Britannia rules..ok?

Ella Fitzgerald and whole seminaries of modern leadership-speak got it wrong. It is what you do and not the way that you do it. Ambitious executives, urges a new survey of 1,150 global CEOs, should spend less time agonising over their people skills. Instead, focus on getting the right technical, business change management and international expertise under their custom leather belts. Are we seeing the collision of theory and reality? Business academics like the Australian professor James Sarros routinely welcome a new style of leadership; a sense of integrity, fair play and hard work. A model that recognises individual achievements, excels in communication skills, is compassionate, forward thinking, and with a willingness to involve employees in decision-making processes. "Leaders and workers are increasingly becoming work colleagues working both for corporate success and individual work gratification and sense of achievement," says Sarros. Who could dissent? But what companies across the globe want, says the latest PriceWaterhouseCoopers annual CEO Study, are leaders who are strong, creative, imaginative, and have the courage to challenge. And they are nearly as elusive as a $60 barrel of oil. The good news is that the Best of British fill these exacting criteria. "To challenge occurs naturally in the UK," says Paul Harper of the Association of Executive Recruiters. "It is part of the whole mentality...and plays to the strengths of UK executives." This is the biggest re-invention since the puny guy became muscle man in the Charles Atlas ads. British leadership was the seven-stone loner on the beach who took the sand in his face for poor industrial performance. Reach back to the 1970s and taste the "sour cocktail of inefficiency and grumbling discontent," as historian Correlli Barnett put it. But that cocktail has long gone down the pan and now, says leading auto industry authority Professor Garel Rhys, top British industrial leadership is "the equal of anything else. So much so that we are seeing an increasing flow of British management into managing foreign companies. They are everywhere, though they might not perhaps get the recognition they deserve." Rhys, emeritus professor at Cardiff University Business School, sees a parallel with the UK auto industry, 30 years ago a byword for all that was hidebound, myopic and self-destructive in British industry. "We're now exporting more cars then ever. And that's the best test of the efficiency of the British motor industry and the quality of the product; nobody has to buy them. It's the same with British managers. Nobody has to employ them. And British managers are filling most of the bases on the world commercial baseball field, in the UK itself and increasingly at and towards the highest level in companies in Europe generally, in North America, and even in Japan." Rhys cites as an example, fellow Welshman Sir Howard Stringer, chairman and CEO of the Sony Corporation. And as an auto man he holds up as a role model of corporate leadership, Carlos Ghosn. Ghosn, whose turnaround of Nissan gained him celebrity status in Japan, says the basic objective of management is to create value. "It's very important never to forget why we're here. And the higher you are in management, the more obvious it has to be," with motivation the ultimate weapon. "I'm very demanding about performance, on myself, and I'm very demanding of those around me. But you can't be demanding of someone who isn't empowered." If you have to put two words around his management style, says Ghosn, "it would be value and motivation." Not quite the mantra of the Longbridge, Halewood and Dagenham of the 1970s, but one very much endorsed among modern British top leaders. So what's brought about this seismic shift? Reaching far into the soggy vapours of British Leyland, Sir Don Ryder, the Austin Allegro, Red Robbo, et al, Rhys recalls the words of BL chief Michael Edwards. "Edwards said 'give us the ability and right to manage and we will', and under the Margaret Thatcher regime managers were indeed given the ability and right to manage. If things went wrong in the days when they felt constrained, management could hide behind those constraints and say 'it's not our fault.' "Now, especially in the private sector, if things go wrong you can't hide behind the mealy bags of something else - it's your responsibility. Sub-standard management will always look for an excuse; good management will say 'this is a challenge, lets overcome it'." There are exceptions, says Rhys, but in the main, management in Britain has risen to the challenge where markets are open and where there's nowhere for the inefficient to hide. "If you are going to survive you have to be efficient yourself. Top management has found it does have the ability to manage, and the background to that has been largely more benign than 25 or 30 years ago. Industrial relations by and large are excellent; you have to look in a dictionary to find the word 'strike', Britain has bought into the need for higher productivity and efficiency. All this is understood right across the political spectrum. "Under these conditions it would be remarkable if management didn't find they had the ability to be, in many instances, world class." But if motivation is a core achievement trait, what motivates the motivator? Towards the end of his life, ex-ICI chief and legendary upsetter of rut-locked corporate apple carts, Sir John Harvey-Jones, said he had given up on most things - "except my basic belief in people, in treating them right and giving them the right incentives. "And those incentives are bugger all to do with money, they are almost all to do with recognition and trust." Money, very big money, is in the news. In the first five months of 2008, bankers and financiers took out a record £12.6bn in bonuses. What financial crisis? At the same time a survey showed that the CEOs of Britain's 30 richest companies - those with a market value of more than £10bn - received pay rises of 33%. According to the survey, the best rewarded CEO is Bart Becht of Reckitt Benckiser, at £22,357,500, followed by Michael Davis, Xstrata on £16,113,022, and Mike Turner, BAE Systems, £9,035,980. The survey by the remuneration consultancy MM&K and the proxy voting agency Manifest, took into account performance-related bonuses and rewards as well as salaries. It found that the average pay of many top executives had risen to a staggering £5m, climbing 10 times the level of inflation in the course of a year. Prized reward All shall have a prize, it seems. Barclays' Bob Diamond took £35m in bonuses despite the bank writing off £12.2bn in bad debts, while Royal Mail's Adam Crozier trousered more than £3m in pay, pensions and incentives. Or £1,200 for every post office closed. According to Rod Burdett of specialist management consultants Hewitt New Bridge, a typical FTSE 100 finance sector CEO's annual package could be worth about £3.2m; in the industrial sector, £2.5m. "If you had a chief executive who had two jobs he could choose, one in the finance sector which is much more highly remunerative than the manufacturing sector, then clearly it puts the manufacturing sector at a disadvantage," says Burdett. "But whether this actually happens in the real world is a moot point. When you get to the most senior levels in industry you will have specialised, so you don't have the choice of being the CEO of say Schroeder's or the CEO of a major manufacturing company." Manifest's chief executive Sarah Wilson says: "Most people would agree with the observation that industrial CEOs are motivated by a series of complex interacting factors including recognition and reputation, sense of achievement and yes of course financial reward. There is, however, still a mismatch in reward with performance because we all too often see the 'rising tides lifts all boats' effect. And as we start to expect major quoted companies to take more responsibility as global citizens, directors are not rewarded for changing corporate behaviour through use of - for example - environmental/CSR targets which has to be the way forward for capitalism with a strong ethical streak." But ethics, or lack of them, also reach back to the bottom line. Another survey finds top management receiving bonuses even though their profits have barely kept pace with inflation, thus contravening a dictum of management writer Robert Heller. Most of all says Heller, "great managers have objectivity. They put corporate performance first and their own rewards second, therefore putting their personal performance ahead of their egos." Yet according to centre-right think tank the Bow Group, 27% of chief executives in the FTSE 100 have contracts that pay out bonuses even if profits rise by just 1% above inflation. Thirty three companies use schemes such as these which pay out shares worth two to four times the annual salaries of chief executives. "Setting very low performance targets encourages a bonuses-for-nothing culture where merely standing still is rewarded," says the report's author, Christopher Mahon. The Americans have a term for it - pay for respiration. But from America come signs of a grounbreaking backlash. American Express has signed a new incentive plan for CEO Ken Chenault, based on performance over six years - a long time in terms of company fortunes and executive pay-backs. Among the details: Chenault will be rewarded in options, not restricted stock, so no automatic reward for marking time. The targets are tough - earnings must be up by no less than 15% on average, revenue by 10% and average equity return of 36%. And American Express must outperform the S&P 500 by an average 2.5% per year. If Chenualt brings home these cookies, he will have earned every dime of his package. But for British global front-line manufacturing, marking time is not an option, and Cardiff's Rhys believes that in many ways the sector's remuneration structure "frankly reflects the essential integrity of the industry. "I think the top companies led by top charismatic people get the message through that working in manufacturing is exciting and very rewarding. Although they don't get the huge salaries, many of those salaries are based upon bonuses which are really mis-conceived. The bonus system, even in the boardroom, all too often forces those operations to take short-run decisions because there can be immediate reward against which the bonus is paid. "You can turn the thing round and say the basic salaries in manufacturing are good, but not pumped up by the dangerous bonuses you see in so many other sectors. And my word, aren't they coming home to roost at the moment."