Effective leadership and economic development
View(s):By Lloyd F Yapa
Readers may recall two articles I wrote in the Sunday Times Business pages on enhancing export competitiveness to resolve the balance of payments problem and to boost economic growth. In those articles the need to create a positive enabling environment consisting of good governance and macro-economic (budgetary and monetary) stability particularly to attract investment and measures to promote improvements and productivity were mentioned. It is effective leadership that makes all this to happen. Here, the word leadership refers mainly to the representatives of the people (politicians of all political shades) in the central and local government institutions; besides them of course there are leaders in business firms, non governmental organizations and the rest of civil society.
Definition
Effective leadership can be defined as (a) the ability and passion to convert a dream or a vision into a reality, (b) by making ethical or moral judgments about the most practical strategies and actions to be implemented, (c) relentlessly communicating them among followers and (d) inspiring a small team of people with the right kind of skills for the job for executing them in an extraordinary manner.
Vision
Leaders of a country (or a firm or any other organization) should have a vision or a dream of a desired long term (20 to 30 years or more) state of greater goodness, rooted in the wishes of the people (the shareholders, the employees and the members, respectively) for peace and prosperity. For example, Nelson Mandela dreamed of an integrated and prosperous South Africa for all Africans and achieved it democratically, without resorting to destructive conflict with the white minority.
But in the case of a country as in the case of Sri Lanka (SL) this can most often be short term gain for the politicians. The long term welfare of the rest of society, with regard to elimination of poverty, especially by providing well paid jobs (in Sri Lanka itself) for all those seeking employment for increasing real (adjusted for inflation) incomes by attracting higher investments particularly foreign direct investments, is often sacrificed. This is exemplified by the failure to create a positive investment climate consisting of good law and order conditions and democratic rights to all citizens irrespective of race or religion in this country (especially through separation of powers among the legislature, executive and judiciary and devolution of power). Most of the leaders of companies in Sri Lanka as in many other countries do the same. Their primary motive much of the time appears to be increasing short term profits. Inclusiveness like pursuing the long term welfare of the employees and the people at large is most often forgotten. For instance most firms in Sri Lanka demand import tariff protection to boost profits. Protection confines economic activity to the small domestic market, where economies of scale (reduction of unit costs when the size is large), that could support global competitiveness and real income growth, are not possible; the resulting inability to compete with the firms in the rest of the world could reduce the pressure to invest and undertake innovations to improve quality and thereby make higher earnings. It also tends to push up prices of goods and services required by the people of the country due to the imposition of taxes on imports. It is global competitiveness, achieved especially through liberalization of trade that could convert a small country to be a ‘Wonder of Asia’ like Japan, Taiwan or Singapore and in fact ensure the long term sustainability of the firms themselves and not heavy protection, although initially the intense competition will be rather uncomfortable for the firms, most of them without doubt will ultimately succeed and be rewarded with higher earnings and profits.
Communication
The next attribute of great leadership is the rare capability of thinking through the entire process of realizing the vision in consultation with stakeholders and relentless communication of the vision and the process clearly to the followers and the people in a language they could understand particularly by using stories and descriptive terms, to create ultimate consensus. An example is the “it does not matter whether the cat is black or white as long as it catches mice” speech made by Deng Tsiao Ping of China that persuaded over a billion people to accept a capitalist approach to economic development in the late 1970s. Leaders in certain countries as in SL and firms do not make the effort to create such consensus resulting in continued controversies and distractions from the right path to the vision. This is necessary in most countries of Asia and Africa as the people in general are not aware of the right policies required to realize their wishes.
Not only the leaders of countries but also the Chief Executives Officers of companies need to keep on talking with as many people as possible in this manner about their vision, its conversion to goals and targets to be achieved along with the benefits that can be realized as well as the strategies and actions to implement them by overcoming the impeding factors and building on the impelling factors identified in the course of these contacts. These strategies of course have to be reviewed by the leaders from time to time to change course as circumstances change and to monitor progress. They have to do this, in addition, to learn from others, facts and figures not known to them.
Moral purpose
The process or strategies advocated by the leaders to realize the vision must have an ethical and moral (righteous) purpose behind them to attract a mass of followers and for the realisation of the greater good of society/prosperity. There is no moral purpose behind some of strategies proposed by certain leaders, as stated above as in the case of Sri Lanka, since they will lead to the destruction of democracy, create lawlessness, denial of equal rights to all irrespective of race or religion, leading to a poor investment climate. In this connection it is worthwhile to quote former British Prime Minister Margaret Thatcher who once had said, “There is little hope for democracy if the hearts of men and women cannot be touched by a call to something greater than themselves.” Higher ethical and moral standards also could help to reduce corruption, which slows down economic growth.
Having a moral purpose behind strategies applies to firms as well; they have to be inclusive. Most Japanese companies are known to do that. However, Tadashi Yanai, CEO of Fast Retailing of Japan, the largest apparel retailer in the world, (according to the article titled ‘The Wise Leader’, by Professors Ikujiro Nonaka and Hirotaka Takeuchi, Harvard Business Review, May 2011) had said, “Not only does a company have to live in harmony with society, but to be accepted, it must contribute to society. The majority of companies have failed to maintain that balance. Everyone is, first, a member of society before one of the company. Thinking only about the company will undoubtedly result in failure.”
At this point it is necessary to say that it is not entirely correct to point an accusing finger at the politicians and leaders of firms in Sri Lanka as well as certain other countries for unethical behaviour. They are products of society. It may be very worthwhile to ask the question whether present day society (e.g. in Sri Lanka) could produce leaders with a foundation of ethical and moral values; if not what could parents, teachers, educationists and religious leaders could do about it? Much research and action are necessary on this subject.
Practical strategies
The strategies and actions selected by effective leaders have to be practical (as in the case of Communist China opting to capitalist methods for economic development) and not ideological or theoretical, to succeed. For instance in SL the decision to opt for ‘big’ government with running even state owned business enterprises (SOEs) at a loss for ideological reasons and continuing with massive public expenditure on defence even several years after defeating terrorism, in the midst of continuing government budget deficits, cannot be described as practical. Public private partnerships to infuse capital and better management practices in the case of the SOEs and quick reconciliation with the Tamil speaking people to solve the ethnic problem, as in South Africa would have resulted in large budgetary savings for the government (in addition to a better investment climate) and faster real economic growth which would have benefited the population especially the majority community as they have the majority of the poor among them. It is they who will benefit the most from quick reconciliation.
Import substitution by way of heavy tariff protection adopted by SL at present is also not a practical policy as stated above. Open market policies with a reasonable degree of protection for local firms with an enabling environment of good governance and stable macro economic policies can have a tremendous impact on economic growth. It can attract the best known large investors particularly foreign direct investors with global market access like the 500 leading global companies which get listed in the Fortune magazine (and not the ‘foot-loose’ type or the ‘carpet baggers’ who generally leave once the tax incentives are exhausted). The former could help to establish a flourishing manufacturing sector, which could provide well paying employment opportunities that could stop the outflow of foreign job seekers (especially women who are generally ill-treated in those countries) and even absorb the unproductive excess employment in the public sector (and in rural agriculture), besides helping to bridge the trade deficit.
It is impractical to expect an enhancement of international competitiveness without comprehensive policies for improving productivity in Sri Lanka, as described in the earlier articles by the writer. The infrastructure development projects that are now taking place in the country like the road, irrigation and power supply works, however, could contribute to improvement of productivity to some extent, although some substandard constructions are reported due to non conformity to tender procedures and specifications.
Small team
Wise leaders tend to surround themselves with righteous and wise advisers who may not have the correct political connections but have the right kind of experience and in addition to select a small team of people (large teams being ineffective and expensive as in this country), with the right skills and experience for implementation of the strategies. This can be done successfully only by selecting them on merit alone as in Singapore. The merit that is in great demand and most suited for achievement of success is management ability, knowledge and experience and not mere qualifications. Unfortunately in Sri Lanka after the 1972 constitutional changes it is the politicians (most of them who are barely literate) who seem to take important administrative and policy decisions with disastrous consequences and not the better qualified public officials. Sadly even the latter have been selected and promoted mostly on the basis of political connections since 1972.
Inspiration
Above all leaders also have to inspire their followers and their team members in the implementation of strategies to be used to realize the vision, to prompt them to achieve extraordinary results by giving credit where credit is due, striving for excellence and living by example.
So, as Margaret Thatcher said, if leaders could be “touched by a call to something greater than themselves”, they could make things happen for the good of society and most countries especially in South Asia including Sri Lanka could see a great boost to their international competitiveness leading to a faster rate of economic growth and higher real incomes.
(The writer is an economist)
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