Sunday, 20 May 2012

The 'HI Principle'

In my earlier musings I commented about the failure or void in leadership that the boomer generation has authored during its time at the reigns of power.  For the most part we have simply adopted the 'commander-in-chief' model and then altered it to suit us by supplanting thankfulness with entitlement.  In the process we have determined that in business we ought to run our companies with a three month window on activities to appease the stock markets and maximize bonus opportunities.  And politically we have elected leaders who promise to fulfil our wants and desires by mortgaging future generations with unsustainable debt.  What a wonderful legacy.  We were handed everything we could hope for:  peace, prosperity and a healthy planet.  Yet through our wanton disregard and lack of leadership on both the personal and corporate level, we foisted the consequences of our excesses and our failures on our children, our grandchildren and beyond.

I submit to you that the leadership model is broken...if indeed it ever truly worked.  In its place we need something that works for the good of all for today and for the future.  In that model we must exercise our responsibilities as the `willing followers` and accept the fact that the noble goals may not be ones which pander to our every want and desire.  Sometimes changes come with a certain amount of pain.  In this context I am not referring to the workplace, but to our societal expectations, yet the leadership model should be equally applicable.

The HI Principle is based on two like-weighted pillars.  The first is humility and the second is integrity.  Neither of these are skills.  Both are qualities or characteristics.  Our focus on skills in leadership has, in part, brought us the results that I previously referenced, and most studies on leadership have focused on the differences in skills needed to lead as opposed to manage.  But as several have said in different ways, reputation is what others think about you; character is what you really are.

We need our leaders to inspire us with their character, not with their skills.  Skills can be taught.  Character is who you are, what you have CHOSEN to be. It is- or ought to be- part of our DNA. Character inspires us to achieve our full potential because it nurtures and encourages us.  This is not to suggest that skills are unimportant, but if we are to weigh the importance of the two- character versus skill- the scales clearly favour the weight of character by a wide margin.

And yet, this is where our leaders have generally failed us.  And it is an indictment on the majority.  The good news is that because character is a choice, leaders can change.  The question is `will they?`.  There are eight specific qualities that I will focus on, and then I will offer an unexpected challenge to leaders over the coming weeks.  Today I present my first characteristic; that of accountability.

Leaders must accept a higher level of accountability. It may seem unfair, but nonetheless it is true. Typically those in leadership roles are compensated more significantly than their colleagues. As well, they are afforded other perks and benefits that escalate with the impact of their leadership position. Accordingly, it is reasonable to expect that the tolerance for performance becomes stricter and stricter the higher the level of authority reaches.
Sadly, too many executives take an entirely contrary approach to the matter. Instead of scrutiny, executives have invoked entitlement and have abused their roles as leaders. Some have been caught and now pay the consequences by serving extended incarceration. Senior executives at well-known firms such as Tyco – ADT, Enron, and Adelphia are just a few examples. World Com, Hollinger, Livent, and Nortel are others in a similar position.

Some have avoided prison, but face public humiliation for their actions. Former leaders of GM and Chrysler have all been disgraced for their opulent or excessive behaviour during the recent economic crisis. These auto executives felt that they were acting appropriately by taking a private jet to Washington D.C. to beg for bailout funds to support their companies despite the fact that their decisions had brought about the demise.

In January 2009, the former chief of Merrill Lynch authorized payment of over $3.6 billion in bonuses just before the company was acquired by Bank of America in a distress sale brought about by the actions and decisions of the bonus recipients . How these individuals could have become so self-deceived as to justify their actions speaks volumes to the depth of entitlement that they had developed. Somehow they came to believe that they were beyond scrutiny, beyond principles, beyond common sense.
We rightfully hold leaders to a higher level of accountability. We look to them for examples of right. They are not obliged to accept the role, but they are obliged to accept the expectations of leadership and all it  encompasses. As Harry S. Truman famously stated, ‘…if you can’t take the heat, stay out of the kitchen…’ It was true in the 1940s and remains true today. Inspirational leaders feel the heat, but they don’t melt! Inspirational leaders choose to accept all the expectations along with all the benefits. It is not an either/or proposition. It is a both/and commitment to do your very best, all the time. That is being accountable.

If this expectation seems unreasonable to you as a senior leader, consider some facts from Statistics Canada that provide context to the argument.
1. The top 10% of wage earners now earn more than 10 times the amount of the lowest 10%.
2. In Canada, under 6% of all earners make more than $100k per year. But over 60% make less than $40k.
3. The top 1% of earners took home almost 14% of all income.
4. The wealthiest in Canada saw their marginal tax rate fall from 43% to 29% over the past 30 years. Not only are they making more but their take home pay increased by 25%.

Is it any wonder that there should be a heightened level of expectation for performance, conduct and responsibility the higher up the leadership ladder one ascends?

One author has called the current executive level compensation approach nothing more than ‘crony capitalism’. A CEO works to ensure that the Compensation Committee accepts the need to keep the pay scale in the 75th quartile or above. This becomes a self-perpetuating means of automatic increases that exceed anything justified by merit or cost of living. But what is good for the goose is seldom good for the gander as the need to rein in operating costs drives organizations to restrict or even reduce any growth in income for their general population. How else can you explain the fact that the average CEO compensation for the top 100 companies is 189 times the wage of the average employee? It is an extraordinary company which can truly demonstrate that this level of accomplishment actually exists and is thereby justified. The reality is that regardless of the role that ANY person occupies in an organization, the company can and should be able to survive their departure. Even the largest and most successful companies have a succession plan in place that should have several candidates under consideration should the CEO suddenly need to be replaced. Whether that departure is planned or a result of a catastrophic event, the company will carry on. Its health and long term well -being should never be in jeopardy as a result of a change in leadership.

And so the answer must be ‘yes’ to the question of accountability. Entitlement must be replaced with the expectation that every person is required to provide their very best performance. And this level of performance is the reasonable expectation regardless of the amount of compensation.

Links to references are available upon request.

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