In business today, it’s increasingly taken as read that a company must be more than the sum of its profits. The idea that business has obligations beyond the bottom line and shareholder value has grown well beyond the world of social enterprise and the CSR silo. It’s now embodied by global powerhouses like Unilever, and in organisations like the B Corp movement, now several hundred strong in the UK.
It’s not that we’re witnessing some unprecedented wave of altruism sweeping the business world. CEOs haven’t lost their commercial compasses, or suddenly declared a year-round corporate Woodstock. There's a simpler, more fundamental reason that more and more companies are striving to do better by all their stakeholders, and by society as a whole. It’s good business. As countless surveys have shown, consumers – and especially Millennials – want to work for and buy from companies that share their values and show a clear purpose. Doing the right thing doesn’t just make customers, employees and investors feel good, it’s increasingly what motivates key decisions on what to buy, where to work and who to back. In other words, a commitment to do good, to give something back, can easily become competitive advantage.
In businesses that are embracing this new paradigm, the good example often is being set from the very top; by leaders who understand what it takes to get ahead in an environment of enhanced scrutiny and raised expectations. Yet the move beyond the traditional, profit-focused and shareholder-centric business model also presents a significant challenge to today’s business leaders. The role many have become accustomed to playing – as the ultimate custodian of shareholder value, controlling every other factor to meet this need – is swiftly becoming incompatible with the new reality. When you pair that with the pace of change affecting business today, it’s clear to see that we need a fundamental change in the role and purpose of corporate leadership.
Think of what that has traditionally looked like in a business of any scale. The leader’s role has been to set strategy, provide direction and do everything in their power to keep the show on the road. To be an organisational brain that delivers instructions to the rest of the body corporate.
Such a concept of leadership can be highly effective when strategy and shareholder value are the overwhelming concerns of an organisation. Yet in today’s faster-moving, more demanding and transparent business environment, it cannot do the job. It was the American management consultant Peter Drucker who said that culture eats strategy for breakfast. And we are now witnessing that come true.
Leadership must adapt to a world where its beloved five-year plans are becoming obsolete before the ink has dried on them; and in which the obsession with strategy is starting to pale against the need for culture. Companies that are embracing the wider responsibilities of business today are generally those with a robust culture that empowers people to make good decisions.
In contrast, some of the world’s most controversial businesses are struggling to deal with exactly the same area. Uber is a business with as many strategic challenges as it has global opportunities; but among all the regulatory, financial and competitor roadblocks, one issue that is repeatedly being identified at the top of new CEO Dara Khosrowshahi's priority is company culture. And rightly so; the ride hailing app’s many observers are not wrong to suggest that it can never fulfil its potential unless the troubled internal ethos of the company is turned around.
In a business world where culture comes first, a new style of leadership is needed. By its definition, culture is not something that can be created and franchised from the boardroom down. To work, to become something more than just words on an office wall, culture must be collectively owned and every employee, from the CEO to the newest hire. Company culture has to be as democratic as the business environment today is becoming. For leaders, that means knowing when to get out of the way; there is a role, of course, to set the tone, take decisions and give people what they need to do their jobs well. But more than ever, that is about encouraging people to find their own answers rather than mandating your own. This generation’s best business leaders will be more top coaches than star players: those who get the best out of their team, create the conditions to succeed, but are ultimately focused on letting those who do it best get on with the job. In today’s fast-changing business environment, hard as it may be for some leaders to accept, less is often more.