Accountable Supervision

Leadership values are not only confined to the running of a political campaign, party or country for that matter, however, like in any venture that has an objective and deals with human beings – it forms the backbone of a successful any business.

Consequently, what leaders such as CEO of Tesla Elon Musk, for example, say or does, have a positive or, in the recent unfortunate case, a negative impact on the shareholdings of his business.

The share price can decline sharply and worse yet, it can lead to the exit of senior staff members and thus undermining the business, its leadership values and objectives.

This why it is critical for companies to adopt the right practices and responsible leadership to enable them to address both internal and external issues affecting them.

This is even most relevant when dealing with a company that has a multinational operational facet such as the Murray and Roberts Group – a South African company that operates in a global setting.

This specific multinational company was used in a case study for a research paper because it is firmly entrenched in the construction and engineering industry.

More specifically, they service the global natural resources market sectors of underground mining; Oil & Gas; Power & Energy.

Such a diverse set of operations requires a varied set of objectives spearheaded by a solid leadership path.

New model of leadership

We have covered the topic of Emotional Intelligence before. It now surfaces again within a brand-new leadership model known as the ARCHES model.

The name derives from a key characteristic of the physical structure of an arch and its durability. Coupled with its diversity in models and materials and its depiction as symbols of triumph, it represents an apt analogy of what responsible and effective leadership should be.

The model was especially derived by an academic* for a syndicate group assignment and is based on six key characteristics that should be imparted in a leader.

An effective and responsible leader is one who is attuned to their followers, responsive, possesses the necessary competencies, serves with humility, is ethical and adopts a sustainable approach to leadership.

A leader who possesses all these attributes is one who can rise above adversity and lead their followers in a way that promotes innovation, motivates, develops skills, promotes personal growth and encourages improved performance – B.Moyo

Application of the model

The model defines attuned leadership as the act of being self-aware, informed and  aware of the environment in which you exist – servant leadership.

Employees should be encouraged to take responsibility for their actions because responsibility and effectiveness are complimentary. The demise of US energy company Enron, for example, was due to a failure of management to execute communication-based responsibility, internally and externally.

ARCHES

A volatile, uncertain, complex and ambiguous environment in which a business operates can result in many potential projects not coming to fruition.

In such an environment, leaders that are attuned, responsive and possess the right competencies can expert power as their way to influence followers to exhibit the same traits.

Referent power develops out of admiration of another and a desire to be like them. Expert power on the other hand, is a person’s ability to influence others’ behaviour because of recognized knowledge, skills, or abilities.

This requires the leader to have a tolerable level of humility. This is defined as a personal quality reflecting the willingness to understand the self (identities, strengths, and limitations). That combined with a purpose in the self’s relationship with others.

Once again, the emphasis on Emotional Intelligence coupled with traditional leadership competencies is needed to steer multifaceted companies.

Even more so when dealing with diverse cultures and work ethics across borders and continents.

Direct consequences

Being the largest employer in the locality directly implied that Murray and Roberts had to be consistent with the idiomatic Zulu expression of “Umuntu ngumuntu ngabantu”. This means: I am because you are, you are because we are.

Good leadership in the Ubuntu philosophy is based on the engagement with communities and defines a well-led organization.

Not paying attention to ethical issues surrounding a community or the environment can have an adverse effect on your values. This would also affect your staff and the image of the company you steer.

A bitter consequence of the failure of ethics was evident in the $4.2m (64.1 million ZAR) fine to the said company. This was for its involvement in sector collusion related to construction projects for the 2010 World Cup.

Finally, a practical leader will also consider any upcoming projects with the lens of understanding the environment that surrounds them to incorporate the concept of sustainability.

These traits might sound like they need to be learned but most should be already ingrained or come naturally to you or your leaders.

If not this is not the case, you need to quickly install the right personnel with such to help steer your business enterprise or economy for that matter, to success.
*This blog post contains excerpts and is derived from a master’s research paper. It was conducted by Bonnie Moyo for the Rhodes University Business School.

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Can’t Get No Satisfaction

In economic terminology, the term “utility” has not much to do with multifunctionality nor completing specific useful tasks.

It does in context, relate to the level of satisfaction or “completeness” one derives from the consumption of a product or service. For example, there is only so much pizza one can eat before feeling ill from satiety.

On a broader and more macroeconomics spectrum, our utility levels will also help determine how resources are allocated and consumed.

Definition

The concept, a brainchild of Daniel Bernoulli, has so many relevant connotations. As humans, we individually have a maximum biological boundary which when reached, signals absolute satisfaction. This in economic terms is called maximum (total) utility.

Total utility as the complete satisfaction that you can get from consuming all units of a specific item.

Economists are more interested in the changes in levels of utility or what is referred to as the marginal utility.

We will return to its application to the economy.

Applying utility

Incidentally, utility has no formal unit of measurement – though some have coined the term “utils”. These so-called utils equate a number to utility levels in a controlled sample experiment.

Understandably it can be quite a feat to quantify utility as it is based on human behavioural preferences. The closest we got to quantifying such was via the marketing concept of the consumer black box.

N26_banner-160x600-ENAs an illustration, the concept can be applied to something as basic as eating a delicious meal.

Depending on how hungry you were, you would derive the highest utility from the first few bites of your meal.

As you progressed and depending on your appetite, each additional fork, spoon, handful more would provide fewer levels of satisfaction. As you reach your stomachs capacity (inch towards satiety) your utility diminishes.

This can be applied to the taste of the meal. It specifically explains why we tend to eat something sweet after a main (savoury) meal.

The appreciation of ice cream when you are starving would diminish quickly as you concentrate on filling up your stomach. This as opposed to enjoying the taste.

When applied properly to the running of an economy, governments and policymakers can determine which goods and services yield the most maximum utility.

This helps them to consequently direct expenditure to identified priority areas (products/services).

It is a long term concept

Education, for instance, may not provide immediate utility (gratification) for scholars and pupils. However, when appropriately harnessed, it could yield higher levels of satisfaction as individuals enter the job market with better remuneration packages.

Tweaking education curricula, taking into consideration levels of utility to whip up interest for the good of the individual. This should, therefore, be a prime focus for legislators.

Inputs such as maximum times that students can concentrate and the length of study for a degree, diploma or course should be offered without compromising the substance.

Without a doubt, there would be considerations, at a micro-level to assist in enhancing both marginal and total utility in the education sector.

Read more about fiscal policy and budgets here

More life-related uses

The concept of utility is a lot less ubiquitous as we think and relates to the unsavoury phenomenon of megalomania and why we have greed.

When the level of satisfaction or self-gratification diminishes quickly, you find that it takes longer for those experiencing lower levels of marginal utility to reach a plateau of pleasure.

Drug addiction, sexual appetites, and fetishes would then kick-in in such cases where people upgrade the “product or service” that they have already maximized their utility. At that stage, another level of fulfilment would be sought.

Utility applied to finances

120x600It also explains why people lose a lot of money gambling or investing in stocks. The satisfaction of gaining more for a little outlay based on your decisions, will often drive you to take more risk until a level of risk aversion kicks in.

High-risk equity investors “called whales”  are now delving into the Crypto market to maximize their utility. They are diverting their funds from property and stock trading into digital currencies like Bitcoin and Ethereum.

The saying too much of a good thing is inevitably bad for you applies and can be countered by diversifying the things that deliver pleasure or satisfaction.

This is to ensure that you do not maximise utility on them too quickly and lose interest.  Worse case, delve too deep into the dangerous territories of addiction.

Economists need to be relevant, more than ever before. They also need to formulate a means to measure and quantify utility or provide “utils” for at least, the most common goods and services.

With such a strategy, policy-making, product pricing and the efficient allocation of resources would be more effortless.

Criminal mindedness

One fundamental and often ignored view within economics is that humans have the propensity to display irrational behaviour in the decision-making processes.

Based on this notion, one can conclude that we have a fundamental tendency to act corruptly and be generally criminally-inclined except maybe the virtuous few.

How advanced our economy or society is, depends on what measures or incentives we enforce to deter or punish criminals.

In most cases, we find that in countries where punishment is severe (e.g. in Central Europe or Nigeria), the criminals end up moving to less strict countries.

The economics of crime, especially violent crime experienced in countries like South Africa and Brazil, is something that requires adept research if anything is to be done.

In the US, studies were conducted to access the impact of legalized abortion on the level of crime. This was discussed in detail in a best-selling book by Levitt and Dubner’s called Freakonomics.

The study found that legalizing abortion (seen by many as legalized killing equivalent to death sentences) reduces the level of drug abuse and subsequently other criminal activity.

The real problem

Perhaps there is no relevance here but for instance, abortion is legal in South Africa yet a high crime rate prevails. So, what’s the problem then?

Part of the problem lies in the fact that the incentives/benefits of committing crime far outweigh the “costs” and chances of being caught and convicted by the judiciary.

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John Nash through his renowned works (well at least amongst economists), devised what he called “game theory” or “the prisoner’s dilemma”.

Cheating occurs through degrees of severity from a classroom test or examination all the way to the plotting and execution of murder or indirectly killing individuals by selling users addictive drugs.

Then you have your white-collar crime such as insider trading, corporate espionage (unlawfully acquiring recipes, formulas, and technologies from rival companies).

Or simply ‘cooking the books’ or siphoning off profits from a company’s coffers.

Nash’s rationale for such cheating behaviour boils down to the attitude of: ‘if I don’t, someone else will, and leave me with the short end of the stick – so given the option, I’ll always cheat’.

His explanation is one ‘formally proven’ reason for human ‘irrational’ behaviour – or rather, could we say it is rational if the outcome is to favour the decision-maker in the short or long term? This is instinct is innate in human behaviour of not such a few.

Crime and law enforcement

Back to the subject of crime: higher than usual levels has often been blamed on the poverty caused by poor and exclusionary fiscal, social and monetary policies.

There are of course more layers and underlying factors unique to the history of political climate and resource allocation.

Further studies (such as that in the Freakonomics book) need to be carried out such as the potential effects of police presence in deterring crime in the diagram below:

Police officers per 100,000 population by regions and sub-regions (medians)

Crime deterrant

Source: www.unodc.org

Also, highly recommended if you are a law enforcer, economist, government official, or student, is a book entitled Economics of Crime by Erling Eide, Paul H Rubin & Joanna M Shepherd.

This book covers the theory of public enforcement including probability and severity, fines and imprisonment, repeat offenders, incentives of enforcers, enforcement costs and enforcement errors.

It might shed some light as to how criminally-inclined people can be dealt with once and for all. Because as we know – whatever government is doing to fight crime now is clearly not really working!

“When crimes are left alone long enough to fester, a second economy is borne.”

The proceeds from a ‘secondary’ economy because of criminal activity never benefit society. Even though people like Pablo Escobar were seen by locals (in his Colombian town) as philanthropists, their assistance came at a price. Such contributions which are naturally tax-free generally are referred to in economics as ‘social ills‘.

A third market is formed – one comprised of the need to feel secure.

Dealing with the scourge

But fighting fire with fire (with more guns & police who are sometimes corrupt themselves) will not alone solve the problem.

Criminals simply become more aggressive when met with a more confrontational approach as seen in South Africa. The Jeppestown (Johannesburg) shoot-out in 2006 for example, left several police officers and criminals dead.

It’s time to get ’smarter’ about crime and look to the accuracy and conclusive study of human behaviour and the use of incentives.

As crimes continue to ravage communities, cities and countries, we can question why government officials have relatives who own or have stakes in security companies.

It basically places less of an ‘incentive’ for officials to do much about crime.

So, conceivably, those with such vested interests in the third economy would need to be weeded out of the system for crime to be curbed.

That would be the first major step in order to bring about some rationality to society.

Nine Reasons Why Globalization Can’t Be Permanent

We spoke about globalization in an earlier post on some general terms – citing that it has taken a different shape or evolved.

This article below however, delves deeper and highlights on nine reasons why this evolution will be forced to happen.

It well written and covers all salient points and asks all the right questions – such as what you may have pondered on the validity of GDP as a measure of success.

The Intelligence Quotient (IQ) has of late been questioned as the main determinant of intelligence. This especially so with the growing popularity of Emotional Intelligence (EQ) and soon Artificial Intelligence (AI).

You must also question the accuracy in the way the success (or disguised failures) of a nation is presented.  This follows what you are told is required for this success to materialize.

We especially loved this analogy of the current world situation and if anything is to be taken from this article, this is it:

bicycle-analogy

Again kudos to the author Gail Tverberg for this in-depth piece (featured on her website on 31 Jan 2018).

In it, Gail touches on issues such as a population growth, a growing wage-disparity, heavy energy consumption, and the demand for cheaper alternative energy:

Read about the 9 reasons here:   https://wp.me/p3dRG-b4w

Also read more on how Globalization has evolved here

Hope you enjoy it as much as we did.  That it has the same effect it had – getting one to think outside the box and look at the big picture.