Leadership plays a major role in shaping business, the economy and the full realisation of human potential. One way or another it affects all our lives. It is no surprise therefore that good leadership is crucial to sustainable growth across the world. But what is ‘good leadership’?
With the recent onslaught of the financial crisis and the subsequent economic slowdown and recession, the implementation of countermeasures is required to offset lasting negative effects. Furthermore, the developed world is under mounting pressure from emergent regions, ignored for the most part of the last decade. All things considered, decisions need to be made that will ultimately make or break the future prospects of the developed world.
However, in the West we continue to use dated methods that will only worsen the current situation in the long term. European governments and firms are cutting costs right down to the bone, mainly by reducing operations and firing employees. These leadership techniques are worn down and simply ‘old hat’.
We are desperately in need of ‘growth leaders’ that will continue to develop the UK and the world through innovation and forward thinking. Carol Dweck, Professor of Psychology at Stanford University and author of Mindset, originally inspired this idea. She has covered extensive research on the personality of leaders and aims to establish what it is that makes some individuals successful in a sustainable and healthy way, and others destined for a destructive ascent to self-glorification. According to Dweck, the dichotomy has to do with the way people perceive their abilities. This is what she calls “mindset”.
The debate has typically focused on the tension between nature versus nurture. People generally believe their destiny is determined by the configuration of their genes, or the development of skills and abilities at an early age, which sets them up for the rest of their lives. Some might even believe in an amalgamation of the two. However, according to Dweck’s findings, abilities are continually shaped and developed over the course of human life. Of course, there is no denying that people’s characteristics are predisposed a certain way, but it is the right mindest that brings to fruition our full potential.
Many of us, says Dweck, tend to construct our ambitions, actions, plans and so on, based on praise, reward, acceptance and conformity. These types, whom belong to what she calls the ‘fixed mindset’ group, also tend to avoid actions that lead to criticism, disappointment and isolation from the peer group or norm. According to Dweck, people who have the fixed mindset split people into two broad categories, ‘good-bad’, ‘superior-inferior’, ‘successful-failure’ and so on. They designate themselves in one of the categories based on the outcome or potential result of their actions.
Research done by Dweck et al. suggests that a significant number of people do actually behave this way much of the time. Moreover, according to Dweck, many people shape their entire lives according to this ‘fixed ideal’: avoid looking like a failure and pursue praise and reward. This is intuitively counterproductive to your development and must be avoided at all costs. Continually avoiding failure and pursuing ‘pedestal treatment’ all the time will lead to a humungous ego, which sits on a foundation so fragile and superficial that when it is put to the test it will eventually crumble under the pressure.
It is unfortunate that many leaders exercise themselves in this way. One need only look at the collapse of major global players, such as Lehman Brothers and Enron, to see the fixed mindset in action. Malcom Gladwell, writer and journalist (author of Outliers), says that leading consulting gurus, such as McKinsey, have been “obsessed with talent” and believed that some “people either have it or they don’t”. Any sign of failure or “lack of talent” of employees would be immediately dealt with and fired. Conversely, they would, as in the case of Enron, avoid confronting leaders they perceived as godlike. Both Jeffrey Skilling (CEO) and Andrew Fastow (CFO) led people to believe they were geniuses, superior to everyone else, and their methods were beyond the comprehension of the rest of the company’s employees, partners and affiliates. They enjoyed their superiority so much that they manipulated financial loopholes to augment their godlike status. It is not surprising that they were on an inevitable course to destruction and devastating criminal exposure.
Consider Alfred Dunlap, famous for making one hundred million dollars from the turn-around and sale of Scott Paper. Dunlap is a fixed mindset CEO. He once said, “making my way in the world became a matter of self-respect for me, of a kid trying to prove he was worth something… to this day, I feel I have to prove and reprove myself”. Dunlap sought to prove himself by getting rich, he says “if you’re in business, you’re in business for one thing—to make money”. In 1996, Dunlap took over Sunbeam. In his typical ‘Chainsaw AL’ ruthlessness, he sold two-thirds of the firm’s plants and fired half of all the employees. His plan was to bump up the stock price over the short term, to sell it and maximize profits. Ironically, the stock went up so high there were no longer any buyers. Forced to run the company, he fired people who questioned him and continued inflating revenues. It was not only the revenues that were overinflated, but Dunlap’s ego grew so big that it eventually burst after the company suffered massive damages. He inevitably fell apart and was removed from the company. Dunlap was later investigated by the Securities and Exchange Commission and was expected to be in technical default on a $1.7 billion bank loan.
These examples expose the symptoms of a more fundamental disease. Chasing gains and avoiding small losses in the short-term, precisely sums up the events leading up to the explosion of the property bubble, accumulation of toxic assets and ultimately the credit crunch. It is unfortunate, that politicians and leading global players still pursue short-term gains to win elections, secure profits and promote themselves. Some banks, for instance, have made losses with no sign of recovery after the financial crisis, but their bonuses still seem to be pouring in. Some recoveries appear superficial at this stage, as they have merely cut costs to unsustainable levels.
Dweck offers us a more constructive alternative to this flawed mindset, she calls it the “growth mindset”. According to Dweck these people pursue self-development, learning and long term sustained growth. They don’t believe that talent is enough, but believe that in order to stay on top, ability must be maintained and developed constantly over time through hard work. They do not pursue a polished status in itself but their own development, the development of their team, and relationships. They welcome challenges and see it as a way of becoming better people. Most importantly, they do not perceive failure the way the fixed mindset people do. They recognize that they are only human and resist fearing failure as they expose themselves and their weaknesses and ultimately grow as a consequence.
This is perfectly captured in a recent study using young schoolchildren. These kids, aged five to six years old, were given some problems which increased in difficulty over the course of an observed test period. Researchers found that children would come to different stages of the test based on their natural abilities. However, what happened next is most amazing. Some children started to cry when it got too tough and some tried to continue but inevitably surrendered with aggressive spouts in-between. Some children however, increased their concentration as it got harder and some were completely focused on the task at hand they could not be drawn away from it, whether they were naturally clever or smart, that made no difference in later stages. One child even rubbed his hands together and said something along the lines of “right, let’s do this”. The results show that the growth mindset kids were more likely to learn complicated problem solving techniques, irrespective of standard intelligence scores before the test.
Fortunately, there are business leaders with the growth mindset, such as Jack Welsch, the former CEO of General Electric (someone that is not as popular as he should be, in my eyes). He joined GE when it was valued at fourteen billion dollars and twenty years later brought it to a value of $409 billion (the most valuable company at the time). So why is he one of the “right’ let’s do it” people? The following extract from his biography shows why, “I hate having to use the first person. Nearly everything I’ve done in my life has been accomplished with other people… please remember that every time you see the word ‘I’ in these pages [reference to his autobiography], it refers to all those colleagues and friends and some I might have missed.” Dunlap, who once called himself a “superstar in his field”, does not exhibit this self-effacing spirit. Welsch recognises that he is not some fixed entity in the world above the rest, but always learning and growing, with small losses and gains in the short term, he knows that he will overcome challenges in the long term.
Currently, many developed countries across the globe are suffering numerous effects of the crisis, through austerity or other social-economic nightmares. The economy—or society more generally—is not something separate from us, but inextricably tied to people, our psychology and of course mindset. We are in a place right now in the UK where economic disparity is at its highest since the early ‘70s, and the gap is projected to continue to grow. Unemployment and tax increases in the UK have led to the demise of small business in the most deprived regions in the UK, dependent on local enterprises. This only exacerbates the situation. All things considered, it is not surprising that the NHS recently published two health reports, one of which states that the primary cause of death in young men in the UK is suicide and the other writes that alcohol related deaths have increased by more than one quarter in the last decade. It is not unreasonable to relate such problems to a lack of good leadership.
The fixed mindest needs to change. The reverence of “supermen” has gone, it just is not believable anymore. The real heroes of the future will be growth leaders. Leaders who will not let pride and artificial sensibilities get the better of them and thus conduce the demise of our future and the full realisation of human potential. Not only will we be better, stronger and more dynamic, but it will be sustainable and healthy, and collectively it will perhaps change the course of the world.
