The parting shot taken against Goldman Sachs by an executive who quit last week laid the blame for the investment firm’s “toxic and destructive” culture with Goldman’s leaders.
Management gurus say the ensuing reverberations are part of a growing backlash against the type of leadership that was venerated during the boom.
Greg Smith, the London-based head of the firm’s American equity derivatives trading in Europe, wrote to The New York Times attributing Goldman’s decline in “moral fibre” to Gary Cohn, its president, and Lloyd Blankfein, its chief executive.
“Leadership used to be about ideas, setting an example and doing the right thing,” Smith wrote. “Today, if you make enough money for the firm (and are not currently an axe murderer) you will be promoted into a position of influence.”
As the 1980s “greed is good” dogma falls out of favour in the aftermath of the financial crisis, management experts say that the vacuum created by the ousting of arrogant and aggressive CEOs is ripe to be filled by a new style of leader.
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Organisations that embrace trustworthiness, integrity, humility and modesty in their leaders are more successful, according to Amy Lyman, an American academic and co-founder of the Great Place to Work Institute. The San Francisco-based consultancy analyses the workplace culture of 5,500 firms every year to compile its Best Companies to Work For list. Lyman has just written a book called The Trustworthy Leader, based on 20 years of research into leadership practices.
“The definition of what makes a good leader has changed. The economic collapse has emphasised the consequences of a lack of trustworthy behaviour,” she said.
“Even with all the data to show trustworthy leaders are more successful, the people who featured in the business press were the ones who were paid the most, were ultra-aggressive and the most competitive. There was this idea that in order for a leader to be a success, they had to be tough, mean and greedy.
“Trustworthy leaders can be tough but they still care about their employees. It’s not about being a softie. Being trustworthy means you speak your mind, you are honest, you support people and encourage them to speak back to you, and you develop people’s skills and talents.”
Disgraced bankers have come to symbolise most how much trust in organisational leaders has been eroded. But their brash, maverick attitude is the antithesis of the humble, self-effacing leader long advocated by management gurus.
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Jim Collins, the author of Good to Great and, more recently, How the Mighty Fall, points to evidence showing that great companies are not led by gung-ho or charismatic types, but by quiet, dogged people who put the business first and combine humility with a will to succeed.
John Cullen, a lecturer in organisational behaviour and leadership at the National University of Ireland Maynooth, notes that Robert Greenleaf championed a similar style of leadership as early as the 1970s.
Greenleaf coined the term “servant leadership” to describe those who put their workforce and organisation before themselves. It was not until the Enron and Worldcom scandals of 2001 that a re-evaluation of overconfident leadership began to take hold, according to Cullen.
“There has been a movement away from this charismatic leadership style for the last 10 years, because it was often masking a lack of ethical substance,” said Cullen. “But most people who do the work I do have not been listened to. In fact, the more you spoke, the more you were told to shut up.”
There are indications that the tide is turning in corporate spheres. Graduates from Harvard Business School began taking an oath in 2009 to promise to “serve the greater good”, act ethically, and refrain from pursuing greed at others’ expense.
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In Ireland, though, it will take time for the message to sink in, according to Andrew McLaughlin, head of training and development at the Irish Management Institute.
“There are leaders in Ireland who are servants of the company, who work without self-promotion, rarely appear in the news and focus on sustaining long-term development,” he said. “Although they are less obviously charismatic and heroic, it’s this style of leadership we need for things to change.
“I definitely feel that dictatorial styles of management will be out of the window among the coming generation. There will be much more of an emphasis on collaboration.”
McLaughlin believes Irish firms are more likely to advocate humble, trustworthy leaders when they see the effect it has “on their bottom line”. Research suggests charismatic chief executives often produce volatile company performances. They make more daring acquisitions, expand too quickly into new fields, and abruptly switch strategies.
Conversely, Lyman says the financial performance of publicly traded companies in the Great Place to Work Institute’s 100 Best Companies list consistently outperforms big stock indices by 300%.
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Lyman will address 300 executives at a conference on workplace culture hosted by the Institute’s Irish division on Thursday. The speakers will include Bob Savage, the general manager of EMC Ireland, named Ireland’s most trusted leader by the institute last month.
Savage, who oversees the digital storage firm’s 2,500 employees, says leadership is “all about emotional intelligence for me” and that “you can never over-communicate”.
Lyman’s own examples of trustworthy leaders include Sally Jewell, the chief executive of Recreational Equipment Incorporated (REI), a US outdoor clothing and equipment firm run as a co-operative. “One of Jewell’s non-negotiables for all REI leaders is that they have to acknowledge everyone they pass in the hall and say hello,” he said. “As a leader, you have a requirement to let people know that you see them. Not every leader is comfortable with that.” Cullen believes the Irish firm that best represents this newer style of leadership is Brown Bag Films, the animation company. “It started off in the last recession and was always focused on high-quality work and treating people well,” he said. “Two Oscar nominations later, it has an office in LA and is expanding. It is an example of all that is good about a modest style of leadership.”