Leadership / Performance: Are You Committed To Something Bigger Than Yourself?

Is There Anything Bigger Than The Maximisation Of Shareholder Value?

According to Roger Martin, the third most influential business thinker in the world according to Thinkers50, the shareholder value maximisation revolution was triggered in 1976 by Michael Jensen and William Meckling.  How? These economists published, what has turned out as the most cited article ever:  “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”.

In this article, Jensen and Meckling argued that the professional managers (running businesses) were looking after their interests at the expense of the shareholders.  Thus began the  shareholder maximisation movement that has since then taken over the business world. And in so doing, all other stakeholders (customers, employees, suppliers, partners, society at large ..) have been viewed-treated as mere resources and/or means of creating-maximising shareholder value.

Are You Committed To Something Bigger Than Yourself? 

What does Michael Jensen say on the matter today?  Let’s listen:

“I have a bad rep on this kind of thing. Because people think that all I want companies to do is to maximise the value of the stock. First of all that is false, it’s not what I ever said. But I guarantee you if you are talking about maximising the right value, which is the total value of the firm, if that is all you’re doing you won’t maximise value! 

You’ve got to be committed, the company has to be, the firm has to be, committed to something bigger than itself. That will light people up. And cause them to be attracted to your organisation. Passionate about it! They’ll find something in what you’re committed to, the company is committed to, that satisfies them, lights them up and excites them. And that’s a HUGE missing component of what’s going on out there in the world ….”

– Michael C. Jensen talking on leadership at the Simon School (talk published on Mar 17, 2014)

If you are interested in listening to Michael Jensen and Werner Erhard share their ontological-phenomenological model of leadership at the Simon School then here is the associated YouTube video:

Without Integrity, Is Talk of Customer Focus Just Cheap Talk?

Integrity is a choice – one that we fail to choose

Let me make clear that when I speak integrity I am not talking about morality nor virtue.  I am talking about integrity as honouring one’s word.

Integrity, as honouring one’s word, is a choice. It is a choice that almost all of us choose not to make. And those of us who do choose integrity, as way of being and showing up in the world, get that ‘Integrity is mountain with no top’ – that is to say that one never arrives. Put differently, integrity is always flowing out. Therefore, the challenge is to be present to this flowing out and make the necessary corrections ongoingly – this applies to individuals, teams, organisations.

It occurs to me that we live in an age given by cultural practices which allow and encourage us to have a cheap-weak relationship to our word. In our societies one expects people not to talk straight. One expects people not to mean what they say. Nor to say what they mean. It is perfectly ok to make promises and break them if it is convenient to do so. And when we do this the challenge is to find convenient reasons and excuses that allows us to ‘save face’.

What place is there for integrity when the measure is ROI?

Consider the world of business. What drives decisions and actions? If you look at it theoretically, every significant decision should be based on ROI. If honouring your promise, your word, delivers ROI then the smart course of action is to honour your word. If honouring your word does not deliver ROI then the smart course of action is not to honour your word. Doesn’t the ROI argument, in one shape or another, show up at each level of the organisation: Tops, Middles, Bottoms?

Without integrity promises to customers are just cheap talk

Why am I drawing our attention to integrity and the importance of fierce resolve to honouring one’s word? I say that work on harnessing digital technologies is useful. I say that work on changing policies and processes is necessary and useful. I say that harnessing data and using it to generate insight is useful. And I say that all of this makes no difference if fierce resolve is missing. What kind of fierce resolve? The fierce resolve to create superior value for a core set of customers. The fierce resolve to honour the organisations implicit and explicit promises to the customer. The fierce resolve to honour one’s word to colleagues within the bigger context of honouring the organisation’s word to customers.

Let me put it bluntly, the companies that excel at generating strong profitable relationships with customers create and show up from a fierce resolve to create superior value for their customers. Companies like Amazon, John Lewis, SouthWest Airlines, USAA, Zappos… Then are the rest – those that talk the talk and lack the fierce resolve to honour their word. Their words, our words, are cheap.

The real test of integrity is?

The real test of integrity, honouring one’s word, comes when the ROI of keeping one’s word is negative. For an organisation the real test of integrity shows up when the cost of honouring one’s word directly and negatively impacts the short term numbers: revenues and profits. And when the cost is a loss of face even ridicule. I think back to Warren Buffet sticking to his way of investing-doing business during the tech-internet boom.

Here’s the core point when it comes to integrity and honouring one’s word. Those who recognise the critical importance of integrity (as a positive phenomenon) would never do an ROI calculation once they have given their word.  For these people honour one’s word is  matter of principle not expediency. People with such deep relatedness to their word get that integrity is not a nice to have. No, they get that integrity is basis of workability and performance – of our lives, our relationships, our communities, our organisations, our societies, our world.

What is possible when cultural practices encourage and call forth integrity?

Enough said, now I want to share with you this article that I read  and which got me present to what is possible when cultural practices encourage and call forth a strong relationship to our word.  Here is what struck me about this real life WWI story:

  • Capt Robert Campbell had been languising in Magdeburg prisoner of war camp for two years;
  • He received word that his mother was dying of cancer;
  • He wrote to Kaiser Wilhelm II, begging to be allowed home to visit her one final time;
  • The Kaiser granted his request, allowing him two weeks leave, and did so on Capt. Campbell’s word as an Army officer;
  • Capt. Campbell returned to Kent (England) in December 1916, spent time with his mother and returned to the prison camp (keeping his word to the Kaiser), and was held there until the end of the war (1918).

I say that this is possible only in an age where cultural practices call us to be our word. When we are called to be our word, our enemy can grant us leave trusting that we will honour our word. We in return are called upon to honour our word. As the author of the article says:

“Had he not turned up there would not have been any retribution on any other prisoners. What I think is more amazing is that the British Army let him go back to Germany. The British could have said to him ‘you’re not going back, you’re going to stay here’.”

Imagine what level of performance would be possible if the people in your organisation were committed to honouring their word. Imagine what kind of relationships would be possible with customers if the people in your organisation – Tops, Middles, Bottoms – were committed to honouring the organisation’s word to customers.

If you want to explore integrity at a deeper level

If you find yourself drawn to this conversation on integrity then I encourage you to listen to this 2 hour talk on integrity by Professor Michael Jensen