By Marc Cox
The World changed in 2008, and Business has been slow to react. As a generation of employees and customers looked on and questioned the ethics, values and beliefs of our financial institutions and those who ran them, many CEO’s seemed unwilling or unable to change the way they behaved, so put their head in the sand and carried on as normal. Running their companies with only themselves and their shareholders as a priority. Seemingly oblivious to how their actions were seen and interpreted by those watching on.
Since the Financial Armageddon large, seemingly well-regarded companies have regularly made the news for what turns out to be poor internal behaviour. Further undermining trust and confidence in the way companies are run. Indeed, some people now question the notion of capitalism and the very role of business within our society. The scandals have shown that poor behaviours are not just the preserve of our Bankers and can occur in any category. Airlines, Automotive, Construction, Retail and Oil, to name just five, have all had their time in the spotlight.
The exposure follows a now familiar pattern . First the crisis. Be it a customer disaster (United Airlines), an environmental disaster (BP), a financial disaster (Carillion), a leadership disaster (‘Fraud’ at Tesco and perhaps the biggest of them all, VW and Dieselgate) or just the ‘Bosses’ poor behaviour (The Presidents Club, Sir Philip Green and Ray Kelvin, former CEO of Ted Baker). Then after ‘the outing’, the analysis of what happened. This rarely, if ever, points to strategy but almost always highlights human failings: the poor company culture and behaviour of the bosses as the reason for each crisis.
These exposures have occurred so frequently, and the effects on the company is so damaging, even the most hard-nosed Financial Directors, are beginning to understand the link between poor internal behaviour and the external reputation of the company. Even though it is late in the day, there is growing consensus that Business needs to take a good hard look at how it behaves, and understand it needs a moral compass as well as commercial targets to sustainably succeed.
As a consequence, a company’s values and sense of purpose, or lack of them, are very much in the spotlight. Even the UK’s Financial Reporting Council have got into the act, and albeit 10 years too late, and published a revised Corporate Governance Code for accounting periods beginning on or after 1st January 2019. One of the five core principals is now “That the Board should establish the company’s purpose, values and strategy, and satisfy itself that these and the culture are aligned. All directors must act with integrity, lead by example, and promote the desired culture”.
‘Simples’. To quote the unfortunate Theresa May in one of her endless Brexit monologues. Now, culture is part of the corporate governance guidelines it will just happen. Right?
Ever since I founded The Company Spirit, nearly ten years ago I have been lucky enough to work with many CEO’s across a variety of categories in companies big and small in the UK, Europe and beyond. I get hired to kick-off behavioural change and my focus is company culture, or in my language the Company Spirit. In doing so, I have met a lot of CEO’s and I have reason to believe the ambitions of the Financial Reporting Council face an almighty challenge.
I have come to the conclusion CEO’s fall into two distinct groups: they either truly believe in the importance of their company’s values, sense of purpose and beliefs, or they do not. It’s black and white with not much fudging of the edges. One type is ‘heart-led’ and they fundamentally want to engage and involve their people in creating an environment which people ‘love’. They do this because they believe that by starting with their employees loving what they dowill lead to customers loving the experience they receive, and will set the foundations for long term commercial success. They also understand employees want two things from their CEO. Clarity on goals, strategy and the numbers, but also empathy and a sense of collaboration that together we will succeed. The other type of CEO is ‘head-led’ and is largely dominated by a focus on ‘hitting the numbers’, and an ‘I’ not ‘We’ approach to leadership.
Those who are ‘heart-led’ often exhibit similar characteristics. Invariably they are and remain driven by curiousity. Open minded, empathetic and interested in gaining fresh insights and fresh perspectives. They enjoy being the Boss. They have emotional intelligence. They are likely to have the mindset of wanting to listen, to be inside the heads of their customers and employees to better understand what is going on. Interestingly they are always ‘comfortable in their own skin’ which does not mean that all is perfect in their home and social life, they just know who they are and are happy with their ‘Personal Spirit’.
Conversely those who are ‘head-led’ often come across as egotistical and quite old fashioned in their approach to leadership. They are clearly not comfortable in their own skins and cover this up through a rather brusque management style and poor communication skills. Although they like the rewards of being the Boss, they don’t really enjoy the role and spend their time worrying that they will be found out. They struggle with ‘culture’ because they don’t get it or see the need for it.
So, whilst I applaud the changes to the Corporate Governance Code, it’s success, in my opinion, will not be down to the role of the Board but to the attitude of the Boss. This change may force the ‘head-led’ boss to pay lip service to the importance of culture but it highly unlikely to result in a values-led culture all employees ‘get’ and customers ‘feel’. At best, it may result in a few posters being created by a management consultancy / branding agency espousing a series of sentiments which are likely to be generic and imposed on the employees at a ‘beer and pizza’ evening.
It’s an approach which rarely, if ever, works. Not least because the first people to break the behaviours heralded on the posters are normally the ‘Boss’ and his or her leadership team. The reason I know this approach fails is, often I get hired by a new CEO with a ‘turn around’ situation and during the discussions with the employees left behind after the previous CEO has gone, people often talk of the ‘old’ team saying one thing and doing another. Or put it another way, what was written on the posters bore no resemblance to everyday life. The culture was a fake.
Successful cultural change is about leadership and attitude. It’s about having the right mindset, personal values, beliefs and sense of purpose. Offering clarity and creating a feeling amongst employees that together we will make this happen. It’s about living and breathing the six ‘best in class’ leadership behaviours. These will be explained in a series of future articles.