AUSTRALIAN INSTITUTE OF MANAGEMENT: Are you a human-centred leader?

Human-centred leaders put people before profit, doing what is right before results, and focus on creating an environment where people can grow, develop and become their best selves. When you care for people they will care for your business. When you put people first, the results flow through to the bottom line.

People impact the bottom line

This is demonstrated most clearly by what can happen when you fail to fully care for people. Although perhaps an extreme example, I am reminded of a conversation with Nick Leeson.

In 1995 Nick Leeson traded Barings Bank into insolvency and himself into jail, racking up losses of GBP827 million — twice the bank’s available trading capital — before it imploded. Nick understood what he was doing wrong and that he would ultimately get caught and go to jail. While taking full responsibility for his actions Nick expresses disappointment that managers above him did not see what was happening. He suggests their fixation on profit and bonuses blinded them if not to the fraud but to behaviour which any caring, human-centred leader would have observed.

Nick was drinking to extremes, avoiding meetings, ignoring trading statements — in other words exhibiting a number of behaviours that a caring concerned manager should have observed.

People and their behaviour impact the bottom line. What is perhaps less obvious is the role of leadership — or lack thereof — in the outcome.

Why does business exist?

Leaders face a range of strategic, operational, cultural and political decisions. However, you do so from a particular perspective based on your assumptions about the purpose of business. Does the business exist to maximise returns for shareholders — the profit motive? Or does the business exist to contribute to solving problems faced by people, and to do so in a commercial manner?

Leaders who look through a profit lens tend to judge the suitability of actions based on whether they deliver a financial result. Leaders who look through a people lens — i.e human-centred leaders — assess actions based on their impact on people.

When you look through a financial lens it is easy to view employees as units of economic production. However, employees are people with hopes and dreams and aspirations, with dignity and meaning to their lives. A new kind of leadership — human-centred leadership — is required to promote and advocate this view.

People are not assets

An illusion exists in business that people are our greatest asset. Our behaviour, however, suggests that people are our greatest liability.

If you examine your balance sheet you will find a list of assets, including (in simple terms) property that you own and money that people owe you. Below this your liabilities indicate what you owe others. The bottom line shows the financial health of the business.

Nowhere on that balance sheet is there any indication of what you claim is your single greatest asset — your people. The reason for that is the view that people are an expense to the business. They show up as a cost on the P&L. When a business experiences financial difficulty they immediately turn their attention to cost reduction and immediate wins. Unfortunately these immediate wins are often called Ahmed or Angela, Luke or Lucia.

Most employees recognise the fragility of the social contract with their employer, and understand that they can be made redundant at any time, or replaced if they do not perform to a particular — often onerous — level.

Nick Leeson, and the destructive impact he had on Barings is a compelling example of what happens when you put profits before people. Poor behaviour can damage the bottom line, and even sink the entire business.

The bottom line is people

The bottom line is that you have a choice to put people before profits. This is human-centred leadership. When you put people first, do what is proper rather than merely what is permissible, and create an environment where people can do their best work, you will maximise rather than minimise your bottom line.

When you care for your people — all of them, not just those who seem to make you a lot of money — your people will care for your business and your bottom line will flourish.

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