Moving past austerity: Business leadership principles for 2011 by Polly LaBarre @FortuneMagazine December 30, 2010, 2:03 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons While it would be easy to label 2010 a year of business leadership failure, here are a few lessons from some of the most effective managers working today that we ought to carry into 2011. (Management Innovation eXchange) — The authorities at Merriam-Webster have declared “austerity” the defining word of 2010. That may be an appropriate reaction to all that’s transpired this year (and built up over this decade), but the word — and, more to the point, the feeling — that permeates this shabby, hangdog year is loss. Look back and all you find are holes: gaping maws opened up in the earth (the penetrating devastation in Haiti followed closely by disaster in Chile), the ocean (the maddening, staggering oil spill in the Gulf), the economy (the evaporation of billions upon billions of dollars, millions of homes foreclosed upon and jobs lost), and our collective soul (as we’ve become almost accustomed to the rampant self-dealing, fractious incivility, and outright venality among the leaders of our most powerful institutions). Not to mention the crater left in Cleveland’s heart when LeBron James decided to take his talents to South Beach. We are literally leaking — money, jobs, oil, state secrets, and, worst of all, integrity. It’s no wonder the most indelible image of business leadership this decade is Matt Taibbi’s savagely resonant depiction of Goldman Sachs as “a giant vampire squid wrapped around the face of humanity.” Of course, it’s easy to play the blame game when so many of our leaders appear so colossally lame. But the more productive (and certainly more inspiring) course may be to look at the examples of the leaders who are the most effective, energetic, and creative when it comes not just to staunching loss, but fundamentally rethinking what it means to win. In my ongoing quest to discover and learn from these positive deviants, I’ve found that, for many, the journey toward a more honorable and sustainable form of success starts with the courage to ask a tough question: “If I’m such a big part of the problem, how do I become part of the solution?” That’s not just a question for BP BP executives and CEOs of all stripes, but one for all of us — creators, consumers, citizens. So, as 2010 comes to a close, let’s shift focus from the rogues who drain us to the innovators who sustain us. Here’s a set of guiding principles for 2011 from a few of my favorites: Be honest: You’re dirty That’s where the journey starts, says Casey Sheahan, CEO of Patagonia. Patagonia is the poster child of sustainable enterprise — an outdoor apparel company founded on the “dirtbag” values of Yvon Chouinard that has grown into a nearly $400 million company and a much-admired brand driven by the higher purpose of “inspiring and implementing solutions to the environmental crisis.” Of course, making clothes is a resource-intense, high-impact business and as progressive as Patagonia is, its products and processes still contribute to the very crisis the company seeks to avert. Casey would not only agree, he’s eager to tell you exactly what kind of damage the company does — in detail. That spirit of total disclosure was behind the launch of the “Footprint Chronicles” — Patagonia’s path-breaking online corporate social responsibility report. The site explores what the company makes and how it makes it in minute detail. The decision to go “broadly transparent” isn’t a natural one for any company and Casey worried Patagonia would get “filleted,” but they went ahead anyway. The reaction was universal applause — and as the site has evolved, it has become a model for how to tell your story in a way that connects and engages a broad constituency in your cause. Even when the news is bad. In fact, Casey and his team go out of their way to expose the details that would make most executives squirm in their seats. “We’re honest about it,” he says. “We’re dirty. Everything we make pollutes. There is no such thing as a sustainable company. We’re just doing the best we can.” What Casey Sheahan and Patagonia get is that that brutal truth isn’t theirs to hide — it’s everybody’s business. You can no longer bury the story of your impact or pass off the true costs of your actions, whether you make surfboards or concoct complex financial instruments. We want to know. We deserve to know. It turns out there are real benefits to what Casey terms “leading and sharing.” The aversion to opening up is understandable — secrets have been the source of power in institutions for centuries — but the rewards are palpable. Patagonia’s approach has made the company a magnet for every kind of institution (including Wal-Mart) seeking to accelerate progress along the path to true sustainability. And Patagonia is happy to open up about what the company has learned — as Casey puts it, shrinking our environmental impact is not an arena to seek competitive advantage. What’s more, when you share, you learn. This aggressively open approach doesn’t just apply to how Patagonia communicates with the outside world — it’s a genuine value woven into every aspect of the organization. Casey and his team apply as much intensity and creativity to the process of sharing as they do to designing the next down jacket. “There are no secrets at Patagonia,” he says. The result? Employees consider themselves stewards of the company’s values, and rather than shirk from bad news, they tend to make an effort to get ahead of it, share it, and learn from it. Practicing transparency isn’t just good behavior. As the designer and artist Stefan Sagmeister puts it in his Things I Have Learned in My Life So Far, “Everybody who is honest is interesting.” Be human — and tune into your higher calling It’s not news that so much of organizational life goes against the grain of our basic humanity. Our systems for mobilizing people and organizing resources were designed more than a century ago to maximize standardization, specialization, hierarchy, control. In other words, to turn freethinking, flesh-and-blood human beings into semi-programmable robots. While that model delivered an immense contribution to global prosperity, the values driving our most powerful institutions are fundamentally at odds with those of this age — zero-sum thinking, profit-obsession, power, conformity, control, hierarchy, and obedience don’t stand a chance against community, interdependence, freedom, flexibility, transparency, meritocracy, and self-determination. Just as companies are asking employees to bring their full passion, initiative and imagination to work every day, those employees are asking, more and more, what’s worth my life? Is my work inspiring enough to unleash my best gifts? People want to be called up. They don’t want to work for you so much as to work on something important and meaningful. The most awake, exciting, and thriving leaders and organizations I’ve come across exhibit a striking clarity about who they are. Their animating and attracting force springs from a deeply felt, fundamentally disruptive sense of purpose — a set of ideas that reshape the sense of what’s possible in the world for their people, their customers, and the wider marketplace. If you’re even a little bit blasé about the importance of purpose, ask yourself (and ask any leader you come across) two questions: “What ideas are you fighting for?” and “Why would great people want to work here?” If you don’t have an immediate, truly compelling, utterly original answer to those questions, chances are you might soon be out of the running for the world’s best people and the most loyal customers. “Purpose” may have become something of an anodyne buzzword, but let’s be clear: if you want to compete, it’s crucial to develop a distinct point of view; to make a case for why what you do matters; to imagine and advocate for a better future for your industry and the world. Purpose is not nice. It’s not tame. It’s not a generic statement of goodness. It’s about sharpening your edges, drawing lines in the sand and declaring what you stand for. Roy Spence understands this better than most. Roy is the co-founder of GSD&M, the free-spirited Austin, Tex.-based ad agency behind Southwest LUV , Wal-Mart WMT , the PGA Tour, and the pioneering anti-litter campaign “Don’t Mess with Texas” — and a passionate and charismatic voice around competing on purpose. He also makes a mean salsa. He recently launched a business around this passion called “Royito’s Hot Sauce.” The tagline: “We don’t do mild.” And what goes for salsa goes for purpose. Here’s a recipe for 2011: Ask yourself, what’s the strongest, spiciest, most deeply human expression of what you do and why you do it? And then ask yourself, in the spirit of Casey Sheahan’s radical honesty: Are you really who you say you are? Be generous — and you’re bound to be prosperous So much of the conversation in business is about what we can get: a better price, more profits, a larger share of customers. What if we flipped that conversation and asked: how much can we give? In this open, fluid world where individual contribution is increasingly unbounded from any singly institution or loyalty, the organizations that engage the best energies of the most people tend to operate by a powerful, perhaps counterintuitive, principle: generosity begets prosperity. Rob McEwen embraced this logic when he was CEO of Goldcorp GG , which became the most productive and lowest cost gold mine in the world under his leadership. In search of bold, boundary-pushing ideas around drilling locations and techniques, Rob staged an innovation contest called the Goldcorp Challenge, which engaged hundreds of scientists and researchers from 51 countries around the world and quickly became a model for crowdsourcing solutions. But Rob didn’t just figure out a way to compel groundbreaking (and highly profitable) contributions from a range of talents he would never have been able to directly discover, he also focused on what he could give back. Along with generous cash prizes, Rob designed and funded a showcase for all of the contest semifinalists at the annual gold industry trade show. He not only created a platform for far-flung talents to advance their ideas (and in several cases, get funding for their work), he also generously shared all of his discoveries with his colleagues and competitors in the industry. Generosity isn’t simply nice behavior — it’s a genuine opportunity to set yourself apart in the minds and hearts of customers and employees alike. Idea entrepreneur and bestselling author Seth Godin argues that every business should commit “outrageous acts of generosity.” One of his examples: World Barista Champion Gwilym Davies has devised a “dis-loyalty” card for his customers. The idea: go drink coffee at his competitors’ cafés (all independent, quality-obsessed operations) and come back to his Prufrock Coffee for a free cup after you’ve gotten eight punches in your card. This is no gimmick. Davies is simply out to call attention to the best of his breed, to spice up his customers’ lives, and to raise the game for everybody. Ask yourself: Can I be as ambitious, inventive, and energetic about what I have to give as what I stand to gain? Be stupid — and open yourself up to the unexpected One of the biggest gifts and most important capabilities in today’s world is the ability to see the world afresh moment-to-moment, day-by-day — to harbor what the poet Rumi called “a freshness in the center of the chest.” Unfortunately, that talent is in woefully short supply in a business world that values mastery, celebrates the experience curve, and reveres the leader as the “smartest guy in the room.” That’s why it’s so refreshing to come across leaders with both the intellectual humility and playfulness to be genuinely open and curious about the world and the people around them. Dan Wieden, co-founder of independent ad agency Wieden & Kennedy and the guy who penned the words “Just Do It” among many other indelible creative acts, is relentlessly inventive when it comes to finding ways to keep himself open, awake, and fresh-eyed. His Portland-based agency employs all kinds of strategies to “invite subversive elements in” — from sharing their lobby with one of Portland’s most progressive arts institutions, to hosting artists-in-residence, to launching a disruptive advertising-school and creative incubator inside the agency. When it comes to his own personal discipline around cultivating the inexperience curve, Dan encapsulates it: “my job is to walk in stupid every day.” Why would the CEO want to walk in stupid? Whatever industry you’re in, you can be sure something’s changed overnight. If you want to stay ahead of those changes, your job is to forget what you’ve learned and to keep yourself open to what’s different. Being “stupid” means dropping the facade of authority, mastery, invulnerability and exposing yourself to possibility and surprise. So, here’s some peculiar advice for starting fresh in 2011: when you get back to work in January, try walking in just a little bit stupid. Here’s to an honest, human, generous and fresh year. Happy holidays! Polly LaBarre is the editorial director of the MIX (Management Innovation eXchange), an open innovation project dedicated to reinventing management for the 21st century.