Soft leadership creates strong companies

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The openness and plurality in a company’s leadership has a direct impact on its actual performance.

At the recent TEDIndia conference in Mysore, the Minister of State for External Affairs and MP Shashi Tharoor argued that India’s vast, open, pluralistic society is creating a stronger, more respected Indian identity that will translate into greater power globally. Indian power will be less the “hard power” of military might and more of what Harvard’s Joseph Nye calls the “soft power” of attracting others simply by being desirable. If McDonald’s and Hollywood colonised the world with certain American values, so, too, can palak paneer and Bollywood (and yoga, ayurveda, Tata and ICICI Bank) help to “Indianise” the world through their own particular intrinsic appeal. The standing ovation at the close of Tharoor’s remarks says that his insights resonated with the largely Indian audience present.

My field is leadership in corporations – what it is and how to develop it up, down and sideways in organisations. Minister Tharoor’s observations make me ask the leaders in Indian companies: how can you enhance the soft power of your leadership – and attract better employees, more loyal customers and higher quality earnings, particularly as you expand around the globe? Hint: how much openness and plurality reside in the leadership of your company?

I am alert to this, of course, because I come from America where we have struggled with these issues for years. There, women and non-white men are tremendously underrepresented at the highest levels in most corporations given their achievements in university and up through middle management.

How do we know that homogeneity at the policy-making level stunts company results? Because the few competitors who have a healthy mix at the top consistently outperform those who don’t. A broader range of voices at the helm can even save a sinking ship: IBM pulled off one of the greatest turnarounds in history in part through draconian diversity efforts that brought more ideas and experiences into decisions and shook up IBM’s approach to business.

One perceives this phenomenon most clearly when reviewing the statistics on gender equity at the top, the most easily measurable form of demographic mix. Consider the following research: Companies that have at least 25% women on their senior leadership team make 35% higher ROE (Catalyst); are consistently in the top quartile of their peer group (McKinsey); return substantially higher innovation and effectiveness (London Business School). Hedge funds with non-token numbers of senior level women make more money in an upturn and lose less in a downturn (Hedge Fund Research, Inc.).

This leadership gap around women will particularly matter as Indian companies go increasingly global. A recent BCG study published in Harvard Business Review shares that the world’s women, for example, control far more buying power than the much-coveted Chinese and Indian markets combined: conservatively, the world’s women directly earned and spent $13 trillion USD in 2009, contrasted against a Chinese GDP of $4.4 trillion USD and an Indian GDP of $1.2 trillion USD (women actually controlled $20 trillion USD in consumer spending). By 2014, women’s income is projected to rise to $18 trillion. These women will increasingly demand products and services that will reflect their interests, values and preferred buying patterns.

After all, it was women who invented windshield wipers, Scotchguard, liquid paper, the miracle safety fabric Kevlar, fire escapes, ironing boards, disposable diapers, dishwashers, electric hot water heaters, alphabet blocks and chocolate chip cookies. No accident that women as a group score high on caring about safety, education, children, cleanliness and comfort. And, yes, cookies, too.

Leadership is about strategy and execution, as well as about inspiring, enabling and growing people. The individual leader’s personal experience and insight informs the endlessly emerging decisions around markets, products and services, diverse customers and assorted employees. Plurality at the top will open up that key executive body to deeper wisdom and more attractive solutions around the market, business and people.

Soft power, in other words.

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