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

One piece of chocolate now or two pieces of chocolate later?

In the aftermath of the recent economic crisis, much has been debated about its potential causes and the lessons learned. However, it seems to me that neither from the causes nor the lessons as a starting point, a significant and generally accepted foundation emerged that could now lead the way out of this precarious situation and prevent us from future economic failure or misbehavior. Except for the obvious and the unhelpful, such post-fact evaluations leave us still wondering when the next crisis is going to happen and what it might look like.

In a recently published paper, Thomas Donaldson (2012) illuminates potential causes for the crisis from the angle of business ethics and leadership. In doing so, he also sheds a valuable light on some of the lessons that must be learned. Donaldson puts forward an argument for the ethics story behind the crisis and submits that among its causes can also be found three ethical roots: ‘Paying the peril’, ‘The normalization of questionable behavior’ and ‘Tech-shock’.

Without going to much into detail on these ethical roots that indeed go beyond the obvious and unhelpful, I came across a central aspect that is common to all of them to a certain extent – the dilemma between short-term profit and long-term value. Whether it is on an individual level, where an investment banker gambles on a ten percent annual risk of disaster in order to reap a big bonus; or on an institutional level, where banks pay salaries and bonuses to managers for actions today, even though the firm’s rewards or penalties for those actions happen tomorrow; or on an industry level, where practices become accepted that enrich the short term only to impoverish the long term, the dilemma is ever-present.

Thinking of these matters, I was reminded of an insightful TV report about the human ability to make time-dependent decisions. A simple experimental design was set up; children at the age of about 4 years were given a piece of chocolate and told that if they won’t eat it during the next 5 minutes, they get another one. The outcomes were equally amusing as astounding: except for some rebels for which the single piece seemed too tempting, the majority either managed to run down the clock without touching the chocolate (in which case they usually tried to distract themselves) or they tried to cheat, i.e., tasting the chocolate and then putting it back before the investigator returns in the hope of getting away with it. Apparently, the ability to trade individual short-term satisfaction for a future bonanza, which is by the way also found among certain animals, starts to evolve at around 3 to 4 years of age – one of the behavioral scientists explained.

Although, this straightforward comparison might tempt us to argue that the bad ethics, which led to the recent financial crisis, is occasionally part of our nature, it also and more significantly emphasizes the importance of setting appropriate incentive structures to encourage good ethics and placing more weight on collective rather than individual value. Because the most important question that remains is at what age the ability to trade individual short-term profit against future collective prosperity starts to evolve?

Marc Moser

Donaldson, T. (2012): Three Ethical Roots of the Economic Crisis. Journal of Business Ethics, vol. 106, no. 1, pp. 5-8.