Leaders In London

From our Leaders in London chairman, Rene Carayol:

LEADERSHIP ESSENTIALS

• No leader is flawless, if we always fire them when they fail, who will want to be a leader?

• Everybody in the team must be made to feel important and their contribution valued otherwise necessary tasks may appear trivial or unimportant and performed without enthusiasm

• When addressing your team ensure you take the time to mention the individual contributions that have stood out. Remember it is from success that we discover what to do and this helps shape culture

• For generations we have been told what cannot be done, and far too little time has been spent on encouraging us to ‘go for it’. Muhammad Yunus would have achieved very little if he had listened to the ‘experts’

• Optimism is a force multiplier and so much more galvanising than cynicism and pessimism

Rene drew those conclusions from analyzing how Nobel Prize winner Muhammad Yunus, who will be on-stage at Leaders in London in a few weeks turned GreammenBank into a major success story. You can read Rene’s analysis of Yunus’s leadership at Grameen in Rene’s latest online newsletter here

This is a provocative post just to get you thinking differently on a Tuesday morning…

There’s a new economics of capitalism. It’s been emerging for a while, but the clearing away of the weird world of financial derivatives that looked like the new capitalism - but has turned out not to be - has cleared the air.

Investment banks are almost no more (their financial model, it seems, doesn’t work…yet was seen as the engine of capitalism until a year or so ago).

So, let’s do what leaders are supposed to do, and look away from the slow motion car crash that is transfixing us all, and look to the edges to see what’s emerging.

And here it is. Here’s the one surprising thing that is moving to the heart of economic thinking. Here’s what Kofi Annan, who spoke at Leaders in London last year, calls “the single highest returning social investment in the world today”.

It’s what drives the success of GrameenBank and the other pioneers of the multi-billion dollar microlending form of new banking that is thriving while largescale investment banking is disappearing as a business model. Muhammad Yunus, founder of GrameenBank, who was granted the Nobel Prize for making it work, is coming to Leaders in London to help us define the new economics.

‘ It’ could be the mythical lever big enough to move the world (”Give me a lever big enough and…”) out of poverty. And, as economists have noted resoundingly recently, move Africa in particular out of poverty to become self-sustaining and capitalism has a Continent-sized new engine.

Tom Peters, another of our past Leaders in London speakers, has for long plugged away on a variant of this insight, pointing out that the second biggest economy in the world by size of purchasing power after the US isn’t China, it’s….women. (See what he did there? ‘Reframing’, our NLP-er friends call it: leaders see differently; that’s where insight comes from).
The actual lever, that is most likely to have the most positive effect on the world economy, according to Annan and economists who back him up on this, is educating women.

The Financial Times says today that women’s education has moved from ’sandal-wearing’ fringe issue to the heart of economic thinking.

GrameenBank only lends to women, because they pay back, whereas their husbands don’t. Female education is the variable most highly correlated with improvements in social factors. Women typically spend their income on food and healthcare for their children, leading to an upward spiral of health and wealth.

Move on to the wider issue of women as consumers and Tom Peters has an eye-opening set of slides he goes through that shows that in the US, women are the decision-makers on buying almost everything, including ride-on mowers, the ultimate in boys’ toys.

In what way is this mainstream or linked to your leadership agenda? Well, it takes an investment bank to notice it first, oddly. In March, Goldman Sachs said it would invest $100m in 10,000 women from developing countries to improve their access to entrepreneurial education. They can see a return on investment by thinking differently. Can you? (PS Interesting to see if they are still making that investment or if they have changed their minds as $100 m suddenly became real money that they might not have available…)

There’s more here:
FT on the impact of developing developing women on world economics

And here’s Tom Peters $5 booklet ‘Women Roar’, which starts off with this rant from Tom: “The evidence is clear!
(1) WOMEN ARE BETTER LEADERS THAN MEN (under the conditions of the New Economy).
(2) WOMEN ARE THE WORLD’S BIGGEST MARKET OPPORTUNITY (BY FAR) … and are wildly underserved. The stakes amount to TRILLIONS of dollars. Our story: WOMEN ROAR. WOMEN RULE. Believe it!”

Hmmm, ‘It’s a time for leaders’ I pompously posted below. I believe it is. But, what is the best kind of leadership for the current turbulence? In the UK, the leadership at the bank Lloyds TSB was, over the past few years, characterized as boring and unadventurous. That’s how other financial institutions viewed its reluctance to gorge on the new financial instruments that have emerged in recent years, making fat short-term profits from repackaging and selling on loans, for example.

The media joined in and contributed to this version of Lloyds TSB - that it was too cautious, not a place to invest in if you want big returns fast, that it was somehow getting left behind by the more adventurous financial institutions at a time when money (credit) was virtually free.

Well-run, safe but boring. That was the general consensus. So, yesterday, Lloyds TSB turns out to be the only bank in a sound enough position to say ‘yes’ to the UK government’s attempt to broker a takeover of HBOS (Halifax Bank of Scotland), the UK’s largest mortgage lender, to head off the possible need for yet another government bailout akin to Fanny & Freddie in the US, and Northern Rock (in the UK).

Sir Brian Pitman’s tenure leading Lloyds TSB helped start off the ’safe but boring’ cliche, because his sound, unflamboyant leadership set the tone for the bank. Eric Daniels, Lloyds TSB’s chief executive of five years, is similarly known, says the FT today

“as the Quiet American because of his low profile and cautious approach…Under his stewardship Lloyds TSB has been cautious about expanding into more exotic business such as credit products rooted in subprime mortgages”.

Both Brian Pitman and Eric Daniels strike me as what Jim Collins calls Level Five leaders - longterm thinkers who are guided by an inner conviction rather than following the current trend, who are usually ego-lite and happy to stay out of the limelight, and who have a clear view on the horizon as well as the short-term. Unflappable, sometimes mild-mannered, but with the courage of their convictions.

Rene Carayol, our Leaders in London chairman, has said in the past that what characterizes great leadership is a mix of two apparent contradictions: great courage and great humility. That sounds close to Collins’ characterization of ‘the quiet leader’, the Level Five leader.

There’s some research that shows charismatic leaders who make big bold swooping decisions and adopt high risk strategies win bigger than Level 5 leaders when they are winning, but (obviously) lose bigger too. I’ll dig it out and post it here when I find it.

That research, and the contrast between those two types of leader, seem to me to be reflected in the choice of leadership we have before us now. And it seems as if the market is making the decisions for us. In a game of ‘last man standing’, or at least, of consolidation in which the genuinely strong players take over and consolidate the ones that appeared strong but turned out not to be, my suspicion is we’ll see a lot more ‘quiet leaders’ running things once the smoke clears.

Is that what we need? What kind of leadership do you want to see in your organization at the moment? And are you getting it? How about your own leadership? Where do you fall between the two ends of the spectrum mentioned above - the quiet leader at one end and the charismatic risk-taker at the other? Yes, it’s a time for leaders. But, what kind of leadership do we need?

As we are in the middle of turbulent times - getting more turbulent by the minute judging by Lehman, Merrill Lynch, Alitalia, Lloyds TSB/HBOS…the list goes on - more than ever we need to be clear on what leadership actually is. Because it’s leadership that’ll haul us out of the current situation, sooner or later.

Your leadership of your organization, or business unit or whatever you lead, is part of this. Cumulatively, the decisions we all make help set a direction, shape the climate. So, listen up on how to lead through turbulent times, to help us make the right decisions. First up, Rene Carayol, our conference chairman:

Management vs Leadership

In predictable times, management is often enough, Rene tells us. But, turbulent times are when you need to push leadership to the fore. What’s the difference?

“If management is what we do, leadership is how we feel.”

“Managers talk strategy. Leaders tell stories.”

- Rene Carayol, Leaders in London Chairman

Next up, Ben Zander, who reminds us that leadership comes down to three things:

“1. Realise it’s all invented. Don’t follow the rules.
2. Radiate possibilities
3. Take the work seriously, but not yourself.”

- Orchestra conductor Ben Zander, speaking at last year’s Leaders in London

Lastly, Al Gore, also from Leaders in London 2008, with perhaps the most important lesson for leaders in the current situation:

“Leadership means inspiring us to manage through our fears.”

Up until the past year or so, most of us have been leading our organizations through optimistic times. Up until the past year, even a muppet of a CEO could return double digit annual growth in some sectors. That was then, this is now. That was easy, this is…something new.

It’s a time for real leadership. People are scared. You may have to deliver bad news, deal with situations you’ve never faced before, reassure and inspire people who are unused to such uncertainty and need steadying. You can’t manage your way through this one. Take that management hat off. Time for you to step up. This is a time for leaders.

Related Post
How to lead in a downturn: the most important lesson of all

Leaders in London

OK, as Lehman crashes and other big banks look shaky, and the FT banner says ‘Wall Street Bank’s Black Monday’, I just have to pull up this post from July to remind us all how to be a good banking leader:

“If you don’t fully understand an instrument, don’t buy it.

If you would not buy a specific product for yourself, don’t try to sell it.

If you do not know your customers very well, don’t lend them any money.

If you do these three things, you will be a better banker, my son.”

- Emilio Botin, 73-year-old Chairman of Spanish bank Santander, which has emerged unscathed from the credit crisis and was named ‘World’s Best Bank’ at this year’s Euromoney Awards.

PS So Lehman Bros, which has a customer base concentrated in the richest country in the world, can’t handle its debts and goes belly up, while GrameenBank, whose customers are among the poorest in the world, is a multi-billion dollar profit-making success story. When Muhammad Yunus tried to get traditional bankers to lend to the poor they laughed at him and said they’d go bankrupt as the poor never pay back what they borrow. Turns out Grameen’s micro-customers (Yunus leant them the money himself to start with, to prove his idea worked), who live on less than $2 a day, are less likely to default on their bank repayments than European and American middle class borrowers. His new model of banking pulls them out of poverty AND makes a profit. Compare that with the mess Western banking’s old model has got itself into and it’s really time we challenged our assumptions, isn’t it?

The Nobel prize winner is coming to Leaders in London in a couple of months to help us do just that.

“If you don’t fully understand an instrument, don’t buy it.

If you would not buy a specific product for yourself, don’t try to sell it.

If you do not know your customers very well, don’t lend them any money.

If you do these three things, you will be a better banker, my son.”

- Emilio Botin, 73-year-old Chairman of Spanish bank Santander, whose bank has emerged unscathed from the credit crisis, “delivering a tongue-in-cheek lecture on the basic tenets of banking” (FT) at the Euromoney Awards, where Santander was named ‘World’s Best Bank’.