PurposeThe paper sets out to explore the leadership processes and dynamics of change management in a fragmented, and resource‐poor, health service in an impoverished rural region in South Africa.Design/methodology/approachThe paper outlines an action research process aimed at assisting the stakeholders of two rural clinics to integrate psychiatric care into the Primary Health Care service that they offer their respective communities. This involved the transformation of existing practices through a form of praxis that involved learning from action and acting on learning.FindingsThe findings of the paper relate to the role of leadership in the facilitation of transformational learning in team‐based social action. Four areas of leadership responsibility are highlighted: the transformation of inappropriate mental models; the development of strategic resilience; the shifting of the locus of control of stakeholders to a more internal position; and the creation of a social environment in which intangible capital resources are generated and leveraged in the collective interest.Research limitations/implicationsThis paper is subject to the limitations of potential bias and distortion in action research. Although the “objective” evidence of the integration of psychiatric services at Pelsrus and Kwanomzamo clinics exists, the portrayal of the learning processes through which this was achieved could have been influenced unwittingly by the authors' own knowledge and other interests.Practical implicationsThe paper endorses the educational importance of work‐based projects through which strong tacit leadership knowledge bases can be developed in health sector personnel.Originality/valueThis paper has attempted to share the effectiveness of work‐ and project‐based learning in district health teams in South Africa. In particular, it has outlined how the learning strategy of the module leverages the team structure of the district health management units in order to create and exploit the social and morale capital resources that are potentially available through such a structure and the covenantal culture that it spawns. Furthermore, an attempt has been made to show how these resources are leveraged in the generation of mission‐pertinent tacit knowledge that is then converted by project stakeholders into explicit knowledge forms that can be used more effectively in framing subsequent strategic action.
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