By Prof. Dr. David A. Jordan, Director, Yunus Social Business Centre at Becker College and Prof. Dr. Debra Pallatto-Fontaine, Executive Director for Global Initiatives, Becker College
Globalization calls for a new consciousness and a new collective leadership capacity to meet myriad social challenges in a more intentional, compassionate, and strategic way (Scharmer, 2009). If one subscribes to the philosophy and principles of social business (Yunus, 2010), what does that say about one’s leadership style? What knowledge, skills, and aptitudes are critical? What types of people are most inclined to adhere to the tenets of social business, both as a personal value and as a way to govern one’s work? The intent of this paper is to then suggest a relationship between leadership theory and leader motivation juxtaposed with a continuum of business responsibility model. The authors offer a unified model in which to view the ‘Corporate Social Responsibility–Shared Value–social business continuum’ with the corresponding construct of ‘transactional-transformational-and-transcending leadership theory.’
Exploring the prospective relevance of leadership theory, and by extension the motivations of leaders to engage in various forms of societal responsibility, may further an understanding of how business leaders grapple to understand the means to conjoin their deontological interests (i.e. their perceived moral obligations to respect others, benefit society beyond a self- interest motivation, demonstrate ethical standards, etc.) with the fiduciary responsibilities owed to their organization and stockholders. Conceptualizing a framework in which to view various permutations between the motivational options open to a business leader (e.g. self-interest, mutuality of interest, or selfless/’other interest’) with the many needs of the society in which they operate seems particularly poignant in the 21st century.
A Triarchic Leadership Model
A common criticism of contemporary leadership research and theory has been that the literature is fragmented and contradictory (Chemers, 1997, p. 151), resulting in multiple leadership paradigms. Gardner (1995) suggests that the broad paradigm of leadership can and should be viewed in terms of a continuum that denotes the capacity of an individual or group to influence others. One way to understand a continuum is by examining its poles – its extremes (p. 6). Suggesting a less linear perspective, Wheatley (1999) speaks of looking at the leadership phenomenon from a whole system, or gaia perspective, where personal values, traits, personality behaviors and style, contingent situations, environmental or organizational culture, and a host of other variables form an elaborate mix, which leads to a myriad of permutations in which to view the leadership phenomenon. A leadership model broadly embraced in the literature as a means of conceptualizing leader characteristics and motivations is the ‘transactional-transformational’ construct initially proffered by Burns (1978) and later elaborated upon by Bass (1985), as well as Bass and Avolio (1994). Figure 1 provides a simplified conceptualization of Burns (1978) transactional-transformational model of leadership.
Figure 1. Conceptualization of Burns’ (1978) Transactional-Transformational Model of Leadership
As seen by Burns, transactional leadership is merely an economic exchange relationship; a formal transaction of goods or services for money, current influence for future favors, or other quid pro quo transactions. In the transactional construct, a leadership act takes place, but not one that ties leader and follower to each other in the mutual pursuit of a higher ideal. Burns contends that transforming leadership in contrast, “is a relationship of mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents” (p. 4). Transforming leadership implies a social exchange relationship based on changing, developing, and elevating the follower’s values and beliefs. Burns further clarifies this definition by explaining that transforming leadership “occurs when one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality” (p. 20).
Furthering the work of Burns (1978) and Bass & Avolio (1994), Jordan (2005) identified a leadership construct which adds to the transactional-transformational model an “other-interest” perspective manifest in leader altruism, benevolence/beneficence, a determined resolve, and attributes broadly associated with emotional intelligence. Figure 2 ( Triarchic Leadership Model) provides a conceptualization of a triarchic model of leadership which moves beyond self-interest (i.e. transactional leadership) and mutuality of interest (i.e. transformational leadership) to a construct of leadership which emphasizes ‘other-interest’ – or selflessness – termed transcending leadership. Jordan’s (2005) ‘Triarchic Leadership Model’ enriches the earlier work of Burns (1978) and Bass & Avolio (1994) toward understanding the phenomenon of leadership and leader motivation. The “transcending leadership” dimension is aligned with Maslow & Lowery’s (1998) notion of ‘self-transcendence’, or selflessness, Kohlberg & Ryncarz’s (1990) transcendental phase of moral development, and relevant to the intent of this paper – Professor Yunus’ description of social business as a ‘selfless’ construct.
Figure 2. Conceptualization of Jordan’s (2005) Triarchic Leadership Model conjoining the ‘full range of leadership model’ with a transcending construct
A Business Responsibility Model
Investigation into the role in which the for-profit business sector may have in addressing societal concerns such as poverty alleviation, environmental concerns, equal education opportunities, access to healthcare, income disparity, or other social maladies is also uncertain resulting in polarizing points of view. Friedman (1970) and, more recently, Reich (2015) have asserted that for profit enterprises should not, and more directly, may not have a legitimate legal mandate to utilize shareholder equity for societal interests. Friedman noted that “in [a free economy] there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game” (Friedman, 2002, p. 133). Former U.S. Secretary of Labor Robert Reich further opines that “. . . so-called ‘Corporate Social Responsibility’ is founded on a false notion of how much discretion a modern public corporation has to sacrifice profits for the sake of certain social goods.” (2008, p.1).
In contrast, Davis (2005) argues that the business sector should be fully engaged in societal issues as a means of strategic value. He notes, “Companies that treat social issues as either irritating or simply unjustified vehicles for attacks on business are turning a blind eye to impending forces that have the potential to alter [their] strategic future in fundamental ways.” Corporate Social Responsibility has its genesis in the 1948 United Nations Universal Declaration on Human Development but found prominence during the social movements of the 1960’s and 70’s in America. Moore (2104) of Heifer International noted,
“Privatization, deregulation, corporate takeovers and leveraged buyouts in the 1980’s …emboldened stakeholders, customers, shareholders, civil society organizations, international NGO’s and the media [to mandate] transparency and accountability from corporations, rewarding companies that contributed positively to social and environmental well-being and punishing firms that ignored or neglected the negative externalities of their business practices.” (p. 2).
Moore posits that “CSR is fundamentally about taking resources from the business and investing those resources in …community works” (p. 3). The Harvard Kennedy School CSR Initiative (2104) adds “Corporate Social Responsibility encompasses not only what companies do with their profits, but also how they make them.” As well-meaning as CSR was originally intended to be by the United Nations in 1948 toward advancing equal pay for equal work, collective bargaining, and safe working conditions, more recently CSR has been held up as a veiled attempt by corporations to polish their public images in hopes to garner favorable customer relations absent an earnest motivation to advance societal concerns.
As the influence of the CSR movement has grown internationally since the 1960’s so have criticisms concerning the motivations of corporations to promote their CSR credentials. ‘Greenwashing’ (Motavalli, 2011) and other pejorative terms have been attributed to the more recent attempts of business to self-promote their CSR programs lending credence to assertions that CSR is fundamentally a ‘cost of doing business’ marketing function intended to advance the self-interests of the company ( Bhattacharya, 2009).
Following the historical efforts to advance CSR as a mainstay of corporate activity, Harvard Business School researchers Michael Porter and Mark Kramer (2006) added to the construct of Corporate Social Responsibility (CSR) a further dimension they term Shared Value (SV). In so doing they have extended the self-oriented perspective of CSR to one which seeks to create a measurable business value by identifying and addressing social problems that intersect with the financial interests of the business. This suggests an enhanced mutuality of interest between business and societal needs. “Shared Value is aimed at changing how the core business operates – strategy, structure, people, processes, and rewards – in order to deliver the triple bottom line (Moore, 2014, p. 4). Porter and Kramer (2006) suggest that Shared Value is the next iteration of modern capitalism wherein the social interests of community and the profit seeking interests of business intersect.
The most recent extension of the ‘Corporate Social Responsibility’ movement of the 1960’s and the ‘Shared Value’ proposition offered by Porter and Kramer in 2006 is the seminal work of Professor Yunus, who has coined ‘social business‘ (2010). Apart from CSR and Shared Value, where the preponderance of profits generated by a company are directed to enhancing shareholder worth, Professor Yunus asserts that a social business is a profit generating organization whose entire net profits are “directly devoted to changing the economic and social situation of the poor or to creating some other social improvement in the world.” (2010, p. 9). The historical progression of CSR – to Shared Value – to Social Business is illustrated in Figure 3 and serves as a means of contrasting the motivational characteristics of each with the triarchic leadership model (Jordan, 2005). In this model CSR is closely aligned with transactional leadership theory and a self-interest motivation, the mutual interests of Shared Value conform to transformational leadership theory, and the selfless attributes imbued within social business align with transcending leadership.
Figure 3. Conceptualization of a Business Responsibility Continuum
Aligning Business Responsibility with a Triarchic Leadership Model
As a means of conceptualizing an integrated model of business responsibility with enlightened leadership theory the authors suggest a unified triarchic business responsibility and leadership model.
Figure 4. Triarchic Business Responsibility & Leadership Model (Jordan & Pallatto-Fontaine (2016)
The triarchic business responsibility and leadership model moves from self-embeddedness to self-transcendence, thus removing the leadership disconnect. Traditionally, the leadership disconnect collectively creates results that benefit a few to the exclusion of the many because decision-makers are increasingly disconnected from the people affected by their decisions. Adopting a style of transcending leadership helps to ensure that business remains responsive and relevant to meeting the needs of all people – both financially driven stockholders and others in society who are often in most need of resources to sustain a reasonable quality of life. This leadership model is an intention-driven, co-creative eco-system. In this emerging business paradigm, success is not defined exclusively by profit but also by its contributions toward bridging the ecological, social, and spiritual divides. This mindset values not only one’s own well-being and profit but also values the well-being of society. By providing equal access to microcredit financing and to the development of social businesses worldwide, disconnected and marginalized individuals become change-makers and are empowered in their communities.
Permutations of Business Responsibility and Leadership Motivation
While it is desired that leaders who determine to engage in some meaningful expression of social business do so with a ‘selfless’ (i.e. transcending leadership) motivation, the authors recognize that various permutations among the three forms of business responsibility discussed in this paper (i.e. Corporate Social Responsibility, Shared Value and social business) and the three forms of leadership motivation styles (i.e. transactional – transformational or transcending leaderships) are possible.
Figure 5. Permutations of business responsibility and leadership motivations (Jordan & Pallatto-Fontaine (2016)
For example, a business could conceivably seek to establish a for profit – non- dividend paying entity with an intended social benefit, yet whose desired intent is to seek public accolades reflecting a self-interested – transactional leadership motivation. Alternatively, a corporation or business might earnestly commit to some form of Corporate Social Responsibility with the best of intentions toward serving some social benefit. It is therefore important to consider BOTH the inherent motivation of a business leader as well as the form in which that leader’s company seeks to fulfill their social responsibility. Only those leaders and organizations that engage in non-dividend, profit generating, and socially determined activities AND have a selfless (transcending) motivation should be considered legitimate social businesses, as defined by Professor Yunus. As was the case in determining what metrics proved useful in affirming legitimate ‘micro-lenders’ from those who irresponsibly presented themselves as such but were in fact charlatans or ‘loan sharks’ falsely embracing the term but not the practice. The matrix offered by the authors may serve as a useful tool in assessing the veracity of future claims by corporations or their leaders in evoking a social business status.
Transcending (Selfless) Leadership and Social Business
A core tenet of leadership is about shaping and shifting how individuals and groups attend to and subsequently respond to a situation. A fundamental theme of this paper is exploring how leaders decide to make the shift from Corporate Social Responsibility (CSR), to Shared Value (SV), to committing to social business (SB) principles within the culture of their respective organizations. Leaders who assume a transcending leadership style focus on an eco-system awareness that cares about the common good moving from “me” (ego) to “we” (eco). Eco goes back to the Greek word oikos and concerns the “whole house;” transforming to an eco-system economy means reconnecting economic thinking with its real root, which is the well-being of the global community rather than just profit or the well-being of a few. The principles of social business, as defined by Professor Yunus, reflect this paradigm shift. A critical leadership skill, especially in aligning social business with transcending leadership, requires us to reexamine traditional leadership styles. We are called to ponder how we lead from the emergent future in the face of increasingly global challenges, what economic frameworks guides us forward, and what traits will help us in shifting the “me” (self-interest) to “we” (other interest) paradigm.
Scharmer and Kaufer (2013) outline three major pathologies that inhibit a selfless oriented leadership approach in the relationship between business and society:
- The Ecological Divide: a disconnect between self and nature. We are depleting and degrading our natural resources on a massive scale, using up more nonrenewable precious resources every year. Although we have only one planet earth, we leave an ecological footprint of 1.5 planets; that is, we are currently using 50% more resources than our planet can regenerate to meet our current consumption needs.
- The Social Divide: a disconnect between self and other. Two and a half billion people on our planet subsist on less than $2 per day; this number has not changed much over the past several decades. Additionally, there is an increasing polarization in society in which the top one percent has a greater collective worth than the entire bottom ninety percent.
- The Spiritual-Cultural Divide: a disconnect between self and Self. This concept represents a disconnect between one’s current “self” and the emerging future “Self” that represents an individual’s greatest potential. This divide is manifest in rapidly growing figures on burnout and depression, which represent the growing gap between our actions and who we really are.
One of the most essential practices in advancing our thought and action processes in the journey from “me” to “we” is that of intentionally aligning one’s value and purpose in life and work. The more one can clarify the commitment to serve the greater good, the better we can act as instruments for bringing that emerging future into being (Scharmer & Kaufer, 2013). Thus, the major divides in our society are weakened.
To achieve fundamental change either in an organization or in an individual leader, we must move to a model of transcending leadership integrating concepts in emotional intelligence (Goleman, 1995). Emotional intelligence is the ability to manage ourselves and our relationships effectively and consists of four foundational capabilities: self-awareness, self-management, social awareness, and social skills. Self-awareness involves self-confidence and an ability to accurately assess one’s self and remain aware of emotions. The ability to control or redirect disruptive impulses and moods, and the propensity to suspend judgment and think before acting, defines self-management. Social awareness comprises the concepts of empathy, organizational awareness, and service orientation. Social skills are the proficiency in managing relationships and building networks, and an ability to find common ground and build rapport. In emotional intelligence, empathy requires having an open heart to connect directly with another person from within. We forget about our own agenda and begin to see how the world appears through someone else’s eyes. After all, this was where the idea of microcredit loans originated when Professor Yunus first gave $27 out of his own pocket to forty-two people who were struggling to survive on the streets of Dhaka (Esty, 2013). Empathic awareness is at the center of transcending leadership.
Leaders are enabled to effectively navigate accelerated change and adapt to rapid cycles of disruption in order to most sustainably respond to the needs of society through applying the ethos of the Agile Mindset (McGowan, 2014), which values learning over knowing. The Agile Mindset is especially useful for entrepreneurs involved in continuous innovation, adaptation, and learning. The following concepts may be followed when approaching novel challenges:
- Empathy: to uncover insights and human needs in times of ambiguity;
- Divergent thinking: to find, frame, and address problems not yet known;
- Entrepreneurial outlook: to create value in all that we do; and
- Social and emotional intelligence: skills to effectively collaborate with others to create solutions.
Often the success of a leadership intervention depends on the interior condition of the leader. Scharmer (2009) invites us to explore the inner place from which we operate as leaders in providing quality outcomes and effective change. He calls this the “blind spot:” the quality of that inner place from which we operate in “the Now” tends to be outside our range of our normal observation, attention, and awareness. Leaders are often blind to the source dimension from which effective leadership and social action are actualized. The success of our actions as change-makers does not depend on what we do or how we do it but on that inner place from which we operate. Knowing one’s emotional and social intelligence is central to moving from the blind spot in leadership. If, in fact, we focus on self-transcendence in leadership style and characteristic, we must also transform the quality of awareness and attention people apply to their actions.
Key Attitudes of Transcending Leaders Advancing Social Business
For leaders to be successful at implementing social businesses in their communities, they must:
- Serve the needs of those they lead ahead of their own needs assuming the principle of other-interest before self-interest;
- Lead from an enriched, social exchange relationship;
- Transform conversation by co-sensing and co-creating asking what individuals need and want rather than assuming;
- Respect the fabric of the culture while generating transformative solutions;
- Assume a posture of ethical leadership in deeds, behaviors, and expressed values;
- Move from one’s “blind spot” to tap into a deeper level of humanity;
- Establish community with others engendering trust, respect, collaboration, and unity of purpose;
- Implement the Agile Mindset framework centering on empathy and emotional/social intelligence;
- Move to an intention driven eco-system strengthening ecological, social, and spiritual divides; and
- Demonstrate full commitment to social business tenants. Some individuals ask why not do good for others and still take home a profit for themselves? Professor Yunus explains the problem with this line of thinking in the following example: “In Ramadan, Muslims are not allowed to eat or drink until after the sunset. Why not take a sip of water during the day?” To which Professor Yunus answers, “It diminishes one’s strength of mental commitment.” This is an equally important leadership attitude, as it demonstrates the strength of one’s moral responsibility to social business.
It has been the intent of this paper to explore, and then propose, a relationship between leadership theory and a continuum of business responsibility which has emerged over recent decades; culminating with ‘social business’ as proposed by Professor Yunus. Social business is in complete alignment with the construct of selfless transcending leadership, whereas CSR and Shared Value appear to correspond with transactional leadership and transformational leadership, respectively. In fashioning the ‘triarchic business responsibility & leadership model’ scholars and practitioners of social business alike will be better able to discern the motivational leanings of leaders and businesses advancing social business as the next iteration of “capitalism that serves humanity’s most pressing needs” (Yunus, 2010).
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