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Performance●Productivity●Profit
Yesterday I met up with John Vines, Chairman of IBSA (Innovation and Business Skills Australia)
John is widely experienced on the boards of organisations and I asked what Responsible Leadership means to him.
John explained that responsible leadership means that organisations need to take into account every external environment and how their decisions make impact internally as well as externally.
Many boards of directors need to think more broadly.
This brings with it an implication...
Boards need to recognise multiple stakeholders...
Among the most distinctive contrasts at Mubadala is its charter’s mandate that it should not only be profitable but also lay the foundations for a diversified economy in the Emirate. Its mission is closely aligned with Abu Dhabi Economic Vision 2030, an official document mapping out the Emirate’s primary development areas from a government perspective. In an era when companies around the world seek to integrate social values and the public interest into their business models, Mubadala stands as a vivid example. Its mission and structure are built around what it calls a “double bottom line”: pursuing opportunities that could deliver both strong social returns and commercial profit. In a July 2010 interview, Mubadala’s chief operating officer, Waleed Al Mokarrab Al Muhairi, spoke with McKinsey’s Zafer Achi about Mubadala’s role in Abu Dhabi’s economic development and the trade-offs the company makes to fulfill seemingly competing mandates.
Take our investment in Emirates Aluminum. This joint venture between Mubadala and Dubai Aluminum is constructing the largest single free-standing smelter in the world. Phase one is already operational, and we think we’ll be able to reach 1.5 million tons per annum over the next few years, with an aspiration to be a top-three or -four producer worldwide. This investment was a good fit: aluminum is an energy-intensive business and relies on a multifaceted transport infrastructure, both of which we have. It also creates the type of employment we think will be quite beneficial for Abu Dhabi. So in many ways, it meets our priorities. Now, there are many opportunities for deals we might make to support Emirates Aluminum once Mubadala has firmly established itself in that space. For example, we want to diversify and secure our upstream supplies. We don’t necessarily have a target in mind, but we will look for potential transactions.
We have many examples of investments that start out as financial investments but take on a strategic angle. But nothing prevents us from looking at pure financial plays—and we will do so increasingly over time.
If our shareholder asks us to do something that makes sense only from a social perspective, we’ll try to turn it around and engineer it in a manner that respects the mandate of Mubadala to produce economic returns. If that doesn’t work, we’ll go back to our shareholder and say, “We don’t believe this is the right project from Mubadala’s perspective.” And the government of Abu Dhabi and our board of directors are quite adamant about staying true to both sides of our mandate.
We’ve taken that advice to heart, and that’s really the way we manage as an organization. Not having the intense quarter-on-quarter expectations takes away some of the pressure but none of the discipline.
As a result, we’ve worked quite closely on curriculum issues with the Abu Dhabi Educational Council, for everything from primary schools to tertiary education. And we’ve tried to find models that work for the different types of positions we need to fill in different industries. For example, in the semiconductor industry we need people with a polytechnic type of background, all the way to PhDs who can help us on manufacturing and process design. So we work with the authorities to create the linkages between industry and academia, and as a third and important pillar we’re thinking about how we can use R&D to help bridge that talent gap as well.
Those are things we don’t quantify—we just take those positive externalities for granted because they are things we like. Education and training are a necessary part of doing business, and the issues aren’t unique or endemic to our part of the world. Think about aerospace, an industry that traditionally invests a huge amount in R&D and training. As you would expect, the innovation element of that is really quite high. So we’ve looked at what other countries have done—looked at Singapore and South Korea, both of which are quite strong in aerospace. We learned about how government and industry work together to “upskill” the workforce, to take advantage of these positive externalities and ultimately have a productive workforce that’s able to deliver on quite ambitious targets.
Al Muhairi:
What’s interesting is that today you’re seeing spin-offs which are becoming more and more private sector–like, which illustrates the importance of state-sponsored capitalism. Although the government is the main engine for economic development, what you’re seeing is the spinning out of wholly private entities that are injecting the kind of dynamism we need in our economy—which helps us move away from state sponsorship as the main source of innovation. For example, Mubadala is 100 percent owned by the government of Abu Dhabi. But if you go a level down, to our portfolio companies, six or seven have already gone public through an IPO. That’s how we move away from 100 percent government ownership to create opportunities for nongovernmental actors. Obviously, each of those companies has tendrils and networks that reach even further into the economy and away from state-sponsored capitalism. So while state-related entities will be important in our part of the world for the foreseeable future, there is a clear direction toward increased private-sector innovation.
The Quarterly: Let’s talk about Mubadala’s health care partnerships with Imperial College, Cleveland Clinic, and so forth. How did those happen?
Al Muhairi: If you spend time in Abu Dhabi or the UAE, you know that there’s a clear need for world-class health care. Lots of patients travel abroad to get health care. And as we thought about creating businesses, we always felt that we would distinguish ourselves by offering best-in-class service—in addition to doing things that hadn’t really been done before. Take, for example, the Imperial College London Diabetes Center in Abu Dhabi. Here, we did a couple of things that were quite new.
First, we imported a very common business concept, the “one-stop shop,” into health care before other folks did, at least in our part of the world. Managing diabetes doesn’t mean managing a single disease but, rather, managing multiple conditions. We asked ourselves, “Doesn’t it make sense to have cardiologists next to nephrologists and ophthalmologists and podiatrists so that they can work with the endocrinologists on the front line of diabetes treatment to address the disease holistically—instead of what used to require eight different trips to a hospital?”
The second thing we did—and, again, this is very simple, but nobody had really done it before—was to design the diabetes center from the inside out. We wanted to make sure that folks could navigate the building in a manner that reflected the way their condition was treated. We designed the center in a circular pathway so that patients could start with endocrinologists, followed by cardiologists and other specialists, and then be done in an hour and a half. This was really quite game changing, quite revolutionary, from our perspective.
And the success of the diabetes center has prompted us to look at creating more relatively small, self-sufficient centers of excellence around Abu Dhabi, both from a patient-services and a support-services perspective. Our goal is to create an integrated health care network, anchored by the Cleveland Clinic Abu Dhabi—a tertiary health care facility fed by a network of specialist centers that reinforce one another, all of which ultimately puts the patient at the center of the experience. It’s a very simple but powerful idea, developed jointly with our partners, that has worked spectacularly well. It’s not a particularly large investment for us; it’s actually one of our smallest. But it’s a home run in terms of returns on invested capital—and from a social-impact and a personal-satisfaction perspective it’s had an outsized impact across the community and the region.
The Quarterly: How would you describe the general progress toward the 2030 plan?
Al Muhairi: It’s too early to declare success, but there’s no question we’re heading in the right direction. Mubadala, as a reflection of that vision, is still quite young. Yet we’ve grown from a handful of people in 2002 to the 600-plus we have today, not counting the subsidiaries, and that’s really astronomical growth. Managing that growth, managing the cultural elements that propel you from A to B, managing the people issues and the institutional framework for reporting and cash management—these are all things we’ve had to look at, and we’ve had to learn very quickly as an institution. It’s been challenging but gratifying.
Zafer Achi is a partner in McKinsey’s Dubai office.
Source:
Yesterday I caught up with an old friend who has recently retired after leading a key organisation in Australia and overseas.
We discussed thoughts on Responsible Leadership, particularly in relation to their global manufacturing and retail business as their business expands internationally.
They began by suggesting that Responsible Leadership is an unusual description to apply to many businesses. "It has some conservatism attached to the thought.”
Responsible leadership is broadly viewed as part of governance in their manufacturing and retail areas of business.
Looking forward, leaders should always focus on adding value. This is their core responsibility.
Businesses who manufacture and sell products are not a utility or insurance company with governance that relates to those industries and their regulators.
Our business make and sell products people need, so as leading providers in that field, we have integrated responsible leadership into the structure of our business. We went on to look at the key areas where this has been done.
Responsible Leadership Adds Value to Stakeholders and Customers:
Firstly, “The term 'Responsible Leadership' is about adding value for all stakeholders.”
Shareholders want a good return on their investment. Staff want to be rewarded for their efforts. Retailers and suppliers also expect a good long term relationship that they can build with their supplier.
What ties shareholders, staff, retailers and suppliers together is the customer.
So, successful businesses focus on adding value for all stakeholders by ensuring the end customer is valued and are looked after.
After sales service is where many businesses fail to provide without realising this is where they can achieve their competitive advantage.
Customers automatically expect a product of good quality and value. Every customer expects the same. So how do they choose?
After care service is the point of difference that can be promoted via their retail network. When you buy a product in a shop - you know you are supported by their after care service.
Products from so many businesses are good quality, innovative and good value, including those provided by the global giants.
After sales service is what works to differentiate product from competitors by adding value to the customers purchase. This in turn adds value to all stakeholders as every customer learns from the retailer that your brand ensures products will work properly, and if there ever is a problem, they will have after sales service fix it for you.
Responsible Leaders Empower Staff:
The second component of responsible leadership is built into supporting how staff are managed and focuses on empowerment.
Run the business through offering staff decision making power. This gives them empowerment to grow - an important attribute of a responsible leader. It also helps with succession planning as future leaders emerge through the actions they make and the outcomes they achieve.
The attributes of a future leader are:
If these are encouraged through developing a business culture that empowers staff to do well in these areas, then this philosophy becomes part of the DNA of the business - a touch point that transcends to the consumer via recommendation of the retailer.
Responsible Leaders Connect with The Community:
The third area of responsible leadership in business is connecting with the community.
Everyone would always like to do more with initiatives that focus on engaging with the broader community in ways that add value to society.
For example, having a sustainable approach to business.
Also try to be generous with the needy and charities. There are however so many causes to support.
Each market worldwide should be dealt with appropriately and differently when connecting with the local community to take into account different cultures and local idiosyncrasies.
Responsible Leaders are Empathetic and Fair:
Finally, we looked more broadly at the attributes of a responsible leader.
The core of a responsible leader is empathy and fairness. Good leaders can be sharp business people. Entrepreneurial is good as they take on quality risk. When this is balanced with fairness and empathy it is inspiring for staff.
As a leader you can be tough whilst keeping everyone accountable for their actions and the outcomes they achieve. By also being fair and empathetic you help to keep staff inspired.
Responsible Leaders can Communicate with Everyone:
Common amongst all great leaders, including those who live an ethic of responsible leadership…
“As a responsible leader you need to be able to talk to the woman or man on the street. You shouldn't be above your station as people will always appreciate your open acknowledgement when you meet and greet them equally.”
This important concept of open communication has been a common theme shared by the leaders we have interviewed on the subject of Responsible Leadership to date. It helps leaders convey their values and beliefs to everyone in a simple method that everyone can understand and follow
Today I met up with Paul Jury, General Manager - Australia and New Zealand for Talent2 Recruitment
Paul has been a mentor for many years, so I was looking forward to his insight into Responsible Leadership.
Paul began by explaining that responsible leadership is multi-dimensional and he thrives on the constant challenges of personally, professionally and organisationally getting it right and making a difference in all areas.
Responsible leaders balance various components in business and in life. These include the people they are responsible for, their customers and clients, shareholders and stakeholders, their business / brand reputation and overall contribution to the broader community.
What about responsible leadership at Talent2?
“It’s a big challenge when you lead in a business that is growing fast and has rather large aspirations!!”
That said, many have recently felt the frustration and pain of pulling back and managing for profit rather than pushing forward on our promise to be truly holistic on all aspects of the responsibility spectrum.
Whilst we always aimed to do more it is good to be back on script and building towards the main game of outstanding responsible leadership again.
While we have always found ways on the CSR front, like our charity days programs we are really pleased to be working towards our Talent2 foundation which is sponsored by our CEO John Rawlinson.
Every day, many groups and individuals in society require assistance with their careers, return-to-work challenges and other obstacles, so our staff are readily giving their time to share recruitment experience and careers advice. There is nothing more rewarding than helping a candidate get that job!!
At Talent2, the company culture around responsibility is moulded by an ethos that empowers the staff to:
So how does responsible leadership work within the Recruitment industry?
In the recruitment industry, the largest stakeholder groups are our staff, candidates, clients and contractors.
In order to show respect, demonstrate responsibility and provide service excellence to these groups, we follow the code for Professional Conduct as set out by the Recruitment and Consulting Services Association (RCSA).
The RCSA is dedicated to improving regulation and legislation relating to employment and the workplace, and fostering ethical standards for the conduct of businesses within the industry.
One of our General Managers, Laura Mabikafola, also a finalist at the 2009 Telstra Women’s Awards is a national board member of this association.
I then asked Paul what he thought were the attributes and values of a responsible leader? Paul explained;
When considering the attributes and values of a responsible leader, an area that has recently been on his mind is the importance of work / life balance as an enabler.
Responsible leaders all have a number of roles, responsibilities and obligations. Whilst often dominated by work, these include family, friends, peers and the community.
A responsible leader's abilities to weave all these responsibilities together will contribute greatly towards true success as a leader.
Some tips Paul shared included:
> Don’t separate work and life, just weave in together
> Identify own unique formulae for sustained energy
> Focus on the priorities that will make you successful
> Utilise resources and technology to manage workload and responsibilities
> Build in some pause to reflect…fuel the clarity of your vision for your business…and for your life!!
Ideally, a starting point would be to schedule everything outside of work first, and then weave work in around it. While this may not be practical, keeping a balance and scheduling the right actions can be fundamental to living the life of a responsible leader!!
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Yesterday I had a conversation with Colin Walker who is General Manager of Terumo.
Most of you are likely not familiar with Terumo - they are a leading organisation working in the health industry - their head office is based in Japan. Terumo’s main customer base is within hospitals and the Australian Red Cross Blood Service.
I asked Colin what responsible leadership means to him...
Colin said responsible leadership primarily involves setting the personal example when it comes to behaviour and the many rules and regulations that are set by government, head office and society.
As a leader you need to follow a code of conduct. More so, you need to champion it, taking the lead and encouraging others to follow your example. This begins at the induction of a new employee where Colin discusses the Terumo code of conduct and the ethical framework underpinning it. He also describes how the company code of conduct works in alignment with the medical industry code of conduct.
Colin is the local representative for the Terumo code of conduct and also was involved in the creation of the industry code of conduct.
Colin agrees that responsible leadership covers a lot of areas. These include, for example, looking after employee safety through conforming with OH&S legislation, an obligation that is also written into the Terumo code of conduct. Responsibility to staff and the company must be at the forefront of every manager’s focus. However, Terumo has the underlying philosophy of contributing to society through healthcare. This brings about a patient focussed approach where every interaction with a doctor or nurse is based on the needs of the patient.
Processes can be put in place to help guide everyone, though in the end it comes down to people being responsible for their own actions. If leadership is set at the highest level, others have a direction and example to follow and this makes it easier for them to be responsible about what they do.
People should be given authority to follow through with their own ideas, thoughts and direction. They can add a lot to philosophies and direction portrayed by their leaders. By following responsible leaders they add to the value of the organisation whilst following their leader’s example.
Customers also should have authority to direct the course of business by giving feedback. When engaging with customers, staff should be given authority to make executive decisions within the confines of their authority that are in the best interests of the customer.
This does not mean providing the cheapest price. It refers to providing an agreement valued by both parties that is in the best interests of the customer whilst also fair and providing value to the business.
Relating to society, responsible leadership ensures the business is in touch with society - as a corporate citizen whilst also ensuring sustainability issues are maintained. Currently Terumo are looking at their own head office property in Australia which has lighting designed to turn on across the office, when all rooms are not necessarily used continuously. The alternative is to re-wire the office which is an expense that needs to be considered if they plan to stay at their present location in the long term.
Colin cited a couple of examples of when responsible leadership has gone wrong - like the David Jones story recently in the media. Society in general has finely tuned social and moral antennae and companies that ignore these do so at their own peril. Doing the right thing (being responsible) may not be easiest path to follow but it usually pays dividends in the long run.
Finishing up, Colin summarised that Responsible Leadership is conveyed across a whole gamut of areas and definitions. Senior leaders need to be holistic with their thoughts and communications in order to be a truly responsible leader.
Leaders need to decide whether they are going to follow certain paths into the future as their own staff and society are regularly looking at what they are doing.
Today I spoke with Narelle Kennedy, CEO of the Australian Business Foundation.
Narelle has impact via her connections to many businesses, government policymakers and to leading edge researchers - both nationally and internationally
Our conversation began with what Responsible Leadership means to Narelle. Narelle's quick response was...
"What is the opposite of Responsible Leadership? Is it ir-responsible leadership?"
Narelle questioned the meaning of “responsible leadership” as a separate category of leadership focused on ethics, values and corporate responsibility. Rather, Narelle explained, leadership is a broader, more robust idea.
Corporate Social Responsibility (CSR) forms part of the puzzle, as does sustainability, ethics, values and many other elements.
But ‘responsible leadership’ is much broader, it includes an appreciation of facts and mixing those facts with judgement, creativity and insight. Leadership involves both left brain and right brain activities.
Responsible Leadership should be seen in the context of all leadership, fully integrated as a part of being professional.
Leaders are not responsible for people, but they are accountable for the things people who report to them do.
An effective and good leader is accountable for outcomes. That is part of their responsibility. But leadership is not restricted to the top of organisations. Leadership occurs at all levels and in all functions of an organisation.
Paternalistic concepts of leadership, where the boss looks after and is responsible for subordinates, are out-moded. Leadership is more a two-way street.
The key concept is 'Empowerment'.
Perhaps instead of “Responsible Leadership’ we should be talking about “Empowering Leadership.” This is the first key concept.
Empowerment is not freedom to do anything you want. But it is a more dynamic concept than a single, authoritative, strong leader.
It mixes judgement with information, facts, intuition and both sides of the brain.
Empowerment helps those you are responsible for improve their lives, so they can improve the lives of those they care about.
The 2nd key concept for leadership is Context.
Look at what context you work within. If you are a large enterprise, your context is different to a small business.
In every context, leadership manifests itself differently.
There are some leadership fundamentals in any business, like making sure your financial, accounting and governance systems are in place.
But in a small family business, leadership will involve addressing the issues of family dynamics and succession planning difficulties.
If you are a large corporate, then leadership can be tested by your ability to understand the maverick elements of your business, where the next wave of business offerings might be generated.
If you are a charity or not-for-profit business with a social or environmental purpose, then leading your industry in social innovation might be the priority.
The 3rd key issue for leadership is the is Time Horizon.
Leaders at any level of business are focussed on their key business offerings that contribute most oto their successful and profitable business performance today.
But responsible business leaders must always look forward to what new business offerings they will need to create for tomorrow and beyond.
Very few leaders invest enough in the long term viability of the businesses/communities/constituencies they represent.
Responsible Leaders look beyond today’s success to what will make their businesses viable in the future. They look beyond their own tenure to a time when they will no longer lead their organisations.
Responsible Leaders have foresight, built on the knowledge of hindsight, as well as on the uncertainties and wildcards.
They have antennae out to detect options for the future and engage with those who can help provide solutions.
Many people confuse management and leadership. One of the core differences is leaders have the ability to look forward beyond the horizon.
The leader as futurist is often dismissed as irrelevant and impractical for achieving tangible immediate bottom line results. But leaders who avoid ‘futures’ thinking are flirting with danger, as they can be blindsided by unforseen threats and miss unimagined opportunities.
If you look at the Global Financial Crisis (GFC) as an example - many business owners and leaders did not pick it!
Now, people are looking at how to avoid being caught by surprise again.
From an individual perspective through to the largest enterprise it means investing a little in the future - to look at solutions for any unexpected future needs.
James Moody's book The 6th Wave is a classic example of how this can work - looking at the opportunities to be had as trends of resource management and efficiency become mainstream.
Businesses involved in monitoring, managing and considering our environment will be much more in demand into the future - such as smart energy, infrastructure and associated technologies.
Technology and communications are able to transform capabilities in business that we would never have considered in the past. They can transform the capabilities of businesses which leads to greater productivity, not only for individual businesses but for Australia as a whole.
As Cambridge Professor Alan Hughes’ analysis of Australia’s Productivity Growth in a recent study for the Australian Business Foundation shows, it is the high tech users, not the high tech producers, that are reaping the benefits of enhanced productivity. View the download here:
Australian Productivity Growth
So how does Narelle as a leader of businesses across so many levels see the attributes of business leaders in the area of responsible leadership?
Narelle summarises...
Responsible leaders...
1) Have an enquiring mind.
They generally never accept the first right answer. They are intellectually curious. They probe beyond the obvious and they consult, they are open to different perspectives and ideas and they can tolerate dissenting opinions.
But while being a consultative leader, they back their own judgments and are decisive at the end of the day. They have confidence and assurance to listen to critics and diverse opinions and incorporate this knowledge into the final decision.
2) Translate complex ideas so that they make sense.
The ability to translate the complex to be easily understood and acted on is a key feature of effective leaders.
In this way you make it easy for everyone to follow your decisions and thoughts.
Knowledge should be accessible and understandable for all staff and stakeholders.
3) Buck stops with you!
Effective leaders have no fear of being the decision maker, with informed appraisal of the facts and sound judgement of the alternatives. Leaders take responsibility for results.
Narelle volunteered Catherine Livingstone, Chair of Telstra and former Chair of the Australian Business Foundation as someone epitomising these leadership attributes and has proved to be a great mentor for Narelle.
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