Nothing to lose but their chains
The corporate world has never been more uncertain. Bosses need to find ideas and insights from wherever they can
Unilever boss Paul Polman believes the traditional shackles of business must be shaken off
Shortly after Paul Polman was appointed chief executive of consumer goods giant Unilever in 2009, he made an announcement that shook the City: he scrapped both the issuing of guidance and quarterly reporting.
He wanted to remove the temptation to work only towards the next set of numbers and instead focus on the long-term future of the business.
This tallied with his focus on sustainability and environmental imperatives. Polman argued that leaders can make the right decisions on the biggest challenges facing the business world — and the planet — only if some traditional shackles of commerce are shaken off. “We have to look at these boundaries and say, ‘How can I move these boundaries so people start to behave differently?’
“In Unilever, I moved these boundaries by stopping quarterly reporting and guidance, by changing compensation systems [and] by working on different key drivers of the business. You see when you do that that people have more space to end up doing this right thing, but also it’s increasingly clear that that’s the right thing for business long term as well,” he said.
The chief executive, who was paid £10.4m last year, said businesses must have a purpose beyond delivering returns to shareholders. “If a business cannot explain what their purpose is beyond shareholders, for me I have a hard time understanding what their reason for being is and society will have a hard time understanding as well, and increasingly they will be rejected.”
Polman is one of the longest-serving chief executives in the FTSE 100, but not all leaders today have his foresight and ability to deal with what the Chartered Institute of Management Accountants (CIMA) has deemed “unthinkable” events.
“Since 2010, remarkable events have been happening with regularity,” said Noel Tagoe, executive director of CIMA Education. “Simply the speed at which things are happening in the business and economic environment; it becomes very difficult to predict and to handle. Organisations are struggling with it.”
A CIMA report, based on interviews with 50 corporate and public sector leaders, showed many leaders are found to be perilously inadequate at critical moments. Unthinkable events are often unpalatable, the report said, which can lead to bosses burying their heads in the sand.
Dealing with unpalatable realities is something Sir Peter Gershon, chairman of National Grid and Tate & Lyle, knows all about. Soon after joining the sweeteners maker, he and chief executive Javed Ahmed decided to write off “hundreds of millions” in investment in a bioethanol plant in America’s Midwest.
“The chief executive and I came to the view that actually the dynamics of the ethanol market had changed significantly [after the project had been green-lighted in the mid-2000s] and that the prospects for making attractive returns were very doubtful. We went to the board and said we should abandon this project, we should write it off,” said Gershon.
“That is an example of having to think the unpalatable: there is nothing very palatable about having to write off hundreds of millions of dollars of investors’ money. The only thing that is more unpalatable is the possibility, if you continued, that it might lead the company to a position where it is facing significant losses.
“There hasn’t been a day since we made that decision that I’ve regretted it,” said Gershon.
In this instance the chairman and chief executive agreed the course of action, but it can help to seek insights from elsewhere in the business.
Patricia Seemann, an executive coach and former board member at Zurich Financial Services, said the younger generation of chief executives were more comfortable in asking for insight from outside their immediate circle.
“Mainly the older generation struggles with that,” said Seemann. “They think, ‘If we all think the same thing, we can come to decisions more quickly and get on with it, [whereas] if we have diverse opinions in the room, it can make things a lot more messy.’ Most leaders have one huge weakness: tidiness.”
There is also a lot of pressure on leaders to have all the answers, even in today’s complicated world, she said. “There’s still this view, and it’s also from the employees, that the CEO should know everything and see everything.”
It can be helpful, too, to gain insights from outside the business and away from the leader’s sphere.
Seemann encourages clients to speak to employees lower down in the company. “For most of the problems companies face, it is very likely that somebody in the firm has done some thinking about it.
“One of the skills leaders have to develop is to find that person, or those groups, in their own corporations — and listen to them.”
Wanted: the courage to lead
Leaders are often found wanting in today’s complex business environment, said Paul Polman, chief executive of Unilever.
“The average tenure of a CEO is now 4½ years; the average lifetime of a publicly traded company is now 17 years. What you could conclude from that is that in many cases we have [leaders] who are not equipped to lead in today’s business environment.”
The qualities leaders possessed in the past may not be applicable in the future, said Polman. “The challenges we are seeing right now differ significantly from the challenges that were there 10, 20 or 30 years ago. We are living in a very interesting time when economic, environmental and geopolitical risks and technology revolutions are all coming together. Clearly some people have a hard time dealing with that.”
One of the most important character traits of a leader today is courage, he said. “If you want to have an opinion about things, you have to have a certain amount of courage.
“I work a lot on sustainable development goals and we are working on poverty alleviation, sustainable farming or climate change and I often find myself on panels with highly specialised people — who are sometimes also highly critical people. Sometimes it’s difficult as the CEO to be that knowledgable but you have to have the courage to participate.”