Five Half-truths Undermine Business
The Enron, Andersen and Global Crossing business catastrophes are at the pinnacle of a culture that is increasingly defined by selfishness, according to the June issue of Fast Company. Carried to the extreme, the glorification of greed causes a disconnection between the interests of the few and the well being of the many. Consequently, confidence in business executives has eroded.
Business leaders can overcome this crisis of confidence by challenging what the article’s authors call “the five half-truths of business.”
- We’re only in it for ourselves. Business simply won’t work if each of us
is only in it for ourselves. While we need to have individual initiative,
we survive in a context of social engagement. The essence of real leadership
and responsible management is the ability to judge the difference between
short-term calculable gains and deeply rooted core values.
- Corporations exist to maximize shareholder value. Maximizing shareholder
value at the expense of all of the other stakeholders is bad for business
and for capitalism. It divides those who create the economic value — the
employees — and those who harvest its benefits. Customers, too, recognize
the cynicism of a company that only sees them as dollar signs. That may be
one reason why the American Customer Satisfaction Index has declined steadily
in almost every industry since the mid-1990s.
- Companies need CEOs who are heroic leaders. The problem with the notion
of heroic leadership is that it is corrosive to the connection that needs
to exist between a real leader and the people who make the company work. Real
leadership is about teamwork, about taking a long-term view, about building
an organization slowly, carefully, and collectively. The job of the CEO is
to set an example of energizing others.
Nothing reveals the corruption of leadership more clearly than the record
of executive compensation. According to one recent survey of executive compensation
during the 1990s, your pay rose by 570 percent. Profits rose by 114 percent.
Average worker pay rose 37 percent, barely ahead of inflation, which went
up by 32 percent. In 1999, while median shareholders’ returns fell by 3.9
percent, CEO direct compensation rose another 10.8 percent.
- Companies need to be lean and mean. The fact that “mean” sounds good is
a sad sign of the times. In 2000, before the recession even hit, employers
cut 1.2 million workers, ending the year with the highest number of layoffs
since the Bureau of Labor Statistics resumed calculating them in 1995. The
biggest loss of all may be the sense of betrayal that workers have come to
feel toward their employers. In the United States, only 47 percent of employees
saw the leaders of their companies as people of high personal integrity. That
was before Enron, Andersen, or Global Crossing gave workers more evidence
that it is right to be distrustful.
- A rising tide lifts all boats. This last half-truth helps knit together
the first four. In order for the focus on personal gain, shareholder value,
heroic management, and lean and increasingly mean organizations to work, we
must find a way to rationalize what otherwise looks like self-serving behavior.
Moderator Comment: Have the actions of top management
caused a crisis of faith within their organizations?
When will the lesson be learned? Employees are not loyal
to companies. They are loyal to people. The need for leaders that engender loyalty
is critical in every aspect of business today. Sadly, it is an attribute lacking
in many, if not most, management circles today.
The announcement that the SEC and FBI were investigating
Kmart and the actions of some of its former executives comes, sadly, as no surprise.
Retail has seen its fair share of unscrupulous behavior by executives abusing
the trust of coworkers and shareholders alike.
The recent announcement of Publix’ decision to cut wages
for some of its store associates without any mention of cut backs in the executive
suite drew criticism here and elsewhere. In the end, Publix and its shoppers
will be the losers as associates that feel betrayed or mistreated, either reduce
their commitment to performance or leave the company altogether. [George
Anderson – Moderator]