Tag Archive for: Development

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The Evolution of Capitalism: Profit or Purpose?

HR Magazine, 26 January 2022

The Evolution of Capitalism

Profit or Purpose?

Adam Kingl

Is profit the fundamental criterion for a business?  As capitalism is evolving under our feet, and that evolution is accelerating since Covid, we’re seeing a shift of emphasis from the pre-eminence of shareholders to stakeholders: customers, employees and communities.  Now, I want to make a very important distinction.  This does not mean that shareholders are getting the short end of the stick in terms of reward.  If companies refocus or even redefine how they add value to stakeholders, then shareholders are rewarded too.  

At a macrolevel, this shift that we are just starting to observe is essentially a rebalance in corporate focus from outcomes to outputs.  If we think of outcomes as share price and profit, we cannot deny that these are good things to have.  But I can’t storm into the office and say that my focus today will be to maximise my share price. What am I supposed to DO??  A blinkered focus on share price creates drift away from the reasons a company was founded in the first place: to identify a market need and to serve customers brilliantly.  Creating value for customers and serving them better are outputs that companies can rally behind, can guide whether to spend more time on activity A or activity B.  My outputs will lead to the outcome of enhancing my bottom line.  But the outcome is not my daily focus – this is a subtle but hugely important point.  

Does this mean that the CEO would not want to earn a profit?  Absolutely not. Business has to survive and thrive.  Here’s the rub.  Most businesses were founded on an idea of introducing an exciting product to the world, serving a previously undiscovered market need, bettering a community or creating employment opportunities.  But then financial analysts’ opinions grew in importance to investors, with their use of various ratios that are useful shortcuts in assessing company health.  However, we must remember that these shortcuts are only performance indicators for today; they do not assess if the business is closer to or farther from achieving its purpose, closer to or farther from achieving long-term or ‘moon shot’ objectives.

Chasing ratio optimization is a short-term game.  Before one knows it, the purpose of the business is about tacitly, implicitly pleasing analysts.  Making decisions toward long-term objectives takes a back seat, and sustained success can become much harder to achieve over time. Unfortunately, that’s exactly what happened on a massive scale.  At an inflection point in the second half of the twentieth century, as analysts’ and shareholders’ voices became louder, the CFOs’ and Investor Relations’ departments began to dominate the c-suite conversations. CEOs’ compensations grew increasingly related to share price and less on customer value indicators.  The focus on outputs dropped down the totem pole in terms of time and attention in favour of outcomes.  One could argue that the Great Recession of 2007-09 was caused, or at least made much worse, by this shift in focus.   

Companies that remain focused on their purpose are rewarded by investors and customers.  Aggregate research has proven that such purpose-focused firms significantly outperform their rivals.  The authors of the book, Firms of Endearment, explored those organisations who are in the top ten percent in relation to focusing on their purpose, community, customers and employees.  Their research revealed that, over the decade ending in June 2006, these firms returned 1,025% to their shareholders, compared to 122% return on investment by the S&P 500 overall.  Just to be clear, this study therefore quantified that purpose-driven organisations reward their investors better than the market average by a multiple of ten!  

Separate research published in Organization Science reached a similar conclusion.  Faculty from Harvard, Pennsylvania and Columbia Universities surveyed half a million employees across 429 firms.  While these academics did not find correlation between purpose alone and financial performance, they proved that companies with strong purpose and high clarity from management exhibit stronger financial and stock market performance.  The implication is that one condition of commercial success is that an organisation’s employees understand and believe in their collective purpose and have a clear path as to how that purpose will be achieved.  

Perhaps our ultimate question is: Are purpose and profit a zero-sum game?  Recent research indicates this is not necessarily so, and the two forces may even serve each other.  A huge amount of dialogue has attempted to answer this question both in media and in conferences.  The opinions are typically more definitive than one may guess and often resemble the sentiment: ‘The most successful companies, both in profitability and longevity, are the ones who recognise the absolute necessity of profits as well as the equally high necessity of having a purpose beyond shareholders’ wealth.’

Adam Kingl (adamkingl.com) is the author of Next Generation Leadership and is an Adjunct Lecturer at the UCL School of Management, where this theme of the evolution of capitalism is explored in the School’s executive education practice and notably in its Building Competitive Advantage through Sustainability course: https://www.mgmt.ucl.ac.uk/executive-education. 

https://www.hrmagazine.co.uk/content/comment/the-evolution-of-capitalism-profit-or-purpose

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Managing Diverse Collaboration in a Virtual Environment When Leading Innovation

Managing Diverse Collaboration in a Virtual Environment When Leading Innovation

Adam Kingl

A plethora of collaboration dysfunctions can easily derail innovation conversations.  I began conducting a number of experiments ten years ago to explore virtual and face to face dynamics, and which may be optimal, when holding conversations requiring creative inputs from a team.  These experiments demonstrated that team leaders should consider continuing to hold at least some of their innovation discussions on virtual platforms, even if the pandemic would technically allow the team to meet in person.  There are two important reasons for this recommendation.  

First, charisma or extraversion, a traditional leadership trait, is often disintermediated in a virtual environment.  The extrovert jumps in with their contribution first and often, while the introvert is still processing options and responses.  But on an asynchronous, virtual discussion platform like a discussion board, team members cannot rely on force of personality to push solutions, but on the clarity and quality of their ideas.  Introverts, and those who are less confident working in a second language, may actually thrive more in a virtual team.

Second, merit has more power than familiarity or hierarchy in virtual teams.  We have all experienced how factors such as cultural norms, gender, career levels and reporting lines contribute to only a few voices, sometimes only one voice, dominating in a room.  Most of our organisations’ architectures are predicated on a pyramidal hierarchy, which for centuries has suggested a tacit dogma of the manager’s infallibility.  This canon has ruined many millions of meetings, where idea creation gives way to waiting for the leader to contribute, and then the rest of the team either agreeing or remaining silent.  

In a virtual, asynchronous environment, team members scan reflect before answering, the less confident can reply thoughtfully and bravely.  Adding anonymity to contributions reduces the senior voices from owning the lion’s share of the conversation.  The best ideas rise to the top instead of those which happen to be from the most senior.  Therefore, if an important objective of any leader is to bring out the best in everyone, then he or she should consider utilising a virtual forum for at least some discussions and particularly if managing a very diverse team.  

Two important points to remember when considering virtual teamwork:

First, technology does not solve every problem.  Virtual teamwork can fail if leaders do not attend to the fundamental problems of coordinating, engaging, and motivating individuals, particularly across time zones.  It’s easy for team members to disengage when they’re not face-to-face, so the leader must convey a high degree of enthusiasm and clarity and agree on who is accountable for what from the start. 

Second, it is dangerous to assume everyone has the same understanding of how the virtual team with work together.  For example, will everyone be in one virtual ‘place’ at the same time, or will they contribute on their own time?  To lead a virtual team, the leader must focus more on team maintenance (‘How are we going to work together?’) before task maintenance (‘’What is the creative solution to the problem or opportunity?’).  

When to Leverage the Expert or the Crowd

I am mindful that the expert in the team must still be given his or her due in creative conversations, particularly when understanding technical issues or opportunities would be key.  I would argue that the smaller the team, the more this lesson is true.  On the other hand, a possibly negative team dynamic that could occur is that the expert is used to being right and may win a debate just through the power of his or her own confidence and of having more data to hand.  With larger teams, I recommend a balance between considering the expert view and leveraging the collective wisdom inherent in diversity and large groups.  The following table is a short-hand guide suggesting when to utilise the expert and when the ‘crowd’ in a given team.

Size of Team

Use of Experts

Use of Diverse Group

Small (seven or fewer people)

Experts are more likely to provide some of the best answers

May not have powerful diversity in a small number so the ‘crowd’ is less likely to provide the best answers

Medium (eight to twenty people)

Solicit the experts’ opinions separately from the group to avoid rushing to an answer

Discuss with the team before bringing the experts back into the dialogue

Large (twenty-one plus people)

Solicit the experts’ opinions; test the team’s collective view of those opinions 

Survey the team’s views and look for trends and averages

Organisation-wide

Gather a group of experts with diverse views to test the emerging views of the wider organisation for rigour and/or to ask follow-up questions

Consider using an internal company platform or social media to collect large samples, votes and discussion boards to test ideas

Another solution may be to consider the views of the crowd and the expert separately, so that one view does not influence or anchor the other, and then share for discussion.  A final recommendation is to find ways in which the emerging collective view is not a victim of groupthink.  

A diverse group’s mosaic of different views can balance the important but perhaps narrower view of the expert. The challenge for the manager of such a team or organisation is to find incentives and create cultural norms that make the soliciting of views a regular occurrence, while identifying patterns, averages and trends in those views, and then encouraging rigorous debate.  Instead of following the cliché of ‘agreeing to disagree,’ perhaps embracing multiple and diverse points of view could lead to the stronger though less intuitive paradigm of ‘disagreement to convergence.’  

Adam Kingl (www.adamkingl.com) is an Associate of the Moller Institute, Churchill College, University of Cambridge.  He is the author of the book Next Generation Leadership and an educator and adviser.  Formerly, Adam was the Regional Managing Director, Europe, of Duke Corporate Education and the Executive Director of Thought Leadership at London Business School.  

https://indd.adobe.com/view/bb16cf03-6c8a-4d66-8ae3-90c406118980

Inspire Magazine, The Møller Institute at Churchill College, University of Cambridge, Issue 4, Leadership Mindsets, pp.32-33

UCLSOM

The Cost of the Global Resignation Crisis

UCL School of Management

20 JANUARY 2022

THE COST OF THE GLOBAL RESIGNATION CRISIS

Notebook with the title "the great resignation' clipped to an arrow pointing left.

Recent studies indicate that almost 55% of the global workforce are considering resigning from their current role. Adam Kingl has been discussing the innovation and finance implications of the current resigning crisis. 

Adam’s research indicated that the “great resignation” phenomenon was already growing before the pandemic when he found that 90% of millennials (who compose about 60% of the global workforce) do not plan to stay with their employers for more than five years, and over a third plan to leave within two years.

Replacing an employee can be costly for organisations, averaging around half to two times their annual salary. Adam explains the implications can be more severe for professional services firms, such as law firms and consultancies where a partnership model is most common, but that it has drastic implications for all organisations.

He advises that to keep employees engaged and reduce the high levels of resignations employers must focus on; development, organisational culture and purpose. He says organisations must “reconsider the models in our organisations and think about how we can still imbue people with purpose and values so that they will stay a little bit longer, but also create those organisational designs that are not necessarily ‘up or out’.”

Read the full article

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How to Fail Successfully

I think you will agree with me that when we come together in these social constructs called companies we tend not to be as innovative, adaptable or inspirational as any one of the human beings in those organisations.  Why is that?

These companies tend to perpetuate this fear of failure.  As a result, we only innovate around tiny, incremental ideas that we’re almost one hundred percent certain are going to succeed because it’s a reputational hazard if we do otherwise.  As a result, companies usually don’t invest in big, supernova ideas that are going to leapfrog the competition and achieve exponential returns.  It is contingent on the leadership community in organisations to rethink their attitude toward failure and how they communicate failure as a learning opportunity.

Of course you have to control the risk when you are innovating, but you have to consider your innovation pipeline as a portfolio with a collective return rather than as individual opportunities that represent lots of chances for embarrassing failures.  If you have one supernova idea out of a hundred that you try over the course of a year, it doesn’t matter if the other ninety-nine were unsuccessful.  And I’ll go even further!  You never could have had that one supernova idea unless you also tried the hundred ideas.

How many of us in our companies try a hundred new things in a given year?  Very few!  U.S. Poet Laureate Maya Angelou once reflected, ‘People will forget what you said…but people will never forget how you made them feel.’  As leaders, therefore, let’s think about how we make our people feel about failure.  Change that attitude and we may find that our organisations are much more innovative than they ever could have been in the past.

Adam Kingl is the author of Next Generation Leadership (HarperCollins) and is a keynote speaker, educator and adviser.  www.adamkingl.com

      Photo by Matthew T Rader on Unsplash

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What Should Senior Executives Focus On When Pursuing Innovation?

A lot of executives say they want to enhance innovation in their organisations. I tell senior executives not to focus on products, services or processes because they have many colleagues who can focus on those. Senior executives should be focusing on strategic innovation, answering three fundamental questions: ‘Who, what, how?’ : Who is my customer? What am I offering that customer? How am I offering it?

This is also known as business model innovation, challenging the assumptions implicit in the answers to those three questions. If you can innovate around your strategy, you can develop an inimitable competitive advantage. To improve the quality of internal conversations in an organisation, leaders have to encourage that their assumptions be questioned. They should be asking their colleagues, including those more junior, ‘Based on what you’ve just heard me say, what assumptions do you think I’m making?’

Once those assumptions are surfaced, then ask, ‘OK, which of those assumptions may not be true or may no longer be true? Maybe some of the ways I look at the world were fit for purpose five or ten years ago, but they aren’t so today.’ That’s a really simple hack to make yourself automatically a more innovative executive. Of course, in a COVID and post-COVID world, the relevance of one’s perspective may be limited to months rather than years!

This approach to encourage questioning is rather antithetical to the old paradigms of the leader as the font of wisdom. Experience is sometimes an ally and sometimes a professional hazard. So do consider encouraging others to identify and then question your assumptions in order to progress on the road to enjoying an innovative environment in your team or company.

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How to Develop Your Young People in Lockdown

How to Develop Your Young People in Lockdown

One of the main conclusions I came to in researching my book, Next Generation Leadership, is that Generation Ys (Millennials) crave development more than almost anything else from their organisations.  But the question I hear now that we are in lockdown under Covid is: How can we recreate the development that would have happened organically by our youngest colleagues’ observing how senior people go about doing business?

There are still at least a couple of things that we can do.  First, even under lockdown, we can invite our young team members to senior stakeholder meetings, senior customers or strategic conversations, even if they are just observing.  If we want to enhance a culture of development, one way to do that is to help our people observe desired behaviours.  The best definition I’ve ever heard of ‘culture’ is so good because it is so simple.  It’s just two words: ‘shared behaviours’.  That’s it!  But that definition implies that you have to give your people the opportunity to observe behaviours in action, and you can certainly still do that under lockdown.

The second piece of advice I would give is to consider mentoring your youngest employees.  These don’t have to be your direct reports, but also make that a reverse mentoring opportunity.  You can teach them about how to navigate your organization, advance their careers, serve more sophisticated customers, and they help you with issues such as leveraging social media, identifying new customer segments, and using skills and tools they have acquired which many of their older colleagues have not.  It’s also an opportunity to find out for yourself what younger generations want from life, their career and their leaders.  I think you’ll find it illuminating!

So how do you still organically develop your Millennial colleagues under lockdown, in ways that don’t cost you anything?  First, invite them to senior virtual meetings, and ask them to observe and note behaviours.  And second, consider mentoring and asking for reverse mentoring.