An organisation can be destroyed by its own culture. There’s the slow route to decline, where outmoded assumptions and practices render it increasingly uncompetitive – a dinosaur which just doesn’t ‘get it’. But there’s also a swift route to catastrophe. In these circumstances, institutional collusion in interpreting key facts leads to pervasive managerial delinquency. We’ve seen it in the collapse of Enron and more recently in the fall of Northern Rock. We’ve seen tragic consequences in the Challenger space shuttle disaster, caused more by managerial than engineering failure.
Organisational culture therefore belongs firmly on the risk register for any significant organisation. Directors need to ask not just whether they are being given facts, but whether they are also being given the story. Their legitimate role is to challenge assumptions which lie under the facts. The over-arching question should be “what is the true story of what is happening here, and why is it happening?” In this article, I draw on my experience in executive coaching to unearth the main risks and identify the strategies to address them.
In the privacy of a coaching engagement, leaders often share vignettes of executive dilemmas like the one highlighted on page 82. Anxiety caused by navigating uncertainties at pace and scale sets up unconscious defensive responses. I call these defences a ‘flight into deviance’. We avoid thinking about, talking about and therefore addressing, the results we fear the most. And in complex, fast moving, ‘go-getting’ cultures there are many excuses to avoid reflection or asking the awkward questions. Eventually, executives cross the line from silent discomfort (a regular feature of life at the top) to flight from realities they should confront more openly. And when things beyond your control change as fast as they do these days, you might find it’s best to know whether the common ground, on which you thought you were all standing, has got any earth beneath it.
These days we can take a good level of technical knowledge and intellectual ability in a given job for granted. These are qualities related to our IQ. Our Emotional Quotient (EQ) measures personal qualities such as empathy, adaptability and persuasiveness. These qualities are becoming more and more important in a world fragmented by technology and changing work structures. How important? We reckon that EQ is twice as important as IQ in determining future career success (not to mention what is does for your social life). And it can count for even more.
It’s a growing phenomenon. The emotional abilities of today’s children are dropping even as their IQ is rising. So Emotional Intelligence is becoming more and more important as a way of recognizing tomorrow’s leaders. A low level of Emotional Intelligence can actually hold you back; think of the boss who loses their temper. Out of control emotions can render the smartest people stupid. The smart thing to do is work on your EQ. It’s not a fad, it’s not a trend. EI is the result of a long history of analyzing social intelligence (otherwise known as ‘what makes people tick’).
Another demonstration of the value of Emotional Intelligence comes from the financial sector. Hay Group provided emotional competency development support for 45 sales people in the insurance industry. Our client gave high quality product and sales training to a matched sample of 45 other sales people. Their intention was to run a comparison of the two groups for a full year. They called a halt to the action research after seven months because the difference in sales results was so large that they could not afford to wait another five months before training the control group.
Emotional intelligence is “the capacity for recognising our own feelings and those of others, for motivating ourselves and for managing emotions effectively in ourselves and others.” This has been misconstrued by some as a requirement to become ‘warm and fuzzy’ at the expense of having a hard-nosed business sense. But emotionally intelligent leadership is not about unfaltering ‘niceness’, nor is it about being emotionally bland or controlled to the point of appearing emotionless and robotic. Rather, it is about exercising real choice, based upon a realistic and accurate assessment of oneself in a given situation, instead of being driven by one’s emotions to act in an uncontrolled manner.
As described in detail in The New Leaders2, this perspective on emotional intelligence can be encapsulated in a behavioural framework of four competency clusters: self-awareness, self-management, social awareness and relationship management.
This kind of leadership is not based on personal dominance and is not directed toward self-aggrandisement,the service of self-interest or the exploitation of others. Nor does it rely on manipulation, threat or punishment. Rather, it shows regard for the rights and feelings of others, within the context of established institutional procedures and guidelines. In order to be a catalyst for change, these leaders must deal with their own uncertainties and gain the personal confidence that will enable others to respond positively to change. Emotional intelligence is not for ‘wimps’. In fact, leaders who are not emotionally self-aware will not be mentally tough enough to succeed in tomorrow’s business environment.
Organizations are emerging from recession into a tougher, more cost-conscious and performance-oriented world. It is clear that a return to ‘business as usual’ is unlikely. Indeed, the new mantra is ‘do more with less’. Firms are lean, and, if not exactly mean, concentrating their effort and investment on those activities that will deliver the greatest returns.
At a time when both financial and human resources are at a premium, the discretionary effort of employees will be the most vital component in creating high-performing organizations. And in order to ‘go the extra mile’ employees need to be both ‘engaged’ and ‘enabled’.
As we highlight in this issue of ViewPoint engagement alone will not driveperformance; enablement is also critical. Embedding both into organizational cultures is no easy feat. It requires strong leadership, management accountability, strong performance management, ongoing measurement,excellent communication and, last but not least, clear alignment between individual targets and rewards with business objectives.
It’s a challenge, but it can be done, as some of Hay Group’s recent research shows. Three of our landmark studies – The World’s Most Admired Companies (in conjunction with Fortune magazine), Best Companies for Leadership (with Bloomberg Businessweek) and The changing face of reward – provide valuable insights and lessons for fi rms wanting to create their own high-performance cultures. In the rest of this ViewPoint we examine some of the different levers to create better engagement, as exemplified by some of the world’s leading organizations.
Goleman’s book had all the earmarks of a classic fad: a bestseller featuring ideas and concepts borrowed from outside the business world; articles and follow-ups in dozens of professional magazines, including the Harvard Business Review; seminars at scores of professional meetings and conventions; and serious discussions in hundreds of executive suites and HR departments across the country and around the world. But a funny thing happened to emotional intelligence on the way to being forgotten. It wasn’t.
In fact, far from joining other management fads that have come and gone in the ensuing decade, the qualities that comprise emotional intelligence are more critical to the success of business leaders than ever. The reasons for this enduring value can be found in the ways the business environment has evolved since the 1990s – including the economic uncertainty of the last few years– and in how the core qualities of emotional intelligence help leaders strengthen their effectiveness in that changing environment.
Perhaps more to the point, however, emotionally intelligent leadership delivers results. Research has confirmed a significant performance gap between leaders who display the qualities of emotional intelligence and those who don’t. Hay Group’s own work has revealed that the most admired organizations report their executives demonstrate higher degrees of emotional intelligence – and that the lack of these qualities contribute significantly to the failure of high-potential executives. Emotional intelligence has endured because it really is essential to effective organizational leadership. And that’s even more true now than when it was introduced in 1998.
The impact of the Arab Spring has led to several announcements by governments regarding increases in pay and allowances for their national population, mainly in the public sector.
From a recent ‘Hay Group Middle East Flash Survey’, c. a third of the organizations surveyed in the Middle East are looking at expansion in revenue growth in the coming year, indicating a change from the sombre atmosphere of early 2011. They have forecast a healthy 5-15% revenue increase compared with global organizations. FIGURE 1 above highlights the 2012 pay forecast from the responses received from 1,500 organizations in 11 countries. It is clear that salary increases will outpace inflation.
All countries in the MENA region are forecasting a modest-to-healthy increase in salaries in 2012, although this varies depending on inflation rates. From government initiatives in the Gulf countries to recruit nationals, to revisions in pay and benefit policies in North Africa, to salary reforms in the Levant, all these have an impact on pay. A combination of civil unrest and legislation means many changes still lie ahead for compensation and benefits in the region.