Responsible, stakeholder-centric leaders

Marion-Rose Banks, Co-Founder of The Game Influencers

In January 2020, the World Economic Forum (WEF), in collaboration with Accenture, released a study entitled “Stakeholder-Centric Leadership Linked to Stronger Financial Performance.“

In this study, MD of the WEF Adrian Monck points out that due to the climate crisis, growing inequality and economic fragility that threaten human wellbeing like never before, “We need a stakeholder approach in which companies combine entrepreneurialism with purpose, working with others to improve the state of the world in which they operate.” The fact that the world trusts in business leaders to lead in this way, was recently also confirmed by the 2021 Edelman Trust Barometer, which demonstrated that ≥68% of the thousands surveyed globally believe that it is in the hands of our CEOs to step up and solve the problems of our society and our economy.

However, whilst responsible, stakeholder-centric leadership is no doubt an ethical imperative for businesses in what is now referred to as the ‘era of stakeholder capitalism,’ the tangible business results and financial yields that are gained from it, also prove that it has become a business priority. This same study by the WEF and Accenture for example demonstrates that those businesses who achieve high levels of innovation and stakeholder trust outperform their industry peers, with an average of 3.1% higher operating profits, as well as greater returns for their shareholders. Join me as I delve into some of the traits of ‘responsible leaders’ who we can also refer to as ‘transformational leaders’ and some of the business gains that can be obtained by leading responsibly.

But first, appoint transformational leaders

In a study entitled the Impact of Leadership on Organisational Performance (Ibrahim and Daniel, 2019), which surveyed the impact of leadership on the organisational performance of Coca Cola in Abuja, Nigeria, it was found that leadership and leadership style has a direct and substantial impact on the performance of co-workers, and that hands-on leadership improves employee performance and enhances accomplishment of the business goals.

One could therefore argue that the point-of-departure to improve overall performance and to accelerate the achievement of business goals and objectives, is to appoint transformational leaders. These results are confirmed by a league of similar studies which have been conducted over the years. A number of them are chronologically listed in a study with a similar title, namely The Impact of Leadership on Organizational Performance (2015) by Raluca-Elena from the Faculty of International Business and Economics at The Bucharest University of Economic Studies.

What do transformational leaders look like?

The concept and impact of transformational leaders are more broadly discussed in the latter study which points out that the term ‘transformational leaders’ originated from James McGregor Burns (Burns,1978), who characterised them as positive, optimistic and trustful leaders who are emotionally intelligent, encourage teamwork, set high expectations (which stimulate high performance), inspire a sense of mission and purpose, and promote innovation.

Later, Bass and Rigio (2006) concluded that transformational leadership is made up of four main components which are basically defined as follows:  i) charisma: forming connections with co-workers, obtaining their buy-in in the shared mission and gaining their trust, respect and confidence; ii) inspiration: inspiring others by communicating the business values with clarity, fluency, confidence and positivity; iii) intellectual stimulation: providing co-workers with the autonomy to leverage their own creativity, innovativeness and experience to perform their tasks and iv) individual consideration: paying close attention to each co-worker’s individual needs and delegating tasks with the necessary guidance, mentoring and coaching.

Again, similar observations are confirmed in more studies later years, such as the 2020 study by the WEF and Accenture which identifies five key traits of stakeholder-centric (AKA transformational leaders) which can be abbreviated as follows: i) stakeholder inclusion: safeguarding trust and positive impact for all, giving diverse individuals a voice and sense of belonging; ii) emotion and intuition: unlocking commitment and creativity by being truly human, showing compassion, humility and openness; iii) mission and purpose: inspiring a shared vision of sustainable prosperity for the organisation and its stakeholders; iv) technology and innovation: creating new organisational and societal value by innovating responsibly with emerging technology; and v) intellect and insight: finding ever-improved paths to success by embracing continuous learning and knowledge exchange.

Interestingly, the two principal denominators that have remained prevalent in all studies over the years that have examined the impact of transformational leaders on organisational performance, are that transformational leaders have a direct and substantial impact on business performance. In this respect, allow me to quote: “A performant and effective organization has a high degree of collaboration and commitment among stakeholders through work groups, team projects and management” (Cohen and Bradford, 2005).

Integrity – the guiding light of transformational leaders

When looking at the evidence, it becomes clear that trust is the glue that holds all the various traits of transformational or stakeholder-centric leaders together, and trust in turn, can only be achieved, when a leader has integrity that is beyond reproach. Allow me to quote from another research article Integrity & Trust: The Defining Principles of Great Workplaces by Shahid and Azhar (Journal of Management Research, 2013): “Integrity, as a measure of coherence and consistency, is key to establishing and sustaining trust.” Having leaders with unquestionable integrity is therefore of the utmost necessity to foster a culture of trust in the leadership of the business.

Another major driver for appointing or developing leaders with indisputable integrity, is that it is critical for rooting out counterproductive behaviour from the top down, which is now more important than ever, as we are rebuilding our businesses to rise from the ashes of COVID-19. As pointed out in studies such as Integrity Testing and Counterproductive Work Behavior, published by John Wiley & Sons (2018), conducting integrity tests is a widely-adopted and accepted scientific tool to test integrity and minimise counterproductive behaviour. By counterproductive behaviour we mean any form of behaviour that could undermine the legitimate interests and goals of the business and potentially harm any of its external or internal stakeholders, including the likes of fraud, corruption, theft, discrimination and sexual harassment.

Emotional intelligence – the leadership trait that trumps technical knowledge

Emotional intelligence (EQ) evidently shines through as one of the quintessential traits of transformational or stakeholder-centric leaders. One such thought leadership article that was published in Harvard Business Review, What Makes a Leader, demonstrates that EQ accounts for up to 90% of what sets high-performing leaders apart from peers with similar technical skills and knowledge. The leaders who soar and who enable their companies to soar, are thus not so much the ones with the greatest intellectual and scientific abilities, but the ones who understand how to build relationships, collaborate, coach teams, establish a culture of mutual understanding, respect and trust, and inspire others to greater heights.

Whilst the importance of EQ has already been widely recognised and discussed, the latest ‘Q’ that has become the buzz phrase in boardroom discussions, is the adaptability quotient (AQ). This speaks to the ability of leaders to remain resilient enough so they can swiftly rethink their strategies to ensure their businesses can effortlessly bounce back from any crisis and seamlessly adapt to an ever-changing business landscape, ensuring the business does not only remain relevant, but continues to thrive.

Transformational leaders create transformational businesses

Essentially, when the world talks about transformational or stakeholder-centric leaders, they actually mean transformational or stakeholder-centric businesses, because it is after all our leaders, who run our businesses.

The first and foremost principle of any ‘transformational business’ is to be ‘leadership-resilient’, which can be defined as follows: “Guided by leaders with unquestionable integrity, EQ and AQ, who proactively build inner and outer resilience to continually recalibrate and reframe their strategies to seamlessly lead their business and people through ever-changing circumstances and crises.”