Driven to Lead: Good, Bad, and Misguided Leadership

Published by Harvard Business School Working Knowledge on August the 23rd, 2010



"Humans have evolved a leadership brain," says HBS professor emeritus Paul R. Lawrence. "Good leaders are people with a conscience who respect and reward all the four drives of other stakeholders [the drive to acquire, to defend, to bond, and to comprehend], even as they respect and reward their own drives."
 
Inspired by the writings and insights of Charles Darwin, specifically his 1871 masterwork The Descent of Man, Lawrence's new book, Driven to Lead: Good, Bad, and Misguided Leadership, offers managers an integrated understanding of the complex decision process at the heart of good and wise leadership.

In the following excerpt, Lawrence describes how various forms of globalization—classic trading, international sales, and transnational outsourcing—reveal examples of good, bad, and misguided leadership behavior through the lens of humans' four drives.

Lawrence is the Wallace Brett Donham Professor of Organizational Behavior, Emeritus, at Harvard Business School. His multidisciplinary research, published in twenty five books and numerous articles, has dealt with the human aspects of management, organizational change, human nature, and leadership.


Excerpt from Driven to Lead: Good, Bad, and Misguided Leadership

By Paul R. Lawrence

To deal with the much-discussed but still poorly understood complex of economic affairs known as globalization, we must examine its several forms from a Renewed Darwinian Theory point of view. Some can have positive effects for all parties while others inherently benefit the rich and strong at the expense of the poor and weak. Furthermore, some can be beneficial but also lend themselves to abuse, especially by people without a conscience, and therefore call for some kind of world-level impulse/check/balance control.

The classic trading system of exchange is identified with David Ricardo, the early nineteenth-century economist who first analytically clarified it. Imagine that tribe A is good at both hunting and fishing, but more efficient at hunting. Tribe B is not as efficient as tribe A at either hunting or fishing, but is more efficient at fishing than at hunting. Ricardo pointed out that both tribes would eat somewhat better if tribe A sold game to tribe B in exchange for fish. Both parties would win; most notably, the poorer one. Ricardo's theory is the basis of the very strong support that most economists now give to the overall benefits of globalization.

As practiced today, Ricardo's classic system results in win-win exchanges when both trading partners are either (1) industrialized nations with modern impulse/check/balance governments, no excessive unemployment, and reasonably effective control of corporate abuses or (2) less-developed nations roughly equal in power and with some control of corporate abuses. Unfortunately, much of today's international trade does not meet these conditions.

Under the colonial system, powerful industrialized countries gain political control (typically based on military control) of less-developed countries and exploit their workers and natural resources. This form of globalization is clearly a win-lose system in terms of all four drives. And while political colonialism is practically dead, economic colonialism is still alive and well in many extractive industries, including timber, oil, gold, silver, and titanium. […]

Under the widely practiced international sales system, a corporation in a developed nation sells finished goods to a consumer in a less-developed nation; this is McDonald's selling a hamburger in El Salvador. This system is not inherently abusive; the citizens of the developed country are winners and the citizens of the undeveloped country may be getting a better or cheaper product. But when regulation is weak or nonexistent, this system can lend itself to severe abuse, as in the sale of fake drugs […].

Transnational outsourcing, as when a U.S. auto company builds a parts plant in Mexico, has come into prominence only in the past few decades. Cutting costs is fair enough, unless it is done by paying less-than-living wages, creating unsafe working conditions, or causing environmental damage which would be prohibited in the United States. But because most American corporations are currently designed and mandated to fulfill dA [the drive to acquire] exclusively, both top management and shareholders might object to incurring any costs in Mexico beyond those that are legally required, so transnational outsourcing is frequently a win-lose exchange between nations which are unequal either in their power or in their willingness to enforce basic standards of human rights, worker safety, and environmental impact. Another golden opportunity for people without a conscience.

Japan and China have updated the old-fashioned mercantilist model of government-managed trade. Japan's version of mercantilism primarily used its own banking system, as well as export revenues themselves, to generate the needed capital (in contrast to making heavy use of foreign investments) and used its own well-educated and well-motivated (with decent pay and job security) workforce to supply the manpower with which to create sophisticated products. The export of these well-designed and efficiently produced goods was actively supported by the government in many ways while domestic consumption was constrained by progressive taxation. This type of mercantilist system was, with a short time lag, a winner for all Japanese citizens, who were all able to raise their living standards; the income gap between the upper and lower quintiles was actually reduced to only 3.4 percent, the lowest among all the economically developed countries. Japan's trading partners were also winners, receiving excellent value in the goods they imported from Japan. Other nations, such as South Korea, Taiwan, and Singapore, as well as Hong Kong, have followed Japan's example with excellent results. The Japanese model of mercantile globalization scores high on all four drives for all of the stakeholders involved.

In contrast, China primarily finances its rapid industrialization by attracting large amounts of foreign investment capital. Domestic consumption is constrained only among the poorer working masses, while there is rapid growth of wealth among the party and governmental elite and among a new class of entrepreneurs. Surprisingly, Chinese mercantilism is also widening the income gap in Western trading partners. For example, Wal-Mart, the largest and fastest-growing trader with China, is famous for cutting off purchases from U.S. manufacturers and switching to Chinese firms. Wal-Mart has even hired the owners or managers of its abandoned U.S. suppliers to teach their efficient methods to the Chinese. As a result, many Americans have lost their manufacturing jobs and often have been forced into lower-paying service jobs—a net loss for lower-income families. Meanwhile, the resulting profits add to the wealth of the Walton family and their fellow stockholders—a net gain for higher-income families. If one considers only dA, this profit gain could well be more than the wage losses and thus create a net gain in America's gross domestic product. But from a four-drive point of view, this is a serious loss for American society.

The economist Benjamin Friedman has found evidence that a steadily rising standard of living provides not only material benefits but also moral and political benefits. People whose standard of living is rising are happier, more tolerant, and more willing to settle disputes peacefully and democratically. Stagnating or declining economic growth is associated with intolerance, ethnic strife, and dictatorship. But here Friedman adds an important conditional factor. The social benefits of economic growth will arise only if people at all socioeconomic levels are gaining from that growth. If, for example, the richer classes are gaining while the poorer and middle classes are stagnant or declining, the moral benefits go into reverse, resulting in frustration, intolerance, and social conflict. And even in pure dA terms, these are not good conditions for economic growth. Friedman concludes, "Broadly distributed economic growth creates the private attitudes and public institutions that foster, not undermine, a society's moral qualities…. Any nation, even one with incomes as high as America's, will find the basic character of its society at risk if it allows its citizens' living standards to stagnate…. At the outset of the twenty-first century, America's problem is not unemployment. It is the slow pace of advance in the living standards of the majority of the nation's citizens."3

The positive and negative consequences of the various kinds of globalization and of economic growth versus economic stagnation are consistent with the Renewed Darwinism Theory's proposition that one's sense of dA fulfillment is relative to that of other people to whom one compares oneself. The innate insatiable drive to acquire cannot be fulfilled, even by a steady increase in wealth, if one is steadily falling behind others. This may be illogical—a Porsche is a Porsche, no matter what's parked in the driveway next door—but it is the way our minds have evolved to work.

It is disturbing, then, that in both the United States and China the rewards of globalization are flowing disproportionately to an elite few. A 2003 Congressional Budget Office report found that the share of income going to the wealthiest 1 percent of American households was more than the amount going to the bottom 40 percent. In contrast, as recently as 1979, the top 1 percent had less than half the income of the bottom 40 percent.4 When Business Week writers commented on what was to blame for this increasing gap, their answer was the same as mine: "Certainly globalization has taken its toll."5 In China, as in many developing countries, it is estimated that only 1 percent of China's population now controls 60 percent of its wealth.6 Sure enough, the Chinese government itself has recently reported that there have been thousands of bloody clashes between police and the farmers who are being displaced by industrial expansion.7

Globalization need not work this way. Its benefits can be steered to all nations and to all levels in each nation in a more equitable manner. But a free-market, laissez-faire process will not do this automatically. It will require governmental regulatory action with guidelines and incentives that can best be established at the world level.

Footnotes

3. B. Friedman, The Moral Consequences of Economic Growth (New York: Knopf, 2005), p. 435.


4. L. Browning, "U.S. Rich Get Richer and the Poor Poorer, Data Shows," The New York Times, September 25, 2003.


5. S. Rattner, "The Rich Get (Much) Richer," Business Week, August 8, 2005.


6. N. Kristof, "Under Hut, China's Malaise Just Grows," International Herald Tribune, June 19, 2006, p. 19.


7. A. Chua, A World on Fire (New York: Anchor Books, 2004).