The term “shareholder value” was officially introduced by Alfred Rappaport in his 1986 book: Creating shareholder value. I remember sitting in one of my MBA classes listening to the professor telling us that the responsibility of a corporation is to increase shareholders wealth and its success ultimately judged by how much it enriches them. While shareholder value continues to be an important aspect of how successful a company is, a major difference exists today. Up until recently in business, mixing financial wealth and shareholder value with any kind of emotions, feelings or respect for something else than profits was seen as pure heresy. However, financial wealth no longer represents the almighty measure of business success. As the business world opens itself up to social responsibility, the world is awakening to the wealth of the human spirit. The future success of companies, small or large, will greatly depend on their ability to touch that human spirit and engage it.
Surveys conducted by Towers Perrin in the past couple of years highlight the importance for leaders to pay attention to that human element and ensure it is fully engaged in the success of the company. In fact, one study revealed that firms which had the highest percentage of engaged and happy employees collectively raised their operating income by 19% and earnings per share by 28%, certainly something to pay attention.
How does a company move beyond being strictly focused on profits to being focused on profits and happiness in the workplace? Well, for one, by moving away from the notion of shareholders and adopt a view of stakeholders, which includes not only investors, but also employees, customers, vendors and the community. By being willing to embrace a different way of being such as the one presented by David Bakke, former president and CEO of AES Corporation, a 13.6 billions dollar energy and electricity generating company. Back in 2008, David Bakke wrote in his book Joy at Work, that the single most important characteristic of a leader in a joyful workplace is humility. And since then, many more books have been written on humble leadership.
So what are the three C’s of Leadership?
It takes a lot of courage for a leader to show humility. The old model of leadership has always called for leaders to demonstrate this attitude of power and “beyond reach” persona. Being humble as a leader means that leaders are not afraid of admitting they are wrong. They willingly come down from the proverbial Ivory Tower and recognize that the success of their organization depends not only on their managerial abilities and that of their executive team, but of their whole employee team, all the way to the mail clerk. When leaders leave their Ivory tower and start walking their talk, they also become authentic and genuine, and they are not afraid of embracing a culture of compassion.
The definition of compassion is the desire for someone’s suffering to end. Why is that important in a business context? Because if employees suffer, are unhappy, are kept in the dark about what goes on during a re-organization, are not recognized for their contribution, are not allowed to be who they are, their productivity will inevitably suffer. So why would a leader want to contribute to an employee’s suffering knowing that it decreases productivity and ultimately profits? After all, a company really isn’t worth much without engaged and committed people.
Compassion means that the leaders of companies must put aside the old model of management, start thinking out of the box, put themselves in their employees’ shoes and come up with solutions that recognize the human element and the inter-connectedness to their actions. Compassion does not mean avoiding making the tough decisions, but rather it means keeping in mind the consequences when making these tough decisions and alleviating the anguish.
Unless leaders are totally convinced and act with full conviction, their attempts at developing a culture of compassion are likely to fail. Why? Because embracing compassion, particularly in the business world, requires an absolute belief that we are all connected, that our actions have consequences on others and the environment around us, and simply because if we don’t believe in it and try to fake it, people won’t buy it. Acting from a place of conviction requires having the courage to continue despite what your competition is doing, knowing that stakeholders’ wealth is more than just profits.
So how do you know whether you and your company are ready for this change?
- Check if your behaviour and the culture of your company are aligned with your personal values.
- Re-engage your heart in the management process, not just your mind.
- Review successful compassionate companies.
- Start an open dialogue with your executive team. Invite employees at a round table focused on happiness in the workplace.
- Be convinced that this is the right path for any business, small or large.
- Ask yourself what you can do to make a difference.
- Embrace these simple words from the Dalai Lama on business: “ if you do good, you get positive results”
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To your Well Being