What Defines Great Leadership in Businesses that want to Create Shared Value?
Michael Porter and Mark Kramer’s article in the January 2011 issue of the Harvard Business Review made ambitious claims for the concept of creating shared value, to the point of suggesting that it provides an approach through which we can redefine both capitalism and the role of corporations in society. The central premise behind creating shared value (CSV) is that the competitiveness of a company and the health of the communities around it are not in opposition but in fact are mutually dependent. So, no longer is there a trade-off between “doing good” and “making profits” - instead, the two are mutually inter-dependent. Moreover, Porter and Kramer argue that there are significant opportunities for the creation of competitive advantage from integrating a social value proposition into corporate strategy.
Unsurprisingly, much of the ensuing debate triggered by the article focused on the theoretical resilience of creating shared value as a concept, and the extent (or otherwise) of the empirical evidence that it can be used to create competitive advantage. Very little of the debate, however, focused on the opportunities for companies to set the pre-conditions under which creating shared value - the process of creating social and financial value under a single business model – can be most successfully realised. We believe that this more contextual approach – asking the question “under what conditions can CSV prosper?” - is a much more useful standpoint than seeking to judge theory or practice to date.
If one were looking for contextual factors in any assessment of any corporate strategy, the quality of corporate leadership inevitably rises to the top of the list. And CSV is no exception. So, to the question posed by this short article: what does leadership in a CSV-oriented organisation actually look like? And is it different from effective leadership in other organisations – and, if so, how?
The concept of a mutually beneficial relationship between corporations and society is not original to Porter and Kramer. In 1997, Ryuzaburo Kaku, president, chairman and chief executive of Canon from 1977 to 1999, wrote a visionary article about business and the Common Good in the Harvard Business Review:
“If corporations run their businesses with the sole aim of gaining more market share or earning more profits, they may well lead the world into economic, environmental and social ruin. But if they work together, in a spirit of kyosei, they can bring food to the poor, peace to war-torn areas and renewal to the natural world. It is our obligation as business leaders to join together to build a foundation for world peace and prosperity.” (Ryuzaburo Kaku, 1997).
Kaku defined this spirit of kyosei as a “spirit of cooperation” in which individuals and organisations live and work together for the common good. But how should leaders actually unlock this spirit - both in their organisations, and – perhaps more fundamentally - in themselves?
Part of the problem lies in the complexity of the world and the feeling of disempowerment that this can create. Paul Polman, CEO of Unilever described this modern world in an interview with The Guardian Sustainable Network in 2011 as “VUCA” - volatile, uncertain, complex and ambiguous. He comments:
“It is very difficult for people to get a total picture. The food, water, energy nexus is so inter-related that it is for most people too difficult to know where to start and where to end."
As Pruzan (2007) observed, many business executives aspire to live with integrity - where their thoughts, values, words, and deeds are in harmony. The problem is that they don’t know how to do so in a business world that is increasingly characterised by complexity, turbulence and greed.
A particular concern for Polman is the motivation of the financial community. In fact Polman famously stopped quarterly reporting and drew a line in the sand by making it clear he wanted investors who were interested only in supporting the long-term health of the company.
So, what are the qualities which enable leaders to cut through the complexity and put aside short term financial motivations? (at least where these don’t support the long-term creation of shared value).
The starting point is to be able to re-connect the organisation with a sense of its fundamental purpose, beyond just making money and getting bigger. As Polman says,
"Having a deeper purpose to what we do as people makes our lives more complete, which is a tremendous force and motivator.
What people want in life is to be recognised, to be part of, to grow and to have made a difference. That difference can come in many forms; by touching someone, by helping others, by creating something that was not there before. To work for an organisation where you can leverage this and be seen to be making a difference; that is rewarding."
As well as re-motivating employees, articulating and sharing the organisation’s broader purpose can create new sources of real loyalty from consumers who – as citizens – are increasingly looking for brands that share their values.
Second, sustainable leadership is about moral agency - the concept that, as leaders, we provide a moral compass and a “moral will” within the organisation, as well as a financial compass. These characteristics are closely associated with attributes such as wisdom and virtue. Sustainable leadership requires leaders who are respected as being wise, in being able to distance their ego from decision-making and cultivate a highly developed perception of people and the patterns of life. This goes well beyond the ability to apply rational decision making, towards a more highly developed state which uses reasoning and careful observation, but allows for non-rational and subjective elements when making decisions, whilst valuing humane and virtuous outcomes.
Above all, it seems to require the capacity for foresight – a synthetic sense, developed through heightened awareness, of the patterns in the organisation and the patterns in the wider world, and the spaces and opportunities these will create for the organisation to serve its wider purpose in the future. Otto Scharmer, in his book “Theory U: Leading from the Future as It Emerges”, describes the process that leaders need to develop the ability to faciliate as one of “presencing”. A blend of the words “presence” and “sensing,” presencing signifies a heightened state of attention that allows individuals and groups to shift the inner place from which they function. When that shift happens, people begin to operate from a future space of possibility that they feel wants to emerge.
Being able to facilitate that shift is, according to Scharmer, the essence of leadership today. Albert Einstein famously noted that problems cannot be resolved by the same level of consciousness that created them. Scharmer’s U-process aims to offer a new social technology which allows teams, organisations or systems to reconceive the world and their part in it anew.
Finally, sustainable leadership seems to be about recognizing the need for utter alignment of your organisation internally and externally. Put simply, in today’s hyper-connected “sharing” world driven by the power of the Internet and social media, organisations – and indeed their leaders – can only appear to be what they really are. Organisations that seek to project an image that differs from their true “character” get found out, and today that happens in double-quick time. The need for authenticity and transparency in leadership – and indeed your willingness for your company and your brand to be judged by others (who you should expect will be fully informed) and not by you – seems to be a hallmark of today’s sustainable leadership.
So, in conclusion, three characteristics seem to summarise sustainable leadership – identifying the organisation’s fundamental purpose and galvanising all stakeholders around this, providing “moral agency” through wisdom and the ability to bring forth a shift of mindsets into the future state of possibility, and acting authentically and with transparency throughout. In Porter-speak, these are certainly “opportunities for competitive advantage”. But they are much more than that – they are also surely obligations on those of us who are privileged enough to occupy leadership positions in large organisations. In the words of Kaku (1997):
“Because multibillion-dollar corporations control vast resources around the globe, employ millions of people, and create and own incredible wealth, they hold the future of the planet in their hands. Although governments and individuals need to do their part, they do not possess the same degree of wealth and power. My point is this: if corporations run their businesses with the sole aim of gaining more market share or earning more profits, they may well lead the world into economic, environmental, and social ruin. But if they work together, in a spirit of kyosei, they can bring food to the poor, peace to war-torn areas, and renewal to the natural world.”
Amen to that.
James Cashmore, Senior Consultant, Goodbrand
Kaku, Ryuzaburu, “The Path of Kyosei”, Harvard Business Review, July-August 1997,
Polman, Paul “The Power is in the Hands of the Consumers”, interview with Jo Confino for the Guardian Professional Network, guardian.co.uk, 21 November 2011
Porter, Michael E. and Kramer, Mark R., “Creating Shared Value: how to reinvent capitalism—and unleash a wave of innovation and growth”, Harvard Business Review, January 2011.
Pruzan, Peter and Pruzan Mikkelsen, Kirsten, “Leading with Wisdom: Spiritual-Based Leadership in Business,Sheffi : Greenleaf Publishing, 2007
Scharmer, Otto C, “Theory U: Leading from Future as it Emerges”, Society for Organisational Learning, 2007