Susy Roberts, 6th May 2016
As taxpayers find themselves liable for BHS’s £571 million pension fund deficit, questions are being asked about Philip Green’s leadership of the company.
Not only did he pay himself and his wife £358 million in dividends, while the pension fund swung from a health surplus to a deficit, but the Financial Times has discovered that by charging the store costly administrative fees and rent for properties sold to his wife, the cash extracted actually amounts to £1.2bn.
Unfortunately, as Green takes possession of his latest £100 million pound yacht and the public calls for him to be stripped of his knighthood, he’s become just one more individual on a very long list of people who’ve put personal gain ahead of the fortunes of the company and people they were entrusted to lead. There appears to be no evidence of values based leadership.
So what can we do? If we don’t want to have any more pension deficits, cheating on car emissions, telephone hacking by journalists, bribes being accepted by sports officials, not to mention unethical behaviour by bankers, there’s one clear thing we could and should be doing differently…
Why leaders behave unethically
In my experience of coaching leaders over the past 20 years, most don’t start off lacking integrity. If anything they have greater ambition than most to achieve great things, both for themselves, and the people they’re responsible for.
The majority continue to demonstrate strong values based leadership throughout their careers.
Things start to go wrong when leaders are encouraged to drive only financial performance with the promise of huge financial bonuses. Those leaders who are hugely motivated by personal financial gain can change their behaviours and not demonstrate valued based leadership.
Problems arise when these financial bonuses are linked to financial results alone. This encourages senior leaders to focus on the figures ahead of everything else. If they’re struggling to hit those results, there is a strong temptation to do whatever they can within the law to achieve those results, be it making otherwise unnecessary redundancies. Or whatever they can to be seen to be delivering the results – as Tesco chief executive found out when he has to suspend four senior executives for overstating profits by £250 million in 2014.
The moral is that although offering business leaders a huge financial bonus, if they achieve certain financial results, might appear like a sensible way to drive business performance, at best it encourages leaders to focus on financial results ahead of everything else. At worst it tempts some individuals to resort to unethical behaviour to get, or appear to get, the results.
A proven way to drive ethical behaviour
Short of setting up a partnership and giving all employees ownership of the business so that any financial reward is distributed equally, as per John Lewis, a far better solution to ‘fat cat’ bonuses is to accept that it’s everyone in the company that determines its success, not just the leader at the top.
When we were called in to help global chemicals company, Chemtura, start focusing on the right things, after it consistently missed its quarterly business results, it was creating a culture of accountability across the entire organisation, rather than incentivising the leaders at the top, that brought the company back from the brink so that it could start hitting big financial goals again.
Similarly, when ABB set about achieving ambitious growth plans for its multi-million pound Power System division, it was the award-winning way we helped them to roll-out the positive leadership principles of ‘responsibility, respect and determination’, across the entire division, that enabled it to win work in new markets and double the value of orders secured. You can read the full story here.
If you want your company to succeed, the moral is that instead of rewarding strong financial results alone, reward the behaviours and attitudes that will get you there. Attitudes such as ‘accountability’, ‘integrity’ and ‘trust’ not only help to drive performance, but also encourage ethical behaviour and boost employee engagement.
Only by accepting that everyone in the company has a stake in its success and thinking about how best to embed value-driven behaviours across the entire organisation can we put an end to ‘fat cat’ bonuses in favour of rewarding everyone who makes the company a success. Not least by safeguarding their jobs and livelihood.
As for Philip Green, it just doesn’t seem right that he should have been allowed to reward himself so handsomely while the tax payer and people he once employed are left to pick up the pieces for his failure. Let’s hope the pension regulator uses its power to order the present and past owners of businesses to make good the pension deficit at the very least.
In summary: Cascade meaningful goals down through the organisation.
Please share your thoughts on boosting productivity in the comments below. If you need help to put any of the above ideas on boosting productivity into action, call us on 01270 750232 or email firstname.lastname@example.org
- Why the productivity gap, BBC Business, 21 May 2015
- Corporate Leadership Council, 2005
- The Strengths Focused Guide To Leadership, Mike Roarty and Kathy Toogood