In search for positive narratives of leadership

Within the context of our new research project “Towards positive narratives of leadership”, we have recently been in contact with numerous professional colleagues, leaders in firms and public enterprises. In this process we have seen that a large number of managers are looking for new paths for reliable and sustainably successful leadership behavior, after the many years of crisis as well as market and management failure. They don’t believe that yesterday’s mindset can solve the problems of tomorrow.

For many leaders the negative headlines have clouded the view of positive role models. However a positive role model is just what we were able to witness at the beginning of the New Year: hardly anyone believed in the end that the US would be able to negotiate the fiscal cliff. Thanks to their joint positive effort, Biden and McConnell managed to find a solution. Clearly what we need most are positive narratives for leaders that they are able to develop mutual solutions.

What do we mean by “positive narratives for leadership”? Five ideas come to mind:
First, it means that the firm is not understood as a selfish fighter against all other individuals or institutions in markets as well as in society, trying to reap profit from others by every legal and not so legal means. The firm is not outside but part of society, for which it must have positive regard and from which it must accept limitations and regulations. In a positive perspective, firms are required to act as economic and societal institutions. Thereby not only the leaders in firms are challenged but also those in society.

Second, leaders have to be aware that in a global and knowledge intensive society, the interactions with highly qualified and indispensable stakeholders are the key to superior value creation. These stakeholders are always human beings and have to be accepted and treated as such. They have to be accepted with their distinct knowledge, experience, values etc. All stakeholders, not only selected managers or shareholders, deserve respect and trust in providing firm specific engagement.

Third, short term profit maximization has to be replaced by the principle of economic and social value creation with and for stakeholders. This includes that contributing stakeholders get a fair share of the value created. The one-sided consideration of selected investors or managers in value distribution has to be avoided.

Fourth, the firm is always part of a complex and dynamic network of contributors and not the dominator. This embeddedness in a stakeholder network opens opportunities for mutual stimulation and positive developments for both the firm and the stakeholders.

Fifth, we also have to take a fresh look at competition. Gaining and maintaining a monopolistic competitive advantage towards others is not part of a positive mindset. The real values created for all relevant stakeholders must be transparent so that customers, investors, ranking agencies etc. can decide which firm creates the most value in an economic and social dimension.

It is a fascinating but also an urgently needed requirement to search for positive narratives of leadership that can serve as role models for leaders.

Sybille Sachs

Awareness and simplification: The KONY 2012 campaign

To increase the awareness level of a message, advertisers and campaign managers know well about the psychological effects of simplifying matters on people’s attention. Short communications are persuasive and affect people’s readiness to engage in different kind of actions. However, short communications have to simplify complex topics an may lead to the problem of not taking into account the entirety of a complex problem, for example by focusing only on a specific relationship among many affected interest groups. To avoid a misleading reduction of complex issues, I argue that the intention to increase the level of people’s awareness by simplifying communications should be accompanied by a careful consideration of the corresponding impacts in a more fine-grained stakeholder network. An insightful example is the viral campaign KONY 2012, which entered the social media in early March 2012.

The core of the KONY 2012 campaign is a short film created by the non-profit organization Invisible Children, Inc. The film documents the brutal abduction and cruel abuse of children by Joseph Kony and his Lord’s Resistance Army (LRA) to use them as child soldiers in an ongoing conflict in northern Uganda. The LRA is a guerilla group and its leader, Joseph Kony, was indicted for war crimes and crimes against humanity by the International Criminal Court in 2005, but still has evaded capture.

 

The KONY 2012 short film spread virally in the World Wide Web, mainly through social media channels like YouTube, Vimeo, Facebook and Twitter. Within a month the clip had been viewed more than 90 million times and the social media campaign raised a tremendous awareness all over the world. Celebrities and politicians started to support the concerns of Invisible Children, Inc. to bring Joseph Kony to justice.

However, criticism about simplifying the complex conflict in northern Uganda arose shortly after the film’s release. Invisible Children, Inc. was accused of providing a black-and-white picture of the situation and of manipulating the public opinion. For example, the film suggests that violence in northern Uganda will come to an end and the abducted children will be able to return to their families as soon as Joseph Kony would be captured. Of course, Kony is a dangerous and cruel individual and bringing him to justice would be important. But reducing the problems in northern Uganda to the faith of Joseph Kony is deceptive. The history of the conflict is far more complex and includes many other interest groups like, for example, the Ugandan army and government, of which many seem highly suspicious too. Further, the film neglects the fact that most LRA forces, including Joseph Kony, fled northern Uganda in 2006 to be dispersed now across three neighboring countries.

 

As the example of KONY 2012 shows, awareness and simplification have to be balanced so that creators of social media campaigns are able to achieve their objectives and at the same time meet their responsibility towards other stakeholder groups affected by complex problems. The narrow spotlight on Joseph Kony led Invisible Children, Inc. to donate funds to support military action for capturing the LRA leader. But what about the rehabilitation and reintegration of former child soldiers as another affected interest group?

Walmart – Civilizing the Chinese?

Your first reaction to reading this title may well be one of bafflement (what does Walmart have to do with civilizing anything?!), or if you happen to be Chinese, of likely indignation (how can a fifty year old American retail megastore contribute anything to our august, thousand year old civilization?!). But – as preposterous as it may seem – there is indeed a kernel of truth in this proposition. Let me explain.

The word “civilize” has its etymological roots in the French word “civilité”, which initially denoted the refined manners and decorum at French aristocratic courts. With repeated initiatives to – yes, “civilize” – the Chinese (as in their “no spitting on the street” campaign), the Chinese leadership is keen at molding the behavior of its citizens for the better. Recent outrage involving food manufacturers deliberately fortifying food with poisonous substances in order to cut costs, with employee unrest and even suicides (such as at Foxconn) in response to poor working conditions, as well as the omnipresent environmental pollution scandals, has the Chinese regime become increasingly edgy and aware that things need to change.

Enter Walmart.

Much as the Chinese regime, Walmart has seen itself confronted by a customer base ever more bent on better quality food, disgruntled employees (as with a high publicity class-action suit by female employees) and a questionable environmental record driven by aggressive rock bottom pricing on many of its throw-away products. So starting in 2004, Walmart’s then CEO Lee Scott proactively contacted environmentalist NGOs such as the Rocky Mountain Institute and the Environmental Defense Fund for assistance as to how to better manage its environmental track record.

What resulted is no less than remarkable. Wall-Mart has, since its entry to the Chinese market in 1996, become the leader in China as pertains to food quality, implementing rigorous food quality standards for its suppliers and launching an ambitious – and well received – organic food initiative. Moreover, the company has significantly reduced its packaging material volume and pressured its suppliers to cut energy consumption and pollution. The Chinese suppliers, while at first skeptical, are now keen to advertise their environmental objectives and successes. The Chinese shoppers, for their part, are delighted to get better quality food and organic produce, trusting a big company like Walmart more than smaller shops which are – in their eyes – more prone to cheat them and offer inferior quality products. And the Chinese regime is pleased to have such a potent partner in addressing these pressing problems and “civilizing” its companies and citizens. In sum, we have an excellent example of numerous stakeholders working in sync to achieve a win-win situation for all.

So all is good that ends well? Well, it may be too soon to bring out all the trumpets. While Walmart in China serves de facto as an extension of the Chinese government’s regulatory efforts and as a “civilizing” factor for its citizens, it is legitimate to question the long-term sustainability of such an in the end effect still purely instrumental objective. Nonetheless, there is reasonable hope that at least parts of it may be sustainable due to an interesting insight that the sociologist Norbert Elias outlined as part of any civilizing process. Therein, he posits that to become “civilized” entails individuals to restrain their drives and affects. In a first phase, this is achieved through a permanent outside authority and on pain of punishment. With time, however, in a second stage, there arises a moral code that is upheld by individuals even in absence of the threat of punishment, driven by people suffering from a bad conscience in light of failure to adhere to these mores. In the last phase, then, even such self-constraints dissipate, and individuals are intrinsically motivated in a very natural manner to adhere to the involved normative standards.

This is, in essence, what is beginning to occur in China in part with the help of Walmart (and also other parts of the world in other contexts), where social and environmental responsibility by corporations and individuals is becoming ever more part of the discussion, part of the regulatory and legal fabric and as well as public awareness in form of a normative “should”. Normative change, while it may initially have to be forced upon individuals and corporations, may in due time become second nature to them. We as a global civilization, as is apparent also in China, seem to be “primed” for a major normative paradigm change towards greater social and environmental responsibility. And, as we have seen, even a major multinational corporation such as Walmart can play a significant role in this “civilizing” process, if the necessary extrinsic motivation is there and a society is ready to reward such a change.

Manuel Heer Dawson

 For a fascinating and detailed account of Walmart’s social and environmental impact in China, read the “How Walmart is Changing China”, by Orville Schell in The Atlantic: http://tinyurl.com/bopuxsa

The blame game

Have you ever noticed how efficient people or organizations are in identifying their stakeholder relations when it comes to being blamed for a specific behavior in the context of a negatively framed issue? A striking example is BP’s public communication regarding the disastrous oil spill in the Gulf of Mexico. Although assuming more or less the responsibility for the leaking wellhead’s consequences, BP continuously emphasized that deepwater oil drilling depends on cooperation between various business partners. In this regard BP frequently pointed out that the oil-drilling rig “Deepwater Horizon” was operated by offshore drilling contractor Transocean; that the oil-companies Anadarko and Mitsui are co-owners of the leaking well; that Halliburton cemented the leaking seal of the wellhead; that the oil service provider Cameron delivered the failing blow-out preventer; and that the responsible US supervisory authority did regular inspections on BP’s rented drilling rigs. It seems that being blamed for various failures leading to the oil spill in the Gulf of Mexico, BP’s communication provided the public, at least partly, with the company’s stakeholder relationships regarding the controversial issue of deepwater oil drilling.
Interestingly, in the case of success people and organizations do not mention their stakeholder relationships in the same way as they do when being blamed for failure. Indeed, employees and customers are frequently recognized as being important for organizations’ positive results, but has BP ever mentioned Transocean or Halliburton during the years of (financial) success? It would clearly add to the quality of stakeholder relationships, if an organization not only recognizes its stakeholder network in the case of being blamed, but also when it comes to the dissemination of mutually created value. 

A second example describes an issue in many countries, including Switzerland: violence between sport fans. After the abandonment of a soccer game between two teams in Zurich due to fighting scenes among rival fan groups, the affected stakeholders blamed each other for being responsible. The rival fan groups accused each other for having triggered the clash; the people accountable in the different soccer clubs blamed each other for not taking positive influence on their own fan groups; the Swiss Soccer League blamed the hosting soccer club for not providing adequate security arrangements; the hosting soccer club blamed the municipality for not getting sufficient resources to guarantee the safety of the game’s spectators; and finally almost all of the issue’s stakeholder groups blamed the police for not sufficiently demonstrating presence in the stadium. Again, this sort of “blame communication” by the different actors revealed quite exhaustively the involved stakeholder network. However, I am wondering if I have ever heard a positive mention of the police from a Swiss soccer club’s official in the case of success...
The two examples mentioned above show that being blamed often forces people or organizations to defend themselves and, therefore, leads to blaming other stakeholders in the context of a negative issue. However, recognizing the different actors in a stakeholder network can also take place in the context of success and the corresponding dissemination of mutual created value. This behavior can be appreciated as taking on responsibility, not only in the case of failure, but also in times of success. Indeed, recognizing stakeholders in the case of success may prevent organizations of being overly blamed in the case of failure.

The Great Transformation 2.0

This year’s World Economic Forum WEF is headlined: “The Great Transformation: Shaping New Models”.  However, the term “The Great Transformation” does not seem to be all new to us. It has not been invented by Klaus Schwab, Founder of the WEF, but by the Austro-Hungarian philosopher Karl Polanyi. As early as 1944 he described what he understood as the “Great Transformation”: The transformation of traditional societies into market societies, characterized by the subordination of the substance of society to the laws of the market.[1]

For many years, the World Economic Forum was almost a synonym of this development, and to big business; and politicians who attended the forum seemed to understand economy as “the continuation of politics by other means.” As opposed to Clausewitz, who understood war as “the continuation of politics by other means”, they certainly shaped a more peaceful process. Nevertheless, the WEF was one of the most important forums and market places of “The Great Transformation”: The subordination of all realms of society under the laws of economy. Those were the days when protests against the WEF mobilized thousands of “anti-globalization activists”, and the critics of capitalism were suspected to be reactionary communists.

Today, there are just a few dozen protesters, and Klaus Schwab himself publishes the following sentence on the front page of the WEF website: “Capitalism, in its current form, no longer fits the world around us. We have failed to learn the lessons from the financial crisis of 2009. A global transformation is urgently needed and it must start with reinstating a global sense of social responsibility,” (http://www.weforum.org/). What a remarkable shift! Are the illustrious attendees of the forum willing and able to work towards a second “Great Transformation?” Do they understand what has been wrong with “Capitalism in its current form?”

I dare to doubt. I dare to doubt that “Capitalism in its current form” is capitalism at all! I haven’t heard any better analysis of what we have seen during the last couple of years than the one of Marc Chesney, Professor of Finance at the University of Zurich, who said this was not capitalism but “betrayal of capitalism”[2]. According to him, capitalism is based on an elementary principle: Those who are taking entrepreneurial risks, are entitled to reaping the benefits of their endeavors. However, “Capitalism in its current form” has been the art of separating risks from benefits, of creating “absolute return” to owners of capital, no matter which way the markets would develop. Governments, tax payers, unemployed people, society at large are paying the bill today and in the future.

Thus the problem is not with capitalism, but with its abuse by those who created – or tried to create – private wealth at the cost of society, and legitimized their action by referring to mainstream economics. Stakeholder theory is about value creation through fair exchange of risk and benefit potentials in stakeholder networks. This has been described and explained by many scholars from Freeman’s seminal Book in 1984 (Freeman, R. Edward, 1984: Strategic management: A stakeholder approach. Boston: Pitman) to the latest publication of my colleagues Sybille Sachs and Edwin Rühli at HWZ (Sachs Sybille / Rühli Edwin, 2011: Stakeholders Matter, Cambridge: Cambridge University Press).  

We may call it capitalism; we may call it anything else: I do agree with Schwab, a “Great Transformation” is needed. However, I would call it “The Great Transformation 2.0”, towards true leadership and management in the service of a peaceful and prosperous global society. Do we need the WEF for this insight? Not really: We could have known earlier – at least since 1944 – and we could have known better – at least since 1984. Let’s hope the attendees of the World Economic Forum 2012 are wise enough and fast enough – not to turn back the wheel, but to make credible steps forward towards a fair and more stable economic system in the service of humans around the globe.  

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[1] Polanyi Karl, 1944: The great transformation. New York: Rinehart

[2] Chesney Marc, 2009: La finance trahit-elle le capitalisme? In: Revue Finance & Bien Commun, Genève, Mai/Juin 2009

Ties that bind

Recently, I had a talk with a catholic priest about people’s participation at the Mass. Not surprisingly, he told me about the continuously declining numbers of participants, but he was more worried about the decreasing level of general social participation in his parish. As a matter of fact he pointed out the additional problems of recruiting or retaining members of various parish-related associations like charities, youth, hiking or card playing groups. In his opinion this phenomenon was not basically a question of religious faith, but mainly one of individualism. As people want to take their lives in their own hands and like to organize more and more aspects of their lives individually, they make ever less use of the parish’s social offerings. Again, this is not a new insight, as Robert Putnam (2000) described in his seminal work “Bowling Alone” various aspects of the American community (political, civic and religious participation, workplace connections etc.) and its decreasing level of social activity or, as he named it, social capital.

I am asking myself what the consequences of this shrinking in social capital are for people’s willingness to participate in collective actions regarding social issues. Let’s take the steadily increasing disparity of incomes and wealth in most of the Western countries as an example: “We are the 99 percent” is one of the corresponding “Occupy”-movement’s slogans. But why are those 99 percent not able to trigger any societal change regarding fairness in the dissemination of income and wealth? “No, we can’t!” seems to be the more adequate slogan.

I think that individualism is part of the problem. If people are striving for their own personal goals, they are not really organized regarding the pooling of shared interests in the context of a social issue. Further, people’s membership in and their feeling to belong to associations, unions and other social groups fosters the development and maintaining of shared values, norms and interests in the context of a social issue. Therefore, not only personal relationships, but also memberships in social groups lead to ties that bind among people.

One possibility to approach a social issue is a stakeholder network. Especially regarding complex social issues for which cooperation among the affected actors is needed to create sustainable solutions, stakeholder networks are a promising organizational form. However, even if stakeholder networks have proved their potential to create value regarding a complex focal social issue, they are no panacea. Stakeholder networks depend heavily on the knowledge and skills of the different stakeholders’ representatives participating in the problem-solving regarding the focal issue at hand. Therefore, through the interactions of representatives in a stakeholder network, the corresponding shared values, norms, and interests regarding the social issue are emerging. These personal interactions, in the sense of people for people, are important for creating sustainable solutions in complex issue-based stakeholder networks.

Stakeholder networks and its organizational form create social capital by supporting two different kinds of ties that bind. On the one hand, there are the already mentioned interactions among representatives of different stakeholders. On the other hand, shared values, norms and interests provide the social glue among individuals. This glue is needed to address complex social issues like the increasing disparity of incomes and wealth.

Tom Schneider

The Limits of Regulation - A Claim for Good Management

A new study from Syracuse University recently revealed the shrinking numbers of fraud prosecutions since the financial crisis in 2008 (http://articles.businessinsider.com/2011-11-16/wall_street/30404680_1_prosecutions-transactional-records-access-clearinghouse-financial-crisis#ixzz1ehpr2kd9, see also  http://tagesanzeiger.ch/wirtschaft/geld/Finanzbetrueger-haben-Justiz-im-Griff/story/28152529).  And the New York Times already in the spring of this year raised the question: “Why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?” (http://www.nytimes.com/2011/04/14/business/14prosecute.html?pagewanted=all). It seems that a serious regulation failure exists based on wrong assumptions of what should guide the actors’ behavior.

In our book we argue that today the underlying basic assumption of the dominant business model, which promotes self-interest as rational behavior, is at risk of having to be revised (see chapter 5). And we mention that already the Nobel Prize Winner Amaryta Sen reflected on the basic assumption of the self-interest of actors in his book "On Ethics and Economics” in 1987. He concludes that the idea that only self-interested values are rational is even harder to defend.

If all human beings are modeled as self-interested actors, and efficient market functioning fails to occur, additional control mechanisms of firms and their actors must exist. These are normally in the form of state laws and regulations, or in some cases voluntary self-regulation (e.g. Global Compact). A continuous need for control is all the more important as some of the actors are not interested in efficient market functioning. And it is the same actors that are also trying to annul all kind of regulations. In as much as state sovereignty is by definition limited to geographical borders, this leaves serious gaps in governmental control of this self-interest. But even a mixture of compulsory and voluntary adherence to regulation will always lag behind a constantly and swiftly changing environment.  It is consequently often up to the discretion of the diverse actors of firms whether or not they exploit such regulatory gaps. Meanwhile, regulators and prosecutors are frequently not able to fulfill their functions in an adequate way, resulting in the lack of prosecutions mentioned above.

To overcome this unsatisfactory situation, new mindsets are necessary: After the first waves of corporate scandals, Ghoshal claimed in his seminal paper that we have to change the basic assumption of strategic management, and that amoral business with its negative impact should not serve as a role model (Ghoshal, S. (2005). Bad Management Theories Are Destroying Good Management Practices. Academy of Management Learning & Education, 4(1), 75-91). In this context, we ask why it is necessary for firms to commit themselves to the worst forms of self-interest and to fight against an endless series of constraints, when they can focus and draw upon the stimulating cooperation of a broad cast of stakeholders for value creation? We propose as a positive approach that the potential of value creation will be unleashed through creating a sense of mutuality in networks of stakeholders, rather than through the self-interest of single parties sometimes violating regulations. Therefore new narratives about leadership are required for good management (http://www.fh-hwz.ch/g3.cfm/s_page/63500/s_name/leadershipprojekt11).

Sybille Sachs