The executive director of The Ethics Centre, Simon Longstaff, has a simple message for business leaders. If you don’t prioritise purpose, values and principles, you’re “toast”.
Current role: Executive director, The Ethics Centre
Tenure: 30 years
Other roles: Adviser, Banking and Finance Oath; Co-founder, Festival of Dangerous Ideas; Deputy chairman, Global Reporting Initiative.
How would you define good leadership?
As constructive subversion.
What does that mean?
Well, the greatest threat to organisations is broadly described as unthinking customer practice. You can see it when you walk into an organisation and you ask people to say why they do what they do and they say, “That’s just the way it’s always been.” That unthinking customer practice is extremely dangerous because it can lead to perfectly good people doing bad things as the context in which they operate changes. It also throws up a series of problems around hypocrisy – or the perception of hypocrisy – where an organisation says one thing and does something else. When that happens, people say, “Well, if they don’t believe it, why should I?” The job of leadership is to subvert unthinking customer practice and help the organisation to become truly what it says it wishes to be. That requires very large amounts of moral courage.
So what does ethical leadership look like?
The same thing. Leadership itself is an ethical practice. You can see this in the Australian Defence Force. Its doctrine on leadership reads: “It’s the exercise of influence over others in order to gain their willing consent in the ethical pursuit of missions.” In other words, it’s not about ordering people to do things; the important part is that it’s the ethical pursuit of missions.
You work with a lot of executive teams and boards. What are the issues they’re grappling with at the moment?
One of the most profound changes they’re dealing with is the effect of AI and automation and the disruption it will bring to the world of work. There’ll be many, many people – and I’m talking about vast numbers compared to what has occurred in history – who will no longer be required to perform functions better done by machines. Do we talk openly about this? Do we tell people that the change is coming? Do we look at how it’s being accelerated by COVID? Do we transition people into something else? What happens to the tax base when fewer people are employed? Is there a difference between doing good work and having a job? There are so many questions.
So should business leaders be warning people about the impact of AI?
Yes. We should be saying, “Here are the golden opportunities and here are some of the things that could stop us.” We could be on the brink of becoming the most prosperous society the world has ever known. We have abundant access to clean energy, we’ve got all the natural resources you could ever hope for and, with automation, we can completely eliminate the competitive disadvantage of high labour costs by putting machines in to do all the work. The question is how will we sustain a society with that much prosperity? It would mean we’d have to rethink tax, production, wages, how we redistribute wealth and how we think about people having rich and meaningful lives doing lots of interesting work but not necessarily a job in that sense. But the rosy picture I paint can be stopped dead in its tracks by a community that’s afraid of change or afraid of being sacrificed on the altar of that change. So business leaders have a tremendous role to play in this and they have to think about how they position themselves as being part of the community in which this is happening.
Has trust become much more important?
It’s always been important. Trust is not a very mysterious thing, I have to say. The first element of trust is you must be willing to declare to anybody who asks, “This is who I am and what I stand for.” In the case of a corporation, the three core ethical components are purpose, values and principles. That immediately tells people who watch you that this will be the basis on which you’re going to act in the future to realise those values. People know how to judge you because you’ve declared it yourself. If you don’t act in conformance with that declaration, they won’t trust you. If you do, they’ll progressively build trust. What trust then delivers to you is an immediate set of benefits. High trust equals low cost. If, for example, we entered into an agreement in a high-trust situation, I’d say, “Let’s just shake hands or agree as we are now.” That’s all you need to do to know it’s going to happen. If you don’t trust the other party then you’ll put in place contracts and enforceable provisions. It costs a fortune compared to the simplicity of a handshake. You get that inside businesses and between businesses. It’s an ecology of meaning where people find for themselves something with which they can align. That’s where an ecology of meaning begins to build with investors, customers and employees.
The trust dynamic between employers and employees has become more heightened during COVID. A lot of businesses are promoting hybrid working but some companies are quietly wishing we’d all just go back to the office because they want greater oversight.
If they can trust people then they’ll get efficiency benefits as well as a more robust culture – certainly more robust than the one based on regulation and surveillance... We’ve created a lot of workplaces where people never get to practise making a responsible decision – they merely get to comply – and that’s a form of systemic risk. I think some employers are nervous about not being able to monitor and constrain the actions of their employees, without realising that perhaps one of the best things that’s happened is to have to be in circumstances – albeit none that we’d ever choose – in which employees are having to make some choices and live with the consequences. Not in a punitive sense but to say, “Okay, what did I learn from that?” That’s going to lead to better organisations and less risk overall.
Some CEOs have told me that they like to start by assuming trust and then if people lose it, there’s an issue. Is that a good strategy?
I think it’s great. There’s an old Islamic saying, which I love: “Trust in God but tie the camel’s leg.” In other words, start with trust but have a back-up plan [laughs]. Starting with trust is really important because it’s far more powerful than transparency. The whole point about trust is it’s what people do when no-one can see them.
We’re hearing a lot about the “great resignation” and the war for talent. How do ethics and trust play into the decision-making process of leaving a job?
People now say it’s not just about finding a place to work that’ll pay well; they’re also looking for a complementary connection. Imagine two businesses on either side of the street. One operates according to “Treat other people as you’d like to be treated yourself”; the other one says, “Do unto others before they do it to you.” Both of those businesses have to compete and they’re going to compete for people, capital, customers and all the other bits they need to be able to sustain their profit. If you looked at the balance sheets 100 years ago, it was all about equipment and plant and things like that. Now it’s all people and skills. They make or break you. So how do you attract them? It’s not that they’ll be indifferent to their pay but offering them a meaningful proposition will be the winning factor. What you don’t want to have are people sitting around feeling bitter and twisted. Meaning, purpose, values and principles are how you distinguish yourself in the marketplace and attract talent. It’s how you get capital investors. If you’re a leader who cannot do that, if you think it’s just down to pure functional things, you’re toast.
What advice would you give a brand-new CEO?
Work out your purpose, values and principles. If you can do that right then you can patiently put in place an honest expression of those things. And if you can review all that exists – the things that appear to be unrelated, like systems, policies and structures – and bring these things together in alignment as far as possible then you’re setting the foundations for extended prosperity for your organisation.