If they have a choice, customers return to where they are treated well. Leadership matters, and not just in local businesses, writes BREDA O'BRIEN.
CALL ME Cassandra, but I think things are much, much worse than we think they are. And until we acknowledge that fact, things are not going to get better. This is not a recession, or a Great Depression. It is an unprecedented global meltdown. Some saw it coming, but few foresaw the swiftness, or the ferocity. We have watched the best brains virtually everywhere in the developed world throw every intervention that they have in their armoury at it, and it is still getting worse. We have mortgaged our children’s futures, and it is still not enough.
It is being compared to the end of Marxism, but it is much more far-reaching. Then, capitalism was virtually the only remaining paradigm. Now that it has imploded, there is no widely accepted alternative paradigm waiting to take its place.
At the moment, the mood is ugly. In Ireland, virtually every sector feels that it is bearing an unfair share of the pain. Recrimination is everywhere, and a desire for vengeance on those who ripped our brief idyll away from us. It may get even uglier, as terrified people, especially the young who have never known want, suddenly find themselves redundant, and unlike previous recessions, with nowhere to go.
Some of our leaders are desperately acting as if this is just a glitch, and things will go back the way they were, if we all just calm down and take some cuts. Things cannot go back the way they were, because if they do, it will be merely be a short interlude before an even greater meltdown.
An economic system that made an idol of maximising profits for shareholders was morally bankrupt long before the consequences began to unfold before our horrified eyes. It still is. No society is devoid of selfishness, but few societies have made a virtue of it as western society has. There has been an ethical rupture, and until that rupture is healed, no real progress will be made.
In 1981, the business roundtable in the US, which consisted of chief executives of the 200 largest corporations, could say that the “legitimate concerns” of stakeholders such as “customers, employees, communities, suppliers and the community at large” had to be balanced with the need to provide profit for shareholders. They even went so far as to say that the corporation that recognised and took into account all these other constituencies “would best serve the interests of its shareholders”. By 1997, all that had gone out the window. The same roundtable, in a report on corporate governance, declared that its primary responsibility was to the shareholder. Suddenly, all other interests once held to be legitimate were now only bit players.
We all know what resulted. The subprime debacle was only the most obvious example. Nor will the new mantra of regulation work, while the model remains fundamentally flawed. People will just find more sophisticated ways to evade regulation. Remember, on paper, even Enron had a robust code of ethics.
Greed is one obvious cause of the current crisis, but far more important is the erosion of trust, truth, responsibility, compassion and solidarity. These vital virtues were hollowed out even further because people kept on using the words, but acting in a way diametrically opposed to them.
Having begun as Cassandra, let me now open myself to accusations of morphing into Pollyanna, by declaring change to be possible. As Johnson said: “Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates the mind wonderfully.” Perhaps the sheer scale of what is happening will also concentrate our minds, and make us see that virtue is not an optional extra, but a vital underpinning of any society. Even the most venal person realises it is much, much harder to work in a cut-throat world than it is in a fair environment where people are treated as human beings, not disposable commodities.
Most of us have had the experience of being treated well or badly in a shop, or a restaurant. You can tell within minutes of entering a premises what kind of leadership it has. As a rule of thumb, workers who are treated well treat customers well. If they have a choice, customers return to where they are treated well. Leadership matters, and not just in local businesses. In 2001, Jim Collins wrote a classic piece for the Harvard Business Review, called "Level 5 Leadership". He wanted to isolate the factors that changed companies from "good to great". (Unfortunately, his idea of "good to great" was based on the narrow criterion of cumulative stock returns, but it is clear that other things were also going on, such as building for the future, and not just short-term gain.) In all the companies studied, one factor stood out above all others – a humble, self-effacing leader who was also possessed of fierce resolve.
We lionise the high-profile, flamboyant, ego-driven leader, but the highest level of leadership was found among those who were focused, not on themselves, but on building companies of enduring greatness. They were self-effacing to the extent that they willingly took the blame for mistakes, but tended to attribute success to the “great people” around them, and to luck. They showed unwavering resolve in doing whatever had to be done to achieve the best long-term results, no matter how difficult the road.
To date, aside from some attempts by the severely outnumbered Greens, there has been a striking absence of that kind of leadership. Budget cuts have looked panic-stricken and driven by short-term goals. Ironically, having institutionalised and rewarded selfishness in our economic system, now we expect people without much positive example from leaders to suddenly develop a massive degree of altruism at a time of crisis. Waiting for the supplementary budget in April, there is little evidence of humility with fierce resolve, or the kind of leadership that can transform this crisis into an opportunity to build a society where people, and the planet, matter.
In order to take the pain that will be necessary in a transition to a more sustainable and just economy, we have to be presented with more than a threat of needing the International Monetary Fund or World Bank to do for us what we cannot do for ourselves.