The Road to Co-operation’ (out in April) reviews the why and how of the Anglo-American collapse in business leadership over the past thirty years. It identifies practical routes back to a genuinely business supportive regime. The key initiative is the involvement in leadership of all stakeholders, not simply those who regard themselves as the agents of the owners. The road from where we are now might look long and hard, but after the first few steps in the right direction, progress might not be too difficult.

There’s no shortage of macro and micro examples to follow. ‘The Road to Co-operation’ identifies, at the level of a whole economy, many lessons offered by practice in Japan and Germany as well as the industrialising economies of China and India. There are also many examples of successful companies demonstrating the realities of true leadership.  One such, which nicely illustrates the most fundamental truth of real leadership is W L Gore and Associates.

Gore was ranked 30 in Fast Company magazine’s “Fast 50” list of the world’s most innovative companies in 2009.  2010 was the 13th year in a row that Gore was listed by Fortune magazine as One of the 100 Best Companies to Work For in the United States. For several years its overseas units have had similar recognition in Germany, France and Italy, while its British plants in Livingston and Dundee have headed the Sunday Times ‘Best Companies to Work For’ list for four years in a row.

The company is best known for its Gore-Tex fabric but also produces thousands of advanced technology items for electronics, fabrics, industrial and medical markets. Based in Newark, Delaware, it has sales revenue of around $2.5 billion and employs more than 8,500 people in nearly 50 facilities world-wide.  But what makes Gore really distinctive is its governance structure: a private company co-owned by the Gore family and the employees, who participate in management, attend and participate in general meetings, and approve such things as the appointment of directors. To fulfil that role effectively employees also have the right to information about the company’s position and progress. As Simon Caulkin put it in his Observer column, ‘There are no titles or conventional lines of command at Gore, where the only way of becoming a leader is to attract followers – if a project can’t attract people to work on it, then it doesn’t get done.”

In a Gore-like democratic and permissive culture, leadership is fundamentally the process of attracting followers. In most business situations, managers have the benefit of all sorts of leadership aids: hierarchical position, formal and informal rules about ‘the way we do things around here’, professional expertise, formal qualification, length of on-the-job experience and so on. But those alone do not make managers effective leaders. It will be something more personal about the individual manager’s behaviour which determines whether they are surrounded by grudging, cynical ‘yes’ men and women, or by enthusiastic and initiative taking followers.

There has been so much absolute bollocks written and talked about leadership over the years. An eminent lecturer on leadership at St Andrews University in 1934 was quoted as follows: ‘… some men possess an inbred superiority which gives them a dominating influence over their contemporaries, and marks them out unmistakably for leadership.’ Before disregarding that as the nauseating period claptrap it truly is, it might be worth reflecting that in our own celebrity-stricken era, charismatic leadership still gets space. Drucker’s comment was that the three most charismatic leaders of the 20th century were Adolph Hitler, Joseph Stalin and Chairman Mao. ‘So beware!’

There have been well over ten thousand academic studies of leadership. Stogdill surveyed around three thousand of them in 1974 and concluded the characteristics most frequently associated with effective leaders were above average intelligence (but not too far above), initiative (ie independence and inventiveness) and self-assurance. In addition most successful leaders appeared to enjoy good health and be above average height or well below it.

However, leaders can be effective with a wide variety of personality and physical traits. The interesting question is how to do leadership. What matters is the leader’s behaviour. What is it about a manager’s personal behaviour which makes them an effective leader?  That is far more important than what they are or where they come from. And the one behavioural characteristic, which has repeatedly been identified as absolutely crucial to an effective leader, is integrity. Followers have to have trust in the honesty, fairness and impartiality of their leaders. Otherwise they will not follow for long or with enthusiasm.

The Rise and Fall of Management’ (out in paperback in April) provides a brief history of how industrialization led to the emergence of management as an area of expertise, with high ideals for developing people, and then its fall from grace under the influence of malign economic theory. That is the theory, led by Milton Friedman, which still today dominates government, the financial sector and big business, encouraging top people to become fat cats and tax avoiders.

A decade and a half ago, Drucker suggested the ratio between top executive’s pay and that of the average hourly paid worker ‘could be no more than twenty to one without injury to company morale … Few executives can imagine the hatred, contempt and even fury that has been created  …  among their middle management and professional people.’ Drucker’s point was that bosses paying themselves in excess of twenty times the hourly paid average would be perceived as having no integrity, only an overweening desire to maximize their own self-interest and therefor would have no willing followers.

As indicated in ‘The Road to Co-operation’, that ratio is now commonly exceeded many times over. Yet business leaders seem surprised when the ‘hatred, contempt and fury’ comes to the surface as it did recently in the case of Stephen Hester, boss of the tax-payer owned RBS bank. They may be at the top of their organisations, but the only followers they have, will be those they have corrupted by inviting them to share in the same excess.

That’s not leadership.

© Gordon Pearson 23.2.2012