Looking Back on 2011

The sharpest minds in business have long known that just holding out and hunkering down for market conditions to return to ‘normal’ was no real strategy at all. Leadership styles are evolving to encourage agility in decision-making in order to create value and build better businesses.

Looking back at some of this year’s dominant themes, it’s apparent that although mistakes will be ruthlessly punished in the current environment, the rewards can be enormous for taking risks and getting decisions right. Abbas Hussain, President of Emerging Markets for GlaxoSmithKline, says: “Effective leaders are the ones who can see the future before people around them and then take the organisation on a journey towards it. One thing that the crisis has taught is that your business model should be robust enough that it can weather these blips. At the end of the day, it’s about anticipating change. This does not and will not stop with a recession.”

A CEO has to carefully judge when to step in or to let others take the lead. David Brennan, CEO of AstraZeneca, says: “I may be involved in some of the business development decisions of opportunities in an emerging market like China, for example, where there’s a changing dynamic and of which you can take advantage if you make the right acquisition. That’s a decision that ultimately sits with the CEO. But this means having a really good understanding of what that opportunity is and getting close to customers and local markets in order to develop a strong local understanding.”

The ability to inspire and motivate has rarely been as important. Peter Cheese, Chairman of the Institute of Leadership and Management, says: “We have reduced the support and level of resources in most businesses and we now need to think about how to work smarter, not just harder, and be more agile and adaptable. That is something all employees can contribute to and will help them to feel more empowered and engaged.”

Mark Spelman, Global Head of Strategy at Accenture, says: “The pace of change in the global economy continues to accelerate, driven along by the forces of shifting economic power, industry convergence and new technologies. The ability to see the new global order through the lens of both the developed and emerging worlds will provide a critical context for the next generation of winning business strategies. Leaders will have to demonstrate a new level of versatility and foresight if they are to navigate their organisations successfully in both short-term and long-term success.”

It’s no secret that many leaders are struggling to come to terms with fast-growth markets in Asia and South America and the changing nature of how business is done. Nandani Lynton, a Criticaleye Thought Leader and Adjunct Professor of Management at China Europe International Business School, says: “Through South-South investments, China-India-Brazil in Africa, India in China and China in Brazil, for example, we are seeing businesses become enormous, with approaches Western companies have never considered.”

For Nandani, the pressure is on to recognise what is happening and learn quickly: “Western companies need to observe and participate. However, they should not or cannot become borderless. If you are British, be British; but have operations all over. Use your heritage, use your strengths and identity, but figure out how to bring that as a new ingredient to the mix while adapting locally. I believe such cultural agility is the new competitive advantage.”

At the table

It’s not only the executive team that needs to stay focused. For non-executive directors (NEDs), the game has also changed radically as the input expected from all board members increases. Sir Andrew Likierman, Dean of London Business School and Non-executive Director at Barclays, says: “You have got to keep up with good practice to make sure that you don’t sink into complacency and just assume you’re doing a great job tomorrow, just because you’re doing a great job today. One of the ways in which you can keep up with good practice is by making sure that you have some non-executives who have experience elsewhere so that they can then look at what good practice is.”

The bar been raised and when assessing whether to take on a NED position, it’s vital to assess the responsibilities involved in a public versus private role, particularly if the latter has private equity (PE) investors. Mike McTighe, Chairman of JJB Sports, Volex Group plc and several PE-backed companies, says: “The board of a PE-backed business differs from its plc counterpart in that not everyone has gone through that corporate education. Within PE I’ve had to reinvent my thought process, and how I look at individuals and structures, because not everyone has all the boxes ticked as they mostly do in a listed structure.

“You can’t rely on anything and you can’t take anything for granted. The key is to have an inquiring mind, a set of context-based experiences from which to draw and to dig in, to really get down to the ‘bedrock’. That’s the only place to get to, and from where I feel comfortable making decisions.”

John Lovering, Chairman of Echelon Partners, says: “A private equity chairman needs to be a strategy director and personal councillor to the CEO. You’re not a steward and, although you have a responsibility towards shareholders’ interests, you’re an adjunct to the chief executive. As such, it requires different skills and it’s a harder role than in a public company – it will benefit from practice. You must gain the trust and support of the CEO and other key stakeholders quickly, in what is a very brief period.”

That evidently differs from the public company role, where good governance and stewardship tend to take up more time. Ruth Cairnie, Non-executive Director of the FTSE 250 engineering firm, Keller Group, says that, when looking to build the best board, regardless of whether it’s public or private, “members should have varying backgrounds to bring in different perspectives and to achieve the right balance; they need to support the executives as ‘one team’ but also have the courage to bring in an element of edge and challenge”.

Clarity and communication

One of the prominent themes of 2011 has been the re-emergence of ethical leadership and trust. The penny may have finally dropped among business leaders that simply paying lip service to corporate and social responsibility won’t be tolerated. It is too easy nowadays to highlight inconsistencies, contradictions and hypocrisy. Added to that, more leaders appear to be realising that an ethical stance can actually mean good business.

Chip Pitts, a Criticaleye Thought Leader and a Lecturer in Law at Stanford and Oxford University, says: “There’s a new recognition of an old truth that many forgot for a while: businesses are and always have been part of society, dependent upon the same natural and social systems… that support business people in their other roles, for example as consumers, citizens, children and parents.”

Perhaps this is all part of an awakening among leaders that a rounded, 360 degree view is fundamental for an organisation if it is to be a success. That means communicating with clarity, both internally and externally, while also taking the time to listen and absorb feedback. Paul Polman, CEO of Unilever, says: “To drag the world back to sanity, we need to know why we are here and the answer is: for consumers, not shareholders. If we are in sync with consumer needs and the environment in which we operate, and take responsibility for society as well as for our employees, then the shareholders will also be rewarded.”

The big challenge for companies is to ensure that both the executives and NEDs are up to the task. Short-term, narrow thinking in today’s markets simply won’t work.

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon.

Matthew

www.twitter.com/criticaleyeuk

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s