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Leadership for success

Risk management is often thought of as a wholly technical discipline, all jargon, software and processes. Reality is however somewhat different. Organisations which effectively manage risk have effective leadership. An absence of the right type of leadership will inevitably lead to failure, if not in the short term but certainly over the long run. 

Strong and consistent leadership has a direct influence on organisational outcomes, not only through articulating a clear vision, but also clear values as to how that vision is to be achieved. In safety, that equates to being a role model and showing real concern for the welfare of the workforce, plus consistently communicating and setting clear goals and standards for safety (UK Health and Safety Executive, 'A review of the literature on effective leadership behaviours for safety', 2018) 

In this introduction, we explore four key traits of effective leadership: 

  1. Setting the tone 
  2. Vision and values 
  3. Embedding leadership culture 
  4. Diversity 

Setting the tone 

In his book, 'How to be a successful leader' (2009), John Adair identifies the following traits of effective leaders: 

  1. Enthusiasm - can you think of any successful and admired leader who isn't enthusiastic? 
  2. Integrity - the quality that makes people trust you, and trust is essential to all human relationships 
  3. Toughness - good leaders are often demanding people, with high standards - respected but not necessarily popular 
  4. Fairness - they treat individuals differently but equally, and with no favourites 
  5. Warmth - leadership involves the heart as well as the head 
  6. Humility - willing to listen and learn - who wants an arrogant manager?
  7. Confidence - but not over-confidence - the confidence to admit mistakes 
  8. Decisiveness - without a decision, the whole team lacks direction

Strong leaders also have a vision for their organisation's future, a clear view of where they're heading, but this is also accompanied by a clear set of values too. 

Vision and values 

In 'The courage of their convictions' (2018), the think-tank Tomorrow's Company sets out a vision for how purposeful companies can prosper in an uncertain world. Taking insights from over twenty companies who think it is important to have purpose beyond profit, the report shows how the most successful companies over decades, centuries even, are those with a clear and enduring purpose that combines financial success with outcomes that are important to human beings and the society in which they live. 

With the prospect of rapid change and great uncertainty in the future, such values are increasingly important for four reasons: 

  1. They become a source of energy and commitment in workplace relationships, enabling them to attract and retain talent and engage and develop their people better
  2. Secondly, a clear vision and values gives people stability and resilience, and provides a clear basis for building trust 
  3. Thirdly, the benefits in terms of trust yields a reputational return, enhancing brands and accumulating external trust and goodwill 
  4. Finally, as a result of the three benefits above, there is a more compelling case for those investors interested in long-term performance. 

'With honest and straightforward business principles, close and careful attention to details and the ability to take advantage of favourable opportunities and circumstances, there is scope for success' - Jamsetji N Tata, Found of Tata Group (1860). 

'Being a leader doesn't come only with the right to dominate - it comes with the duty to share, and a responsibility to protect' - Emmanuel Faber, Chairman of Groupe Danone (2017). 

Embedding leadership culture

As so coherently explained by the leading South African judge and governance guru, Professor Mervyn E King, 'leadership doesn't 'Stop at the Top' - it must translate to the 'Tune in the Middle' and 'The Beat of the Feet on the Ground''. Without a truly embedded set of value across an organisation, those values don't translate into behaviours and behaviours into appropriate actions. 

The HSE Leadership Guide goes further. Good working relationships between management, supervisors and workers, and perceptions that management values safety, all influence the 'bottom up' communication of safety concerns. Trust in management is an important determinant to safety as it enhances perceptions of a positive safety climate and workers' motivation to work safely, and thus reduces accident involvement and injuries. Perceptions that management values safety and encouragement of two-way safety communication help promote trust. 

For instance, in the case of the Columbia space shuttle disaster in 2003 there was a lack of honest and open communications, which were identified as a contributory factor to the accident. In particular, NASA promoted a culture, which discouraged the communication of bad news, and when these were communicated they were ignored (Kadri & Jones, 2006).  

Similarly, a breakdown in communication during shift handover was identified as a contributory factor in the Piper Alpha disaster. Safety critical information regarding the removal of a safety pressure valve was not passed on during the shift changeover, which resulted in starting a pump that should have been out of service (Paté-Cornell, 1993; cited in Gordon, 1998).

Diversity in style and backgrounds 

All governance codes in today's world stress the importance of diversity in leadership - indeed, in many countries, equality is increasingly enshrined in law. In Norway, for instance, it has been the law for the past 12 years for boards to have at least 40% female participation. Interestingly though, this has not led to any improvement in corporate performance of Norwegian firms as yet, nor any improvement in female achievement at lower positions in companies either. The UAE, too, has become a role model for the empowerment of women, and leads many global competitiveness indicators in gender balance. This includes the Social Progress Index, in which the UAE is ranked first in the world for both treating women with respect and gender equality in education. Only time will tell whether such initiatives will bring their intended benefits but they are generally seen to be steps in the right direction. 

So whilst gender, ethnic, disability and sexual orientation diversity are increasingly recognised as important in leadership, less well understood is the importance of class or background. Indeed, too much focus on the aforementioned 'hard' diversity factors can lead to weaker performance in bringing together great diversity of thought generally. Every leadership team therefore needs at least one member of the 'awkward squad' to challenge the status quo and to ensure alternative options aren't inadvertently suppressed. At US public conglomerate Tyco, CEO Dennis Kozlowski was able to convince his board that 'a felony conviction would not be grounds for termination' when presenting his new employment contract - he later received a 25 year prison sentence for misappropriating millions of dollars. The board were subsequently accused of being 'asleep at the wheel.'

Indeed, would the Global Financial Crisis have happened had more firms had more truly diverse boards? To succeed in today's diverse environment, it is essential to have knowledge of, and be able to establish effective working relationships with people of different cultures and languages. Businesses must be able to relate to the people they are trying to reach. HSBC is one trans-national company that has responded positively to this challenge with its 'think global, act local' approach, becoming a leader in diversity to make it happen. 

The UK Financial Reporting Council's new Corporate Governance Code (July 2018), applicable to all listed companies, makes clear reference to this form of diversity and goes further in requiring boards to review their approach to diversity every year. Firms are also urged to carry out periodic external Board Effectiveness Reviews to cover both this area and to ensure the right balance between governance and direction.

Bringing it all together - IIRSM's Risk Management and Leadership Competence Framework 

IIRSM has developed its own competency framework that sets out the skills and knowledge needed at different levels of an organisation. This covers leadership behaviours, business insights as well as technical skills. Indeed, without all elements, no risk leaders at any level will be effective. The framework can be downloaded here

Managing Risk 

The issues explored in this article are covered in more detail in IIRSM's Managing Risk - in a day course and our new online course Managing Risk - the essentials. Find out more here. 

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