Good Dividends

Responsible Leadership of Business Purpose

Steve Kempster, Thomas Maak, Ken Parry, Steve Kempster, Thomas Maak, Ken Parry, Steve Kempster, Thomas Maak, Ken Parry

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781351591652
• Edition: 1
• Topic: Business
• Subtopic: Organisational Behaviour
• Index: Business

This book seeks to answer the question of 'leadership for what?'. We shall outline an answer by focusing on responsible leadership of purpose through an inter-disciplinary perspective. Responsible leadership moves the axis of leadership from leader-followers to leader-stakeholders; away from looking at leadership as person-centric – the qualities, abilities, and effectiveness of the leader, to a focus on the purposes, responsibilities and activities of leadership. Leadership orientation is about realising value for a range of constituencies, not just the shareholders of the business. In this way this book offers up an alternative business model to that of dominant neo-liberal approaches to capitalism and its flow-on effect to the leadership project. This is a model that draws on a most obvious assumption – if leaders maximise the use of all the capitals of their business they will maximise their dividends, and thus deliver their responsibility to the shareholders as well as other relevant stakeholders.

This book explores how five dividends (based on five capitals) can be developed through attention to a sixth dividend (and sixth capital) – the dividend from our planet and communities. The planetary dividend is the flourishing of humanity – but it is also a significant dividend to the business. For example, by engaging the business in a purpose-led orientation to enhance the planetary dividend, the dividend from human resourcefulness becomes manifest – employee sense of purpose, commitment, passion and energy. The realisation of such can also connect with dividends from innovation, operations and brands. For example, the business benefits from a purpose-driven brand.

In short, responsible leadership of purpose outlines a case for leadership to focus on a connected portfolio of 'good' dividends as an answer to the question 'leadership for what?' The book is written by academics and organisational leaders. It draws on a range of research with leaders from a variety of contexts to illustrate the challenges but also the benefits of this argument. It is an ambitious book: ambitious, in terms of moving leadership towards realising purpose; ambitious by seeking to align a range of business disciplines around responsible leadership; and ambitious because it challenges the dominant assumptions that shape business leadership. However, it is based on a simple question: why would a business not wish to generate good dividends for all its stakeholders?

Part 1

1
Leadership of Purpose

In Search of Good Dividends

Steve Kempster, Ken Parry and Thomas Maak

Business has the very real potential to be the greatest mechanism on the planet to enhance humanity, if it can do this profitably and generate dividends for all its stakeholders.

All businesses seek to generate profits or dividends—how could it be otherwise? But let’s go further. All businesses should generate good dividends. By good dividends we mean four things: that bigger dividends are good; that dividends are sustainable over the medium- to long-term; that dividends are connected to a good purpose and that dividends are realised through ethically good activities. And here’s the thing … all four are interconnected and depend on each other. Research shows us that when businesses combine all four, these businesses outperform the market over the medium- to long-term (Hesketh in Chapter 11). However, for these good dividends to be realised it requires leadership commitment and action to align purpose and business. This seems straightforward, but again research shows us that this is far from the norm. It is not that there are few purposes to align a business to, but rather limited leadership awareness and understanding of how value is generated from such alignment. There is a fundamental need to move beyond philanthropy (fund raising for a local charity, or an employee volunteer day off once a month scheme) and make purpose central to the business model—enhancing society and realising good dividends. In this book we seek to outline how this can occur. We do this because business has the very real potential to use its assets (or capitals) to enhance, communities, society and humanity. It just needs leadership commitment and some ideas to move that commitment into action. But first, let’s start with the much-abused term of ‘dividend.’

A dividend is more than simply the term for a payment. It is an ownership in something to which a return today or in the future is anticipated. That return is typically divided up between the owners. It is of course a term we closely associate with business where shares are bought and sold on the basis of success and anticipated future performance. Yet it does apply to all organisations and institutions that have owners who can anticipate receiving dividends—hopefully good ones. Employees have a stake in the success of their organisations. We have a stake in our governments. Further, we all have a stake in the well-being of our communities and indeed the planet. So, it should be considered a much more encompassing term. And that’s how we frame it within this book. Good dividends matter to all of us.

Good dividends are drawn from the use of capital. Capital (or stock—from the old English term for a tree stump) is something that can be increased by human endeavour. It is of course financial, and good dividends usually translate to an increase in financial capital. But the conflation is unhelpful. Financial is but one of six capitals: in addition to financial there is human capital, social capital (networks, relationships, communities), reputational capital (brand value), operational capital (transforming capability) and natural capital (planetary). All of the six capitals relate to all institutions—including but not limited to businesses, charities, NGOs, local and central governments.

And here’s the thing …

If you maximise the capitals you maximise the good dividends—including financial. All can be systemically interconnected and we provide an example further on in this chapter to amplify this point. But it is rare for institutions—notably for-profit businesses—to overtly pursue the maximisation of all capitals. The preoccupation is with financial capital and financial dividends, and ironically, this preoccupation limits the potential financial dividend over the medium- and long-term. We explain why this is so in Chapter 2 and Chapter 4. Thus, the premise of this book is simple—it is about the role of leadership (arguably the most dominant social influence mechanism on the planet!) with a focus on purpose to maximise the six capitals and maximise the six good dividends.

This book is ambitious. We have sought to bring together academics and senior managers to address what we think is the fundamental question that the leadership field (and perhaps leadership practitioners) has not addressed: leadership for what? The answer we offer is leadership of business purpose through the notion of achieving good dividends. We will explore this answer in depth in this chapter and throughout the book. The ambitious nature of the book is related to the interdisciplinary approach. Too often, arguably invariably, discussions on leadership are delineated to an examination of the leader, the person, the role and to a lesser extent the leadership relationship. Here we examine the purposes, responsibilities and orientations of the activities of leadership with regard to the fiduciary duty and the generation of value. Our ambitions seek to reframe discourses on the role of business. We outline in Chapter 2 a set of four interdisciplinary cornerstones that have not been drawn together to date, yet we contend that it is prescient that we do. These are: moral capitalism, virtue ethics, responsible leadership and the grand societal challenges to humanity (alternatively described as the sustainable development goals [SDGs]). The four cornerstones form the philosophical foundation that underpins the arguments within the book, notably the necessity for leadership to influence organisational activity to generate good dividends, for shareholders, for communities and indeed for humanity.

It was estimated in 2007 that there were well in excess of 20,000 books on leadership (Grint, 2007). This number will have grown considerably since then. Although we have not read more than perhaps 5 per cent of these between all of us in this volume, we draw on this sample to assert that very few explore the theme of leadership of purpose (save for Robinson, Hickman and Sorenson, 2014). Purpose plays an important, if implicit, role in the growing body of research on the notion of responsible leadership (Maak and Pless, 2006a; Pless and Maak, 2011; Fernando, 2016; Kempster and Carroll, 2016). But because it is mostly implicit we believe that it is time to bring it to the fore.

Overwhelmingly, most leadership books can be classified under Grint’s (2005) heuristic: leadership as person; leadership as position and leadership as process. Grint offers a fourth, that of leadership as results. The notion of results provides a sense of trajectory towards purpose—as an outcome orientation. But purpose is so much more than simply results. Purpose can be seen to be a journey of investment towards the achievement of outcomes to which a person can gain fulfilment. Societal purposes enrich such fulfilment through being achieved for others. Societal purpose becomes ‘an aim that guides action in a broader societal realm’ (Kempster, Jackson and Conroy, 2011). Howie, drawing on the writings of Aristotle, suggested a ‘being [realizes] a purpose outside that “being”, for the utility and welfare of other beings’ (1968: 41). Aristotle was framing purpose as ‘telos’—a quest in which people gain contentment from the commitment and investment of their talents to this journey. In this way purpose has a strong moral base. Moral orientation to purposes of everyday activity is the central theme that runs throughout this book.

Let us offer a challenge at the outset. The Young Presidents Organization (YPO) is made up of 25,000 members—one of whom is a chapter author (Randall Zindler). It is a global network of CEOs, Presidents and Chairs of organisations of a minimum size and complexity. The total combined revenue of members-run companies is in the region of six trillion dollars—reflecting an estimated 7 per cent of the world’s output. If the supply chain and customer engagement are included in this reckoning the capability for change is most real. Imagine all of this interconnected dynamic of YPO and other networks being put toward more engagement at realising positive societal impact. What might be the result? Would there be progress towards the elimination of modern slavery, or disease eradication, enhanced food and water security, reductions in poverty, or perhaps a sizeable step towards addressing climate change? Or would shareholders be less well off? Would the executive leadership of these organisations have failed to serve their fiduciary duty to the shareholders and be out of jobs? Would share capital have fled these organisations to find traditional ‘safe’ harbours? It seems highly likely that the latter set of questions would form an understandable refrain of neo-liberal capitalism. There is the need to work with such a refrain and engage within the norms of the existing system. In a sense, use capitalism to change itself. Drawing on a metaphor from judo, use your opponent’s strength against his/her self. This, then, is the necessity of the notion of the good dividends. We use the notion of dividends—a very real symbol and discourse of capitalism—as the focus of organisational leadership of purpose.

We offer a brief vignette as a means of introducing the good dividends. Steve had collected his youngest son from university and journeying home in the car Rob explained what his Masters in research was on. Over the next 90 minutes or so the intricacies of bioinformatics were explained. It seemed that society, over the next few decades, was on the cusp of considerable change in terms of breakthrough health research. The ability to run thousands of experiments in a week through software, which would have taken years in traditional laboratory experiments, would revolutionise biological research. Rob’s research was working on protein refinements (Shuid, Kempster and McGuffin, 2017). All seemed most exciting, certainly his dad thought so with regards to gaining fulfilling employment. But no, seemingly bioinformatics is too distant from market value at present and there is a dearth of jobs.

As they pulled off the motorway for a coffee at a service station, Rob asked ‘what’s happening with your research.’ ‘Well let me tell you about the good dividends’ was Steve’s response. Between parking up and getting into the queue for coffee all was explained. There are six good dividends. The word good is used in three ways with regard to the financial dividend: good in the sense of quantity; good in a sustainable sense of how it has been derived—a medium- to long-term orientation; and good in terms of how it has come about—the virtuous conduct of the organisation and related partners. The good financial dividend is the result of an organisation’s attention to maximising all its capitals. In this way the output of the capitals as a financial dividend is interrelated within a systemic web of five other good dividends: good brands, good human resources, good innovation, good operations and a good ‘one-planet’ community (the idea of one planet as a symbol of humanity and nature being as one unity comes from the World Wildlife Fund and we acknowledge their contribution here; when we speak of ‘planetary’ in this book we refer to this unity). Each draws on the other as a consequence of leadership attention to each and to the whole. For example, appropriate leadership will yield greater returns from employees (the human resource dividend), including increased commitment, curiosity, engagement and responsibility—realising human resourcefulness. Further, positive outcomes of this flourishing human resourcefulness include reduced sickness, lower attrition and greater well-being. This dividend enables enhanced innovation and utilisation of resources. With leadership aligned with societal needs, social innovations will inform organisational innovation and become a fertile ground for new products and services, alongside process improvements reducing waste and enhancing productivity. The overt dividend to our planet and to our communities reinforces the meaning and purposes of work. With the organisation aligned, the authentic marketing narrative strengthens the customer relationship, particularly through purpose-driven brands. The deepening of attachment, engagement and sense of collective community with customers enhances the value of the products and services. The dividend becomes manifest as increased brand equity and related brand value. For employees, there is further benefit from working for an organisation with a high customer reputation that is valued by communities for its approach and engagement with societal needs. The strength of this reputation feeds back to greater identification with the organisation and its purposes that inter alia reinforces attention to innovation and good use of resources. Ultimately, of course, all these dividends feed back to greater returns for owners/shareholders. The shareholders are investing in a ‘good’ organisation with good dividends. The good financial dividend invests back to encourage and reinforce human resourcefulness creating a virtuous cycle replenishing the six capitals that become further utilised for on-going good dividends. The essence of the good dividends is that it is a business model based on capitalism rather than a bolt-on initiative to pursue sustainability.

This was not quite how a father and son chat actually occurred, but it captures a flavour of the conversation. Rob’s direct comment [that perhaps only a son can give] was: ‘Surely this is common sense … why would a business not do this? It does seem strikingly obvious.’

Why indeed would organisations not seek to maximise their dividends by drawing these six good dividends together? Why do organisations underutilise the available six capitals? Why is there the need to write a book on such obvious common sense? The answer to these questions lies within the four cornerstone themes of the book that are outlined in Chapter 2. In short, the complexity lies with our neo-liberal capitalistic assumptions that have captured leadership orientation. By giving prominence to purpose and responsibilities of leadership, by embracing the grand challenges that face communities and the planet, and by reframing the business model around moral capitalism, the power of leadership has the chance to realise good dividends for society at a time when it has never been more required; and at the same time realise good dividends for the organisation, employees, customers and suppliers, and of course the share-owners. This book then is a journey that seeks to reclaim this virtuous common sense.

We next provide a brief journey through the structure of the book and the chapters. The book is organised into three parts:

• Part 1 comprises three chapters. Chapter 2 lays out the four cornerstones of the book: namely: the capitalism cornerstone—Neo-liberal assumptions versus moral aspirations; the philosophical cornerstone—MacIntyre’s (1985) virtue ethics; the leadership cornerstone—purposes and responsibilities; the systemic cornerstone—the societal grand challenges. In Chapter 3 Thomas and Nicola Pless explore responsible leadership through examining leadership and values creation in a systemic world. The chapter situates the role of leadership within current events and future challenges. In Chapter 4 Steve, Ken and Thomas explore the systemic nature of responsible leadership through the good dividends and introduce each of the six good dividends.
• Part 2 is formed by an examination of each of the six dividends—indeed each dividend forms a chapter. The chapters give attention to the stakeholders who receive and generate the dividends. It has been the aim that the chapters are written as an interdisciplinary partnership between leadership and the respective discipline of the dividend. Part 2 is opened and closed by two examinations of the financial dividend. In Chapter 5 Steve Young, Sam Rawsthorne and Luke Hildyard explore the financial dividend through published stakeholder communications that illustrate the low salience of the value anticipated from employees with financial statements. In Chapter 6 Robyn Remke and Steve examine the human resource dividend and the leadership challenges for realising this dividend that has been so long anticipated—they argue for the need to give attention to human resourcefulness developed out from what they describe as responsible human resource management. Steve and Minna Halme unpack the notion of the social innovation dividend and give insight to the opportunity it offers through three case studies. The chapter highlights the need for understanding and working with stakeholders and the importance of an organisation learning its way into realising value to the business and society through social innovation. In Chapter 8 Steve Eldridge and Steve offer us a new way of understanding operational management through a focus on realising value across a range of connected stakeholders. By connecting behavioural operations and sustainable operations with traditional approaches to operations management they utilise a case study of a homicide investigation that applies lean thinking to illustrate the gains from operational dividend for the organisation and society. In Chapter 9 Malcolm Kirkup and Katalin Isles address the brand dividend through a leadership case study of Kresse, co-owner of Elvis & Kresse, a business established by the reclamation of decommissioned fire hoses from the London Fire Brigade, and the transformation of the hoses into affordable luxury fashion accessories. They outline a set of key elements that enable a purpose-driven brand dividend to be realised. In Chapter 10 Thomas and Nicola Pless outline the leadership role of stewardship for the realisation of the planetary dividend. They give particular attention to the challenge of climate change to illustrate the moral agenda of such leadership in addressing matters of intra and intergenerational justice. The final chapter of Part 2 returns to the finance dividend. Drawing on the discussion and arguments of the preceding chapters Anthony Hesketh will explore the need for leadership to rethink value and the utilisation of capital from maximising all dividends. Measuring the dividends involves the natty problem of addressing what constitutes value in the dividends. How, for example, can a balance sheet make sense of the intangible values of innovations, community engagement and support, customer loyalty and brand values, or human resources? Anthony outlines an argument for how these intangibles, the si...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• About the Contributors
• PART 1
• PART 2
• PART 3
• References
• Index