CEOs should lead corporate culture

But it takes a rare breed to do it.

It’s become something of an obsession, particularly for business leaders under pressure. Perhaps one of the most unlikely advocates for the idea of corporate culture in recent times has been former Barclays chief executive Bob Diamond. Before being forced out of the bank he claimed to “love”, Diamond repeatedly spoke about the importance of building a culture of integrity and trust and he once defined true organisational culture as being “how people behave when no one is watching”.

Meanwhile on the G4S website, the security outsourcing giant states that it is proud of its “distinctive culture and strong values that are cascaded through the organisation”. It would be interesting to hear Nick Buckles, the G4S chief executive, explain what part that culture and those valued played in the current Olympic security farrago.

Both examples demonstrate how closely culture and leadership are connected. Both organisations fall into a category that might be called macho management.

Hierarchical, slightly old-fashioned and reliant on a supposedly “strong” leader to set the organizational tone, which can then cascade down through the ranks. In these situations, the values, ethics, behaviours and attitudes of the top people in an organisation set the tone and culture. Such leaders usually feel the need to add their seal of approval or stamp of authority on every major decision.

They also like to keep organisational power secure in the centre. They surround themselves with people who agree with them, people who defer to the position and authority of the leader rather than challenge their wisdom. This is a culture that has little or no place for dissent and little time for discussion. These leaders would agree with the old-fashioned concept that it is lonely at the top.

Rather than a strong, open culture, this approach breeds fear and resentment and encourages people outside of the hallowed centre to keep things under wraps if they think it might displease the leader. It encourages people to misreport activity in order to make sure those they are reporting to hear what they want to hear. When the leader shouts jump the rest of the management team ask “how high?” and then rush off to organise jumping practice and instigate new height measurement protocols.

Management and leadership writers have spent the past 30 years filling business school library bookshelves with reports, books and academic papers about the value of low-profile leadership, open and transparent management processes and creating cultures that empower people to make decisions at the lowest effective level in an organization. Those as close as possible to the front line should be the ones making the most important decisions quickly and effectively.

The trouble is that this rhetoric and research is hard to put into practice. The modern corporation was born in the image of the military and too many leaders appear hard-wired to continue this approach. Worse still, too many senior and middle management adopt the attitude of followers, rather than challengers.

While most people can probably name a company that does things differently, if you ask lots of people you get a depressingly short list of the same usual suspects. It’s refreshing, and yet also shamefully rare, to hear of a successful organisation that adopts an upside-down culture or whose leader seems to embrace the idea of an open culture and is big enough to actively invite dissent and discussion around the boardroom table.

That’s because it takes a rare breed of leader confident enough to do it. And a rare bunch of shareholders and investors to allow it happen. The financial crisis and recession have made things even harder. The upshot of this is that senior executives are not used to dealing with confrontation or dissent. Perhaps that’s why so few CEOs seem to know how to cope with the uprising among the shareholder and investor community.

The bad news for CEOs — and shareholders — is that culture change is difficult and painful to do at all, let along do well. The good news for all of us is that recognising there is a problem with culture is a good first step towards making things better.

This article originally appeared in economia.

Some CEOs. Photograph: Getty Images

Richard Cree is the Editor of Economia.

Ellie Foreman-Peck
Show Hide image

Martin Schulz: could this man bring an end to the reign of Angela Merkel?

The German Eurocrat is the biggest threat to the possibility of a fourth term for Merkel. 

At first sight, Martin Schulz looks like an unlikely political saviour. Thin of hair and thick of waist, the 61-year-old was a member of the European Parliament for 23 years and its president for five. In an anti-establishment age, it was predicted that Schulz would struggle when he became the Social Democratic Party’s (SPD) candidate to replace Angela Merkel as the German chancellor in January. Instead, he is spearheading a remarkable revival in his tribe’s fortunes. On 19 February, for the first time in a decade, the SPD polled above Merkel’s Christian Democrats (CDU), attracting 33 per cent to their 32 per cent. The SPD vote share has increased by 12 points in a month. The cause is clear: “Martin mania”.

For months, it was assumed that Merkel would secure a fourth term as chancellor in September’s federal election. The SPD, the grandfather of European social democracy and Germany’s oldest party (it was founded in 1863), had polled as low as 19 per cent. After forming a grand coalition with the CDU in 2013, Schulz’s party was marginalised as Merkel claimed credit for policies such as the country’s first minimum wage. Voters defected to the far-left Die Linke and the far-right Alternative für Deutschland. The SPD’s future looked to be one of managed decline.

Sigmar Gabriel, the party’s leader since 2009, stood little chance of supplanting Merkel as chancellor. As a result, like François Hollande, he reached for the pearl-handled revolver: he announced his intention to step aside on 24 January after internal SPD polling showed that Schulz would perform significantly better against Merkel. “It was not an easy decision but I’m convinced it was the right decision,” Gabriel told reporters. His judgement was vindicated as public polls gave Schulz an 11-point lead over Merkel (49-38).

The German chancellor’s apparent unassailability owed less to her strength than to her opponents’ weakness. Eleven years after she entered office, voters had grown weary of Merkel’s leadership but saw no viable alternative. In Schulz, they have found one. Having been engaged at EU level and held no domestic office since standing down after 11 years as mayor of the north-western market town Würselen in 1998, Schulz has been embraced by voters as a relative outsider.

Unlike his SPD colleagues, Schulz can criticise the CDU’s record without appearing hypocritical or feeble. He has attracted voters with a centre-left emphasis on redistribution and social justice. “When people see that their taxes are used to give their children a future, they buy into it,” Schulz has said in interviews.

The European Parliament has been a useful platform for his pugnacious style. He is best known for being compared to a concentration camp guard by Silvio Berlusconi in 2003 and for his interjection in 2010 after Nigel Farage branded the then EU president, Herman Van Rompuy, a “damp rag”. Schulz retorted: “It’s not right that this man should be able to trample over the dignity of this house!”

Voters have warmed to Schulz’s personal story as well as his political history. He was born on 20 December 1955 in the village of Hehlrath, North-Rhine Westphalia, to a policeman father and a homemaker mother (he is the youngest of five). Rather than going to university, he trained as a bookseller and was a promising footballer. Two severe knee injuries ended his playing career at the age of 18 and he sought refuge in alcohol after falling into depression. Having contemplated suicide, he recovered to open a bookshop in his home town (which he ran until he became an MEP in 1994) and has been teetotal since 1980.

Schulz educated himself by devouring historical fiction (his favourite writers are John Steinbeck and Giuseppe Tomasi di Lampedusa) and retains the restlessness of an autodidact (he often works 18-hour days). His bonhomie and blunt manner appeal to voters who regard Merkel as aloof.

That Schulz has come to the SPD’s rescue is unsurprising. He joined the party at the age of 19 and became the youngest mayor in North-Rhine Westphalia when he was elected in Würselen at 31. After more than two decades serving the EU, the attractions of a return to domestic politics were obvious. “People must look into your eyes and see that you are a bloody streetfighter,” he remarked in 2013, as he presciently dismissed Ed Miliband’s electoral chances.

Schulz has disoriented the Christian Democrats, who failed to anticipate a centre-left renaissance. In a mark of how much he has unsettled them, the German finance minister, Wolfgang Schäuble, has denounced him as a Trump-like populist for his slogan “Make Europe great again”. Were Schulz to replace Merkel and Emmanuel Macron to be elected French president, the pair would unite in seeking to impose punitive Brexit terms on the UK.

For Germany’s Social Democrats, the fear is that Schulz’s surge has come too soon – voters could swing back to Merkel and the CDU before polling day. But after years as an emblem of centre-left malaise, the SPD has momentum. Schulz is determined to prove that there are second acts in political lives. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit