Some corporate leaders are mapping the way to bridge the gap between CSR ideals and reality.
By Derek F. Abell
In the wake of a string of corporate scandals and failures, stock market meltdown and economic crisis, and in the face of looming other financial, environmental and social problems, it is small wonder that there is no lack of finger pointing or demands for deep change. Targets range from business, government, and consumers to certainly unstoppable globalization and technology. Even our much vaunted market system and capitalism itself are under fire.
Less frequently asked is whether business leadership, in its pivotal role, is up to the growing challenges and broadening responsibilities with which it is now confronted.
More precisely, can those at the corporate helm, but also those further down the line, keep their eye on the ultimate goal of long-term sustainable growth and profits in a world of strong countervailing forces? While Adam Smith’s “invisible hand” can work wonders when the market system’s firms are populated by the right leadership, it can evidently wreak havoc when not.
The Gap Between CSR Ideals & Reality
In their own defense, executives point out that they find themselves torn between what sounds theoretically right and the hard realities of practice. While in theory there seems to be a crying need for leadership that can perform today but also build, innovate, and transform for tomorrow, in practice financial and self-imposed pressures argue for the short-term at the expense of the long-term.
And while prudence should guide risk taking, recklessness rules when rewards are astronomical and asymmetrical on the upside. Further, while in theory corporate social responsibility and ethics should be part and parcel of the business equation, in practice it is smarter to keep your head down when difficult choices are on the table.
Leaders Bridge The Gap
What can be done?
We do not have to look far for clues since leaders in some notable industrial giants, like Nestlé, IBM, and HSBC to name but a few, and particularly family and social enterprise leaders, with their eyes on making a profit by making a difference, are showing the way. These leaders:
- Define responsible leadership first and foremost as long-term building (inside and outside) as well as short-term performance. Leading responsibly is considered integral to both. This redefines CSR practice, which too often is a staff not line responsibility, and often risks putting the cart before the horse.
- Avoid the “shareholder value trap.” Shareholder value is considered a desirable result but a misleading primordial goal, especially when over-incentivized. They recognize that when customers and employees are put first, shareholders come out ahead — and that robbing Peter to pay Paul eye-popping bonuses may come home to roost.
- Set the bar high. Baking a big cake is recognised as the best way to pursue ‘win-win’ when faced with inherent dilemmas, and the easiest way to satisfy squabbling stake-holders.
- Put vision before strategy, purpose ahead of goals, and values above all. Values-based leadership complements value-based management.
- Wear three hats interchangeably — a managerial hat for results, a leadership hat to move the company forward, and a governance hat to ensure adherence to core principles and directions. They extend governance responsibility beyond the board room to senior management, frequently the weak link in the governance chain.
- Are ever- vigilant where there is a propensity to go off the rails, and use the “6 c’s”—heavy communication, controls, censure, compensation/incentives, as well as codes of conduct and compliance to head off problems at the pass.
What Role Can Business Schools Play?
What can business schools do to prepare the way, and to complement the school of hard knocks?
- First, preach as well as teach. Current and would-be leaders need to be inspired as much as taught if they are to step up to the new mark.
- Second, remember that few practitioners read the Journal of Irrelevant Research. Research has to be more conceptual than theoretical, and more holistic than functionally- or discipline-based.
- Third, bring teaching, research, and practice together. The German design Bauhaus of the 1920s/30s and today’s great teaching and research hospitals are cases in point.
These are tall orders for many of today’s business schools. But the “new business of business leadership,” unheralded as yet, is taking shape. The reshaping of leadership development cannot lag far behind.
It would be better to lead it.
Previously: Rethinking Shareholder Value and CSR: "Do Well by Doing Good" a False Premise
Derek F. Abell will be a keynote speaker at the upcoming Who Cares Wins conference. Learn more and register now!
About the Author
Derek F. Abell is Professor Emeritus and Founding President of the European School of Management and Technology, Berlin, Germany, and Professor Emeritus of the Eidgenössische Technische Hochschule Zürich, Switzerland. He was previously Professor at IMD, Lausanne, Switzerland, and Dean of that Institution in its earlier development from 1981-89. Prior to that he was Professor at the Harvard Business School, Boston, USA.