How to get the right leadership to lead a business in a viable way while contributing materially to sustainable development? This article explores the necessity to take a long-term approach to business development, the nature of solution design by leaders, and their implications for getting the right leadership for long-term viable and sustainable business development.
Short-term business creates short-term-oriented business leaders
Businesses that disregard the interdependency between environmental and social requirements for business to thrive in for the longer term create short-term-oriented business leadership, and vice versa. In other words, unsustainable business creates leadership that promotes unsustainable business, and short-term oriented leaders of businesses generate short-term and unsustainable business models. This is how I understand the fascinating article by Harvard Business School professors Joseph Bower and Lynn Paine who threw a stone into the pond in their article The Error at the Heart of Corporate Leadership. They point to the mutually reinforcing influence relationship between long-term orientation of businesses towards value creation and the quality of leadership conclude that “The time has come to challenge the agency-based model of corporate governance. Its mantra of maximising shareholder value is distracting companies and their leaders from the innovation, strategic renewal, and investment in the future.” (1). A long-term orientation would both incentivise and enable leaders to create long-term value and to let businesses realise the needs of multiple constituencies of stakeholders in the longer term.
Flying blind in terms of business impacts is a choice
In a recent publication, McKinsey & Company state that companies with a long-term business perspective outperform their peers in creating financial value and job creation (2). At the same time, however, they report that short-term thinking seems to be on the rise, while executives feel they are under strong pressure to take management decisions that favour short-term financial results. And indeed, taking a long-term and sustainable approach to business development is not yet mainstream: RobecoSAM concludes in its Sustainability Yearbook 2017 that not even fifty percent of the companies it had analysed had performed sustainability assessments of include social and environmental impact valuations in the management of their businesses (3). In nine out of fifteen industry sectors, this percentage is twenty percent or less. Many businesses and industry sectors are flying blind in terms of the external effects and impacts they create.
Good leadership control their greed
So what kind of leaders and leadership are required to realise long-term-oriented business strategies and management decisions?Around 380 BC, Plato discussed problems with leadership in The Republic, and he argues that greed control is the most important quality of future kings and leaders of states (4). To avoid putting powerful people in positions to command businesses or government, potential leaders should be carefully be monitored, evaluated and selected for decades regarding the degree of desire control they show in their personal and professional decisions. Also, leaders and kings should show that they use and never defy the latest scientific knowledge, according to Plato.
A matter of choice?
An in intriguing question is how well people are able to control their desires and greed, and choose course of actions that serve the long-term collective interest rather than their own short-term interests. This ability is called free will: we assume that people have a conscious, rational choice to make the right decision and purposefully will chose those actions that are knowledge-based and oriented toward longer term interests.
In his book Homo Deus, Yuval Noah Harari answers the question about free will based on recent insights from the life sciences. He concludes that attributing free will to human does not sit well with the latest scientific findings. Choices that humans make are either explained from random biochemical processes in the brain, by deterministic outcomes of such processes or by both. As a consequence, we must prepare to accept that free will of humans may not exist, says Harari.
Short-termist leadership behaviour a behavioural trait?
Following Harari’s line of thinking and hypothesis, the consequences are far-reaching should further scientific research provide more support for the hypothesis while failing to reject it. For example, that observation that some humans reject or ignore compelling science-based information as to the viability of human life at personal, community or at the global level may be well explained by their inability to understand or to act upon the truths or facts available to them. Rather, it could be the electro-bio-chemical functioning of their brain that makes them emotionally reject science-based information.
Follow the leader, but first instal long-term oriented ones
However, some leaders may be more predispositioned towards managing a business and creating from a long-term perspective than others. Let’s spot them, educate them, evaluate their actions and impacts, enable them, elect them, select them. Not only from a long-term business perspective, but also from their motivation, ability and track record regarding creating long-term value for multiple stakeholder groups.
(1) Bower, Joseph L.; Lynn Paine. The Error at the Heart of Corporate Leadership. In Harvard Business Review, May-June issue, 2017.
(2) McKinsey Global Institute (McKinsey & Company). Where Companies with a Long-Term View Outperform Their Peers: Measuring the Economic Impact of Short-Termism, 2017.
(3) RobecoSam. Sustainability Yearbook 2017., 2017. www.robecosam.com.
(4) Plato. The Republic. Penguin Classics, 2003 (first published 380 AD).