Has the drive for operational and financial excellence weakened business?

This question was posed last week, in conversation, by a former leading CEO from the 1990s who argued that business accidently created its own destructive cycle whereby it rewarded senior executives’ higher incentives and rewards for stronger results and shareholder returns. The business logic, which has been dominant over the last twenty years, was that it would attract more investors, plus reward directors for strong operational and financial performance with wealth.

This all has happened but the argument was that it also served to weaken the overall business structure as:

• Directors were rewarded with packages which made them wealthy to a higher than needed level which in turn changed their psychologies
• It made others want to compete with them so too many conversations came about reward over good business practice
• It subliminally told others they were not valued
• It retained leaders within business for a further decade than was the norm and this then acted as a barrier to fresh talent
• Young talent met more barriers and were lost
• Many budgets were cut in the name of the bottom line maximisation. L&D being the most obvious
• It created a more alpha climate within business and far more hierarchy which was a contradiction when all were calling for more empowerment. In truth the opposite was happening.
• In turn, this led to less loyalty and higher levels of disengagement than have ever previously been seen.

So the question was asked: was the business philosophy which led to the above worth it?

Is business now paying the price?

The argument is that business is only now, twenty years on, beginning to understand that it placed too much emphasis on shareholder return and director returns over strong, core internal values which were important to build succession plans, nurture talent and internal cultures.

The CEO went on: “I found it strange that no one linked the fact that mental health and job satisfaction got worse as the world became ever safer and more secure. It was because we also created internal business cultures which worked to principles which the vast majority do not buy into. Will it change now? The opportunity exists but it will need leaders in corporates to change the management ethos which has led to their own success.”

The other line of argument is that it is important to start to rebuild teams, business cultures and loyalty of companies really want to possess a sustainable business model. There is little point arguing for more D&I, working to appeal to new audiences, if one isn’t going to create a culture which will nurture those groups. It will take a major change in focus to create the trust required and for new talent to be developed from new communities.

The counter argument is that many today are arguing that leadership has changed, that lessons have been learnt from the pandemic and that much has changed. There is a belief that many have worked hard to correct the existing structural problems and to create more positive environments.

The argument is that companies today are working in the most challenging conditions and therefore are being forced to make more informed decisions which will impact on their businesses potentially over the next 3-5 years. For this, it needs stronger conversations, data and understanding and it is this which is driving the real change for the better.