Leaders, Leaders, Wherefore Art Thou?

 Leaders, Leaders – Wherefore Art Thou

There are many theories on the key priorities and attributes of effective leadership. For me, when you boil it down, to be any kind of leader you have to have followers, more specifically, willing followers. This following tends to but should never be regarded as a given. The priority for consistently effective leadership is therefore about understanding people, their motivations, reactions, requirements, aspirations and expectations in order to achieve operational effectiveness and optimal long term performance. Key, indeed primary leadership characteristics and attributes are therefore about communicating, persuading, listening, coaxing, clarifying, and coordinating. Sure, you have to be dynamic, decisive, and analytical, see the big and small picture, long and short term, and practise organisational ambidexterity, exhibit technical insight to be credible and all sorts of other wonderful, exciting things.

However, it is when the chips are down, when the organisation has hit a bump in the road and you have marshalled your capital, you have revamped your technology, products, costs, clarified policies and objectives, communicated a new vision and you say OK, follow me, that you look around and realise that there is no one there, physically and/or mentally, that you realise that there may be something missing in your leadership tool bag to fill in or bridge the black hole which represents sub-optimal organisational performance or impending collapse and failure. That critical tool is understanding that organisational success is based upon acknowledging, understanding and taking day to day decisions on the basis of the importance, the centrality of people rather than products, processes, profits, projects in order to resolve issues and optimise performance. This is recognised as logical to some of those who have responsibility for achieving organisational goals; to others it is soft headed and a nice to have, since only a primary focus on the priority of policy, product, price, project, process and procedure will consistently achieve these goals.

The importance of people leadership capabilities is a point increasingly and more strenuously made  over the last ten to twenty years, as the requirements of the knowledge economy have been considered and the age and therefore priority of the principles, perspectives and priorities of mass production management have been found wanting in respect of operational effectiveness and organisational performance. My experience indicates that people focussed leaders do exist in most organisations. Regrettably it is also my experience, with only few exceptions, that the senior echelons of the majority of organisations, those who define business policy and organisational culture, tend not to be populated by individuals with people focused perspectives and attributes.  I have this belief, based upon my experience managing and leading within a range of organisations that not only existing senior executives but the next couple of generations consider that and indeed have been effectively inculcated in the belief that to rise to the top in an organisation it is not considered a requirement to be a great or even good people leader, merely to be a proficient manager in terms of technical skills and routines important in that specific organisation, self-confidence, with a certain cunning and astuteness for what is required at that moment in time to satisfy key stakeholder groups.

This perspective is admittedly a little cynical and Machiavellian but will I think resonate with the reality as accepted by those who are long in the tooth organisational practitioners. This may be a little confusing; it is like saying that the captain of a ship who decides on the direction and destination is not the leader. This is indeed the case; it is the person(s) who organises the capabilities of the ship, particularly the people, to reach the destination, who is the leader within that entity. Those whose role requires core perspectives and attributes which allow them to effectively direct, motivate, coax, persuade and coordinate a diverse range of individual characters within the daily working environment in order to consistently achieve operational effectiveness and achieve business deliverables and strategic objectives. Without such individuals the captain stands on the bridge, merely monitoring the dashboard, in control of nothing, fundamentally unable to control speed or direction. Captains (whether of ships or industry) can take as many policy decisions and set objectives as they wish. Unless the real leaders (of people) understand and support them they will either not be achieved or will be sub-optimally achieved. This is fundamentally the reason why so many annual targets and goals and long term objectives are consistently not achieved. This is why Alexander was in reality not so Great; he conquered but did not have the leadership perspectives and attributes to reign; to motivate and energise, to satisfy personal aspirations, requirements and expectations over the long term. Like so many lauded merger and acquisition experts, once the deal was done he lacked the leadership perspectives, insight, judgment and attributes to take the key resources, the people, with them to optimally realise the benefits of the transaction over the long term. Many empires, be they societal or business, have declined and ultimately collapsed due to this leadership deficiency.

The operational result of limited (people) leadership perspectives, priority, attributes and capabilities within the decision making cadre is consistently debilitating to operational effectiveness and organisational performance in respect of decision making and issue resolution. Allow me to provide an example. Whilst working in the Arabian Gulf I was requested to interview a number of candidates in the Indian sub-continent for the position of Head of Islamic Banking and thereafter provide written feedback to those who would ultimately take the recruitment decision. Upon my return I found that the candidate selected had been the one who undoubtedly had the technical qualifications but whom I had counselled against recruiting because I considered that he lacked people leadership skills, was egotistical, self-important and self-serving. To make matters worse, it had been decided that whilst from a strategy development perspective he would report to the Deputy Group Chief Executive, for operational day to day reporting he would report to me. This was the ideal situation for someone who wished to create his own empire. He smiled, nodded and agreed but out of earshot proceeded with his personal agenda and during orientation discussions with functional heads stated that he should in fact report to the Group Chief Executive because of his expertise and the importance of Islamic banking to the organisation. The result was disruption, confusion and conflict across large parts of the bank which were involved in the coordination of Islamic Banking initiatives, as subordinates and peers sought guidance on who was ultimately taking the decisions. Whilst there was a realisation within a few weeks if not days that a major blunder had been made in the recruitment process and the reporting lines, the organisation stood still on a major business initiative for six months until the individual’s services were dispensed with.  

This is a direct reflection of the importance of people leadership attributes in the minds of senior executives as a key capability to be engendered throughout the organisational leadership cadre Where individuals lack a people and organisational community perspective, perceiving an emphasis on technical skills as the critical factor for progression, this fosters a less principled, indeed unethical approach to decision making and issue resolution. There are countless other examples which I could provide of recruitment primarily based upon technical capabilities rather than allied to embedded people leadership capabilities and the substantially detrimental impact upon operational effectiveness and organisational performance that such a perspective and priority can and does have  (I am sure that many readers could also recount similar instances).                  

My solution to this critical issue of acknowledging and understanding the requirement to engender true leadership perspectives, priorities and practices?

•  Laud less those who “conquer” or undertake mergers/acquisitions and more those who have led an organisation to sustained optimal performance over an extended period.
• When making policy decisions such as merger, acquisition, market penetration or significant change in organisational direction the primary senior executive focus should be less on the numbers (enhanced cost efficiency, capital strength, ROI, market share, revenue enhancement), processes and projects to complete the transaction and more on evidence of the people leadership capabilities to effectively deliver on initial changes in perspectives and structures but most of all to achieve the benefits of the transaction over the long term.
• Senior decision makers must be selected less for their technical skills and more for their people leadership perspectives, attributes and capabilities.
• If this is not possible/acceptable then senior decision makers must accept that in operational terms they are not the leaders within the organisation and delegate responsibility and authority accordingly, putting aside issues in relation to ego. 
• It is the role of the dominant coalition within the business organisation to develop a culture which encourages and facilitates the development of people leadership skills equally if not more than technical capability since this is what delivers consistent operational effectiveness and long term performance. Once this cultural transformation is largely in place leadership should be left to those with the required perspectives, priorities and attributes in those roles within the organisation where they are required to optimise organisational performance through an ability to lead people    

So, look not upwards for true leadership; look rather to those areas of the organisation where operational coordination, motivation, energising, persuasion and direction of a broad range of individuals with a swathe of varying requirements, aspirations and expectations is required in order to achieve operational effectiveness and long term organisational performance. Admittedly this is a big ask, to change the embedded dominant organisational logic, the inculcated principles, perspectives, priorities and practices amongst the present and future senior executive and leadership cadres. In this respect perhaps the prevailing economic and financial services sector crisis is an ideal stimulus to spur the required change in logic. One merely needs to compare the dominant logic and priorities of the dominant coalition of many of the financial services organisations which failed with those which survived comparatively unscathed to understand the primacy of (people) leadership for performance and long term survival and the benefit of a dominant logic which continued to motivate and energise and engender confidence and loyalty amongst stakeholders. Long term operational effectiveness and performance is based upon senior executives creating an environment and culture which allows the real leaders within the organisation to persuade, motivate and energise those key resources which deliver, people. This is the hard-headed, pragmatic but soft hearted leadership perspective for long term “success” in the twenty first century   

Lawsky's Law

Continuing on from my previous blog on HSBC and laundry, there can be no greater banana skin for a leader than a Young Turk, astute, self serving, politically aware and predatory, who has no regard or recognition for the consequences of their actions. Such dangerous, ravenous beasts appear out from the long grass when you least expect, both internal and external to the organisation, spurred into action by perceptions of an easy kill. It will be an interesting battle, Lawsky vs Sands (chief executive of Standard Chartered). There can be little doubt now in the minds of those with a bit of knowse that there is heavy duty political momentum at the most senior levels from the eastern seaboard of USA to knock the City off its perch and get some business back to Wall Street, lost during the collapse of its banking sector. Whether the Wall Street sheriff is a maverick or has been cajoled forward by those who prefer to work from the shadows remains to be seen.  Unlike HSBC, Barclays, Lloyds Banking Group and Royal Bank of Scotland, whose leadership decided to say mea culpa, admit to more than they think they are culpable, cough up and get on with sorting out more urgent and survival threatening  problems, Standard Chartered would be wounded seriously but not mortally by losing its banking licence to transact in New York. Standard Chartered is therefore a strange choice for the sheriff since it has provided the City with an institution for the City and its political and other friends to rally around. By all accounts the USA regulators intend, by the time they have finished, to hammer banks in many of the competing global financial centres, London, Frankfurt, Zurich amongst others, whilst merely slapping the wrists of banks such as Wachovia and Goldman Sachs & Co., who arguably have perpetrated much more serious infringements of the type of which non-American banks are accused. Benjamin may well be a stalking horse sent forward by the men in grey to assess the likely response to their plans to level the playing field, in favour of the American financial sector. As with organisations, so with empires, power is transient and historically has diminished and evaporated in the face of ad hoc coalitions of blocs who feel threatened by those who consider themselves invincible.     

Leaders within HSBC and Standard Chartered in particular have had to deal with predators, both individuals and political groupings, over the last century or so, particularly in the maelstroms which have been the Far and Middle East and South America. Methinks this is a banana skin which might just be mobile and the sheriff should periodically look down rather than keep his gaze on the stars.    

HSBC - Let's Get Real About the Laundry

Whilst it is fast becoming yesterday’s news, as further financial scandals hit the headlines on an almost daily basis, the recent debacle concerning the laundering of Mexican drug and other suspect funds in the Middle East/Arabian Gulf by HSBC Group is a prime case study exposing the realities of organisational leadership and the conflicts between the interests of the different stakeholder groups which have to be constantly navigated in strategic and operational decision making within the global organisation. I should state from the outset that I know and have in the past worked with many of the names and faces which have come to the fore in this case; also other HSBC senior executives who are likely to have been involved but managed to remain under the radar, so far. In my view these individuals are amongst the most highly experienced, professional and principled that I have worked with in a career spanning four decades, in many organisations and societal cultures. I must therefore admit to equal measures of disappointment and bemusement. It is a mark of the prevailing (and perhaps historical) short termism, “smash and grab” of the Anglo-American business culture that the values, principles and dominant logic of an organisation such as HSBC ( developed through business, economic, political crises, civil and global warfare spanning 150 years) appear have been substantially undermined. For all that, HSBC must and will be fined a sum to make its stakeholders’ eyes water, as a punishment, an act of contrition and as the chosen representative of an industrial sector where a large number of other members have, do and will probably continue to perpetrate similar practices, despite the potential costs of discovery.

As one of those cited in this case commented in 2011 in respect of the financial crisis in Ireland, the Mexican laundering issue is less to do with corruption, greed and short termism and more to do with leadership inexperience, incompetence and inadequate insight, judgment, overall and detailed control within key functions and positions on the part of the organisational leadership. Like Ireland, Mexico has for long suffered from embedded societal, institutional and individual greed, corruption and cronyism. HSBC had for long avoided significant investment in Russia and Eastern Europe due to its view that the levels of institutionalised corruption and criminality seriously impacted upon social and economic development and therefore acceptable long term optimal organisational performance. It is inconceivable HSBC Group leadership thought it in the organisation’s best interests, over the long term, in terms of profit and credibility amongst key stakeholders, to consciously and deliberately transport and launder drug proceeds. The chief executives of HSBC in Mexico have for long been part of the HSBC Group dominant leadership caucus and until a recent retirement sat as two Group Managing Directors within the HSBC strategic decision making forum. As in the case of a number of western European banks who invested in Eastern Europe, they found that the deeply embedded corruption and cronyism culture and the allegiances, perspectives and practices developed during the communist era could not be easily changed, with a resultant substantial adverse impact upon performance, profit and credibility, at some early or later juncture. So it is in Mexico, where the tentacles of the drug cartels go deep and wide, where the staff, management and many of the leadership had become accustomed and familiar with certain deeply embedded primary allegiances and practices, which many out of duty and/or fear continued to hide from statutory and organisational authorities. This does not detract from the responsibility of highly paid HSBC leadership and the expectations of the broad range of stakeholders. It just makes it more understandable from the perspective of the realities of strategic and operational leadership control and decision making. HSBC has for long consistently succeeded on the basis of its incomparable experience, professionalism, integrity, insight and judgment. This episode, allied to the Household Mortgage Corporation debacle, which may be said to have initiated the sub-prime crisis in USA, severely dents its Teflon image and credibility.  My suspicion is that senior leadership within HSBC, in both Mexico and USA, were aware of these practices, as was the Comptroller of Currency, but the last thing that they wanted was to create another scandal during the period of the Lehman, AIG, WaMu and plethora of other financial crises. In many respects this was an important but less urgent matter to be resolved once the Household crisis had been resolved on the part of HSBC Group and the USA financial structure had been stabilised.         

In my view the case of the Middle East/Arabian Gulf laundering is very different in respect of the realities of organisational leadership. Effective leadership concerns satisfying and managing stakeholder expectations. HSBC has based its continuing success over the last approximately 150 years on this complex and difficult process. On the basis of the limited detail available HSBC is accused of laundering Al Qaeda and Iranian funds in contravention of USA financial compliance regulations. It is specifically accused of business dealings with Al Rajhi Bank whose founder is accused of having funnelled funds to Al Qaeda.  HSBC has had a substantial representation in the Middle East and Arabian Gulf for over 100 years in respect of commercial, corporate and institutional banking, from Persia as it then was, to Saudi Arabia, Egypt, Jordan, Lebanon and the UAE. It has therefore developed many embedded business relationships with governments, institutions, corporations, individuals, local regulators and supervisors and competitors. The reality of operational leadership is that you utilise your experience, intelligence, professionalism, insight and judgment to apply the plethora of regulatory requirements from a multitude of states in a manner which is consistent with the framework of values, principles and priorities upon which the organisation is led. The USA has in the past understood the economic, business and particularly political implications of to the letter application of its regulations and sanctions. There has therefore been a measure of unofficial nodding and winking, such that certain approaches and practices were allowed which today, as the stranglehold on Al Qaeda and Iran tightens and achieves increasing global agreement, cooperation and integration, have become anathema.

The difficulty about leadership is the pragmatism bit. Al Rajhi Bank is one of the largest financial institutions in Saudi Arabia, which itself is the biggest economy in the Arabian Gulf. To avoid transacting in some form with Al Rajhi is unrealistic. Moreover, the majority of banks in Saudi Arabia and the Arabian Gulf would be guilty of a similar accusation under the USA supervisory terms. Similarly, Iranian businesses are major traders in the Arabian Gulf, where HSBC has long standing business and institutional clients. The reality of organisational leadership in the Arabian Gulf is that you are daily faced with customers, clients and other key stakeholder groups, many with considerable influence within your business context who contend that USA compliance regulations should not be the determining factor in business decisions which adversely affect not only individual businesses but also the economic well being of retail customers and industrial sectors. Stakeholders in the Middle East and Arabian Gulf frequently have a different view from those in the West on the logic of sanctions against Iran when the nuclear capabilities of Pakistan, India, Israel and others are addressed with less vehemence and belligerence. Whilst significant and powerful, USA regulators are but one stakeholder to take into account when taking operational and strategic decisions within the realities of doing business in the Arabian Gulf. HSBC no doubt took into consideration the downsides on non-compliance along with the interests of a wide range of stakeholder requirements and expectations. In many respects one of the worst case scenarios for HSBC has materialised. Time to pay up and move on with doing business.   

I abhor Mexican drug dealers, the Iranian theocracy and Al Qaeda’s wanton acts of terror and violence. My objective is to use this laundering example to throw light on the complex decision making process of operational business leadership and why even organisations which many would regard as possessing high standards of integrity may oft times be found wanting. Leadership is about optimising rather than maximising the application of key values, principles and priorities which determine the dominant logic of the organisation. It is about knowing that you have not totally complied with these values and principles but knowing why on each occasion you have not done, so but that, in so doing you have optimised the requirements of the broad rather than narrow range of stakeholders whose interests are your prime responsibility. This is where HSBC Group differs from the likes of Enron, who started without any recognisable embedded leadership values or principles.

In this respect I will close with a question. Whilst the media has been focussing on the practices of the financial services sector, most recently on Barclays plc and HSBC Group, little attention has been given to the $1.5 billion fine paid by the pharmaceutical company GSK (GlaxoSmithKline) to the US authorities, after admitting to the largest healthcare fraud in US history. GSK was accused of bribing doctors in America, between 1998-2003, to prescribe medicines for unapproved uses, with potentially dangerous side effects.  As someone who has had my fair share of Lucozade and Ribena I trust GSK, who have carefully built up a very credible long term reputation in the marketplace. Yet the leadership decided that it was in the interests of its stakeholders to promote a drug for treating depression in children, even though it was not approved for under 18s. It also promoted a drug for weight loss, sexual dysfunction, substance addictions and attention deficit hyperactivity disorder, although it was approved only for treatment of major depression. Going beyond the ethical issues, what were the pressures, perspectives, priorities in the minds of experienced, insightful and presumably highly principled individuals of integrity leading, a highly successful and reputable pharma company? This is why we need to look beyond the media hype and tut tutting to better understand the complex process and realities of operational leadership decision making. By not doing so we merely await further scandal and the gradual erosion of values in reputable business organisations.