Continuing with the recent theme of leadership and the question of whether or not you are a good leader, here is something else you can do to find out. Ask yourself, “Do I focus on value?”
That might seem like a very strange question. Your instinctive reaction may be to shrug it off and say “Of course!” But I urge you to probe a little deeper. You may recall Oscar Wilde’s line that, “A cynic is someone who knows the price of everything and the value of nothing!” Unfortunately cynicism seems to be a trap that many business leaders can fall into all too easily. So it may be useful to take a good, honest look at yourself, your behaviour and your thinking, to be sure that you haven’t inadvertently fallen into that trap.
This is a cause for concern. The report claims that “61% of executives and directors say that they would cut discretionary spending to avoid risking an earnings miss, and a further 47% would delay starting a new project, even if doing so led to a potential sacrifice in value.” (My emphasis.) This supports my long-held view that performance management is the tail that is wagging the dog, resulting in too great a focus on management at the expense of leadership. If you want to be a good leader, you need to focus on value.
In fact, the article “Finally, Evidence that Managing for the Long Term Pays Off” provides the evidence that I have been seeking for years. According to McKinsey’s research, firms that were identified as focused on the long term significantly outperformed the market as follows:
- Average revenue +47%
- Average earnings +36%
- Market capitalisation +58%
- Economic profit (i.e. profit after deducting a charge for invested capital) +81%
So, I ask again, “Now do you think you are a good leader?” I suspect that, once again, you are less likely to answer positively than you might have done earlier.
Yet, encouraging though this report is, there is more to value than just these traditional measures. It is certainly a step in the right direction that they include “economic profit” but the definition is definitely open to debate. If you truly want to measure value you would need to take account of two other elements that are generally excluded when looking at organisational performance:
- The value of the human contribution
- The environmental cost
As I am not qualified to talk about the latter, which is in any case being addressed in more august circles, let’s focus only on the former.
Do you, as a leader, have any idea of the value of your people? If my experience is anything to go by, I will wager you do not. Early in my career I worked for a leading financial services company that decided to close down its private banking operation. This entailed making everyone who worked in the division redundant. Nothing unusual there and a valid commercial decision if it wasn’t making money, you might say. The issue, however, is that when setting up the function only two or three years earlier they had recruited their top 10% performers. This decision effectively meant that the company laid off some of its best people!
This would be bad in any organisation. But in a financial services company, where people are, fundamentally, the working capital of the organisation, it is inexcusable. The executives who made the decision clearly had no idea of the value they were destroying. This is unquestionably due to a deficiency in the way we account for people. The question you need to ask yourself is, “Would you do the same?” It is very likely you would if you have no idea of the value of your people. How then could you call yourself a good leader?
If you like what you have read contact me today to discuss how my ‘Every Individual Matters’ Model could help you value your people and provide the catalyst to help you create an organic culture where everyone cares and the business becomes our business, embedding continuous improvement that engenders love at work and transforms – and sustains – organic business performance.
Bay is the founder and director of Zealise, and the creator of the ‘Every Individual Matters’ organisational culture model that helps transform organisational performance and bottom-line results. Bay is also the author of several books, including “Lean Organisations Need FAT People” and “The 7 Deadly Toxins of Employee Engagement” and, more recently, The Democracy Delusion: How to Restore True Democracy and Stop Being Duped.