SCG explores the reasons for our failing financial empire and asks if there is more than “global markets” to blame.
The past months have witnessed all sorts of mayhem in the global economy; with congested credit markets, currency devaluations, soaring oil prices, decreasing house prices and a stock exchange that has more swings and rollercoaster rides than an amusement park.
The fortunes of many of our institutions have suffered (in some parts of the financial community the decline was irreparable) and we continue to see the fall of empires on a daily basis. Whilst a declining global economy and continued bear markets have contributed, the corporate leaders and their actions should also assume some responsibility for what has eventuated.
Lack of business growth and underlying profits have of course been the partial result of a poor economic backdrop, but Stonewater Consulting Group asks: are there other factors to consider? Recent research shows that the tenure of C-Level leadership is shorter today than at any previous point in history and this, in itself, points to a fissure in the leadership of our executives.
SCG asked a group of clients why they thought turnover at the C-Level was increasing and what the perceived reasons for the failure of their businesses were. The questions were posed in the form of a multiple choice questionnaire, whereby the participants were asked to rank their answers from the following list:
- Leadership style
- Over governance
- Lack of vision
- Failure to take risks
- Poor communicator
- Poor ethics/values
- Doesn’t change with the market
- Lack of innovation/creativity
- Failure to execute strategy
- Doesn’t performance manage underachievers
- Doesn’t understand the business/market
- Doesn’t build strong teams
- Doesn’t listen (to customers and/or staff)
- Lacks financial rigour
- Poor market conditions
The respondents were organized into 4 categories; C-Level (senior management), middle management, front line professionals and human resource professionals and the results revealed a difference in perception between some of the levels as to the causes of poor leadership.
Surprisingly, the underlying market conditions did not rank particularly high in any group. On the other hand, there was one area all respondents were in unanimous agreement over; the importance of developing a high performing team and then setting a strategy, communicating that strategy and executing as being the key to success.
Interestingly, C-Level views of competencies which help them succeed or fail differed from others in one key area; communication. Leaders perceived that where their C-Level colleagues had most often failed was caused by their lack of a clear vision, failure to build teams or not being able execute. However, while other levels agreed on the importance of vision and building teams, they also saw failure to communicate as another key reason for their ineffectiveness.
It is understandable that when leaders and their top teams did not develop a well articulated and thought out vision, when there were no lucid strategies and direction, and when they didn’t communicate, the execution and competitiveness of the company was affected negatively. The requirement to build strong and cohesive management teams was also highlighted in a McKinsey Quarterly (“Teamwork at the Top”, when it’s not working well it affects the entire company). In short, nothing happens unless management and the front line want it to happen. They are the key to successful execution and this only happens with team cooperation across the entire organization.
A report in the Financial Times, “Organizations too, can be put on the couch”, notes that a 30% difference between a competitor’s performance can be attributed to differences of culture within the management team. If you want to build a “success” culture, it is leader driven, leader communicated, and leader practiced; “walk the talk”.
In summary it would be foolish to ignore market forces, to disregard the global economy, or to overlook financial systems. We know that we live in interesting times and the outlook is far from rosy. However, for every threat there is a counter and in every market condition there is opportunity. Whatever the case, for leaders and their organizations to be successful, these very clear practices must be employed:
- Build a strong top team
- Develop a clear vision and strategy
- Communicate the vision and strategies clearly and consistently
- Execute the strategies flawlessly
- Lead from your strength and stretch the organization for success