Book of the Year! Wilful Blindness by Margaret Heffernan

Simply, a cracking book and one that explains more about what has really being going on in these past few years than any economist has provided.  Written with a clarity, but fueled by anger, this book cuts through our most deep seated assumptions about our smartness and intellect. We, as humans, repeatedly fail to spot the obvious and speak the truth.
She writes "...our blindness grows out of the small daily decisions that we make which embed us more snugly inside our affirming thoughts and values. And. what is most frightening about this process is that, as we see less and less, we feel more comfort and greater certainty. We think we see more -  even as the landscape shrinks."
Heffernan is a good journalist and writes about specific case after case, ranging from the denial from the Catholic Church in child sex abuse to the arrogance of Alan Greenspan. By doing so, it becomes clear that our cognitive lapses are not just adhoc and confined to those of us in the slow lane, but endemic to the human experience. Powerful people frequently believe their own myths and models they create for themselves and impose on others. They are not sensitive to the impact they have. So, when a BP senior manager demands a 25% cut on a processing plant already cut back to the bone, resulting in multiple deaths, Heffernan argues that he could and should have known. Willful blindness.
Should be compulsory reading all members of a Board.

Gender Inclusion, a fiduciary responsibility

The issue of getting more women on to boards is becoming simpler and clearer. The research is in:

Boards with a better balance of men and women perform better than those dominated by males. 

'Professor Laura Tyson, former dean of the London Business School, found that diverse boards were more effective at running their companies'  Times, February 25.

Here is the link to the full Times article that quotes the Cranfield study.

http://www.thetimes.co.uk/tto/opinion/leaders/article2925767.ece

With this evidence, the question for all Chairman is what is their strategy  is for increasing the proportion of women on boards; not because of political correctness or because of legislation, but because the business will likely perform better. And, this is what they were appointed to do by shareholders.

Lord Davies, leading a UK governmental study of the issue, says:

"The motive for more female voices is not so that companies might make a token gesture towards gender parity, but because boardrooms which have a greater mix of men and women are more effective at steering and stewarding their companies'. Times, February 25.

Gender balance, specifically, is likely to directly impact evaluation of risk.

Fewer women on boards is indicative of failed talent development strategies, poor succession planning and a lack of targeted leadership development. It is also suggested of regressive male attitudes, such as 'women can't do maths', which are simply inaccurate. Men and women can do maths equally well when they have similar expectations of success. Therefore, the issue is one of expectation, not ability. 

This is why both men and women need to see more women business leaders. Not only will it mean businesses will access a broader base of leadership talent; it will also encourage more women to enter science and technological disciplines with ambition.

Executive coaching and mentoring have too often been used to anoint the heir apparent, rather than build a more inclusive board.  This is changing. Coaches are becoming more aware of their role in designing the right coaching interventions for sustainable business success.

Executive coaching; and board mentoring, are interventions that can have direct impact on accelerating the numbers of women on the board. Coaching can help shift male attitudes towards women, and embolden women to step up exercise power.

Lessons from Tunisia

The Financial Times (26.2.11) carried an interesting front page piece describing how car firms operating in Tunisia were "reconsidering" their relationship with former President Ben Ali. 

A tad late, I think. 

This suggests that  many global firms have not learned the numerous lessons from past experiences of investing in developing markets. 

The experiences of Suharto's regime in Indonesia, where western firms and banks made catastrophic bets on their relationship with corrupt and much despised family members, come to mind. 

All too often, firms seek a quick way to market access by fostering close relationship with an autocrat's family. These "relationships" are built on a mutual return of favors: A blind eye is turned to on-the-ground corruption in return for access to key decision-makers. Such relationships become quickly mutually reinforcing. Firms get lazy and complacent. 

As a result, otherwise clean global firms watch helplessly as their products are smashed up on global TV networks, and the autocrat and his or her extended family head for the airport. An all too familar picture. 

In these situations global firms are not just "doing business". They are reinforcing the very unstable and rigid regimes that enticed them into a trap. They are causing great harm to the societies in which they trade by enabling a regime to enrich itself at the expense of their people, causing long term political and economic instability. Think of the Pahlavi regime of Iran and how we  all continue to suffer the consequences of the corruption that took place in his regime on a grand scale, with complicity and full knowledge of respected global firms operating in Iran under his grace and favor.

A better and more effective way has to be found to enter and trade in developing markets. Firstly, I am a pragmatist and I know that relationships are the life blood of business in developing markets. Unless you know the right people, you're not really in business at all.

However, here are a few pointers as to what global firms can do to build sustainable and diverse relationships in developing markets:

1. Build a broad base of relationships, not just a dependency on one regime. Do not enter a market unless you are allowed to do this. 
2. Be very clear and transparent about the nature of these relationships
3. Express your ethical values in this relationship; and insist on transitioning to professional purchasing and contractual management within a brisk time period. 
4. Insist on audits of local partners.
5. Promote vocally economic and social (and even political) reform, to promote the general development of the community in which you trade.
6. Beware of hidden and implied reciprocal favors forged in Karoake bars by junior and middle managers.
7. Play a long game in these markets, and be prepared for short term obstacles put up by greedy autocrats negotiating for a larger slice of "their" pie. 
8. Do not build business plans or make commitments to investors assuming the continuation of autocratic rulers.

If investing firms follow these suggestions they might make a real positive difference in the communities in which they are investing. And, they will reap long term benefits to their global brand.

Women-on-Board Initiative

Click the link to see the interview with Helena Morrissey, Chief Executive with Newton Investment Management, and founder of the 30% initiative (and who has 9 kids!): 

http://video.ft.com/v/701925017001/More-women-makes-business-sense

Here is a really intelligent discussion of the business case for women taking more seats on the board. This follows a body of research (most recently from Cranfield University in the UK) that now points to the rather obvious fact that a balance of men and women is needed for better decision-making and risk assessment.

And, Ms Morrissey also suggests what women need to "seize the moment" to make change happen.

This is a real issue in Central and Eastern Europe where the percentage of women on boards is even lower than in the rest of Europe. Based on my own research on Poland's 'WIG 20', the number of women on boards is actually getting smaller (See table based on data gathered up to 2009). 

The situation is somewhat better in Czech listed companies, which I think is due to the larger representation of Austrian owned businesses on the Prague Stock Exchange; influenced by recent legislation monitoring the number of women on the Board.

Improving Airline Safety: Simple rules; intelligent behavior

Even as a frequent but terrible flyer, who craves a gin & tonic every time the safety belt sign goes on, I thought it was about time we all celebrate the remarkable progress in airline safety in leading western airlines.

The fall in the number of accidents from three fatal accidents per million flights to one plane loss for every 3.57 million flights is a remarkable case of what happens when we combine good technology, expert training, sensible regulation and empowerment of crews to do the right thing (Flightglobal.com).

Read below Charles Hogeman account of how this progress was made. His useful maxim I'm sure could inform many other areas of organizational activity:

Presenting on pilot standards at the Flight Safety Foundation (FSF) International Aviation Safety Seminar in October 2010, the Air Line Pilots Association International's chief human factors spokesman Capt Charles Hogeman summed up the limitations of regulation to enforce safety thus: 

"Simple, clear purpose and principles give rise to ­complex, intelligent behaviour. Complex rules and regulations give rise to simple, ­stupid behaviour."

The IATA rate equates to one jet hull loss accident every 3.57 million flights, whereas the world average is one every 1.5 million flights. A comparison with days gone by shows that, in 1979, the world average accident rate in the same category was three fatal accidents per million flights, so the global average has improved by a multiple of 4.5 in that period.

Source: Flightglobal.com

2011: A Year of Integrity?

I call for this year to be the year in which little by little, person-by-person, we rebuild integrity in our society, communities and businesses. We need to put the wheel back on the wagon.

This is an idea gaining traction. In the Jan-Feb issue of the Harvard Business Review,  strategy gurus Michael Porter and Mark Kramer argue for the reinvention of capitalism through the creation of shared value (CSV) between business and society. They criticize business leaders for conceiving of value creation narrowly and ignoring broader societal factors that govern their long term success.

As soon as one talks of "value" in the broader sense, they raise the question of our ethical decision-making and how we decide what is one value in preference to another. Porter and Kramer take business beyond the right/wrong polarity of compliance to laws and best practices, and they move into the qualitative area of good/bad:A broader and more complex understanding of ethics is needed.

This is timely, as the Edelman survey of Global Trust in Business presented at Davos (FT, 25.2.11), shows a steep decline in trust in business in the US, (to just 46% saying they trust business); and a marginal improvement of 2% globally, (to just 56%). This conceals a sharp drop in trust of banks in western countries.

This loss of trust matters a great deal. It influences the ability of business to shape the global agenda and at the micro level, will mean businesses (and especially banks) will have to work harder to gain the trust of existing and potential customers.

I'm convinced that at the heart of this issue is ethics. But this is not just a subject for law professors;. Nor can we just leave it to "them", then politicians and corporate leaders. It involves us all to be more conscious of our own values and ethical framework, and to act on those values in the face of increasing complexity and uncertainty. 

In June 2010, I wondered around a fascinating exhibition at the Science Musuem in Singapore. It was about the ethical dilemmas in science and medicine. The exhibits showed that there is often no right answer to ethical dilemmas. I reflected that we act with integrity when we consider the different ethical choices and make a conscious decision which we can account for. As US Supreme Court Judge, Potter Stewart describes so well, ethics is about that space that exists between our rights  and obligations.

Integrity therefore means more than keeping to the law, or complying with lists of codes, standards and professional rules. Yes, these are usually important. But rarely do such codes or rule books help us decide what is the right thing to do right now, in this moment.  The Lehman collapse, the Gulf oil spill, and the Iraq  imbroglio did not happen because we lacked the necessary laws or codes - they happened because there was a failure of ethical leadership. 

Put simply, political, institutional and corporate leaders in recent years too often promised more than they could deliver and did not fully consider the wider ethical consequences of their actions.They acted on impulse and in arrogance, not through conscious thoughtful choices.

Philosopher Simon Blackburn describes the need for us to take care of our "ethical environment". This means being aware of all the promises and commitments we make. It means considering the ethical basis of our actions. It means confronting truths.  It means taking ownership for what we do.

Most of us think of ourselves as ethical. Perhaps we work as a professional in some field and have the necessary qualifications and credentials. Perhaps we have a history of doing good work with our clients and we treat people with whom we work well.

Yet, this backward looking view and hubris can make us fall prey to the arrogance that can take over all professionals at some time or other. This is the point when we start listening to  our own ego too much  rather than to others:  Others who may have vital perspectives we need to make good and sounds decisions.

One thing I am working on as a coach is to be less proud of myself as an ethical and professional coach, and be more inquiring and reflective with clients and sponsors about "what is the right thing to do here?" I am learning all sorts of new "stuff" in the process. 

To be ethical therefore we need to be constant state of awareness and learning in relationship with other people (Griffin, D. 2002).

The three ethical perspectives I've found most helpful to guide me are as follows:

• The Utilitarian: What is my underlying purpose or utility in this action to myself, others or society in general?
• The Existential: What are the stark realities and painful truths of the matter, on which I need to decide?
• Deontological: What is my duty in this situation? (NB, Not necessarily to just "follow the rules")

There are many philosophical and ethical factors that go into making a good decision or action - but these three are often a useful starting point, particularly when in discussion with others.

I have designed this short poll to help each of us think about what we need to do more of in this year. The responses are confidential (I cannot see the individual results).

It would be interesting to see the spread of opinion about what is really important for us to focus on  ethically in 2011.

As ever, your comments and questions of any hue are more than welcome.

Virtue is the key to leadership

Like most people, I've been trying to comprehend the disaster still unfolding in the gulf of Mexico. The thought of 35,000-60,000 barrels of oil a day spewing unchecked into the ocean is an environmental nightmare. So much so that we have tended to overlook in recent weeks the deaths of eleven workers as a result of the original explosion. 

How could this have happened? And what do we learn from it? 

BP has a legacy of fatal incidents dating back the Texan oil refinery explosion in 2005, and the Alaska spill in 2006. A recurring theme of this blog is the consistent failure of highly capable and intelligent people to learn from mistakes. The decision by BP not to spend $US8-10m on drill-hole lining technologies, will be studied for years to come. BP followed the fashionable business-school agenda of outsourcing its operations and maintenance, and was left with its Chief Executive unable to answer even basic questions about how the business worked.

However, as we investigate and atomize the causes of this disaster, we run the risk of missing the real significance of the event in the bigger picture. It is also through reflecting on the coincidence of this event with others that we can understand its real meaning.

The coincidence I refer to is the aquital this week of Jeffrey Skilling, former CEO of the collapsed Enron. Skilling convinced and/coerced thousands of Enron employees to invest their 401k shares into company stock at a time when he knew it was about to blow out, and after he had withdrawn his own stock. His acquital means,  in the C-suite at least, lying, cheating and misleading people is not actually illegal. That is, his dishonesty was not proven to be an illegal act. 

I believe the real cause of the Gulf of Mexico tragedy reveals a much bigger hole in the ethical fabric of capitalism.

Rather than doing what is right, business do only what they have to to stay within the law.  Doing more than the law requires may even contradict the fiduciary responsibilities to maximize shareholder value. In the madness of quarter-by-quarter stock market capitalism, making prudent and sensible previsions for safety and risk management can be regarded as acting against the interests of shareholders, who may only own stock for a matter of hours.

Because breaking the law is (mostly) unethical, it does not follow logically that keeping within the law is necessarily ethical. 

Society itself is skewing the ethical framework of capitalism. Deregulation, outsourcing, and  the creation of merged corporations of bewildering complexity sounded like a good idea at the time. We too have all been guilty of losing sight of what is really important and right.

The real lesson of this tragedy is not, therefore in the realms of cognitive psychology. It is obvious that CEOs cannot understand the complexity they are taking on. From Lay to Fuld to Hayward, we are confronted with highly intelligent people overwhelmed by complexity. 

More and better psychological understanding might help, but won't solve the real problem.

The answer lies in Philosophy. This branch of learning has been all but forgotten in the rise of neuroscience and behavioral economics, yet holds vital and perennial lessons for mankind. We need to be constantly reminded that in every thing we do, we face ethical and moral choices. BP's failure is first and foremost not being aware and reflective of the ethical choices it is making. It simply grew too big and took on too much. By not being aware of its own limitations, it failed a basic ethical test - to represent what it can and cannot do, honestly.

The real lesson is that abiding by the law, and following the rules, does not mean that you are acting morally or ethically.  Your business can be at risk even if you are in the technically legal.

The implication is that leadership in business needs to rediscover the philosophy of doing what is right. Being courageous, honest and fair. Business in the last ten years, from Enron, to Lehman and to BP, shows a pattern of amorality that has brought great businesses to its knees.

The lessons therefore, are not about engineering, not about the law, nor even about psychology. The real lessons are the same ones Aristotle taught 2,500 years ago. We must go beyond the law and seek a good, virtuous life. For Aristotle is was all about character and in particular, the habits that flow from good character. Leaders must have good character themselves, but must strive to build good character in others. Above all, virtue comes from how we act, continuously. For Aristotle, achieving virtuous life, or eudaemonia, as he called it, is what its all about. By losing sight of this purpose, we have lost contact with our ability to make sound moral choices.

By reducing questions of business practices to engineering, the law or operational effectiveness, we have forgone access to fundamental human learning. As we develop the technologies to drill in deep water, or to trade in complex financial instruments, we have forgotten the philosophical knowledge, even the language,  that enable us to discern right from wrong.

We need leaders to rediscover virtue as the very basis of their leadership.

But how to put ethics into action. Can we really rationally decide if one course of action is more ethical than another? And, isn't everyone point of view equally of valid? 

Well, leaders can recognize and respect each persons ethical perspective, and at the same time seek the best possible ethical choice. These do not contradict each other. A useful model for leaders is the 6R model (The Code of Ethics and Practice for the Society of Coaching Psychology). Using the six hours as a basis for open, exploratory dialogue can increase the probability that good moral choices are made. The six Rs can be summarized as follows:

• Rights 
• Respect
• Recognition
• Relationship
• Representation
• Responsibility

For instance, workers have a right to life that cannot be compromised by a shareholders right to maximize their returns. People affected by decisions have a right to be included, even if they do not own shares. Public authorities for instance, should have been more involved in disaster planning.

By using the 6Rs leaders can improve their moral decision-making and at least be aware of where they are having to take ethical risk and make remedial provision for this, by improving safety processes, or taking insurance, etc.

Businesses do need to cut costs and take risks. Yet, the question leaders should be asking is not only "what do we have to do within the law" but what is the best ethical decision we can make. It is a matter of being able to properly account for the moral choices you make. This reflexive process is itself a virtuous action. 

Any decision-process is only as good as the character of the leader using it. 

Turn left, Turn right- A conversation with Rsyzard Petru and Michael Dembinski about the Polish economy

Ryszard Petru (Above Left), Michael Dembinski (Above Centre)

Turn left, turn right: Poland goes a different way

As Adam Zamoyski's popular history The Polish Way makes clear, Poland through out its history has taken a different path to the rest of Europe. Historically,  a religiously tolerant Poland sat out the wars of religion in the 16th-17th centuries. The country was erased off the map at the end of the 18th century, just at a time when countries were finding their national identities. November 11, which elsewhere is a day of solemn remembrance for the ending of WWI, is celebrated as independence day in Poland. Whereas the rest of Europe looks back to the 1930s as a dark era of hyper-inflation followed by depression, Poles look back to this pre-war era as a golden age.

It should be no surprise therefore that today Poland is experiencing a very different crisis from the rest of Europe.

I managed to catch up with two well-known commentators on Poland to help understand the differences that still beguile Poles and foreigners alike.

I asked Chief Economist at BRE Bank, Ryszard Petru, and then Michal Dembinski of the British Polish Chamber of Commerce a number of questions about the Polish economy. Here's a summary of these conversations:

How do you explain the resilience of the Polish economy during the world wide slow down?   

Ryszard: Firstly, there were no asset bubbles in Poland. The banks have tended to be highly restrictive on loans both private and commercial. Next,  our reliance on exports is half that of Czech, Slovakia or Hungary, so Poland has been less affected by the reduction in demand in other countries. Also,  the consumption patterns in Poland are different to Western Europeans. For example, Poles spend on food around 30% of  their income while Germans 10%, so there is not too much consumption to be postponed.    In other words, Poles need to keep spending a higher proportion of their income in order to sustain their basic needs. The Polish economy has been less leveraged than average European country, with a total debt to GDP ratio of around 40%, while in EU 27 close to  125%.

Michal: The ruling Civic Platform came to power with the slogan ‘An economic miracle for Poland’. And that’s just what happened! A large number of unrelated factors all coincided – by luck more than judgment – to soften the blow of the global economic crisis. Ryszard outlines some of these. I’d add the weakening of the zloty in February 2009 (by 40% to the euro), making Polish exports more competitive and Poland more inviting for FDI, and a lack of glaring errors in macroeconomic policy. Also worth bearing in mind that as the automotive industry crumbled around the world, Poland continued churning out small, economic cars such as the Fiat 500 and Panda and the Ford Ka, which continued to sell well, especially with scrappage bonuses across western Europe.

What are the big economic risks that business leaders in Poland need to watch out for over the next 12-18 months?

Ryszard: The risks are mostly global. There is a risk that recovery in the US and Germany will be too slow, and that global imbalances in currency and trade, with China for example, cause instability.

Locally,  fiscal dynamics could be a problem. What I mean by that is if deficits do not decrease in the near future Poland could get into debt spiral, which should be avoided at all costs. But the likelyhood of such development in rather small.

Michal: The shocks will be exogenous. Polish is economically and politically stable, but the Greek debt crisis (which caused the zloty to drop by 6% in value against the dollar over three days) shows how vulnerable its economy is to events abroad. The crises that engulfed Hungary and Latvia in February 2009 hit the zloty even harder. Neither Greece, nor Hungary, nor Latvia are even neighbours of Poland.

Michal (cont): My view is that Poland’s budget deficit is over 50% and heading towards 55% at which stage the constitutional alarm bells will ring. And the EU27 GDP-to-Debt ratio quoted by Ryszard, I agree, although this figure includes Greece (150%) and the other PIIGS (Portugal Italy, Ireland, and Spain), but also the more fiscally prudent countries of the north. UK’s is 70%. I reckon the EU 27 average would be nearer to 100% as a proper point of comparison. .

One economist commented to me that he regarded  anything below a +3% GDP growth as a technical recession in a developing  economy such as Poland. What’s your view of that?  

Ryszard: He is  right. Due to the catch-up effects, Polish potential growth rate is around 5%.  Historically growth below 3% was not leading to increase of  employment.

Michal: If you look at what happened between Q3 2001, when growth bottomed out at 0.3%, and Q1 2004, when it hit a pre-accession peak of 6.9% – during that time, unemployment continued to rise. Lack of flexibility in the labour market means that unemployment – normally a lagging indicator – in Poland is even more so. Things have improved since 2001-04. Prof. Witold Orlowski says that Poland ‘only’ needs to grow at 3%-4% for there to be net jobs growth – no longer the 5%+ required in first half of the previous decade. The US, by comparison, needs to grow by a mere 0.5% for job creation to become visible.

Should Poland stop comparing itself to mature markets  in the rest of Europe as opposed to more relevant (and stretching) benchmarks, such as the BRIC countries?  

Ryszard: If you look at the structure of Polish economy,  there are more similarities with the rest of Europe than with BRIC countries; for example, in their access to oil and natural resources, and the overall size of the country.

Michal: I don’t think Poland is striving to plump itself into the Rich Old Europe club; it complains – rightly – that it gets unfairly compared with countries like Ukraine, Latvia or Hungary, which have economic problems of a different order of magnitude.

Any  other comments that you think would be helpful.  

Ryszard: What I like to say about Poland that is still has a huge potential for  growth. The lack of basic infrastructure, especially motorways, a high rural population are just two factors that show how underdeveloped we are on the one hand,  but on the other show how much we can gain by changing it. Poland is like a small China in this  respect

Michal: Of interest to Poland-watchers will be the political debate in the run-up to the 2013-2020 EU budget perspective. Poland believes it deserves another round of EU funds similar in size to the 2007-2013 one. “If Spain received such sustained help with convergence, then so should we”, runs the Polish argument. Whether the net beneficiaries to the EU budget will be able or willing to stump up is another matter. 

Perceptions of Poland are changing. The Economist ran a very favourable article on Poland on 28 January. They comment: "It was the only country in the European Union to register economic growth last year, at 1.2%. As Jacek Rostowski, Poland’s finance minister, likes to point out, GDP per head rose from 50% to 56% of the EU average in 2009—a record jump".

Moreover, investors are beginning (belatedly) to differentiate Poland from the rest of the CEE, which has experienced a real and far deeper crisis. The Financial Times is reporting that Poland cost of debt was less than that of Greece or Spain, and modest and stable by international standards. Poland has been able to re-finance its debt successfully.

My own view is that Poland has a achieved economic stability, and this has to be a good thing. But, this has been won at the expense of any long term vision about how the country will achieve sustainable wealth creation. The philosophy of "tight money" institutionalized by former National Bank of Poland President, Leszek Balcerowicz has squeezed out not just inflation and asset bubbles, but also entrepreneurship, creativity and innovation. And I think a better balance has to be found.

Banks lend only to sure-fire cash cow or asset rich businesses. This policy is good for big business and small traders, but sucks the life force out of SMEs, which is the principle source of growth in value and employment in mature economies. The entrepreneurs who do succeed in Poland tend to be a rare, hardy breed indeed.

Poland's lack of strategic investment in education will constrain the long term potential of the country.  There is no Polish University in the top 100 in Europe, although the private business school, Kaminski Institute, did register in the FT MBA rankings (at 42). And, Polish businesses have traditionally under-invested in training and development, preferring instead to use free cash to fund the business.

All this means that while the economy may win praise from economists for its stability and financial prudence, it is failing to generate enough wealth for its population, or enough jobs for its young people. Unemployment has risen to 12.8% (in January 2010), whereas, by comparison, unemployment in the UK is 7.9%. Hidden from view is also chronic under-employment, with too many trapped in low value, unskilled bureaucratic jobs.

So, while agreeing with Ryszard and Michal that Poland needs to be looked at uniquely on its own merits I am concerned about the lack of vision and pace of reform. As a coach, I am very interested in how people compare themselves to others and the impact this has on their attitudes and behaviors. Donald Tusk was quoted in the Financial Times (Jan 28) as follows: "Who would have thought we would see the day when the Polish economy is talked about with greater respect than the German economy." To me, this indictaes a mindset of stunning complacency and perhaps a good leading indicator of a poor execution on much needed social and economic reform.

High migration is the social consequence of this, leading on the one hand to a haemorrhage of talent and on the other, a lucky escape for politicians, who would otherwise have to come up with solutions with unacceptably high youth unemployment.

Probably, this situation has only been sustainable due to the complete collapse of the left in Polish politics, due to its associations with ex-communists, SB-spooks and corruption. But this will not last for ever. The neo-conservative PO will soon have real contention on its hands if it does not develop jobs and viable, attractive futures for young people.

A recent trip to Lublin in the South East of Poland brought home to me how different their experience was to the lives of business and professional elites growing comfortable in suburban districts of Warsaw, Poznan and Lodz. Poland has one of the highest earnings differentials (the earnings gap between rich and poor) in the developed world. [Michal points out: Worth noting that in 1989, Poland, along with Japan, had the world’s smallest disparity between the poorest and richest quintile of society!]

The title of this article comes from a delightful Hong Kong/Taiwan movie of the same name. It is based on a Szymborska poem about two lovers, destined for each other, who nearly meet...but not quite. I won't spoil the ending for you. This is a wonderful allegory on Poland's relationship with Europe. For Poland to "find Europe" it needs more than just economic stability.  It needs a vision for the future which meets the rapidly changing needs of a much wider cross-section of its population.

Book Review: Susan Greenfield, I.D. The Quest for Identity in the 21st Century

Professor Greenfield is one of the world's leading neuro-scientists. She is Professor of Pharmacology at the University of Oxford. I had the great pleasure to meet her after a seminar at the leaders in London Conference in November, 2007. I was struck then by how she could relate complete scientific insights with a deep concern for humanity. This book takes this winning combination to a new level.

It is wonderfully informative about developments in modern brain science. But it provides a lot more. The book is really about what makes us human. Her thesis is that our brains are highly dynamic entities that constantly interact with, and are changed by our environment. She describes neural plasticity, and the  capacity of the mind to change and develop.

She writes: "The dynamics of the environment and the neuronal malleability give rise to an ever evolving identity, one that is unique and individual, yet an individuality that is constantly transforming".

No longer can we assume that our brains are "hard wired". Our minds are not fixed at birth. Our brain, mind and personality are part of a dynamic system that change throughout our lives. The implications for leadership and coaching are profound.  Minds can be nurtured and developed. The environment can foster minds that become more creative and intelligent. Through conversation, learning and experience we can continually develop ourselves.

At the same time, Professor Greenfield points out our identity is at risk. Technology advances present a series of ethical dilemmas as well as providing many obvious benefits. But more than this, she argues that our very connectedness and immersion in "wrap-around" web technologies can threaten our sense of who we really as people.

This book does more than just describe the threats. It inspires us to protect our humanity at all costs.

Book Review: The Smartest Guys In The Room, Bethany McClean, et al

Although the fall of Enron now seems old news, the book and movie are as relevant today as in 2003.

It is an insider expose of the macho, ego-driven ride to disaster. It also, as today, charts a tragedy. Many decent hardworking folk working for firms acquired by Enron lost their 401ks and a lot besides.

Unchecked risk, leaders without scruple, out-right lying about the real value of stocks - it's all here. On the movie you can here the Enron traders cynically manipulating California's energy prices to max-out on profits.

It also shows how Enron innovated the very credit instruments that formed the heart of the 2008-09 sub-prime crisis. In my view, we have lived through one continuous crisis, starting in 2003, the alleviation of which caused the bubble of 2008.

The book neatly integrates the sequence of events and links to a psychological interpretation, referencing the infamous Milligram experiments, showing just how far people will go to follow the orders of authoritarian leaders.

The book also works as a story of how one female journalist and one female whistle-blower brought down the stack of cards.

Feeding time: Bankers bonuses and the need for Good Banking

I wanted to build on Colin Gruar's article yesterday and add some perspectives to the very topical subject of bankers bonsues, and what it says about the state of the banking industry.

I have added the widget of the gold fish. Like goldfish we seem to swim around, respond to the immediate stimuli and retain only about a seconds worth of memory. Haven't we been here before?

This tendency to forget is not new. If you watch the movie Smartest Guys in the Room about the Enron collapse of 2003, you will see Chuck Prince in denial to a Congressional hearing. This is the same Chuck Prince that led to the fall of THE biggest banking brand, Citigroup.

Just yesterday, the Economist dropped on my desk arguing that a second bubble had emerged. Yet, news from Wall Street and the City of London suggests that bumper bonuses are in the offing due to the massive year-on-year rise in profits. It might well be the case therefore that bankers will receive inflated bonuses on the back of growing assets temporarily, which will simply crash again mid year as we enter a second dip.

It is not banker bashing to suggest that this is wrong. Ultimately, it means that the bonus mechanisms inherent in many bank bonus plans ratchet up, but not down, resulting in a too greater share of the economic pie being given upfront to bankers.

The result is not just public anger, but the real risk that the Financial Centers of Europe end up being regulated by Belgian socialists. If bankers behave like goldfish there is only so much governments can do to prevent this, given the complex political trade offs going on in Brussels.

Banking by nature is a risk taking activity that has to allow large scope for entrepreneurship. Regulation that turns banking into a utility will impoverish the whole of Europe, not just Frankfurt and London.

The answer lies in rediscovering the old ethics that underlay the growth and success of the financial centers from the thirteenth century onwards. In 1801, the London Stock Exchange adopted the motto, "My word is my bond". We might guffaw cynically today. City slickers might say, "Come off it, mate, you don't really expect us to believe that today".

Well, the answer is yes, we do.

As both a former head of Executive Compensation for the Hay Group in Asia, and as an Executive Coach, I have seen banking leaders increasingly opt out of their leadership responsibility to allocate bonuses fairly and ethically. Rather than making balanced judgments, banks adopted formula based schemes, linking bankers bonuses directly to short term indices, such as new business, fee income and net profit. Nothing can indicate more the lack of trust within the banking industry that its leaders were no longer trusted to make decisions.

Cynically, banks created a lot of HR bumph around bonuses, designed to create an impression that clients came first and their bank was committed to the public good. The evident disregard for these words in the actions of their leaders meant that no longer was a banker's word to be trusted.

The key point I want to make however, is that we need good banking. Banking is how wealth is created. I recall some years ago at a function in the City of London sitting next to an bond trader. I asked him how his day had been. He replied, "Not good really, I just dropped $5 million. Never-mind, tomorrow's another day". We clinked glasses and toasted to success. This is banking.

Bankers who have protected their clients assets and found new sources of growth need to be reworded handsomely. Bankers who simply grow with the market should receive a salary and no more. Bankers who fall behind the market need to have immediate cuts in their cash compensation. These performance indices should be measured on a rolling three year basis. 

Most banks simply don't do this. They prefer to manage performance by mass firings (often, after the market has crashed), leaving the rest to enjoy the pie. This creates a selfish, greed culture in which undermining your buddy from college becomes a rational act. At a macro level, it means partners of Goldman Sachs feast on the bones of Lehman brothers, while adding no value other than being the last man standing.

Back to Colin's article. Banking can only be recovered if leaders rediscover the morality inherent in banking. Short term concerns about loss of talent are misplaced. Banks that act on sound values will attract customers and talent in the short term, mid-term and long term.

Within a bank and across the banking industry, these winners and losers should broadly balance out to ensure the banking industry does not consume a too greater share of the economic goods.

Here's my view of how to do this:

• Banking leaders demonstrate they act ethically when confronted difficult choices. For example, telling the truth would be a good start.
  
• Banks do away with short term, profit-linked bonuses 
• Banking leaders become individually accountable for making bonus decisions based upon good economic information and in accordance with core banking values
• The overall pattern of variation in banker's bonus pay becomes clear to the public
  
• Promotion within banks weight heavily towards those who have shown they can make good ethical choices
• The Boards of banks are strengthened by well paid, expert and independent non-executive Directors with the power to report independently to shareholders and regulatory to governance risks within the bank.

There is much more to be done.  But these things would be a good start and help re-build a banking industry to be proud of.

Guest Contributor: Dr. Colin Gruar, Bankers need morals to rebuild their brands

Dr. Gruar is a former Marketing Director of the British Heart Foundation and has been awarded a Doctor of Business Administration (DBA) from Cranfield School of Management. 

He now leads Repubrand and advises major corporations on strategy and branding.



Bankers have destroyed their global brands. Never has there been so much resentment against banks, and yet we need them as the wealth-generating engine of our economy.

Alan Greenspan thinks another collapse will happen again ... and we agree. He thinks it’s only human nature, and you can’t control that. We disagree. We think it’s behavioral, and we know we can change brand behaviors. Despite £1.3 trillion having been pumped into the ailing banking system (not to mention the ‘secret’ loan of £60 billion) in the UK alone, there remains real concern that we haven’t learned our lessons, or made changes to prevent it happening again.

Some say the Anglo – Saxon banking model is dead in the water. Many of our European partners want to see fundamental change

Lord Turner, Chairman of the UK's Financial Services Authority, conducted his thorough 'drains up’ review. With a ‘vested interest’ in shoring up the existing regulatory system, the FSA wants ‘tougher’ legislation with ‘more teeth’. But when you consider that the FSA failed to use the ‘simpler’ legislation effectively, why should we believe they could do any better next time, with more complex rules to follow? No Lord Turner, regulation is necessary but not sufficient. We need to address the root cause of the crisis if our global banking brands are to be rejuvenated

We think Gordon Brown is on the right track when he says ‘Bankers need Morals’, except it is not just about Bankers. And we don’t believe you can build morality off the back of legislation alone. Legislation can underpin a moral code, but not create it. Instead, it requires Leaders who are clear about their brand values (what they stand for) and demonstrate to their people how to live them. Deep down, most business people yearn for more integrity in the workplace.

Leaders set standards, including MP’s. So when our organizations have their ‘backs to the wall’, what happens? We ‘look after number 1’. That’s what we see everyone else doing. It’s a ‘learned’ behavior that we act out, subconsciously. We don’t know we are doing it. This is the real challenge, changing subconscious behaviors. Recent commentary on Bankers bonuses shows the game of ‘look after number 1’ is back in play, with JP Morgan recently paying its biggest bonuses ever! Looks like Greenspan will be proven right, unless we do something major, soon.

Bizarrely, the FSA recognize this issue but have done little to address it, In March 2009, Hector Sants, Turner's boss, was reported as saying:

‘Managers of the future must acknowledge and fight against the herd mentality ... the recognition that financial markets are not rational, but rather that they are a behavioral system built around personal aspirations, is critical to us effectively changing this time around’.

So how do we stop this game? Sir David Walker, former Chairman of Morgan Stanley International,  was asked by the British Government to make recommendations on Bankers pay and these may help, but again, we think ‘necessary but not sufficient’. More than controlling pay, we need to create strong, value driven cultures that are clear about what is acceptable behavior. For Banks, this must include a social responsibility. How would they account for their social impact to day? To change, we have to help managers practice appropriate behaviors and decision-making, just like pilots regularly practice how to fly (and crash) safely. Building the behavioral competency of an organization is the only way to ensure its members act appropriately through uncertain times.

And we agree with Mervyn King, Governor of the Bank of England. It is essential for Banks to be subject to market economics, including failure. That’s a big, big problem at the moment that has not been addressed. Bad behavior isn’t being met with a punishment that fits the ‘crime’. Nobody has been properly brought to book. ‘Crime’ is therefore being rewarded. And as any law enforcer knows, that’s a recipe for anarchy. Only by rewiring the value system, will behaviors really change and that will take time, so the sooner we start, the better.

As news is received of record bonuses being paid this month at JP Morgan, and other banks clearly feeling the need to continue to ‘reward’ their staff, it will be interesting to see how this moral dilemma is played out, publicly and politically across Europe. Both the British and French governments have already expressed their consternation at the behavior of some Bankers, when will they wake up and smell the coffee?

Suggestions for Comments: How do you think values-based leadership can be instilled once more in Banks?

To learn more about value driven cultures and how you can build the behavioral competency of your organization, contact colin@repubrand.co.uk.

Dr Colin Gruar is a strategist, consultant and coach at Repubrand Limited. Repubrand specializes in helping brands build strong reputations. It does this by working with clients in 3 ways: 1) to increase their strategic momentum (because most change takes too long and lacks focus); 2) to learn new skills to improve the effectiveness of strategy implementation (because good strategy requires doing new things); and 3) to help top teams achieve greatness (because being the best at what you do is what its all about). You can read more at www.repubrand.co.uk.

Connecting The Dots

I watched the press conference last night in which President Obama displayed understandable frustration at the failure of various National Security departments to "join up the dots". As a leader, he is not alone in watching in disbelief as staff fail to spot important trends, see new threats and opportunities, or connect different pieces of information to get a clear picture of what is going on.

The picture emerged of highly educated and intelligent analysts myopically looking at lists of data, rather than spotting the significant fact that Al Quaeda had adapted by recruiting single angry young men into their ranks using a simple,  intoxicating ideology.

As journalists pointed out quickly, the 9/11 Commission had identified the exact same failings eight years earlier.  The President, like many leaders in his situation has called for "Accountability Reviews". But, this is not a structural problem of who's accountable for what. This is about an unproductive repetitive pattern of behavior, with it roots in cognitive psychology and the way in which we think and form images in our minds.

What the President and all leaders have to deal with from time to time, is for the natural human tendency homeostasis: The tendency to see things the same way unless presented with overwhelming proof to the contrary. It is one reason why we have stereotypes. It is one reason we sometimes fail to join up the dots.

I would argue therefore, the answer lies not in "Accountability Reviews" but the compulsory reading and discussion of "Zen and the Art of Motorcycle Maintenance" for all Homeland Security staff.  The book is about a sensory journey of the author, Robert Persig, who discovers how to become aware of the significant things in life. In his analysis of why most people find motorcycle maintenance difficult he appears to describe exactly why highly intelligent analysts fail to spot threats, or marketing people miss opportunities, or sales people fail to close.

He explains:" The real cycle you're working on is a cycle called yourself. The machine that appears to be "out there" and the person that appears to be "in here" are not two separate things". In other words, it is when we become aware how our self and pieces of information interact as a whole that provides the subtle clues as to how solutions to apparently complex problems can be developed. This calls for a creative process, not an analytical one.

All science must involve the creation of an imaginative hypothesis at some stage in the discovery process. Science, economics nor business are never "just about" the data, the numbers, the facts. It is the meaning we draw from these facts that allows us to form new figures in our mind (gestalts) and see patterns, possibilities and solutions that were previously hidden from us.

And, first, we have to be ready to drop our previously held images. US National Security held onto an image of complex, multi-event plots. They did not see Al Quaeda reacting and adapting so easily.

Persig writes: "We take a handful of sand from the endless landscape of awareness around us and call that handful of sand the world".

I can imagine the the pressure on the Honeland Security analysts. "Stay focused", might have been the directive command from their boss, encouraging the person to think that the more they looked at the data, the more deeply and intensely they thought, the more likely it is that answer will be deducted. All the time, the person moves further away from making the critical connections. Being focused can be precisely the wrong directive to solving complex problems.

Alternatively, sitting back, looking out the window, going next door for a chat, even going for a walk and looking at the data again when you get back, moving it around, looking from different angles, feeling it, rather as a craftsman would carve a table, can be far more effective in such situations. 

There are several key things all leaders can do to coach people to "connect the dots" :

>Help people see the whole landscape through exploratory language: What's happening out there?

>Foster a creative and energetic work environment, with minimal routine work

>Encourage peer-to-peer contact, and overcome silo-ed thinking

>Question preconceived images and assumptions, often hidden in peoples metaphors and word choice

>Recognize work as a craft, not just a job with defined lists of accountabilities

>Articulate  clearly what is important and what is less important NOW, and the reasons why

The US, as with most organizations, has the capability to solve its own problems, if it draws fully upon the resources of its culture.

Discussion suggestions:

What are the ways in which leaders can help their people make conenctions between different pieces of information?

How far can we rediscover work as a craft? 

How do leaders themselves overcome homeostasis, and what are the consequences if they don't?

Happy New Decade! Time for the Teenies

Congratulations. You made it through the Noughties. Twin Towers; two wars, Afghanistan and Iraq, both with terrible aftermaths; Hurricane Katrina; The Tsunami; floods in India; two major economic crises, Enron to Lehman; two epidemics, Bird flu and Swine flu; and urban terror, 7/7, and Madrid; and the double shame of Abu Grahib and Gitmo. The past decade is not likely to be mourned by many, struck as it was by a series of paired misfortunes. We have to feel happy at least that we got through this.

And yet, we also need to enter the Teenies with a sense of optimism, even pride. Beneath the calamities, the worst decade since the 1940s taught us is how to work together. The last two years have seen a major global depression avoided by unprecedented and successful coordination. China weighed in and threw itself behind global stability, ironic given its continuing ideological allegiance to communism.

Poland and other new entrants to the EU tangibly brought Europe together again, in a fashion not seen since medieval times. Hundreds of thousands of young East Europeans sought jobs and experience abroad, returning cash and knowhow to their home countries in the process.

The Tsunami brought a coordinated global response and on-the-ground activism in a way that contrasts strongly with the indifference towards Rwanda and Sarajevo in the 1990's.

India and China emerged as major economic forces with the ability to lift tens of millions out of the poverty trap.

The decade finished with the highly imperfect but significant Copenhagen agreement. Again in pairs, the Lisbon Treaty came into force, which will enable much higher levels of European integration to take place.

The role of women in public life and business took huge strides. Women lead countries and corporations; and they now account for about half of all entrants into the accounting professions. In developing countries, women are benefiting from service jobs resulting from globalization. Yet, think back twenty years to the times when many men and women argued that a male dominated society was an natural order of things. The rise of women shows that change can and does happen. Things are not going to be always the same. We can make conscious decisions about how we organize society.

If there's one thing all of the above showed, it was how these events were seen and felt around the world. Globalization is not just a function of the expansion of corporate structures, it is a mindset reshaping the way we think about the world. Media too, both official and unofficial, is becoming more global and real-time. Social media is at the cutting edge of this. We look at Iran on the bring of a revolution, we see videos and read tweets from the streets.

President Obama was elected saying "Yes, we Can." What has he achieved, people ask? Well, aside from stabilizing the economy and passing historic health care legislation in year one, I believe he has made us all feel differently. The proud Iranians patriots fighting injustice in their country are not not necessarily pro-American, but the changes they are attempting to bring about are going to be a lot easier to achieve with a thoughtful and conciliatory Obama as President, rather than the instinctive and abrasive Bush.

Unquestionably, the world faces great challenges. The troops will need to come home from the Middle East, while maintaining stability in these countries. The debts incurred while stabilizing the economy will need to be paid off through taxation or cost-cutting, while not triggering a global recession. The world will actually need to cut its emissions and mitigate the effects of environmental erosion on people already at the economic margins.

But I for one start this decade in a cautiously optimistic mood. There is a new global alignment around the need for economic and banking reform; for environmental action; for fairer policies governing global trade. There are disagreements about how to do this, and who should pay for what. But, we are leaving behind much of the thoroughly neo-conservative and nationalistic baggage that has so constrained the debates in the last decade. The Teenies will see solutions to these problems.

One thing stands out for me as the defining theme of the coming decade: The need to change patterns. Alignment and awareness are not enough. Individually and collectively we need to reduce our dependence on debt; live sustainable and balanced lives; be prepared to give more to those injured by global changes that they cannot control. This requires us to think and act differently. We need to rediscover our ethical sense and work pride - we do it because it is the right thing to do, not just because we are incented that way. Yes, Thiery Henri might be right that most footballers would commit handball as he did. Yet, neither Bobby Charlton nor Franz Beckenbauer would and they achieved greatness because of this.

So, I think the Teenies will be about a decade of change. Reform of business and financial institutions has to occur. Businesses and banks will have to account for the social cost of what they do and the broader societal risk that they incur.

Business will need to be authentic and honest. They will need to appeal to a young generation of employees and consumers who feel they have been lied to. Just like the Ayatollahs of Iran no longer have a monopoly of information within their country, corporate bosses need to understand the revolutionary nature of Web 2.0 and how social media empowers individuals and communities.

The beginning of the decade is a good time for each of us to think about how these broader patterns will shape us, because shape us they will. People who succeed in this decade will be the ones who will sense the changes taking place and embrace it, rather than fight it.

The hackers who broke into the servers of the University of East Anglia Environmental Science department, revealing as they saw it the falsehood of climate change, are a metaphor for what we have to overcome: the saboteurs in our own minds. When change seems difficult, our mental sabateurs start telling us that "We don't need to change; no one else is changing; change is a trick; what do these experts know anyway; let's just stay the same until we're really, really sure". All these mental "saboteurs" will be present in our minds over the next decade. Being aware of them, and staying committed to changing dysfunctional or too-risky patterns of behavior will be the key to avoiding a personal and collective calamity in the coming decade.

So, I have chosen the image of a door into the next decade to represent a sense of new beginning, opportunity and relief. It is up to us to walk through it.

Even Tiger Woods has a coach, right...

Yes, it won't just be Accenture who has to rework its favorite tag line. Business coaches everywhere will be scratching their heads to think of some easy way to convey the role they have in coaching successful people. Tiger's enduring success presented an icon, an ideal: Someone who had actually "self actualized". He'd really done it. Athlete of the decade, model wife, kids, billion dollar contracts. With Tiger around, we all knew that with enough practice and a winning smile, anything was possible.

Now we are all faced with a hard landing back to Planet Reality. Life is full of painful choices and trade offs even for successful people and in some cases, particularly for successful people.

We are reminded of the fact that (according to Psychologist, Dr. Steven Ungerleider) within 5 years, 40% of Olympic medalists undergo psychotherapy or counseling in some form. Success itself creates its own dilemmas. As one motivational driver is satisfied, others remain unmet. They surface from our unconscious to remind us of their continued existence at inconvenient moments.

So what's going on? And, why can't we have it all?

In my view, it all relates to the key elements of our Mind: our Values, Motivation and Goals. There are other things going on in there of course, but these are the elements that I observe as a coach being most significant in shaping how we live. Keeping these three elements in some sort of balance is what I think life is all about. We function best when our goals are routed in our values and are driven by our motivational needs. For instance, if a successful person has very high Achievement motive, they might value the continued striving. It is not just about winning, its the struggle itself that they enjoy. It is this value that keeps them going on to keep winning. The goal to be #1 can therefore be grounded in real psychological needs. We achieve success in some aspect of our life, be it sports, work or in our social networks, as a result of this alignment.

Yet, just when we think we have it sorted, other motivational needs start to surface, under-nurtured and unmet. The need for freedom, independence, control, can assert themselves. My guess, it that this did so in Tiger's life, with disastrous consequences. The freedom to "be like other guys", and do what they do. With a life and family, and billion dollar promotional contract, Tiger's downfall brings to sharp relief just how "irrational" and self-destructive we can become when our motivational and value system collide.

This is a sad story. I don't know the chronology, but it might well be Tiger lost his bearings after the loss of his Father, who seemed unusually prominent in his adult life. Perhaps the child in Tiger hung around for just that bit too long. The impact on his wife and two young children can only be imagined.

The only lesson we can draw from this is coaches is to be reminded that its never just about the golf, anymore than it is ever just about work. Successful leaders bring their whole self into what they do, and their success impacts every other aspect of their life.

The sad part in all this is that Tiger was not able to change a habit before it was too late. Habits can be changed. He he is a young man with a lot to offer the world. He is a leader, icon, husband and parent, and what he does now will influence directly and indirectly many people.

Today, the message is that Tiger needs a real coach now more than ever. This is a distinctively different role and relationship from father or golf instructor. He needs someone with sufficient insight to spot the patterns, detachment to ask the tough questions and relational skill to build his self awareness. He needs someone who could bridge his public/private worlds and ensure the two were in alignment with each other.

And, let's face it, we all want to be inspired by the gods because they make us feel that we too, can rise above our complex, imperfect humanity.

Eric Schmidt on Why Everyone Needs a Coach

Thank you, Eric. This is a succinct business case for coaching. He nicely describes the normal reaction a successful and senior leader would go through when being presented with the option to work with a coach. He goes on to describe how a coach can help you understand how you are seen by others.

Building Better Boards

We seem to be approaching a synthesis on the issue of women taking on leadership roles. Rather than he issue being seen entirely through the lens of sexual polemics or political correctness, there is rising realization that having a balance of men and women on boards delivers better results to shareholders. Recent research from US universities, comprising an in-depth study of over 520 companies1, concludes "Companies with more women board members outperform those with least by 53%".

Roger Carr, chairman of UK listed Companies, Centrica and Cadbury, was quoted in the Guardian newspaper this week stating: "Women win board positions on merit but add value to the role with a different mindset, a different skill-set and a different style. Boards are intellectually and socially enriched by the presence of women and are consistently more effective through balanced judgment and opinion in decision-making."

The key conceptual shift here is inclusion, rather than just diversity. In the politically correct world of the 1990s we got bogged down with diversity, which descended into more of a statistical compliance activity. This also stigmatized women as a minority (which their not). Inclusion suggests an active seeking of other peoples point of view. It suggests that small circle decision-making is innately risky.

With this in mind, in many European countries there seems to be concerted effort to increase board representation for women, albeit from a low base. In London, a Women For Boards initiative has been launched with the sponsorship of BP. In Norway and Finland, a quota system has been introduced, but this remains controversial. New legislation is being introduced into Austria to encourage more representation of women (Edit: I'm still studying this).

But progress is "glacially" slow according to the European Professional Women's Network. A survey by Egon Zhender on their behalf estimates the total number of board seats held by women on the top 300 European companies as just 10%, up from 8% in 2004. But movement there is.

According to my own research, the situation in Poland is actually deteriorating. When I conducted research in 2009, the overall average female representation on boards was 8.5%. However, there has been an actual decline so that now only 13 women are represented in 240 board positions (5.7%) on the twenty largest companies listed on the Warsaw Stock Exchange.

By comparison, the similar figure on the Prague Stock Exchange is around 8%.

So the position today is a mixed picture, where the current reality shows some slow movement from a low base. But, there is a clear shift of attitude. No one can rationally say that a representation of 10% is either fair or in the best interests of shareholders.

This new awareness is timely, but much work needs to be done.

Reading books such as "A Collossal Failure of Common Sense", recounting the failure of Lehman Brothers and the classic book and movie, Smartest Guys in the Room, detailing the Enron disaster, one can only conclude that the very masculinity of these companies was their strategic weakness. Overly ambitious, unable to properly assess risk, unable to listen to feedback and unwilling to recognize obvious indications of failure were all characteristically male behaviors present in these familiar sagas of corporate excess and collapse. Its not that all men are like Fuld and Skilling, its just that too many of us are.

However, biology has provided the perfect answer: Women.

And, shareholders burned in the last two years should now be aware of this.

It is not sufficient to have just token representation of women. They tend to be either excluded by the male caucus or, as in the case of Carly Fiorina at HP, can behave in a more aggressive and competitive fashion than men. The prospect of having to conform to male stereotypes is one reason why so many women bail out before they even get considered for Board roles.

So, its not just about having more women on boards. Its about allowing the women that are represented to be who they are - women. This means actively encouraging feminine characteristics, such as empathy and intuition, to be more acknowledged as leadership behaviors.

A CEO who is both successful and is breaking the mould is Indra Nooyi, taking Pepsi into health foods and stressing the company's global and ethical responsibilities. Interestingly, She has been described by former CEO Reinemund as "a deeply caring person who can relate to people from the boardroom to the front line."

One reason why so many (male) Chairman cling on to the lag-argument - there just too few women available now - is that leadership competencies are defined too narrowly. If big business continues to emphasize competitiveness over collaboration; aggressive risk-taking over prudence, self assertion over influencing, then it will be mainly men that will fill the talent pool. If we start to value people who can empathize with customers, coach top talent and nurture the values of the organization, then more women will start to get noticed.

Again, research helps here. We know that competitive differentiation in periods of low growth is gained by customer loyalty. You need to make sure your clients are not enticed away by discounters. The key to loyalty is customer empathy. The ability to see the world from the customers point of view is not customer service biz-speak. It is crucial behavioral trait you need in leaders in order to get your product, positioning and price right. As US consulting firm Katzenbach pointed out in a recent study, front line staff learn empathy from leaders.

Which gender has naturally higher levels and easier access to empathy? Not men.

The book The Female Brain2, by Louann Brizendine MD, neatly summarizes the brain scanning research showing that women naturally have the capacity to mirror the feelings of others. As a generalization, Women experience feelings of others more immediately and directly via the brains limbic system. With feelings aroused within them, women observe small changes in non-verbal clues more closely. This is probably socio-biogical. In stone age times, women had to quickly discern friend or foe. Men often rationalize through their neo-cortex first before accessing their limbic zone. This probably is connected with the need to strategize in tribal conflict. Men needed to first calculate the odds of any attack or defence strategy, and the outcome of this rationalization would influence their emotions.

The significance of this biological perspective to business becomes clear if we consider Professor Emeritus of Psychology, UCLA., Albert Mehrabian findings which showed that in determining the meaning of any "like or dislike" message, we assign only 7% weighting to the verbal content. We give a full 55% of weighting to facial expression.

Therefore, women have a natural in-built advantage in non verbal and empathetic communication. Women are better at reading the true intentions of the other person.

But there is important difference that makes the case for greater board representation of women. Women to act on values more often than men.

Do you remember back to 2002 when Fortune carried the headline:

"THE WHISTLE-BLOWERS:
Cynthia Cooper, WorldCom; Coleen Rowley, the FBI; and Sherron Watkins, Enron

They took huge professional and personal risks to blow the whistle on what went wrong at WorldCom, Enron and the FBI—and in so doing helped remind us what American courage and American values are all about".

Time Magazine, Persons of the Year 2002.

In the cases of Worldcom and Enron, it was women who blew the whistle on false accounting practices. They often showed courage and tenacity in the face of male aggression and condescension. They held acted on their values - a female characteristic.

When Fortune Journalist Bethany McLean confronted the Enron COO Jeffrey Skilling, she did so by asking a naeive question "How do you make money?" Through his bluster and rage he gave the game away. It would probably have been a women who asked this (empathetic) question. Guys on the street, from analysts to auditors were still trying to show how smart they were by understanding the Enron accounts. Humility, empathy and the courage to act on values are powerful tools of leadership if we choose to recognize them as such.

Where was our Cynthia, Coleen and Sherron in 2007-8?

A final balancing remark here. I have referred to men as analytics and women as empathizers. This is of course a gross simplification. I believe most men and most women are similar most of the time, and can do pretty much the same things. However, over time there are inbuilt traits that we can notice and measure. And these become important at critical moments, when we default to our instinctive behavior. Research by Oxford Psychological Press3 in 2001, using the MBTI instrument, provides clear data that the personality traits of men and women differ and that certain traits appear more frequently in one gender than in another. Men show a greater frequency of introversion, pattern recognition, assertion, reasoning and being systematic. Women show a greater frequency for extroversion, imagination, empathy, living values and flexibility.

These are tendencies and not absolutes. Men can be empathetic; and women can be assertive. I coach many men who are uncomfortable filling the competitive macho stereotypes expected of them. I coach women who enjoy being powerful and are quite able to assert themselves. But for me, this simply reinforces the case for a balance of gender on Boards.

Women do have greater access to personality traits which have been underweighted in business to date. These traits will be much needed in future if we are to restore credibility to our values and re-connect with a younger more sceptical generation of employees and consumers. We need to move beyond the polemics and good/bad paradigm, and start to recognize that nature provided us with two genders for a purpose.

Through executive development, career management, mentoring and coaching, there are things that can be done to accelerate this change. The development focus needs to be widened however to include all those of either gender who find inclusion difficult. Under-representation might be a problem for women, but it is not exclusively a problem of women. Recognizing feminine values as part of a leadership paradigm is probably the most important change that has to take place, otherwise most women will simply not want a seat at the table.

©Andrew Atter

1.Catalyst, 2007: The Bottom Line: Corporate Performance and Women's Representation on Boards.
2.The Female Brain, Louann Brizendine, MD, 2006
3.Oxford Psychological Press, 2001

Other useful sources:
HBR, 2007: Women and the Labyrinth of Leadership, Alice H. Eagly and Linda L. Carli
HBR, 2002: Executive Women and the myth of having it all; Sylvia A Hewlett