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A few years ago, students at UBI (United Business Institute in Brussels) where given the choice between a course on leadership or entrepreneurship. Almost all of them choose leadership. This confirmed our perception that people remain fascinated by the alpha-wolf. As we all know the wealth of a nation is its entrepreneurs but history is made by leaders, good or bad. Whatever, leaders exercise a sort of fascination. The recent American series, “The house of cards” is about an alpha pair. Alphas my achieve their status by means of strength or aggression or through social efforts and building alliances within a given group.

There are mainly two classical discussions related to the subject. Are human leaders born that way or can people be trained to become leaders? If so, will they be as efficient? The second question is the difference between leaders and managers. The Harvard Business Review Magazine for which I have been a subscriber for decades has covered that issue so often. Likewise numerous issues have covered leadership, if not even more.
Let us first look at the second question, which is the easiest one to answer and for which I refer to numerous articles. In a nutshell, a manager’s goal is to have things done based on the leader’s vision about what needs to be done. I recently read in INTERNET what the perfect robot manager would be like? Unfortunately I did not record the exact source. “It would arguably be objective, transparent, unselfish, and apolitical. Because of this, it would assign the right task to every person and reward unselfish team behaviours, creating a culture of trust and keeping morale high. It would monitor individual and team performance with the precision of the best quantified-self app, and provide real-time feedback to boost everybody’s productivity. Undoubtedly, it would operate according to data rather than intuition and make only evidence-based recommendations. In short, the perfect robot manager would be utterly predictable – and completely boring”. It is a funny vision and is not for tomorrow.

Let us focus on the first question related to leadership. According to Jack Welch in his book with a great title “Winning” ¹ he mentions the eight points of what leaders do. I quote him:

1. They relentlessly upgrade their team
2. The live and breathe their vision
3. They exude positive energy and optimism
4. They establish trust and transparency
5. They have the courage to take unpopular decisions
6. They probe and push with curiosity
7. They set the example
8. They celebrate

I want to underline some key words, which one does not immediately relate to leadership, such as: upgrading, trust, transparency, courage and example. It is so much more that the alpha character. This can be learned and practiced. It is often a matter of exposure, training and attitude. It is not necessarily inborn.

Leaders are decision makers. It seldom a matter of intuition but the examination of every alternative. They wonder if previous decisions are still applicable, make decision for the short time but with the long term in mind, are not afraid of changing decisions if need be. Above all the consider the implications of each decision. They wonder what can go wrong and analyse possible outcomes. This is all base on a balance between intuition and logic, the use of the two systems as described by Kahneman ². They sense when a decision has a large element of chance in them. They are not afraid of challenging the company’s culture if need be whilst they are not afraid of delegating a maximum to think and prepare for alternatives. Furthermore, when it proves that they have taken a wrong decision, they take fast action and last but not least, they never postpone vital decision.

Of all this what is inborn and what can be acquired? Hard work! Leaders are not necessarily the people who are flashy, and who fascinate one way or the other. Outstanding leaders are not the people who self-promote and take credit for others’ achievements, or have mastered the art of politics and upward career management. Outstanding leaders are probably not born not unlike Olympic athletes. Gold winning athletes are the result of hard, very hard work and numerous sacrifices. Great artists follow the same pattern, great leaders as well. It is a matter of attitude enabling to take a helicopter view when needed, adapt, control, understand, and cultivate confidence and collaboration. If you want to be a leader you may wish to start with leading yourself.

I do not know if our students were aware of this all but they would certainly agree with point eight of Jack Welch’s list!

1. ↑ « Winning » by Jack and Suzy Welch, Harper Collins, 2005
2. ↑ « Thinking fast and slow », Daniel Kahneman, Allen Lane, 2011

The book by Malcolm Gladwell with the title “Blink”, Back Bay Books, 2005 covers the “Decision Making process” during the first TWO SECONDS of the decision making process! This corresponds to the system 1 of Daniel Kahneman, Nobel Prize winning author. See our previous blog on Decision Making.

Both authors complement each other. Actually Mr. Kahneman refers to Blink in his well know book “Thinking Fast and Slow”. Blink is about intuition and as stated by D. Kahneman, depends on frequent exposure to a known environment. Is it about “just knowing”! Blink is not about instinct which is part of the characteristics of living beings on this planet. It covers the result of knowledge, experience or extreme professionalism in a given field. This is even truer in times of stress.

To quote the author, “We really only trust conscious decision making. But there are moments, particularly in times of stress, when haste does not make waste, when our snap judgments and first impressions can offer a much better means of making sense of the world. My aim is to demonstrate that decisions made very quickly can be every bit as good as decisions made cautiously and deliberately.” Consequently, the issue is summarised in the following question: “When should we trust our instincts, and when should we be warry of them?” And I would add, particularly when stressed! The author underlines that there can be as much value in the blink of an eye as in months of rational analysis.

The book provides interesting examples such as the fake ancient Greek statue, the measurement of the sweat glands of players under stress and an unforgettable example of Mr. Gottman who observed thousands of married couples and after one hour of observation of a husband and wife talking, he could predict with, 95%, yes ninety five percent, accuracy whether that couple will still be married fifteen years later. If he watched a couple fifteen minutes, this success rate was about 90%. In fact three minutes proved to be sufficient. His research was based on what he calls “thin slicing” which refers to the ability of our conscious to find patterns in situations and behaviour based on very narrow slices of experience. According to the author, “thin-slicing” is part of what makes the unconscious so dazzling. Thin-slicing is not an exotic gift. It is a central part of what it means to be human. In this case it is an observation of the same pattern over and over again. Predicting divorce is like tracking a Morse code operators, it is a pattern recognition.

“When we leap to a decision or have a hunch, our unconscious is doing what John Gottman does. It’s sifting through the situation in front of us, throwing out all that is relevant while – we zero in on what really matters – And the truth is that our unconscious is really good at this, to the point that thin-slicing often delivers a better answer than more deliberate and exhaustive ways of thinking”.

Another interesting example and observation is speed –dating. “It is the distillation of dating to a simple snap judgment. It is finding the answer to a very simple question – do I want to see this person again? – To answer this question there is no need for an entire evening”. This brings me to the likeability factor which I so often observe in competitions such as the X-Factor. In fractions of seconds we have a feel for the contestant. Questions and answers will often confirm this first impression and set the level of the expected performance.

Rightly so the author underlines the dark side of thin-slicing. Indeed, “What happens if that rapid chain in thinking gets interrupted somehow? What if we reach a snap judgement without ever getting below the surface? Part of what it means to take thin-slicing and first impressions seriously is accepting the fact that sometimes we can know more about someone or something in the blink of an eye than we can after months of study. But we also have to acknowledge and understand those circumstances when rapid recognition leads us astray”. Further to this, the author states that we make connections much more quickly between pairs of ideas that are already related in our minds than we do between pairs of ideas that are unfamiliar to us. Research shows that our unconscious attitudes may be utterly incompatible with our stated conscious values.

Let us revert to stress. A study mentioned by the author shows that when people make decisions under pressure, such as nurses, intensive care unit personnel, firefighters, they do not logically and systematically compare all available options. That is the way people are taught to make decision, but in real life it is much too slow. These people size up the situation almost immediately and act, drawing on experience and intuition and a kind of rough mental simulation. Let me underline the key word, i. e. experience. “How good people’s decisions are under the fast moving, high-stress conditions of rapid cognition is a function of training and rules and rehearsal”.

Let me finish with what the author says about information. Often you need to know very little to find the underlying signature of a complex phenomenon. Often, the extra information is more than useless. It can be harmful. It can confuse the issue. It can overwhelm

The author concludes, not unlike Mr. Kahneman, that there two important lessons from the research on decision making. The first is that truly successful decision making relies on a balance between deliberate and instinctive thinking. Deliberate thinking is a wonderful tool when we have the luxury of time, the help of a computer and so on. The second lesson is that in good decision making frugality matters.

This article is based on the highlights of “The Belgian Code on Corporate Governance”, elaborated by various economic associations, the central bank and the supervisory authorities in Belgium in 2009. The original code from this workgroup dates back to 2004 but was revised after the much publicised financial crisis. I could have inspired myself from other countries but Belgium had a special reason to review the code as its largest bank was in dire straits. As a Belgian national I spent quite a bit of evenings defending the financial majors in my country of origin and hopefully convinced the audience that the future might be brighter in the case the professionals would adhere more strictly to a code of conduct. I had the pleasure to defend this in a TEDx presentation for UBI Wiltz in Luxembourg.

Crisis have shown that a code is not a luxury but should be at the fundamentals of economic activities in all sectors of the economy, obviously not just the financial sector. The list of organisations that have come in the news for non-respect of laws, rules and regulations is, sadly so, far too long and consists of prime names of both the financial and non-financial industries. Fines have been significant but worst of all trust has been damaged. Some sectors really suffer a branding image issue, to name just one sector, the financial sector.

Most of the readers will be familiar with the anti-money laundering regulations (AML) but this is just a small part of a bigger issue as shown below.

The anti-money laundering regulations or AML/KYC (know your customer) as it is often referred to fits into the compliance obligations which covers, amongst others more particularly insider trading, market manipulation, preservation of information and so forth,….These obligations, in turn, fit into what we refer to as governance and in turn governance is part of the broader responsibility or corporate responsibility.

Governance is about core values, it implies words such as ethics, corporate culture, policy and charter, teamwork, integrity, principles, accountability, customer focus, code of conduct, and you name it. It is a top down responsibility and resulting strategy. Unlike compliance, which should be regarded as everyone’s responsibility, governance is a top-down responsibility. It starts at the highest level of a corporation and influences the way the mission is translated into the reality. Corporate governance will be translated into a mission statement, a policy and a charter. Its aim is to assure a correct management and control of an organisation, based on laws and rules and appropriate behaviour of management and staff. It is a matter of “culture”.

The nine principles of corporate governance

PRINCIPLE 1.

The company shall adopt a clear governance structure.

PRINCIPLE 2.

The company shall have an effective and efficient board that takes decisions in the corporate interest.

PRINCIPLE 3.

All directors shall demonstrate integrity and commitment.

PRINCIPLE 4.

The company shall have a rigorous and transparent procedure for the appointment and evaluation of the board and its members.

PRINCIPLE 5.

The board shall set up specialised committees.

PRINCIPLE 6.

The company shall define a clear executive management structure.

PRINCIPLE 7.

The company shall remunerate directors and executive managers fairly and responsibly.

PRINCIPLE 8.

The company shall enter into a dialogue with shareholders and potential shareholders based on a mutual understanding of objectives and concerns.

PRINCIPLE 9.

The company shall ensure adequate disclosure or its corporate governance.

Respecting above principles require managers with a sense of integrity, involvement, honour, experience, expertise, responsibility and objectivity. It starts with the qualities of the board members and the executives of an organisation. It translates into a code. It reflects who we are as individuals and when working in a corporation as members and ambassadors of a group of people aiming at reaching the common goal. It is the basis for corporate social responsibility, i.e. all the people who have an interest in our existence. Ultimately it is relevant for your future and your job. It can do more for you than you might think at first glance.

The full document is available on www.corporategovernancecommittee.be.