Leaving the cult

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Written by Daniel Wain on 1 October 2012 in Interviews
Interviews

Daniel Wain discusses myths, monsters and manifestos with award-winning writer on leadership Christopher Bones

"Although modern business is obsessed with leadership," says Christopher Bones, author of award-winning new book The Cult of the Leader, "its real meaning has become ever-more obscure. Today we define leaders in terms of their image rather than their judgment. The result has been a failure of leadership at a time when we need all the good leaders we can find. We now face critical decisions and urgently need to rethink the role of leadership, rebuild trust and confidence, redefine talent and reconsider remuneration."

Professor Bones's book is subtitled A Manifesto for Authentic Business and is a compelling rallying cry for radical reform. He cites the global financial crisis, the failure of the world's governments to mitigate our changing climate and the continuing rise of religious and political fundamentalism as just a few examples of modern leadership failing to deliver.

"Good leaders," he says, "wouldn't let these things happen. The weak ones in key positions have, by their actions or inactivity (take your pick), been the authors not just of their own misery but, more importantly, of the conglomeration of crises we now face."

To address this pervading malaise, Bones advocates fundamental change in the way business leaders are educated, selected and rewarded. This includes adopting "a more realist attitude" to the value of MBAs, promoting more internal candidates, removing unnecessary benefits, abolishing share options and introducing stricter expenses regimes.

The Cult of the Leader was the unanimous winner of the Chartered Management Institute's Management Book of the Year award 2011/2012, beating a field of more than 150 entries. One of the judges, Novia Financial chairman Sir Anthony Cleaver, described it as "the best analysis of the underlying causes of today's economic issues I have seen".

The work originated as an article on TheEconomist.com, sparking a worldwide debate about modern leadership and leading to Bones being voted one of the UK's top five most influential HR thinkers of recent years.

His analysis of what's gone wrong with modern leadership and his subsequent manifesto for change is more the result of a gradual realisation than any one eureka! moment. "I worked for Grand Metropolitan as group head of compensation and benefits, next for Guinness, and then for Diageo when the two companies merged in 1997," he explains. "During my time there, we tried to avoid the short-term rewards that led people to juggle the financials at year-end, by introducing a system of 'bonus banking'."

This meant executives only received 50 per cent of their total reward immediately, with the rest being fed through later based upon longer-term, sustainable results. He also tried to limit the size of total reward, at a time when, he says, "the range of senior executives' definitions of 'decent pay' was already extraordinary". 

After Diageo, Bones became group organisation effectiveness and development director at Cadbury Schweppes, where he defined performance from the perspective of the company's shareholders rather than its executives. So by the time he became principal of Henley Management College in 2005, he "had already experienced two companies who were trying to do things different to the norm".

He traces the roots of the problem back to the 14th century, when leaders became the embodiment of the state, "next only to God" or, as Louis XIV told the French parliament in 1655, "L'Etat c'est moi". For Bones, modern business leaders have "shaped themselves in the mould of the formerly omnipotent", and spin and compliance have created conditions in 21st century organisations "more akin to a feudal court than a collective of equals within which freely-held views can be shared without fear" .

Despite the fact that all leaders must be flawed because so are all human beings, Bones believes that the modern 'cult' has created leaders who are "egotistic, blind to their faults and surrounded by people created in their own image". Driving the culture of the super-ego leader was the rise of what he calls "the L'Oréal generation": those who believed "they were worth it" when it came to power, influence and financial reward, and for whom consumption became a way of life. He points to a fundamental shift in societal values since the Second World War from a corporatist, homogenous world view towards one of individualism and self-centredness.

Emblematic of this shift, he says, was the "War for Talent myth" created by McKinsey & Co in the late Nineties. For Bones, this cemented the narcissistic organisation, one led and peopled by individuals whose self-belief was reinforced every day by systems of reward that confirmed their already over-rated abilities.

The War for Talent "provided a lazy solution for business leaders unwilling or unable to handle the complexity of investing in their whole workforce. So they simply identified and invested in the top talent, leaving them to make a difference. I guess the one thing we can all agree on is that in financial services, in Enron and WorldCom and in many other active adopters of this philosophy, they certainly made a difference: not quite the one, however, McKinsey predicted".

In his book, Bones quotes some startling statistics that support his view: for example, in 1997, the average UK chief executive earned 39 times that of the average UK full-time worker. Ten years later, this pay differential had risen to an average of 98 times.

For Bones, such senior executives, supported by "a coterie" of fund managers, have "engineered a coup d'etat in which the right of the enterprise's owners to the lion's share of excess profits has been usurped. The cash is taken above the line and allocated to outrageous levels of personal reward". He argues, in essence, that the tail now wags the dog, that the "stewards" of the business have grasped greater power for themselves than that of the other stakeholders whom they are supposed to serve.

Today's business leaders, he feels, are rewarded like entrepreneurs not employees, even though, unlike true entrepreneurs, they don't have 'skin in the game': "Economic entrepreneurs are prepared to risk their own capital, future and quite often family in pursuit of success. While they take risks, they are rarely reckless, for it's their own money and reputation that's at stake." Conversely, 'fat cat' senior execs run no personal risk, meaning they are more willing to accept greater levels of corporate risk and can then negotiate a handsome severance payment and pension pot if, or when, they fail.

So why did so few, before the recent financial crisis, notice that the emperor had no clothes? Some, like Mintzberg and Galbraith, did flag up the dangers, replies Bones, but "although we were warned, those who could have taken action failed to listen because they were making too much money and it wasn't in their interests to change".

Bones spreads the blame widely and evenly, between politicians, banks, businesspeople, accountancy firms, management consultants, business schools and, of course, HR. Despite his time at Henley (ending as dean of the newly-merged business school) and having been professor of creativity and leadership at Manchester Business School since 2010, he believes most business schools, with a few honourable exceptions, were right in the middle of the cult.

"Most," he says, "took too junior and inexperienced, if academically bright, people and taught them theoretical models with no focus on the real-life context of owner, employee or customer. MBAs have reinforced the systemic assumption that grads from top business schools are the only really talented people worth recruiting, so strengthening their 'rarity value' in the market."

He also points the finger at the 'management gurus'. Amazon now offers more than 1.9m business books, including more than 267,000 in the 'business management' category: an industry worth, back in 2006, $9.6bn in the US alone.  "The cult that now surrounds leadership, claiming the existence of the Mary Poppins Manager - 'practically perfect in every way' - is positively dangerous to society as a whole," he believes. He cites the likes of Jack Welch, Tom Peters and the late Stephen Covey as among the worst offenders, who "pulled off the feat of combining fireside hokey with state-of-the-art, new-age management jargon", along with Anthony Robbins, whose book Giant Steps boasts 365 lessons in self-mastery, including: "Remember to expect miracles... because you are one."

But HR does not escape Bones's censure, far from it. "Personnel, renaming themselves Human Resources, bought into the 'War for Talent' myth," he says. "It was their ticket, they thought, to the top table in the mid-Nineties, flattering the egos of their senior executives. The enthusiastic adoption of this myth by HR professionals as a lever through which they could gain influence and credibility was one of the reasons it attracted so little rigorous review and challenge. It certainly enabled them to build an industry in assessment surveys, capability and competency models and expensive leadership development programmes with a penchant towards the exotic."

For Bones, HR shouldn't obsess about getting on the board: "Good HR people will get there naturally. The reason so many aren't at the top table is usually, unfortunately, because they're not very good." And he speaks from considerable personal experience. Before Diageo and Cadbury Schweppes, he started in industrial relations for Shell, and has also worked in retailing and property, with board roles covering Europe, Africa and Asia Pacific. He's currently a board member of Skills for Government, a director of the UK's Agricultural and Horticultural Development Board, a member of the Advisory Board of Saville plc and chairman of the supervisory group of AIESEC International (the world's largest student-run organisation).

So what can HR, and indeed L&D, professionals do to help address the leadership crisis that Bones identifies? "Ours is one of the worst professions for fads and fashions," he believes. "We need to learn lessons and be far more critical of the latest management mumbo-jumbo. Also, we tend to over-engineer everything, with basic values getting lost in the process. So let's throw out the over-complicated systems, all the noise that detaches people from their organisation's strategy and purpose. Let's get back to basics: this is good, this is bad, this is right, this is wrong."

Bones sees HR and L&D playing a fundamental role in building and reinforcing organisational values: "We need to force executives to face the difficult questions, and to reflect on whether what we're doing today is sustainable. For example, is HR setting expectations in younger execs that success is not all about money and Ferraris?" It's about thinking and acting in a longer-term way, measuring success beyond the annual and the financial: he believes all senior execs should be able to pass the 'mum' test of "if I leave on Friday and tell my mum what I've done this week, will I feel embarrassed?"

Moreover, he sees a role for L&D in "enabling people to employ all their talent in the support of their organisation, by maximising their innate skills and capabilities, building their emotional commitment to the organisation, and creating a strong personal engagement with it". Engagement is clearly key to superior business performance, hence his view that HR needs to close the gap between commitment ( "the emotional attachment one has to an organisation") and engagement ("which is more than commitment, being the demonstration of discretionary effort to ensure the organisation achieves its goals").

And it is here that he believes line managers are crucial: "Converting commitment to engagement requires every manager to be able to impact positively on everyone who works for them. One of the reasons modern organisations have engaged with the cult is that those who lead them, and especially those who lead their HR functions, conflate good management with leadership. The leadership agenda for talent should be far less about what leaders can do directly and much more about what they get others to do."

Hence his view that L&D should focus on the development of fundamental people management skills: "For too long the cult of the leader has diverted investment, focus and support away from line managers, who are critical to delivering, day in and day out, the organisation's long-term objectives. Where they are effective, they nurture your talent and develop it. Where they are less, they squander it, letting it leave for your competitors. Trained properly, and measured and recognised appropriately, the line manager is the pivotal role in any organisation."

Bones also believes that L&D should help to redefine what we mean by leadership, by accepting a more collaborative model and ending the cult of the leader "as hero and sole achiever". He counsels focusing on team goals, accountability and rewards, especially for the board, to remove the obsession with individuality and says that "the most effective leadership programmes I have been associated with focused on developing a consistent and commonly-understood leadership approach across the organisation".

It's also about focusing less on leadership and more on individual personal effectiveness, as well, crucially, as redefining 'talent' to mean 'all' rather than the top few: "We need to make it a focus of recognition of great line management to invest in training, coaching and other development activity that supports the achievement of potential of a range of employees, not just the graduate fast-trackers."

Aligned to this, he also advocates more promotion from within, to ensure leaders "who understand the business they're in", as well as the widespread use of annually updated 'development contracts', recording the employee's progress and the activities the organisation supplies to support it.

Bones believes HR is fundamentally about having conversations, not ticking boxes. Hence his atheistic view of performance management systems: "Most are introduced by HR because they don't trust line managers to do their jobs. I'm a believer in strong performance management by managers. We don't need a school report format that takes us back to teacher/child relationships, so remove the paperwork and require the line manager to manage, rewarding them for doing it well."

So L&D could, and arguably should, play a considerable role in helping to address the corporate and leadership malaise he describes. However, there's one recommendation in his manifesto beyond the gift of L&D: the need to reform corporate governance by giving power back to the real owners of an enterprise's capital, and away from the stewards and fund managers. "The system has to reassert the primacy of the owner," he says.

So does Bones see any reasons to be cheerful, given, for example, the recent rise of the 'shareholder spring'? Or is it still just fund manager funk? "The changing commentary in the media has helped to validate the views of the silent majority," he feels, "and a lot of ordinary people are now confident enough to question the status quo, thus, at least, requiring some chief execs to defend what they do and receive.

"However, I'm still waiting to see a major CEO restructure his company pay deals, remuneration committees and ratios. The government could help with legislation, but I don't think we're yet at a tipping point. Despite the words of contrition uttered after the collapse of major banks and the near-collapse of the system itself, it appears that business, and big business in particular, has learned little and has changed even less."

Time perhaps for L&D to leave the cult and lead the change.

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