Why tough guys don't make the best business leaders

Getty ImagesTough means low trust levels in business.

Business leaders can save themselves some restless nights staring at the ceiling by rejecting the leadership style of certain world leaders today.

Business leaders have sometimes looked to those at the top of their game in politics as an example of how to do leadership ‘right’.

But with public trust and innovation both in the top 10 issues giving business leaders insomnia, according to last week’s KPMG ‘Keeping Us Up At Night’ report, the smartest CEOs would be wise now not to emulate political leaders who rule through intolerance and division.

Amongst several complex factors that help organisations be innovative and earn trust from their employees, customers and the public, leadership style plays a huge part.

Today, the 70th Anniversary of the Universal Declaration of Human Rights and World Human Rights Day, is the perfect time for business leaders to think about trust, and whether their leadership style is both effective and ethical.

Having recently joined Amnesty’s 2020 Council, I note today’s Amnesty report, which points to “bombastic figureheads who use macho posturing, misogyny, xenophobia and homophobia to give the appearance that they are ‘tough guy’ leaders”.

The report says these leaders cling to power through their persecution of marginalised groups.

In the commercial sector, thankfully, such a style of leadership is fast going the way of the dinosaurs.

SuppliedDavid Krasnostein

Anyone in business still taking the ‘tough guy’ leadership approach in this day and age is not only out of touch, but also exposes their organisation to multifaceted dangers, both in terms of their workforce and their finances.

With the Edelman Trust Barometer finding that Australians’ trust in business is sitting at a miserable 45% (a three point drop from the previous year), trustworthiness has never been more prized. And the less said about the banks the better.

The alternative has several consequences. With trust at such low levels, individual shareholders will not choose ownership in companies where on-the-nose business leadership prevails. Institutional shareholders such as Superannuation funds and investment managers, who today are often major shareholders, have their own reputations to consider and are even less likely to invest in such a company.

A business known for a toxic workplace culture also faces challenges in borrowing from banks, whose own shareholders put them under pressure not to lend to bad actors. And such a business would also, of course, lose customers, the ultimate punishment for losing trust.

The opposite business leadership style of empowerment and tolerance can also help to ameliorate another concern in the KPMG top 10: innovation.

Only those companies who constantly innovate will stay competitive. It is simply not possible to sustain above average performance with below average talent. Attracting and keeping that talent is the critical challenge for business leaders to meet.

No one is safe, no matter how big or how longstanding. With General Electric this year dropping out of the Dow Jones Industrial Average, we see yet another corporate behemoth now but a shadow of its former self.

The most innovative companies are those avoiding groupthink and winning the war for talent, both of which are only possible when business leaders foster a workplace that attracts and welcomes a diversity of thought. There can be no diversity of thought without diversity of talent.

Only those businesses drawing from the greatest pool of talent and leading in a positive, ethical manner, will find, and keep, the most exceptional employees, and remain the most competitive of businesses.

Many businesses are now proactively addressing gender diversity. That is critical to appealing to the widest possible talent pool, but it doesn’t stop at just gender diversity. Others have a way to go in truly fostering cultural diversity, political diversity, sexual diversity and religious diversity.

Amidst a groundswell of human rights movement, and compelling business imperatives, employees and the public are seeing diversity as increasingly important. If people aren’t made to feel valued and comfortable in the workplace, they won’t stay. You can’t fake it by printing glossy Annual Reports or posting slick websites. If it’s not genuine, it’s not happening.

Business leaders must go beyond anti-discrimination laws and other legal requirements, and actively lead a workplace that welcomes and keeps a diversity of employees – otherwise staff will take their talent to competitors.

This diversity of minds and of experience is also essential for boards of directors who need to lead by example.

While I’m considering this in a human rights context today, the motivating factor for businesses has gone well beyond that. If we strip away the active debate over the extent and limits of companies’ broader social responsibilities, and focus just on pure financially driven business objectives, it is market power now driving these behaviours.

With innovation and public trust on our top 10 list of business concerns, a leadership style that celebrates diversity is a data-driven, commercial imperative.

* David Krasnostein is a member of Amnesty International Australia’s 2020 Council, Director of the Qualitas Advisory Board, Director of the National Breast Cancer Foundation, the Melbourne Symphony Orchestra and the Hellenic Museum of Melbourne. He was the former CEO of MLC Private Equity; former NAB Chief General Counsel; and Telstra’s first General Counsel.

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