Leadership: All pay and no promise

Is there positive relationship between good leadership and massive executive remuneration rewards? No, no, no.
An increasing array of evidence – behavioural, scientific and organisational performance based – discounts the value of multimillion-dollar pay packages and perks to anyone except, of the course, the recipient.
The downsides of the race to embrace American’s most destructive organisational export are, on the other hand, increasingly apparent. Even the International Monetary Fund has acknowledged the risks of rising social inequality. New Zealand, unfortunately, is buying into the argument that we must pay megabucks to buy the best leaders. Take moment’s dispassionate look and evidence of the truth of this claim is scant, to say the least.
Defenders of the high pay practice claim that in the scheme of things (in other words in relation to revenues), executive remuneration packages are insignificant. Tell that to the average family earning around $50,000 year. If all other justifications falter, there is the simplistic and self-serving defence that criticising high pay packets simply reflects our pre-occupation with cutting down tall poppies. Nonsense, it is about fairness and what an individual, any individual, is worth.
Great leadership is not expensive or brim-filled with hubris. Great leadership has the wit to appreciate that it is greed, not need, nor merit nor hard graft that makes them worth so much. And it is perpetuated by greedy support network.
What is good leader? Let’s start with description by Alan Webber, founding editor of Fast Company magazine. He recently told class of college graduates in the US that they would soon move out into the world and be told they had “a responsibility to lead”. They would, he said, hear that the world needs more leaders and that it suffers from lack of leadership.
“Hogwash,” said Webber. “Choosing to lead is one of the most rewarding decisions you may ever make. But it is not about you. Yes, you will bring your unique and much needed gifts to the world, but not for your own sake. Your job is to use your gift to help others express, make known and fulfil their potential – influencing others with purpose, calling, and with opportunities they never imagined they had,” he said.
Leadership, he continued, “is mindset of service. It’s mindset of continual learning. It’s mindset of growth. And the single biggest truth of leadership is that we build who we are, by building up others.”
The payment of excessive salaries – and they are excessive no matter how much directors and employment advisors attempt to justify them by linking them to rates in other countries, to other business or to anything else they can think of – has done nothing for the quality of leadership in most New Zealand enterprises. And that does not look likely to change any time soon.
Business is in leadership bind. The best leaders come from within organisations – and if you don’t believe it read management guru Jim Collins’ book Good to Great. Or read the latest US research findings of 20-year study that shows chief executives promoted from within their own ranks outperform those recruited from outside. And there is raft of other supporting data if anyone cared to read it.
The bind will tighten as the changing nature of enterprise and the demands for new, more relevant and responsible leadership qualities and organisational priorities shift. The outrageous pay regime was America’s self-serving response to the speculators’ obsession with growing shareholder value. That priority is, perhaps slowly but inexorably shifting however. Even Jack Welch, the former CEO of General Electric and for many years the “archpriest” of shareholder value, has declared that taken to its literal conclusions, “shareholder value is the dumbest idea in the world”.
New Zealand needs Collins’ Good to Great leaders. As he said, what catapulted company (and why not country?) from “merely good to great” was paradoxical mixture of personal humility and professional will. That does not, in my mind, translate into being obsessed with money and hypnotised by self image.
Collins called his discovery “level 5 leadership”. The label doesn’t really matter; what it describes does. What was, and still is important, was his finding that good to great transformations “don’t happen without level 5 leaders. They just don’t,” he said.
Would the level 5 leaders in New Zealand enterprise, or government, raise their hands? Hmmm. And they are not sitting in head hunter’s office in London, New York or anywhere, waiting for the right price to show they have what it takes to lead.

Reg Birchfield is NZ Management’s consulting editor and writer-at large. [email protected]

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