Getting it right in your organization in 2010

Economically no one can be in any doubt that 2009 has been one of the most dramatic years that most of us are likely to have lived through. The demise of the major financial institutions has led to tectonic shifts in the economic landscape. Who would have thought at the start of the year that we would end up with one in four pounds now borrowed and a nationalised banking sector!
Whilst we all have opinions about both the origins and future of the crisis, there is broad agreement that an increase in liquidity was squandered for short term profit; 'share holder value' became short hand for 'share price manipulation'. Many made significant sums of money, if they were smart enough to ride the wave up and get off at the top; sadly for most of us this was not the case and now looking at our pensions or endowments they are proving to be a shallow pool. The advice that we were given from seemingly large and respected institutions has frequently been proven not to be in our best interests and we feel we have been massively let down.

We know that into the space left by this market failure will be increased regulation; an attempt to regulate our way to a better future. For example in financial services this is being championed by the FSA and in particular through its ‘Treating Customers Fairly’ initiative. However, whilst we believe that this is to be applauded it should not be regarded as another regulatory hoop to jump through but instead be regarded as a significant opportunity to re-evaluate how a business works for the benefit of customers, staff, shareholders and wider society.

The MP's expenses scandal shows that living by the rules alone is not what we have come to expect of our leaders; we expect them to demonstrably live to a higher set of standards and values. These values should be unquestioningly for the wider good and be informed by our perception of 'fairness'. Increasingly we apply the same principle to what we perceive as society's valued institutions. Financial institutions are an economy's key vehicle for wealth creation and must be challenged to take up that role.

The opportunity for leaders in financial institutions is to use the drama and crisis of 2009 and the market breakdown to create a change imperative in their organisations.

That change is not just about more customer smiles but instead re-positioning an organisation to be a champion for customers and re-positioning it as a trusted institution. This means leaders re-defining an organisation’s purpose to be more than just serving shareholder value alone. We firmly believe that shareholder value remains important but needs to be re-framed as shareholder value for the long term and as an accurate measure of both profit and contribution to a country's and community’s economic growth.

In 2009 customers were dramatically re-educated to think about the long term, because of short term market failures. In this new era businesses must redefine their purpose, they must recognise the importance of the long term, building lasting and trusted institutions. We know that the state will increase its role and provide ‘libertarian paternalism’ a sense of having enough regulation to guide and protect and yet not stifle actions - more importantly values really matter. This has been summarised by Akerlof and Schiller (2009) as moving from ‘fear and greed’ to ‘commitment and fairness’.

The internet and social media means that leaders and institutions are more accountable in the court of public opinion; not just against the rules but against our perceived notion of what is fair. We are moving from Adam Smith’s invisible hand of capitalism to a new form of social or creative capitalism which redefines it as ‘the invisible handshake’.

The new heart of business will be about simplicity, transparency and products that are not over engineered; people want to do business with those that they trust; a trust based on a visible demonstration of the principles of fairness.

Self regulation, or principle based regulation, is no soft touch but instead a much harder challenge as it asks an organisation to be clear about its values and sense of purpose. Society is challenging major institutions to think about its purpose in a far broader way; a way that serves shareholders and society and builds long term sustainable value.

Boards need to face the challenges of 2010 as not just leaping through regulatory hoops, but instead as a huge opportunity for leaders to drive reposition themselves and to drive big change in their organisations

Leadership and the importance of history

I recently had the privilege of working at Windsor Castle, which was an amazing experience and a memorable setting. As chance would have it we were there on the 11th November and broke off from our labours to commemorate the fallen from two World Wars and recent conflicts. I also took the opportunity to wander around St George’s Chapel, established by Henry III in the 14th Century and the burial place of Henry VIII and Jane Seymour, it is also home to the Knights of the Garter, the world’s oldest chivalric order.

The richness of the history and traditions was inescapable and given added poignancy on Armistice Day. What, however, has this to do with leadership and senior teams? What struck me most deeply was the way in which each previous generation of royalty built upon the legacy of the past; each leaving great monuments that testify to their ambition, which, at times, was wildly disproportionate to what was needed or was reasonable.

I wonder what enduring legacy the leaders of today will leave for future generations? Sadly our environmental legacy will be a permanent scar for our children and one which they will only look at in amazement at our naivety and lack of courage to act. The short termism of driving shareholder value has shown to distort the market and corrupt the judgement of good people. Whilst we are gripped by the fear of recession there is a danger that we do not think about the bigger issues of ‘what is our legacy?’

The history and traditions on display at Windsor is a great reminder of the importance of the past and it challenges me to think about how senior teams recognise and learn from the past as well as think about the legacy that they leave for the future. Finally I like the quote from Zhou Enlai, the former Chinese leader from 1949 to 1976, who when asked about his thoughts on the French Revolution of 1789 he replied ‘it is too early to tell’. Maybe we need to start to challenge senior teams to shift their time line so that they can acknowledge the past as well as think seriously about their enduring legacy.

Working with Senior Teams

I am now working with a number of senior teams that by any measure are performing at a high level - the challenge is to take them, to the next level and if I can characterise this it means being able to have a level of debate that people can sustain whilst sustaining strong relationships.

Does anyone have any ideas or experience on this?

Welcome to my blog and why you should read this!

Everyday I have the privilege of working with Senior Teams and Boards that challenge me to think in new ways; as a strongly reflective practitioner I am always learning and take that learning forward to work with each of my new clients. I feel that it is important to share that learning for the benefit of others and also to develop my own practice through the debate and challenge that is afforded by the interactive nature of this blog. My hope is that you will want to challenge my thoughts and help develop them further as the conversation unfolds.

I look forward to hearing from you and sparking a wide debate!