Dr Michael Greenspan,Managing Partner, Kiddy& Partners
Brexit is something that most leaders of UK-based financial services firms could do without even if a few are personally in favour of it. Whatever leaders’ own views, Brexit presents them all with the challenge of leading through a time of great uncertainty– as if the 2008 crisis and its many ramifications weren’t continuing to be challenging enough.
The longer term specifics of Brexitare in essencve unknowable, yet it has created or contributed to a new environment with some distinctive features. First, the loss of public credibility suffered by the financial services sector in the last decade is now compounded by a widespread loss of faith in capitalism itself. Populism has expressed, or given rise to, increasing hostility to business. So the fact that financial services are so important to the UK’s economy – particularly given manufacturing’s relative decline – no longer makes it a given that the sector will be treated sympathetically. Neither politicians nor regulators want to be seen to give FS an easy time. And many bright would-be recruits now look to other industries for their careers.
Brexit will alter, or even disrupt, the UK’s relationships with the financial systems of other European countries and perhaps beyond. This disturbance of a financial ecosystem that has developed, to some extent organically and without conscious design, suggests that, at a minimum, FS leaders must expect to live in a world of unintended consequences. Some of these might be opportunities, but most, even if unspecified now, are feared as threats to entire revenue flows, business models and even institutions. Just ask the CEOs of banks who are wondering whether tens of thousands of cross-border derivatives contracts might become worthless if the legal frameworks behind them are not regularised in time for the post-Brexit world.
Finally, the world is riskier and more complex than for many years –falling prey to major events that hit without warning, to rapidly proliferating trends and beliefs facilitated, and often distorted, by social media, and to the upheaval of trading relationships and the entire globalisation agenda.
The questions Brexit raises for FS leaders are profound, particularly when asked against the basics of what we think leaders are supposed to do. How do they credibly set out a compelling vision for employees when the destination is shrouded in mist – and strategize when the future is so unpredictable?How can they make long-term investments on the basis of such imperfect information?Can they make money in a constrained environment of low interest rates and significant currency fluctuations?How can they influence stakeholders who view FS so negatively?Can they attract and keep the talent they need when other sectors enjoy higher status? And how can they manage their own energy and motivation when confronted with such a complex and growing agenda?
The starting point for answering at least some of these questions is to abandon the idea of the leader as the all-knowing, all-seeing authority directing the affairs of an obedient hierarchy. This is still the default for many senior people and it exerts an even stronger attraction at times of crisis – which is what Brexit is starting to resemble. But the most fundamental reality of Brexit is that it may turn out to create some problems for any FS business with harmful consequences to the UK that cannot be avoided. In such a situation, the leader’s credibility rests on two pillars – a set of skills that maximize the chances of making the best of a difficult situation, even if, in the end, they fail; and an authenticity that means their people continue to respect and follow them, even when some things go wrong.
The skills that leaders need today must combine particular ways of thinking with ways of getting things done. In a complex environment where cause and effect may not be obvious, the ability to think systemically – understanding linkages and points of leverage that others don’t see – and to prepare for multiple scenarios is paramount. Looking beyond one’s own FS sector and even beyond finance entirely for ideas and lessons is also important. This is not a time for specialisation only; for knowing more and more about less and less.
Innovation is important too, not only at the personal level, but in terms of freeing up the organisation’s ability to operate differently, to discover news ways to serve customers and to make money from all the business’s assets – its capital, its brand, its people, its technology, its relationships and its core capabilities. In turn, none of this will happen if those resources are kept locked away in functional silos and conventional lines of business. So fostering collaboration, team working and cross-organisational processes also become key leadership skills.
Then there’s the management of change – as a constant rather than a periodic feature of business life – and of people. Whilst your people still need and expect to see you lead, these difficult times require them to behave as adults too, which means you need the people skills to treat them as such – providing credibly positive motivation, listening to their concerns, yet making it clear that they also have a responsibility for facing up to unpalatable realities….whilst reminding them what is not changing!
All of which raises a question about the extent to which today’s FS leaders have those skills. Here, the news is mixed, but the reality is that FS is still dominated by large, divisionalised businesses in which complex products and services, overlaid by demanding regulation, have produced big bureaucracies and the hierarchical leadership traits that they tend to encourage. This suggests that the real issue around Brexit is not the consequences that may emerge, whether positive or negative, but the ability of complex FS organisations to move quickly and flexibly enough to respond to, or even anticipate, them.
What then can organisations do better to help their leaders be successful? First, they can help them make sense of Brexit where possible by reminding them what is not changing, disaggregating Brexit wherever possible into time frames, accepting the reality that at times Brexit is likely to act as a tax on businesses by requiring them to prepare for multiple scenarios (and incurring the costs involved) even though only one scenario will evidence itself. Optionality is expensive but at times the lack of it will be even more costly. Secondly, they can make sure leaders get the personal development they need to build the skills they lack. And thirdly, the leadership of FS businesses need to ensure that the motivational frameworks – of objectives, performance measures and rewards – around their senior leaders will drive the required behaviours and attitudes.
Leading through Brexit will be as difficult as leadership gets, but the chances of success can be improved if FS businesses can help their leaders equip themselves for the task and actively support them through it.