Not business as usual
In a morally interdependent world, businesses must focus on how they engage with customers and employees if society as a whole is to prosper, says Dov Seidman
Today, due in large part to favourable lending regulations, small businesses account for more than half of America's private sector. At their best, our institutions, regulatory frameworks and organisational cultures have created enormous certainty. This environment of trust has served as a solid floor on which to launch ideas, companies and collaborations. Great American projects have always benefited businesses in the US; after all, DuPont, the Delaware chemicals company, made 24 of the 25 elements in Neil Armstrong's spacesuit.
Yet, at a time when these conditions are needed more than ever, we are not heading in the right direction. November's presidential election only served to deepen our divisions and largely concerned shifting a tiny sliver of swing-state voters from one polarised camp to the other. As I write from New York City in the aftermath of Hurricane Sandy, it seems that even an epic disaster did not change these dynamics. From climate to infrastructure to public education, our conversations remain tactical. No one has truly tried to elevate us by taking the nation on a daring new journey of progress.
Instead, American citizens are becoming less involved in civic life and employees less engaged in their work. Many workers feel stuck in unsatisfying, dead-end jobs, when they aspire to be on the kind of meaningful careers their parents wished for them.
America is not alone; similar issues face much of the global private sector as companies, also facing tough times and rapid change, continue to operate as if they can superimpose control and accurate projections on our complex and shifting economic and social conditions. Business remains trapped in a linear mindset that does not map to the volatile way the world now operates. In particular, the world has rapidly and dramatically gone from being connected to interconnected to morally interdependent.
Roughly two centuries ago, Scottish philosopher David Hume observed that moral imagination diminishes with distance. It follows that moral imagination should increase as the world shrinks through globalisation. We are no longer distant and, therefore, need to reawaken our moral imaginations.
Put simply, this means that everyone's values and behaviours are crucial, because they can affect more people in more ways than ever before. One banker in London can lose billions of dollars trading, force the resignation of his CEO and send shockwaves through the global financial community and the real economy. A vegetable vendor in Tunisia can spark a revolution towards freedom throughout the Middle East.
Yet we continue to operate under the false assumption that we can create and sustain separate spheres for our personal and professional lives. Think of the famous line from The Godfather, often used in the corporate world: "It's not personal, it's strictly business." We have invented language to justify amoral behaviour: "Just get it done. I don't care how." There is no room for this in today's morally interdependent global environment. If I sell you a mortgage, I'd better be prepared to stand behind it, because the days when I will never see you again – or the days when any of us can escape the consequences of our actions – are gone. We are in a relationship of dependency.
Meanwhile, we seem to be experiencing higher levels of volatility. Ten-year boom and bust cycles now occur more frequently. Markets are prone to unpredictable human behaviour, violent economic swings, powerful natural disasters, sudden commodity shortages and crippling cyber outages. If we still had ten-year cycles, it might be rational to pull down our sails, wait out the storm and set sail when economic conditions improve. But when bad weather is hitting us regularly, we need to learn – for the first time – to navigate with sails up in a storm. In other words, we need to build the institutional and individual capacity for simultaneous resiliency and growth.
Compounding this challenge are the ways in which interdependence has enabled 'freedom from'. Citizens and employees alike are clamouring for – and achieving – an unprecedented level of freedom from old, outdated structures and conventions. Employees who no longer want to work under command-and-control managers can expose their boss's behaviour online. Consumers who do not agree with price increases can bolt to another provider overnight. As traditional structures break down, a vacuum is naturally created in which anything that can happen – good or bad – will happen. Meeting this challenge urgently involves creating for citizens and employees the possibility for 'freedom to': to pursue happiness, innovate, collaborate, and to live and work in a more fulfilling manner. These factors require us to rethink fundamentals of how we lead, govern and operate our countries and organisations, designed specifically for a morally interdependent world.
To lead and thrive in this world, we must first embrace the notion that competitive advantage has shifted from what we do to how we do it. We are in the era of behaviour. Anyone can easily peer into the innermost workings of companies and governments and evaluate how they really treat suppliers, employees, stakeholders and constituents; and then they can tweet or blog about it. Customers can instantly compare price, features, quality and service, effectively rendering every 'what' a commodity. This requires leaders to devote new energy and focus to how their organisations operate and how their people conduct business.
Second, we need to understand that the days of leading by a one-way conversation are over. When the streaming site Netflix raised its prices in 2011 with a one-way announcement, 800,000 customers fled. When a Scottish girl decided to blog about the quality of her school lunches, school officials tried to shut down her site. Only after thousands of supporters amplified her cause online did a conversation result in changed policies and more nutritious food. Leaders must embrace two-way discussions and be prepared to listen to constituents, and employees, who hold more power than ever before.
Third, we must build healthy interdependencies, so we rise more and fall less together. It is our responsibility to build new coalitions, even with former competitors, as we eschew zero-sum competition in favour of the true ideal of the word, derived from competere: to strive together.
Fourth, we need to elevate and not just shift behaviour. Leaders, mindful of the conditions of interdependence, are asking their employees to go beyond merely serving customers to be collaborative and creative. They must nurture the company's brand whenever they publicly express themselves in tweets, blogs or email. We ask teachers to create a sense of curiosity in the classroom, and doctors to show compassion at a patient's bedside. Carrot-and-stick methods of motivation are outdated. These qualities can only be inspired in people if employees consider the company's mission and values worthy of their dedication.
Fifth, we need to change how we measure progress. The adage that 'you manage what you measure' remains valid, but traditional measures do not add up in today's world. We painstakingly continue to track GDP, revenue, debt, risk, friends, votes, followers and engagement, yet revenues are flat, debt has never been higher, risk has never loomed larger and engagement scores are at an all-time low. While these measures remain necessary, they are no longer sufficient. In an interdependent world, we need a reliable method for measuring how we forge healthy interdependencies, how organisations operate and relate to society, the way in which they treat their people and how their staff behave and treat others.
Finally, leaders must recognise that, as power shifts to individuals, leadership itself must shift with it: from coercive leadership that extracts performance and allegiance out of people to inspirational leadership that fosters commitment and innovation in people. Leadership is no longer about formal authority that commands and controls and exerts power over people, but rather about moral authority that connects and collaborates and generates power through people.
There is an old business cliché that hope is not a strategy. It is an expression usually used to belittle someone and to exhort him or her to deliver a linear plan. But inspirational leaders understand that without hope, there is no strategy.
When we lose hope, we retreat into ourselves. When we are inspired by hope, we lean into the world and can collaborate with others to take on great challenges. Hope is thus fundamental to our ability to forge healthy interdependencies and strive together.
In this interdependent world, we are all leaders. If we are all inspired by hope and inspire it in those around us, America and other societies around the world will elevate to greater things.
Dov Seidman is the founder and CEO of LRN and the author of How: Why how we do anything means everything.