An array of scandals has rocked the world in recent times, such as financial malpractices (Arthur Andersen, Lehman Brothers, the LIBOR scam), unethical practices (FIFA mismanagement), and environmental damage (Gulf of Mexico oil spill, Volkswagen emission controls) - all of which the critics of capitalism are not unhappy to report and embellish in great detail. The competing goals of a quest for power, meeting ethical standards, maintaining profitability, securing dwindling resources, and adapting to global environmental change have created an increasingly complex business canvas for leaders to navigate. The acceleration of environmental and social challenges exert pressure on corporate leaders to be not just reactive but proactive. Richard Branson, Founder of the Virgin Group, and Paul Polman, former CEO of Unilever, are among the new breed of leaders who are attempting to catalyse a better way of doing business, keeping in mind the triple bottom-line of profits, people and the planet.
A review of the existing theories on various leadership styles highlights that there is currently a lack of two critical factors— responsibility and accountability—in their characterisation. It is imperative in this era to focus on that class of leaders who can respond collectively with credible actions for their businesses while accepting full responsibility for their actions. What is it that drives certain leaders to consolidate the strengths of multiple stakeholders and create larger synergies while accepting full responsibility for their actions? With the existing leadership theories missing the ‘responsibility’ and ‘accountability’ element in their characterisations, what aspects of their behaviour sets these leaders apart from those who act based on a common good? These questions have given rise to Responsible Leadership (RL), a new leadership construct for leaders in the 21st century.
Still in its infant stages of discussion, literature on RL lacks a clear definition on the kind of behaviours that are manifested in responsible leaders. While certain characteristics like authenticity, virtuousness and charisma are quite clearly highlighted as a must for effective leaders, there remain large gaps in understanding some behaviours, such as the role of ‘authority’ and ‘responsibility’. For example, a leader who outsources the organisational activities to a third party is clearly delegating some of the responsibility to that third party—however, if these leaders do not assume accountability for the actions of that third party, then there is a serious problem that needs to be rectified. Nike’s sweatshop practices that made headlines in the late 1990s are a case in point of delegating responsibility with a lack of accountability.
• In 2016-17, a study to understand the key behaviours demonstrated by responsible leaders. showed that responsible leaders exhibit three types of behaviours:
- Consulting with all stakeholders and including them in decisions that impact the business.
- Engaging with employees at a personal level and being concerned about their progress.
- Advancing the cause of business and society by fostering inclusion and engagement.
Inclusive approach
The study revealed that an inclusive approach is possible when leaders are aware of diverse stakeholder claims and can engage in a dialogue with multiple stakeholders who perceive the leader to be one who is open and approachable, available to hear their diverse views, address their concerns, and alleviate their fears. Thus, a comprehensive and collaborative approach has to be adopted by a responsible leader for generating the best results during stakeholder engagements. It is necessary that the leader himself is present in critical meetings and has the capacity and willingness to engage in a dialogue. A responsible leader should not be seen as one who is solely dependent on a close coterie of people for advice when implementing and executing business decisions. When a leader takes a decision that favours multiple stakeholders and implements the same for the benefit of all, such actions can produce an optimal solution.
One CEO who was interviewed for this study shared an example of the time when his organisation went through an integration process after being acquired by a larger company. He recalled the emotions from different stakeholders - the Board, employees, shareholders, vendors, and clients—of both the organisations when the integration was announced. The immediate stakeholders of the two organisations seemed to be in conflict with one another, and their views were not aligned to the new direction that the joint entity proposed to adopt post-integration. He had to proactively work with the different stakeholders to identify and address all the issues, and also sought the help of advisors and domain experts to effectively resolve some of the more contentious ones. The leader concluded that the success of the integration was largely due to the fact that his stakeholders recognised his commitment as he embarked on an engagement and inclusion strategy.
Responsible leaders are required to demonstrate awareness of various stakeholder claims. It is this awareness that helps a leader draw conclusions or present arguments that favour business interests without denting relationships. It also helps the leader to step into the shoes of others and see how they view the situation. When leaders demonstrate the above behaviours, they balance the immediate and extended stakeholder interests to achieve an optimal business outcome by adopting an inclusive approach.
Engagement approach
Digging deeper into what constitutes an engagement approach, the study revealed that responsible leaders centre their attention and efforts on their employees first, take pride in their people, are generous in crediting the team, and are extremely concerned when they have to break bad news to their employees. Thus a critical aspect of responsible leaders is their focus on their employees or internal stakeholders. This was evident from the interviews conducted, where leaders mentioned how their first priority was always towards the employees of their organisation and then towards other stakeholders.
Responsible leaders adopt a social and relational approach as they interact with the employees in their organisation, both in a professional and a personal context. By modelling themselves as an example, they are able to inspire others. They recognise the individual accomplishments of their team members and assign due credit to the individual and deserving teams. These leaders have a high focus on the holistic aspects of their relationship with their employees.
Responsible leaders are extremely concerned while breaking bad news to their employees. During the interviews, the leaders candidly shared about the pain of dealing with their people when there was a right-sizing of the company, or in cases where the leader had to reprimand an employee for poor performance or violating ethics. A responsible leader recognises that sometimes they have to do things that may seem irrational, but make sense for emotional reasons.
Finally, it is often during a crisis, when there are rarely any manuals to dictate how a leader has to behave, that we can distinguish a responsible leader from other leaders. One such example is Ratan Tata, former Chairman Emeritus of Tata Sons, who shifted into the driver’s seat during the Mumbai terrorist attack in 2006 when his group’s Taj Hotel was under siege. As a responsible leader, he took charge of the situation and led from the front, taking full responsibility and accountability for his actions.
Advancement approach
As a third behavioural pattern, the study revealed that responsible leaders work towards integrating inclusive and engaging behaviours for the advancement of the external community. This is done by keeping a focus on advancing quality of life in the context of the organisation’s location, as well as collectively exploring how the business can partner on social actions that can enhance the community
Responsible leaders thus demonstrate a strong focus on the external community and embark on actions to develop the community around the business. These two items establish the existing views of scholars that such leaders move away from a narrow economic view to a more extended stakeholder view. Responsible leaders explore the benefits they can render to the community while keeping in mind how these actions can enhance the reputation of their business, and hence earn the licence from the extended stakeholders to operate as true corporate citizens.
Responsible leaders are tasked with societal progress by aligning organisational activities for the benefit of both the business and the community. However, for that, protecting the business interest and safeguarding the bottom line is a key priority. Leaders should strive to reach that goal first and subsequently see how they can play an active role in the community they operate in.
Conclusion
The demands on corporate leadership are getting disrupted rapidly due to globalisation and technology. Leaders are expected to have a clear understanding of the dynamics in the operating environment, the social aspects of engaging multiple stakeholders with emotional intelligence, and also leaving a legacy for businesses to sustain themselves by executing strategy well.
Leadership failures arise when leaders focus on short-term wins over long-term gains, or a win-lose outcome over a win-win outcome. At a time when leadership behaviours and actions are under increased public scrutiny, there is a dire need for leaders to make decisions and implement actions that are just and fair for everyone. So, at a strategic level, it becomes relevant for Board members, when identifying a CEO to head their business, to choose somebody who embodies the RL behaviours of inclusivity, engagement and advancement.
Executive Certificate in Leadership and People Management
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Originally published by SMU Asian Management Insights, 22 May 2019 by Dr Flocy Joseph. Access the case in full here.
