.

Every leader must master three aspects of visionary sight –
1.    Hindsight: The ability to reflect and learn from the past
2.    Insight: The ability to interpret and respond to the present
3.    Foresight: The ability to predict and prepare for the future

But while every leader must operate in all three aspects of vision, which focus they rely on most will have far-reaching implications for the organisations they build.

Insight Leadership: Tends to emphasise the value of tactics and reality. They look at the future as an extrapolation of current events and trends. Finely tuned to what is happening around them, they hope that by responding correctly now they will experience success in the future. Although they’re not spending a lot of time looking backwards, they’re also not spending much time looking ahead. The focus becomes about where we are now and what step we could take next. For this leader the old adage not to “climb the ladder only to find it’s leaning across the wrong wall” contains an important warning.

Foresight Leadership: Tends to emphasise possibilities and innovation. They look at the future as uncharted territory or a clean slate. Although they reflect on the past and respond to the present, they are much more concerned with preparing for the future. They drive their organisations with glances in the rear vision mirror and awareness of their surroundings but more than anything else they have clear focus on where they are going and what’s coming up on the road ahead.

b.

The info-gap approach relies on the principle of robust satisficing. The principle of satisficing is one in which the planner is not aiming at best outcomes. Instead of maximizing utility or minimizing worst outcomes, the planner aims to achieve an outcome that is good enough. For example, the planner tries to assure that loss is not greater than an acceptable level, or growth is no less than a required level. When choosing between alternative policies, the robust-satisficing planner will choose the policy that will satisfy the critical requirement over the greatest spectrum of models.

c.

Following are some of the factors lenders consider when evaluating a public company investment merits and creditworthiness:

Credit worthiness. A history of trustworthiness, a moral character, and expectations of continued performance demonstrate a debtor's ability to pay. Creditors give more favorable terms to those with high credit ratings via lower point structures and interest costs.

Size of debt burden. Creditors seek borrowers whose earning power exceeds the demands of the payment schedule. The size of the debt is necessarily limited by the available resources. Creditors prefer to maintain a safe ratio of debt to capital.

Loan size. Creditors prefer large loans because the administrative costs decrease proportionately to the size of the loan. However, legal and practical limitations recognize the need to spread the risk either by making a larger number of loans, or by having other lenders participate. Participating lenders must have adequate resources to entertain large loan applications. In addition, the borrower must have the capacity to ingest a large sum of money.

Frequency of borrowing. Customers who are frequent borrowers establish a reputation which directly impacts on their ability to secure debt at advantageous terms.

Length of commitment. Lenders accept additional risk as the time horizon increases. To cover some of the risk, lenders charge higher interest rates for longer term loans.

Social and community considerations. Lenders may accept an unusual level of risk because of the social good resulting from the use of the loan. Examples might include banks participating in low-income housing projects or business incubator programs.

Value of investments. what are the nature of investments made? How safe and liquid are those investments. what is the current value etc.

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