Leadership: Look beyond the bottom line

Andrew Baxter

Being a responsible corporate leader is considerably more challenging than focusing single-mindedly on earnings per share, but there is an increasing realisation among companies of all shapes and sizes that it pays off handsomely.

Looking at the world through a camera viewfinder provides a good analogy, says Signe Spencer, Boston-based senior consultant at Hay Group.

"A lot of leaders, particularly through the 1980s and 1990s, zoomed in on profits," she says. "Good socially responsible leaders pull back and look at the world through a wide-angled lens - which benefits their business in very subtle ways. They see more of the world and start seeing connections.

"Conceptually and cognitively, it is much more demanding; instead of just trying to maximise one thing, they are looking at multiple stakeholders and factors," she says.

This helps develop a "win-win thinking" mindset that can benefit the business, because "the same mindset that allows you to do win-win thinking with your community allows you do it with customers, suppliers and so on".

Understanding these interconnections is the key to responsible leadership. Spencer cites the Catholic Health Association of the US, which talks about its mission and its margin.

"You can't have the mission without the margin - you can't do good in the world if you are going broke," she says. "But if you just have a profit margin and no mission, to them you are losing your soul and your purpose."

The top-performing companies in Business in the Community's CR Index and Big Tick Awards also understand this link.

According to research by BITC in February, 63 per cent of business leaders believe that factoring social and environmental issues into their business model is the most important role for responsible leaders. National Grid chief executive (Platinum Plus on the CR Index), Steve Holliday, recalls bringing his top team together four years ago to craft the energy provider's mission statement.

"It is an aspirational statement about wanting to be the very best at delivering energy in a safe, reliable way, working in the communities that we serve as a business spread across huge geographies," he says.

"We talk about being part of the community and wanting to take a leading role in adapting our energy use to climate change - and there is nothing there about shareholder value."

Holliday says quite a few people were perturbed by this, but defends the exclusion of shareholder value robustly. "If we do all the things that are encompassed (in the mission statement), we will deliver shareholder value," he says.

"Shareholder value is an outcome of what organisations do in executing their strategy, it's important but I don't think you need to state it."

The interconnections work in a different way at LSI Architects, the Norwich-based firm (shortlisted for Small Company of the Year). "Architects tend to go for design awards, and so do we," says David Thompson, principal.

"The difference is that we see our community investment - in the many ways it is exercised - as a means to improve our communications and training inhouse, raising our game so that we are better designers."

Dealing with employees sensitively when times are tough is another important facet of responsible leadership. KPMG in the UK (new Platinum Plus company this year) has won plaudits for its recent Flexible Futures program, designed to enable the firm to hold on to all its staff by having volunteers work only four days a week.

John Griffith-Jones, senior partner, says: "We asked everyone to support it voluntarily, but we didn't use it in practice anything like as much as we thought we would need to."

If job cuts really are necessary, he says, the key thing when deciding who has to go is "to come out with at least the vast majority believing you took business-rational decisions - that you handled those who are going in a thoughtful rather than thoughtless way.

It makes a difference to people here." Ms Spencer at Hay adds that handling such decisions gracefully, rather than awkwardly, has another business benefit.

"If you do it awkwardly, when things turn up, the best people - those with most choice about where to go - are likely to go. They will remember and say to themselves: "I don't want to be associated with a place like this."

The Financial Times