Living dangerously:coin tosses, tigers and thepuzzling psychology of risk

Where did the peopleprofession come from?

Goodbye Donald, helloJacinda: why servant leadersgive us a warm, fuzzy feeling

Valerie Hughes-D’Aeth on lifein the Beeb’s HR hot seat

Because business is about peopleWork.

Autumn 2021

03

Work.In a world where the march of technology has made morerisks more quantifiable than ever – from daily dangers likecrossing the road or riding a bike, to the huge complexitiesof the financial markets – why do human beings so oftenreject careful calculation in favour of snap judgements?For one thing, life would be pretty boring if all ourdecisions were correct, but made for us by an equation.For another, we can’t help it – it’s just the way our brainswork, as our feature on the psychology of risk (p18)explains. The original US oil barons were surely some ofthe most maverick risk takers of all, but in the 21st centurythe giant firms they created are being targeted by a newbreed of ‘green’ activist investors intent on forcing them– and other carbon-intensive businesses – to take theclimate crisis much more seriously. Work. examinestheir unusual modus operandi – using the ownershipprinciple to enforce change – as well as their chances ofsuccess, on p50.

Andrew SaundersContributing editor

Because business is about people

Features in detail p4

Perspectives: distilled management thinking p6

15 minutes with… Rob Pierre p12

Valerie Hughes-D’Aeth on life in the BBC hot seat p14

The complex psychology of risk p18

A brief history of the people profession p34

Interview: Denise Kingsmill p40

The rise of the servant leader p44

Will activist investors solve climate change? p50

Corporate Japan’s Olympian challenges p58

Debrief: business research, reports and insight p66

Further reading p76

The off-piste guide to transparency p78

Inside front cover:

Japanese fans made from

silk and bamboo. Marco

Bottigelli/Getty Images

The new chair of theCIPD, ValerieHughes-D’Aeth, is certainly nostranger to the spotlight.As the formerHRdirectorof the BBC, shewas thepeople person in chieffor some of the nation’sbest-known – and bestpaid – TV talent. Shewasalso involved in some highprofile equal pay claims,notably that of Chinaeditor Carrie Gracie.Hughes-D’Aeth took overin 2014 in thewake of theJimmy Savile revelationsand her focus for the five-year stint that followedwas, she tells Katie Jacobs,tomake the BBC amoreopen and transparentorganisation. Her remitencompassed everythingfromnegotiatingwithtrade unions to fosteringa fairer ‘speak up’ cultureamong the corporation’s22,000-plus staff. Andnow shewants to use herexperience to benefit theentire profession.

Katie Jacobs is seniorstakeholder lead atthe CIPD and formereditor ofHR and SupplyManagement

ValerieHughes-D’Aeth

Psychology ofrisk

Risk – the gamble that anew idea or activity willpay off either personallyor professionally – is notonly the rawmaterial ofcapitalism, but also aninevitable component ofdaily life. So why are somepeople daredevils, othersdownright scaredy-catsandmost of us somewherein between? It’s one ofthe questions AndrewSaunders attempts toanswer by examining thepsychology of risk. And itturns out it’s got a lot todowithwhether we areglass-half-full or glass-half-empty types. Butperhaps the biggest issueis that, despite centuriesof progress in themathsof probability and thetechnology to apply itmorewidely, humanbeings are still far fromrational when it comes totaking risks.Will we everchange thewaywe think,and shouldwe even try?

Andrew Saunders iscontributing editor ofWork. He also writesforTheTimes, CondéNastmagazines andManagement Today

p18

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FEATURES IN DETAIL

As Labour peer BaronessKingsmill of HollandPark, she sits on numerouscommittees, is a championfor the quality of debatesto be found in theUK’supper chamber and hascrossed swordswithchancellor Rishi Sunakover Brexit. But DeniseKingsmill has an equallyimpressive and evenlonger business career.She is a board director atInditex, theworld’s largestfashion chain, was deputychair of the CompetitionCommission for six years,chaired challenger bankstart-upMonzo andhas been a non-exec forIAG, RBS (under FredGoodwin) and Betfairamong others. She tellsMatthewGwyther abouther early experiences asan ambitiouswoman in amale-dominatedworld,andwhy despitemuchprogress the genderagenda is still a live issue.

MatthewGwyther is abusiness journalist, and apresenter on BBCRadio 4’sIn Business

Q&A: DeniseKingsmillp40p14

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Ever wondered howthe people professioncame into being? Thisoral history takes in notonlyHR’s early rootsin workers’ welfare butalso its development intothe influential businessdiscipline it is today.Robert Jeffery talks tosome of the industry’sleading lights, includingthe CIPD’s Peter Cheese,Professors RichardSaundry, Paul Sparrow,andDrWendyHirsh totrackHR’s century-plusjourney fromVictoriansocial philanthropy,through twoWorldWars,numerous recessions, thedawn of the informationage and the comingof digitisation. Do thechanges wrought by thepandemic present anothergreat opportunity to putpeople right at the heartof the business agenda?

Robert Jeffery is editor inchief ofWork. andPeopleManagement

The historyof HRp34

Japan at acrossroads

Japan remains aneconomic powerhousebut there is little doubtits corporate culture is inturmoil. High-profile CEOresignations, an ongoingrow over executivepay and, in 2018, theheadline-making arrestand subsequent flightfrom justice of Renault-Nissan CEOCarlosGhosn, are emblematicof the country’s broaderquest to engagewiththewider world on itsown terms. But criticsof Japanese business,Paul Simpson explains,must first understandits unique culture ofcorporate stewardshipand its oftenmaddeningbut occasionallyuseful proliferation ofbureaucracy. A “dividedcountry with lowlevels of public trust inbusiness and gaffe-pronepoliticians” it may be, butas the Tokyo Olympicsshowed, it remains a gianton the global stage.

Paul Simpson is a journalistand author. His latestbook,TheColour Code,is published in October byProfile Books

p58

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PerformancemanagementFast, targeted feedback is morethan just common sense – italso raises performance levels.

EngagementBritain’s largest listedcompanies are required tolisten to their workers. Whyaren’t they doing it?

I&DWhen organisations taketargeted action on racialinequality, everyone wins.

RemunerationIs it fair to link managers’ pay tosocietal good?

Job qualityNew CIPD research suggestswork, across multiple criteria,isn’t getting worse.

LeadershipIs cultural intelligence the keyto creating effective teams,particularly in internationalworking environments?

MotivationInvestors and directors agreeon one thing: CEOs are beingpaid too much.

WellbeingHalf of all homeworkers feelanxious every week – and thatis a challenge for bosses.

Development‘Informal’ leaders are your nextgeneration of talent, so makesure you nurture them.

Financial misconductThere’s an upside to a fiscalscandal – for rival businesses,at least.

Health& safetyThe wrong kind of exercise atwork is worse than none at all.

L&DTo make reverse mentoringwork, do your homework.

EthicsWhen brands co-opt socialcauses, they must take care tobe genuine.

LeadershipAcknowledging employees’emotions is the first step tobuilding trust at work – and itcouldn’t be simpler.

Debrief p66-75

If Covid has achievedanything, it may be tohasten the demise of thecommand-and-controlleader. Donald Trump’sdefensive reaction to thepandemic, for example,has been unfavourablycontrasted with themore consensual styleof New Zealand’sJacinda Ardern (not tomention the emergenceof Gareth Southgate as afigurehead for sensitivemanagement). JeremyHazlehurst takes a tourthrough the history of‘servant leadership’ todiscover why the idea isfar from new, and why itmight be just the style ofcorporate citizenship weneed to face the futurewith confidence. But asleadership expert DrAmy Bradley puts it, don’texpect a revolution: “Egoleadership has alwaysbeen with us and alwayswill be”.

JeremyHazlehurst is ajournalist who haswrittenforTheWall StreetJournal andTheTimes

Servantleadersp44

Think activist investorand youmight conjurean image of a deliberateagitator, looking to shakeup boards andmaximisereturns by critiquingbusinesses from outside.But the tactics of CarlIcahn and his ilk havenow been adopted, withincreasing amounts ofsuccess, by those trying toforce polluting industriesand businesses to clearup their act. Themostcelebrated example,Engine No 1, is run bystockmarket veteransand has imposed newdirectors on ExxonMobil,among others, throughits ‘positive’ agenda. But,as AdamGale explains,traditional eco-activistsare among those callingfoul at such ideas – andsuggesting the only wayto truly ameliorate theeffects of climate changeis to oppose, not engagewith, the activities ofbig business.

AdamGale is a businessjournalist and formereditor ofManagementToday

Sustainableactivismp50

STRESSDOESN’THAVE to be abad thing.Managedwell, arguesa recentMcKinsey report,How toturn everyday stress into ‘optimalstress’, it can be your ally. Jan Ascher(pictured) and Fleur Tonieswrite:“Many executives view stress asan unalloyed negative, somethingto fight through. As a result, theymaymanage it ineffectively. In fact,stress serves a natural, physiologicalpurpose that can help us solveimportant problems and learn andgrow from our experiences.” It isfar better to understand stress andminimise the downsideswhilecapturing the upsides.What does thismean in practice?

First, discover your optimal stresspoint –when you have just the rightamount of stress to feel engaged,energised, focused, creative andproductive. Allow this to happen,and avoid going beyond it. Second,enjoy periods of recovery, whichallow your brain to processwhat hasbeen going on and recuperate.Learning how andwhen you

experience these states and ensuringyou achieve a fair balance takeseffort, but the authors give tacticsto help. For example, block outtime for deep, concentratedwork,reduce distractions and take a breakfrom video calls.When it comes torecovery, addmicrobreaks to yourdaily routine, take getting good sleepseriously, eat better and hydrate.

Jan Ascher is a senior partner at McKinsey

PERSPECTIVES

The benefits ofbeing stressed

MANAGEMENT THINKING DISTILLED

Q&A JOHN KOTTER

EMERITUSPROFESSORofleadership atHarvard BusinessSchool and strategy guru, JohnKotter, has turned his attention tohow leaders can help organisationsnavigate dramatic and constantchange. His latest book,Change,co-writtenwith Vanessa AkhtarandGaurav Gupta, explores thebenefits of giving employees greaterautonomy so they can navigate avolatile futuremore effectively.

Howcan leaders help theirorganisations adapt quickly?Change is different fromwhatit was a decade ago because inaddition to beingmore rapid, itis unfoldingmore uncertainly.The amount of information anddata available to inform decision-making has gone up dramatically,as has theworld’s unpredictability.Thismeans it is not feasible for afew peoplewithin an organisationtomake all the decisions andset the direction. Creatingorganisations that are better ableto deal with non-linear, frequentand dramatic change requiresencouragingmore leadership from

more people. For leaders, thismeans delegating and encouragingmore autonomy from all parts ofthe organisation. Ensuring thisdoes not come at the expenseof alignment requires leadersto provide a greater degree ofclarity around the opportunities,strategic priorities and principlesthe business is pursuing to governdecision-making.

Whydo people strugglewith change,andwhat can leaders do about it?Which forms of changewe resistandwhichwe embrace comesdown to our hardwiring.We areprogrammed to respond to changethatwe perceive to be a threatby either fighting it, hiding fromit or ignoring it. This ‘survive’response is very strong; however,we also have hardwiring that islooking out for opportunities thatcan lead to greater innovationand acceptance of change. The‘thrive’ responsemobilises action,collaboration and progress.

Howcanmanagers help teamsrespond to accelerated change?The challenge is tomitigate the‘survive’ and activate the ‘thrive’hardwiring. One tactic is turningthreats into opportunities – goodleaders acknowledge any threatsposed by change and swiftlyreframe them. Another is to findways to foster predictability –helping individuals focus on thethings that are not changing.Likewise, providing predictabilityin some areas can create space tohandle uncertainty in others.

No one should makeall the decisions

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Jo Owen’s Smart Work is published byBloomsbury Business

Even before the pandemic, digital technologymeant that many workers were struggling

to separate work and home life, with emailspinging deep into the evenings and weekends.This ‘always-on culture’ has accelerated, and

our recent research found that 42 per centof workers who experienced negative mental

health outcomes in the pandemic attributed itto the blurred line between work and home.

As we continue with increased home andhybrid working, it is important we take stepsto rein in this trend, help workers to unplug,and avoid mass burnout. That is why we arecampaigning for a Right to Disconnect to beincluded in the upcoming Employment Bill.

The Right To Disconnect is not about banningemails. That would be a blunt tool that wouldn’twork and could impact negatively on those who

work different patterns. It is about workload,culture and ensuring that flexible workingworks. We are calling for an obligation on

employers to set out a plan with their workforceabout when and how staff can be contacted.

This won’t be a one-size-fits-all approach.

France and Ireland already have versions ofa Right to Disconnect. In the UK, many goodemployers are already starting to tackle the

issue. Introducing a Right to Disconnect wouldaccelerate this conversation and help us face

the future of work with confidence.

An assumption that people will stay connectedto work over dinner, into the night and onweekends has become the norm in manyorganisations. Navigating personal lives

and work demands has become even morechallenging in an era of work-from-home

mandates and hybrid work arrangements. It istempting to think banning out-of-hours emailswould help workers take a much-needed break

and live more sustainable lives.

But while it is often the vehicle enablingconstant connectivity, email in and of itself is

not the culprit. People use communicationtechnologies to enact shared values. As

long as the myth of the ideal worker driveswork practices, banning email won’t make adifference. Those who want to be seen as a

good worker and colleague will turn to Slack,texting or a social media app to display their

commitment to the communal project of work.

One can imagine that a workplace that valuespeople who meet deadlines (rather than

constant connectivity), finish tasks efficiently(rather than work long hours), and strategically

call on their colleagues (rather than assumeever-availability) would use email quite

differently. Banning out-of-hours email won’tupend a culture of overwork. Re-imagining

how “good workers” approach work and usingtechnologies to enact new values is the only

path toward real change.

The increase in remote working has blurred the necessaryboundaries between work and home to the detriment of

individuals. With 24/7 communication, is it time to imposestricter rules to curtail email expectations?

MELISSA MAZMANIANProfessor and chair, department of

Informatics, University of California, Irvine

Should out-of-hoursemails be banned?

TALKING POINT

07

EXPERTS’ VIEW

ANDREW PAKESResearch director,

Prospect union

COVID-19 IS the best thing tohappen to management in 200years, claims author Jo Owen. Wediscovered, he says, three things:first, that people and firms arecapable of far more change, farfaster than we ever thought. Second,that managing hybrid teams is farharder than managing in an office.And third, command-and-controlis starting to come to an end. Theupshot is managers have to raisetheir game. “You have to become themanager people want to follow, notthe manager they have to follow,”says Owen.

Everything is harder whenmanaging a remote or hybridteam: goal setting, communication,influencing people and motivation.“Managers have to be far morepurposeful and deliberate ineverything they do,” he says. But thebiggest challenge is communication.

“Technology lets us communicatemore than ever, but we understandeach other as little as ever,” he says.One tip is to establish a daily YTHmeeting: each person has 90 secondsto say what they did yesterday (Y),what they will do today (T) andwhere they will need help (H).

Another healthy habit is toschedule breaks to decompress.“Many firms insist on 25 minute or50 minute Zoom meetings, so youget those breaks,” says Owen.

What remote meansfor managers

MELISSA MAZMANIANProfessor and chair, department of

Informatics, University of California, Irvine

Communityof practice

What is it?Remember the 10,000 hours of work

theory popularised by Malcom Gladwell?The community of practice, most recently

expounded by Roger Kneebone – a professorof anatomy, surgeon and shining exemplar

of nominative determinism – is the polaropposite. Kneebone believes we learn moreby bringing people with different experience

together than through the solitary pursuitof individual mastery. In his view, surgeons

– and other experts – can learn frompuppeteers, potters and chefs in a process

he calls “reciprocal illumination”

What gave him the idea?Kneebone noticed that many medical

students he encountered, while academicallyknowledgeable, did not know how to stitch.

Too much time learning on screen and usingsmartphones had left many lacking the

manual competence to sew up wounds. Tohelp rectify this, he says medical students,and experienced surgeons, can learn from

other activities that rely on collaborativeeffort and split-second timing, such as stringquartets. He likens his model to the collective

enterprise practiced by medieval guilds.Kneebone believes too much emphasis on

one definition of expertise – people such aspilots, doctors and athletes who do things therest of us can’t – obscures the broader pointthat we can all become expert by making the

most of our potential.

The bottom lineKneebone’s argument is that we dwell on theindividual tasks an expert performs without

seeing the bigger picture – the skills they(and we) have in common and the attitudesdifferent disciplines share. You cannot, hesays, become a great surgeon or a greatlacemaker unless you excel at living with,

managing and anticipating risk. The natureof the risk – and the outcomes – are verydifferent. The expertise isn’t. Mystifying

expertise makes it easier to misunderstandit – and ignore it. The growing imperativefor us all to learn new skills and be flexible

about our careers makes the idea thatwe can all become expert at something a

timely message – and a useful counterpointto the media’s obsession with life/work/

relationship ‘hacks’. To be truly expert, youcan’t ‘hack’, you have to do and learn. And

that takes time.

PERSPECTIVES

INCOMING

Use frames to makebetter decisions

The Listening Shift is published by PracticalInspiration Publishing

08

Framers is published by WH Allen

HUMANSTHINK INmentalmodels or ‘frames’ tomake sense oftheworld, explains VicktorMayer-Schönberger of theUniversity ofOxford, and co-authorwithKennethCukier and Francis de Véricourt ofFramers. “We can turn this basicfeature of cognition into a tool tocome upwith better alternativeswhenwe need tomake decisions,”he says. “Instead of improving howwe decide between twomiddlingoptions, a good framer can generatemore and better options.”Mayer-Schönberger says there is a

temptation to thinkmore data leadsto better decisions, but using framesgives an invaluable big picture view.“Howwe frame theworld affectswhatwe can do in it. AI algorithmsneed data, but humans can imagineaworld that doesn’t yet exist – thebasis of innovation,” he says.We can select the right frames

by using three ‘C’s: causality,counterfactuals and constraints.“Through causal templateswesee connections between causesand effects.With counterfactualthinking, we imagine alternativerealities. But by playingwithconstraints we open up the spacefor better decisions, actions andoutcomes,” he explains.

JANIEVANHOOL, a leadershipcommunication expert and authorof The Listening Shift, wants toanswer the very modern questionof how to get people to listen toyou in an era of speaking out. “Ourcommunication world is becomingever noisier, andmore noise isnot the way to cut through,” shesays. Instead, it requires practicalstrategies to make yourself heard.“All too often, we are focused on

people hearingwhat our agenda isandwhat our priorities arewithoutconsideringwhat our listenerswantand need. Find outwhat’s on theirmind, and shape yourmessagingaccordingly,” she suggests.Another tip is to clearly structure

things so others know exactlywhat’s coming. If you’re givinga presentation, keep the numberof items to two or three. If it’s ameeting, don’t overload peoplewitha long list of agenda points.It also pays to think: what’s the

most important thing you needpeople to hear? Spend time craftingthis into a single sentence or twountil it is absolutely clear in yourmind, then practice articulating it.Finally, VanHool recommends

you record yourself in ameeting orpresentation to find out how youcome across, and adjust accordingly.“Most of us are surprised by howwereally sound,” she says.

Cutting throughthe noise

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IT PAYSTOBE compassionate inbusiness, argues PaulHargreaves,CEO of B-corp Cotswold Fayre,whose new bookThe Fourth BottomLinemakes the case formore loveat work. “Compassion has alwaysbeen key to great leadership,” hetellsWork. – just think of NelsonMandela,Mother Theresa orMahatmaGandhi. “Compassionhasn’t always been on the list ofcharacteristics at business school. Infact, manywill have sneered at ‘loveand compassion’ being in the samesentence as ‘business leader’.”Hargreaves argues that

compassion canmake you a betterleader. Peoplewho are cared for bysomeone aremore likely to be happyand fulfilled, which in turnwillmake themmore productive and lesslikely to leave. Leaderswho exhibitcompassion for the people in theirsupply chains and the planetwillchange their business accordingly.“This has always been true but

more so now than prior to thepandemic. Having the time to slowdown has greatly increased people’sdesire towork in a company thatmakes a positive difference,” he says.“I have been criticised for

emphasising love and compassion…[but] true leadership is not aboutgetting the glory but serving thosewe lead so they are empowered toachieve great things.”

PERSPECTIVES

The case for lovein theworkplace

09

The Fourth Bottom Line is published bySRA Books

TECHNOLOGIESDRIVE the shapeof businesses and the organisationalforms they take. Formost of us,those are deeply connected tothe interplay of three ubiquitoustechnologies – electricity, thetelephone and the car – that cameof age about a century ago.Todaywe are entering the

Exponential Age, a distinctivelydifferent techno-economic era,driven by new general-purposetechnologies. Themost familiarare computing and artificialintelligence, but alsoreordering theworld ofbusiness are renewableenergy, the bioeconomyand 3D printing. Justas 20th-centuryworkpatterns formed around the definingtechnologies of the era, so toowill 21st-centurywork patternsbuild around the fast-movingbreakthroughs of ours.The distinction is that in the

Exponential Age, these technologiesimprove and spreadmuch fasterthan the industrial systems of 100years ago.More than that, thesetechnologies have ramifications forbosses, workers and policymakers.To explore just three: the

successful Exponential Agecompanywill increasingly looklike a platform able to benefit fromnetwork effects. A firm operating

as a platformneeds distinctoperational expertise, such asbusiness development, partnershipsand ecosystem relationships.Organisational structures – and thecommunication flows underpinningthem–will need to shift.Exponential Age firmswill

increasingly rely on complexproductswhose value arises frombrand, co-ordination, knowhowor code. Thismeansworkerswillneed to become increasingly skilledin new areas (such as AI, synthetic

biology or software),and be supported bynew tools.Finally, managers

will need to upskillthemselves, their

reports and their organisations.Evidence suggests the firmswho do best in the ExponentialAge are thosewho started early:learning accrues advantage. Andthe risk of job losses through theimplementation of automationand robotics seems to fall more oncompanies that do not automate.ForHR leaders, this is an

unparalleled time.Whenwe lastredefinedwork,moving fromthe Victorian to themodern era,human resources did not exist asa discipline. Today it represents amoment to shape theways of workfor the coming decades.

Azeem Azhar is an investor and entrepreneur whose new book Exponential: How AcceleratingTechnology Is Leaving Us Behind and What to Do About It is published by Random House Business

“The riskof job lossesthroughautomationfalls on firms thatdonotautomate”

AZEEM AZHARCOMPETING IN THE EXPONENTIAL AGE

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BEST OF

Why it pays to be along-term thinker

Dorie Clark is a consultant and keynotespeaker who also teaches at ColumbiaBusiness School and Duke University.The Long Game is published by HarvardBusiness Review Press

SIMON SINEKLeadership author

How to discover your ‘why’in difficult times

Sinek reflects on his experience of thepandemic, seeing it as a reminder of just howfragile humans are, and how strong the need

for human connection is. “We have an intensecraving for the human voice,” he says. When

he found things overwhelming, he forcedhimself to pick up the phone and speak tofriends. It’s something leaders can take onboard – build trusting relationships so that

when a crisis arrives, a team can lean on eachother. “It takes hardship to bear fruit,” he says.

SARAH ELLIS AND HELEN TUPPERCo-founders of Amazing If

The best career path isn’talways a straight line

Could your career ladder be holding youback? If the next rung up leaves you feeling

cold, why not cast the ladder aside and pursueunexpected opportunities that interest

you instead, ask Ellis and Tupper. Followingyour own career path – which might mean

moving sideways to jump sectors – doesn’talways mean accepting the obvious next

step. “Ladders are limiting” they say, warningorganisations who hold staff to the traditional

career path risk losing the adaptable andopen-minded people they need.

EMILY AND AMELIA NAGOSKIAuthors

The cure for burnout (hint: it isn’tself-care)

Stress causes physiological symptoms,so spotting when you are in danger ofburning out means becoming more

self-aware about what your body is trying totell you, argue the authors of Burnout(pictured above). They explain that in

general, for men, burnout tends to manifestitself in de-personalisation (where you

separate yourself from your workemotionally), while for women, it manifests

itself as emotional exhaustion. A good way todeal with your stress response cycle, they

suggest, is by doing something physical – awalk, jumping jacks, breathing exercises – to

tell your body you are in a safe place again.

Fresh thinking from the world-famous incubator of ideas

HOWCANWEBREAK theendless cycle of feeling rushed,overwhelmed and perenniallybehind on our schedules to createa more meaningful life? This is thequestion business thinker DorieClark – amember of the Thinkers50previously named the world’sleading communications coach –answers in her new book The LongGame. She argues that when wethinkmore long-term, we tacklemore meaningful projects becausethe good stuff (whether it’s craftinga successful career, launching anew product or thinking abouta company’s strategy) is oftencomplex and takes longer thanwemight want. “If you’re amanager or leader, the benefits areclear… Strategy is the leadershipbehaviour that matters most for anorganisation’s success,” she says.Becoming a long-term thinker

is easier said than done. “Long-term thinkers resist the pernicioustendency (often driven thesedays by social media) towardcomparison…We have to ‘run ourown races’ and we can only dothat through focus, persistence,and evaluation based on our ownmetrics and with the guidance of

trusted advisers whether we’reon the right course – not fromthe noise that surrounds us fromwhat everyone else is doing,”Clark explains.The biggest challenge is the

day-to-day pressure caused by theworkplace, and the expectationsmultiple stakeholders have ofindividuals. “It’s often easier,logistically and emotionally, to‘keep your head down’ and justfocus on executing without askingtoo many questions. But that canlead to bad outcomes when a seriesof short-term decisions leads usto a place we don’t want to be,”concludes Clark.“No one is going to ‘gift’ you time

for strategic thinking – we haveto carve it out and force it, andmake it for ourselves. That meansbecoming extremely disciplinedabout which invitations you accept,where you push back, and carvingout time in your schedule so youhave a moment to breathe andre-evaluate as needed.”

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Mary Ann Sieghart is a journalist and broadcaster. Her new book, The Authority Gap, is published by Doubleday

AS SOMEONEWHOWORKS inHR, you’re the last person to bebiased. Right? You’ve done yourunconscious bias training – hell,you’ve probably led the unconsciousbias training. You’re intelligent,liberal, dying to promotemorewomen to senior positions. Youdon’t need to read this article.Wrong. For a start, we’re all

biased. I’m biased against womenand I’vewritten awhole bookabout it. Unconscious bias is called‘unconscious’ for a reason.We can’twish it away or banish it from ourbrains. All we can do is try to correctfor it in our everyday behaviour. Andour behaviour often lets us down.We are farmore likely to interruptwomen, talk over them, ignorewhatthey say inmeetings, challenge theirexpertise and underestimate theirability. All these aremanifestationsof what I call the authority gap, theways inwhichwe still instinctivelytakewomen less seriously thanmen.Lest you think this is old hat,

let me offer you some evidence.Womenmake up a third of USSupreme Court Justices but suffertwo-thirds of all interruptions. Inother words, they are four timesmore likely to be interrupted thantheir male colleagues, 96 per centof the time bymen. Female jobapplicants who negotiate are twiceas likely not to be hired as menwhonegotiate. This bias comes entirely

frommen: male hirers don’t dislikemenwho negotiate, but do dislikewomenwho do.Women are hiredmuchmore on

likeability thanmen are, particularlywhen it ismenwho are doingthe hiring. Yetwemake itmuchharder forwomen to be likeable. Ifwomen show the same confidenceand assertiveness asmen, weoften recoil and dislike them.Weuse adjectives such as ‘abrasive’,‘strident’, ‘aggressive’, ‘bossy’ or even‘bitchy’ to describe them,words that

are rarely used ofmen. This createsa terrible double bind forwomen:not confident and assertive enough,and they are held back atwork; tooconfident and the same happens, butfor a different reason.The same is true for speaking

time. Youmight mark women downfor not speaking up enough inmeetings. It’s true that, on averagethey don’t, but what they’re doingis completely rational. Becauseresearch shows that if a womantalks for the same length as a man,we’ll think that she dominated theconversation. And we don’t likewomenwho – as we see it – talk

toomuch.We also see them asless competent (though the samedoes not apply to menwho talk toomuch). So women have to learnto talk just enough to be takenseriously but not so much that otherpeople disapprove.Self-promotion is a problem too.

To get a job orwin a pay rise, peoplehave to explainwhat they’re goodat andwhat they’ve achieved.We’rehappy to hear this from aman;muchless so from awoman. Becausewomen are often assumed to be lesscompetent than they are, if theydon’t highlight their successes andachievements, theywill lose out onjobs and promotions, andwill beundervalued by their colleaguesand bosses. If they do self-promote,though, theywill be disliked – andalso, therefore, miss out on jobs.Until we learn to recognise these

biases, we can’t correct for them.So instead, we’ll lament that womenaren’t confident enough or volubleenough or assertive enough to behired or promoted. Or because theyhaven’t told us how good they are,wewon’t recognise their talents.And if they do show the

confidence and assertiveness andvolubility we demand from them,will we like them enough to hire orpromote them?Next timewe findthem ‘abrasive’ or ‘strident’, we needto ask ourselves: does that tell usmore about us or them?

“Womenare in a terrible doublebind: not confident enough andthey are held back atwork, buttoo confident and the same

happens for a different reason”

MARY ANN SIEGHARTWOMEN AT WORK STILL AREN’T BEING LISTENED TO

MARY ANN SIEGHART

15minuteswith...

Onbeing called an entrepreneur…Even though I have been runningmy own business for 17 years, Idon’t like theword ‘entrepreneur’and I shy away from callingmyselfone. I think there can be a stigmaattached to it, because some peopleuse it as an excuse for startingthings and then not finishing them.‘I’m an entrepreneur, so I don’thave to deal with all the detail thatcomeswith building a business andthe hardwork of getting tractionwhen you are doing somethinginnovative’. I don’t putmyself inthat category. I am entrepreneurialinmy approach but I’m about howto structure and run a successfulcompany in the long term too.

Onabolishing the hierarchy…At Jellyfishwe don’t have linemanagers or heads of department,delegation is banned andaccountability lies with thosewhoare doing the job. It’s a system thatreflectsmy views that everyoneshould be responsible for theirown progress, and that everythingabout how you structure a businessshould be scalable. A couple ofyears ago, it became clear that ourtraditional hierarchical structurewasn’t working anymore –whathad been a great collaborativeorganisation began to feel likea bureaucratic job factory.Wehad about 800 people globally,and I realised therewas nowaywewould ever be able to get to10,000 peoplewith the same

linear hierarchy in place. The newsystem is one that we came upwithourselves – as a leader, you need thecourage to recognisewhen the oldways are no longer fit for the futureand it’s time to try something else.

Onbeing in charge of your career…In the old system, peopleweredependent on their bosses forpromotion and no-one ownedtheir own career. Nowprogress isdependent on evidence: it doesn’tmatter how old you are, or yourgender or ethnicity, if youwantto progress you have to build abusiness case that demonstrateshow you have added value. Thatis then anonymised and put to arolling panel of adjudicatorswhomake the decision. You canmoveto a higher pay grade by adding toyour job rather than changing it,so someonewho is a great designercanmake progress and still staya designer, rather than having tobecome amanager. It started out asa radical experiment but it’s morethan that now.We’ve had over 800evidence-based promotions and 58per cent of themhave beenwomen,despite the fact wewere told oursystemwould unfairly advantagemen because self-promotion issupposed to be amale trait.

Onnot getting the grades…I grew up in Trinidad but cameover to theUK aged 14withmyMum. Shewas a teacher andwedidn’t havemuchmoney. I couldn’t

Rob PierreThe CEO of Jellyfish on smashing thehierarchy, finding your superpowerand being great – one thing at a time

afford to go to university, so Iapplied for sponsorship from IBMto do a degree in computer studies.I got an offer but I hadn’t read thebit where it said ‘pending A-Levelresults’. I missed physics by onegrade and they retracted the offer.I ended upworking in SunglassesHut at Gatwick Airport. I stayed forseven years and by the time I left Iwas head of Europe for the highestturnover division of the company.I do sometimeswonderwhatwouldhave happened if I had got thatgrade, but the thing about retail isyou can get responsibility quickly.Thatworked forme – I enjoyedthe accountability and gettingrecognised formy results.

Onnot beingwell-rounded…Giveme a problem to solve and Iam all over it. Butwhen it comesto literature, history or generalknowledge I am terrible – I comeacross as ignorant because I don’tstore stuff I don’t need. I canwatchmovies over and over because Idon’t rememberwhat happens andI don’t know the lyrics to songs.Once you come to termswith thefact that you don’t need to be greatat everything, it’s very empowering.That’s the philosophy at Jellyfish –find your superpower and focus 95per cent of your effort on that. I’drather have a bunch of peoplewhoare each great at one thing even ifthey are terrible at everything else,than a bunch of peoplewho aremediocre across the board. In

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RobPierrePierre is co-founder andCEO of digital marketingspecialist Jellyfish. Sinceopening its virtual doorsin 2005, the businesshas grown and now has40 offices worldwideand annual revenues of£198m, servicing clientsincluding Google, Netflixand Nike. A keen golferand foodie, Pierre alsoowns MBER, a pan-Asianrestaurant in London.

15

interview

Portrait Colin Stout

When Valerie Hughes-D’Aeth firstwalked through the doors ofBroadcasting House as chief HRofficer of the BBC in July 2014, shecould have been forgiven for feeling

apprehensive. The rolewas certainly not one for the fainthearted, not least during a period of intense turbulenceand scandal for the Beeb. The JimmySavile sexual abuserevelations were raw, with a review ongoing. Aninvestigation into payoffs had led to the previous HRdirector, Lucy Adams, achieving the dubious honour ofbeing savaged in the Daily Mail after being hauled infront of the Public Accounts Committee.

Then there’s the fact she was going to be in charge ofHR for some of the most recognised – and well paid –celebrities in thecountry (GaryLinekerbeing thecurrentbest remunerated). But as Hughes-D’Aeth says: “You

can’t get fazed by someone just because they happen tobe on the 10 O’Clock News or whatever it might be. If youare, it’s probably not the right place for you to be in HR.”It’s a typically pragmatic and self-effacing approachfrom a leader whose love for the profession (she is one ofthe few who wanted to work in HR from a young agerather than ‘falling into it’) makes her an ideal fit for hernext role as chair of the CIPD, which she has taken on aspart of a portfolio career having left the BBC in 2019.

Hughes-D’Aeth has never shied away from taking tothe stage at HR conferences and acting as a passionatespokesperson for the profession, but she admits the BBCgigwas another level of public scrutiny. “Itwas challeng-ing being in the spotlight. My background was muchmore private, commercial organisations. It was my firsttime dippingmy toe into the public service side of things.That scrutiny from so many places – the National Audit •

When shewas the BBC’s chief HR officer, ValerieHughes-D’Aethfaced huge public scrutiny. She tells Katie Jacobs how she is using

the experience to give back to the profession in her new role

“You can’t bean introvertin this job

”

16

Office, the Public Accounts Committee, freedom ofinformation requests, bloggers, members of the public…It was quite a shock.”

Her “unusual surname” – one newspaper columnisteven referred to her as “luxuriously named” – added anextra challenge: “With three children in their late teens,I was concerned theywould be brought into something.”

Fortunately, during the five years she spent leadingHR at the corporation, Hughes-D’Aeth escaped theordeal of a Public Accounts Committee hearing (sheprepared for one but it was called off at the last minute).She was, however, immersed in National Audit Officereviews and high-profile equal pay claims, most notablyinvolving China editor Carrie Gracie, which hit theheadlines during her tenure.

“We were held to a higher level of account than any-body in thewhole of theUK,” she says. “It’s right becauseof the nature of the BBC. But often what’s in the pressisn’t the whole story. At times that was frustrating. Youdon’t want to start arguing, so you have to let the head-lines wash over you. As long as you know that you areabsolutely focused ondoing the right thing for the organ-isation, making it a more open, transparent and fairerplace for everyone, you can shrugyour shoulders and sleep easy.”

That focus onmaking the BBCmore transparent is somethingHughes-D’Aeth believes herteam achieved. She cites one ofher proudest achievements asworking with trade unions toreform “contracts, policies, payand grading, working patterns,thewhole lot”, aswell as creating amore open, ‘speak up’style culture in the wake of the Savile scandal and thesubsequent review, which slammed the BBC as having a“culture of not complaining” and “an atmosphere offear”. Nothing, of course, will placate critics who believethe corporation is too unwieldy and bureaucratic to beeffectively managed or who question its dual role com-peting with commercial rivals while retaining its role asnational broadcaster. But reducing complexity and tak-ing out layers (going fromabout 15 to nomore than sevenbetween the most junior member of staff and the direc-tor general) were part of a huge programme of activityrequired to prove the BBC was efficient and effectiveenough to receive a new Royal Charter.

“When I joined, people would say ‘you won’t under-stand. We’re creatives. We’re different. We don’t needstructures,’” Hughes-D’Aeth recalls. “The truth is, theywanted fairness, trust, transparency and more consist-ency. People are people, and most people want the samesort of things. It’s about explaining it in a way so thatthey understandwhat you’re trying to do. It wasn’t aboutbureaucracy; it’s actually the opposite. You are puttingstructure in because you have to, but it’s a structurethat’s as efficient and as simple as you can get it.”

The BBC experience was certainly challenging, ifrewarding and fascinating, to live through, but lookingback Hughes-D’Aeth sees learning to deal with theintense public scrutiny as a good and increasingly essen-tial discipline for any HR professional. “It really makesyou think about everything you are doing and whetheryou are reaching the highest ethical standards. You haveto imagine that everything you say, do andwrite is in thepress or under public scrutiny. How would it look? Areyou doing the absolute best? Those high standards ofprofessionalism are a good discipline for everyone inHR.” More andmore, she believes, it is part and parcel oftheCHRO role to bemore public facing, representing theorganisation externally and dealing with a range ofstakeholders, from regulators tomedia to investors. Thatmeans not only adhering to the highest ethical standardsbut also understanding the broader business inside-out.And itmeans becoming comfortable being challenged ona public platform – or at least faking it. “If you’re anintrovert, you just have to develop those skills if you aregoing to do senior, board-level roles,” she says.

Now Hughes-D’Aeth has the opportunity to furtherpracticewhat she preaches. Aswell as the CIPD role, she

is a non-executive director andchair of the Nominations Com-mittee at the Department forWork and Pensions – arguably aperfect fit for a former CHRO.Speaking about both roles, it isclear how important purpose isto her career choices.

She views herself as an “HRpractitioner through and

through”, having been part of the profession her entireworking life. “My career has all been about championingbetter work and working lives,” she says, on why shedecided to go for the CIPD role. “It’s a purpose I wantedto spend somemore of my time working towards.”

When it comes to the DWP, the government depart-ment is facing immense challenges in the wake of thepandemic. “The mission in DWP is really important,”she says. “It’s about maximising employment across thecountry and improving people’s quality of life, looking atdisability, universal credit, unemployment and so on.” Ingovernment departments, the role of an NED is to act asa bridge between ministers and the executive team.Hughes-D’Aeth’s BBCexperience has proven a huge helpin navigating the nuances of such an enormous publicbody (the DWP is the largest government department,with about 80,000 employees).

While more HR leaders are taking on non-executivedirectorships, the supply exceeds demand. Many chairsstill favour those with a finance background. ButHughes-D’Aeth believes now is the perfect time for thetide to turn as organisations figure out their place in apost-pandemicworld. “People issues are veryhigh on theboard agenda now,which is great for theHRprofession,”

“When I joined, people wouldsay ‘youwon’t understand.

We’re creatives.We’re different.We don’t need structures’”

17

interview

she says. “Boards will increasingly look to have at leastone NED with those skills – particularly for chairing aNomCo, a RemCo or a people committee.”

Does she think boards and chairs truly understand thecomplexity of the people agenda, even if they talk a goodgame about the importance of engagement or peoplebeing their greatest asset? “All through my career, when-ever I’ve worked with someone who has come into HRfrom another part of the business, I’ve heard the samecomment: ‘I hadno ideawhatHRwas all about, howcom-plex it is and all the different things youhave to dealwith.’There is something about people not necessarily appreci-ating the depths of expertisewe have inHR,” she says.

“Every board shouldhave someonewith a really strongHR background. Over the past year, all those things thathave worried organisations [are people issues]. What dif-ferentiates organisations is what they’ve done with thepeople agenda. If something like 60 per cent of costs inorganisations are people-related, why is it that [leaders]don’t think it’s important enough to put at board level?”

What about the trend for CHROs who step into thoseroles without having much, if any, experience in thefunction? “It’s a shame if people dismiss [HR] and thinkit’s something anyone can do,because it has proper profes-sional areas of expertise,” shesays, giving the example ofreward. “If you want to be aCHRO and sit on RemCos, youneed to have some in-depthreward expertise and under-standing things like LTIPS, shareschemes and pensions.” Hughes-D’Aeth gained that expertise herself relatively early inher career when a mentor “pushed her”, rather reluc-tantly she admits, into taking a reward director role.

With the future of work up for grabs and organisationdevelopment firmly on the agenda of most businesses,there is now an opportunity the HR profession needs toseize, she believes. While the past 18 months have chal-lenged the profession and pushed exhausted peopleprofessionals to thebrink, it’s clear that amongmany lead-ership teams it has been the CHROwho has stepped up.

“Wehavebecomemorerespectedanddevelopedcloserworking relationships with CEOs,” says Hughes-D’Aeth.“There is a better understanding of the value HR canbring – and an understanding that how we invest in anddevelop our people will determine whether companiessurvive and thrive. The pandemic has also acceleratedthings that [theprofession]wanted todoanyway, fromtheuse of technology to the focus onwellbeing.”

What the profession needs to do now is build fromthis foundation. “We’ve been in a reactive phase for thepast 18months.Weneed tomove to beingmoreproactiveas businesses refocus. HR needs to be supporting busi-nesses as they build people and organisation capability,whatever the strategy.”

That includes keeping those ‘softer’ topics that peopleprofessionals know are anything but – wellbeing, inclu-sion, culture – front of mind for leaders. And it meansaddressing some stickier areas whichmay have fallen offthe to-do list or put in the ‘too hard to deal with rightnow’ pile: “Take reward and fair reward.Are the levels ofpay for people in frontline roles right compared to chiefexecutives? Multipliers and pay gaps – all that needs tobe looked at.”

All this requires a “huge amount” ofworkwithmanag-ers and leaders, as well as a long, hard and honest look attheHR function itself. “[Managers and leaders] need sup-port, development and clarity of what’s expected becauseold-style leadership models have long gone,” Hughes-D’Aeth believes. Post-Covid leadership needs to be farmorecompassionate,withagreater focusoncoaching, butmanagers need to be supported byHR to get there.

As for the HR function, serious consideration needs tobe given to embracing both technology and operatingmodels that are fit for the future. “Some organisationsstruggled with the lack of data and analytics as we werethrown into the pandemic,” she says. “HR functions needto stand back and take a good look at themselves. Are they

doing what they can to providethat great employee experience,but also that evidence-based datawe need if we are going to movethe function forward?”

In terms of operating models,Hughes-D’Aeth foresees a moreagile and project-based futurefor the function, with consulting,OD and project management

skills becomingmore important. Rather than traditionalHRbusiness partner roles, she predictsmore consulting-style roles, with people deployed on projects across thebusiness as andwhen. This requiresmore agilemindsetsamong HR professionals themselves, with practitionersbeing willing to work on various projects rather thanbeing tied to one area. The operational centre, mean-while, will shrink as technology takes on a bigger shareof the work. Centres of excellence for specialist areaswill exist but will need to be more collaborative. Asmaller number of senior HR leaders will provide strate-gic advice to executives on people matters.

And in her CIPD role, Hughes-D’Aeth is determinedthat the voice of the profession, which has been magni-fied during the pandemic, continues to be heard bygovernment, media and business leaders. “HR needs tobe involved right at the start. Whether it’s the work, theworkforce or the workplace, how you organise it is goingto be key. What you automate, what you outsource, whatskills you need… We’ve been seen as hugely helpful andvaluable during the pandemic. Now we have a greatopportunity to continue on the platformwe’ve got.”

“Post-pandemic, people issuesare very high on the boardagenda, which is great for

theHR profession”

For further reading, see page 76

18

AREYOU

FEELINGLUCKY?

Taking chances is an inherent part ofeveryday life and business, but whenit comes to weighing up the odds wearemuch less rational thanwe think.Andrew Saunders investigates the

complex psychology of risk

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I s the human attitude to risk a question ofinstinct and psychology or rational thought?For most of our history, the answer could onlyreally be instinct – there is little evidence thatprehistoric people were much good at formal

mathematics, and even if they had been there isn’ttime to stop and jot down a string of equations beforedeciding whether to chuck a spear at that pouncingsabre tooth tiger, or try to run away.

But unlikely as it may seem, all that changed when,in a series of dazzlingly brilliant letters written atthe height of the Renaissance in 1654, the Frenchmathematicians Blaise Pascal and Pierre de Fermatfinally answered a question about gambling that hadbeen puzzling punters and intellectuals alike since itwas posed some 200 years earlier by Italian monkLuca Paccioli – the inventor of double-entry book-keeping, no less.

The question – known as ‘the problem of the points’– pertained to how the spoils in an unfinished game ofchance between two players should be divided, if thegamewere stoppedwhen one of the playerswas ahead.So, for example, if the object is towin the best of five coin tossesand the game is stopped whenthe score is 2-1, what is the mostequitable split of the would-bewinnings?

It sounds like a simple enoughproblem. But the fact that it tooktwo centuries and two suchminds to solve is proof enoughthat it was not. Pascal and Fermat’s solution was alsocomplex, involving an algorithm that cycles throughevery possible outcome from the point at which play isinterrupted, and assigns a number for the likelihoodof that outcome. Totting up the likelihood scores pro-vides a ratio according to which the gamblers’ pot canbe most fairly shared.

Theremaynot seem to bemuch connection betweena Neanderthal deciding on fight or flight when facedwith a life or death threat, and card games betweenthe well-to-do in 15th-century France. But they areboth essentially questions of risk, and illustrate astruggle between logic and psychology when it comesto weighing up and managing risks that continues tothis day.

The word risk derives from the Italian verb risicaremeaning ‘to dare’, which highlights the classic ‘whodares, wins’ approach. But the discoveries of Fermat andPascal laid the foundations of probability theory, theschool of mathematics which transforms the outcomesof risk-taking from the fundamentally unknowable intothe at least partially predictable andmakes the dare ulti-mately less daring but more winnable.

The pair ushered in an era where rational thoughtousted instinct and put risk at the service of humanity

through further subsequent innovations in everythingfrom public health and mortality to the limited com-pany, equity and bond markets and insurance. In fact,modern society and the capitalist system as we knowit is based on this rationalist approach to risk. It’s thedifference between an impetuous child jumping off acliff because a friend dares them to, and a high diverwho has carefully weighed up the height of the drop,and the depth of the water at the foot of it.

That’s the theory, at any rate. But the problem withthe idea that reason can banish psychology when itcomes to risk is that the way our brains work hasn’tkept pace and is still stuck in the past, says consultantand business thinker Alastair Dryburgh. “We stillthink like cavemen. We look at risk very asymmetri-cally, because life in the stone age was like being up toyour neck in water. It only took a very slight deteriora-tion in your position and you would drown. People inthat situation can’t afford to take any risks.”

We may know with our intellect that we have totake a risk in order to seek a reward, but our underly-ing psychology remains instinctively risk-averse.

“When I speak at conferencesabout risk, I often play a gamewith the audience. I say tothem, ‘I’ll toss a coin, and if itcomes up tails I’ll give you£150. If it’s heads, you give me£100’ he says.

“Mathematically, that’s avery attractive risk – if youplayed that game once a day

for 10 years, you’d be up about £90,000 by the end of it.And it’s one that most of us could actually affordto take. But despite that, I’ve never had more thanabout 25 per cent of the audience put their hands up totake the bet.”

By the same token, we can be as irrational abouttaking risks as we are about avoiding them. Just lookat the huge range of responses to the lockdown restric-tions during the Covid pandemic. For many, the risk ofnot wearing a mask, or avoiding busy places, wasworth taking, whereas for others these actions weretantamount to superstition, like the fearful medievaltypes who wore sweet-smelling pomanders in anattempt to ward off the ravages of the bubonic plague.

Or think of the recent billionaires’ space racebetween Jeff Bezos and Richard Branson. Yes, there isan element of PR and self-aggrandisement involved,but looked at purely rationally there are many morefinancially rewarding – and physically safer – ways ofspending your fortune. The fact that they are bothmale may have something to do with it – the subject iscontroversial but there is some evidence that men aremore likely to take risks than women, a trait usuallyascribed by researchers to higher levels of testoster-one in men.

“The problem with the idea thatreason can banish psychologywhen it comes to risk is that ourbrains are still stuck in the past”

20

risk

Investors and psychologists call this propensity‘risk appetite’, and everyone has one – a level of riskthey are comfortable with. “Psychologically, riskinvolves uncertainty and is defined as the chance of anegative event, or a loss. There are large individualdifferences in how people react to risk, and a lot ofthat is because some people are more averse toloss than others,” says behavioural scientist ProfessorDavid Faro, co-director of the Decision MakingStrategies for Leaders programme at LondonBusiness School.

In business, entrepreneurs are classically regardedas being risk-takers by nature, individuals who arejust hardwired to have a greater appetite for – andenjoyment of – uncertainty. “I do have a high riskthreshold and I love a bit of chaos,” says Pip Murray,founder of the fast-growing Pip & Nut healthy eatingbrand. A keen runner, Murray started making andselling home-made nut butter from her own kitchentable. Without a healthy risk appetite, the businesswould never have got off the ground. “For me, risk isinevitable – if you don’t take some risks in business,you will never progress and move forward.”

But there is more to it than someone’s naturalinclination to take a punt, she adds. “When you arestarting something up, you have very little informa-tion to go on and so you have to take more risk. It’sbasically a leap of faith. But you also have less to lose,which helps you to make freer decisions than some-one in a more established business where there ismore at stake.”

Personal attitudes to failure also play a part in deter-mining risk appetite, she says. “When I was startingPip & Nut, I do remember thinking to myself, what’sthe worst that can happen? For me, the risk that thebusiness might fail was not the only risk. Not doing it atall was also a risk – if I didn’t try because of fear Imightfail, and that would have been a bigger regret.”

Source: US National Safety Council, 2019

At the other end of the ‘is the glass half-full or half-empty?’ spectrum, in big businesses which have moreto lose, risk-aversion can tip over into wholesale riskavoidance – the idea that risk can and should be elim-inated, as far as possible. “We look at risk andinstinctively we see the possibility that somethingmight go wrong,” says Dryburgh, who was financedirector of a mid-sized corporate subsidiary earlier inhis career. “If I were still doing a corporate job, Iwould probably be very risk averse. In corporations,asymmetry is layered upon asymmetry – you have thenatural asymmetry of risk aversion, plus the effects ofincentives. Why should I stick my neck out and take arisk, when if it goes wrong I will get the blame and ifit goes well someone else – the shareholder, or myboss – will get the reward and the credit?”

Neither extreme of risk appetite is necessarilycompletely rational or irrational, but governed by arange of biases as well as at least a passing assessmentof risk vs reward. “A trader who is sufficiently cold-blooded might take a huge risk that could net them abonus in the millions, even knowing that if it goeswrong they could be fired,” he adds.

To make things even more complicated, the sameperson can have a different risk appetite in differentsituations, says Faro’s colleague Niro Sivanathan,associate professor of organisational behaviour atLBS. “I might be the kind of person who says ‘Thiscorporate acquisition we’re looking at is far toorisky, let’s not do it’ but then when I’m on a weekendaway I decide to go skydiving. It can flip, it’s very con-text-dependent.’

This may be partly explained by research that sug-gests we are more judicious when assessing risks forothers rather than for ourselves. The vast majority ofdrivers, for example, support laws banning textingwhile driving, despite the fact that around 80 per centadmit to having done so at least occasionally.

DEAD CERT

Mortality risks ranked

by lifetime chance of death

Choking onfood

1 in 2,535Plane or

train crashToo few

deaths tocalculate

Heartdisease

1 in 6Cancer1 in 7 Suicide

1 in 88Opioid

overdose1 in 92

Car crash1 in 107

Drowning1 in 1,128

Bicycleaccident

1 in 3,825

Dog attack1 in

86,781

Lightningstrike

1 in138,849

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But the fundamental issue is that we perceive risksthat may be statistically comparable in very differentways, as Paul Slovic, professor of psychology at the Uni-versity of Oregon described in a classic paperwritten in1987. His work explains why government attempts topersuade people that, for example, living next to anuclear power plant is safe, not only fall on deaf earsbut may actually provoke increased resistance.

The actual risk from radiation may only be equiva-lent to riding three extra miles a year in a car, but theperceived risk is not. For one thing, we are happy toaccept higher risks from voluntary activities – such aschoosing to take a car journey – than involuntary onessuch as the government deciding to build a nuclearreactor in our town.

And for another, the potential ‘bad’ outcomes carryvery different psychological weights. A nuclear acci-dent, Slovic says, features on many more people’s list ofthings they truly dread than a car crash. We naturallytry to avoid the things we most dread, and mistrustthose who try to ‘prove’ that we are wrong to do so.

We also have a level of risk tolerance that can behard to overcome – a study in the US by Alma Cohenand Liran Einav showed that while making seatbeltwearing compulsory did reduce traffic fatalities, thereduction was substantially less than predicted by thehighways safety authority. The authors concludedthat the effect was due to risk compensation – the psy-chological feeling of safety provided by the seatbeltencouraged more careless driving in some motorists.

And while it is easy for experts to dismiss such‘caveman’ thinking, when it comes to day-to-day lifethe instinctive approach isn’t entirely without merit.If we had to conduct a full probability analysis everytime we cross the road, board a train or a plane, oreven put the kettle on, we might make more informeddecisions but we would struggle to get much done.Instead we rely on mental shortcuts that are goodenough for such quotidian challenges, and so quickand familiar that we often don’t even know we areusing them.

These are the famous heuristics that won psycholo-gist Daniel Kahneman the Nobel prize for economicsin 2002. His colleague Amos Tvaerksy, who died sixyears previously, onlymissed out on sharing the awardbecause Nobels are not given posthumously. Thepair’s work sparked a whole new discipline of behav-ioural economics and has done a great deal to put theemphasis back on the human factor when it comes tounderstanding the way we think about and assessrisk. It also neatly illustrates that the ongoing tusslebetween mathematics and psychology in risk is notjust a question of competing theories slugging it out,but is actually baked into the way our brains work.

Kahneman and Tvaersky posit that we have twobasic modes of thought: the instinctive, emotional‘fast’ thinking that allows us to decide in a moment

CHANCING YOUR ARMCommon psychological biases which

skew our attitudes towards risk

Loss aversionThe perception that losing something is

worse than gaining an equivalent benefit.Research suggests that people are on the

whole loss-averse – they place greaterpsychological value on not losing £10

than on gaining an additional £10.

Availability biasExcessive reliance on recent, vividly

recalled events when assessing risks.Aircraft accidents are a good example– the statistical probability of a plane

crash is low, but we tend to over-estimateit because we all have readily availablemental images of the potentially direconsequences when it does happen.

The Dunning-Kruger effectThe tendency of low-skilled or less

knowledgeable individuals tooverestimate their own ability, and

conversely of highly skilled experts tounderestimate their own ability. Oftenconflated with over-confidence, it can

also result in under-confidence.

Survivor biasThe assumption that because some

highly-visible people survived a certainprocess, we will too, because the small

number of survivors have a much greatervoice than the many more who fail. MarkZuckerberg, Steve Jobs and Bill Gates alldropped out of college, but that doesn’t

mean that every college dropout willbecome a billionaire.

Halo effectThe belief that a person or organisation’spositive attributes in one area spill over

into other, unrelated ones. Henceassumptions such as physically

attractive people being more honest orintelligent than less physically-attractive

counterparts, or that brands weappreciate for their quality or design

characteristics are also more ethical orbetter value for money.

Framing effectMaking a different choice based on thesame evidence according to how it is

presented. So a drug treatment that is 90per cent effective is preferred to one that

has a 10 per cent chance of failure, thoughboth outcomes are statistically identical.

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whether someone we meet is more likely to hug us orhit us, for example, and the ‘slow’ more logical modethat can help solve more challenging intellectualproblems when time allows.

Their basic conclusion is not that we are incapableof making at least fairly rational choices, but ratherthat most of the time we just don’t bother. Slow think-ing is harder and requires mental effort to overcomeour preference for fast heuristic shortcuts, and asKahneman put it in his 2011 book Thinking, Fast andSlow, “A general ‘law of least effort’ applies to cogni-tive as well as physical exertion. The law asserts thatif there are several ways of achieving the same goal,people will eventually gravitate to the least demand-ing course of action. In the economy of action, effortis a cost, and the acquisition of skill is driven by thebalance of benefits and costs. Laziness is built deepinto our nature.”

As if that wasn’t enough, we are also subject to allsort of conscious and unconscious biases that sabo-tage our efforts at slow thinking even when we do try(see box, left, for some common examples). The prob-lem comes when we apply theseshortcuts designed to keep usalive in the face of clear and pre-sent dangers, to more abstractand distant risks – such aswhether to invest in equities orbonds, acquire this company orthat, develop an expensive newproduct line or even whether tobelieve the ‘fake news’ thatcomes at us from all sides over the internet. “A relia-ble way of making people believe in falsehoods isfrequent repetition, because familiarity is not easilydistinguished from truth,” as Kahneman wrote.

Bias can also lead to bad hiring and talent manage-ment decisions, the most high profile recent examplebeing Amazon’s experimental AI recruitment algo-rithm, scrapped in 2018 because it was biased againstfemale candidates. But despite the subsequent outcryover the dangers of using tech to make such sensitivedecisions, the fault was not in the algorithm itself butin the historic data about previous hires that wasused to ‘train’ it. In other words, the bias was alreadythere in the minds of human recruiters, but it took acomputer to point it out to them.

Andwhenwe domanage to fire up our more logical‘slow’ thinking mental circuitry, it doesn’t take allthat much for us to abandon it and revert to ourdefault ‘fast’ system, with all its failings. This is why,when a crisis strikes, the carefully-designed crisismanagement plan often seems to be the first thing togo out of the window, says Sivanathan. “Crises havecommon ingredients – there’s time pressure, thereare high stakes, there is a lot of emotion. These are allthings that make it more likely that we will deviate

from making rational choices and fall back on heu-risitics. And heuristics are very rarely the right way ofmaking decisions; they will almost always fail you.”

Even when we are aware of our own biases anddefaults, psychology can still lead us to overcompen-sate – for example, by seeking certainty and collectingmore data. But more data does not necessarily meanbetter decisions, says Dryburgh, citing a piece ofresearch by the CIA. The US intelligence agency askedhorse racing handicappers to predict the outcomes ofraces, using their own choice of some 80 availabledata points. The more data points they used, the moreconfident the handicappers grew in their predictions.But their actual results were most accurate when onlyfour pieces of information were used. “Extra datainflated the handicappers’ confidence hugely,” hesays. “But it didn’t actually improve their results at all.That’s a dangerous position to be in.” So by trying tominimise risk, we can end up increasing it.

Our attitude to risk also plays an important part inthe concept of psychological safety, a hot trend in highperformance team theory ever since Google published

the results of its extensive twoyear report into the subject in2017. The tech giant discov-ered that the members of itsbest performing teams all hadone thing in common – thebelief that they would not bepunished for speaking out, ormaking a mistake.

When people feel this senseof psychological safety, they are more inclined totake potentially advantageous risks because the fearof adverse consequences that would otherwiseinhibit their actions is reduced. In a world wherecompetitive advantage increasingly depends onbeing more innovative and agile than your rivals,psychological safety is a valuable component of theleadership toolbox.

So more than 350 years after the enlightenmentefforts of Pascal, Fermat and all those who came afterthem, while many specific risks are more quantifiableand predictable than they have ever been, the way werespond to them remains as much a matter of instinctand psychology as rational thought.

The realisation that not everything in the humanexperience could be reduced to an equation or algo-rithm may even have played a part in Blaise Pascal’ssomewhat surprising fate. Shortly after his work onsolving the problem of the points, he had a ‘Dama-scene’ conversion, renounced both gambling andmathematics entirely and switched the power of hisconsiderable intellect to focus instead on philosophyand religion. If pondering the complexities of risk cando that to one of history’s greatest minds, what chancedo the rest of us have?

“When people feel a sense ofpsychological safety, they are

more inclined to take potentiallyadvantageous risks”

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24

THE GOLDENAGE OF

DAREDEVILSDAREDEVILSTales of remarkable risk-takingenthralled the masses when EvelKnievel and co ruled the roost.But it would be wrong to assumedaredevilry is a thing of the past

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Record-breakingstunt motorcyclist

Evel Knievel adoptsa characteristicallydefiant pose aheadof one of the jumpsthat made him one

of America’s biggestcelebrities in the 1970s.

A fatalistic attitude tothe many spectacular

crashes he survivedis summed up by the

catchphrase attributedto a Simpsons character

that parodied him:“If he’s not in action,

he’s in traction”

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Australian Trent Conroymakes a trial jump overZhangjiajie in China’sHunan province for the2017 World WingsuitChampionship. Witharound 40 deaths sinceits inception in the late90s, wingsuit flying hasbecome known as themost dangerous extremesport of all

French high wire maestroPhilippe Petit took theworld by storm in 1974when he dodged security– and the law – totightrope-walk betweenthe two towers of NewYork’s World TradeCenter at a height of over410m. Here he is in 1982

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at a rather more modestaltitude, crossing thecity’s busy AmsterdamAvenue to promote theCathedral of St John theDivine, where he wasartist in residence

41

The first person tobreak the sound barrierwithout the benefit of a

rocket or a jet aircraftto help him, Austria’s

Felix Baumgartnerperformed a freefall

jump of over 24 milesfrom the edge of space

on 14 October 2012,reaching 706mph before

opening his parachuteand landing safely in the

New Mexico desert

28

Performance artistMarina Abramovic inaction at the Museumof Contemporary Art inBelgrade. Abramovic’sother high-stakes workshave included notonly facing a bow andarrow, but also having astranger point a loadedgun at her head, self-immolation and enactingher own funeral

29

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Eddie Kidd, the ‘BritishEvel Knievel’ in mid-flight.Kidd hit the headlineswhen he cleared 14double decker buses in1978, aged only 19. Hewent on to perform over12,000 jumps beforesuffering brain damageand paralysis from apost-jump crash in 1996

Are men simply moreboneheaded than

women? There certainlyhaven’t been many

female daredevils, butone exception to the

rule is Lillian Boyer ofChicago, who regularly

performed wing walkingand other aerial stunts

from her Curtiss Biplanein the early 1920s

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Alex Edge (left) andJeff Weatherall (right)throw fellow BASEjumper, stuntwomanand professionalskydiver Clair Marieoff the 300m-tall deckof Malaysia’s KualaLumpur Tower, tocelebrate her birthdayin 2014

risk

For further reading, see page 76Mo

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WHEREDOES HR

COME FROM?A BRIEF

HISTORY OFTHE PEOPLEPROFESSION

From its origins in welfare to its digital reinvention, the storyof HR in the UK is simultaneously the history of an economyin search of an identity.Work. spoke to a group of experts

about their own perspectives on the past century

Interviews Robert Jeffery

35

history of hr

The early yearsThe formation of the Welfare Workers’ Association – theforerunner of the modern CIPD – in 1913 shows that for thefirst time,wellbeing is on theorganisational agenda in theUK,albeit only amongmore progressive employers. The advent ofWorld War I and an influx of women into factories leads to1,400 welfare supervisors being mandated in workplaces anda growing sense of professionalisation, though not everyoneapproves: in 1917, the early trade unionist Mary Macarthurclaimed “there is noword in the English languagemore hatedamongst the womenworkers of today than that of ‘welfare’”.

Richard Saundry The origins of personnel were inwelfare officers and other individuals who were employedas factories grew and the UK began to industrialise. Aspeople started to work in factory environments where youhad a finer division of labour, you inevitably had concernsaroundhealth and safety and definitely aroundwomen andchildrenworking, as strange as thatmay sound now.

The shift in work from the cottage and home into thefactory inevitably meant people were at risk. Some ofthe more far-sighted employers realised they got greaterproductivityoutofpeoplewhowerehealthyandreasonablywell cared for – even when labour was very disposable,therewas still a cost attached to it. Inmanyways, that’s stillsomething that drives investment inHR today.

Religion had a big part to play, too – the idea oftemperance was very specific to that time. You also hadthe nascent trade union movement, which perhaps led to

THE SPEAKERS

Peter Cheese Chief executive of the CIPD and author of The New

World of Work

Professor David Clutterbuck HR consultant, author and speaker

Dr Wendy Hirsh Principal associate at the Institute for

Employment Studies, researcher and consultant

Professor Richard Saundry Chair in HRM and employment

relations, Sheffield University Management School

Professor Paul Sparrow Emeritus professor in international

human resource management, Lancaster University

Management School

an acceptance that if the employer didn’t try to look afteremployeewelfare therewas the potential for activism.

Peter Cheese What the Welfare Workers’ Associationsignalled was the idea of the human at work, rather thanjust getting people into factories and making them worklike slaves. Cadbury, Lever Brothers and others had amorehumanisticway of thinking about their workforce. You canlook too at Henry Ford and what he was doing at a similartime in the US, bringing in the five-day week, decent payand paid leave. He realised that made employees moreproductive andmoreable tobuyhis cars too.But therewereother voices out there, as well, people like Karl Marx whotalked aboutmoving away from aworldwhere peoplewerethere to be exploited.

Cadbury, through thecreation of its Bournvilleworkers’ village, isregarded as a pioneerin employee welfare

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Themarch of industrialisationDevelopments in the wake of World War II improve livingconditions for many: the expansion of national insurance andthe formation of the National Health Service ensure it is notjust those with far-sighted employers who enjoy a basic levelof healthcare. Employees rush to join trade unions to use theirnew-found voice and the Labour party challenges the asset-owning establishment. But by the 1970s, organised labour isinvolvedinhigh-profileclasheswithbusinessesastheeconomyindustrialises, with the car and print industries among themost affected. It is a chance for personnel departments newlyschooled in psychology and organisational behaviour to provetheir industrial relationsmettle.

Richard Saundry This is a slightly crude and simplisticanalysis, but in the post-war period as British industrystarted to develop, you saw a cadre of management inbig organisations who were ex-military officers. In themain, they weren’t very good at managing. I’m sure somemade good leaders, but we had a relatively high level ofunqualifiedmanagers in big industries.

At the same time, youhad the rapid development of shopstewardorganiserswhowerequiteoftenverywelleducatedby their unions. They were quite militant – they had oftencome out of the war, though they generally weren’t officerclass, and theywere strong leaders on the shop floor.

Personnel managers came into that from the late 1960sand actually did an incredibly important job. They werea mile away from the welfarist types that a lot of HRtextbooks have painted. They were people who had tonegotiatewith smart, powerful tradeunion representativesin really complex situations.

Wendy Hirsh The history of having to organise people todowork is of course ancient. TheChinese civil service usedentrance exams in its recruitment well over 1,000 yearsago. The RomanArmy expected you towork your socks offand go to godforsaken places, butwhen you retired, you gota pension and some farmland. It’s a rather more coherentreward strategy thanmany employersmanage today.

AlthoughHR tells itself this narrative that it has movedfromwelfare to amore professional and strategic function,I suspect there was always more than that happening.Theremust have been someone in theWedgwoodpotteriestraining workers to throw pots the same size and shape,and indeed someone recruiting and paying them too.

SomanyofthethingsthemodernHRfunctiondoeswerealways needed, but they were not necessarily organised inthe sameway.

PeterCheeseWekeepciting thepioneeringcompaniesbutthe average working conditions at the time were appalling.Health and safety came about because people were dyingin the workplace – it was still the predominant view thatworkers were units of labour and means of productionrather than people. And if we’re honest, that sort of thingwas still going on formuch of the last century.

Wendy Hirsh Today the term paternalism is usuallypejorative. But we can think about it as employeeengagement. Why did Cadbury bother to have schools,housing and healthcare on site? To have a seriousunderstanding of and pay attention to what employmentlooks like from the employee’s end is not paternalistic. It isfundamental business sense.

World War I munitions factories, invariably staffed by women, were the drivers for welfare officers to be introduced more widely in workplaces.And though regarded as a necessary evil at first, soon they were able to encourage a link between wellbeing and productivity

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history of hr

The reason we had a lot of militancy in some industrieswas because of the clash between these educated unionreps and their inadequate management. There’s thatfamous quote Barbara Castle used in the 1960s thatmanagement get the trade unions they deserve. That’sexactly what happened.

DavidClutterbuckHRvalues transparency in away otherdepartments in organisations don’t. After the secondworldwar, somanyofthepeople inHRcamefromthemilitary. If itwas felt that youhad leadership skills and could understandstructures, you’d be good for personnel. The command andcontrol era ofHRwas verymuch related to those people.

Wendy Hirsh The UK has tended to look to Americanbusiness schools and large American corporations forclever HR ideas. We imported performance-related pay,for example – not actually a bright idea after all. Workpsychology has tended to dominate UK HR thinking,ousting other perspectives like industrial sociology andeven labourmarket economics.

If you’re working in HR, only thinking psychologicallyabout the individual is anenormous mistake. Even thinkingseriously about teams is often notevident in HR thinking. HRMtreats the person as the unit ofproduction. If your performanceis rubbish, it’s your fault. It’s notthat the organisation is rubbish, oryour team is bullying you, or yourjob is badly designed.

Peter Cheese Unions got very focused on pay, collectivebargaining and the industrial unrest of the 1970s. Itwas about calling out the inherent tension between theworkforce and the employer. A lot of people point to Ford[in the UK] as one of the birthplaces of modern HR. It wasa place where the heartland of HR, industrial relations,probably worked reasonably well – HR was sitting inbetween employers andworkers, trying to understand theirinterests and mediate between them. That role led to someof the growth in HR and also madeHR professionals thinkthey had a dual responsibility – the needs of the workforceand the needs of the employer. But for every good examplelikeFord, you canpoint to others likeBritishLeylandwhichwere catastrophic.

Paul Sparrow In a way, that welfare model which gotsubsumed by industrial relations responsibilities ran fora long time. Most of what we would currently think of asan HR function was done by very few people. You wouldhave succession planning, but only for a handful of peopleat senior level. That didn’t really shift that much until the1970s – for me, the first break point was Thatcherism, andthe 1979-1982 recession, which was massive. It was when

we tried to find a language to talk about the things peoplemanagement functions should be doing. As you got into the1980s, the societal context was one of huge restructuringin industries that were suddenly being liberalised. At acorporate level, itwasaboutsurvival formanyorganisationsand trying to stabilise in this new industrial world.

Wendy Hirsh The tenor of employee relations has variedfrom one industry to another and over time. For example,I worked with an HR director in the Post Office in the1980s and the business was both quite confrontational andquite chummy at the same time. Key employee relationsmanagers were often ex-union officials. This was the era ofthe drinks cabinet, and beer and sandwiches. Managementand the workforce understood each other very well. Fromthe outside, it may have looked like head-on disputes – aview often talked up by politicians and the press. On theinside, these people were dealing with old industries thatneeded to be radically reinvented.

Paul Sparrow In the 1970s, the debate was all aboutautomationandhowwouldyoupartitiontimeacrosssociety

as you automated. That went awayfor about 40 years and now it’sback.What arewe going to do ifweautomate knowledgework?

The 1980s was the start ofindividualisation, which meantdifferentiating between people.The upside was that organisationsrealised that people and theirbehaviour were more important

than they had previously given credence to. They putresources behind it. But of course, the moment you startto do that, some people benefit more than others and youbegan to see all those debates about resources being carvedup, thewar for talent, executive excess. The spoils were notshared equally, unfortunately, and that led us eventually totheglobalfinancial crisis,wheneverythinggot recalibrated.

Themodern eraDave Ulrich’s seminal work, Human Resource Champions,is published in 1997, and may or may not reinvent the way theprofession is organised – but it is emblematic of a functionseeking to become more strategic and more embedded asknowledge work proliferates. HR spends the turn of themillennium experimenting with outsourcing and digitisationof its services and processes, but also begins to gain the muchvaunted ‘seat at the table’ inmany sectors.

PaulSparrowBythe1990s, youbegantoseemorerecoveryandwe began to talk about the competencies we need in anorganisation and what that means for individuals. HR hadalmost no involvement in the organisation design aspectpreviously but they were able then to start thinking aboutprocesses, behaviours, skills and so on.

“Personnel managers wereactually a world away fromthe welfarist stereotype HRtextbooks have portrayed”

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Peter Cheese With the shift towards knowledge work,it became important to engage workers. You saw humanbehavioural science and motivational theory, expressed bypeople like [Frederick] Herzberg and [Abraham] Maslow,that recognised human beings were not machines but hadgreater dynamics at play.

We’ve seen demographic changes, too, particularly inthe last couple of decades. Young people coming into workare saying ‘if you think I’m just going to rock up, take mymoney and go home and that’s all that counts, you don’tunderstandme’. You could visibly see that shift among themillennials and Gen Ys coming into the workforce andasking questions about purpose, asking for support andcoaching from their managers.

David Clutterbuck It’s fascinating to watch how HR hasevolved in the hate stakes. If you go back 30 years or so,the department everybody hated most was HR. That wasquickly overtaken by IT, then along came compliance, andnow in most organisations purchasing is the one everyonehates themost. It’s a positive progression in someways.

Wendy Hirsh Renaming the personnel function humanresources was not really a bright move. In everyone else’sears it sounds like such a negative thing. It led people downthat path of thinking of theworkforce only as a collection ofindividual units of resource, not as actual people.

We’ve spent the last 20 years unlearning a lot of that andre-learning the importance of what motivates people atwork and what managers and leaders need to do. We now

have engagement and wellbeing as high-profile issues andwe see job titles shifting in all sorts of interesting ways,fromHRdirector to chief people officer, for example.

Peter CheeseThe war for talent emerged in the late 1990sand early 2000s. We’ve moved a long way from what thatMcKinsey report initially described, but it definitely droveHR – if you’re going to go out and hire the best, you need aproposition and you need to retain and engage them.

It all drove a more strategic agenda, but even in theearly 2000s, HRwas still a profession that wasn’t confidentenough. For a long period, HR found itself in a position ofshifting too much to being the servant of management inorder to justify its existence and earn its seat at the table.Arguably, it lost sight of what’s really important aboutpeople and organisational culture, focusing too much onbeing efficient and creating strategies around consolidationand standardisation.

WendyHirshTheadoptionofUlrich’s ideasinamechanicalrather than a conceptual way unintentionally segmentedHRwork and the job roles in the function into the strategicversus the operational. This made so-called operationalwork seem less important and less skilled.

.Peter Cheese Ulrich always says he never told HR hismodel would solve all their problems. Its adoption wasdriven firstly by an obsession with an idea of best practicebut also an indicationofHR’s insecurity inneeding tograbamodel.Theyevennamed it afterDaveUlrichwhen itwasno

Industrial disputes, including long-running battles over the closure of print facilities at News International’s site inWapping, London, forced HR teams to rediscover their industrial relations skillsets in the 1980s

39

more thanfinanceweredoing– itwas just a shared servicespartnership with a centre of excellence. HRwasn’t terriblyconfident at that time.

The futureThe Covid pandemic is demonstrating the value of people inbusiness and thewayHRcanact as a strategic enabler duringtimes of profound change. But can the function use it as aspringboard to bring about the humanistic shifts that will berequired of our economies over the next 100 years?

Richard Saundry HR is in a difficult situation. For alltheir strategic endeavour and aspiration, there is simply noevidence HR is any more influential than it was 20 or 30yearsago. Itstilldoesn’thaveaseat intheboardroom,whichI think is crucial. The things organisations and managersneed fromHR are the thingsHRhas said it doesn’t want todo any more – such as dealing with employment relations.Theywant to advise and do the strategic stuff. It’s counter-aspirational. But when you look back at HR’s journey, it’sbeen a hugely important one, in a relatively short time.

PaulSparrow In away,whatwe’re seeingnow is that 2008recession play out through things like Covid and we’rebeginning to deal with the institutional reaction to thechangedworld we live in.What role the HR function playsin that, I don’t know.

David Clutterbuck People now accept that we have tothink more systemically, and that’s what enables HR

to add value. Nobody else in the organisation is reallythinking systemically. They’re all thinking about thenext targets, even the board. The HR role is evolving intobeing the connector of the organisation to its values andthe ecosystem around it. It’s looking at organisations ascomplex, adaptive systems. It’s not just policing people, it’saboutHR becoming the real strategic thinkers.

RichardSaundryAworldwithoutanyHRwouldbehugelyproblematic – large numbers of employees would have asignificantly worse experience. The counter-argument isthat if you didn’t have HR, you’d have managers who hadbetter people management skills. I’m not convinced. HRis there for a very good reason. There needs to be a bufferbetween operational management and workers. Arguablythatwas the origins of the profession in the first place.

Peter Cheese The pandemic has greatly accelerated thepositioning of people as critical to the business agenda.This is such anopportunity to bemore front and centre andto reinforce why supporting and engaging people at workis so important. There’s massive change going on and weneed a profession that is at the centre of business thinking,is able todevelopwith thebusiness and is drivingprinciplesaround inclusion, transparency, skills. We need to engagewith the huge agendas that are being discussed – thatmeans investing in our skills and broadening the professionto attract different types of skills and experience.

For further reading, see page 76

Covid is changing how and where we work – an opportunity for HR both to reinforce its importance as a driver ofprogressive employment practice and to ensure it takes its roots as a welfare function into an age of remote working

history of hr

denise kingsmill

40

Baroness Denise Kingsmill was a pioneer inbusiness and parliament, and as she tellsMatthewGwyther,

her battles for equality are far from over

Portrait Colin Stout

Baroness Denise Kingsmill has a CV that,in the old world of paper, would fill severalsides of A4. She’s a peer of the House ofLords, an active board director and advisorto startups, anda leading speakeronfintech,

regulation and issues of diversity and sustainability.She’s beenonmoreboards thanmostpeoplehavehadhotdinners – British Airways and IAG, headhunters KornFerry, Betfair, the Judge Business School and TelecomItalia, to name but a few. And she was an advisor to RBSin the pre-crash days of Fred Goodwin. The fintechchallenger bank Monzo was even devised at her kitchentable, and she chaired it through its earliest years.

Kingsmill began her career after Cambridge infashion,startingoutat theInternationalWoolSecretariatbefore becoming a lawyer in her late 20s. She went on tofound her own firm in 1985 after she was told by a seniorpartner at her then employer, “we’ve never had awomanpartner and you’re not going to be the first.”

Her reputation for vigour and forthright opiniongoes before her. She is not afraid to speak her mind.“Being a lawyer teaches you to think and resolveproblems,” she says. “And with experience you developan ability to see trains coming down the tracks.” One(male) colleague, when asked for a comment in a profileof her written some two decades ago, said: ‘In a male-

“Very goodwomen still have

to work formediocre men”

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dominated society, if you are a powerful woman who istall, blonde and attractive, it is inevitable that you aregoing to be treatedwith suspicion.Mostmen are simplyshit-scared of her.’”

Following a 20-year legal career, Baroness Kingsmillbecame deputy chair of the Competition Commission(now the CMA), chairing more than 20 inquiries intoevery aspect of the UK economy, including the sale ofcars, milk, flour, insulatingmaterials and even cruise shipholidays. In 2007, she chaired an inquiry into thehealth ofsize zeromodels which considered eating disorders

She is currently a member of the board of Inditex SA,the Spanish fashion giant which owns Zara, and wasnamed one of the best-dressed members of the Houseof Lords. Once divorced and then widowed four yearsback, she says she has had two perfect marriages. She’salso selling off her vast collection of beautiful shoes forcharity – “No more high heels for me” – while planninga fly-fishing trip to Scotland with her grandchildren.“Never mind the salmon. We’ll try trout first. I haven’tcaught many. But catching them isn’t the point.” Priorto her departure, she tells Work. what she really thinksabout Brexit, Big Tech and becoming ennobled.

Tell us a bit about your ownbackground.I’m aNewZealander by birth, and heritage, animmigrant, a Brit bymarriage, a Londoner byadoption, a European and amember of theHouse ofLords.My parentsmet at a dance inWales during thewar.My fatherwas a Kiwi in the RAF,mymother thedaughter of aminerwho became a shop steward in afactory. I came toWales as a child and the planwas toreturn toNewZealand, but it never happened.

I was the first child frommy grammar school toget into Cambridge and at the time only 10 per centof studentswere girls. I did Part One Economics andPart TwoAnthropology. I had a great social life but itwasn’t an easy place for awoman.Wewere the frillson the lives of themen. It felt like a setup arrangedformen. Not reallywoman-shaped. But then that’sbeenmy experience throughoutmy career –womenhave to performworkaroundswithin essentiallymalestructures. It’s not actual sexism in an aggressivewaybut a system set up for the benefit ofmen.

You started out your career back in the 1970s. Havethings improved for women in theworkplace sincethen, andwhat still needs to be done to getmorefemale board representation?

Gosh, things are enormously better. But we now needto move the focus from boardroom equality to thepipeline for women towards leadership. There arestill huge lacunae there. Until relatively recently Ispent decades being the only woman on the board.There are fewer executives on board these days –normally only the CEO and the FD – and findingindividuals to fulfil these board roles means you’reafter people with financial experience or who havedone the job before. That still disadvantages women.The bankers, accountants, consultants. It’s thefemale executive pipeline that needs more work.

Very goodwomen still have to work for mediocremen. I see it all the time. It’s depressing.What areperceived to be leadership qualities – arrogance,aggression – are still out there. A bullying attitudestill gets you there, although it’s changing especially

Facebook founder Mark Zuckerberg was questioned by the European parliament in 2018 – a rare exampleof Big Tech addressing its social responsibilities and one Baroness Kingsmill would like to see repeated

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denise kingsmill

in America. TheMe Toomovement has had asignificant effect.

I once said that “running for political officeholds a particular sort of hell for women” and that’sstill true.Women have to undergo far more sexistscrutiny by the media. Could you imagine a womanliving with her toy boy in number 10? The pity is thathigher standards are required of women.

You’re amember of the Lords EconomicAffairsCommittee.Howdid you feel about being ridiculed insome sections of themedia for your cross-questioningof the chancellor, Rishi Sunak, about Brexit?

Wewere asking him about Covid and how it requiredemergency powers to deal with an event of suchunexpectedmagnitude. I merely added that theeffects of Brexit were as yet unknown and asked if hewas ready for them coming down the line.

The referendumwas a terrible idea that gotworse.I think referenda are the last resort of the desperateand shouldn’t feature in representative democracies.We cannot expect the electorate to delve into deep andcomplex detail ofmatters of state on a regular basis.

The effects?Well, lookat Cornwall, which votedLeave. They just assumedthat the government wouldgive them the funds the EUhad provided because they’rea deprived area. Never mindthe adverse effects on theirfishing industry, which nowsees the result of turning yourback on your main trading partner on your doorstep.

I’m also entirely unconvinced that businesswanted a bonfire of red tape in, for example, UKemployment law. We’d reached a level within theEU with which business was mostly happy, andbusiness wants certainty not surprises. Good HRdepartments welcomed enlightened and progressivepolicy. What I love about business, good business,is that it’s pragmatic. It adjusts. It does what theregulations say.

I worked inmy early career as a lawyer inindustrial injury and discrimination claims. I knowwhat it was like in the old days. Health and safety plusemployment regulation hasmade a huge difference forthe better in the last 40 years ofmyworking life. Thewhole direction of travel towards sustainable businessdoes not lead to Singapore-on-Sea.

I chair the sustainability committee at Zara.These are big issues for us – ethical supply chainsincluding the sourcing of cotton, of dyes. It’s acompany that does things because they think it’sright. Zara interacts very directly with its customers,the public. And that public demands the higheststandards these days.

Youwere the deputy chairman of theCompetitionCommission.What’s your viewonBigTech, thecurrentmajor focus of regulators?

My job as a regulator was the best I ever had,even if it was the worst paid. If you believe insocial justice it’s the one. I felt as if I was makinga difference. I am a great fan of capitalism but itrequires strong regulation.

I advisedMicrosoft with its antitrust issues.Initially they didn’t take European regulationseriously. But now, after experiencing its strength,they do. Facebook, Google, Amazon are youngcompanies but they have grown to the extent thatthey now need investigating in the way Big Oildid over 100 years back. The Americans inventedantitrust, after all.

I think Big Tech has a tendency to crushinnovation. It buys up potential rivals at an earlystage and they just disappear and die. They also needto have a far greater sense of social responsibility.I tried but failed to get a “public interest” factorincluded in investigations. It’s very hard to define.

As someonewho joined theLabour party at universitydid you have any hesitationabout accepting a place in theunelectedHouse of Lords?No. Iwas incredibly flattered. Ihave an issuewithmy ludicroustitle, whichmakesme sound likeamiddle European aristocrat.Also, some of theHouse of Lords’

protocols are a bit silly. But it would bewrecked byelections. You have senior doctors, police officers,social workers – people at the top of their game –whocontribute a perspective of great value and expertiseandwho don’t have toworry about re-election nextyear and therefore can be truly independent. In thisera, the value of high-calibre lay expertise in politicsismore important than ever. Onmy committeewe’vehad ex-chancellors, governors of the Bank of Englandand other distinguished economists. The debates arefar better than those in the Commons. Just read them.

Howdo you feel about the Labour party now?It was Francis Pymwho said many years ago thatthe most dangerous thing is a large majority. But it’svery tough breaking through. [Jeremy] Corbyn wasan unmitigated disaster for us. I’m saddened by thechaos emanating from the government. A traditionaldepartment of justice as in the States is somethingwe lack to keep the government in check.

Labour requires a complete rethink. Ourtraditional heartland has changed for good.

“The Brexit referendumwas aterrible idea that got worse.I think referenda are the last

resort of the desperate”

For further reading, see page 76

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Words Jeremy Hazlehurst

The servant leaderstrikes back

The days of dictatorial, command-and-control bosses may be numbered. But isthere hard science behind the move to a softer, more consensual approach?

Servant leadership is having a moment. Manypeople’s mental image of the archetypal leader isstill a commander, a powerful person (often aman)who gives orders. But in our pandemic-ravaged

world another, softer style is coming to the fore, not leastbecause Covid has forced many leaders to show a moreempathetic side. As their direct reports have dealt withillness, bereavement and other challenges, leaders havebeen forced to take aspects of colleagues’ lives into accountwhich were previously invisible at work. It’s hard to hold‘feet to thefire’ as swaggeringfigures likeGeneralElectric’sJack Welch used to, when the person reporting quarterlysales on Zoom has a kitten climbing on their keyboard andaMarmite-smeared toddler in thebackground.The leaderswho have thrived during the pandemic are thosewho havedialled down the tub-thumping, acknowledged that workis not the only – or even the main – thing in most people’slives, and learned to embrace their human side.

The concept of servant leadership, however, is neithernew nor entirely Covid-related. Like so many other trendsit was already developing and hasmerely been speeded up.The Black Lives Matter movement sparked conversationsabout race, structural inequality and bias. The youngergeneration are more tolerant of differing ways of life thantheir parents, who in turnweremore tolerant than theirs.

More observant and flexible leaders have realised that,just maybe, they can play a part in making amore tolerant,acceptingworld.Theold styleof leader–epitomisedalmosttoparodyby its last, lurid incarnation,DonaldTrump–hasvery quickly gone from ruling the roost to looking like abizarre relic of a bygone era.

This yearning for a new, service-oriented sort of leader isnot just about image. It is also about results. In politics,

bombastic individuals such as Trump and Boris Johnsonhave found their stylewasunsuited to themultiple, complexchallenges of the pandemic, but more collegiate characterssuch asNewZealand’s JacindaArdernhave fared far better.US president Joe Biden quietly got on with rolling out thevaccinewithoutoncegettingangryor tellingpeople to injectthemselveswithbleach (althoughhis stanceonAfghanistanis proving more controversial). And then there is GarethSouthgate, the England football manager who somehowepitomised this refreshing new style of leadership despitehis team’s defeat in theEuropeanChampionship final.

Far from restricting himself to the usual discussions ofwing backs, through-balls, and games of two halves,Southgate looks after his players emotionally as well asphysically and talks openly about values and socialresponsibility (“It’s clear to me that we are heading for amuchmore tolerant andunderstanding society, and I knowour lads will be a big part of that”). Sentiments that oncemight have seemed at best platitudinous, and at worstindulgent, suddenly felt likewords to spark a revolution.

So arewe seeing a sea-change in leadership, andmovinginto a world where a softer, more empathetic style ofleadership will come to dominate? Despite its recentpopularity, the phrase “servant leadership” is half a centuryold.Itwascoinedin1970byRobertKGreenleaf,anexecutivewho worked at US telecoms company AT&T for 40 yearsbefore becoming an academic and consultant. In his essayThe Servant Leader, Greenleaf explained that he wasinspired by the German author Herman Hesse’s storyJourney to the East, in which a band of men go on a strangequest. Hesse focuses on a man called Leo, a servant whocarries out menial chores. When Leo vanishes, the groupfallsapartandabandonsthejourney.Yearslater,thenarrator •

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Old school leadership: Kim Jong-un, as portrayed by Italian artist Eugene Willer. (Previous page) DariaMarchenko and Daniel Green’s The Face of War is a critique of Vladimir Putin’s totalitarian reign

Joseph Stalin and the smartphone collide with George Orwell’s dystopian vision in the work of NikitaEfremov. Significantly, Stalin’s influence as a leader was never entirely diminished by his regime’s brutality

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findsLeoagainand is taken into theOrderwhichsponsoredthe original journey, and it is revealed that Leo is in fact theOrder’s leader.Servant leadership,writesGreenleaf, “beginswith the natural feeling that one wants to serve, to servefirst. Then conscious choice brings one to aspire to lead.”

The servant leader is contrasted with the leader who is“leader first” and sees it as a route to power or wealth.Greenleaf says a servant leader ensures that others’“highest priority needs” aremet, so they “growaspersons”and become “healthier, wiser, freer, more autonomous,more likely themselves to become servants”.

Greenleaf is far from the only person to say that serviceshouldbe theprimarybusiness of leadership.ManagementguruTomPetershaswritten: “Organisationsexist to serve.Period. Leaders live to serve. Period.” The sentiment isechoedbyPeterDrucker,whosaid: “Thekey togreatness isto look for people’s potential and spend timedeveloping it.”Lao Tzu, the founder of Taoism, wrote: “To lead people,walk behind them”.

Amodern proponent of servant leadership isDanCable,professor of organisational behaviour at London BusinessSchool, who argues in his book Alive at Work that it is thebest style for themodernworkplace.Modernneurosciencetells us that workers who are challenged, autonomous andcreative – in short, whose “seeking system is activated,who can bring their ‘best selves’ to work” – are betteremployees and make for better organisations, arguesCable. The style best suited to creating this sort of enablingworkplace is servant or “humble” leadership.

Cable writes: “Humble leadership works not bydemanding perfection, but its opposite – by showing thathumans are never perfect and must explore, fail, andpractice in order to learn and improve.” He is damning of“bureaucratic leadership” which relies on “certainty,decisiveness, and positional power”. Leaders can usepower to “bully and frighten employees into compliance”,but mere compliance is not the way to get the best out ofthem. Cable says arrogance – seen as a defining trait of thedecisive, alpha leader – is in fact “a form of learnedhelplessness”. He explains that “learning only happens ifwe admit that we don’t know everything… a workenvironment where admitting ignorance or uncertainty isviewed as a sign of weakness” is a toxic one. And if thatsoundswishy-washy, it shouldn’t: “Becausemanagement isan overhead cost,managers donot create value unless theyare serving the employeeswho create the value.”

This all sounds verymotivational, but isn’t it just a fancyway of saying managers should be nice? This is a classiccriticism of servant leadership. Unspoken in it is the ideathat the qualities of a servant leader are traditionally“feminine”, whichmakes them unappealing to aggressive,alpha types who believe “masculine” traits such as raisingyour voice and throwing your weight around are the signsof a real leader.Whoever got anywhere by being nice?

It is, perhaps, to forestall this type of objection thatSimon Sinek begins his book Leaders Eat Last – which

THE HUMAN TOUCHFour diverse examples of servant

leadership in action

Jacinda ArdernFollowing the Christchurch shootings in

2019, New Zealand’s prime ministerprioritised compassion over anger and

powerfully framed the attack as anattack on her country’s ideals. Ardern

also took a 20 per cent pay cut insolidarity with those who have lost their

jobs or seen their wages reducedduring the pandemic, and thanked her

“team of five million” for helping protectthe country. According to polls, she isthe most popular leader New Zealand

has ever had.

Martin Luther KingThe very aims of the US civil rights

movement were not about individualpower but collective freedom. By takinga public leadership position he had a lotto lose. King demurred when a follower

called him an African American“Moses”, and refused to take part in1961’s freedom rides, not wanting todraw too much attention to himself.

When he won the Nobel Peace Prize, hedonated the money to his cause.

Gareth SouthgateAlthough he comes from a different

generation – he has talked about feelinga fatherly protectiveness towards his

players – the England team’s managerhas been happy to take his lead from hisplayers’ values. Despite opposition fromsenior members of the government, hesupported his players’ decision to takethe knee before matches, an anti-racist

gesture. In an essay about his leadershipstyle, he wrote that his players have a“duty to continue to interact with thepublic on matters such as equality,

inclusivity and racial injustice”

Angela MerkelWhen she was elected chancellor of

Germany for the fourth time in 2017, aGerman commentator wrote: “With her,strength has nothing to do with visible

dominance, with arrogant pride, with aneasily inflammable sense of honour,with boastfulness, with intimidationand public humiliation, or with the

ability to scare others.” This, muses thewriter, is a solution to Germany’s fear of

wielding its power in a way that mightseem aggressive. But it also flows fromthe structures Merkel finds herself in,with Germany embedded in the EU, a

rules-based bureaucracy whichdemands a very particular approach. •

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promotes a formof servant leadership – by telling the storyof a vicious firefight inAfghanistan,where the pilot of aUSArmy Warthog attack plane known as Johnny Bravomachine-guns a bunch of al-Qaeda fighters to save aplatoon of American soldiers. Exceptional organisations,writes Sinek, “all have cultures in which the leadersprovide cover from above and the people on the groundlookout for eachother”.Thecentral examplehegives is theUSMarines, where officers always let their men take theirmeals before them. Servant leadership, we are meant toconclude, isn’t just for sparrow-chested metrosexuals or –God forbid –women, but for real-life tough-guys too.

A proper understanding of servant leadership dialsdown the cosiness. “I would be sceptical about this ideathat it is all aboutbeingnice,” saysMichaelSmets, professorofmanagement at Said Business School at theUniversity ofOxford. He says Greenleaf in fact makes two arguments.“Thefirst is that thereare leadersamongservants,meaningthat you don’t have to wait until you are the CEO to startbeing a leader,” says Smets. This, he argues, is becauseresearch shows that organisations that promote this typeof behaviour thrive. The second argument – that leadersare there solely or even primarily tohelp people grow and providepsychological safety – is moreproblematic.Thatmightwork insomeorganisations – religious or sportingones, for instance – but in businessesit is less realistic, because theyneed tobe profitable. There is no voodoowhich ensures that helping peoplereach their spiritual potential willresult in a companymakingmore – or even any –money.

“Researchers get quite frustrated at the idea thatpsychological safety has been associated with being niceand warm and fuzzy and fluffy and everyone gets along,”says Smets. In fact, the key is to find the balance betweenpsychological safety and accountability, the “sweet spot”where high performance people are willing to take risks.But they have to do so “in the pursuit of organisationalmission”, saysSmets. “The research is very clear thatwhenwe create the safety for people to experiment, wherepeople feel they won’t be judged or ridiculed for an out-there idea that might actually take the company forward,thatwehavea lotmorecreativityanda lotmore innovation,becausewe draw ideas from amuchwider pool of people”.This also taps into the power of diversity, and it is wellknown that is a driver of organisational performance.Servant leadership is “not about being nicer, but it is abouttaking down the level of risk, and really helping peoplegrow and kind of unleash their potential,” Smets adds.

But what does it look like in practice, and does it getresults? Cable tells the story of Standard Chartered bank’sChinese operation, where new head office managers wereexpected to visit branches and emphasise their power andposition in the hierarchy. These visits caused huge stress

for employees, who spent weekends and late nightspreparing presentations for the big boss, hours cleaningbranches, andwere evenmade to obsequiously serve themmeals. A new manager, Jungkiu Choi, decided to ditch allthis. Instead, he showed up in branches unannounced andserved employees breakfast himself wearing an apron,then “huddled” with them and asked what he could do tomake thingswork better. Staff quickly told him about suchsimple things as greatermemory for computers so the newsystems ran faster, and opening one branch located in amall on weekends. “I have found that people do not movemuch by KPIs and reward/penalty. These cause smallchanges. People move in larger ways by noble purpose,emotional connection, experimenting with new things,and leading by example,” Jungkiu told Cable.

Another example is a well-established British grocerydelivery firm which found itself losing out to Ocado andother new competitors. Therewas a hard (and destructive)divisionbetween the“roundsmen”whodrove thevansanddelivered the food, and management, who literallysat behind desks and scolded workers about misseddeliveries, dirty uniforms or customer complaints. When

the company changed thenature of these debriefs,simply asking the mangers tostart their conversations withthe question: “How can I helpyou deliver excellent service?”roundsmen started suggestingimprovements. For example, ifmanagement wanted theiruniforms to be clean, they

should allow roundsmen to put them on after they hadloaded the vans. Things began to improve.

Standard Chartered says that during the two yearsJungkiu Choi was head of consumer banking, there was a54 per cent increase in customer satisfaction, customercomplaintsdecreasedby29percentandemployeeturnoverwent from among the highest of all foreign banks in Chinato the lowest. A separate experiment at Novant HealthWipro found thatwhen it changed its traditional inductionprogramme to one which allowed employees to talk abouttheir own, unique talents and express themselves, therewas an up to 72 per cent reduction in employee turnover.

A 2015 study found that humility in leaders even creates“contagion”, making team members humbler in theirinteractions. “This, in turn, creates a team-emergent statefocused on progressively striving toward achieving theteam’s highest potential…which ultimately enhances teamperformance,” wrote the researchers, concluding that ifthey want these sorts of outcomes, managers should “leadby example”.

Even apparently ego-driven leaders can appreciate thevalue of the servant approach, says Ruth Morris ofconsultancy Rema, who has been running leadershipcourses for years. Shealways asksparticipants to interview

“Ego leadership has always beenwith us and always will be…there is no incentive to change

and aim for collectivism”

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British artist Antony Micallef’s juxtaposition of Donald Trump with a cigarette packet health warningwas quickly adopted by protesters in Washington and Los Angeles after Trump’s inauguration

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leadership

a leader they admire and quiz them about their style. A fewyears ago, a group decided they wanted to interviewRichard Branson. To their amazement, he said yes.However, when they returned to class following theirmeeting with him, the group were buzzing, as expected,but the name they kept mentioning was not “Richard”, but“Will”. It turned out that they had indeed got face-to-facewith Branson, but when they started asking him about thenitty-gritty of leadership, he said he had no idea how toanswer and called in his deputy, Will Whitehorn. “Willknows about leadership,” explained Branson.

Anybody hoping for a revolution in management stylesshould probably slow down, however. “Ego leadership hasalways been with us and always will be,” says Dr AmyBradley, who teaches leadership at Hult Ashridge BusinessSchool. “I think the reason for that is that the system, thecapitalist system in particular, rewards the output ofindividuals. So formost leaders at the end of the day there’sno incentive –and I don’t just mean financially – to changeand aim for collectivism.” She agrees that leaderswhohavea humble, servant-like style have performed better duringthe pandemic, but also that we are perhaps noticing themnow largely because they are such a contrast to the ego-driven hero figures of historical norm.

Will servant leaders continue to flourish, and grab ourattention, once the pandemic had faded from view? “Weare yet to get to see that, because we’re still in it to some

extent,”Bradley says. “Ido think ithas accelerated theneedfor us to bemore human. It’s just a question of whether westick with that, or whether the pressure to show resultswithin this system then prevails.”

Perhaps servant leadership will never become thedominant style. Maybe that is because capitalism rewardsmore self-centred styles, and because different peoplesimply have different personalities which are expressed intheir leadership. The example of Branson and Whitehornsuggests that rather than competing, different styles cancomplement each other. It’s not good-cop, bad-cop exactly,butmaybe it is something like ying and yang.

Perhaps styles are also about what counts to eachindividual as success. Morris’s early experience ofleadership came from her own father, the managingdirector at an engineering firm. As a child, she remembershim saying hello to people from the firm as they walkedthrough town, and spending time chatting to the cleaners.Another time, he demonstrated a new safety harness bydangling from a crane while wearing it – this after he hadalready had two heart attacks.

At his funeral, coachloads of employees came from thefirm to pay their respects. In aworld of KPIs and quarterlyreturns, maybe for some people that is a better metric of asuccessful career, and a life well lived.

For further reading, see page 76

A new breed of activist shareholdersthink they can force carbon-intensive

businesses to change – but not everyone isconvinced by their confrontational tactics

CAN INVESTORSSOLVE CLIMATE

CHANGE?

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The story of how aDutch climate activist with asingle €30 share mobilised an army ofgrassroots investors to hijack the annualgeneralmeeting of one of theworld’smightiestoilcompaniesbeganin2006,withaDamascene

moment in a dark corner of an Amsterdampicture house.At the time,Mark van Baal was a sales manager at a US

company that provided refrigeration units to the shippingindustry, a major polluter. He’d started off as a mechanicalengineer,making–ashenowputs it– themachines thatputCO2 into the atmosphere. Now he sat with tears in his eyesas the author behind his epiphany intoned in a Tennesseedrawl that the world was on the brink of disaster. “Globalwarming, alongwith the cutting and burning of forests andother critical habitats, is causing the loss of living species ata level comparable to the extinction event that wiped outthe dinosaurs 65million years ago. That eventwas believedtohavebeencausedbyagiant asteroid.This time it is not anasteroid colliding with the Earth and wreaking havoc: it isus,” said Al Gore inAn Inconvenient Truth, the blockbusterdocumentary about his environmental campaign.

“I hadn’t worried about the climate too much beforethen,” van Baal says. “But after seeing that movie, it wascompletelycleartome.NowIknewthe problem, I knew the solution,and I knew the best contributionI could make to it.” He quit hisjob at 36 and spent the best partof the next 10 years as an energyand climate journalist, laying outthe rationale for the oil industry tochangecourse, for its ownsakeandeveryone else’s. On the one hand,government policy would eventually force society awayfrom fossil fuels, while on the other, renewables wouldinevitably become a better investment than oil and gas,which were becoming more and more expensive to get outof the ground. “I wrote that many times, especially aboutShell. If you don’t change course, you will be the Kodak ofthe 21st century. And that’s still the case.”

Of course, Shell wouldn’t listen, not to a journalist withan axe to grind, probably not even to a politician with ademocratic mandate. In fact, van Baal reasoned, the onlypeople Shell might listen to were its owners. So in 2015, hebought stock and set up shareholder pressure group FollowThis to encourage others to do the same. In 2016, he and100 signatories filed a resolution at Shell’s annual generalmeeting, calling for the company to stop all explorationfor oil and gas and begin an immediate transition intorenewable energy.

Unsurprisingly, the board advised voting against, but asmall but significant 3 per cent of shareholders rebelled. Itbecame an annual spectacle. In 2017, the proportion was 7per cent. By Shell’s 2021 AGM, 30 per cent of shareholdersbacked van Baal’s motion. Follow This, which now counts7,000 retail investors among its members and has thesupport of numerous institutional funds, has launched

“Twenty years ago, investorswere just asking for disclosure –

now they are much morefocused on action”

similar rebellions at other oil majors, notably BP, Total andChevron. The executives who once washed their hands ofthe problem, saying they were simply supplying society’sdemand for energy, are now – at least publicly – committedto net zero emissions.

‘Climate activist investors’ like van Baal shouldn’t exist,inconventionalwisdom.There is something fundamentallyincompatible about our mental images of activist investors– aggressive Manhattan or City financiers like ElliottAdvisors’ Paul Singer or famed corporate raider CarlIcahn, using their clout to force changes on hapless CEOsfor financial gain – and climate activists of the ExtinctionRebellion stripe, gluing themselves to aeroplanes.

Yet this Swampy-meets-Gordon-Gekko phenomenonis increasingly common, albeit in different guises. At oneend of the spectrum is EngineNo 1, the brainchild of hedgefund veterans Chris James and Charlie Penner, which usestraditional activist methods to achieve a “positive impact”.This summer, it imposed three new board directors onclimate change recusant ExxonMobil, winning over othershareholdersonaplatformofpushingthecompanytowardsa long-term, sustainable transition from fossil fuels.

At the other end of the scale, London-based activistinvestor Chris Hohn – founderof the $30bn The Children’sInvestment fund, which famouslyforced the 2007 break-up of Dutchbank ABN Amro, later inspiringthe likes of van Baal – has takena somewhat softer approach innudging the likes of Rio Tinto,Glencore and Unilever to backhis Say On Climate resolutions,

which commit them to making annual statements aboutclimate strategy and progress towards reducing emissions.Follow This, which exerts pressure through non-bindingshareholder resolutions, sits somewhere between thetwo, alongside other non-profit shareholder activists likeMarket Forces andAsYou Sow,which last year incited 49.6per cent of JP Morgan’s shareholders to back a resolutiondemanding to know how the bank planned to “reduce thesubstantial greenhouse gas emissions associated with itslending activities”, as the largest provider of finance to thefossil fuel industry.

Although these methods may be new, the traditionof investor engagement in sustainability isn’t, says NickRobins, professor of practice in sustainable finance at theLondon School of Economics, and co-founder of financialthink tank Carbon Tracker. “Investors have been activeand engaging on climate change since at least the year2000. What is new is the breadth of investors who aredoing this, and also the focus on their effort. Twenty yearsago, itwasmore indicative – typically asking companies fordisclosure. Now it ismuchmore focused on action.”

An unprecedented number of institutional investorshave committed to reaching net zero – a state where theactivities of their portfolio companies no longer increase

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The fate of Kodak – once a cash cow but now regularly dodging bankruptcy – is seen as a salutory lessons for oil firms

the proportion of carbon dioxide in the atmosphere – by2050 at the latest. The 545 institutional investor signatoriesto the Climate Action 100+ initiative, founded in late 2017to limit global heating to 1.5C above pre-industrial levelsin accordance with the Paris Climate Agreement, have$52 trillion under management. The Glasgow FinancialAlliance for Net Zero, a similar organisation launched thisyear andchairedby formerBankofEnglandgovernorMarkCarney, represents $70 trillion.

This is not small change. Robins suggests four reasonsfor this apparently sudden greening of the financial sector.The first is that it’s an “existential issue” with the potentialto devastate the global economy – and therefore returnsacross the breadth of a financial portfolio. “Pension fundswill increasingly be unable to meet their promises to theirbeneficiaries if climate change goes onunchecked. If you’vejust taken on a 16-year-old, the investment horizon for theirpension fund needs to be into the 22nd century…what’s thepointofbuildingapensionpot for a future that is completelyunlivable?” Robins says.

Secondly, the material impact of climate change isalready apparent, particularly in oil and gas, the sectorwhich has received the greatest pressure from investors.Between September 2019 and August 2020, the sevenlargest publicly-owned oil majors were forced to writedown $87bn in so-called stranded assets – proven reserveson the balance sheet that may never be pumped – becauseof predicted falls in long-term demand, plus the shorter-term impact ofCovid-19.The reputational impact of defyingpublic sentiment on climate is harder to quantify, though

environmental, social and governance (ESG) recordsconsistently rank among key considerations for talentedemployees decidingwhich company towork for.

Robins’ last two factors are the twin threats fromregulators and central banks – which could see theeconomic fallout from climate change interfere with theirability to maintain financial stability – and climate-relatedlegal action. There were 1,587 climate litigation casesglobally between 1986 and 2020, and the average number ofcases per year has risen sharply since 2006. The two mostsignificant were both in the Netherlands: the successfulinjunction sought by the Urgenda Foundation in 2015,and confirmed by the nation’s supreme court in 2019, thatforced the Dutch government to introduce €3bn worth ofimmediate measures to reduce carbon emissions, on thegrounds that it was failing in its duty to protect citizensfrom foreseeable harm; and the landmark 2021 decision infavour of Friends of The Earth Netherlands, ordering Shellto make a 45 per cent cut to its emissions by 2030 (the oilgiant is appealing). The latter in particular has proven ofgreat concern to investorswhohadpreviously thought theiroil assetswere immune from litigation, Robins says. “I don’tthink the case against Shell will be the last.”

That greenhouse gas emissions are everyone’s, andevery company’s, problem is becoming painfully apparent.As August’s Intergovernmental Panel on Climate Change(IPCC) report made clear, we can expect more extremeweather events such as droughts, floods, wildfires andheatwaves, alongside the steady deluge of low-lying coastallands and river deltas around the world as sea levels rise, •

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The high priest of shareholder value, Carl Icahn (bottom) and Engine No 1’s Chris James, whose focus is societal change Mar

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bringing untold human and economic damage. It alsostates very clearly that the worst outcomes – associatedwith temperature rises of more than 2C – are inevitableunless “deep reductions in CO2 and other greenhouse gasemissions occur in the coming decades”.

It’s not all doom and gloom. John Godfrey, corporateaffairsdirectoratLegal&General,andamemberofitsgroupenvironmental committee, describes the need to addressclimate change as a “strategic driver” for the business, andnot just because of the financial downsides it could bring.“This is the biggest investment need in our lifetimes, butit’s also the biggest investment opportunity,” he says. Theinsurance and asset management giant invests both as aprincipal (through its £87bn pensions annuity book, whichis committed to net zero by 2050) and as an agent (for thelikes of mutual funds and sovereign wealth funds, with£1.3 trillion under management) in firms developing greentechnology, including in the oil and gas sector.

Godfrey believes L&G and other institutional investorsare holding companies to higher standards over emissions,but doesn’t see this as some grand change of heart, morea consequence of greater transparency about investees’climate strategies. “More and more companies are makingdisclosures about what they’redoing, so there’s better data onwhich to act,” Godfrey says, addingthat L&G uses its own climate riskframework to analyse progress.

Is all this investor pressureactually succeeding in driving highcarbon investees down a morevirtuous path? At first glance, it’shard to tell, partly because thesector has a particularly egregious history of greenwashing(visits to oil companies’ websites can be a disorientatingaffair; with all those pictures of forests, solar panels andcrystal blue skies, you could be forgiven for thinking you’daccidentally clicked on an environmental pressure group).

It also doesn’t exactly help that the companies oftengroup what you might call ‘low-carbon’ activities, likeliquified natural gas (LNG), biofuels – or, in Shell’s case,bizarrely, petrol stations – into the same business units as‘no carbon’ activities likewind or solar power. Nonetheless,they’re not impossible to decipher.

Let’s take BP, which has widely been seen as the mostcommitted of the oil majors to the climate transition, eversince new CEO Bernard Looney announced in early 2020a new purpose (“to reimagine energy for people and ourplanet”), and an ambition to become a net zero companyby 2050 or sooner. Its plan to transform into an “integratedenergy company”, which drew considerable praise andeven resulted in Follow This withdrawing its 2020 AGMresolution, releasing a buddy-buddy joint statement aboutworking togetherwithmanagement, rests on four pillars.

First, the company is substantially increasing capitalexpenditure into low-carbon business areas, from $750m ayear in 2019 to $3-4bn a year by 2025, and around $5bn a

year from 2030 onwards. This includes major investmentsin wind and solar power, but also in things like bioenergy,electric vehicle charging infrastructure and so-called bluehydrogen, which is extracted from gas.

Second, BPwill correspondingly invest less in oil and gasexploration, intending itsupstreambusiness to shrinkby40per cent in absolute terms by 2030, atwhich point it expectshydrocarbons to take only half its total capital expenditure.

Third, the company will reduce the carbon intensity –the CO2 emissions for each joule of energy delivered – of itsdownstream (refining, distribution and sales) business by50 per cent by 2050. This is significant as BP sells roughlythree times asmanybarrels of oil equivalents as it produces,and will be achieved partly through the increases in low-carbon production, but also through prioritising the sale ofgas over oil, which has a higher carbon intensity.

Finally, BP’s plan to reach net zero relies on carboncapture and storage, plus offsetting – the former industrialprocesses that extract carbon dioxide from the air orprevent it entering the atmosphere at source (for exampleat a gas power station), the latter essentially planting trees.

All this, the company insists, means it is on track toreduce carbon emissions from oil and gas production by 20

per cent by 2025, 35-40 per cent by2030, and reach net zero by 2050.

Is that good enough? Opinionis divided. Nick Hyett, leadequity analyst at HargreavesLansdown, reckons BP is pivotingsignificantly from looking for newoil deposits to optimising old onesbut won’t be quitting the blackstuff completely just yet.

“The challenge is that, at the moment, the rate of returnyou’ll likely get from low-carbon sources is far lower thanwhat you’re already getting from those oil and gas assets,”he says, in part because there’s so much virtuous moneychasing renewables, ratchetingup theprice. “Itmeansyou’dhave to give up short-term gains in favour of hypothetical,uncertain long-term returns, and that’s difficult to do.”

The more traditional environmental campaign groupsgenerally see the shareholder activist tactics of vanBaal andothersaswell intentionedbutmisguided. “When it comes tooil and gas companies, we believe the only route to forcingthem to change is through divestment and political action,not engagement,” says Friends of The Earth campaignand community organiser Rianna Gargiulo, adding thatAGM votes are non-binding and thus essentially toothless.“Proponents of shareholder activism and engagementsuggest that a corporate net zero pledge is a demonstrationof success, butwhen you look at the reality of these pledges,none of them are actually deviating from the objective ofextracting and burningmore fossil fuels.”

Divestment – refusing to own stock in high carbonindustries – has certainly been a prominent alternativemethod for investors to show their disapproval ofbusinesses thatdon’tmeet their sustainability expectations,•

“The reality of corporate net zeropledges is that none of themdeviate from the objective ofburning more fossil fuels”

The Paris Climate Agreement places pressure on oil majors to radically reduce their output by 2050 – and many are responding

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alongside the traditional quiet-word-behind-closed-doorsengagement approach and the militancy of shareholderrebellions. Activist group 350.org, for example, has beenencouraging shareholders to divest for years – it says $14trillion of divestments have beenmade or pledged.

The jury is out among investors over which is the moreeffective strategy. The principal argument in favour ofdivestment is that it reduces the disinvested company’sshare price, thereby increasing the cost of capital availableto the business, as there’s less equity to support bank debt.

Hyett is unconvinced that this will work, at least in thecase of oil andgas.Hedrawsa comparisonwith the tobaccomajors, which were under similar pressure from investorsand regulators a decade ago. “Their price to equity (PE)ratio has trended down for the past five to seven years. It’snot because they’re any less profitable – it doesn’t reflectthe company fundamentals, it reflects a lack of investorappetite to buy tobacco shares. It’s made the share priceless attractive, but the reality is that tobacco companiesare so cash generative they don’t actually need to raise anymoney, so it’smade a negligible difference to the day-to-dayrunning of the business,”Hyett says.

“You can envisage a world where the oil majors end upin a similar position, where their share price falls but theircash flows increase over the next 10 years, as supply slowlydwindles but demand stays flat or shrinks at a slower pace.”

Ultimately, without getting into the heads of oil majorCEOs – or their counterparts in aviation, heavy industry,

shipping, mining or any other high carbon industry – it’simpossible to know whether engagement, activism ordivestment is the most effective form of investor pressure,or even whether investor pressure is really what is causingthem to take climate changemore seriously.

But that pressure is undoubtedly increasing. Van Baalrecalls that in his early days trying to win over pensionfunds to his cause, he was repeatedly told that challengingmanagement in the openwasn’t the done thing (“if a friendof yours beats his wife, you don’t put it on Facebook, yougo talk to him,” one of them said); now the majority ofthe Netherlands’ biggest pension funds habitually backFollow This resolutions, which have already won outrightmajorities at Chevron andConocoPhillips.

Perhaps van Baal’s original case, conceived 15 yearsago in that Amsterdam cinema – that political andeconomic imperativeswill eventually forceoil companiesto go green or face oblivion – is starting to get through, ifnot to the management of those companies, then at leastto their owners.

And that, of course, iswhat activist investors ultimatelyare, no matter how green or radical they seem. “I’m just aresponsible shareholder,” van Baal says. “I’m doing this formoral reasons, but I only use financial arguments, andthat’s thereason it’s going tosucceed. Inacapitalisticworld,you don’t win debateswithmoral arguments.”

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CULTUREWARS:THE OLYMPIAN

STRUGGLEFACING JAPANESE

BUSINESSThe battle between ‘closed shop’ corporate traditionalists

and globallyminded reformers has claimed some high-profilecasualties in the world’s third-largest economy. But we couldall benefit from the questions it raises, says Paul Simpson

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If Carlos Ghosn had celebrated his sixtieth birthdayat McDonald’s, he might not be living in a goldenprison today. Accused of under-reporting his salaryand misusing company assets, the former Renault

and Nissan CEO ended up having to smuggle himself outof Japan in a flight case designed for musical instrumentsto avoid a likely jail sentence. He is now a fugitive fromjustice and lives in a pink $15m mansion in one of theposhest parts of Beirut.

Much like Donald Trump fulminating about stolenelections from his Mar-a-Lago mansion, Ghosn emergesperiodically to proclaim his innocence and insist he is thevictim of a conspiracy led by Nissan executives. His causewas not helped by a YouTube video of a £520,000 party hethrew at Versailles. Ostensibly a celebration of the fifteenthanniversary of the Renault-Nissan alliance – although noexecutives fromNissan Japan appear to have been invited –it was held, by sheer fluke, on his sixtieth birthday, 6March2014. AsNewYorkTimes reporterBenDooley put it: “Whenyou’re cutting thousands of auto workers’ jobs, throwingparties at Versailles is not a good look.”

TheGhosn imbrogliowas emblazonedacross theworld’sfront pages in November 2018, but another acrimoniousand significant row over executivepaywas largelyunreportedoutsideJapan. Keen to attract the besttalent to the Japanese InvestmentCorporation, a new government-backed $18bn fund to supportemerging technologies, Ministryof Economy, Trade and Industry(METI) officials agreed that theJIC’s CEO Masaaki Tanaka andother senior executives could earn more than Y100m(around £650,000), the level at which, according to a 2010law, publicly-listed companies had to declare executives’salaries. Minister Hiroshigo Seko criticised their decisionsaying: “This is Japan. Compensation must correspondwith what the people find acceptable”. Tanaka, and eightother executives, quit when chastened METI officialsreduced their offer.

The 2010 law addressed a problem that – to manyinternational observers used to much larger executive paydeals - simplydidn’t exist.Ayear after it came into force, theratio of CEO-to-worker pay in Japan was 11 to 1, comparedto 22 to 1 in theUKand475 to 1 in theUS.The simultaneousarrest of Ghosn and the JIC fiasco led foreign investors toquestion whether Japan Inc really wanted to becomemoreinternational, more talent-oriented and more incentive-driven. They also highlighted the unique and – to westernbusiness eyes at least – confusing and contradictory natureof Japanese corporate culture, eager to reap the rewards ofbeing a major player in international trade while jealouslyguarding control and ownership of the assets that generatethose rewards.

If you put Ghosn’s actions and the machinations of hisopponents at Nissan to one side, it is clear that his downfall

became inevitable when he committed the cardinal sin:challenging one of the basic precepts of Japan’s corporateculture. His proposal to merge Nissan and Renaultconflicted directly with Japanese ideas about the purposeof a company, a view that is deeply embedded in thecountry’s culture.

In America and Britain, businesses are primarily profit-making machines. Making money is important in Japantoo but it is not, as Takeshi Nagano, the former CEO ofMitsubishi Materials, once observed, the only purpose:“One idea that has traditionally and universally beenaccepted in Japan is that a company is also a communalsociety for all those who work there, including themanagement, and provides the basis for their livelihoods.”

Nagano’s definition still applies although theterminology has changed. “In the 1990s and 2000s, thiswas often discussed, even in Japan, in terms of stakeholdermanagement,” says Fabio Gygi, a lecturer in anthropologyat London’s School of Oriental and African Studies. Thisconcept of the company as a community encouraged thetraditional practice of offering employees a job for life.Nagano said: “When I became president of MitsubishiMaterials, the first thing that crossed my mind was what I

coulddototransformthiscompanyso that I could hand it over as anentity to a future generation forgrowth and development.”

ThiscredowaselaboratedonbyKonosuke Matsushita, one of themost respected entrepreneurs inJapanese history, who said: “Theessence of corporate managementin the West is for the executive

to do the thinking and let subordinates implement it,whereas the essence of Japanese corporate managementlies in the ability of people at the top to gather and organiseideas from the entire workforce.” Implicit in this view ofthe CEO as custodian of the company, and protector ofthe community’s wellbeing, Nagano argued, was thatmanagers should behavewith self-restraint.

One of Nissan’s failings before Ghosn took over in 1999was that management had stopped gathering ideas fromthe front line. He changed that instantly. “From 1999 toabout 2005, he was a much more open, collaborative boss,constantly visiting the gemba – factory floor – and talkingtoworkers. But he changed hugely, becamemore autocraticand told people he didn’t want to see problems,” PierrePalata, a former CEO of Renault, told the Financial Times.

When Renault, at Ghosn’s behest, bought 35 per cent ofNissan for £4bn in 1999, the auguries were not good. OneGeneral Motors executive remarked: “That money wouldhavebeenbetter spentby taking thenotes, putting theminabarge, andsinking it in themiddleof theocean.”Nicknamed‘Le Cost Killer’ in France for his radical streamlining ofRenault, Ghosn defied Japanese corporate tradition byadoptingthesamemodusoperandi there,cuttingthousandsof jobs tomakeNissanmore competitive. It worked, at least

“The essence of Japanese corporatemanagement lies in the ability ofpeople at the top to gather ideasfrom the entireworkforce”

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High profile Japanese leaders who have left their roles recently (clockwise from top left): Renault-NIssan’s former CEO CarlosGhosn, ex-Tokyo Olympics creative Keigo Oyamada and games chief Hisashi Mori, Toshiba’s departed chair Osamu Nagayama,

ex-boss of Japan Post Masatsugu Nagato and Mitsubishi Electric’s former president Takeshi Sugiyama

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to start with: GM acknowledged his success by trying tohire him as CEO in 2009.

But as his star rose, Ghosn forgot all about self-restraintand started behaving like a rock star, gracing the cover ofcelebrity magazine Paris Match, hosting ever more lavishentertainments (celebrating his civil wedding to secondwife Carole with a Marie Antoinette-themed party –again – at Versailles in October 2016) and constantly beingphotographed alongside assorted heads of state. By 2017/18,hewas earning $17m a year.

Ghosn’s leadership came to exemplify what Japaneseanalysts call ‘founder mentality’, a phenomenon in whichJapanese entrepreneurs enjoy a unique status within thebusiness and are known, only half-jokingly, as ‘emperors’.Entrepreneurs such asMichio Suzuki, Soichiro Honda andKonosukeMatsushita enjoyed this exalted status and, eventoday, that aura surrounds Uniqlo’s Tadashi Yanai. Theproblem for Ghosn was that he was no founder but merelyemployedby thebusiness: that honourbelongs toYoshisukeAikawa, one of Japan’s most feted business leaders, whocreatedNissanway back in 1933.

While Nissan boomed, however, no-one wanted to rockthe boat and Ghosn could flout Japanese management

traditions with impunity. Even his redundancies couldbe defended as protecting the livelihoods of the vastmajority of people in the Nissan community. But pressingfor Renault and Nissan’s merger to create a new entity,partly owned by the French government, which could thencombine with Fiat Chrysler, was a completely differentkettle of sushi. At best, it represented a leap into the greatunknown formembers of theNissan community. At worst,it could be perceived as a clear and present threat to theirlivelihood, and to the independence of one of Japan’s best-known businesses.

METI civil servants were not enamoured with themerger talks. The power of bureaucrats in Japan remainslittle understood externally. Bureaucrats at METI’srenowned predecessor, the not-quite identically-namedMITI (Ministry of International Trade and Industry) allbut invented the concept of amodern industrial policy in the1950s, advising companies how best to serve the nationalinterest.In1963,theyinformedmotorcyclemagnateSoichiroHonda he would waste Japan’s resources by diversifyinginto cars.Honda recalled: “In thosedays, officials controlledeverything. But I thought I was free tomakewhat I wantedand told them: ‘We’re not atwar now, you know.’”

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Bureaucrats are no longer as powerful but, seeingthemselves as guardians of the national economic interest,they still belong – alongside politicians, business leadersand journalists – towhat analysts call the ‘ironquadrangle’that protects Japanese businesses against outsiders.

In this context, Ghosn’s hotly-debated conspiracytheory sounds plausible. A group of Nissan executives,desperate to stop themerger,maywell haveplotted againsthim. They may have had the tacit approval – or activeencouragement – of bureaucrats. Yet Ghosn gave any suchplotters plenty of ammunition – not just his munificentsalary (by Japan’s standards), but the luxurious homesin Amsterdam, Beirut, Paris and Rio de Janeiro (paid forwholly or largely by the company) and some ambiguousdealings through obscure Nissan subsidiaries.

His defenders have suggested that, as the foreign CEOof a famous Japanese company, Ghosn was an easy target.There is a grain of truth in that. The Japanese have hadan equivocal relationship with gaijin (foreigners) since the1870s when American gunboat diplomacy forced themto open up to overseas trade. Ghosn’s very appointmentstruck some right-wing nationalists as unpatriotic. Thereare also echoes of the 2011 scandal in which anothergaijin – Briton Michael Woodford – was dismissed by theboard of Olympus where he was CEO for “disruptive”investigations into corporatemalfeasance.

Woodford was accused of misunderstanding localcustoms although, as the scandal unfolded, Olympus’definition of local customs turned out to include systemicfalseaccounting,kickbackpaymentsworth$1.5bntoyakuzagangsters and a $687m fee to a middle-man to facilitate anacquisition. After the Japanese authorities investigated,Woodfordwas paid $11m forwrongful dismissal.

Yet there is a sense in which Ghosn, a Brazilian-French-Lebanese businessman and an exotic figure by theconservative standards of auto industry execs, was alwaysan outsider. Even in France, where he was a citizen. In thecompelling BBC Storyville documentary Carlos Ghosn:The Last Flight, Louis Schweitzer, the former RenaultCEO who appointed Ghosn to transform the company, isasked whether he liked his old protégé. “Like him?” saysSchweitzer. “I like what he did.”

Ghosn’s spectacular fall prefigured a period ofunprecedented corporate turmoil in Japan, suggestingthat broader, as yet not fully understood, changes mayhave been stirring in society. In the past two years newchairmen, presidents or CEOs have been appointed atscores of Japan’s largest companies. This changing ofthe guard has occurred at the massive trading houses, orsogo shosha (notably Itochu, Marubeni and Mitsui), manyiconic brands (Bridgestone, FujiFilm, Honda, Olympus,Panasonic, Suzuki, and Toshiba), the financial sector(Nomura, Tokio Marine) and, ironically, Nissan itself,where Ghosn’s successor Hiroto Saikawa quit, admittinghe had been overpaid too.

Many leaders left by choice. Takahiro Hachigo’sreplacement as Honda CEO by R&D chief Toshihiro

JAPAN INC-SPEAKTerms to help you understand one of theworld’s most intriguing business cultures

AmakudariLiterally meaning ‘descent from heaven’,

this is the common practice of placingretired bureaucrats in strategic positions

at major companies.

GakubatsuThe Japanese equivalent of the oldschool tie network. At many large

companies, a gakubatsu (school clique)encourages the recruitment of managers

from a few select institutions.

Gyosei-ShidoThe administrative guidance officials givebusiness leaders is not as influential as it

was, but it is still a common practice.

HanseiLiterally meaning ‘self-reflection’, this isthe belief that acknowledging one’s own

mistakes is the first step to improvement.Politicians often practice hansei when

corruption is exposed.

Kaizen‘Change for the better’ refers to a

corporate philosophy of continuousimprovement. The concept has become

famous as part of the Toyota Way.

KeiretsuThe literal translation ‘headless combine’captures the complexity of these business

networks in which companies andsuppliers are linked to – and own shares in– each other. New regulations have been

introduced to combat this practice.

SokaiyaSometimes translated as ‘meeting men’,these are a peculiarly Japanese type of

racketeer who blackmail management bythreatening to disrupt public meetings.

ZaibatsuMeaning ‘financial clique’, these groups

would typically be centred around afamily holding company, a bank, and

several industrial subsidiaries.

ZaikaiAlthough the term describes the entire

business community, in reality it refers tothe corporate elite who play a leading role

in employers’ federations, chambers ofcommerce and similar organisations.

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Mibe in April is expected to help the car maker accelerateits development of electric vehicles. Some quit to takeresponsibility for scandals on their watch: improper sellingof insurance policies forced Masatsugu Nagato’s exit fromJapan Post in December 2019 and Takeshi Sugiyama leftMitsubishi Electric this summer because the company hadbeen falsifying test data for train components since 1985.

In business and in politics, these resignations haveceremonial aspects, says Gygi. “The leader stands before amicrophone, apologises and bows – the deeper the bow themore serious the offence. Often, especially in politics, if youresign quickly, and look contrite enough, you can lay theground for an eventual comeback. If you hang on until youare forced out, it could be the end of your career.”

Few executives will choose to follow the precedent setby former justice minister Katsuyuki Kawai, now in jail,who said he had decided to bribe dignitaries to vote forhis wife after “consulting a priest with whom I’ve been incontact for twenty years.”

Osamu Nagayama was probably a tad unlucky to beousted as Chairman of Toshiba in June this year. Threefinancial scandals in six years had enraged institutionalinvestors. Before he took over as chairman in July 2020,managers had colluded with bureaucrats to bully foreigninvestors into towing the company line. The subsequent •

revelation of this campaign persuaded 55 per cent ofshareholders to vote Nagayama out at this June’s AGM,a revolt hailed, possibly prematurely, as a milestone forcorporate governance in Japan.

Therehavebeenother resignations too,manyconnectedto the Tokyo Olympics. Prime minister Shinzo Abe hadfervently hoped the Games would promote Japan as adynamic, competitive, ethical and modern society. In asign of how dysfunctional the country’s leadership classhad become, this lofty ambition was entrusted to YoshiroMori, an octogenarian, gaffe-prone, former primeministerwho had been photographed having a bevvywith a leadingyakuza and oncemade $1m from improper share dealings.

Mori resigned in February 2021 after complaining thattalkativewomenmademeetings “dragon too long”, andwasreplacedbySeikoHashimoto,oneofJapan’smost successfulfemale Olympians. The turmoil didn’t end there. HiroshiSasaki, the Games’ creative chief, quit after suggestingthat comedian Naomi Watanabe appear as an “Olympig”.Kentaro Kobayashi, director of the opening ceremony,resigned over charges that he had once joked about theHolocaust, Composer Keigo Oyamada also stood down,after boasts abouthis bullyingof disabled childrenat school,came to light. The Games’ official theme ‘unity throughdiversity’ began to seem ironic, if not downright satirical.

Footage of Carlos Ghosn’s ‘arrest’ was aired around the world but, it later transpired, was staged by the Japanese authorities. TheRenault-Nissan CEO had already been detained awaiting trial when officials returned to ‘recreate’ the incident for the camera

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Hashima Island, a striking symbol of Japan’s regional decline: once a busy mining town, it was abruptly abandoned in the 1970s when itsundersea coal reserves ran out. It now stands empty, and in 2015 was declared a UNESCO World Heritage Site

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After such a succession of scandals, the openingceremony of Tokyo 2020 was a pleasant surprise, tastefuland subdued, subtly reflecting the anxiety and uncertaintyfelt by a world still reeling from Covid-19. Hashimoto’ssalvage act was no consolation for Abe who had resignedthe previous August, officially for health reasons, norhis successor as PM Yoshihide Suga, whose post-Gamesapproval rating remained dangerously low at 28 per cent.

“The 2020 Tokyo Olympics were supposed to be astatement to theworld that Japanwas back, especially afterthe Fukushima disaster,” says Gygi. “The 1964 Olympicswas Japan’s way of showing the world that it had becomea modern, demilitarised, economically powerful andtechnologically advanced society – remember that theshinkansen (bullet train) from Tokyo to Osaka went intoservice just days before the Games opened.” That messageresonated globally, ushering in a golden age for Japan Incwhich, in the 1980s, was credited bymanagement theoristswith reinventing capitalism. That narrative ended abruptlyin 1992 when inflated real estate and share prices crashed,triggering recession and economic stagnation.

TheJapanesegovernmentplayed theOlympiccardagainin 1998, using theWinter Games atNagano to tell theworldthat the country was bouncingback from stagflation. (Spoileralert: it wasn’t). The nation wasstill becalmed in what analystshave dubbed ‘the lost decades’.

Likethepreviouspanegyrics,this narrative was overdone.World Bank’s figures showthat Japan’s per capita income(on a purchasing power paritybasis) grew from $27,910 in 2000 to $45,470 in 2019. By thismeasure, the Japanese fared slightly better than the Britishand French but not as well as the Germans or Americans.The ‘lost decades’ cliché looks evenmore nonsensical whenyou consider that, between 1971 and 2021, the averageunemployment rate in Japan was 2.7 per cent, compared to6.8 per cent in theUK.

Determined to challenge such misperceptions, theJapanese government launched an initiative called CoolJapan. This campaign made its global debut at the closingceremony of the Rio Olympics in August 2016 when Abeappeared in costume as SuperMario, the fictional plumberof video game fame.

Cool Japan soon fizzled out. As Gygi says, differentparties had different ideas about what made Japan cool.Some initiatives – such as a certification scheme toauthenticate Japanese food – had little connection to thecentral goal.Many things aboutJapanarecool –TheLegendof Zelda videogame, minimalist retailer Muji, the boardgame Go, Mount Fuji and tennis champion Naomi Osaka,to name a few – but, as Cool Britannia proved, anything agovernment promotes automatically ceases to be cool.

TheTokyoOlympicswerenot ‘cool’ but theywere, touseanother overused term, ‘authentic’. The choice of Osaka,

who has been open about her mental health struggles, tolight the Olympic flame set the tone for a Games which –especially after American gymnast SimoneBileswithdrewfrom many events – sparked a genuine conversation aboutthe psychological pressures on athletes. This, in itself, wasan historic Olympic first.

“Even inJapan,wherementalhealth is rarelydiscussed,and karoshi – people who work themselves to death – arestill an issue, this opened up a public conversation,” saysGygi. “Itwas not all constructive –Osaka is half-Americanand some nationalists suggested that if she’d been entirelyJapanese she would have persevered and not, as they sawit, put herself first. Yet her fame – and the election of twobiracialwomen asMissUniverse – gives people, especiallyyoung people, different kinds of role models, who showthat Japan is not the completely homogenous society it isoften portrayed as.”

Like almost every nation at present, Japan faces seriouschallenges. As Ghosn’s case proved, its justice system,which allows prosecutors to imprison someone formonthswithout charge, interrogate them with no lawyer presentand, even when they’re on bail, prevent them from talkingto their family, requires root and branch reform. Many of

Japan’s regional banks arebasket cases, the population isshrinking, ageing and fleeing thecountryside – some 1,200 villagesand small towns are estimatedto have been abandoned by theirinhabitants – and the nationaldebt is even more impressivethan the aforementioned MountFuji (although most of it is owed

internally). It is also unclear how Japan Inc will reconcileits growing reliance on foreign investors – which own35 per cent of shares on the Nikkei stock exchange –with Nagano’s traditional concept of the company asa community.

The Tokyo Olympics, Gygi says, “revealed a dividedcountrywith lowlevelsofpublic trust inbusinessandgaffe-prone politicians.” For all that, he still sees hope for Japan.“It’s not all dark. We are starting to see the imagining ofother ways of life from those who can’t or won’t join therat race.” Hundreds of thousands of 15-to-34-year-oldshave become ‘freelers’, savouring the freedom of short-term low-paid jobs. “There is also a trend – notmassive butgrowing – for young people to return to the countryside insearch of a simpler life,” Gygi adds.

Having endured thirty years of low growth, lowinflation and low interest rates – a combination economistscall ‘Japanification’ – the country could now be well aheadof a new global curve. Carlos Ghosn might not agree butif Japan’s business, political and bureaucratic leaders cancreate a viable, sustainable, zero-growth societywemay allbe in their debt.

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“The 2020 Tokyo Olympics weresupposed to be a statement to the

world that Japanwas back, especiallyafter the Fukushima disaster”

BUSINESS RESEARCH, REPORTS AND INSIGHT

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Like VAR, instant feedback enables us to up our game, and can help employees focus on improving particular skills, according to new research

enabling managers and workers togive, seek and receive competency-based feedback using computers,smartphones or other devices.However, questions remain

about these systems and theireffect on performance appraisals,say researchers from TempleUniversity and the Universityof Florida. They analysed oneparticular market-leadingapplication and examined 5,000instances of feedback from fiveorganisations spanning thepharmaceutical, healthcare,interior design and paymentprocessing industries.They discovered that when

real-time feedback systems areused, employees who receivepoor feedback or low scoressee their results improve moresignificantly over time comparedwith employees who receivetraditional performance reviews.It’s the immediacy of the feedbackthat helps bring this about, says the

study. Problems can be addressedquickly and feedback can befocused on a specific behaviour ortask, unlike in a formal annual orsix-monthly appraisal that typicallyrates skills in general rather than aspecific event.In addition, it was found that

positive real-time feedback raisesan employee’s willingness tocontinuously performwell. Timelyand immediate praise for a jobwelldone increases the likelihood of anemployeewanting tomaintain goodperformance, the research says.This is in contrast to less frequentappraisals with recognition comingmuch later after the event, meaningthe opportunity to garner higherperformance and engagement is lost.It was also discovered that

managers rate their direct reportshigher if they had previously ratedthe manager high, and vice versa.However, this tit- for-tat strategy isnot adopted by employees.bit.ly/Templemanagers

One of the most discussed HRtrends of recent decades has

been the end of the traditionalperformance review and the adventof informal, frequent “check-ins”between employees andmanagersin the name of moremeaningfuldevelopment. And the introductionof real-time feedback applicationsis helping accelerate the switch,

PERFORMANCE MANAGEMENT

MakingfeedbackfasterThe immediate andspecific nature of real-timeappraisals improves employeeperformance, a study finds

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ENGAGEMENT

Is anyonelistening totheir staff?Many companies are stillignoring an obligation totalk with their workforce

Since 2018, listed companies intheUKhave been required to

involve their workforcesmore incorporate decisionmaking. Thetrouble is, very few are taking theguidelines seriously.The Corporate Governance

Code from the Financial ReportingCouncil (FRC) requires thatcompanies havemechanismsin place that help boardroomsbetter understand the views oftheir workforce. It recommendsappointing aworker as a directoron the board, creating aworkforceadvisory panel, appointing a non-executive director (NED) responsibleforworkforce engagement – or anycombination of the three.Where none of thesemeasures

are adopted, the code requires thatbusinesses explain in their companyreports what alternativemeasureshave been taken.A studywas carried out by

the FRC, the Involvement andParticipation Association andRoyalHolloway, University of London tofind outwhat action companies hadtaken in response to the rules.Its review of 280 annual reports

fromFSTE 350 companies showedthat only one organisation hasappointed aworker director.Meanwhile, 12 per cent have createdan advisory panel, 40 per cent haveappointed anNED and 16 per centhave an advisory panel and anNED.A further 32 per centmade other

arrangements or relied onmeasuressuch as staff surveys or site visits.While some progress is beingmade

with regard to boostingworker voice,

the report warned that many annualreports relegated engagementto “boilerplate language”, with anumber of firmsmaking little effortto developmeaningful engagementbeyond an annual staff survey.“Formost firms, their current

position onworkforce engagementrepresentsmore of an evolution ofexisting practices than a revolutionin approach”, the report says.

Workforce Engagement and theUKCorporateGovernanceCode:AReviewof CompanyReportingandPracticemakes a numberof recommendations to raiseworkforce engagement, including:• ensuring that employee voicefully reflects the geography anddemography of the workforce

• giving workers input into the peoplechosen as their representatives

• making sure boardroom agendashave a balance of topics thatwill interest management andthe workforce

• establishing a two-way dialoguebetween boards and the workforce,so staff are properly briefed beforebeing asked their opinions.

bit.ly/FRCengage

I&D

Getting racerightIncreased revenues and improvedcreativity are direct results offocused action on racism

Ending racism atworkmattersfrom the perspective of fairness,

equality and social justice. Butachieving genuine racial equity alsobrings tangible financial gain.Businesses that have targeted

measures to tackle racial divisionrecord an average 58 per cent higherrevenue than those that do not,new research has revealed.

A sample of 100 companies fromthe FTSE 350 shows that averagerevenue across a three-year period is£2.1 billion higher for those that takefocused action on racism.The Equity Effect, a report from

Henley Business School, highlightsthat whereworkplaces proactivelyaddress inequity, they also see animprovement in employee jobsatisfaction, loyalty and creativity.Conversely, failing to deal with racialdiscrimination in ameaningful wayhas damaging effects.AUK survey of 505 C-suite leaders

and 1,005 employees highlightsthat 29 per cent of workers sufferinterferencewith their worktasks due to the after-effects ofdiscrimination. Around a thirdalso experience verbal abuse orare subject to unfair rule, the sameproportionwho say they have toendure an intimidating environment.The effect of discrimination

on businesses is “pervasive anddamaging”, says the report.Despite this, only 30 per cent

of business leaders acknowledgethat racial inequity exists in theirorganisation; they also rate achievingracial equity the least importantstaff-related challenge to overcomein the next 12months.That’s not to say progress isn’t

beingmade. One in four employeesand two in five business leadersbelieve their organisationwillachieve racial equitywithin the nexttwo years, the survey found.The report identifies areas for

businesses to focus on, such asusing data to identify how andwhere racial discrimination isa problem, and having trainingsessions on race, equity andinclusion at induction stage andthen at regular points afterwards.“The question is whether business

leaders arewilling to do the hardwork to change the practices,policies and attitudes embedded intheir workplace”, says the study.bit.ly/equityeffect •

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REMUNERATION

It pays tobe ethicalLinkingESG targets to executivepay is increasingly common, butnot always the right thing to do

Environmental, social andgovernance (ESG) targets

that underpin responsible andsustainable business practices areincreasingly being used in FTSE 100executive pay packages.But should seniormanagers be

paid on ESG performance?Whilemany companies are keen to dothe right thing, linking the twoisn’t a panacea – and it can be anunproductivemove, warns a report,Payingwell by paying for good,published by PwC and LondonBusiness School.Data fromFTSE 100 companies

released in 2020 highlights that 45per cent nowhave an ESGmeasurein executive pay. These aremost

common in bonuses, with 37 per centof companies taking this approach.A fifth (19 per cent) have an ESGin their long-term incentive plan(LTIP), such as a share plan.For bonuses, themost common

measures relate to the ‘social’ aspectof ESG, including those focusingon diversity, employee engagementand health and safety. For LTIPawards, environmentalmeasures aremost common, particularly thosethat address decarbonisation or theenergy transition.Around half of ESG targets in

bonuses and LTIPs are outputmeasureswith a quantifiable goalsuch as emissions reductions.Around a third are inputmeasuresrelating to activities a companyundertakes, likemaking investmentsin green energy sources.While this points to a growing

trend to link ESG to executive pay,it doesn’t mean it’s right for allbusinesses, the report says.Practical challenges include

coming upwith ESGmeasures thateveryone can agree on and avoiding

creating incentive targets thatundermine the intended outcome.For example, linking gender diversityto pay incentivesmay risk the focusbecoming too narrowly on gender,while other forms of inclusion, suchas ethnic diversity, are neglected.The report concludes that “it’s

vital that boards are allowed to retaindiscretion to align paywith ESG thatis suited to their circumstances.”bit.ly/ESGWork

JOB QUALITY

Jobs aren’tgettingworse– yetTheCIPDGoodWork Index saysmanagerswill need to focus onwellbeing to improve outcomes

Jobqualityhasn’t hugely sufferedasa result of the Covid-19 pandemic

–at least, for those thathave remainedinwork. Butwemay be experiencinga “calm before the storm”, the CIPDhaswarned. Dramatic changes inUK job qualitymay yet take place asorganisations continue to adapt theirbusinessmodels during the currentcrisis and the government’s furloughsystem,which has propped upemployers andworkers, also adjusts.Even so, there are aspects of

work that need improving, findstheCIPDGoodWork Index 2021,an annual benchmark of job qualitythatmeasures seven dimensions: payand benefits, employment contracts,work-life balance, job design,relationships at work, employeevoice and health andwellbeing.Findings based on a survey of 6,257

UKworkers (including those onfurlough) have shown disparities injob quality still remain. For example,highermanagerial and professionalroles have enjoyed greater jobquality across successive years.Food retail is an area where job quality has suffered this year, with workers reporting exhaustion

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Interestingly, other occupationaldifferences have appeared this year,with keyworkers (such as thosein health, education, the police orfood retail) faring badly inmanyaspects of job quality, includingwork-life balance andwellbeing asthey experienced excessive pressureand exhaustion atwork. A total of60 per cent said homeworkingwasnot available to them and 26 percent (comparedwith 17 per cent ofnon-keyworkers) reported always oroften feeling exhausted atwork.Those that couldwork fromhome

scoredmore highly on autonomy,flexibleworking arrangements andworkplace relationships – 82 percent said theirmanger is supportiveif they have a problem, comparedwith 70 per cent of those not abletowork fromhome.However, thisgroup did fareworse onworkload.Meanwhile, furloughedworkers

hadworries about job security – 34

per cent believed it was likely theywould lose their job in the next 12months, comparedwith 13 per centof non-furloughedworkers. Theyalso felt they had less of a voice atwork and reported poorer qualityworkplace relationships.Employers wanting to improve

job quality for their employeesin the next fewmonths shouldthink about prioritising wellbeing,and putting in place individualapproaches that recognisedifferent needs; addressing work-life balance challenges for on-siteworkers as well as remote workers;and taking a “human-centred”approach when reintegratingfurloughed employees thatacknowledges the level of jobinsecurity they have suffered.The report waswritten by

MelNorris-Green and JonnyGifford of the CIPD.bit.ly/CIPDjobquality

LEADERSHIP

Howculturallysmart is yourboss?Your business could succeed orfail on one person’s ability tomanage an international team

Leaders whowant to besuccessful need to develop

cultural intelligence (CQ) as a“matter of priority,” says recentCIPD research.It’s a key trait that will allow teams

made up of different nationalitiesand cultures to thrive – increasingan organisation’s creativity.CQ goes beyond taking an

inclusive approach in theworkplaceormerely being a goodmanager. Itis centred around an individual’s

Cultural intelligence is crucial for leaders of organisations made up of different nationalities and backgrounds – like the United Nations

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“Among employees,CQ is linked to betterperformance andjob satisfaction”

situations

Executive pay has always been a touchy subject, with companies risking reputational damage

skill and ability to interact effectivelyin culturally diverse situations.What does thatmean in practical

terms? TheCIPD report –ManagingMulticultural Teams: Exploring theopportunities and challenges, basedon research intomulticultural teamsand focus groupswith 23managersfrom theUK, Asia-Pacific and theMiddle East – breaks it down.It explains that a critical

component of CQ is avoidingmakingquick assumptions about someoneuntil you have enough informationabout them and their culturalvalues to knowwhether theseaffect how they act, acknowledgingthat personality and context canplay a part in how someone thinksor behaves.It’s also about

overcoming the feelingthat the norms of anindividual’s cultureare (or should be) thenorms everywhere.The report points out that among

employees, CQ is linked to betterperformance, greater job satisfactionand knowledge sharing.

Meanwhile, leaderswith ahigher CQ aremore likely to enableintegration ofmultinational teamsand be effectivewhen it comes tocross-border activity.Research also suggests that cross-

cultural leadership is a significantpart of leadership development.“Global leaders should approach

development in a dynamic, ad hocway, evaluating new situationsand continuously improving theircross-cultural understandingthrough learning frommistakes”,the report says.

Other findings from theresearch include:• Innovation and creativity as

the key benefits ofcultural diversity.Althoughcommunication(particularly languagebarriers) presents a

challenge, putting the time intomaking multicultural teamswork effectively reaps rewards inthe form of ideas and problem-solving capability.

• To overcome communicationproblems, leaders need tomaketeams aware of language barriersand their effect on teammembers’willingness to contribute; explorewhy employees switch to theirnative language inmeetings andencourage them to use a sharedlanguage, if necessary; and highlightachievements of each teammemberso their skills rather than languageproficiency are recognised.The report waswritten by Jake

Young, research associate at theCIPD.bit.ly/CIPDteams

MOTIVATION

CEO pay is thescandal thatwon’t go awayFinding the right leader is vital– so too the right salary, an issuethat divides boards and investors

How far would your businessgo to avoid a controversy over

CEO pay? New research suggests67 per cent of company directorswould sacrifice shareholder value toavoid a furore over executive wages.The paper, CEO Compensation:

Evidence From the Field, revealsthat 56 per cent of investors feelthe same, though there are alsosignificantly differing views aboutwhether leaders should earn less.The survey of more than 203

directors and 159 investors inFTSE-listed companies exploredthe dynamics in deciding CEO pay,including the constraints facingboards and investors.Boards face multiple problems

in setting CEO pay to maximiseshareholder value, it shows.Ironically, the biggest doesn’t comefrom fear of public criticism butinvestors themselves – 77 per cent ofdirectors say shareholder guidelines S

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have forced them to offer CEOsa lower level of pay. Boards alsoreport it means they have to offerone-size-fits-all pay structures morefrequently than they would like.The research – carried out by

Alex Edmans and TomGosling, bothof London Business School, andDirk Jenter at the London School ofEconomics – reveals that investorsand directors are divided aboutaspects of CEO pay. For example,77 per cent of investors think payis too high or far too high, with 86per cent believing boards should betougher on remuneration levels.Only a fifth (18 per cent) think

a companywould recruit a lowerquality CEO if paywere cut by athird. This is in contrast to 59 percent of directorswho think lower paywould result in having to bring in aless talented leader. In addition,whileinvestors believe pay should bemorefocused on the long term, directorsthink this wouldmake it harder toattract and retain the right leader.What the two groups do agree on

is that CEOs are most incentivisedto do a good job by their ownmotivation to create value andambition to build a good reputation,with financial incentives trailing inthird place in terms of importance.They also agree that CEOs should

share in risk alongside investors andstakeholders – even if these risksare outside the CEO’s control. Forexample, it is fair for leaders’ pay tofall in a pandemic and increase inan economic upswing, even thoughneither are due to performance.Co-author Dr Gosling says:

“Investors typically focus on thedetail in incentive plans, whereasboards are more focused on gettingthe right person and, if they aregood, keeping them throughcompetitive pay awards and tailoredremuneration packages.“Tomake progress, initiating

dialogues on these deeperdisagreements may ultimately leadto more fruitful conversations on

executive pay – such as the depthof the CEO labour market and thedrivers of CEOmotivation,” he adds.bit.ly/CEOsalaries

WELLBEING

Homeworkingmakes usanxiousTomitigate stress, organisationsshould involve employees in thedesign of working practices

Working from home hasbrought a range of benefits

for employees, but it’s important torecognise it has had a significantdownside for wellbeing. And thatmeans employers need to ensuretheir homeworking policies aredriven by consideration of mentalhealth rather than staff satisfaction.Researchers at the University of

Leicester, University of East Anglia,University of Exeter Business andUniversity ofManchester foundthat up to 80 per cent of workerstaking part in a survey reportedbeing satisfied or extremelysatisfied with homeworking.However, more than 50 per cent

typically reported being anxiousin any one week.The study took place during

two periods of national lockdownin the UK in 2020, when thegovernment mandated employeesto work from homewhere possibleas part of the response to thepandemic.Weekly diary studieswere carried out amongmore than850 academics and non-academicstaff at two universities.The downsides of homeworking –

and the two crucial factors affectingwellbeing – were loneliness and aninability to switch off fromwork,which both increased the likelihoodof employees feeling anxious.

On amore positive note, havingdiscretion over work had positiveeffects on wellbeing and on staffsatisfaction with homeworking.The study,Homeworking, Well-

being and the Covid-19 Pandemic:A Diary Study, highlighted thatremote working could be a double-edged sword.For example, workers had to find

ways to manage the greater controlthey enjoyed over their job withoutblurring the boundaries betweenwork and home life; and reconcilehaving more peace and quiet athome to get on with tasks with nothaving colleagues around to discussproblems or ideas with.Lead author of the study,

Professor StephenWood, says:“When employees talk aboutmissing the social side of work, theyare referring to more than chattingover coffee; it also concerns beingaround colleagues to share ideas.Much comes out of impromptuencounters and corridor meetings.”The results highlight the

importance of designing remoteworking policies that are not basedjust on self-reported satisfaction orperformance levels.“There is a danger that

employers may neglect employees’wellbeing and health,” saysWood.“Developing homeworkingpolicies must be part of a vision ofhealthy workplaces.”To help employees feel more

connected,Wood recommendsthat businesses involve staff in ideagenerating schemes or workingparties that make recommendationsabout staff-related issues.“You have to involve people

more”, he says. “And a good placefor organisations to start is withinvolving employees in the design oftheir homeworking practices.”Other members of the research

team are GeorgeMichaelides, IlkeInceoglu, Elizabeth Hurren, KevinDaniels and Karen Niven.bit.ly/WFHhealth •

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Feeling underappreciated is not good for motivation, so managers would do well to ensure their leaders of the future are looked after

DEVELOPMENT

How to nurture‘informal’ starsSupport your talent-in-trainingor risk burning out stars beforethey have hada chance to shine

There are officially appointedmanagers and leaders, then

there are ‘informal’ leaders –employees who are identified ashaving leadership potential or whoare particularly ambitious andtake on extra responsibilities toget ahead. And while businessesare keen to encourage people tostep up into these roles, they aren’tbeing properly looked after.A study has highlighted that

informal leaders can feel lessexcited about their job or evensuffer burnout when not givenadequate support from their linemanagers. It challenges findings

from other studies that informalleaders are always happy with theirrole and the unique status it brings.Those who want to contribute

more and help others need to beprotected from feeling exhausted,says the research, Leading theteam, but feeling dissatisfied:Investigating informal leaders’energetic activation and worksatisfaction and the supporting roleof formal leadership.Co-author Paul Tesluk at the

School of Management, Universityat Buffalo, says: “To maintaintheir status and fulfil others’expectations of them, informalleaders face increased demands…If formal leadership support is lowor absent, informal leaders canstruggle to fulfil necessary teamneeds and feel less control overdecisions, skills and resources,which results in greater levelsof exhaustion.”Academics discovered the

drawbacks to taking on informal

leadership roles after carryingout four studies involving 688participants based in the US andTaiwan. Surveys and interviewswere used to examine how supportreceived frommanagers affectedinformal leaders’ motivation.Researchers found that while

the extra pressures of the jobcaused informal leaders to feelless enthusiastic about theirwork, what made up for that wasknowing they had support fromtheir own manager.Organisations can ensure that

is offered in a number of ways,explains the study.First, informal leaders’

contribution should be recognisedthrough promotions or bonuses.More importantly, however, ismanagers making themselvesaccessible, offering help withworkload where feasible, grantingmore autonomy in decision makingand providing mentoring.bit.ly/informalleads

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FINANCIAL MISCONDUCT

Abroken rivalis good newsDespite the stigma, businessescan still benefitfinancially fromthewrongdoing of a competitor

It’s widely understood thatcompanieswho break the law by

‘cooking the books’ are not the onlyones financially penalised throughfalling stockmarket prices – firms inthe industry are tarredwith the samebrush and suffer the consequences.However, a study has challenged

this “stigma effect” and revealed thatcompetitors could stand to benefitwhen a rival is hit by scandal, asformer customers switch loyaltiesand turn to their product instead.Researchers IvanaNaumovska at

INSEAD andDovev Lavie at BocconiUniversity have established thatthe negative stigma effect increasesbased on the similarities between theproduct of themisbehaving companyand its rival. But they also discoveredthat eventually, that drop in shareprice performance bottoms out, andin time a business can benefit fromothers’ misfortune .

At that point, the closestcompetitors – thosewhich have thebiggest productmarket overlap –benefit themost, according to theresearch,When an Industry Peer IsAccused of FinancialMisconduct:StigmaVersus Competition Effects onNon-Accused Firms.The study examined data from 233

publicly tradedUS firms operatingin the software industry in the 1990s.During that period, actionwas takenagainst 16 software companies forfinancialmisconduct.Market loss orgainwas calculated using cumulativeabnormal stockmarket return (CAR)around the time a firmwas accused.Results proved the existence of the

stigma effect.Whereas the accusedbusiness suffered an average CARof -30.84 per cent, “non-accused”companies experienced a -1.98 percent loss. Non-offending companies’market value then recovered andincreased after a certain point; moreso for the companies considered tobe the closest rivals.Interestingly, investorswith a

more refined understanding of theindustry’s competitive landscapeand able to identifywhichwere theperpetrating company’s nearestcompetitorswere alsomore likely toincrease their shareholdings in those

companies, again pushing up stockprices, the study showed.Can businesses take action to

minimise the stigma effect of firmsthat act illegally in their industry?“We suggest that companies shouldanticipate and respond not onlyto the competitive actions of theirindustry peers but also to theirunethical behaviour, which can affectperformancemuch like competitiveactions,” the researchers conclude.bit.ly/stigmaeffect

HEALTH & SAFETY

Stay fit…by notexercisingWhy thewrong kind of physicalexertion atwork is oftenworsethan life behind adesk

Exercise isn’t always good for ourhealth – and it’s exercise at work

that’s the problem.Research has shown that being

more physically active in our freetime reduces the risk of early deathormajor heart-related healthproblems, such as heart attack orstroke. But increasedwork-relatedphysical activity raises the risk ofearly death or cardiovascular disease,even after adjusting for factorsincluding lifestyle, health conditionsor socioeconomic status.Even though “work constitutes the

main domain for physical activityfor a large fraction of the adultpopulationworldwide”, the authorsof the study note that current healthguidelines on physical activity do notmake a distinction between the twotypes of exercise.Authors AndreasHoltermann,

Peter Schnohr, Børge GrønneNordestgaard and Jacob LouisMarott explain that exercise patternsdiffer depending on the setting – andthat accounts for the variation inhow it affects health.Not all exercise is the same – it’s wrong to assume physical activity at work is beneficial

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Physical activitywe choose todo in our own leisure time tendsto bemore dynamic and intense,so it improves fitness. It also lastsfor shorter periods and providesgreater recoverytime. Occupationalphysical activity caninvolvemore static,monotonouswork thatdoesn’t boost fitnessand lasts for severalhours a day, without sufficientrecovery time.The researchwas based on a

survey ofmore than 100,00womenandmen aged over 20 and living inCopenhagen. Participants completedquestionnaires about their healthand physical activity inside andoutside ofwork hours, with follow-ups for around 10 years.During that period, 9.5 per cent

of the sample group died (from anycause) and 7.6 per cent sufferedwhat is termed amajor adversecardiovascular event (MACE). Thisincludes a heart attack and stroke –both fatal and non-fatal.Results went on to reveal that

physical activity at work increasesrisk forMACE by 35 per cent andearly death by 27 per cent. However,exercising for leisure reduces the riskforMACE by 15 per cent and earlydeath by 40 per cent.“A brisk 30-minute walk will

benefit your health by raisingyour heart rate and improvingyour cardiorespiratory fitness,while work activity often does notsufficiently increase heart rate toimprove fitness,” says co-authorProfessor Holtermann. “In addition,work involving lifting for severalhours a day increases blood pressurefor many hours, which is linkedwith heart disease risk, while shortbursts of intense physical activityduring leisure raises blood pressureonly briefly.”Holtermann added that with

the retirement age increasing, weneed adults to be fit enough towork

longer. “We need to findways tomake activework good for health.”The paper,The physical activity

paradox in cardiovascular disease andall-causemortality: the contemporary

Copenhagen GeneralPopulation Studywith104 046 adults, wasauthoredby researchersbased at theUniversityof Copenhagen, theNational Research

Centre for theWorkingEnvironment,Copenhagen andCopenhagenUniversityHospital.bit.ly/Workexercise

L&D

Is reversementoringa risk?Training should ensure allparties feel valued, or learningcould be resisted and resented

Does encouraging junioremployees to trainmore senior

counterparts risk upsetting the applecart? According to a new study, thisarea of learning and developmentneeds to be handledwith care.Reversing the usual top-down

model of on-the job-training andencouraging newer employeesto train others (sometimes calledreversementoring)makes sense,particularlywhen businesses arefacedwith rapid adoption of newtechnology. But it can upset thehierarchy and employees’ senseof status, resulting in experiencedmembers of staff feeling slighted.Researchers Katherine C

Kellogg and Jenna EMyers, ofMIT Sloan School ofManagement,Lindsay Gainer ofMass GeneralBrigham, and Sara J Singer ofStanfordGraduate School ofBusiness and StanfordUniversity

School ofMedicine also found itcan put obstacles in theway ofeffective learning, hampering anorganisation’s progress.How should employers handle

the situation? Their paper,MovingViolations: Pairing an IllegitimateLearningHierarchywith TraineeStatusMobility for AcquiringNewSkillsWhen Traditional ExpertiseErodes examines the issue.It finds that not taking too rigid

an approach and rotating the trainerrole helped foster a better learningenvironment. In effect, thismeans allteammembers get the opportunity tobe both trainer and trainee andmovefrom the “lower status trainee group”to the “higher status trainer group”,helping to restore the power balanceand eliminate resentment.This solutionwas discovered

after the team studied five differentprimary healthcare settings in theUS, at which two roles –medicalassistants and patient servicerepresentatives – had to learn newdigital technologies.Interviewswith trainers and

trainees highlighted that at two ofthe sites the role of the trainerwasrotated. This resulted in traineesmore readily taking part in learningand embracing procedures, as well asaccepting the authority and ability ofthe trainer and being supportive ofthe newdigital processes.At the other three sites, the roles

remained static. Here, trainees –themore senior or experiencedemployees – resisted learning. Theyquestioned the newprocesses,complained about trainingprocedures, and challenged thetrainers’ ability and their authority.Because this group of learners hadno opportunity to take onmoreof a leadership role and becomethe trainer themselves, they felttheir status had been downgraded,hampering their willingnessto engagewith the learningprogramme, the study explains.bit.ly/traininghierarchy

“Work activity oftendoes not sufficientlyincrease heart rate toimprove fitness”

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A “Happy Earth Day” wish can be read the wrong way if policies aren’t communicated effectively

ETHICS

Whenbusinessescare toomuchCorporate social responsibilitypolicies should be genuine, notcynical, or they can backfire

Is there a downside to businessesaligning themselveswith good

causes such as environmentalprotection or diversity? If peoplebelieve firms are doing so to burnishtheir reputations or boost profits, theanswer is a resounding yes.Although there are certain ideals

that people hold sacred, whencorporations use them for their ownself-interest, they become devalued.Companies claim that embracing

valueswhilemaximising profit isa ‘win-win’ approach.However, itsets a different norm for the value inquestion, explains Rachel L Ruttan oftheUniversity of Toronto, co-authorof the paper, Instrumental Use ErodesSacred Values. “These are things thatwe are supposed to pursue as ends inthemselves and this is shifting howpeoplemight think about that.”It can lead to individuals being

lesswilling to donate to the relevantcauses that support those ideals.Seven studies involvingmore

than 2,700 participants carried outby Ruttan and co-author LoranFNordgren of NorthwesternUniversity showhow values canbecome “corrupted” by corporateactions primarily driven for a firm’sgain rather than genuine engagementwith social issues.An initial study tested the strength

of a range of values, with beliefsdeemed “sacred” if respondentsindicated that no amount ofmoneycould change their position on theissue. Values such as equality, humanlife, health, religion, patriotism andenvironmentalism fell into this camp.

Another study showed how asocial media post wishing “HappyEarthDay,” from farming equipmentcompany JohnDeere, reducedpeople’s respect for the annualenvironmental protection event,comparedwith a similar post froman ecological conservation group.Despite this, it is possible for

organisations to align themselves to“sacred” valueswithout diminishingthem, the paper says. Theway theycommunicate CSR initiatives is key.bit.ly/CSRfails

LEADERSHIP

I knowhowyou feelEmotional acknowledgementis a surefireway for leaders toshowemployees they care

The quickest way to build trustin theworkplace turns out

to be pretty straightforward –acknowledging others’ feelings.Alisa Yu and JustinMBerg

of StanfordGraduate School ofBusiness and Julian J Zlatev of

Harvard Business School havediscovered that leaderswho noticeand acknowledge the emotionsothers show through non-verbalcues, such as a frown or grin, areregarded asmore trustworthy.Making a comment such as “you

look upset” gives the impression theyare concerned and they care, explainsthe paper,Emotional acknowledgment:How verbalizing others’ emotionsfosters interpersonal trust.That’s particularly the casewhen

someone is displaying negativeemotions. “A leader could very easilysee someone in distress and chooseto ignore it,” co-author Alisa Yusays. “But only a leaderwho trulycareswould risk getting involvedby acknowledging the distressedemployee. Thus, employeesmighttake this as a signal that this leader issomeonewho can be trusted.”Interestingly, it was found that

emotional acknowledgement did nothave tobeaccurate– saying somethingis better than staying silent.“Evidence suggests leaders are not

acknowledging emotions asmuch asthey could”, says Yu. “If leaderswantto signal care and build trust, theyneed tomeet peoplewhere they are.”bit.ly/Workemotion

Further Reading

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Servant leaders p44

Compassionate leadershipHult-Ashridge Executive Education webinar,2021bit.ly/Hultleader

Gareth Southgate: My coachingapproachThe Boot Roombit.ly/Southgatecoach

How Angela Merkel Has RedefinedLeadershipCarnegie Europe, 2017bit.ly/CarnegieMerkel

How Humble Leadership Really WorksHarvard Business Review, 2018bit.ly/HBRhumble

New Zealand’s prime minister may be themost effective leader on the planetThe Atlantic, 2020bit.ly/AtlanticJacinda

Re-building Work Culture by BruceDaisley and Tom EllisYouTube, 2021bit.ly/DaisleyYT

Servant Leadership, 25th AnniversaryEdition by Robert K GreenleafPaulist Press, 2002

Simon Sinek: How To Be A LeaderYouTube, 2018bit.ly/Sinekleader

Abrief history of thepeople profession p34

100 Glorious Years: the CIPD centenaryPeople Management, 2013

Management Thought in Great Britain byAlfred Dupont ChandlerArno Press, 1979

Personnel Management, 1913-63: TheGrowth of Personnel Management andthe Development of the Institute by MMNivenInstitute of Personnel Management, 1967

The HR (R)Evolution: Change theWorkplace, Change the World by AlanWatkins and Nick DaltonRoutledge, 2019

The Personnel Managers: A Study in theSociology of Work and Employment byTony WatsonRoutledge, 2012

Q&A: DeniseKingsmill p40

Rishi Sunak in stitches as he mocksLabour peer’s Brexit crisis warningThe Express, 2020bit.ly/RishiBrexit

Running for office holds a particular formof hell for a womanManagement Today, 2016bit.ly/MTKingsmill

Valerie Hughes-D’Aeth p14

BBC appoints HR directorBroadcast, 2014bit.ly/BroadcastVHD

The new possible: How HR can help buildthe organization of the futureMcKinsey & Co, 2021bit.ly/McKinseyHR

Psychology of risk p18

Against the Gods: the remarkable storyof risk by Peter L BernsteinWiley, 1998

High performing teams needpsychological safetyHarvard Business Review, 2017bit.ly/HBRsafety

Lifetime odds of dying from selectedcausesUS National Safety Council, 2019bit.ly/UNSCodds

Perception of RiskScience, 1987bit.ly/RiskSlovic

The effect of mandatory seatbelt laws ondriving behaviour and traffic fatalitiesThe Review of Economics and Statistics,2003bit.ly/RESstat

Thinking, Fast and Slow by DanielKahnemanPenguin, 2011

Why we take risksPsychology Today, 2014bit.ly/PTrisks

Because business is about peopleWork.

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Work. is published on behalfof the CIPD by Haymarket BusinessMedia. Registered office:Bridge House, 69 London Road,Twickenham, TW1 3SP

Contributing editorAndrew SaundersArt directorAubrey SmithProduction editorSarah DysonPerspectives editorEmma De VitaPicture editorDominique Campbell

Editor in chiefRobert JefferyEditorial directorSimon KanterGroup art directorTim ScottEditorial consultantPaul SimpsonBusiness directorAngela HughesSenior production controllerLee BristerHead of production operationsTrevor SimpsonCIPD PublishingSinead Costello

CIPD members can get freeonline access to leading HR,L&D and management journals.cipd.co.uk/knowledge/journalsWork. – ISSN 2056-6425Printed by Stephens & George Print Group,Merthyr Tydfil. © All rights reserved.This publication (or any part thereof)may not be reproduced, transmittedor stored in print or electronic format (including,but not limited, to any online service, anydatabase or any part of the internet), or in anyother format in any media whatsoever, withoutthe prior written permission of HaymarketMedia Group Ltd, which accepts no liability forthe accuracy of the contents or any opinionsexpressed herein.CIPD contact details:151 The Broadway,London SW19 1JQ,020 8612 6208,cipd@cipd.co.ukIf you are a CIPDmember and yourhome or work addresshas changed, pleasecall 020 8612 6233.CIPD is a registeredcharity – no. 1079797

Brought to you by…Japan p58

Carlos Ghosn: The Last FlightBBC Storyville documentary, 2021

Exposure: Inside the Olympus Scandal byMichael WoodfordPortfolio, 2012

Japan Story: In Search of a Nation, 1850to the Present by Christopher HardingPenguin,2019

Made in Japan by Akio MoritaNew English Library, 1986

My Neighbors The Yamadas, written anddirected by Isao TakahataStudio Ghibli, 1999

Olympic sponsors need to ‘walk the talk’on valuesFinancial Times, 2021bit.ly/FTsponsors

Peak Japan: The End of Great Ambitionsby Brad GlossermanGeorgetown University Press, 2019

The Convenience Store Woman bySayaka MurataPortobello Books, 2018

The Downfall of Carlos GhosnFinancial Times, 2019bit.ly/FTGhosn

The Reckoning by David HalberstamWilliam Morrow, 1986

Tokyo Olympics branding adds tostereotypical view of JapanThe Conversation, 2021bit.ly/Olympicsconv

Wrong About Japan by Peter CareyFaber & Faber, 2003

Green investors p50

Climate activist investors to target USOil giant ChevronThe Guardian, 2021bit.ly/GuardianChevron

Climate activists claim breakthroughvictories over Exxon and ShellFinancial Times, 2021bit.ly/FTactivists

Does the fossil fuel divestmentmovement impact new oil andgas fundraising?Journal of Economic Geography, 2021bit.ly/JEGoil

Global Trends in climate litigationLSE, 2020bit.ly/LSEclimate

JP Morgan Chase faces unprecedentedvote against its financing of fossil fuelsRainforest Action Network, 2020bit.ly/JPMorganRAN

Reimagining Energy: BP SustainabilityReportBP, 2020bit.ly/BPreimagining

Seven top oil firms downgrade assets by$87bn in nine monthsThe Guardian, 2020bit.ly/Guardianoil

Sixth assessment report of the IPCCIPCC, 2021bit.ly/IPCCsixth

Sustainability matters in the battlefor talentHarvard Business Review, 2013bit.ly/HBRsustainability

Tightening the netOxfam briefing paper, 2021bit.ly/Oxfamnet

78

It is a truth universally acknowledged that transparency is a good thing. One of themost powerfulaccusations you can level against anyone in business is that they “lack transparency”. But one reasonthis charge is so effective is thatmany organisations do lack it. Andwhile transparencymay be abuzzword in theAnglo-Americanworld, it is less of a priority in places like theCayman Islands, hometo 65,000 people and 100,000 companies, 20,000 ofwhich are registered in the samebuilding.

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Transparency has a dark side – as the people of Norway can testify. Between 2001 and 2013, allNorwegians could go online and anonymously inspect each other’s tax records. Tax attractedmore searches than YouTube and apps enabled users tomap their neighbours’ incomes. Afterreports of low-paidworkers being shamed and their children bullied at school, the authoritiestried to restore national harmony by requiring people to register to access records.

In the age ofWikileaks, those of uswho do not achieve transparencymay have it thrust upon us. Thegrowth inOpen Source Intelligence (OSINT) is already starting to expose the secrets of authoritarianregimes and rogue businesses. If you are trying to reverse engineer a Sidewindermissile by acquiringparts on eBay – as someone apparently is – youwill be spotted. In future, whatever you do atwork, you’dbewell advised to operate on the premise that: “What you do in the darkwill be brought to the light”.

Itmay seem a no-brainer, says Paul Simpson, but toomuch openness can backfire on you

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2 “We behave aboutmoney theway the Victorians behaved about sex,” says Kim Scott, author ofRadical Candor.Many employers rely on that reticence to strengthen their hand in pay negotiations. Greater transparency aboutsalaries can level the playing field – a bit – and expose pay discrimination. In 2017, the BBC caused outragewhenit revealed that two-thirds of its highest-paid staffweremen. The broadcaster has since increased pay formorethan 700 female staff.

Complete transparency – inwhich everyone does their work in plain view –may not actuallymake usmoreopen. Canadian sociologist ErvingGoffman believed that if we feel constantly ‘on stage’, we spendmore timeacting, striving tomanage other people’s impressions of us and avoid embarrassment.Whenworking in thepresence of others, Ethan Bernstein noted inHarvard Business Review, we aremore effective at doing repetitive,practiced things than being creative. At factories Bernstein visited, staff had actively concealed improvementsand innovations from bosses and colleagues because of fears theywould not “properly understand” them.

Whisper it, but not everyonewants to know exactly howwell or badly their organisation isdoing, or be held responsible. Some of us, as JackNicholson yelled in themovieAFewGoodMen, can’t handle the truth. One study of 286US organisationswhich had fired their CEO overa four-year-period found 23 per cent of the defenestrated bosseswere dismissed for ‘denyingreality’, defined as refusing to recognise negative facts about their leadership or performance.

3 Lauded for its ‘chilledHR’, Netflix’s take on ‘radical candour’ encourages open debate overwhich colleagues should be fired andwhy. A reassuring internalmemo says: “Adequateperformance gets a generous severance package”.Managersmust “sunshine” theirmistakes,which sounds laudable – and vaguely reminiscent of the Cultural Revolution’s notorious self-criticism sessions. Yet Netflix’s annual staff turnover – 11 per cent – is lower than theUS techsector’s average. By contrast, sweetmaker Tootsie Rollsmay be America’s least transparentpublicly-listed company. Ellen GordonRubin, the 89-year-oldmulti-billionaire CEOwhoinherited the business fromher father, doesn’t do quarterly analyst calls. InvestmentmanagerSpruce Point suggests that “Tootsie is run for the benefit of insiders”.

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EthGirl (2019)Trevor Jones

Scottish artist Trevor Jones took his first steps into theworld of cryptoart in 2019, but found immediate critical

and commercial success: EthGirl, his first such work,broke sales records on one digital art exchange. Inspired

by Picasso’s Girl with Mandolin (1910), Jones firstcreated and then deconstructed his work, eventuallyturning it into a digital animation, in collaboration withcryptoartist Alotta Money. It was then packaged as a

non-fungible token (NFT), the blockchain-enabledownership model that is taking the art world by storm.

EthGirl shows us how new technology can build oncultural artefacts. But NFTs perhaps have even moreto say about our appetite for risk. Analysts suggest$250m was spent on cryptoart in 2020, and with

behemoths such as Damien Hirst creating NFTs thisyear, that figure will explode. For investors, however,

they are still risky: will NFTs hold their value in thesame way as traditional art? Will the technology evenlast a lifetime? The collectors of tomorrow may havemore to consider than just artistic merit – thanks to

NFTs, they may need to be risk assessors too.

Oil on canvas. 140 x 110 cm ©Trevor Jones