Leadership, Culture & Empowerment (Part I)
Leadership and Company Value
For my new venture, Quent Capital, I invest in global small-cap growth companies. The name “Quent” combines two words, quantitative and entrepreneur, that are lifelong passions of mine. With this investment approach, I meld the systematic method of quantitative analysis (which I have used for 30 years) with the energy and intuition of successful entrepreneurs who make their companies tick. Increasingly, I have come to realize that intangible assets, such as company culture and customer service, which are difficult to measure on a balance sheet through standard accounting, may in fact dominate the market value of a business. Among these intangibles, perhaps second to none is strong leadership, so critical to the success and longevity of a company.
With this in mind, who better to sit down with for a “Q Factor” podcast than Francis Frei, one of the world’s leading authorities on the subject of business leadership. Frei is the UPS Foundation Professor of Service Management at Harvard Business School and co-author of the recently published book, “Unleashed: The Unapologetic Leader’s Guide to Empowering Everyone Around You.” For many years, she has advised corporations on areas including leadership, strategy, culture, and customer and employee satisfaction. I’m honored to count Frei as an advisor—personally and professionally—for more than a decade and would like to share with you, in a series of blogs, some of the insights from our conversation.
Strong Cultures
Our research suggests that strong leadership is a key predictor of a successful business. Key to this dynamic is the presence of a strong, healthy culture created by the company founder that allows employees to thrive and reach their potential. Leadership, in Frei’s words, “is about making other people better as a result of our presence and then lasting into our absence.” Instilling qualities such as trust, love and inclusion are important to a constructive culture.
In evaluating small, listed businesses, we are particularly attracted by entrepreneurial, founder-led companies, which tend to thrive. Frei explains, “Organizations that are founder-led with really strong cultures that almost feel like a cult are going to outperform.” She adds that capturing the hearts and minds of everyone in an organization such that they believe they, in their own way, are going to change the world, makes for a “really strong culture that is super-duper performance oriented.”
But cultural values should not be set in stone. Founders, she notes, take great pride in crafting a mission statement and company values. Over time, when those values become stale or misunderstood, it is time to reevaluate them (she suggests conducting this exercise every five years, if not more frequently). This time the founder, instead of dictating, should collaborate with everyone in the organization to “define cultural values that work for everyone,” Frei says.
Inclusive Diversity
There has recently been a national awakening to the systematic inequality that exists throughout our society, including in the workplace. Frei, who served as Uber’s first Senior Vice President for Leadership and Strategy, is an expert on diversity and inclusion and is frequently tapped by major corporations that seek more diversity as part of an organizational transformation. Thus, I was particularly intrigued to hear her advice on the topic of diversity.
First of all, she says it’s inclusion first and then diversity (“inclusive diversity” is a description she favors), not the other way around. “You can have diversity and it won’t necessarily beget inclusion, but if you have inclusion, I’m pretty sure you’re going to attract a lot of diversity,” she explains. For example, if a mostly white organization brings in African-American workers who don’t thrive, they will leave. If 50% of a company’s workers are women but 90% of leadership positions go to men, then it doesn’t sound like a culture in which women can flourish. Leaders must prioritize inclusion and diversity in order for employees to feel welcome, supported, safe and valued. Creating the conditions and environment for all workers to thrive and focusing on inclusion first implies that “you’re naturally going to attract more diversity over time,” Frei says.
I can’t help but note that so much of what Frei observes about leadership and culture as a leading academic and business consultant rhymes with what I am finding in investment as I evaluate entrepreneurial small companies around the globe. I will write again shortly with more of Frei’s insights on leadership from our conversation. In the meantime, I invite you to listen to our Q Factor podcast.