At the Edge of a Business Revolution 
An Interview with RICHARD BARRETT
By Alexander M. Dake

 
     
  Richard Barrett is a managing partner of Richard Barrett and Associates,a consultancy advising business leaders around the world in building cultural capital and developing values-driven organizations. Barrett has created a worldwide network of consultants committed to organizational transformation. Before his current work as a consultant he worked for a number of years with the World Bank in Washington D.C. as Values Coordinator, where he developed a framework for the World Bank to have its lofty goals acted upon in its own workplace. He is also a fellow of the World Business Academy, a frequent speaker around the world and author of books on personal, corporate and societal transformation.

Alexander Dake spoke with Richard Barrett about his views on changes in society and how business should play a role in these changes.


AD: In your book Liberating the Corporate Soul you mention that the two most important issues for business in the 21st century will be employee creativity and values-based leadership. Can you explain that? 

RB: First of all, competition for the best people in companies has been increasing steadily over the last years. Every company I am dealing with is telling me that they have difficulty keeping their best people. Many of these people are currently in middle management. According to demographic studies, that group of people is going to decrease as a percentage of the population within the next 15 years. In other words, pressure to find and keep the best people will increase. More and more companies recognize that employee fulfillment is the way to keep the best people and thus to have a successful company. It also appears that the best people usually are very creative. I believe that creativity is the new frontier of competitive advantage. Companies all over the world have access to the same technology in a matter of months. Many of the current graduates entering the workforce have similar educational backgrounds from one of the many international business schools. So if you have the same technology and people with the same qualifications, then the competitive advantage moves to the culture of the organization and to the creativity of its people. 
 
     
 

   
  AD: How does the culture, or values-based leadership as you call it, play a role in this regard?

RB: You will only draw creativity out if the corporate culture is open-minded and values people’s opinions. Values-based leadership is essential to create a great culture, which brings the best out of its people. But values-based leadership is also important because the business community is becoming more transparent: employees, customers and citizens expect companies to be good corporate citizens of the world, taking care of the environment as well as being concerned about human rights in countries where these companies have their operations. Again, values-based leadership will acknowledge that these other issues are important to their stakeholders as well as to the success of the company itself. 

AD: If you look at the years behind us where many employees were well rewarded due to the strength of the economy, how important are these values versus receiving a large paycheck?

RB: The critical factor in a successful company is the alignment between personal and organizational values. When employees feel that their values are respected in their organization, they feel a much stronger resonance with the organization. It is also true that if a company’s philosophy is based on making a lot of money and on greed, it will attract young employees who value making lots of money. Here too the employees’ and the companies’ values are aligned. However, it is also evident that there is a huge turnover of staff among these types of companies because people cannot operate very long solely based on greed. It is not very satisfying. I was recently talking to a New York bank and they told me that this is exactly what they were doing. They were attracting young ambitious people and offering them high salaries, which kept everyone happy for a while, but their turnover was huge. My point is that that is not sustainable in the long run.

AD: How does one then create a long lasting successful company?

RB: If you want to create a company where employees enjoy their work, then you need to emphasize higher values such as trust, openness, honesty, and integrity because these are the values that young people will move towards and that society as a whole is moving towards. You need an alignment of values as a company in order to be successful, but it will only be long-lasting success if you have alignment of the higher values. From research into stock market performance, it becomes clear that the return on equity is the highest for the “best” companies to work for in comparison to a universe of the S&P 500 index (see below). Market value of a public company consists of a tangible component, i.e. financial capital, and of intangible components, i.e. brand value, intellectual capital (such as patents, R&D) and increasingly cultural capital. Cultural capital is where the biggest developments are now taking place: it is about how the employees can express themselves in the companies; it is about interacting with customers in a mutually beneficial way; and it is about being socially responsible towards society as a whole.
 

   
  AD: You have mentioned companies like Citigroup, Ford and GE as among long lasting successful companies. What about their values?

RB: Well, these companies started out as visionary companies and they prove that they still have some of their initial founding values. But it is also evident that once companies reach a certain size it becomes harder and harder for them to maintain their values. Bureaucracy and self interest will then replace some of the initial values. Every company goes through a lifecycle: when they grow too fast it is not easy to maintain their culture as we have seen with many conglomerates, which are acquiring or merging with other companies. 

AD: Do you see a specific role for your expertise in assisting in these mergers and acquisitions?

RB: Absolutely. The last decade has experienced the largest volume and number of M&A transactions. But research shows that out of the 300 biggest mergers in the last 10 years, 57% of merged firms lagged behind their industries in terms of return to their shareholders. It is clear that even if the financial numbers make sense, merging two different cultures can be very difficult. A value audit, where we measure which values are most important among management and staff, could be part of a due diligence process before deciding to go ahead with the transaction. 

AD: How important is the backing of senior management in deciding to move towards a values-based organization ?

RB: Obviously the backing of senior management is crucial. I am currently working with a successful but very hard-nosed engineering firm. Someone in senior management figured out that with all their successes they were weak in keeping their employees satisfied. We are now working with them to establish which company values are strong and what the employees’ values are. Sometimes, however, the request to advise a company comes from middle management. They are committed to changing the direction of the company, but in the end senior management has to understand and support that as well. It is senior management, which has to exhibit the behavior and live the new culture if it wants the rest of the company to believe that a real shift in the company’s culture is happening.

AD: What about companies which clearly need your advice but where senior and middle management are just not ready for it?

RB: Transformation of a company starts with personal transformation. The people I work with should see that need for change and transformation themselves. If they don’t, the timing is just not right and there is nothing I, as an outsider, can do. It is quite remarkable, however, that more and more companies, some of them very bottom-line oriented, are becoming interested in these “values or cultural” issues, because they sense it will have an impact on their future financial success. Again, I will only work with them when they are really dedicated to such a change. If they consider this some kind of fad, then I tell them I’ll be back when they are ready.

AD: Can you explain why you make the connection between personal transformation and transformation of a company?

RB: For me transformation is a new way of being, in other words, I change my beliefs and assumptions so that I now can operate differently. It is different from mere change: change is doing what I do now, but doing it more efficiently. If I want to change my life as an individual I have to question my beliefs and adopt new ones. I almost become a new person, or at least someone different. What defines who I am is my beliefs system. So when I started looking at the transformation of companies, I started thinking about which beliefs in a company need to change. I realized that these are the beliefs of the leadership of a company, which then filter down throughout the company and influence the actions and behavior of the company. The rest of the staff will follow that behavior because they know that is the way to get on in this kind of organization. Examples of company behavior are: don’t rock the boat or do not express your personal views in meetings, etc. So a company is actually behaving like a large human entity. However, that also implies that in order to change an organization one first needs to change the individuals that form that organization.

AD: How do different cultures influence the transformation of companies? Specifically, do you see differences between companies from different countries?

RB: One thing I can tell you is that so far we are getting more interest from European companies than from companies in the US. In the next few years, I expect 60% from our business to come from Europe and 40% from the US. I don’t yet know why that is. Maybe because European people and businesses live much more closely together in small areas and therefore are more aware of the necessity of looking at values such as social justice and the environment, not just the bottom line. Still, that trend is becoming visible in the US as well. It is also clear, however, that companies from different countries express values specific to their home country.

AD: How do you see transformation taking place in government institutions?

RB: I don’t see any fundamental difference between organizations operating for a profit or for other objectives. The important issue is how effective an organization is in achieving its mission and how its values are expressed throughout the organization. Any group of people working together for a common interest is influenced by its mission and the values expressed by the senior people in that organization. My firm works with these values and draws conclusions, irrespective of what kind of organization this relates to. For example, in a government institution rivalry among departments and bureaucracy can cause the institution to be ineffective. That needs to be addressed for this organization in similar ways as with corporations: more communication, more openness, more trust will be necessary in order to reach more effectiveness.

AD: You state that it will be the corporations who will lead the world towards transformation. Why is it that you have so much confidence in big business playing this role?

RB: I do believe that companies are very pragmatic. When they notice something is working well and will increase their success, they start implementing it. Business has been shown to be much more successful in implementing plans and adapting to its environment than countries and governments. They also have much stronger organizational power than individuals. So if companies realize that organizational transformation will make them more successful and that organizational transformation is actually about personal transformation, they will put all their resources towards that transformation and towards hiring the people who have high degrees of emotional intelligence, vision and creativity. It’s that way that companies will show the world, governments, and other entities that transformation is the way the world is developing.



AD
: Using your professional experiences, past and present, how do you see the current developments for fundamental change in business?

RB: I think we are moving from the Information Age to a Consciousness Age; we are at the edge of a revolution. If you look at what happened in Russia in 1989, that was a peaceful revolution, which seemingly suddenly changed the landscape. The Russian people realized that the system they had did not work. Nobody really talked about this openly till it reached a critical mass. I believe we are at exactly the same situation in business; there is a quietly growing awareness hat this system is not working and that there must be a better way. It is not as visible yet to everyone, but once the critical mass is reached, the change in business will be like a tidal wave. That will be the start of the age of consciousness and of cultural capital.


Books by this author:
Liberating the Corporate Soul: Building a Visionary Organization
A Guide to Liberating your Soul

Relevant websites:
Corporate Transformation Tools A global resources for organizational transformation.
Richard Barrett and Associates Supporting leaders in building values-driven organizations.

2001, Alexander M. Dake
   
 

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