Peter Lederer is the Chairman of Gleneagles (frequently hailed “The World’s Best Golf Resort”) and also the Director for Scotland of Diageo – the world’s largest producer of spirits.
Values-based leadership and Corporate Social Responsibility (CSR) are subjects much discussed in the current climate. I discussed these topics with Peter, drawing on his own experiences, especially with respect to leadership’s role. His observations are below, followed by my own commentary:
When it comes to CSR there are three key areas to think about:
- understanding the difference between authentic, values-based CSR versus what is too often simply marketing and PR spin;
- identifying the main blockers and challenges that stand in the way when it comes to values-based leadership and developing an effective CSR agenda;
- thinking about the roles and responsibilities of top management teams and their boards in this area.
Authentic, values-based CSR – versus ‘compliance’ and ‘spin’
CSR has become a buzzword. Lots of books are written on the subject and most organisations do have a CSR policy. But very often, CSR is simply a bolt-on: a box-ticking exercise that is actually quite superficial. There are organisations that plough a lot of resource into it, but whose own value system and ethics are in direct contradiction. Enron is a good example: it was the poster-child for CSR in the US, winning a slew of awards in the process, but we all now know what was going on beneath the surface.
Heavy and resource-based industries provide other examples. All too often there is a lot of corporate spin about what a firm is doing, for example, to create a clean environment. However, much of the time this is actually more about compliance and regulation – for example, clearing up the environment that your company is impacting. It can feel disingenuous because CSR becomes simply a strand of marketing and PR.
Genuine CSR is not about flashing the cash or corporate spin – it is about being a good corporate citizen and having values that are stakeholder-centric and which focus on customers, employees and the wider community.
Challenges of building an effective CSR agenda: business complexity and the pace of change
We live in a 24 hour, ‘always on’ society that never stands still. The internet – especially social media – has revolutionised corporate reputation management. Companies are constantly under the spotlight and it is incredibly easy for them to be named and shamed – to a huge audience – in a way that was not possible 10 or so years ago. The disconnect between what a brand says it stands for – and what it does in practice – can be vastly more glaring these days.
As well as the pace of change, business complexity is another key challenge. Many businesses operate cross-border and that means exposure to working in countries and cultures whose values and way of doing things are markedly different from in the home country. Examples include the Middle East, China and Russia. Home-grown values statements and CSR policies that work well at head-office are often not easy to reproduce abroad.
On a positive note: there is more debate and greater transparency when it comes to a company’s stated position and its brand values. There is a much greater acceptance that customers do in fact want to know what you stand for, and if you state that you stand for X but in practice this is actually more like Y – you’ll be found out very fast.
A downside, certainly for companies, is that there is much less loyalty than before. Thinking back to the 60s and 70s, for example, it is easy to recall how much loyalty people had to certain brands – for example M&S. That level of trust in brands has diminished and it is not just companies – the same can be said for government and of course, the media. This comes back to complexity, the pace of change and access to information.
With such complexity and pace of change, the task of leading responsibly has become even more challenging and difficult for companies, leaders and boards to get right.
The role of senior leadership and boards
CSR policy has to connect with a company’s key stakeholder groups – customers, employees, shareholders, and the wider environment. 100% of the time they need to be front of mind; it cannot be a bolt-on. The banking sector is a reminder that when you’re blinded by your own PR – you’re on a road to nowhere. It also needs to be objective and led from the top.
In practice this can mean a number of things. It is important to have an individual from the top team who has real clout within an organisation take responsibility for CSR. The individual needs to be fully on-board and to believe in both the concept and what that means in practice; they can’t just pay lip service. Critically: they must have the remit to challenge those around them, especially the senior leadership. There must always be a means to challenge the status quo, and doing so on a regular basis. Boards play a crucial role here, too. Their key remit is to challenge and to provide oversight and objectivity of management’s actions.
When it comes to ethics and day to day practices, the advice I always give is: don’t do anything behind closed doors in your boardroom that you would be embarrassed about if it went public. Decisions and actions should be approached in such a way that – the day your customers, shareholders and staff find out about them – you feel comfortable and able to stand by those actions. That does not mean you cannot make difficult decisions – but those decisions and actions need to be governed by your values and what you say you stand for.
Scenario planning and crisis management exercises are valuable. Such exercises are part of business risk assessment and they help to inform decisions that might be taken. How will these decisions impact your stakeholders? What will the reaction of those groups be?
Values-based authentic leadership and a commitment to CSR is a mindset. You cannot simply turn it “off and on” when it suits you. Instead, it should inform how you operate day to day and how you make decisions as a corporate citizen. It needs to be “lived and breathed” by leadership if it is to be genuine. If you do this – I believe that as the world gets ever more transparent, you stand a greater chance of connecting with your customers in a way that builds genuine loyalty and creates long-term value for your brand.
Commentary by Karin Sode
The internal struggle between values and corporate citizenship versus a forensic focus on maximising shareholder value – especially in the shorter and medium-term – is one that I have seen play out across numerous sectors in my work. Dynamics within the top management team and the board are key variables. How much remit do individuals actually have to challenge the status quo? How clear are individuals of their own values and those of the broader organisation they effectively represent? How explicit is the board and the top management team about the values of the organisation?
The key themes and priorities for leadership in this area are as follows:
Board diversity is crucial. Leadership teams and their boards must reflect the organisation’s broader stakeholders, especially customers. Board diversity, however, remains a key challenge across the corporate world.
I’ve been working with a number of clients in the area of board evaluation. This has included assessing potential candidates for board roles, for cultural fit and to help counter unconscious biases that might reduce, rather than increase, board diversity within the existing team. Whilst firms find it challenging to change the mould, there is recognition from clients that their current board composition does not reflect their customer base. A homogeneous board leads to the risk of ‘group think’ – failing to challenge poor assumptions and common errors of judgement – and making flawed decisions as a result. A board that encourages the airing of differing views and promotes the ability to challenge is going to be a far healthier one, and as a result, should be more able to uphold, promote and safeguard the articulated values of the organisation.
Team effectiveness at the top
The term “high-performing team” is one that tends to get used when talking about lateral and vertical teams within a company. But it also applies to the top management team and even to the board. All too often these teams do not work effectively together. Roles and remits are unclear, as is the decision making process. Leaders often focus on their own business areas, rather than the needs of the broader organisation and its stakeholders. Effective decision-making is often hampered by too much ‘posturing’ and internal power struggles. I’ve seen how these elements can reduce top-team effectiveness when it comes to general business issues – typically causing less tangible aspects of decision-making, such as CSR, to be pushed down the priority chain, even if that carries a significant reputational – and therefore business – risk.
Post-Enron and the broader financial crisis – clients are increasingly seeing the value of clarifying and re-articulating their values and developing processes that provide mutual challenge at top-team level when those values are not lived. They are also placing a greater emphasis on their own corporate culture – specifically, looking hard at how they can create a culture that is joined up, collaborative and which drives their values right through their organisations. If this clarity and mutual challenge is missing at top team level, the organisation runs a much greater risk of not managing the ethical responsibilities of the company overall.
Supporting individual leaders
It’s tough at the top. Leading authentically and being able to challenge the status quo requires a high degree of inner strength and resilience, as well as an understanding of one’s own values.
In much of my 1:1 work with senior leaders we spend time focusing on areas such as:
- Clarifying what the leader stands for, deep down. What does it really mean when they say that they want to make a difference?
- Leading authentically and in alignment with those values and their desire to do the right thing. Helping leaders to develop their own sense of purpose.
- Developing insights into how to change the culture in their wider teams and organisation, for example, taking greater ownership of larger issues, including the CSR agenda.
- Providing challenge whilst also acting as sounding board – asking the difficult questions about how the leader can help drive change – not just within their organisation, but within their sector.
When leaders understand their own values it enables them to lead more authentically and with greater integrity and confidence. In so doing, they are far less likely to ‘sell out’, both at an organisational and also individual level.
Leadership consultant Karin Sode works with Chairmen, Chief Executives and HR Directors in areas including board evaluation, culture change and 1:1 executive coaching. She combines a deep insight into authentic leadership with a strong commercial focus that supports senior leaders and teams to reach their full potential. This support is grounded in knowledge of business reality and the challenges of successful leadership within complex, multi-stakeholder organisations. Karin has consulted to a wide range of organisations including: Diageo, Sony Music, Shepherd+Wedderburn, Standard Life, the Danish Central Bank, Virgin Money and Discovery Communications. www.karinsode.com.
Interview conducted and article written up by Matthew Sinclair.