Focus on sustainable development, tensions between the global and the national, new organizational models - how do these and other trends influence essential leadership qualities of tomorrow?
Source: SLON.RU (publication date 14.07.2014)
In my article, I would like to speak about sprouts of future leadership that can be found today. My speculations are supported by quotes from international CEOs’ public speeches and private interviews I have taken.
To Try On What Cannot Be Tried On
I am pretty sure of one thing: life of business leaders will grow more and more complicated. Take for example reduction of the average CEO tenure term – from 12 years at the beginning of 1980’s to slightly over 5 in 2012, – and ‘enforced’ resignation happening more often: thirty years ago there were less than 10% of them, and now it’s more than 25%.
It’s the ever getting more complicated working environment that makes CEOs’ life more difficult, though, at the same time, interesting and demanding. New flows of information, social networks, groups, needs and expectations turn this environment into a kaleidoscope that is constantly being shaken. Business leaders not only have to handle this chaos, but they are also supposed to make decisions determining people’s destinies, the future of companies, regions, branches and countries.
One can single out several tendencies that will most probably be crucial for business development over the coming several decades, and instrumental for CEOs of companies of all ranks and sizes. These tendencies are multidirectional, sometimes just controversial which makes business leaders’ life even more complex and occasionally, as one CEO I know likes to say, blows their mind.
Humanist attitude to labor, preservation of traditional life and business patterns, development of regions and many other issues have become objects of increased attention from the society and institutions representing it. ‘We need business ‘with a human face’’ is a new powerful social request that has formed and will keep gaining momentum. As Samir Brikho, chief executive of engineering group AMEC, says: ‘You like it or you don’t, but you can’t ignore it. Sustainability is the way of the world. Otherwise move to another planet.’
«You like it or you don’t, but you can’t ignore it. Sustainability is the way of the world. Otherwise move to another planet.»
But at the same time, even the most wealthy countries of North America and Europe keep focusing on expansion of consumption and raising of living standards for all social groups: ‘We need stable growth.’ Frightened by the crisis of 2009 financial markets and individual investors specify: ‘We need profitable stable growth.’ How can one combine persistent business expansion with Earth and people care? How can one turn a one-P (‘Profit’) company into a three-P company (‘Profit, Planet, People’)? It’s a crucial question for all business leaders for the coming several decades.
Another tendency that is going to cause a lot of pain in the neck to CEOs, but will also give a good deal of opportunities for their companies growth is the frictions between the global and the national, between the competitive global market and all the more active interference of the state into economics.
On the one hand, turning of the world economics into a ‘global bazaar’ will accelerate, and to succeed in this ‘bazaar’ even the heads of smaller companies will need competence that the founder of Indian Infosys Narayana Murthy calls ‘global mindset’. CEO of Newsoft Liu Jiren says: ‘Now, no one is independent. All the resources are dispersed. Cooperation and open innovation are the future way. How to open, to communicate, to improve self are the challenge to Eastern and Western worlds.’
On the other hand, the state worried about the aftermaths of the crisis decisively returns into economics in developed countries: the US, France, Spain. In the developing countries it has always been the chief player, only now the scale of their economic lives is comparable to the one of the West. Correspondingly, the role of national governments has become apparent on globally. In 1820, China and India, according to the economist Angus Maddison’s calculations, generated 49% of global GDP. By 1973 their contribution had sunk to 8%, however by 2025 it will get back to 49%. Actions of the governments of these two countries will affect businesses worldwide in the nearest future. That’s why, as the former BP CEO Lord Browne noticed ten years ago, diplomatic and political skills are becoming a crucial competency for a business leader.
Global economics makes companies look for sources of stable competitive strengths in its human capital assets: talent war is already declared and will deepen in the following decade. According to the survey Steve Tappin conducted among the CEOs of the biggest British public companies in 2010, 68% of them consider human capital to be their highest priority.
Meanwhile, modern talents unwillingly strike root anywhere: according to the figures from Heidrick & Struggles, a 2007 graduate will have changed thirteen places of work by the age of 38. How can one manage human capital in such market?
Internet and the almost global connectivity pose another important question to business leaders: remaining open to the ideas from the outside world, how can one preserve and protect the expertise that ensures marketability and continuity of business? According to CEO of Barratt Developments Mark Clare, the rate of change in consumer behavior today is ten times higher than 50 years ago. How, being true to oneself, can one retain relevance in this world that changes so fast?
I have outlined just some most crucial challenges of the nearest future. And even this short list can make the head go round: leaders of the future will have a tough time. However, today one can already see a whole range of interesting approaches allowing business leaders to combine the uncombinable and solve the unsolvable.
The World is a Village
The first thing I would like to speak about is the new mental models describing the world with a leader functioning in it, and the course of action of this leader. These models have three characteristics in common: globality, openness and multidimensionality of leadership.
‘There will be no difference between Eastern and Western leaders in the twenty-first century because the world is now a small village,’ says Liu Jiren of Neusoft. – ‘Although cultures will not merge, abilities will.’ Leaders of the future see the world diverse but whole, interdependent and consistent, and act in compliance with this model. That’s why each of them, regardless of the size of their business, has clear answers to such questions as ‘What is our strategy in relation to China?’ or ‘How do we work in the global capital, labour and technology markets?’
Openness implies understanding of your knowledge being incomplete and active knowledge search; an open leader not just accepts, but welcomes the diversity of opinions, styles and world views. As John Browne says, ‘a leader should never stop listening. However much you know, there will always be someone who knows more on this or that issue. Talking to this person you will learn a lot.’ It is interesting how this leadership philosophy comes in contrast with the traditional views of an industrial society: ‘What’s good for General Motors is good for the country’ or ‘Ford can be of any color as long as it is black.’
Over the past 25 years, many business practitioners and gurus have been proclaiming death to the administrative command system of business management. However, in reality easing of its manifestations was happening rather than liquidation.
One of the reasons why this commonly hated system survived was the business leaders themselves with their rational – but more often automatic leadership models adopted at home, at school, at the institute or in the first working place. These models suggested a vertical of power, top-down decision making, follow-up control from the top, vertical career progression, etc.
Today the top-down leadership model is gradually succeeded by more complex ideas combining the top-down and bottom-up approaches, the formal and soft authority, direct and implied leadership. These new mental models are based on the concept of a leader as a figure encouraging his or her employees to release their creative energy. As Unipart Group chief executive John Neill says: ‘You don’t have to have the great idea, but you need to spot it and propagate it.’
CEOs at the Bottom of the Hierarchy
New mental models bring about new organizational decisions, behavioral standards and tools allowing to at least effectively manage, if not solve, the contradictions of the future leader’s working environment. Here are some of them.
Both internal borders between the units and external borders between the organization and the world are erased. The notions of ‘competitors’ and ‘partners’ blend. Stiff organizational structures depicted as schemes with blocks and arrows are succeeded by softer and more flexible, continuously evolving structures. Some companies, for example IBM or Lenovo, do not have a single headquarters. The former Lenovo СЕО Bill Amelio said: ‘By foregoing a traditional headquarters model we give our multinational executive team an opportunity to gather where it makes most sense. In the same way we disperse functional units following the concentration of specific skills and expertise.’
The Chinese manufacturer of household appliances Haier has organized its business in such a way that every employee is a profit center. Joint ventures, alliances and partnerships are becoming a norm of corporate life, and the ability to effectively create them and effectively withdraw from them is starting to constitute the key competency of a leader.
The leader’s role is changing, too, in different aspects simultaneously.
Firstly, CEOs more and more often use implied leadership. Google is the best-known example of consistent implementation of this model.
In the words of Nikesh Arora, Senior Vice President and Chief Business Officer, ‘Google has done well because we’ve provided a great work environment where people can literally change the world.’ The leaders of the company see their role not in achieving results through such traditional direct impact methods as goals, competence assessments, shares of profits, rebukes, etc., but in creating a productive environment for work.
That’s why Google invests in comfortable offices equipped with restaurants of world cuisines, thinking booths and meeting rooms, gyms and massage rooms. The company encourages acquiring new skills, inventive power and creativity and annually presents the Founders’ Award to the working groups who have made an outstanding contribution to the creation of corporate value. The rules of awarding the multi-million dollar prize are not explicitly stated, but it has become the prime element of the scheme of incenting creative activity.
Secondly, leaders take on the role of a performance facilitator, the chief organizer of effective work and remover of in-company obstructions for employers of all levels. A comprehensive approach to leadership rejects the traditional logics ‘it’s up to you to have a boat if you want to stay afloat’: the CEO’s authority and resources must be included in the process of creating conditions for productive work.
‘We try to eliminate organizational obstacles that might hinder idea development, such as functional silos and hierarchical decision making. How well we foster such a mindset internally dictates our success globally,’ said Bill Amelio.
Sir Bill Castell, Chairman of The Welcome Trust, is even more straight-out: ‘CEOs are going to have to get used to being at the bottom of the hierarchy, supporting their 460 managers above them.’
Another relatively new role for a business-leader is one of a mentor, providing guidance to only and not so much to his or her proximate successor, but also to the employees of all levels of the company. Many CEOs want to work in the new organizational paradigm of bottom-up result, but they can’t. Their subordinate employees have exactly the same problem with unlocking their potential, showing initiative, horizontal interaction and other skills that are in demand in modern economics. Their previous experience from such basic institutions as family, school or college was about living in the format of power vertical, subordination and instruction.
Development of new behavioral settings and skills demands both organizational changes and direct participation of the leaders who become role models and coaches to their staff.
It is no coincidence that today CEO’s work is being compared with the work of a conductor who, as Sungard Chief Executive Cris Conde has put it, 'creates and orchestrates a system' of professional performers.
Thus, the business leader of the future is an Organizer, a Facilitator and a Mentor for creative, progressing, continuously interacting horizontally and diagonally employers. The organization must provide them with the best conditions not only for professional, but also for social fulfilment. Sounds like a revolution.
At the same time, the inexorable logic of capitalism still – and taking into account the global competition and local administrative pressure, even more insistently – demands from CEOs traditional achievements. They have to provide financial results, liquidate obsolescent and loss-making lines, make strategic decisions and assume responsibility for everything that happens in the company. Truly work for a hero.