The leadership consequences of the changing relationship between organisations, their employees and their customers

NB This paper was presented at the 12th International Conference on Corporate Governance held in London from the 10-13th October 2012.

Leadership as an essential human quality

In a paper presented at the World Conference for Corporate Governance and Sustainability held in Dubai in May this year, I put forward a case for us to stop treating leadership as the exclusive property of those ‘in power’, and instead to see it as a normal human quality that can be demonstrated by people of all ages and that we should be nurturing for the future.

While many would instinctively agree with this, in practice those used to being without power continue to project it onto others and endow them with a position of ‘leadership’. In the other direction, many people assume power without justification or use forms of power that are inappropriate. This is the stuff of patriarchy and hierarchy. It is the essence of old school management.

Today’s organisations – the institutions of the future – think differently. They may have approached this because they were founded by new era leaders, or have morphed into it – often through a strong social conscience (the corporate social responsibility or CSR route, for example) or through a recognition of the bigger picture of sustainability leading towards circular organisations and a circular economy.

The democratization of Society

Society and its members’ expectations are changing. Today, many more people work for themselves – and one of the frequent (and very sad) reasons given for this is that they are free from ‘managers’.

A new generation is growing up with the tools to communicate with their friends about issues that matter to them, exerting influence far more widely than they would have been able to do just a few years ago. The Web 2.0 is typically defined in terms of the degree of communication between initial originator and recipient – people like to comment on things! Whether it is on Facebook – commenting on their friends’ lives – on TripAdvisor – expressing views on hotels – on eBay – providing feedback on individual resellers – or Amazon – commenting on the relative merits of different products – the important elements are BOTH engagement and empowerment. The organisation using the Web 2.0 medium has to give their customer a sense that their voice is not only being heard but also acted upon. This is about surrendering some element of control of the organisation to its customers. It is NOT about paying lip-service to comments – the individual WILL check back to see whether their views have been addressed and, if not, they have the tools to share their disgust. While there will be a few who do so crassly and with obvious anger, making it unlikely that their peers will listen for long, others who understand social media finesse can do so in far more subtle ways.

The British Broadcasting Corporation (BBC) no longer fields large teams of foreign correspondents. While it may still send a member of staff to events that are planned and scheduled ahead of time, or to cover an unfolding story of immense importance, a significant proportion of its news coverage is based on the ground – freelance journalists, local media, and citizen journalists. For many, ‘citizen’ journalism traces its roots back to Abraham Zapruder, who filmed the assassination of President John F Kennedy with a home-movie camera. Smart-phone technology has evolved to such an extent that some of the BBC’s own journalists rely on their mobile phones, running apps from an Italian software company, as broadcast-quality sound recorders, but the real power of this technology is when the person in the street can capture an event as it happens, publish it openly, allow others to edit the content, and for the result to be distributed.

There’s a growing body of evidence that members of the public trust content that they know has been read, recommended, and sometimes edited, by their peers more than that which originates from an institution, whether it is the BBC or Rupert Murdoch’s News International! Today, the term ‘participatory journalism’ is beginning to take over – reflecting the importance of the same engagement and empowerment.

These changes ARE having a profound effect on society. Back in June 2010, the UK Government established the Backbench Business Committee – a means by which issues of particular concern to Members of the House of Commons could be scheduled for debate in a far more responsive manner than ever before. Then, in August 2011, they established a website for members of the public to post e-petitions. Any petition that collects over 100,000 electronic signatures, MAY be debated by MPs through the Backbench Business Committee. There are some constraints on this, that seemed to be common sense a year ago – for example, that a topic already scheduled for debate in Parliament wouldn’t get an extra airing. However, the system has proved to be incredibly popular with the public. In its first year, 17 Million visits were made to the e-petition site, 6.4 Million signatures were left, 36000 different petitions were submitted and ten have reached the 100000 threshold. An independent report on its workings felt that the responsiveness of the system to petitioners was insufficient, and has recommended that there should be less Government control over the decision to debate or not to debate. In July 2012, legislation was passed that gave the Backbench Business Committee the power to schedule debates itself.

The changing expectations of ’employees’

This movement doesn’t stop with the customers – it is as much about the employees. An employee of the present generation EXPECTS, at the very least, to have a say in the day-to-day issues of the organisation that affect them. For many, this extends to its strategic direction and bigger scale decision making.

An aside: The term ‘management’ was first coined in the 1560s to describe the controlof the behaviour of a horse. A decade later, it was used to refer to the control of institutions. It is still concerned with ‘control’ – essentially maintaining the status quo – or allowing only small incremental change. Given what we’re trying to achieve today I wonder if a different term altogether would be more useful?

These days we frequently speak of the need for change, of the introduction of substantial transformation and not moving from steady state to steady state, and yet we continue to structure our institutions in hierarchies, and attempt to constrain the behaviour of our employees (and contract staff) through policies and processes that belonged to a previous era.

The need for employers to be far more responsive to employees

Many employers still make much of their long-term benefits to employees, with company pensions, promises of ‘development’, and vague indications of career paths. They still try to enforce ‘no social media’ rules and, despite much PR during the Olympics, few offer much flexibility in terms of hours or working patterns. Most collude with long working hours cultures and there’s still a perception among many aspiring careerists – based on what they observe in many companies – that you should work long hours to be promotable. ‘Development’ programmes are generally not developmental at all – they focus on very basic skills, rarely (if ever) on personal growth, hardly ever take individual aspirations and interests into account, and are frequently used as a means of ensnaring useful potential leavers for a little longer.

The programmes are rarely externally validated so they are of limited meaning to future employers. Employers know this, just as they know that most focused employees will need to leave in order to progress their careers – mainly making a move to achieve promotion, redirect their career, or in order to cope with increasing personal responsibilities. Existing employers are simply not responsive or flexible enough.

Simply delayering organisations leads to fewer opportunities and less developed leadership

Many years ago, there was a path that an individual would follow – starting as a ‘junior’, leading a small team, supervising a larger pool of people, managing a department and so on. This progression meant that the personal traits of leadership could be honed over time. Today, there are fewer layers, and therefore fewer opportunities for such skills to be developed. I am not advocating more layers in the hierarchy – I am pointing out one of the negative consequences of this cost-reduction strategy and suggesting that we need to do something about it.

The growth in poor leadership is reflected in government statistics. In the financial year 2011/2012, there were 28% more industrial tribunals for breach of contract than in 2007/2008 – despite them having reduced a little in the last two years. Similarly, for the same periods, the number of unfair dismissal claims has risen by 13%. Over the 9 years from 2001 to 2010, there was no significant difference in the number of new work-related stress cases reported to the HSE despite many campaigns to address it.

The ACAS definition of bullying is: ’Bullying may be characterised as offensive, intimidating, malicious or insulting behaviour, an abuse or misuse of power through means intended to undermine, humiliate, denigrate or injure the recipient‘. Statistics published by the Andrea Adams Trust in 2007 showed that:

  • More than two million people at work consider themselves as being bullied

  • 18.9 million working days are lost each year as a direct result of workplace bullying

  • 43.5% of employers do not have a policy to deal with workplace bullying

  • 93.1% of all Personnel practitioners say that bullying is occurring in their own organisations

  • 82.2% say that weakness in management is the prime reason for bullying

An individual who bullies needs help, merely ignoring them ultimately leads to their behaviour becoming an accepted norm – both for them and for the institution. Disciplining them can, ironically, reinforce the behaviour. For many, it seems, they resort to a bullying approach partly out of fear themselves, that they won’t be able to meet other people’s expectations of them, and partly because they have only a limited repertoire of tools with which to understand their staff and motivate them. This is a leadership development issue.

Our attitude to other people

Over thirty years ago, Tom Peters and Robert Waterman, presented their thesis that organisations should pursue ‘excellence’ as they defined it. The evidence was compelling – organisations that did so were demonstrably, statistically significantly more profitable in the short-, medium- and longer-term. What’s more they appeared to last longer too. Their model of ‘excellence’ had four components: an obsession with serving customers, empowerment of staff (their liberation from constraints), a transformed approach to leadership, and a consequent outpouring of innovation. They cited some extraordinary organisations that exemplified this degree of radical change. A few of these have continued on their path and not erred from it. Johnsonville Sausage, for instance, was embarking on a massive employee education programme, had stopped automatic incremental wage increases and tied them instead to individual skill development. An employee ownership scheme means that almost every person has a significant stake not only financially but, more important, emotionally in the success of the business. Johnsonville has continued to expand dramatically and, today, its products can be found in every State of the US and even, I believe, in Europe. One of Johnsonville’s ‘secrets’ is that it invests in its members ongoing development – not simply at the trivial level of enabling them to perform their current role, but looking ahead with the individual to their future potential.

The importance of collaborative enterprise

Evidence from the observation of indigenous tribes suggests that they often have quite elaborate mechanisms to ensure that one individual cannot dominate the tribe entirely. Of course, there are charismatic leaders who do just that, but where possible most tribes rely on communities of elders or the whole group to govern them. Membership of this community is won – it is not necessarily a right.

This idea of collaboration for mutual support led to the formation, in 1761, of the Fenwick Weavers’ Society – established to sell discounted oatmeal to local workers, though it later expanded its services to include assistance with savings and loans, emigration and education.

In 1810, the Welsh social reformer, Robert Owen, and his partners purchased New Lanark mill from his father-in-law and introduced better labour standards and discounted retail shops where profits were passed on to their employees. As Owen’s influence spread, so similar communities were set up in Glasgow, Indiana and Hampshire. The Rochdale Society of Equitable Pioneers, founded in 1844, is usually considered the first successful cooperative enterprise, and is still used today as a model for modern co-ops, which are said to follow the ‘Rochdale Principles’. A group of 28 weavers and other artisans in Rochdale set up the society to open their own store selling food items they could not otherwise afford. Within ten years there were over 1,000 cooperative societies in the UK. The cooperative movement has seen extraordinary growth in the last decade or so. Annual figures released in June 2012 by Co-operatives UK, reflecting some 5933 (up 23% in three years) British cooperatives show the movement has grown 1.5% in 2011, which is twice the rate of the UK economy. While the real level of GDP in the UK in 2011 was 1.7%, indicative of these tough financial times, the turnover of the co-operative sector grew by 19.5%.

Today, there are cooperatives dedicated to housing, utilities, agriculture, banking as well as the traditional retailing. The precise form of governance varies – most depend on a concept of membership, though these members may be businesses, volunteers, employees, or consumers. A new departure are the business and employment cooperatives (BECs), which are a subset of worker cooperatives providing support for the creation of new businesses.

Co-operative businesses are also more resilient, 98% are still in operation after three years compared to 65% of all businesses, over half of them (56%) are in disadvantaged areas in the UK, and 88% seek to minimize their environmental impact when 44% of other businesses say they have taken no action whatsoever.

This is a good demonstration that sharing ownership and control with members (rather than shareholders), while benefiting society and addressing environmental concerns, is a successful approach. It isn’t the only one, though there are few well established alternatives, however its considerable growth and success at this time make it worth considering if there are lessons for ‘traditional’ businesses to learn.

Leadership and power in future institutions

To begin with, I believe that we need to challenge those assumptions, structures and approaches that inhibit change and deter innovation, and instead instil values that lead towards a common goal of social improvement.

Today’s institutions would benefit from doing this immediately, but there’s also a need to be building this awareness in the future generation.

I wrote before about the leadership development initiatives being introduced by sports bodies focused on young adolescents. There is a whole syllabus worth of leadership skills and knowledge that could be imparted to these people that will help them to transform our Society for the future. They need to understand the many different forms of power, the significance of wisdom and subtlety, how to motivate others to work towards a common goal, how to negotiate that goal in the first place, why some individuals are so different from them, to respect those differences and how to work together nevertheless.


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