The leadership question
What is leadership? What makes a leader a good one? Are leaders born or made? And can one country be blessed with more leaders than another country?
I was reflecting on this subject given the leadership shenanigans we have seen in our corporate and public sphere over the past few months, and more recently having done research for the Moneyweb Investor cover story this month: Ten CEOs to watch. What particular combination of qualities makes individuals worthy of being leaders and what is it that makes them good at their jobs, I wondered.
There is no question that intelligence makes for better leaders – from student leaders to executives to presidents. It certainly makes sense that handling a market shift or legislative logjam requires cognitive oomph.
But it seems that intellect only takes you so far. Leaders who find it difficult to articulate complex ideas simply, or whose words go over people’s heads will find it difficult to draw people in to them.
In addition to intellect I think real leaders are comfortable with who they are; value who they are and can inspire change in others through genuine relationships and connections.
Leadership is not only conferred by a position. It is not about the exercise of power – or certainly not anymore. In the past the lead-from-the-front model was based on a small number of people having a large amount of information. But today things are different. Today we are a very large number of people with an incredible amount of information. Today anyone can get anything, anytime, anywhere and usually for free on their phone, tablet or laptop.
Knowledge is no longer power. So then, what is leadership? Intellect and self-confidence yes. But I still believe that it’s more than that.
Smart leaders are creative. They are thinking, saying and doing things that others are not. They are engaged with people – whether these are staff, customers or shareholders – and they aim to empower rather than enforce. They are good communicators and collaborators. Finally, I think they adapt to change faster than their competitors.
Many people will disagree with me, but I think former US president Barack Obama espouses many of these values. He was a conscientious leader who lived his humane values, inspired millions of Americans to believe in a better future, but had the courage to make difficult and, sometimes, unpopular decisions – the nuclear deal with Iran and ‘Obamacare’ come to mind.
So as investors how do we apply this in our assessments of leaders in corporate South Africa?
One thing to observe is an individual’s leadership style, because it’s a big contributor to organisational culture. For instance is he or she ethical? Fair to others? Inclusive, autocratic or aloof? And are they sensitive to customers, suppliers and competitors? These are ‘softer’ issues, but many of the disasters that have occurred in corporate history were evident in the behaviour of CEOs simply in how they treated others.
Being receptive to change is critical (and dependent on the above characteristics). Often the indicators of change are visible to employees who are in the market and at the coalface of activity. Apparently Microsoft engineers convinced Bill Gates to go the “internet route” after he had trashed it as a bad idea, simply because they saw what was happening in the market. The complete opposite happened at Kodak, where engineers developed a digital camera years before the digital camera came onto the market – but management chose not to market it for fear that it would kill their business.
Which begs the question, who is responsible for setting strategy? Is this the job of the CEO or the responsibility of the board? While it is the entire board’s function, ultimately a good CEO should ensure that the business operates efficiently and effectively and prepare the business for the future.
The former is operational, the latter strategic. Not all CEOs are good strategically. Strategy is fraught with pitfalls, for instance you may choose the right strategy but execute poorly or vice versa. In some industries a good strategy could be superseded by economic upheaval or technological change.
I think the most critical factor is to avoid complacency, so a good CEO will drive everyone in the organisation to constantly consider whether what they are selling is relevant to their consumers.
Which all goes to show that with so many moving parts, identifying good leaders is a complex task.
With thanks to Daniel Malan from Perspective Investment Management, Reuben Beelders from Gryphon Asset Management and Adrian Saville from Cannon Asset Managers for sharing their thoughts with me.