Human Governance – a perfect fit for Scandinavia?

Scandinavian flagsThe Scandinavian leadership style has often been highlighted as a competitive advantage for Scandinavian multinationals as they have expanded their operations globally.

The definition of ’business as usual’ is changing in the global economy, as all stakeholders and employees in particular are increasingly demanding more transparency and accountability from organizations and individual leaders. This development is not likely to slow down, rather the societal interest in ensuring that organizations are reliable and doing the right things in the right way will only increase in the future.

Corporate reputation has also become a key selection criteria for young talent when selecting among employers. Workforce engagement and productivity is positively correlated to more human-oriented work practices. Most employees want to feel that they serve a purpose at work and that they want to proud of what their organizations do in the world.

According to the Maturity Institute, the concept of ’Human Governance’ can be seen as a mature management approach that to a greater extent takes into account the true value of human capital in organizations. Linking true human governance to the way business is conducted will not only help organizations succeed and thrive, but they will do so while operating in a manner that will offer its employees the stimulation and motivation they need in order to be innovative and productive, while simultaneously creating even greater societal value by realising the full potential value of its entire human capital.

The cornerstones of Scandinavian leadership are often listed as:

  • Respect for the individual
  • A holistic, humanistic and value based approach with a multiple stakeholder focus (e.g. the public/private/voluntary sectors, activist movements, trade unions and employee representatives)
  • Flat and non-bureaucratic organisations with a high degree of devolved responsibility and accountability – an empowering and enabling environment which stimulates creativity, innovation and collaboration
  • Trust, care and concern as key values

The holistic, humanistic and value based approach that is common in many Scandinavian companies share some key characteristics with a leadership approach that has been labelled as ’authentic leadership’. Authentic leaders focus on the long-term, lead with their heart, are self-aware and genuine, as well as mission-driven and result-focused (George, 2003, The Authentic Leader). Scandinavian leaders and organizations should thus be ideally suited to utilize the full power of authentic leadership and human governance moving forward.

However, accountability and reliability will always depend on the individual. Unless every board member, leader and employee takes his/her individual responsibility and makes ethical business decisions, there will always be a risk that the human factor will create a liability that spins out of control. Doing the right things and doing them right starts with the individual. Thus the need for policies, processes, structures and systems to ensure that individual board members, leaders and employees act according to set values and are held accountable. Without such measures organizations cannot create a sense of credibility and reliability that stakeholders are beginning to look for as an indicator of long-term sustainable success.

Instantaneous scrutiny of corporate acts is the norm in the digital age. Corporate wrong-doings, such as the recent VW scandal, have serious ripple effects on a worldwide scale within hours. Sadly the examples of similarly inappropriate behavior are too many to mention, also in Scandinavia. Not a day goes by without news stories about organizational cultures that have allowed for unethical behaviors among its board members, leaders or partners. The right measures need to be in place in any organization to ensure that truly ethical values guide key decision-making and every day business operations. In the digital age, no transgression or faux-pas stays hidden for very long and faking it will not do in the long run.

Risk management practices have traditionally focused less on people risks and more on financial risks. However, all types of risk in fact involve the human factor. It is therefore crucial that overall risk analysis by investment analysts and internal risk managers become more effective in assessing the state of the human governance practices within the organization. As the human factor in the form of single or multiple bad decisions can have severe ripple effects for a brand, a company, or even a whole industry sector in today’s business world, there is a need to break down the silos between business strategy, risk management and corporate governance. The time is right for ’Human Governance’ in Scandinavia.

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