The Human Resources Leader has reported that inadequate business models and failed leadership were major factors leading to the global financial crisis.  In order to prevent this process from recurring again, questions have been raised about the fundamentals of leadership and how they must change.

According to Harvard Professor Bill George and the CEO of Lloyds International David Smith,  the HR department should be central in building a long-term leadership culture in a sustainable environment.

It is the human resources department’s job to build the leadership today – and for the future – he says, and to build the culture of the company. However George also says that the CEO needs to be the real chief human resources officer and that there is no substitution for face-to-face interaction.

“They should take the leadership role, they can’t just del egate this like they would to an accountant on how to keep the books,” he says. “The CEO must be the role model that he or she wants reflected in the organisation. And then that person must be out and about with the people at all levels and not just dealing with people at a board level,” says George.

Smith says that HR practitioners need to influence the discussions that take place, have lasting influence on the commercial terms of the business and be part and parcel of the top team.

“HR [practitioners], in a very sophisticated way, have tentacles into all the decisions of the business and I think that must be made clear to everybody,” says Smith. 

“If one accepts the theory that the world has changed on the back of the GFC – maybe not forever, but certainly in the medium term – I think the way that we design our com pensation schemes, our incentive schemes and the way we motivate and lead people will be different. And I think that thought leadership in part should be led by our HR col leagues,” he says.

Proactive, says Smith, is an essential word in the process for HR, as is strategy. He says that the role of HR isn’t just about responding to people’s queries, but is a much more proactive role.

“It’s about taking that step forward, – thinking about where we’ve come from, thinking about where we want to go and [how to] influence leaders across all levels of the business.”

Now is the best time for HR departments and executives to turn leadership on its head and make steps forward to being leaders of the future. This will not mean going back to previous practices, George says, but developing new strategies and a whole new mindset as to what it means to lead a company.

First, he says, leaders need to develop themselves as leaders and this comes from experience. He emphasises the importance of dealing with a crisis as one of the best lessons in leadership.

“There is no better test,” he says. “You can do all the simulation you want, you can do all the case studies, you can analyse how other leaders did – but there’s nothing that substitutes doing it yourself.”

George advocates that HR leaders take the top potential leaders of the future and get them involved in line assignments where they have to face a crisis and perform. He believes it is only through this that they can make mistakes and learn.

He remains adamant that all good leaders will demonstrate the ability to plan ahead while formulating policy that is positive now. “We should promote leaders who have that long-term view of the world, long-term vision and are willing to make that long term commitment and not trying to make quick-fix solutions,” he says. “If we have leaders who are just looking for a quick fix we’re going to be right back in this problem in five years.”