Business leaders: The new progressives

CSR / 27 January 2012

It used to be thought that ruthlessness maximises profit. But in the wake of the recession, Neela Bettridge – executive coach and author of the sustainability blog, Radical Shift – says a different kind of business leader is now needed

Can business leaders take a role in leading positive social and environmental change?

For many people appalled by the excessive risk-taking of the mortgage industry and investment banks in recent years, the very notion will provoke a cynical response.

Yet the credit crisis and consequent recession have exposed the impact that business can have on society. If this impact is to stop being negative, might it become positive?

Given that many firms have collapsed through short-termist or unethical conduct, there are often purely commercial motives for adopting a more sustainable way of doing business. A recent Ernst & Young survey reported a 40% increase in demands for reports on sustainability from the investment community.

The subject is twice as popular for shareholder resolutions as the company’s takeover strategy – an extraordinary about-turn from just a few years ago.

A decade of feverish dedication to the creed of ‘maximising shareholder value’ has yielded negligible shareholder returns, because the way of pursuing value was in high-risk, short-termist manoeuvres, and the way of measuring value was the highly misleading picture painted by the quarterly financial report.

Reform of capitalism

In the UK, party political leaders are competing with one another on reform of the regulation of capitalism. Prime Minister David Cameron promises measures to make it easier to set up co-operatives, and more transparency on executive pay. Opposition leader Ed Miliband wants to curb charges by banks and energy companies, and require remuneration committees to have employee representatives.

These initiatives are welcome, but politicians skirt around the issue of the ideology that has driven business towards reckless short-termism in recent decades. It has been a shared belief of right and left-wing economic theory that ruthlessness maximises profits.

Now that we have seen this not to be the case, huge opportunities emerge. So while government interventions are welcome, the really big changes will occur if a more enlightened theory is taught in economics and in MBA courses. This would affect career choices and the type of manager who is promoted.

Conventionally, the idea of being an activist for a better world has been associated with the non-profit sector, but business leaders can have more social impact than anyone else.

Moving towards a living wage for employees in supplier companies, for example, can be done in ways that boost productivity and product quality. Such an initiative can lift people sustainably out of poverty, by offering a career in a thriving enterprise.

Marks & Spencer is discovering that this virtuous circle is possible with its suppliers in Bangladesh. The Australian bank Westpac has transformed its brand and its business as part of a long-term commitment to sustainability. Both case studies are featured on the Radical Shift website: http://radical-shift.net/case-studies

Moving towards a living wage for employees in supplier companies can be done in ways that boost productivity and product quality.

Neela Bettridge, executive coach and author of Radical Shift

It is a very different type of leadership, however; one that understands the employees, the social context and the environmental impact as well as the marketing strategies and the financial report.

Business leadership requires a range of apparently conflicting attributes: empathy combined with analytical powers, but also resilience and ability to deploy authority to negotiate effectively.

Alchemist abilities

In my coaching work, clients find it useful to use the concept of ‘conscious leadership’.

Conventionally, many managers are recruited on the basis of their drive and performance within a quite short-term focus and based on clear financially-driven or productivity-related goals.

These attributes remain strengths in many contexts, but the senior leader of an organisation moving towards sustainability needs to develop beyond this. He or she needs to encompass strengths such as the ability to deal with ambiguity, an aptitude for rethinking the organisation’s role and the capacity to engage different constituencies.

There is now a considerable amount of research and applied practice illustrating the importance of these attributes – sometimes defined as strategist or alchemist-type abilities.

Studies have shown a significantly enhanced likelihood of change programmes achieving their objectives, and of organisations becoming sustainable, with such attributes in the leadership team.

Strengths include the ability to understand and accommodate different world views, to grasp the inter-connectedness of business, community and the environment and to have high integrity.

The good news is that individuals can adapt to this way of leading. It has been common in recent decades to equate ruthlessness and exploitation with commercial success, confining the role of social responsibility to the non-profit sector.

The belief in the past was that career choices involved a trade-off: an idealistic campaign for a better world in the third sector, or to ‘sell out’ to the corporate world. The new normal indicates that the conflict between head and heart is not inevitable, even in the most competitive environments.

Visit the Radical Shift website at http://radical-shift.net. The book Radical Shift: The New Normal by Neela Bettridge and Philip Whiteley is out later in the year.