At a time when ‘business as usual’ is in question, is it time to blow the whistle on your own organisation and take a giant leap ahead of the competition? I explain why the time is absolutely now – and provide a field guide to the characters who will feature in the transformation you create.
In my last blog, I looked at the leadership process that ‘free spirit’ CEOs take to stay radically open to the future and create masterpiece businesses. CEOs who have taken that path know that leadership and politics are inseparable. And I’m not talking about the petty organizational politics of egos vying for power but the grand political game that shapes the values of their organization and the wider civic society that supports it.
Why is politics not just moralizing? Because, politics is moralizing. Since the time when Pericles raised the rational common good above personal self-interest for the people of Athens, politics has been about negotiating and re-ordering the values of the city and organizing ourselves to preserve and observe those values.
This reality was reflected in a provocative interview by the co-founder of LinkedIn, Reid Hoffman. He was speaking about the need for leaders to take a stand on important bi-partisan political issues such as the destruction of American values by the current administration. His words resonated strongly with something I’ve been saying throughout my career: we are first citizens and second business people.
Considering leaders who avoid politics and refuse to take a stand on one principle or other, Hoffman quoted a line that you’ve probably heard many times: “It’s not personal, it’s strictly business.” You may not be aware that this quote comes from the mafia movie The Godfather and that the character who utters them, Michael Corleone, is not supposed to be an exemplary leader. As Hoffman points out: “This is a terrible role model for leaders.”
Business doesn’t operate in a vacuum. Business leaders must act in such a way that they take care of the wider society that makes ongoing commercial life possible. When societal values are undergoing radical transformation, it is the CEO’s primary duty to keep their organisation in step. Being moral means being in tune with what is considered moral. Corporate wrong-doing is relative to the times you are in. The levels of anger, protest and counter-protest we are witnessing are signs. Protests from across the political spectrum about racism, gender politics, slavery in supply chains, globalization, collapsing ecosystems, unemployment, inequality, tax avoidance, digital surveillance and nudge-based control are all omens that the times-they-are-a-changin’. Direct politics or civic action, in a word ‘whistleblowing’, takes care of the society within which business is possible. The CEO who sees their business acting in ways that undermine civic life but stays silent is responsible for an unsustainable organization.
By contrast, whistleblowing your company’s wrongdoing and re-aligning with issues of concern to wider communities is not just about taking responsibility, it’s about energizing your organization and rallying your people around a common cause that everyone can believe in and champion. Whistleblower CEOs speak a truth that opens up new ways for the community to go on together, even if it feels uncomfortable. They know what they stand for and so does everyone that works for them.
But what does this mean in practice? I’m not suggesting that CEOs should become political activists for the sake of it, canvassing support from employees for a random agenda of personal identity causes. But in an increasingly politicized world when values are transforming, it’s essential for the CEO to make it clear where their business stands in relation to what is happening in the world, what their business and industry is going to be wrong in the time that is coming, and to play their part in that world as it takes shape. Consider how the following deeply-held entrepreneurial values have begun to show up as problematic in the emerging world: personal freedom versus community responsibility; competitiveness and winner-takes-all rewards versus fair reward for essential workers; private enterprise production of vaccines and medicines versus health as a common good; transparency and surveillance versus ownership of personal data as a right; and post-truth persuasiveness versus science. All these values are changing and any one of them might throw your organization into the wrong where it used to be in the right.
Psychotic Finance
Let’s look at an example of changing values from the last 15 years. The emergence of psychotic finance and how to respond to it.
Imagine an incoming CEO of a business, let’s say in the insurance industry. They’re alarmed at the erosion of trust in the firm among investors and customers. They declare lack of trust as the key issue that their company gets wrong time and again, and vow to clean up their act with customers and suppliers. However, while they are cleaning up their strategic relationships, the CEO sits in on sales meetings, period performance reviews, audit reviews and everyday conversations in the café. In each meeting or chance conversation, they learn of some kind of financial engineering that is propping up company profits.
They hear the Head of Claims referring to customers and market segments only as ‘types of risks’. It makes them sit up straight. Aren’t customers ‘people’? They hear from the finance department how it didn’t automatically credit customers invoiced twice for the same business. They learn of acquisitions made with cunning to cover up organic growth failings and boost the appearance of value creation; of strategists zero-ing the costs of carbon and climate contingencies in future plan projections because they claimed they did not know how to assess them.
They hear sales people bragging of their commercial sleight of hand that charged channel partners ‘spend under management’ expenses for services that were never to be passed on to end-users. They learn of the continued practice of recording revenues before the work is complete (and then abandoning the work), of bogus revenues, of shifting expenses forwards and backwards in time, hiding expenses or losses, deferring investments and moving incomes to later periods, all to make the P&L look good on the surface. They saw the accountants’ cashflow magic of shifting financing cash inflows to operating expenses and operators’ selective use of operational and investment KPI metrics to paint a rosy picture and distract attention. In corporate finance, they saw the mis-use of derivatives as an end in themselves rather than as simple enablers for the core business to trade and invest.
What they discover niggles away at them. They remember the pregnant silence and shifting in the seat when someone spoke of these moves. They remember the relief when no-one drew attention to them. They recall the blank, pitying look on the faces of the corporate finance team’s faces as their use of derivatives was challenged. Most of all, they wondered how the finance team had so badly lost touch with the basics of the business.
Eventually, they can take it no longer and declare the organization’s finance to be psychotic. They’re not trying to be insulting or disrespectful. It’s meant quite literally. Sigmund Freud identified psychosis as the denial of everyday reality and its replacement with a fictitious reality in the service of out-of-control drives and desires. Finance no longer cared about what counts to the wider community only that it counts against the universal score-keeper –money. As it invented new instruments and techniques, Finance was travelling further and further from the day-to-day reality of being the best insurance company on the market.
When the CEO makes a declaration like this, they are captivated and swept away by enthusiasm for their insight. To some of their colleagues, the CEO may scarcely make sense and even appear hysterical. To the CEO, the financial engineers are still living in the 1990s and early 2000s. Their values are way out of step with each other and wider society. Values battle lines are being drawn and the future is at stake. Then, little by little, followers begin to appear who share some of the CEO’s intuitions about the finance situation.
Field guide to the characters of a transformation
At this point, let me introduce three characters drawn from the work of French philosopher, Alain Badiou, the world’s most rigorous thinker of revolutionary change. Each character is a type of leader at the top or within a business. Each gets their sense of self through the stand they take towards a transformative issue. Their contest is a grand political struggle for the soul of the organization. Who prevails determines the success or otherwise of the transformation and of their lives. Which one are you?
1 The Reactionary
The reactionary simply says: “Who cares? This is just the way of the world. If we didn’t do it someone else would. There is no such thing as reality except dollars in the ledger. There is nothing to see here. Move along.
2 The Traditionalist
Secondly, we see a more subtly dangerous opponent: the obscurantist or traditionalist. At first, the traditionalist seems to be a powerful ally for the CEO. They declare their own disgust at the recent moves of the finance team. “In the old days, we just counted the money and enabled the business to grow,” they say. But in truth, they are ‘beautiful souls’ (insert link) nostalgic for the sacred days of the good old-fashioned financial practices. They refuse to get their hands dirty with the new world and do not allow for invention. They do not understand the innovations of contemporary finance. The problem, they say, is simply bad guys running the show. They imagine a return to the days of It’s a Wonderful Life and the good old fashioned bank manager financing businesses. But the CEO knows this misses what is potentially great about this new fictitious finance.
3 The Master
This is the most important figure. The master hears the declaration that finance is psychotic and, instead of simply ignoring it or recoiling in horror, glimpses the beginnings of a new beneficially psychotic way of finance and begins to explore it. They ask whether there could be something worth keeping from these practices. Perhaps, the fictious creative tools based on promises made upon promises could be used to open new markets and develop new insurance offerings. He notes the underlying ‘as if’ logic that asks financiers to act as if a future state is true and make commitments on that basis and then further commitments upon those commitments. He notes that this ‘as if’ thinking is what underlies any world-building efforts and wonders whether a finance function dedicated to building new and better worlds could be his destiny. He declares the possibility of a new kind of creative accounting that does not exploit but instead works on an as if basis to create a better world for the communities his company serves.
Enquiries are launched to identify and quantify each psychotic financial practice. They begin to distinguish exploitative from generative practices, such as distinguishing when derivatives are being used to support the extension and development of the company’s core offerings and when they are becoming ends in themselves. The master rationally reflects on which high-stake commitments (both sacrifices and development of people and practices) will both symbolize that Finance has changed and immediately produce a hole in the company’s finances that he and his colleagues will need to replace. He makes his choices and commits.
The Time Is Now
This brings me to my final point. When should a leader tackle the issue they see? In nearly every organization I have ever worked in, there has been a worldly executive, sometimes even a little group of them, who advocate waiting for the right moment to act. “Of course, boss, this is a key issue. It’s hurting our whole business and its roots run deep. It will take all our effort and, don’t doubt it, we are right behind you. However, there are a few trifling local issues that we should deal with first. Let’s just get this year out of the way, move offices, do the audit, close the books, deal with the investor meetings etc. etc. When we have swept those trifles up we’ll be free to concentrate wholly on your mission.”
In my early years consulting, I even developed a framework that encouraged leaders to divide their transformations into three phases beginning with the trivial “fix the obvious” tasks that prevented them ever getting onto the big transformation. Of course, they set about finding ingenious ways to divert essential action and never get to the gut-wrenching political sacrifices and commitments. These leaders have too much time, the day of judgment never comes, and there is always something new and obvious to fix. Like St Augustine who asked for chastity and continence “but not yet”, these leaders do not want the transformation – they are opponents of it.
Act as if the day of judgment is today and begin. Now.
I’m writing these blogs to share my 30 years of expertise in leading transformational change in major organizations. As an experienced strategic coach, I enable CEOs to embrace the mission that matter to them. Contact me through LinkedIn or visit Missions That Matter.
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