Need new leadership models to help recover from current economic gloom

Need new leadership models to help recover from current economic gloom: must look beyond Fortune 100 for inspiration.

Extract from London Business School Business Strategy Review – Professor Julian Birkinshaw:

Rethinking the responsibility of business leaders

What is the primary responsibility of business leaders today? Is it to make a financial return for their shareholders? Or is it to contribute more broadly to the welfare of employees and society as a whole?

This question has always been important, but it takes on greater significance as we seek to recover from the worst contraction since the Great Depression.  How business leaders respond, and how they prioritise different stakeholders, will have a major impact on the speed of recovery.

A poll conducted by London Business School, in the lead up to the Global Leadership Summit on 20 May, showed that business leaders are being expected to take on a broader set of responsibilities than ever before. Across 3,800 respondents, maximising total financial return to shareholders was rated 3.7 out of 5 in terms of importance, while creating a responsible culture, demonstrating integrity and moral leadership, contributing to the long-term sustainability of the global economy, and creating an engaging place of work for employees all scored between 3.4 and 3.6. The message seems clear: we want our leaders to do everything!

What is the way forward?  There is an increasing recognition that we need new models of leadership, where business leaders can balance the needs of multiple different stakeholders and are visibly accountable to the organisations they work for rather than the other way round.  But it is not obvious what these alternative models might look like.

My view is that we need to look beyond the usual best-practice corporate case-studies, to see if there are leadership and management principles we learn from other settings.

– If we want our business leaders to be properly accountable, we can gain insight from the principles of joint responsibility exhibited by many professional partnerships.

– If we want our business leaders to take a long-term view, we should seek to understand how many family-owned firms have sustained themselves over hundreds of years.

– And if we want our business leaders to balance multiple competing objectives, we can learn from the checks-and-balances built into democratic governments.

This is just a starting point. There are also, of course, many different models of corporate governance that avoid the short-termism and financial focus of the Anglo-American model, and there are insights to be drawn from the renewal and adaptability of cities, faith systems, and even life itself.  The challenge is to raise our horizons, and to look beyond the Fortune 100 for a glimpse of what the future of leadership might look like.

Author: Julian Birkinshaw is Professor of Strategy and Entrepreneurship at London Business School

Copyright 2013 London Business School

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