Understanding Before Leading

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The foundational idea behind ROKC is that organizational leaders need to identify what asset underlies a business’s value proposition before they can effectively and efficiently lead. By lead, we mean the influencing of decisions that ultimately determine how that “asset” is processed, communicated, and sold; the risks managed; and, shareholder value and stakeholder satisfaction maximized. Without a firm understanding of this value chain, leaders may make poor decisions resulting in a loss of trust and ultimately with their removal.

Trust pertains to the ability of leaders to maximize profits to their shareholders, obviously, and this is as far as many corporate leaders would go. As many ROKC practitioners will know, the key asset has an innate social usefulness, hence its marketability. How the asset is stewarded, through leadership, will have either negative or positive results, based upon how engaged the corporation is with the needs of its community.  When the results are positive, and a situation of trust exists, then and only then is a real financial and social contribution possible. Breach this trust, as has happened with mammoth oil spills and nuclear disasters, and the asset is useless – if the asset was ever properly understood at all.

Trust is a fundamental requirement for any relationship. It is the glue that provides us with real connection. Trust is needed in friendships, families, and business relationships as well as between corporations and consumers, and governments and the governed.

So, given my interest in the concept of trust, when my good friend Ann Lee, Adjunct Professor of Finance and Economics at New York University and leading authority on China’s economic relations, was invited to speak at the 2013 Edelman Trust Barometer Conference, I asked to come along as her guest. The results of this 27 country-33,000 person survey are secret until January 27th, so I will not divulge any details. I can say: I was not surprised by the distrust towards business and government in their specific country by those surveyed, but I was surprised by its degree. I strongly recommend that anyone interested in this subject read the survey when it is released.

A few days later Ann asked me what I thought of the survey results. Since I keep up with international events, I am well aware of the problems of inequity in the world, which seemed to co-occur with levels of distrust in the survey. My first thought was this is primarily caused by the financial services industry, because during this period the capital required for a business to grow comes from financial services outside a community; consequently the benefits accrue outside as well. In other words, historically business growth was slow and organic, raising all boats at the same time. Today, with capital supplied from outside, the boats of capital suppliers and their managers are those that rise. The benefits created by a community no longer accrue to that community, but to another, creating an inequity in the distribution of wealth (and thus distrust in either business or government, or both).

I further believe that the level of trust/distrust the sampled population may feel toward government and/or business can be understood by looking at historical patterns of the concentration of power and of efforts to counter the negative effect of this through governmental or legislative mechanisms intended to yield a more equitable distribution of the benefits.

For example, in agrarian societies the benefits of labor and the allocation of resources accrue to everyone in relatively equal amounts. Without any concentration of power in the hands of the few it is easy to understand how people in an agrarian society would recognize the village elders as their leaders. With their advantage of years of experience, elders are able to help maintain an equitable balance.

However, in feudal societies, where there was a concentration of power, the benefits accrued to the few. Within these societies, it was the introduction of the rule of law that helped restore the equitable distribution of the benefits.

Later on, during the industrial revolution when industrialists were perceived to have accrued too much power, some societies developed new economic models (socialism and communism) to achieve the same result. Other societies used legislation to pass laws, either limiting power or taxing the benefits in order for them to be redistributed.

In today’s world, it would seem there is only capitalism. The level of concentrated power in corporations is so significant that some are “too big to fail”. Even without going that far, some corporations are so distant from their community that ecosystems have been established around them in an effort to create the cohesiveness that once existed in agrarian societies, and social media platforms like Twitter and Facebook are required for them to actually “hear” what is being said about their products and services and engage with their customers.

Some governments have become so tied up with – beholden, even – to these centers of power, that they are unwilling, or unable due to polarization, to restore an equitable balance through legislation. On the contrary, deregulation, de-taxation and de-unionization are undoing hard won gains made in the 20th Century. Then again, in less mature countries there is a whole-hearted rejection of Western principles of equitable distribution, with a retrenchment on a romanticized image of an idealized past that never existed.

Maybe next year, Edelman could create a new barometer to measure the sentiment people have about equitability in their country. And perhaps businesses will start to behave more equitably in the markets in which they operate. Legislators could start to do their job by privileging the interests of their electorate over those of corporations, going back to the tradition of passing legislation that limits power where it is too concentrated. Or, corporations could learn about their key asset and inculcate an earned trust in their community.

As much as I hate to write this: “Concentrated power has always been the enemy of liberty.” (Ronald Reagan). I couldn’t agree more.


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