24 July 2024 - For leaders responsible for bringing their team or organisation in line with a new purpose, policies present a useful change lever. Naturally, there’s more to it than that – Dr Tom Norton, Programme Manager at CISL, considers how without the right leadership capabilities, policy interventions can create unanticipated and undesirable consequences, even undermining the very purpose they seek to deliver.
Policy as a change lever
A key way that leaders can influence behaviour within, and consequently of, an organisation, is through policy. These attempt to internalise external pressures, such as those related to environmental regulation, and manage risks and opportunities by changing behaviour. This can support organisational change. For example, fund managers in investment institutions with ESG policies cite these among other reasons explaining changes to their investment decisions, even among those managing non-ESG funds1. Policies might similarly guide decision-making and actions towards suppliers, business travel, research and development, or even the type of milk at the teapoint. But the existence alone of a policy doesn’t guarantee impact, and this can be explained at least in part by two human tendencies.
Making sense of the world around us
First, we integrate information to make sense of the world around us. If there is overlap between a policy and what we see in practice, both sources of information reinforce the other, we are more likely to interpret the policy as valid and behave accordingly. However, this is unlikely to be the case if we see a contradiction between policy and practice. This could be problematic if non-aligned behaviour exists in the absence of negative feedback. We can learn behaviour vicariously and are likely to judge others’ actions as valid if they are rewarded, or at least not punished. Paradoxically then, a policy can actually reinforce the behaviour it is trying to change if that policy lacks teeth in the presence of social influence. For example, imagine how you might behave at a pedestrian crossing waiting for a red light to turn green if the people around you start to cross the road; there’s a good chance you start walking too. This reinforces the belief that rules designed to keep you and the system around you safe are optional.
Adapting our behaviour to fit in
Second, we adapt our behaviour to fit in with what’s going on in our environment, as in the last example. Think of the behavioural conformity of a Wimbledon tennis crowd – silent between points, heads turning in unison to follow the ball back and forth across the court. How might those people behave at a Euros football final? Humans are a social species, and the influence of those around us is probably more powerful than we would like to admit. If we see others behaving in a certain way and getting away with it, we are more likely to follow their example than a contradictory policy. This ‘policy-practice decoupling’ is a real challenge for companies that feel the push to be more sustainable and are undergoing significant transformation as a result.
Leaders undermining policy
Visible contradiction between policy and practice creates fertile ground for cynicism and undermines employee engagement in change initiatives. This is understandable – we dislike being told what to do at the best of times, because this undermines our autonomy. We especially dislike it when we are told what to do by someone who is not practising what they preach.
This decoupling could show up at the individual level, where a leader’s behaviour doesn’t match the policy they are promoting. It could also show up at the organisational level, where a policy born at the strategic level fails to penetrate throughout the organisation to influence practices at different levels. This could be due to leaders failing to role model a behaviour, failing to identify and focus attention on opportunities to do things differently, not providing sufficient consequences for desired or undesired behaviour, or not allocating sufficient resources to enable people.
What can leaders do about this?
Leaders must recognise the obvious – if they want others to follow, they must lead by example. By practising what they preach, leaders create opportunities to experience for themselves some of the difficulties their followers might face. This puts them in a better position to identify and then campaign for any necessary support not considered by policymakers, who might lack the contextual understanding necessary to design a flawless intervention.
We believe a fundamental capability for leaders in the 21st century is recognising and working with the connectedness that exists within a system; a networked approach is vital for systems leadership. This means understanding the environmental and social consequences of business as usual. It also means detecting the relationships among different parts of an organisational system that produced, and maintain, the status quo. Without this, interventions might try to address a symptom, rather than the underlying cause. In such cases, change is likely to be narrow and short-lived before the inertia of the system overpowers the initiative. Leaders bear a responsibility to allocate resources, including people’s time and effort, to address what matters, not what’s easy.
Finally, good policies should hang together to send an intelligible and coherent message that limits the potential for misinterpretation, and misapplication. If done correctly, these policies reinforce each other and produce not just the behaviour stipulated within the lines of text in a policy document, but also the behaviour that exists between the lines. Where that exists, a company has reached a tipping point on its sustainability journey.
What next?
Our understanding of what ‘good’ looks like for business leadership is changing, and so too are the capabilities leaders require. Policies are one of a suite of enablers we have identified that leaders can combine to transform a business. We are running a 2-day residential Leadership Lab in Cambridge this October where we’ll bringing together leaders, leading practitioners and experts to explore these capabilities, and how to apply them.
Find out more about the Sustainability Leadership Capabilities for the 21st Century Leadership Lab
1 Edmans, A., Gosling, T., & Jenter, D. (in press). Sustainable investing: Evidence from the field.
