Wednesday, December 9, 2009

Responsible Leadership

On November 23rd 2009, IMD and the IMD Alumni club of London, organised a business forum at WestLB, in the City. Professor John Wells, President of IMD, led the discussion.

The event was hosted by Heiner Boehmer, Managing Director of WestLB. Mr. Boehmer opened the event by greeting the many participants from all areas of business. He talked about his sense of responsible leadership, linking it to the present economic situation in the UK and elsewhere. Alumni club committee member, William Warren, then also welcomed the participants and presented the results of a survey that the club recently carried out with its members. The club acts as a strong link between the local business community and IMD.

IMD director, Lynn Verdina-Henchoz, then warmly thanked the partners of the event (WestLB and the Alumni club), and introduced Professor John Wells and the topic of the evening. John Wells has been president of IMD since spring 2008 and holds the Nestlé Professor Chair. He has studied and worked in Europe and the US and has had a very rich career both in the business and academic worlds, including senior roles at PepsiCo and Harvard. Professor Wells has also been involved in several start-ups as advisor and angel investor and has served on various boards. At IMD, apart from his numerous duties as president, John Wells is a professor of Strategy, and his current research addresses how companies increase their agility through innovative approaches to strategy, structure and systems. He is also examining the role of responsible leadership in business and society, the evening’s topic.

No newspaper or magazine can be opened these days without some mention of the economic crisis and the responsibility of leaders both in its occurrence and in helping us come out of it.
As Professor Wells explained, the recent turmoil in financial markets is ascribed by many to be a failure of leadership and the calls for more responsible leadership continue to grow. However, as John mentioned “there is a danger that we take too narrow a view and simply bow to the critics demanding more corporate social responsibility. Responsible leadership is more than this; it is a balance between getting the right results and getting results in the right way.”

With a considerable amount of humour and passion, John Wells then went on to describe these two parts of the equation. He demonstrated what these “right results” might be in depth with numerous examples from business. They require not only a good business strategy, but solid implementation and leadership. Many corporate failures are due to inertia, whether strategic, structural or personal. The challenge for organisations is to have an agile strategy and structure, and this requires agile people. “The right way” is a matter of being fair, being honest and taking a broad, long view of the impact of business decisions. The capitalist view is that the goal of an enterprise is to maximize shareholder returns while minimizing the returns to all other stakeholders, be this customers, employees, suppliers or regulators, which is not conducive to building trust. Life is a multi-round game. The goal must be to look for win-win situations rather than play a short term win-lose game.

Ensuring a commitment to honesty and fairness in an organization is a complex issue. Many reward systems do not encourage such behaviour. Indeed, they do the opposite. Compliance systems can also fail, especially if they are not backed up by appropriate rewards and punishments. Finally, it is important to encourage behaviours that reflect these values and that begins at the top with the behaviour of top executives since those below will copy them. Leaders are responsible for managing rewards, compliance and values. The combination of all three helps drive honesty and fairness.

Professor Wells argued that a firm that delivers results AND delivers them the right way is more likely to deliver superior sustainable performance for the long term. Corporate social responsibility programs are important but not a substitute for good leadership of the enterprise. Firms should be encouraged to help solve society’s problems, but they should take care to look for ways they can do it profitably, focusing on activities where they can excel.

You can find links to a video by John Wells talking about Responsible Leadership, IMD participants' testimonials and other relevant information on the right.

The evening ended with a pleasant cocktail organised by WestLB and discussions went on late into the evening. As one participant wrote the next day “I found Professor Wells to be an engaging speaker, the content was not only relevant but also well organised and presented and the facilities and organisation were first class”.

No comments: