“Aligning self-interest to social responsibility is the most powerful way to sustaining a company’s success,” says Starbucks’ CEO Orin Smith. A larger notion of responsibility is moving to the centre of business leadership in the 21st Century. We’re moving away from the Milton Friedman adagio “live up to the law and maximize shareholder wealth”. Why is that? When is leadership truly responsible? And how to lead responsibly? Thomas Maak and Nicola Pless brought together some authors and made a state of affairs of this research field.*
“The business in society perspective is at the core of responsible leadership.”
“One third of the Fortune 500 organisations have embedded explicitly their will to contribute to a better world into their mission statement”, states Daniel Diermeier. CSR activities increase explosively. Many business organisations move towards philantropic, transactional or even strategic partnerships with non-for-profit organisations even though the obstacles are many (James Austin). Peter Pruzan examines the motives. The reasons to do business in a responsible way can be instrumental, e.g. to create a competitive advantage, to build reputation, to find investors or attract talent. The motivation can also be more value driven: humanistic (‘being fully human’), holistic (‘all stakeholders count’) or spiritual (‘realize who we truly are’).
The book gives many examples. For Erik Van de Loo Fabio Barbosa, CEO of ABN AMRO Real, fits the profile of the responsible leader. His organisation grew rapidly and became fast an employer of choice in Brazil by putting social responsibility central in leadership in all it’s consequences. Stephen Young describes the workings of the Caux Round Table: business leaders from three continents dialogue on the essence of leadership and defined a charter for principle based leadership. Mark Wade describes how Shell hard and soft wires sustainable development into the DNA of people and business. Other examples cited by Pruzan: Grundfos, Excel Industries, Grapthex Inc., Motorola, Epson Europe.
The authors in the book have difficulty to answer the more fundamental question why the society perspective is moving to the heart of business leadership. Diermeier develops the interesting hypothesis that the shift from materialist to post-materialist value systems is linked to the development and welfare level of the people. Less explicitely mentioned is the interconnectedness of all societies. Organisations can no longer survive talking care only of their own agenda. They have to deal with other value systems to do business.
Responsible leadership is in that sense not only a matter of free choice and personal or organisational values. It’s the complexity of the multi-stakeholder relations that push leaders to define what is important and responsible. “Leadership is being in multiple relations and playing different roles in different contexts,” state Thomas Maak & Nicola Pless. Leadership can no longer be “leading followers toward determined objectives on established guidelines and rules”, as Bill George explained recently at Harvard Business School**. “Leadership in the 21st century is authentic aligning people around shared mission and values and empower them.”
“Move beyond the smell, sleep and newspaper test.”
How to lead responsibly? Lynne Paines develops a moral compass for responsible decision-making. It’s time to move beyond the smell, sleep and newspaper test: “Does it smell ok? Will it keep me awake at night? How would it look like on the front page of the newspaper?” Responsible decisions should not be based on gut feelings. Also codes of conduct or value statements are insufficient: they do not self-apply, nor self-interpret. They can help, but they don’t solve dilemma’s. Rules can even block personal moral awareness. An example: Philip Morris did a cost-benefit analysis in which cost savings to society from smokers’ early deaths were counted as a positive effect of tobacco usage. The study concluded in 1999 that the Czech Republic gained 147.1 $ million because of savings on health car, pensions and housing due to smokers’ premature deaths.
Paine proposes to integrate four modes of moral analysis into decision-making processes : will this action serve a worthwhile purpose? Is this action consistent with relevant principles? Does the action respect the legitimate claims of people? Do I have the moral power to undertake that action? This moral decision-making compass helps to move decisions to the centre of Net Present Value and Moral Point of View.
Tong Schraa-Liu and Fons Trompenaars define leadership as the reconciliation of dilemmas to a higher level. Responsible leaders bring different values together in reinforcing loops, instead of letting value tensions block or destruct each other. They give an example: the code of conduct “accepting no bribes” can conflict with the value of respect, when your business relation in china gives you a small gift for your sick daughter. The solution could be to change the rule to ‘accept gifts if only less or equal in value to an evening meal for two at a restaurant.’ They propose a conscious and explicit dilemma reconciliation process as a way of moving forward in a responsible way.
The same concern for dialogue and explicit moral awareness shows in leadership development. Nicola Pless & Ralf Scheider explain how PriceWaterhouseCoopers sends their future leaders for two months to developing countries for community work. The program design is highly complex with action learning, coaching, networking, dialogue, meditation to push the development of people and organisation towards leadership, sustainability and diversity.
“Solve the dilemmas in the inner theatre.”
Responsible leadership is not only a question of actions and results. Both matter to be responsible: the means and the ends. But it’s not enough. On the contrary. At the source lies the urge to serve, the ‘integrity’ and virtue of the person and the will to solve dilemmas of ‘the inner theatre’, as Manfred Kets de Vries names it. This is the deontological aspect of responsible leadership: the level of intentions. The combination of person, action and result urges to look at responsible leadership in a holistic and normative way.
Maak concretes the qualities of the moral and ethical intelligent person: moral awareness, critical thinking, reflection and moral imagination. George Brenkert explores ‘integrity’. He defines four features of this quality: the person has a minimum set of values, a core, bound up with who we are. Integrity has a temporal dimension and motivational value: it drives actions and decisions and develops over time. Integrity also has a social dimension: it only shows in relational context. Integrity is not a value, it’s a meta concept, a condition.
Alejo Sison looks at Aristoteles for inspiration on responsible leadership. If we define leadership as being in relation and persuasion, the old concepts of logos (having good arguments), pathos (emotionally loaded) and ethos (character) provide clarity. Character is the most fundamental aspect. It’s a combination of practical wisdom, goodwill en virtue. Character is developed through habits which are developed through actions. They are circularly looped. It’s the classic plea for ‘mind over matter’.
I retain three key thoughts, going through all the papers, wading through the hypotheses, definitions and research questions.
- Evolutions in society push business leaders to become multiple stakeholder managers.
- Multiple stakeholder management push business leaders to facilitate explicitly and openly values and principles. Reconciliation and dialogue are the essence of the responsible way of leading.
- Responsible leadership makes the inner theatre of the leader important: character and virtue matter.
* MAAK, T., & PLESS, N. (2006). Responsible leadership. London: Routledge, 251 p.