Canberra’s leadership vacuum provides an opportunity for business leaders who want to make a difference

As the Abbott government lays the foundations for deep cuts to services, welfare, health and education, in the name of ending “the age of entitlement”; as public policy becomes an incoherent and inconsistent torrent of media leaks, kite-flying and short-term political opportunism; and as trust in political leadership falls to all-time lows, the responsibility – and the opportunity – will increasingly fall on business to show leadership not just at the enterprise level, but more importantly, at the wider community level.

Today’s corporate leader has many responsibilities not borne – or given lip service only – by their predecessors, requiring skills, attributes, sensitivities and an ethos that has the potential to recast the corporate sector, create more profitable businesses, achieve greater community standing and set a new benchmark for leadership.

One reason that this responsibility falls on business leaders is because our political leadership has shown itself to be so inept, so insensitive, so unwilling to grasp the challenges that face Australia as a nation, as an economy and as a global citizen. Not since Paul Keating – or, if you prefer, John Howard in his prime – has Australia had leadership at the national level that inspires trust, confidence and respect.

What we have seen this week with the Commission of Audit and the government’s hairy-chested response was typical of the Canberra theatrics we have come to expect.

Tony Shepherd was chosen to head the commission precisely because he was going to deliver this blueprint. Well may the PM and his Treasurer nod sagely that this “independent” report confirms their worst fears about the economic mess left by the previous government. Australia needs visionary, credible government; instead we have a government that is still behaving like an opposition – scoring cheap political points while ostensibly dealing with a “budget emergency” that most economists say does not exist.

Unfortunately, I don’t see any immediate prospects for improvement in the quality of political leadership at the national level for at least a decade. If Tony Abbott retains the leadership, I believe he will lead the Coalition to a loss at the 2016 election. And Bill Shorten has failed to inspire as the alternative PM and has a battle on his hands to reform the Labor party, let alone the Australian economy.

So, here we are: a political impasse born of mediocrity, mendacity and mindless posturing at a time when, at the very least, there is the need for sound, disciplined economic management, but more urgently, medium- and long-term structural economic reform.

A failure of leadership

This dilemma – if not crisis – takes us back six years to the onset of the Global Financial Crisis. The GFC still casts a menacing shadow over the Australian economy and the Australian political scene.

The root cause of the GFC was a failure of leadership: lax corporate governance, arrogant CEOs, bloody-minded corporations, analysts focused on the short term, self-interested investors, and regulators who failed to supervise.

But in the past six years remarkably little has changed in policy or systemic terms that would prevent the GFC from occurring again. Almost certainly, there will be another financial meltdown that will take the global economy to the brink; almost certainly there will be another stock market collapse. There is a simple reason for this: in the end, you can’t regulate greed.

Government also can’t regulate against bad decisions, poor governance, half-witted incompetence, half-measures, ill-discipline or hubris – most especially its own, quite apart from the corporate sector’s.

Although there is broad consensus that the first Rudd government’s economic stimulus packages in the aftermath of the GFC were a critical factor in ensuring that Australia did not fall into recession, there is compelling argument that pumping billions of dollars into the economy in such a short time only delayed the inevitable economic slump: business closures, massive job losses, and whole industries, most notably manufacturing, deemed no longer viable.

The aftermath of the GFC gave new meaning to the expression “false economy”. Downturns have a purpose: to weed out poorly run companies and unsustainable businesses, and to provide opportunities for those companies willing to take risks, prepared to be innovative and to engage their workforce.

The absence of a clear recovery since the GFC has dulled the risk appetite of many companies. The ever-present prospect of the global economy slipping into another recession has many company leaders driving with one foot tapping the accelerator while the other is firmly planted on the brake – a bit like Volvo drivers.

Given more uncertainty ahead, companies have a choice: they can wait for a break in the gloom, or they can get a jump on their competitors and seize the moment. The time for swashbuckling CEOs may be over, but this is no time for diffident CEOs. As the likelihood grows of prolonged economic and political instability, waiting and seeing is not a viable strategy.

Many risk-averse companies are in danger of institutionalising a culture of caution in their organisations. This is making skittish employees even more nervous about their job security and financial prospects. It’s also making them angry.

Australian workplaces have never been angrier, particularly those who feel they did the right thing by their employers by sacrificing pay and conditions following the GFC.

Employees are feeling short-changed

Employees feel short-changed by employers that are continually gutting companies of resources through relentless cost-reduction, mass layoffs, placing careers on hold and keeping a tight rein on remuneration – all without any evidence of a plan or vision for the future. Employees feel they are under-valued and their contribution barely acknowledged as fewer employees take on greater responsibilities, while being kept in the dark by uncommunicative or mealy-mouthed managements.

The mood of workplaces has been unchanged since the GFC; what has changed is that workplaces are becoming smaller, and many are disappearing: Ford, GM Holden, Toyota, Alcoa’s Port Henry Smelter … and this week, iconic Australian manufacturer of bakehouse products Big Sister Foods. This economy really does take the cake.

It’s in this very volatile environment that Australians are crying out for strong leadership – they are looking for leadership not just in their own workplaces, but in their communities and across the nation. It’s a new kind of leadership that they are seeking and they have stopped looking to Canberra for it.

After the election of the Abbott government last year there was a momentary spike in voter confidence and consumer sentiment, but it took just the first opinion poll after the September election to reveal an unprecedented case of voters’ remorse, with Labor leading the Coalition in the two-party preferred vote: 52% to 48%.

According to the 2014 Edelman Trust Barometer, only 38% of the general population trust government but 49% trust business – hardly resounding, but still reassuring. The annual survey by public relations company Edelman publishes levels of trust within the general population as well as the “informed public”, which comprises university-educated, high-income Australians.

The survey found that Australians expect business to play a much bigger role around the debate and design of regulation: 73% of the informed public believes government should not work alone when setting policy. Although Tony Shepherd is probably not what they had in mind.

As Edelman explains, it has traditionally fallen under the remit of government to create the context for change, but today, and here I quote: “[P]eople expect businesses to play a bigger role in shaping a positive future, trusting business to innovate, unite and deliver…CEOs must now go beyond their operational remit to become chief engagement officers, educating the public about the context in which their business operates.”   

This trust in business is not-open ended. The survey found that size and ownership type of the business has a bearing on trust levels: 76% of Australians favour family-owned businesses, 67% small-to-medium businesses and less than half, 42%, big business – suggesting that CEOs from the big end of town still have some bridges to mend and reputations to heal.

A different kind of business leadership

But the opportunity is there for all business leaders who want to make a difference – both to their businesses, and more broadly in the community.

The leaders who will excel in this environment will have the ability to inspire confidence and trust – not just in their employees, but among all stakeholders. They must demonstrate not only technical leadership, but personal leadership as well.

The leaders who stand out in this economy will no longer take their consumers for granted; they will rethink the role of customer service and make the customer a genuine partner in growth. Leaders with an eye to the future will invest in the training and development of their rising talent. Tomorrow’s leaders also care about the society they and their employees live in.

The characteristics of successful business leadership could not be further removed from the macho management style of yesterday’s hero-CEO typified by the legendary Jack Welch, the former CEO of General Electric in the United States, who in the 1980s and 1990s was the template for the corporate CEO.

Today’s business leaders have a very different environment in which they must operate. It is now understood that employee engagement is a key motivator of end-of-year results.

Employees’ expectations for recognition and inclusiveness have radically changed the way managers and employees interact in the workplace – at least in successful organisations. This has put managers and leaders under more pressure to develop a more communicative style of management.

Employee surveys find again and again that the biggest contributor to employee disengagement is disaffection with non-communicative, unresponsive line managers. Disengaged employees often feel they are not valued or understood, they don’t feel part of the decision-making processes and they resent not receiving regular feedback from their immediate manager. This disaffection is heightened when elaborate HR policies state that these things should be happening as a matter of course.

Whether it’s C-suite executives or line managers, technical skills are no longer enough. Employees respond to managers and leaders who are inspirational, empathetic, good communicators and even better listeners. Managers have to be able to communicate with their employees that the role they play in the company is important and that their contribution is valued.

Employees want to understand the vision and values of the organisation they work for and they want to be active participants on the journey towards those goals.

People want to work for a company that has heart, they expect that a company will treat its people fairly, they expect an organisation to have meaning and purpose for them as individuals but also for the community, the environment and even the world. They want leaders who stand for something; who live their values in the workplace and they way they conduct themselves externally.

The ‘Productivity Secret Weapon’

If employees do not have these things in their workplaces, they will leave first chance they get.

The World of Work report by recruitment firm Randstad found that 56% of employees began 2013 with the intention of changing employer. But even if employees are unable to realise that ambition, it’s obvious that they will not be giving their present employer their absolute best. Productivity is often seen in terms of labour laws, the cost of labour and overbearing unions – but successful organisations understand that a well managed workplace, and a happy workforce, is the Productivity Secret Weapon.       

In addition to all the usual functional and technical skills, today’s leader requires many personal – or “soft” – skills, as well as the attributes of agility, adaptability, innovation, experimentation, and they have to have the foresight and nerve to identify and act on opportunities in a rapidly changing marketplace.

These are skills most often associated with entrepreneurs. Entrepreneurs are instinctively closer to their customers and employees; closer to their markets; they are better communicators and recognise the benefits of being so; they’re innovative; they have passion but they’re also canny; and innovation is their lifeblood. Increasingly, corporate CEOs are recognising the benefits of possessing these entrepreneurial qualities.

There’s more to being a modern business leader than a balance sheet – but there will always be a balance sheet. For anyone in business, what’s important are the values, the vision, the purpose and the ethos that motivates, inspires and engages at a personal and organisational level.

Today’s business leader is a leader beyond the confines of the enterprise. Whether it’s through personal motivation, social responsibility or a sense of good business practice, business, more than ever, is about doing the right thing.

It is a pity that this message is not getting through to Canberra. 

This is an edited extract of my speech to the Woodpeckers Club business lunch in Melbourne on Friday 2 May.

 

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