Enough is enough. That seems to be the view of the general public when it comes to the great and the not-so-good abusing their power and wealth. In the face of this crisis of confidence, leadership teams are finally getting their act together and realising that transparency and trust are vital business assets in the 21st century.
Professor Colin Mayer, a Criticaleye Thought Leader and Professor of Management Studies at Said Business School, Oxford University, argues that balancing morality with market conduct is a key issue: “Is there a fundamental conflict with the pursuit of profit and integrity? Are we undermined by a shareholder culture and our capitalist system? The answer to all these questions is straightforward: trust.”
Regaining it won’t be easy. Martin Sutton, Group Head of Propriety at Camelot Business Solutions Limited, suggests that executives and non-executive directors need to be aware of the wider socio-economic forces now at play and what these mean for the lives of ordinary people. “I firmly believe that business leaders have to ask themselves how members of their organisation are going to cope with these future prospects… Boards need to be sensitive to how they are perceived in this harsher environment.”
But, given the pressure companies are under to deliver results, is it somewhat fatuous to bring ethics and how an organisation strives to hit its targets into the moral spotlight?
Simon Bicknell, Senior Vice President, Governance, Ethics and Assurance, GlaxoSmithKline, says that trust and integrity must be core to an organisation’s strategy and operations. “It’s not bells and whistles. It is part of the anatomy of the company, part of the culture in which we want to be seen to be operating.”
For this to work, it has to come from the top. “The single clearest thing that is important in an organisation today is the shadow that a leader casts,” continues Simon. “The chief executive officer needs to be utterly credible as the leader of an organisation in everything they do and say. It also has to be done in a way that is completely seen as joined-up with the business so it is not any kind of add on.”
Do the right thing
The confidence this creates ought to improve performance too. Peter Cheese, Chairman of the Institute of Leadership & Management, comments: “Good leadership development should always begin with the notion of building trust. Without trust you cannot expect your team or employees to follow you, be engaged and give their best.”
Gwen Ventris, Former COO, Europe and Executive Director, AEA Technology plc, says: “A lack of trust in senior management can negatively affect the implementation of strategy, company performance, shareholder relationships, employee turnover, customer relationships, recruitment and employee morale generally with direct results on company performance. The issue of trust and ethical behaviour therefore sits at the heart of a business, its leadership style and performance.”
Irrefutable as this may be, the antipathy of the public towards the business community suggests that boardrooms need to work harder at winning hearts and minds. “Many executives are driven by the bottom line in the short-term. It seems astonishing when we hear of an executive who behaves ethically, as it often suggests they are doing so at the expense of the bottom line,” says Rod Lohin, a Senior Lecturer & Executive Director, Michael Lee-Chin Institute for Corporate Citizenship, Rotman School of Management at the University of Toronto in Canada.
A dose of pragmatism is required when assessing questions of trust and running a profitable venture. Clive Ansell, Group Managing Director – Technology, Tribal Group, says: “You need to build a sustainable business with your stakeholders where there is an environment of trust…That being said, in the real world, there is always scope for firms which are seen as tough, almost brutal negotiators, or who build major market power through their own efforts which they then exploit, or for firms with large financial resources which they can lever… Even in most of those instances, however, there still remains an attempt to build trust with employees and some selected stakeholders.”
Failure to take this into account proves counter-productive on a number of levels, not least when poor behaviour becomes a political issue and the question of regulation is raised. Peter says: “What concerns many is that there is little evidence among too many business communities in taking more responsibility themselves and acknowledging their failures in the broadest sense – ie, it is not just about their short-term financial position, as is perhaps demonstrated through executive pay rises off the back of improved performance from saving costs by cutting jobs, versus seeking long-term growth and putting something back into the economy.”
Where excesses do occur, regulators will and are stepping in with varying results. “Regulations become a complex code of do’s and don’ts in order to lay down the law of what is right and wrong and can easily degenerate into mindless obligations,” says Rudi Kindts, an Associate Consultant at Duke Corporate Education and former Group HR Director at British American Tobacco. “A possible outcome is that people simply concern themselves with following rules rather than behaving from deep-rooted ethical motivations.”
In short, you can’t legislate or codify trust. Peter says: “Increasing regulation is happening, but alongside that needs to come other messages that reinforce the wider issues of ethical behaviour and encouraging business leaders to act and take responsibility within their own organisations. This needs to be driven by the arguments that this is good business as well as being good for business.”
Maria Tereza Leme Fleury, another Criticaleye Thought Leader and Dean of Fundação Getulio Vargas (FGV) in Brazil, says: “A business leader has to establish a ‘win-win’ game. In other words, aligning what is expected from each person with the organisation’s goals and objectives. The importance of ‘walk-the-talk’ to create a culture of trust and commitment is paramount.”
The loyalty this can engender could make all the difference. Gwen gives an example from her own leadership career when she had to ask employees to take a 5 per cent pay cut. She reflects: “I engaged all employees in the process of making this decision with a commitment that executives would take a 10 per cent pay cut for the same duration and would give up their bonuses. This was delivered as committed and 99 per cent of employees signed up for the pay cut with no employee fall out.”
Given the volatility in the markets and fluctuations in the fortunes of businesses, it makes sense for boards to ensure relationships are solid with employees, shareholders and, of course, customers as all will be needed to navigate the economic storm. “True leadership is really all about what happens in a crisis and when things go wrong – that is when leaders are tested,” says Gary Kildare, Vice President, HR, Americas, Europe & Asia Pacific for IBM.
It’s a high risk game. Kevin Murray, Chairman of communications firm Bell Pottinger, says: “A brand is a promise. People buy into that and every time you fail to deliver you damage the brand and breakdown trust. In a world that moves at lightning speed, you have to build an organisation that’s agile because one of the ways you’re going to destroy trust is [by] not responding quickly enough.”
Values, principles, ethics, authenticity, trust – call it what you will: if stakeholders are misled or mistreated then reputations can be left in tatters in an environment where forgiveness and patience for authority figures are in short supply.
But get it right and the long-term value is clear for all to see.
Please get in touch if you have any comments about the issues raised here.
I hope to see you soon