Interview with Professor Roy Green on Topic of Leadership in Australia

So we have here Professor Roy Green from the UTS School of Business, the Dean of School of Business. Thank you for joining us, Professor Green. It’s a pleasure. And so, the topic today is leadership leadership specifically in Australia and the gaps in leadership in Australia and what we can do to bridge that gap and improve Australia’s leadership capacity both at the academic level, but also within the industry. So Professor Green, what are your thoughts on the level of leadership in today’s society, mainly Australia? Well, I think historically in Australia, we’ve had some great leaders, political leaders, business leaders, union leaders who have taken the society forward at key points in its history. We could start by naming them but it would probably take more than the allocated time, but even in the current era, we have some very significant business leaders around the world, not only in Australia. We have Andrew Liveris, the Darwin boy who has now risen to be CEO of Dow Chemical in Detroit. We have Jacques Nasser who became the CEO of Ford. We have a number of key business figures in international companies around the world, also who have been involved in entrepreneurship and startup activity. Young people like Scott Farquhar and Michael Cannon-Brookes in Atlassian. There is no-end of course to the ingenuity and the potential for leadership among Australians. We are a very fortunate country. We have a good education system and we’ve prepared people reasonably well and so it’s not surprising that we have a larger share perhaps of leaders. Even in the founding of the United Nations, Doc Evatt and other Australians played a very major global role, the usual way of saying, this is the country by their weight. But then, we also have to bear in mind that it’s not entirely a favorable story. And we also have evidence that despite these very significant leaders and events, we also have a real problem with what we might call and we did call in a recent study of management in leadership in Australia, a long tail of mediocrity. Tail – T A I L. You could say T A L E as well. But this was a global study that we were commissioned to do by the Federal government with the London School of Economics and also Stanford University in the later stage. And that took in first 15 countries, then 20 countries around the world looking at management caliber and its relationship to productivity. And what it found was that Australian managers overall and this is mainly looking at SMEs in manufacturing, we’re not the worst in the world and we wouldn’t expect that they were, but they are not the best either. And when we look at the statistical evidence, not just a handful of people have done well, but the whole cohort, we find across world - so around 7,000 observations among those countries, that Australia is in the second tier of leadership. Now, we can get away with that and have done for many years, firstly behind tariff walls, we were somehow interrelated from international competition. We can’t get away with them now. We are exposed to international competition and even more sharply because of the high dollar. We are a high cost economy. And what we’re seeing at the moment is that the top is coming off in terms of trade boom in which the prices other countries are prepared to pay for our raw materials has gone to diminished. And that means we have to make up for the national income lost with other sources of other income and that’s mainly productivity. And normally what would happen and what happened on previous occasions when the terms of trade dropped such as the mid-1980s. We also saw the drop in the dollar which helped our competitiveness internationally. We saw the rise of some very strong manufacturing enterprises at that time. But now, what we face is a decline in our terms of trade and a high dollar simultaneously because the Swiss and the Russian central banks think we’re a safe haven currency. And that means the dollar is going to stay high and that puts even more pressure on our exporters and more pressure to improve our productivity. And what if we have poor management? Well, the connection between poor management and productivity was very evident in our study. And the area where we fell down most in our management and when the 18 characteristics measured across operations management, performance management and people management was in this area of people management. I know a lot of people watching this will be from engineering backgrounds. And well, it’s not your area that is primarily at fault here - you’ll be pleased to know, operations management we do quite well. But if we are not managing the technology successfully and we’re not making the best use of our people in that context, then all the effort that you put into the application of technologies in our companies will be futile. So the area where we fell down most and where we dropped most behind world best practice out of the 18 characteristics is titled "instilling a talent mindset". So, that we might say is a proxy for the innovative capability of our companies and their workforces and the ability of managers to draw that out. If that’s the area where we’re weakest, then we do have some problems with management and leadership in Australia and that’s where we really need to put our focus if we have to develop our innovation potential which in turn flows into our productivity performance. And our innovation potential as many of the studies in this area have shown, not just about science and technology - it’s about non-technological forms of innovation as well, particularly new business models, systems integration and high performance work and management practices. And do you see this issue across SMEs as well as large organisations in Australia or is it something which is more seen in the SME as well? Well, particularly the SMEs. There is size factor here. The larger companies do quite well in our survey as they do in other countries. There’s a kind of uniform level of quality among the leaders and managers of large international companies. And that’s not surprising because many of them are trained in the same way. They’re very mobile and their recruitment practices and promotional practices are pretty standard and regular across companies and countries. But when we drill down into the SME sector, we find family companies with no professional structure unlike in Germany or Sweden or parts of the US where SMEs and particularly family companies are highly professionalized in the German metal-style, in the manufacturing sector of SMEs in Germany. There’s a very meritocratic, very highly structured approach to SMEs and family companies. Here, it’s a lot more haphazard, sentiment plays a role, patriarchy plays a role. There’s much less room for structure in those informal arrangements and part of that comes back to the way in which we train our managers. And so another factor in the long tale of mediocrity, tale of poor management performance in our SMEs, a lot of that stems from a low level of training and education of our management class we on this table of a number of countries come near the bottom when it comes to the proportion of managers with formal tertiary qualifications and I don’t just mean business qualifications, any kind of qualifications at all. There’s a very close relationship between those level of qualifications and the management capability and productivity performance of those companies which is not to say that we can’t find managers and companies that perform well with low levels of tertiary qualifications, but they’re the exception rather than the rule. We’ll always see a leader who stands up and says “Look, I got here even without any qualifications. I just learned and taught the job.” Well, they do exist. But they are the exception rather than the rule. Do you think there are certain traits that leaders have that, you know, it could be that there are leaders which haven’t had formal qualifications, but they tend to be quite good leaders and able to manage their team quite effectively. Are there certain traits that they have that helped them to do - to perform well? Absolutely. People have certain traits that will align well with the requirements in the strategic direction of their organisations that might be accidental rather by design which is why the management education system is important in ensuring that those elements are designed in the capability agenda of the emerging group of managers and leaders in Australia. But those traits are essentially to understand the future of the company, to be able to analyze its strengths and weaknesses and to be able to engage with the workforce and with the company and its customers and the wider community generally about the strategic direction and the markets that it wishes to occupy. It’s also about authenticity and the ability of the manager to, not only communicate but to gain resonance among their workforce that enable that company to be more than the sum of its parts. Management and leadership is being very carefully analysed, over the years, by academics and by pundits and journalists. And there are certain characteristics in managers that really stand out when we find that they have been successful especially at times of adversity. It’s very easy to be a good manager when everything is going well and things are taking over. But you certainly see the test when it comes at a time of adversity for the company with a shrinking market, when it needs to reinvent itself, when it needs to take a different course. And in those contexts, new ideas around design innovation and design thinking are becoming quite prominent. Obviously, business analytics is much more important than it used to be with the wealth of information that we now have out there, how we analyse that information, but also more intuitive concepts, the qualitative aspects of management, as well as its quantitative aspects are also important. And design thinking is about imagining where your company might be if you’re thinking in terms of a blank page in the future, where is its market. This is the way Steve Jobs of Apple thought for example. He didn’t go out and do a market survey as to where everyone wanted an iPod. He produced the iPod and then he measured the market response and then adjusted the design and the functionality accordingly. And that’s how a true leader emerges, that there is a strong intuitive element about where they want to take the organisation, but then they back that up with qualitative analysis and very good engineering. And that’s why when we hear and read management theorists like Peter Drucker, the great management theorist of the 20th century say that “Well, management is essentially about technology and markets.” We have to now adapt that to the 21st century and I would adapt it by saying, “Well, in the 21st century, the corporation is a combination of business analytics and design thinking. If you get those together, then you have a company that has a likelihood of success.” Exactly. And going back to what you mentioned earlier that when things are going well, it’s easier to manage it. But when things are going down, like you know, people kind of lose I guess they lose themselves and that’s where I guess, the cost self-leadership or being to self-manage oneself Indeed. --and one’s emotions and one’s ups and downs and so you are not reacting emotionally to every situation. And I think that’s a key element also. If you may agree that that must be taken into account. Yes. That’s an extremely good point. We brought out here, the Australian business deans council which is all the deans of all the business schools right here in Australia - 40 business schools, we brought out as part of our future management education project, a year and half or so ago, Harvard professor, Professor Srikant Datar, who had just completed his book “Rethinking the MBA” because the MBA is often blamed for the problems that have befallen the world economy in the early 2000s with the global financial crisis and how could these Harvard graduates get is so wrong in the financial sector how could this speculative bubble have arisen, how could we not have foreseen it and also why has it taken so long to reconstruct our economy and reconstruct the way we train our managers and leaders. So he wrote a book about this drawing on a lot of evidence from the US business schools and he argued that the future of business schools should be around teaching three areas, knowing, doing and being - as simple as that. Knowing obviously being the academic and conceptual basis to management and what we have to take out into the real world and there is plenty of management theory around that is valuable and we need to rescue it sometimes, from those who use it in the wrong way, developing all of these financial derivatives that have ruined the lives of hundreds of thousands millions of people and secondly, doing. How do we translate those concepts into practical action, how do make our business courses more practical. The examples often given are medical clinicians in medical schools. Why don’t we have business schools more like medical schools where we have people practicing before they go out and do it. And here at UTS - for example, we’ve developed what we call the u.lab which is an experiential lab where the students can try out new ideas, entrepreneurial ideas, ventures, new ventures, startups and also business consulting with companies and there’s creative exercises to make themselves more employable. So that’s doing. And then being - and that gets to your point of self-reflection, self-knowledge. “Who am I?” “How do I behave ethically?” “How do I take responsibility for my decisions?” “How do I relate to other people?” All of those issues which might have been seen as a bit fluffy and superfluous to business education and now, right at the center of it. Because if we had more reflective people, people who understood the effect of their actions, maybe a lot of these activities and really Fordian behavior that occurred during and before the global financial crisis may not have occurred. Yes. And I think it’s probably where a good leader may need to start as “Who am I?” “What do I stand for?” “What is my purpose here?” Absolutely. “What do I need to achieve?” And coming from within rather than externally and unfortunately I think, a lot of the leaders that you mentioned have come from the external view of “How can we get more out of little?” - compromising human relationships - ethics, and so on. And I think that’s - I think one of the main aspects of probably leadership education would be self-knowledge and being able to understand what is need to be you. That’s right. And ethical and the social responsibility of being human and the social responsibilities. Yes. What you are saying - education goes far beyond technical competence. And the deans in Sydney were given a lesson in that. In fact, about a year or so ago, we were asked into the headquarters of one of Australia’s leading banks. I will not say which one, but it’s a bank that is in fact, reinventing itself. And it brought in the Sydney business deans because it wanted to show them something about their new approach. And we all entered the room which set up with tea and coffee - all looked very nice, but what was lying behind it was a bit of an ambush because when we walked in, what we saw were the key executive managers of this bank brought together especially for this occasion - so extraordinarily, a high power meeting - the manager of wealth, the manager of retail, etc. And as we sat down, we realised first three things. Firstly, they we are all much younger than we were. Secondly and more interestingly, they were mainly not from Australia. They were from around the world - from Canada, from India, from South Africa. These were the managers of an Australian bank which somehow, before we’d really realised it, it become really globalised. And thirdly and most astoundingly of all, certainly to some of my colleagues who are quite pleased at UTS mind you, because it was the direction that we want to go. Most of the executive managers did not have business degrees. They had degrees in politics, in history, psychology and that was telling us something as well, that maybe companies are now looking for something else in their emerging leaders. And they made that very clear in the discussion. They said to us that they were very grateful to business schools for producing generations of technically competent graduates, but from now on, that was not enough. “What we’re looking for now,” they said, was the next general manager. And that meant a broad understanding of the context of business, a broad understanding of the liberal arts, of a more interdisciplinary approach to business drawing upon these other sources. And that was certainly quite a revelation, but it’s one that is common among many companies especially global ones around the world now. They are looking for well-rounded graduates who can develop what we might call Boundary crossing skills across management, philosophy, engineering, psychology, the renaissance - those are the few. It’s exactly what universities were established to do and in many ways, because we’ve become so specialised, we lost sight of that broader mission and the important thing in the future will be to - especially for leaders, to develop those boundary- crossing skills, communication, or problem-solving, critical thinking, collaboration as well as the body of specialised domain knowledge in which they emerged, what is sometimes called the T-shaped people, whit the depth, but also able to think across the boundaries. And as you mentioned, you say the future lies in the bridging the gap between the humanities and technical specialisations - is kind of understanding what the human needs are and also bringing those technical knowledge. And in regards to productivity, Australia - recent research has shown, Australia is losing up to $39 billion a year in lost productivity and the United States also about $300 billion which is of course is a larger scale. What could be the main issue that - is it employee engagement, is it management, is it a bit of both, what would be causing this? Yes. Well, it’s certainly very important for Australia. The US has picked up its game a little bit in terms of its productivity performance, but then they’ve been able to do so as well with the low dollar rates and a lot of opportunity over the last couple of years to improve productivity performance. It’s still not as efficient as it could be. But you know, in Australia, we’ve done far worse than most of the rest of the world. Our multi factor productivity growth went backwards in the early 2000s. And you could say it’s explained by some special factors in particular industries. In the mining industry - for example, there’s a lot of investment that’s going in with no consequent output as yet. In the utilities sector, we did a lot of cost-cutting in the 1990s which can’t be replicated in the 2000s. We’ve had a period in which those utility companies made up for it with a lot of investment, much of it not needed which is why it’s sometimes called “gold-plated” investment. That hasn’t been matched by output. And similarly, in agriculture, we’ve had droughts and all sorts of reasons why productivity has dropped back. So that accounts for some of the loss in productivity. But over the longer term, the key factor in our productivity, is obviously how our assets are being used and in particular, our human capital. And if we have managers who are not capable of making the best use of their workforces, of their human capital in their organisations, then that’s a huge productivity loss to the country. The employers recently surveyed - I think in the Australian Bureau of Statistics reported that at least half of the employers reported that they were not making full use of their employees’ skills. And that’s only looking at their specialised skills. What about all the opportunities for ingenuity and creativity and the contribution to the future, of their organisation’s and the development of an overall strategic positioning. So many employers just treat employees as the components of their machine - Cogs in the machine. --but not within the ability to make a contribution beyond that. Well of course, those companies which have done very well especially at the innovative knowledge -intensive end of the spectrum, have made the best use of the knowledge that their employee has. Such an obvious thing to say, but it’s very hard to find - workplaces where it’s being done successfully. If one is looking for the biggest drag on productivity in Australia, that’s it. And I’ve heard many of my colleagues that work in the industry, they have some ideas they want to share, but sometimes are afraid. They think the manager might criticise them and they sometimes they think they might lose their jobs. So it shows the rigidity of management perhaps or the strictness or the lack of autonomy and support for creativity and innovation and contribution to that kind area, going beyond what is the minimum. And so I guess that’s probably something to also look at is how the management can be more able to effectively motivate employees to be more creative, create an innovative environment where there’s autonomy for them to kind of be able to embark on a more creative pursuit. Yes. That’s the thing - you’re talking now about the future of management. That’s exactly what is required. Too many of our managers are risk-averse. Too many lack the confidence and too many lack the skills that they can use to engage their workforces in discussion of the future, of new ideas, of what might be seen as distractions from the main game. And employees get the picture pretty clearly. They are paid to keep quiet and keep working. They are not paid to offer ideas because it could expose them to retribution, to marginalisation or worse. And so there’s no culture in Australia, generally speaking that encourages employees to speak their mind in their companies to be able to make a much broader contribution than that which they have depicted in their job descriptions. There are companies of course that have broken the mold. They’re mainly in the technology sector - companies like Google and Microsoft. They’re very interested in drawing on the knowledge of their employees and they set aside kind of play time when people can go off line and use the company’s facilities to develop ideas that they have absolutely nothing to do with the formal job descriptions. Yes. They spent 20 percent of their time at Google. And they worked at home. And there has been a lot written now about the innovations that have emerged from such off line activities including with PC itself. And so why this hasn’t been adapted by more companies is surprising and disappointing, but it can be traced back to the culture of risk adversity by managers. It can be traced back to the feeling that if employees are able to do this thing, then I as a manager have lost control. I don’t want to let go of the decisions over which I have control and so many of these issues ultimately come back to the feeling of insecurity and the desire for control for its own sake, not because it improves the value proposition of the organisation. That’s an issue that management education can and sure deal with. But it doesn’t always do so successfully. Exactly. And as you mentioned, some of the more successful companies, even Australian company like Atlassian, they have their one-day FedEX day - they used to call it, where employees can just work on whenever they like outside their main task and a lot of innovation came from that. Yes indeed. Yeah. Yeah. Thank you very much for all that information. Is there anything else? So how can we actually push Australia forward in terms of leadership education and to kind of broaden a larger body of work where we can teach more leaders and managers how to be more effective in their organisations so that their employees can perform better and be more engaged and be more productive so that Australia can go to the next stage? Well I can only use the advice that we were given by the architect of our new business school building that you’ll see emerging shortly from the rubble here in Ultimo, Frank Gere, a world renowned architect. I asked him a few months ago to provide a message for our faculty. If there was a single message he’d like to give us to think about the future of management education, what will it be? And he just wrote back and he said, “Imagine the future and you will soar.” Okay, so he’s a poet. He’s an artist. But that’s effectively what we will say to next generation leaders. Imagine what the future can be like and then work out what are the pathways to achieving it. Work out what kind of pathways you can create for your employees if you become a manager to achieve it. Try to supersede the mistakes, the restrictions, the insecurities, the lack of confidence essentially of the generation you’re replacing. That will be my advice and everything I see about the emerging generation shows that that is coming to, naturally they are connected through social media, they have very little time for some of the restrictions that we have had to endure in this generation and which previous generations had even more severely imposed through Fordist and Taylorist production line mentalities. We’ve now moved to much more flexible approach to work to industry, to our technologies - all of which requires much more knowledge input and once knowledge is recognised as the source, not only of creativity, but of wealth, then the companies and markets will follow. Fantastic. Well, that ends our interview. Thank you very much Professor Green again for your time. Thanks for having me. Thank you. Thank you everyone.