E1 - Responsible leadership

Summary

The recent turmoil in financial markets is ascribed by many to be a failure of leadership and the calls for more responsible leadership continue to grow. But what is responsible leadership? There is a danger in taking too narrow a view and simply bowing to critics demanding more corporate social responsibility. Responsible leadership is more than this; it is a balance between getting the right results and getting results the right way.

Getting the right results

The goal of any enterprise is to deliver superior sustainable performance.

‘Performance’ is a measure of the value created per unit of resources consumed. For companies, we might look at return on investment; for a charity such as Operation Smile, the number of cleft lip operations done for every dollar donated.

‘Sustainable’ means over the long term rather than to meet the next quarterly earnings targets. A firm might do well to remember that, unlike its employees, it could live forever and should encourage its managers to make decisions that reflect this long-term view.

‘Superior’ means better performance than others competing for the same resources. Success attracts more resources and therefore provides greater sustainability. It also generates a greater surplus to share among the many stakeholders who feel they are entitled to a return. Society benefits because it is the more profitable companies who can afford to be socially responsible; and, in a resource-constrained world, is it not our moral responsibility to deliver greater value from limited resources?