Responsible Global Leadership

Dilemmas, Paradoxes, and Opportunities

Mark E. Mendenhall, Milda Žilinskait?, Günter K. Stahl, Rachel Clapp-Smith

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000062861
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

The need to ensure principle-driven, legally sound, and ethically acceptable behavior in the global context is not an easy task for leaders. They face the requirement of meeting the needs and expectations of a diverse set of stakeholders. They are increasingly called upon to protect, preserve, and restore the resources of the environment. They are expected to improve human well-being and social equity and recognize and effectively address economic and social issues concerning equality, social justice, and human rights protection.

How should leaders in global organizations go about meeting the multiple demands of a complex global stakeholder environment? This book explores the dilemmas, paradoxes, and opportunities that leaders in global organizations of all types confront daily and addresses how managers can and should think about and approach these complex issues in responsible and productive ways.

This book will be of interest to students and scholars across business, management and the social sciences more broadly.

Part I
The Nature and Context of Responsible Global Leadership

1 Responsible Leadership in a VUCA World

Christof Miska, Vera Economou, and Günter K. Stahl

“Today’s times are volatile, uncertain, complex and ambiguity prevails everywhere. … We need a very refined leader, a very different leader that can actually power a company through these tough times. … We are looking for leaders who are extremely agile, who can go from geopolitical calms to geopolitical crisis. … Very often we are finding that we need leaders who can make something out of nothing.” (CNBC, 2013).

—Indra Nooyi

Introduction

We live in a world that is increasingly volatile, uncertain, complex, and ambiguous (VUCA). It is also a world that is fraught with conflicts, crises, rising threats, and ethical dilemmas. Today, we face unprecedented levels of disruption and economic, social, and environmental challenges of huge proportions. As growing corporate engagement in initiatives such as the UN Global Compact and the Globally Responsible Leadership Initiative (GRLI) demonstrate, many companies have committed to addressing the grand societal challenges of our time, like those posed by poverty and hunger, climate change, resource depletion, and rising income inequality and economic insecurity (George, Howard-Grenville, Joshi, & Tihanyi, 2016). Some organizations have gone further and adopted ‘profit-with-purpose’ business models (Levillain, Segrestin, & Hatchuel, 2019) with the explicit goal of aligning their activities with the ‘triple bottom line’ (Elkington, 1997) of social, environmental, and economic responsibility (i.e., people, planet, prosperity). What links these is the belief that business needs to consider a broader swathe of stakeholders in decision-making and to “contribute to the creation of economic and societal progress in a globally responsible and sustainable way” (GRLI, 2005, p. 3). Thus, responsible leadership has become a major concern throughout the globalized economy (e.g., Pearce & Stahl, 2015; Waldman & Galvin, 2008).

Despite this attention, responsible leadership remains poorly defined. There is some consensus, however, that responsible leaders engage in two sets or types of activities, which might be classified as ‘doing good’ and ‘avoiding harm’ (Crilly, Schneider, & Zollo, 2008; Stahl & Sully de Luque, 2014). Whereas the former includes actions aimed at contributing to society, such as safeguarding access to products, support for community development, and the design of employee-friendly workspaces, the latter refers to activities seeking to forestall harmful consequences for stakeholders in a broad sense, such as environmental pollution, product or safety hazards, and corruption. The goal of ‘creating positives’ is largely discretionary and ethical in nature, whereas activities aimed at ‘avoiding negatives’ are often mandated by laws and regulations (Carroll & Shabana, 2010; Miska, Hilbe, & Mayer, 2014). Both are influenced by notions of values-based and principles-driven leadership (Maak & Pless, 2006). It is not surprising, therefore, that business leaders have developed distinct approaches toward responsible leadership. For example, Paul Polman, CEO of Unilever, has clearly expressed that CEOs should not be slaves to shareholders and that in moving away from quarterly reporting toward more longer-term solutions, Unilever was progressing toward solving issues like food security or climate change (Byonton & Barchan, 2015).

The example of Unilever echoes recent research showing that business leaders’ discretionary choices are usually embedded in, and often restricted by, organizational structures and policies, strategies, corporate governance, and law and by broader societal and institutional contexts (e.g., Miska & Mendenhall, 2018; Stahl, Miska, Noval, & Patock, 2017). In fact, the quest for responsible leadership can be seen as society’s new expectations of businesses and their executives, driven largely by two developments: one, a significant number of corporate misconduct cases in recent years, including Volkswagen’s CO₂ emissions scandal, the fall of Lehman Brothers, and numerous instances of corruption involving companies like Siemens, Odebrecht, and Samsung, and the other, more positively, a new collective consciousness about the need for sustainable development, as expressed through the United Nations’ Sustainable Development Goals (SDGs) (UN, 2018). The SDGs include 17 targets to be achieved through collaboration and partnership between governmental organizations and nongovernmental organizations (NGOs), businesses, and civil society; they include objectives like SDG #1 No Poverty, SDG #2 Zero Hunger, and SDG #13 Climate Action.

Although the scope for business leaders to engage in ‘doing good’ and ‘avoiding harm’ is constrained by corporate and institutional settings and subject to societal expectations with regard to proper business conduct and targets of sustainable development, another important aspect is the nature of the general setting and business environment in which leadership takes place. Nowadays, this setting is increasingly described as VUCA, and its dynamics pose particular challenges for actualizing responsible leadership; however, it may also open new opportunities.

In what follows, we describe the VUCA environment, including its drivers, and establish links to responsible leadership in terms of challenges, opportunities, and implementation. Subsequently, on the basis of a case study of PepsiCo, we showcase the dynamics of the VUCA environment and illustrate how Indra Nooyi during her tenure as CEO and chairperson between 2006 and 2018 engaged with the challenges and expectations of responsible leadership. We conclude with a discussion of the managerial qualities and organizational capabilities needed for responsible leadership in a VUCA environment.

VUCA—Volatility, Uncertainty, Complexity, and Ambiguity

Today’s business environment is increasingly being recognized as VUCA, with certain recent events offered as symbolic affirmation, for example the election of US President Trump, along with the subsequent global trade-tariff conflicts between the US, China, and the EU; the so-called refugee crisis in Europe and other parts of the world; Brexit affecting both the UK and the EU and beyond as well; economic disasters in Greece, Venezuela, and elsewhere; nuclear weapons concerns in North Korea; continued jihadist terrorist attacks; increased instances of climate change disasters worldwide, and the outbreak of the global COVID-19 pandemic. This kind of turbulence constitutes a highly volatile environment for companies to operate in and directly or indirectly affects the entire world economy (Dombey, 2016). Long-established successful business models are challenged by such rapid changes and by digital developments such as blockchain technology and new approaches to doing business, including the sharing economy (Voegtlin & Scherer, 2019). Services like Airbnb, Uber, Amazon, and Facebook, nonexistent in the past, have modified how business is conducted, sometimes putting traditional companies in survival mode or out of the game. Who would have imagined that Luxottica would partner with Google to create attractive glasses with cutting-edge technology or that Apple and MasterCard would collaborate to offer Apple Pay (Greenwald, 2014)? At the same time, as a reminder that innovation and social responsibility do not always go hand in hand, many of these pioneering companies (e.g., Amazon, Uber, Facebook, Apple, etc.) have been accused of human-rights violations or face other allegations of unethical conduct (Pfeffer, 2016; Stahl, Brewster, Collings, & Hajro, 2020).

VUCA is not a new term. The acronym was introduced by the Army War College to describe extreme, unclear, and complex conditions. VUCA implies greater vulnerability to unknown and unpredictable forces, which in a business context can lead to economic instability and social dislocation (Annan, 2000; McNulty, 2015). Table 1.1 provides an overview of the four VUCA components.

Volatility is caused by continuous change. What is true today may or may not be true tomorrow (Gruwez, 2017). It implies “dynamic instability brought about by drastic, violent, and rapid shifts” (Kail, 2010a), with the consequence that the amplitude and nature of changes are themselves likely to vary. For this reason, volatility may be characterized as unexpected or unstable, and of uncertain duration, although not necessarily hard to understand, per se (Bennett & Lemoine, 2014b). For instance, several years ago, estimating the development of ‘cryptomania’ (digital currencies) was rather difficult; over a relatively short period, several currencies evolved as promising, but to date, some have been affected by considerable crashes. Terrorist attacks, as another example, can be seen as a source of volatility with the potential to destabilize economies and global relationships, which for businesses can imply financial volatility affecting supply chains and international trade (Brownbill, 2016). Also, commodity pricing, such as in the case of the cost of jet fuel, has been highly volatile in the 21st century (Bennett & Lemoine, 2014a).

Table 1.1Overview of the four VUCA components. Based on Bennett and Lemoine (2014a, 2014b), Brownbill (2016), and Gruwez (2017)

VUCA component	Definition	Examples
Volatility	Rapid, unexpected, drastic, and frequent shifts leading to continuous changes. Volatility implies instability and can be of uncertain duration, even if often it is not hard to understand, per se.	• Developments of digital currencies over the past few years. • Terrorist attacks affecting business’ financial stability and international trade. • Commodity pricing in the 21st century. • Negative interest rates changing some of the fundamental banking business models.
Uncertainty	Unpredictability of the extent to which change will be significant and actually impactful. Uncertainty can create biases if managers overly rely on past experience for decision-making.	• Rather unexpected aftermaths of the 2008 financial crisis leading to a global economic crisis. • Effectiveness of anti-terrorism attacks in terms of when and how they might combat terrorism. • Vinyl records, supposed to have died long ago, may have a sudden revival.
Complexity	Compound system of multiplex information and practices that collectively are difficult to understand and process, either because of their nature or volume or because of both.	• MNCs with simultaneous operations in countries and societies with diverse institutional, cultural, political and regulatory environments. • The nowadays-common programmatic advertising is a labyrinth of compound bidding systems aimed to get the right ad on the right screen of the right person.
Ambiguity	Haziness related to cause–effect relationships with contradictory explanations about what to expect. Ubiquitous availability of information makes it difficult to find clarity.	• Companies entering new, emerging, or immature markets unexplored in relation to their products and services. • Transition from print to digital media and how customers process digital products and services.

Uncertainty may be characterized as despite a lack of other information, an event’s basic cause and effects are known, suggesting that change is possible but is not a given (Bennett & Lemoine, 2014b) and is hard to predict. With uncertainty, predictability is lacking, and surprise is ever-possible (Gruwez, 2017). Over-reliance on experience may render uncertainty dangerous (Kail, 2010b), as in cases in which organizations or managers make inappropriate generalizations on the basis of their default problem-solving approaches, even when these are inappropriate and when a different course of action is needed. As an example, the events preceding the 2008 financial crisis were explainable, but was its ramification into a global economic crisis predictable? Similarly, anti-terrorism initiatives are usually beset by considerable uncertainty, because it is normally difficult to project when and how terrorism will occur (Bennett & Lemoine, 2014a) and whether or not businesses might be affected; and the impact of technological advances makes it more challenging for businesses to spot potential competitors, creating uncertainty about how new products and services will be perceived by markets and customers (Brownbill, 2016).

Complexity addresses how situations tend to have many interconnected parts and variables, with some information being available or predictable, albeit in volume or nature potentially overwhelming in terms of processing (Bennett & Lemoine, 2014b). For example, multinational companies (MNCs), which operate simultaneously in a multitude of countries and societies, need to take into consideration various institutional environments and regulatory frameworks, assess the political risks, and so on, and this adds up to a prodigious amount of information that MNC managers need to process. In general, working internationally implies operating with many cultures and unique environments, already complex due to the numerous different and connected parts (Brownbill, 2016) of such environments.

Ambiguity refers to ‘unknown unknowns’ and causal relationships that are not entirely clear (Bennett & Lemoine, 2014b), and it is difficult to diagnose from a single perspective (Kail, 2011). Essentially, for any assertion, convincing yet contradictory information can be found (Gruwez, 2017). This is because ambiguity adds multiple layers to problems and situations with no simple answers, such as in the case of globalization, which has seen companies enter new—and often unexplored in relation to their products—markets faster (Brownbill, 2016). As another instance, the transition from print to digital media has been considerably ambiguous for many companies, many of which are still in the process of learning how customers might access and experience digital data and entertainment (Bennett & Lemoine, 2014a).

Because VUCA conditions increasingly redefine the nature of global business, they pose distinct challenges to business leaders. According to PriceWaterhouseCooper’s (PwC) 21st CEO Survey of 2018 (PwC, 2018), 40% of CEOs were concerned about geopolitical uncertainty, 40% about cyber-threats, 38% about the speed of technological change, 35% about populism, and 26% about uncertain economic growth. Interestingly, although the executives surveyed tended to perc...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Introduction: Why Do We Study Responsible Global Leadership?
• Part I The Nature and Context of Responsible Global Leadership
• Part II Challenges Facing Responsible Global Leaders
• Part III Rolling Out Responsible Global Leadership in Global Organizations: Issues and Best Practices
• Part IV Epilogue
• Index