SEP/NOV 2013 | dialoguereview.com
Toppling the Brics: South Korea rocks the business world opinion
Dave Ulrich unveils his threepoint formula for talent success Research
Inside the mind of the CEO: Thriving in a leadership supernova
Our world: a puzzle to solve In a multi-polar world, the structure of markets, supply chains and capital is turned upside-down. How can leaders confront the complexity?
the dialogue room
Round-up of the latest business books, apps and management tools
The business case for leaders to improve the gender mix at work
Leaders talk exclusively on the skills and attributes it takes to be â€˜truly globalâ€™
Your invitation to join the exclusive club for global leaders and managers
CONTENTS Editor’s Letter In the board room or at the water cooler; when knowledge is shared it is ‘dialogue’. But is it time to cut through the noise?
SPARK! Is the UK achieving the Olympic legacy it yearned for, following the 2012 Games? McDonald’s unvels plans to open its first branch in Vietnam. And why ‘the risk takers’ look set to shake up the business world this millenium
Toppling the Brics? South Korea is not considered a BRIC although its growth potential outstrips most of the west. What does the future hold for its economy?
Organizational resilience How various types of organizational resilience help companies adapt their strategies to changing global trends to survive and thrive
Mike Canning Duke CE’s CEO says leaders need to get smarter faster, accelerate their success and raise their game
Dave Ulrich Talent has evolved into a science for businesses rather than an HR passion. What’s the formula for talent success?
Alberto Andreu Diagnosing the barcode syndrome, where everyone is ‘crazy’ – but crazy people never attack at the same time...
More complex, more ambiguous Anil Gupta and Haiyan Wang examine how global businesses can cut through the confusion in an ever-changing environment
Juggling accuracy and precision Business leaders must develop new skills to enable them to be strategic and decisive in the workplace, says Liz Mellon
Hidden side of complexity Ron Ashkenas gives his advice on how individuals can break the cycle of complexity in the world of business
Masters of complexity Game-changing companies are shrewdly mastering the complexities of doing business in an uncertain world, as Doug Ready discovers
Complexity and mindfulness Leaders have much to learn from the ‘Miracle on the Hudson’ in 2009, says Sudhanshu Palsule as he investigates the thinking, emotions and beliefs that drive managers
Women in business Liz Mellon looks at the business case as to why leaders should seriously consider improving the gender mix within their organizations
CEO perspectives Jared Bleak and Tony O’Driscoll outline the seven senseabilities leaders need to navigate through the 21st century business environment
Conquerors or collaborators? Global executives talk exclusively to editor David Woods about ‘going global’ and moving abroad in a bid to expand their business reach
The next big thing Ella Bennett, Fujitsu’s HR director, looks at how collaborative ways of working will be needed to operate in a global marketplace in the future
The 21st century learning organization Nick van Dam examines why the talent management pendulum is swinging from recruitment to development, creating a strategic role for the chief learning officer
Under the spotlight Global thinkers, practitioners, techies and bookworms give their views on some of the latest literary offerings and apps. In this issue our reviewers investigate how nature is inspiring innovation and what leaders can learn from Hannibal
Guest opinion Alan Wyn-Davies, chairman of DFx Technology, is on the cusp of taking his small business to a global market
Picture credits: iStock pages 4,5,10,11,12,13,21,24,29,30, 36,39,42,48,54,70,74; Sanders-Brown Center on Aging page 56; Shutterstock pages 1,10,11,21; Gareth Hobbs front cover page 1; Laura Hawkins pages 10, 11; Juan Ramon Batista Perez (illustrations) pages 15,19,26. Please note that while Dialogue takes every effort to credit photographers, we cannot guarantee that every published use of an image will have the contributor’s name. If you believe we have omited a credit for your image, please email the editor at firstname.lastname@example.org
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International Deans’ Programme 2013/14 “The best part of my IDP cohort has been meeting a global subset of leaders of business schools from all around the world, thereby having the opportunity to compare the priorities and agendas of leaders of business schools in the 21st century. This is a valuable experience that – even in our e-connected world – is not yet possible without this very personal exchange of views and insights.” Professor Per Holten-Andersen, President, Copenhagen Business School, Denmark
Gain unique insights into the multiple roles of deans of business and management schools in a cohort of around 20 participants from around the globe
UK: 5-6 December 2013
Hong Kong: April 2014
Visit a diverse range of business and management schools, take time out to network with your counterparts, re-energise and reflect on strategies for your own school, and create new strategic alliances
Engage in debates about issues under the Chatham House rule www.efmd.org www.associationofbusinessschools.org @londonabs
Saïd Business School, Oxford Imperial College Business School, London
Three Hong Kong business schools
Denmark & Sweden: June 2014 Copenhagen Business School Lund University School of Economics and Management www.efmd.org /business-schools/idp
Anil Gupta is the Michael Dingman chair in strategy, globalization and entrepreneurship at the Smith School of Business, University of Maryland, a visiting professor of Strategy at INSEAD, and a member of Duke CE’s educator network. His research investigates emerging economies; strategy; creation, coordination and control within complex organisations.
Gareth Hobbs ART DIRECTOR, E-DIGITAL DESIGN
Glenys Trevor PRODUCTION EDITOR
Juan Ramon Batista Perez GRAPHIC DESIGNER
When it comes to devising a formula for talent, few would be able to do it, yet Dave Ulrich – our regular columnist – has had a go. He puts it bluntly: give employees ‘skills, wills and purposes’. HR business partnering was his brainchild and he has made it his mission to put people strategy in the navigation seat of corporate development.
Dr Liz Mellon CHAIRMAN
Jared Bleak VP, GLOBAL BUSINESS DEVELOPMENT AND MARKETING, DUKE CORPORATE EDUCATION
Karina Robinson FOUNDING PRINCIPAL OF ROBINSON HAMBRO
Karl Weber CHAIR, EDITORIAL BOARD, LID PUBLISHING (US)
Marcelino Elosua CEO, LID EDITORIAL EMPRESARIAL
COMMERCIAL Rebecca Nolan COMMERCIAL MANAGER (UK)
Ed Hanus BUSINESS DEVELOPMENT MANAGER (US)
Cristina Alvarez COMMERCIAL DIRECTOR (SPAIN)
Raul Vazquez MARKETING AND DIGITAL PROJECTS MANAGER
Jeanne Bracken GENERAL MANAGER (SPAIN)
Edie Reinhardt GENERAL MANAGER (US)
Raul Lopez FINANCE DIRECTOR
MANAGEMENT BOARD Martin Liu PUBLISHER
Christine Robers MARKETING DIRECTOR, DUKE CORPORATE EDUCATION
Mike Canning CEO, DUKE CORPORATE EDUCATION
A leading business educator, Dr Liz Mellon works with many of the FTSE100 CEOs. Considered one of the world’s foremost authorities on leadership development, she has contributed to the development of public service leadership through her research and teaching. Before joining Duke CE, Liz was professor of organizational behavior at the London Business School. DOUG READY
Doug Ready founded and serves as president of The International Consortium for Executive Development Research, a global network of senior development specialists from corporate and business communities. He is also professor of the practice of leadership at the Kenan-Flagler Business School at the University of North Carolina and is an author of several leadership articles. ELLA BENNETT
Ella Bennett is a key member of the Fujitsu leadership team and believes that any sustainable business can only succeed through its people and how it interacts with society. The economic and business climate presents many challenges and her leadership style has helped the business approach these in an engaged and meaningful way, encouraging feedback and learning at every step. RON ASHKENAS
Ron Ashkenas is a senior partner of Schaffer Consulting and a consultant and speaker on simplification. He has helped leading organizations – including JP Morgan Chase and Pfizer – achieve dramatic performance improvements, while also coaching senior executives to strengthen their leadership capacity. He is also ‘executive-in-residence’ at the Haas Business School of UC Berkeley.
CEO, LID EDITORIAL EMPRESARIAL
Copyright 2013 by LID Publishing Ltd. All rights reserved. Material may not be reproduced without permission of the editor. While we take care to ensure that reports, reviews and features are accurate, Dialogue accepts no liability for reader dissatisfaction rising from the content of this publication. The opinions expressed or advice given are the views of individual authors and do not necessarily represent the views of Dialogue, LID Publishing or Duke Corporate Education. ISSN: 2053-437X
Jared Bleak is executive director and VP of global business development and marketing at Duke CE. He teaches psychology and neuroscience at Duke University. He has worked with global clients such as American Express, PwC, IBM, Rio Tinto and Chanel. He is researching and teaching how corporations can improve their environments by embedding learning into everyday work routines.
David Woods EDITOR
Beautiful thinking With just eight letters, ‘dialogue’ is one of the shortest words in the English language incorporating all the vowels. This, to me, sums up the mission of our journal perfectly. In just one word, all the sounds of the English language are merged. And I believe this is how a dialogue should be – concise, inclusive, allencapsulating, but, most importantly, useful. Dialogue – whether in a meeting, at a networking event or at the water cooler – should always lead to knowledge being shared or a great idea taking shape.
watch David Woods introducing Dialogue
On that point, we invite you to enter into ‘dialogue’ with some of the business world’s leading lights. We took the challenge of how to make leadership ‘truly global’ to international executives from Bosch and Fujitsu, encouraging them to analyze the issue. And in this issue we reveal the findings of a global qualitative study ‘Inside the mind of the CEO’ taking stock of the plans of the world’s high-profile managers and asking what is needed from ‘new leaders’. Dialogue is not frightened to tackle difficult themes. In this launch issue a collection of authors, including Anil Gupta, address the complicated topic of complexity and ambiguity, and how too much information threatens business growth. But drawing on examples from some of the world’s most agile corporates and investigating the psyche of complex individuals, they unveil nuggets of wisdom about how, if we as managers embrace complexity and rise above it, we can become ‘simplifyers’ and cut through the chaos. If you have ever come out of a business briefing buzzing with ideas and fresh ways of thinking that you have never considered before, you’ll know how inspiring a productive conversation can be. But all too often – with so many ideas shooting across boardrooms or circulating in the online ether – the spark of a great idea is lost in the noise. But that’s where this journal sets out to be different. We are bringing together some of the greatest business thinkers on Earth to share their insight, along with ground-breaking examples of business best practice from some of the world’s leading corporates. It is not a case of west teaching east, north teaching south or developed teaching emerging. This is a fair and equal forum of ideas, because we freely admit that no one has all the answers or business solutions. My hope is that by talking about the pressing issues facing leaders, suggestions can be brought forward that might – just might – foster real change.
If you’re interested, the shortest word in English - with all the vowels is ‘eunoia’, meaning a ‘well mind’ or ‘beautiful thinking’. So my advice is to read Dialogue with an open mind and perhaps something you discover will spark an idea in your thinking that will give you a new perspective that you can share with others.
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The UK economy has seen a £9.9bn boost in trade and investment from hosting the 2012 London Olympic and Paralympic Games, research suggests. A report by the UK government department that promotes UK businesses, credited new contracts, sales and foreign investment in the last year to the Games. But the claims were met with scepticism by some economists and the Federation of Small Businesses. Government estimates put the cost of hosting the Games at £8.9bn.
obje cts in mirror may appea r closer tha n they are
“I told Carlos Slim that he should clean both of his rear mirrors, because I would not warn him on which side I was going to overtake him.” Three years ago Brazilian billionaire Eike Batista warned the Mexican tycoon Carlos Slim that he intended to overtake him as the richest man on Earth. Now his company EBX Group is highly in debt and his personal fortune has suffered a dramatic drop, going from $34bn to $2.9bn in just over a year.
‘Leadership, like swimming, cannot be learned by reading about it.’ Henry Mintzberg
‘We expect to see some half a million new millionaires each year between now and 2017. The US and Asia Pacific will be the strongest performers with growth also expected from Latin America. However, crisis-ridden Europe and forever-stagnant Japan are expected to experience minimal growth, with emerging markets continuing to put pressure on their western European counterparts.’ Matia Grossi, senior analyst – private wealth management at Datamonitor Financial
In Africa, between 3-4% of all directors and board members are women. Duke Corporate Education Africa has developed the Women Leading Africa “Board Leadership –Voices of the Future” initiative. There is a critical need to increase board representation by at least 30% for women in decision-making positions in companies in North, East, West and Sub-Saharan Africa. The programme is scheduled for late 2013 and early 2014.
Offered four times annually in Kenya and Uganda, this five-day programme is structured to provide an understanding of board governance, ideas on generating financial sources of value, risk management through integrated reporting frameworks, a toolkit for effective leadership and practical guidance for obtaining board directorships. In addition, participants will derive practical solutions from board executives allowing participants to gain the critical skills needed for application in the organization.
of FSOs believe proposed compensation caps will reduce the organisation’s ability to pay for performance*
of FSOs believed that they would maintain total compensation levels, regardless of the level of bonus cap* *Source: Mercer Global Financial Services Executive Remuneration Report
India has eased rules on foreign direct investment in a range of industries in an attempt to support the sliding currency and boost growth. Senior cabinet ministers and prime minister Manmohan Singh approved the plans as Dialogue was going to press. The move will allow 100% foreign ownership in the telecommunications industry, up from 74% at the moment. The reforms still need clearance from the full cabinet.
of financial services organizations (FSOs) globally believe regulation is creating an unlevel playing field for pay and reward*
India has also picked a former International Monetary Fund chief economist as the head of the Reserve Bank of India, its central bank. Raghuram Rajan will take the role of the top job at the bank on September 4. Rajan famously predicted the global financial crisis of 2008.
Tesco and China Resources Enterprise, Limited (CRE) are in exclusive talks to combine their Chinese retail operations to form the leading multi-format retailer in China. As Dialogue was going to press it was understood the proposed joint venture would create a business with sales of some £10bn, in which CRE and Tesco’s effective interests are expected to be 80% and 20% respectively. It would involve CRE combining its CR Vanguard business, which currently operates 2,986 stores across China and Hong Kong, with Tesco China’s 131 stores and shopping mall business.
Challenges are less predictable; and knowledge less reliable. This is the new reality for CEO’s and their leaders, according to Duke Corporate Education’s study, Leading in Context, in which the opinions and experiences of CEOs of global organizations were distilled into a few key insights. Going a bit deeper into the data collected through in-depth interviews, there are deep implications for learning and development. If, in fact, the challenges leaders face are less predictable, how can they plan and develop learning programmes to address skills needed? And if knowledge sources are in question, what confidence do leaders have in any content or expertise upon which we have traditionally relied? Managers need to develop a new kind of learning for a new kind of leader – a leader that is in the center of constant change, that is challenged by unfamiliar circumstances, and that must take others with him. Duke CE is stepping into the mix and has challenged itself to create the new kind of learning needed. It will not be a traditional programme. It will be a set of missions, one of which is determined by the participant. And those missions will take leaders through a deep process of honing perception, making sense of systems, and choreographing their collectives - all supported by feedback in context. Stay tuned – Duke CE will be sharing the prototype of this during its chief learning officer roundtable in November.
On August 29, Duke Corporate Education held its Fourth Annual South Africa Roundtable, New Leadership for New Opportunities. Duke CE was honored to be joined by Ahmed Kathrada, South African politician, former political prisoner, antiapartheid activist and author of No Bread for Mandela. Proactive and informative discussions surrounding complex global business issues affecting leaders and organizations within the continent and a conversation around building the next generation of leaders for a new set of opportunities emerged throughout the day. More than 50 attending participants contributed to the discussion, learning from and sharing business challenges with one another, while also gaining new perspective from Duke CE thought leaders and educators.
‘Risk-takers will rule the next millennium. This is how we find a clash of new ideas and a surge of creativity, by taking intellectual and emotional risks.’ – Penelope Trunk, founder of Brazen Careerist and management blogger
Vietnam is to get a taste of McDonald’s after the US burger giant said it would open its first outlet there next year. The chain’s franchise has been awarded to Henry Nguyen, son-in-law of Vietnam’s leader. The move underlines Vietnam’s hunger for Western consumer brands and the attractions for foreign investors. McDonald’s is a relative newcomer to Vietnam. Starbucks, Subway, Burger King, and KFC all have a presence there.
of FSOs are looking at creative compensation alternatives* *Source: Mercer’s Global Financial Services Executive Remuneration Report analysed data from 78 financial services organisations, including banks and insurers, across Europe, North America and the emerging markets.
Raising our game to reshape the world
Michael Canning CEO, Duke Corporate Education
Michael sets out Dialogue’s vision to connect people and ideas globally.
We live in an interconnected world, shaped 24/7 by shifting rules and, perhaps more importantly, a shift in who makes the rules. We find ourselves grappling with complexity and uncertainty. The unfamiliar has become the norm. As evidenced in the perspectives in this inaugural issue of Dialogue, the challenges facing leaders have changed substantially, not incrementally. As challenges are less predictable, the solutions must be more systemic and the power to affect change requires influence as opposed to formal authority. No individual or organization holds the answers – and answers are no longer enduring. It is also becoming apparent that professionals need more than new bits of knowledge to meet these challenges. A fundamental reorientation to the world and what leadership truly is today, is required. For that reason, I offer no simple solutions in this column. Rather, I invite you to a global Dialogue. The archetypal caricature of an ambitious business person of the 1980s, Gordon Gecko (portrayed in the film Wall Street by Michael Douglas) declared brazenly that ‘greed for want of a better word is good’. Leaving the obvious deleterious effects of such motivation aside, the notion that greed was an expression of an innate human impulse to compete and survive was probably not misguided.
To deal with constant uncertainty, leaders need to confidently embrace the unfamiliar
Similarly, one might argue that uncertainty, for want of a better word, is good. For years we’ve been taught, as leaders, to root it out at all costs. Certainty and confidence went hand in hand. To deal with constant uncertainty, leaders need to confidently embrace the
unfamiliar in ways we once did earlier in life. To do so will require a reorientation and rewiring which taps into the ability to be more curious than cynical; spend more time engaging and experimenting with problems rather than worrying about being right; find new sources of insight and perspectives; and learn faster to continuously raise our game. Here is where Dialogue comes in and why we at Duke Corporate Education (Duke CE) believe it is important. At Duke CE, we strive to make a difference by preparing leaders to face the challenges of a more complex world and shape a brighter future for their organizations. We create customized educational experiences bringing fresh insights to problems, use innovative,engaging learning methods and enable leaders to have impact back at work. We are also fundamentally rethinking how executive education needs to change to meet these challenges. For us, ‘dialogue’ is an extension of learning and, as such, Dialogue is a global connector, catalyst and community. It will bring together perspectives from global thought leaders and top executives leading to fresh insights on the issues that matter to managers. It will also provide a means for readers to connect online, bringing people, thought and action together. Cynics might argue that in our perhaps ‘overnetworked world’, there is already enough information. While access to information has increased, so has clutter. The premium is not on volume, but efficient access to insight on things that matter. We want Dialogue to be a place where leaders get smarter faster, accelerate their success and raise their game, enabling them to reshape the world significantly and positively. I invite you to join the dialogue; together we can make a difference.
THE DIALOGUE ROOM: bringing the world’s influential business thought-leaders together in one place
WHY is The Dialogue Room different? There are a myriad of clubs and events for business professionals, but the Dialogue Room is different – it is truly internationally focused. Great leaders think far beyond their own borders, so the focus of the content both online and at our events will have global relevance. Networking events will offer insightful debate, small panel discussions and introduce keynote speakers with audience participation and comments from Dialogue Room members. Events will be filmed and hosted online on The Dialogue Room website, reaching the international membership and being made available for those who cannot attend in person.
WHAT are the benefits for joining? Exclusive member invitations to networking events, which could incorporate intimate Q&A sessions with business gurus, working lunches, learning sessions or global forums, seminars and breakfast meetings. Exclusive access to the members’ site – the website will take the form of a modern social portal for business professionals to communicate with one another, share ideas and even headhunt. The filmed event highlights will be enriched by additional material such as essays on the theme, links to relevant news stories and further video contributions.
Exclusive access to research reports, webinars, essays, forums, news, business case studies, video interviews and additional social content on the issues facing leaders. Members set the agenda – they propose events on the topics they want to hear about, so content is tailored around the needs of the network. International networking facilitation – The Dialogue Room will help members set up private business meetings with colleagues, contacts and prospective clients across the world. Members can use the network to book conference space, meeting rooms and accommodation.
...ALL THIS PLUS – discounts, member offers and much more
The Dialogue Room is not just a club for managers – it is a forum for leaders to set the global business agenda. The Dialogue Room is for senior managers, leaders and thinkers who have agreed to foster dialogue to advance humanity’s knowledge and to make businesses more efficient, global and inclusive.
HOW to join? The Dialogue Room has the ethos that people can contribute to the conversation with their thoughts and benefit from hearing others. No one should try to convince people of their views, but just present what they believe and allow others to make their own decisions in an informed way. Members have to share that belief of an open and honest conversation – not a debate – in order to join. While The Dialogue Room benefits are exclusive, the membership process is inclusive and registration is absolutely free. Members are chosen upon invitation, by other members or by personal initiative, but must be leaders or senior management in their respective organizations (companies, universities, associations, foundations, media and political bodies from all countries). The club supports a different organization, the journal Dialogue among leaders and managers across the world, because we are sure that the forces behind this project – Duke Corporate Education and LID Publishing – share our values and we will be able to actively cooperate with each other in our common goals.
Find out more: Visit www.thedialogueroom.com
A recipe for success in the talent pool
Dave Ulrich Professor at the Ross School of Business, University of Michigan, and a partner at the RBL Group
We know it matters. Some go to war for it. Sports teams allocate players for it. Actors audition to show they have it. Others consider it the ultimate solution and try to manage it. Agents contract for it. Some are innately endowed with it, while others strive diligently to earn it. All try to grow it. CEOs declare it as their top priority. Inboxes are filled with prescriptions for it. Talent. It is evolving from a passion for many senior leaders to a science for top HR professionals. A multitude of programmes and investments have been made to attract, retain and upgrade talent. Yet, sometimes after stipulating that talent matters, it is easy to get lost in the myriad of promises, programmes and processes, and lose sight of the basics. At the risk of grossly oversimplifying, let me suggest that there is actually a deceptively simple formula for talent that can help both general managers and HR professionals turn their talent aspirations into actions: Talent = competence, commitment and contribution. Competence means that individuals have the knowledge, skills and values required for today’s and tomorrow’s jobs. One company clarified competence as right skills, right place, right job, right time. To ensure competence, positions need to be matched to employees. Position assessment means identifying the key requirements of a position based on future customer, investor and strategic demands. These requirements often include technical, social and personal skills. Individual skills can be determined and matched against key positions to make sure that people are in jobs where they can perform and grow.
Talented employees must have skills, wills and purposes…
Competence matters, but without commitment, competence is discounted. Highly competent employees who are not committed are smart, but don’t work very hard. Committed or engaged employees work hard; put in their time and do what they are asked to do. Commitment shows up in an employee value proposition where employees who give value to their organization (through insights, hard work and performance) get personal value back. Employee commitment, or engagement, has been linked to delivering strategic goals and to customer commitment. In too many companies, employees feel undervalued and therefore uncommitted to do their best.
+ DIGITAL EXCLUSIVE This extended article is exclusive to the digital edition.
In the past decade, commitment and competence have been the bailiwicks for talent. But, leaders have found the next generation of employees may be competent (able to do the work) and committed (willing to do the work), but unless they are making a real contribution through the work (finding meaning and purpose in their work), their interest in what they are doing diminishes and their talent wanes.
For next-generation employees, contribution becomes increasingly important, especially when talented employees have choice over where they spend their professional time
Contribution occurs when employees feel that their personal needs are being met through their participation in their organization. Organizations are the universal setting where individuals find abundance in their lives through their work and they want this investment of their time to be meaningful. Contribution comes when employees move from behavioral commitment to emotional connection because they find a sense of meaning at work through building on their strengths, melding personal and organizational purpose, personal relationships, positive work environmental, engaging work, and opportunities to learn and grow. For next-generation employees, contribution becomes increasingly important, especially when talented employees have choice over where they spend their professional time. Simply stated, competence deals with the head (being able), commitment with the hands and feet (being there) and contribution with the heart (simply being). In this talent equation, the three terms are multiplicative, not additive. If any one is missing, the other two will not replace it. A low score in competence will not ensure talent even when the employee is engaged and contributing. Talented employees must have skills, wills and purposes; they must be capable, committed, and contributing. A high score on the talent formula will engender sustained employee productivity that helps an organization deliver on strategic promises, serve customers and delight investors. General managers are the owners of their organizationâ€™s talent. They are ultimately responsive for having the investment in employeesâ€™ competencies, delivering an employee value proposition and becoming meaning makers. HR leaders should become thoughtful talent architects who build blueprints, coach and facilitate on competence, commitment and contribution issues. When the ideas of talent can be translated into specific competence, commitment and contribution choices, talent moves beyond a clarion call, to a specific set of leadership actions with positive outcomes.
but through personal resilience, Murray found success. Over the next four pages, we explore the various types of organizational resilience – from the global organisations that have dominated the Fortune 500 since inception to the largest employers on Earth; from the world’s oldest organisations to the digital age companies forced to adapt their strategies to quickly changing global trends in order to survive and, in some cases, thrive.
ndy Murray, this year’s Wimbledon men’s singles tennis champion was about to defend his title at the US Open, as Dialogue went to press. Sports commentators would describe Murray as ‘resilient’ because, despite suffering a loss in the 2012 Wimbledon final, he won the tournament in 2013. It could be argued he did this through sheer grit, a change of training, a change of strategy or a change of attitude,
2005 2006 2007 2008 2009 2010 2011 2012 2013 Australian Open
US OPEN 1st Round
WIN - LOSE
2nd Round 2010
3rd Round 2011
4th Round 2012
2-6, 5-7, 2-6
3-6, 4-6, 6-7 (11-13)
4-6, 2-6, 3-6
6-4, 5-7, 3-6, 4-6
7-6 (12-10), 7-5, 2-6, 3-6, 6-2
7-6 (7-2), 6-7 (3-7), 3-6, 2-6
6-4, 7-5, 6-4
Companies that proved resilient by changing their business model
PayPal was not founded to be an online payment service, but was originally envisioned as a cryptography company, and then later as a means of transmitting money via PDAs. Only after several years of trial and error, did PayPal end up where it is today. Despite being founded in 1998, PayPal was swift enough to change course in time to go public in 2002, and later get bought out by eBay for $1.5 billion.
Google had no business model when it launched. After making marginally profitable forays into selling search appliances to businesses and its own search technology to other search engines, Google radically changed course. In 2003, the company launched its AdWords programme, which allowed businesses to advertise to people searching for things on Google.com. Almost overnight, Google took the leap from popular search tool to advertising juggernaut.
Re-writing history Some organisations are known for their trademark products – credit cards, jewellery and high-fashion couture, but without historical changes of strategy, these businesses might not have lasted to be as resilient as they have turned out to be.
American Express is a financial services giant but when it was created, it provided express mail services of larger parcels and valuable items out of New York. The company made a pivot in the late 1890s when it began competing with many of the banks and financial institutions that the company serviced through the issuance of money orders. In the 21st century financial landscape it is one of the most well-known credit card companies in the world.
Hermès, the French high-fashion house, began life in Paris as a manufacturer of horse saddles in 1837. Following the introduction of the zip in France, Hermès introduced its first handbag in 1922 and today is known as a provider of quality goods, specializing in leather, lifestyle accessories, perfumery, luxury goods and ready to wear. In 1984, it created a handbag for actress Jane Birkin – this product has gone on to become one of the most sought-after bags in the world retailing at up to $150,000.
Tiffany’s, the luxury jewellery and diamond company, originally began in New York City in the 1830s as a high-end ‘stationery and fancy goods’ retailer. In 1867 the company gained global recognition for silver craftsmanship and grew to become one of America’s leading silversmiths and a provider of jewels and timepieces. One has to question if Holly Golightly, portrayed by Audrey Hepburn in the iconic film Breakfast at Tiffany’s, would have taken brunch at a stationery shop.
FORTUNE1965 500 - 1985 ($b)500 TopRevenues 10: FORTUNE Exxonmotors Mobil General General motors Exxon Mobil GeneralMobil Motor FordElectric Motor General Mobil Texaco Chrysler Intl. Business Machines US Steel DuPont Texaco AT&T Intl BusinessElectric Machines General Gulf Oil Amoco
90,854 16,997 83,890 10,815 56,047 9,671 52,366 4,941 47,334 4,499 45,937 4,287 35,915 4,078 33,188 3,574 27,947 3,239 26,949 3,174
1985500 - 2005 FORTUNE Top 10: FORTUNE($b) 500 Revenues
2005 Top 10: FORTUNE 500
Exxon Mobil Wal-Mart Stores90,854 288,189 General Motors Exxon Mobil83,890 270,772 GeneralMobil Motors56,047 193,517 Ford Motor Ford Motor52,366 172,233 GeneralTexaco Electric47,334 152363 INTL Business Machines Chevron Texaco45,937 147,967 ConocoDuPont Phillips35,915 121,663 AT&T 33,188 Citigroup 108,276 General Intl. Electric American Group27,947 98,610 Amoco 26,949 Intl. Business Machines 96,293
Wal-Mart Stores Exxon Mobil General Motors Ford Motor General Electric Chevron Texaco Conoco Phillips Citigroup American Intl Group Intl Business Machines
288,189 270,772 193,517 172,233 152,363 147,967 121,663 108,276 98,610 96,293
Revenues FORTUNE 500 Revenues ($b) ($b)
Revenues FORTUNE 500 Revenues ($b) ($b)
FORTUNE1975 500 - 1995 ($b)500 TopRevenues 10: FORTUNE
1995500 - 2013 FORTUNE Top 10: FORTUNE($b) 500 Revenues
2013 Top 10: FORTUNE 500
The world’s biggest companies General motors General motors Wal-Mart Stores154,951 469 Exxon Mobil 154,951 42,061 Motor Ford Motor 128,439 128,439 449 Exxon mobil General Motors 31,550 demonstrate the worlds biggest Ford The charts above Exxon Chevron Mobil 101,459 234 Exxon Fordmobil Motor 101,459 23,621 Wal-MartPhillips Stores 6683,412 170 companies measured in revenue – the top 10 Wal-Mart Stores 83,412 Texaco 23,256 AT&T 75,094 163 Mobil AT&T 18,929 75,094 Barkshire Hathaway Fortune 500 General Electric Chevron Texaco over General Electric 64,687 Apple64,687 157 17,191 the past 50 years. Only three Intil. Business Machines Gulf Oil 16,458 Intl. Business Machines 64,052 General motors64,052 152 have been resilient Mobil 59,621 147 General Electric Mobil 59,621 enough to stay in the top 10 General Electric 13,413 Robeuck Intl. Business Machines 12,675 Sears Roebuck 54,559 500 launched in 1955: oil giant Sears Valero Energy54,559 138 since the Fortune Altria Group ITT Industries Altria Group 11,154 53,776 Ford Motor53,776 134 Exxon Mobil, General Motors and General Electric. 1995 2013 Revenues Revenues FORTUNE 500 FORTUNE 500 The chart belowRevenues shows Revenues ($b) ($b) ($b) ($b) the size of the world’s biggest employers measured by the number of employees.
The world’s FORTUNE1985 500 - 2005 largest employers ($b)500 TopRevenues 10: FORTUNE 2012 Wal-Mart Stores Exxon Mobil 288,189 90,854 ExxonMotors Mobil 270,772 General 83,890 General Motors Mobil 193,517 56,047 Ford FordMotor Motor 172,233 52,366 Texaco 152363 General Electric 47,334 INTLChevron Business Machines Texaco 147,967 45,937 DuPont 121,663 Conoco Phillips 35,915 AT&T 108,276 Citigroup 33,188 General American Intl.Electric Group 27,947 98,610 Amoco 26,949 Intl. Business Machines 96,293
Revenues FORTUNE 500 Revenues ($b) ($b)
The world’s oldest Wal-mart companies Stores 469 Mobil then 449 the companies If resilience equates to Exxon age, Chevron 234 66 to the right are the mostPhillips resilient. 170 They found a Berkshire Hathaway 163 strategy and stuck to it – in Apple one 157case for more General Motors 152 than 1,200 years. ButGeneral one employer has had Electric 147 Valero Energy 138 52 management systems since launch, and the Ford motor 134 vast majority of companies older than 100 years Revenues are small or medium enterprises,($b)showing that resilience does not always equate to global growth or longevity of strategy.
People’s Liberation Army 2.3 Million FORTUNE2005 Global 500 - 2013 Top 10: FORTUNE($b) 500 Revenues Walmart 2.1 Million Wal-Mart Stores 288,189 482 Royal Dutch Shell
Exxon Mobil 270,772 469 Wal-Mart Stores General Motors 193,517 450 Exxon mobil Ford Motor National Health Service 172,233 Sinopec Group 428 General Petroleum Electric 152,363 409 China National 1.7 Million Chevron Texaco BP 147,967 388 Conoco Phillips 121,663 298 State Grid Citigroup 108,276 266 Toyota Motor State Grid Corporation of China American Volkswagen Intl Group 98,610 248 1.5 Million Intl Business Machines Total96,293 234
Indian Armed Forces 1.3 Million
Revenues Global 500 Revenues ($b) ($b)
2013 Top 10: FORTUNE Global 500 Royal Dutch Shell Wal-Mart Stores Exxon Mobil Sinopec Group China National Petroleum BP State Grid Toyota Motor Volkswagen Total
482 469 450 428 409 388 298 266 248 234
= 0.1 Million Employees
FORTUNE1995 500 - 2013 ($b)500 TopRevenues 10: FORTUNE Wal-Mart 469 GeneralStores motors 154,951 Exxon 449 Fordmobil Motor 128,439 Chevron 234 Exxon Mobil 101,459 Phillips 66 83,412 170 Wal-Mart Stores AT&T 75,094 Barkshire Hathaway 163 General Electric Apple 64,687 157 Intil.General Business Machines motors 64,052 152 Mobil 59,621 General Electric 147 Sears Energy Robeuck 54,559 Valero 138 AltriaMotor Group 53,776 Ford 134 2013
Revenues FORTUNE 500 Revenues ($b) ($b)
Indian Railways 1.4 Million
2013 Top 10: FORTUNE 500 China national Petroleum Corporation Wal-mart Stores 469 Exxon MobilMillion 449 1.6
234 170 163 McDonald’s 157 (Including Franchises) 1.9 Million 152 147 138 China Railway Engineering Corporation 134 Chevron Phillips 66 Berkshire Hathaway Apple General Motors General Electric Valero Energy Ford motor
United States Department of Defense 3.2 Million
Age and location According to a report published by the Bank of Korea on May 14, 2008, investigating 41 countries, there were 5,586 companies older than 200 years. Of these, 3,146 are located in Japan, 837 in Germany, 222 in the Netherlands and 196 in France. But 89.4% of the companies with more than 100 years of history are businesses employing fewer than 300 people. A nationwide Japanese survey counted more than Japan 21,000 companies older 3,146 than 100 years as from September 30, 2009.
Employ Fewer than 300 people
Companies with more than 100 years of history
Asia – Nisiyama Onsen Keiunkan is a hot spring hotel in Hayakawa, Yamanashi Prefecture, Japan. Founded in 705, it is the oldest hotel and oldest company still in operation, according to the Guinness World Records. The hotel has had 52 operators since its founding.
Serving since 803 AD
US – The Tuttle Farm of Dover, New Hampshire, is located between the tidal waters of the Bellamy and Piscataqua rivers on Dover Point, and has been operating continuously since 1632. Tuttle Farm has often been referred to as the oldest known familyowned farm in the United States. However, this claim has been challenged. The Shirley Plantation in Charles City, Virginia, was founded in 1613 and has been in operation since 1638.
Older than 200 Years
Employ 300 people and over
= Hotel Operator 52
Europe – Stiftskeller St Peter is a restaurant within the monastery walls of St Peter’s Archabbey in Salzburg, Austria. It is claimed to be the oldest inn in Central Europe because of a document mentioning it in 803 AD. Stiftskeller St Peter is believed to be one of the oldest continuously operating restaurants in the world and the oldest in Europe.
Toppling the Brics?
The term BRIC was first used to describe Brazil, Russia, India and China by Jim O’Neill, retiring chairman of Goldman Sachs in his 2001 paper Building Better Global Economic BRICs. BRIC countries have become a symbol of the shift in economic power from the developed G7 economies to the developing world. It is estimated that BRIC economies will overtake G7 by 2027.
PURCHASING PARITY GDP BYPOWER
SOUTH KOREA human development index being higher than some of the world’s advanced economies (France and UK.)
Why not ‘BRICK’? South Korea is one of the world’s most developed countries and including it with developing countries like the BRICs was not deemed correct, because by definition they should be emerging. Commentators such as William Pesek from Bloomberg argue that Korea is ‘another BRIC in the global wall’, with its BRIC-like growth rate, despite its
South Korean workers are the wealthiest among major Asian countries, with a higher income than Japan and the strongest growth rate in the OECD. GDP measured by purchasing power parity is larger than Canada and Spain, and is set to overtake Italy by 2016.
GROSS DOMESTIC PRODUCT PER CAPITA (REAL) UNITED STATES
91,683 90,294 83,489 76,044 69,019
36,813 26,012 21,602
PERCENT INCREASE FROM 2006 TO 2050 +106% +397% +107%
According to Citibank and IMF, South Korea will become the world’s wealthiest major economy by 2014 and its credit rating will be rated AAA sooner than 2050. Following the Korean War in the 1950s, government-sponsored schemes encouraged the growth of conglomerates, known as “chaebol”. Hyundai Group was, until 1997, South Korea’s second biggest chaebol. The company spun off many of its better known businesses after the 1997 Asian financial crisis. Hyundai focuses on elevators, container services and tourism. LG makes electronics, chemicals and telecom products, and operates in 80 countries. This year, Counterpoint Research found LG has overtaken Apple to become second largest smartphone manufacturer in the US.
THE REPUBLIC OF KOREA CAPITAL: SEOUL
AREA: 99,313 sq km (38,345 sq miles)
MAJOR LANGUAGE: KOREAN
LIFE EXPECTANCY: MAJOR RELIGIONS:
77 YEARS Buddhism
84 YEARS Christianity
nearly half of adults profess no religion
MONETARY UNIT: WON
GNI PER CAPITA:
US $20,870 (2011)
MAIN EXPORTS: Electronic products
machinery transporT equipment
SURPASS CURRENT G7 Estimating GDP to surpass $6 trillion by 2050. If it occurred, Korean reunification would immediately raise the country's population to over 70 million. Samsung's revenue was equal to 17% of the South Korea's $1082 billion GDP
Samsung is the largest South Korean chaebol. Notable Samsung subsidiaries include Samsung Electronics (the world’s largest information technology company measured by 2012 revenue). Samsung produces a fifth of South Korea’s exports and revenue was equal to 17% of the country’s $1082 billion GDP. In 2013, Samsung began building on the world’s largest mobile phone factory in Vietnam.
GDP IN USD GDP PER CAPITA GDP GROWTH (2012-2050) TOTAL POPULATION
$6.056 TRILLION $86,000
$4.073 TRILLION $96,000
$12.5 BILLION $560
4.8% 71 MILLION
3.9% 42 MILLION
International dialling code:
A ‘United Korea?’ In September 2009, Goldman Sachs published its 188th Global Economics Paper named A United Korea? which highlighted the economic power of a United Korea, which will surpass all G7 countries except the US by 2050. The skilled labour and natural resources from the North combined with technology, infrastructure and capital in the South, as well as Korea’s strategic location connecting three economic powers, is likely to create an economy larger than the bulk of the G7.
-0.008% 23 MILLION
Hyundai Group was South Korea’s second largest comglomerate until the crisis in 1997
Why do crazy people never attack at the same time?
Alberto Andreu Corporate reputation, institutional relations and social innovation director, Telefónica, and professor of organizational behaviour at IE Business School
I had the good fortune during the summer to listen to Joachim de Posada at a meeting of the Telefónica Latin American managers. Professor Posada, a psychologist, author, consultant and motivational speaker, was basically talking about motivation. But what caught my attention was an anecdote he shared about a visit he had paid to a psychiatric hospital where there was just one nurse in charge of quite a large number of patients, some of whom were known to be violent. Somebody asked him: ‘Tell me, don’t you ever get scared, being here all on your own?’ and the nurse replied: ‘That’s the least of my worries. Don’t you know that crazy people never all attack at the same time!’ That anecdote made me think about one of the main ‘cancers’ that organisations suffer from, which I like to call ‘the barcode syndrome’.
Everyone is crazy in his or her own way. What they don’t understand is that what they think is their own is a fantasy
What I mean by that is how hard some organisations find it to work in a horizontal or inter-departmental way, and they cannot solve overarching problems in a coordinated fashion – and what’s worse, they cannot see the customer in a holistic way, therefore every section or department ends up dealing with a ‘portion’ of his needs. I came across a good example of this in former Apple CEO Steve Jobs’ biography, written by Walter Isaacson, president and CEO of the Aspen Institute. One chapter talks about the time when Jobs was preparing to launch the iTunes Store, and he opened negotiations with Sony to acquire the rights to the music, but soon gave up on the idea. The reason, according to Isaacson, was that the Apple team felt that although Sony had everything that was needed (music rights, equipment, computers and so on), ‘their departments were at war with each other. With each department trying to protect its own interests, the company as a whole never managed to achieve a clear direction whereby it could create a complete and integrated service’. In other words, like crazy people, each one was following its own path, trying to protect its own space; its own budget; its own profit and loss statement; its own team; its own marketing and advertising resources; its own decisions on customer profiles; its own decisions on hiring its own advertising agencies; or its own interpretations about vision and brand values.
Everything was own, own, own. Like crazy people – every one is crazy in his or her own way. What they don’t understand is that what they think is their own is a fantasy – if the WHOLE company goes down the drain, their OWN little business vanishes like snow on water.
The barcode syndrome is where every individual has his own “bar”, where every crazy person is crazy in his or her own world
So that’s the barcode syndrome, the syndrome where every individual has his own ‘bar’, where every crazy person is crazy in his or her own world – and the syndrome is more common than you might think. What are the causes? Well, there are many, but here are some of them:
• The lack of a clearly defined corporate culture: the company has no shared vision or common corporate values. Companies without vision and values have no frame of reference to check against, they just rush in all directions at once, in as many directions as there are. This doesn’t happen in companies with a clear vision. Volvo, for example, is quite convinced that the key to everything is safety; at 3M, it is all about innovation; and El Corte Inglés focuses on guarantees and trust. • An ‘exclusive’ budget system: ‘If it’s my budget, I decide; if it’s yours, you do.’ In some companies, the budget system makes it all but impossible to share resources, because it penalises everybody. Setting up a general supervisor, or pushing double or triple signature cost centres, are some ways in which you can avoid ownership of the budget. • Vertical goal-setting systems: it is quite common to find cases of companies where someone has to give up a part of their margin in order to achieve a bigger income for the company as a whole. And nobody ever wants to do that. An example would be the first patent for a Kodak digital camera, which was lodged in 1975. That means that nobody was prepared to threaten 35mm film for the advantage of a new system with an uncertain future. • Problems with evaluating horizontal activities, because the people involved in them cannot put down having helped in other areas as one of their goals. How do you put a value on the work done by the person who keeps moving from one location to another just to get them to work together, because it is the work of the whole that brings in the income? It is not always easy to see the value of the facilitator. This means that companies afflicted by the ‘barcode syndrome’ are more interested in exercising power than managing projects. These are the companies where the heads of the various sections are not prepared to share (goals or resources) in the false belief that sharing does not mean adding to something; it means giving something up, probably decision-making powers. But this means that they work in silos.
Companies afflicted by the ‘barcode syndrome’ are more interested in exercising power than managing projects.
If we take a look around, we can see plenty of examples of people suffering from this syndrome, and I don’t just mean businesses. I always think about the Beatles: together they were so much more than Paul, John, Ringo or George by themselves. Maybe that’s it: maybe they really were crazy when they were the Beatles… Life is full of contradictions.
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FOCUS More complex, more ambiguous?
The joys of juggling accuracy and precision
The hidden side of complexity
The masters of complexity
Step-back! Complexity and mindfulness
Living in a COMPLEX BUSINESS WORLD How organizations can thrive in a rapidly changing environment where complexity and ambiguity must be mastered by global leaders
FOCUS More complex, more ambiguous?
The joys of juggling accuracy and precision
The hidden side of complexity
The masters of complexity
Step-back! Complexity and mindfulness
More complex, more ambiguous? The world is undergoing rapid change from a unipolar one dominated by the US to a multipolar one where emerging markets play central roles in the economy. Anil Gupta and Haiyan Wang examine how global enterprises can thrive in such an environment Illustrations: Gail Armstrong
+ DIGITAL EXCLUSIVE Join the Dialogue – have your say on our forum.
Look at the recent dismissals of the CEOs at two of the world’s largest and most respected corporations – Procter & Gamble (P&G) and Siemens. On May 23, 2013, P&G’s board asked Bob McDonald, the company’s chief executive since 2009, to take early retirement and invited AG Lafley, McDonald’s predecessor, to come back and take up his old job. While the company has not provided any reasons for the change, analysts are almost unanimous in their
conclusion that one of the primary reasons was P&G’s weaker sales growth, compared to its rivals, in fast-growing emerging markets. In the case of Siemens, the board’s approach has been particularly brusque. On July 27, 2013, the company issued a statement that the supervisory board will shortly ‘decide on the early departure of the president and CEO’. Four days later, the board appointed chief finance officer (CFO) Joe
Kaeser to take over as the new boss. The reason for then-CEO Peter Loescher’s departure: a consistent inability to meet profit margin targets due largely to poor cost-cutting in response to economic malaise in Europe and a sharp slowdown in China and other emerging markets. These leadership changes vividly illustrate three central features of the new global era. First, we are in the middle of rapid structural change from a unipolar world dominated by the US to a multipolar world where emerging markets play increasingly central roles in the world economy. As P&G’s board appears to have concluded, no large company can afford to fall behind its rivals in these high growth markets. Second, the growing heft of emerging economies is bringing the challenge of the world’s diversity to the fore. P&G’s AG Lafley has noted that his standard response to people’s question about the company’s strategy for emerging markets is: ‘Which of the 160?’ Third, the world is becoming rapidly integrated. Gone are the days when Siemens could afford to manufacture in Europe what it sold in Europe. It must now manage the supply chain on a global basis, and keep optimizing its manufacturing network in response to fluctuations in market demand and cost structures across regions. Fourth, we live in an era of rising volatility and turbulence. While long-term trends are clear, fogginess about short- to medium-term predictions has gone up. As Bob McDonald, Peter Loescher and their successors would almost certainly attest, this is true for almost every major economy including Europe, US, Japan, China, India, Brazil, Russia and Africa. This article sets out to discuss these four central features of the world economy. Taken together, they are making the global economy far more complex and ambiguous than before. Based on our analysis of dozens of global corporations, we also present our recommendations regarding what it will take for a global enterprise to thrive in such an environment. The world becomes multipolar Emerging economies make up 82% of the world’s population. Yet, in 2000, they accounted for only 17% of the world’s GDP. By 2008, their share had increased to 25%. By 2012, it grew at an even faster pace to 33%. Even assuming slower growth from here onwards, we predict that emerging economies will make up more than half of the world’s GDP by 2025. In its entire history, the world has
As P&G’s board appears to have concluded, no large company can afford to fall behind its rivals in these high growth markets
never seen such a massive structural change at such speed. How do we explain the rapid rise of emerging economies? The answer lies in one word – ideology. Country after country has started moving from a worship of the state to a growing reliance on the market, from isolation behind iron or bamboo curtains to global integration, and from a largely illiterate, unconnected and ignorant population to an increasingly literate, connected and better informed set of consumers, workers and citizens. Among the world’s big emerging economies, China started down this path with the rise of Chairman Mao’s successor Deng Xiao Ping in 1978 and the launch of economic reforms. The fresh ideology spread to southeast Asia in the 1980s, to Eastern Europe in 1990, to India and the former Soviet Union in 1991, and from there onwards to Latin America and Africa. While the process is far from over, it would be impossible for anybody to put the genie back into the bottle. As a direct result of the shift in economic ideology, poor economies are no longer confined to a never-ending state of poverty. They now have access to global capital, global markets and global know-how. Global integration means that poverty can now become a source of competitive advantage. This is why China has emerged as the world’s factory, Vietnam as the world’s shoe manufacturer, Bangladesh as the world’s clothing producer and India as the world’s back-office. This is how emerging economies are boot-strapping themselves up to at least middle-income status. In 1990, emerging economies were a tiny portion of the world’s GDP. By now, they have acquired heft. China today is the world’s second largest economy, Brazil the seventh largest, Russia the eighth largest, and India the tenth largest. Despite their heft, emerging economies as a group are still growing at three times the pace of the developed economies. This is precisely why, with each passing year, the structure of the global economy is changing rapidly. This is also why the board of directors in every Fortune 500 company wants and expects the company to do well not just in developed economies, but also emerging ones. From the lens of corporate strategy, the shift from a unipolar to multipolar world is occurring
simultaneously across a number of dimensions – the global structure of markets, the global structure of manufacturing and supply chains, the global structure of research and devlopment, the global structure of capital flows and the global structure of competition. In 1995, there were only seven companies from the BRIC economies in Fortune magazine’s list of the world’s 500 largest corporations by revenue. By 2005, the number had grown to 26 and, by 2013, to 108. Competition from emerging economy companies is already very real in some industries. In telecom equipment, both Electrolux and Cisco regard China’s Huawei as their most fearsome competitor. In autos, no global company today can afford to ignore the challenge from Tata Motors, either at the top end (through its UKbased subsidiary Jaguar Land Rover) or at the mass market end (through its operations in India). In IT services, IBM and Accenture fear not just each other, but also Indian players such as Tata Consulting, Infosys and Wipro. By 2025, fierce competition from emerging market companies is likely to become widespread across a much larger number of industries. Vast and diverse Of the nearly 200 countries in the world, about 160 can be classified as emerging – i.e., economies that, by global standards, would be classified as low or middle rather than high income. On almost every measure that matters – per capita income, technological sophistication, social culture and political system – the diversity across emerging economies is far greater than across the developed ones. For multinational corporations, this diversity was largely immaterial – until recently. They needed to target only the upper income strata in each country. These customers belonged to the globally affluent. Except for minor cultural differences, their needs were largely similar. Today’s reality, however, is very different. As emerging economies move towards making up more than half of the world’s GDP, MNCs have to go deeper and target the middle, and perhaps even the low, income customers in every market. It is at this level that companies are being forced to confront the challenge of massive diversity at all three levels – between the developed and emerging economies, across emerging economies and, in large countries such as China and India, internally within the economy. This multi-level
By 2025, fierce competition from emerging market companies is likely to become widespread across a much larger number of industries
diversity is a major contributor to the rapidly growing complexity of the global economic environment. To illustrate, take four of the world’s 10 largest economies – two developed (US and Japan) and two emerging (China and India). In terms of per capita income, the US is not very different from Japan ($50,000 and $47,000 respectively in 2012). Look now at the developed versus emerging economies divide. Per capita income in the US is more than eight times that in China ($6,100) and 33 times that in India ($1,500). It’s as if they belong to two different planets in the solar system. To get a sense for the differences across emerging economies, just compare China and India rather than even greater extremes such as China and Bangladesh. While they are not very far apart by population (1.4 billion and 1.2 billion respectively), China’s per capita income is over four times that of India. Alternatively stated, the number of poor people in India is far greater and that of middle income people far smaller than in China. Thus, today’s India is more like China in 1995 rather than that today. Income levels are only one aspect of the differences between China and India. Other obviously important dimensions include political systems, language and culture. Consider now the internal diversity within India (the picture in China is similar). India is home to the world’s fourth largest number of billionaires. At the same time, it is also home to the largest number of the really poor people, i.e., those who have to subsist on less than $2 per day. Aside from income levels, India is also extremely diverse in terms of caste, religions, languages and literacy. In short, there isn’t one India but dozens. If you know Mumbai or Bangalore well, it hardly says anything about whether you know India well. Rapidly growing global integration Think of the world economy as a network where different countries make up the nodes, and trade and investment linkages among them make up the connections between the nodes. The discussion so far has explained that companies now have to be smart about a much larger number of nodes as well as much greater diversity across the nodes. This moves onto another key driver of network complexity – tighter linkages among the nodes.
Consider trade between countries. In 1990, world trade in goods and services totalled 20% of world GDP. By 2000, it had grown to 26% and, by 2012, even more rapidly to 31%. There is every reason to believe that this trajectory will continue. As cargo ships get bigger, transportation costs will keep declining. The growing power of communications technologies will make coordination of dispersed supply chains even easier. And governments are likely to keep reducing or eliminating barriers to cross-border trade. Just look at two major trade deals currently making steady progress towards ratification â€“ a free trade agreement between US and
the European Union, and the Trans-Pacific Partnership (TPP), which will eliminate many of the remaining trade barriers between a large number of economies in North America, South America and Asia Pacific. Look now at foreign direct investment (FDI). The stock of cross-border FDI stood at 9.4% of world GDP in 1990. By 2012, it had risen over three times to 32.9%. Barriers to cross-border investment are coming down even faster than to those against cross-border trade. Thus, it can confidently be predicted that the explosive growth in FDI-based global integration will continue its forward march.
It is useful to look also at two other measures of global integration – cross-border tourism by individuals and internet connectivity. In 1995, for every 1,000 people in the world, the number of international tourism departures was 115. By 2000, this figure had increased to 139 and, by 2011, to 164. Outside of defence and universities, there was no internet connectivity in 1990. Today, an estimated 39% of every man, woman and child on earth is an internet user. As mobile broadband, the use of smartphones and tablets becomes cheap and ubiquitous and as internet access is destined to become almost universal within less than a decade. The rapidly growing integration of the world economy dramatically increases the complexity that multinational corporations must deal with. Winning the hearts, minds and wallets of customers in the US, China or India no longer depends just on what you do in the target market. Success in any of these markets depends on how intelligently your value chain is organized globally and how effectively you can leverage the power of your global network for success in any individual market. At the same time, what you do in any of these markets has global implications. If your company is not organized to sense and respond effectively to the growing complexity of the global economy, by 2020, you are more than likely to look back and wonder ‘what happened?’ Rising volatility and turbulence Even though long-term structural changes in the global economy can be confidently predicted, it is actually becoming harder to make short- to medium predictions, especially about specific economies. As an analogy, think about the wealth of a nation. We could confidently say that, driven by innovations and rising productivity, the US as a nation will be richer in 2025 than it is today. At the same time, it would not be easy for us to predict which innovations will have the biggest impact,
which states and cities will become richer at a faster pace and when the country will have to deal with a recession or two in the interim. Three major factors are contributing to the growing turbulence in the global economy. First, developed economies have not yet figured out how they will deal with the challenges imposed by an aging population, a declining birth rate and slower economic growth. The costs of social security and health care are rising faster than the GDP or the tax base. Thus, virtually every developed economy faces rising deficits that are being financed by an ever-growing mountain of increasing debt. The US and Europe, as well as Japan, keep lurching from one crisis to another, thereby contributing to internal as well as global turbulence. Second, emerging economies face challenges that are a direct result of the success to date. As countries have become richer, a much larger proportion of the population now belongs to the middle class and, because of growing technological connectedness, is becoming more educated and better informed. These young, urban and middle-income citizens are unwilling to accept endemic corruption, environmental degradation and lack of political influence. As a result, every major emerging economy (look at China, India, Brazil, Russia, Turkey, Egypt, South Africa and Nigeria) faces a crisis of governance. It still remains unclear as to how the leaders in power in any of these economies will respond to these crises – through needed reforms, through greater repression or through paralysis. Third, greater integration of the world economy and, indeed, society at large makes it susceptible to greater turbulence. Gone are the days when a financial crisis in Asia (think 1997) could remain just a regional problem. Today, Cyprus – a tiny country with less than one million people – has the power to cause major disruption in Europe and, as a result,
the global economy. The so-called ‘butterfly effect’ (a butterfly flaps its wings in New Orleans thereby causing an earthquake in Tokyo) need not be confined just to economic issues. Similar turbulence can be caused by al Qaeda’s actions in Yemen or by avian flu somewhere in Asia. Thriving in an era of complexity and ambiguity Given ongoing structural change in the global economy, no large corporation can hope to keep thriving without long-term commitment of resources and top talent to emerging economies. It is critical to note, however, that commitment to emerging economies is merely a necessary, but no longer a sufficient requirement for success. As one company after another has realized, emerging economies offer not just opportunities for growth, but also serious challenges in the form of brutal competition, low margins, economic volatility, policy turbulence and a suspicious and sometimes hostile local media. As the leaders of some of the most successful global corporations such as IBM, GE, Honeywell, Nestlé, Samsung and Hyundai have learned, thriving in such an environment requires the following cocktail of complementary ingredients. First, do not put all of your eggs in one basket. The world’s 20 largest economies include almost an even mix of developed and emerging markets. Collectively, they also account for 80% of the world’s population, the world’s GDP and expected growth in world GDP over the next two decades. Commitment to all 20 will dramatically reduce the risk of an unexpected collapse of any subset of them. Second, lower the corporation’s centre of gravity by pushing decision-making closer to where the opportunities lie. If decision-making power remains 5,000 to 10,000 miles away from the point of action, you can bet your dollar, euro or yen that your strategic decisions will often be not just late, but also wrong. Third, strive hard for a one-company culture and run the company like a smoothly run global intelligence network. In a highly turbulent global environment, the enterprise needs to stay one step ahead of the unfolding reality. A well-developed information-sharing culture will enable the company to make sense of weak signals and to anticipate the
second- and third-order effects of unexpected developments in any particular economy. The potential payoff: an ability to exploit new opportunities or ward off potential threats faster than competitors. Fourth, where scale economies warrant, be prepared to consolidate, but remain footloose. Scale economies are often critical to achieve the cost structure necessary to compete in emerging economies. At the same time, relative labour costs and currency valuations can change dramatically in as short a period as five years. Thus, a footloose corporation will be more resilient than one which is not. Fifth, recruit, develop, rotate and promote the world’s best talent with complete blindness to national or ethnic origin. This is how you can increase the odds that, 10 years from now, you’ll have mid- and senior-level managers who are locally astute, who think globally and who are skillful in multicultural settings. Last but not least, globalize the corporate headquarters by distributing key functional and/or business heads to major hotspots in the world. Jeff Immelt, GE’s chairman and CEO, is based in the US. However, John Rice, the company’s vice-chairman, operates out of Hong Kong. Paul Polman, Unilever’s CEO, is based in London. However, Harish Manwani, the corporate chief operating officer (COO), works out of Singapore. These are examples worth analysis and emulation. The world economy is rapidly becoming increasingly multipolar and more integrated. As evolutionary theory explains, organisms which mirror the external reality significantly improve their odds of survival. Leaders of today’s large enterprises would do well to keep this guiding principle in mind. l Anil Gupta is the Michel D Dingman chair in
strategy, globalization and entrepreneurship at the Smith School of Business, The University of Maryland, and a visiting professor of strategy at INSEAD. His most recent book is Global Strategies for Emerging Asia (Wiley, 2012). l Haiyan Wang is managing partner of the
China India Institute, a Washington-based research and consulting organization. They are the co-authors of Getting China and India Right (Wiley, 2009) and The Quest for Global Dominance (Wiley, 2008).
FOCUS More complex, more ambiguous?
The joys of juggling accuracy and precision
The hidden side of complexity
The masters of complexity
Step-back! Complexity and mindfulness
The joys of juggling accuracy and precision It is time for business leaders to develop fresh skills to enable them to be strategic and decisive amid the cacophony of today’s workplace. Liz Mellon looks at how managers can best manage themselves and their work so that they can ride with ambiguity
+ DIGITAL EXCLUSIVE Liz outlines the imperative for leaders to master business complexity.
There was a tremendous study of leadership more than 25 years ago across countries and industries. The conclusion? Companies wanted leaders to be strategic, caring and decisive. ‘Strategic’ meant the capacity to look ahead and think about what the future might bring. ‘Caring’ meant that the leader was not just personally ambitious, but also wanted to develop strong and capable followers.
‘Decisive’ meant having the courage to call it when it needed calling. Being ‘strategic’ and ‘decisive’ has become a lot harder. As part of the study in 1973, the academic and author Henry Mintzberg reported that managers spend half of their time on activities that last less than nine minutes. It has not improved with time. In 2005, a detailed piece of time-tracking research showed that
managers spend only 60% of their time in value-adding activities, and at least 25% of their time is taken up with administration. Future orientation is not high on the list and data overload means that most managers cannot think much more than a day ahead. All this means that there is an epidemic of executive attention deficit disorder menacing more and more organizations. It was bad enough even before handheld devices left the world vulnerable to 24/7 messaging. Overwhelmed by floods of data and exploding demands on their time, talented leaders are turning into harried underachievers. They are losing their ability to look ahead and take decisions. The unknown has become overwhelming. It is time that leaders developed fresh skills to enable them to be strategic and decisive amid the cacophony of today’s workplace. Insight not foresight Leaders need to think about the world differently, not least with regards to strategic planning. In the 1970s, strategy meant carrying out a thorough analysis of an organization’s strategic competencies compared with competitors, looking at how a particular industry was developing and then making a move. Strategy was about ensconcing the company somewhere unassailable. From the 1980s, as the world started to globalize and competition to emerge from unexpected quarters, scenario planning (used by Shell since the 1970s) became more popular. In scenario planning, analysts combine known facts about the future, such as demographics, geography, military, political, industrial information and mineral reserves, with plausible alternative social, technical, economic, environmental, educational, political and aesthetic trends. Instead of one best move, scenarios provide different versions of the future, dependent on a range of events. Today, even these have lost their power. Take the example of Amazon. Jeff Bezos,
the founder and CEO of Amazon.com, is the most famous son of the e-commerce revolution. The company he created became a business phenomenon. Amazon is arguably the best-known online brand in the world. He was senior vice-president of DE Shaw, a Wall Street investment firm in 1992 when, surfing the internet, he came across an astounding fact. According to usage statistics, the internet was growing at a rate of 2,300% a year. Bezos sensed an opportunity. Online commerce, he realized, was a natural next step. He made a list of the top 20 items suitable for selling on the internet and narrowed it down to two – music and books. The rest is history. No strategic planning, no scenarios, just a cross-fertilization of computer science and Wall Street smarts. New businesses, and new business ideas, emerge from the white space at crossover points between separate industries. In 2013, competition can come from anywhere and the internet means that business is also more vulnerable to disintermediation (it cuts out the middle man). So leaders’ approach to strategy, under conditions of extreme uncertainty, has to morph. It is impossible to see around corners or foresee what lies ahead, so leaders need to sharpen their insight. Lessons from bats Bats are the only mammals naturally capable of true and sustained flight. Microbats use echolocation to navigate and forage, often in total darkness. (megabats have good visual acuity.) Echolocation is the same as active sonar. Bats issue ultrasound via the larynx (at a higher pitch than humans can hear) and then assess range by measuring the time delay between the sound emission and any echoes that return from the environment. And just observing bats in flight, they do it very fast. In a similar way, managers need to turn on their competitive radar. It is about constantly scanning for weak signals that are lead indicators for new themes or trends that could undermine the company. It is about searching for hidden insights and that means setting aside diary time for thinking more than one day ahead.
Focus The second trick is to focus on four-to-five key strategic priorities. With so much data and white noise, it is easy to fall for the trick of ‘busyness’ – long lists of things to do. The challenge with ‘busyness’ is that managers spread themselves too thin and don’t get done what they should to keep the business going. Business not busyness is needed. Like giving a good speech, focusing on a handful of priorities takes time and effort (it takes no preparation at all to give a bad speech). It means challenging conversations with colleagues and a resolute desire to pursue a clear direction. It means giving up on pet projects and pursuing the common good. It also means stopping certain activities to make space for new things to start. Deciding what to stop allows leaders to de-clutter the business and have a solid sense of strategic direction. Purpose not vision And the third piece that has to change is business’ collective view of what ‘vision’ means. The classic view of strategy has been that corporate boards set a clear direction, hold up the vision so everyone can see it too and off they go to put it into action. The challenge is that it is much harder to imagine what the future may bring than it was 30 years ago. There is a lot more turbulence in the system. Planning is not a straight path from A to B and, even if it is agreed that B is where corporates want to get, the destination may need to change shortly after leaving A, as the world shifts around us in unexpected ways. So it is quite hard to hold up a compelling vision when so much is changing that it could set off on a series of false starts. Smart CEOs are thinking more about purpose. One of the keynote interviews at Fortune’s Most Powerful Women Summit 2012 was with Virginia Rometty, IBM’s CEO and the woman at the top of that list. A CEO’s most important job is to keep their company adapting as the world changes. Transformational change is an admission of failure, because it means that the company has drifted so far from relevance that it needs a time-consuming and costly wrench . In an interview with Time magazine last year, Rometty said that she thinks that the most important part of staying relevant will not be a strategy or plan, but what she calls ‘strategic
In the world you and I live in now where everything’s changing so quickly, you can’t predict everything and most of us have workforces that are very bright, very intelligent, that want to be engaged in a broad way Virginia Rometty, CEO, IBM
belief’. She describes what this means. ‘Clients would often say to me: “What’s your strategy?” And I would say: “Ask me what I believe first, that’s a way more enduring answer.” And in the world you and I live in now where everything’s changing so quickly, you can’t predict everything and — and this is probably the most important “and” — most of us have workforces that are very bright, very intelligent, that want to be engaged in a broad way. This idea of a strategic belief is saying that you can agree among the firm for the future, on some really big arcs of change, I would call them.’ For IBM, one big directional arc of change is cognitive computing, a world where computers do not just process, but think for themselves. There is no clear vision of what IBM should become in the face of such monumental change. There is a blurry path ahead in the fog. Rometty’s radar has spotted the trend and IBM’s purpose is to follow the directional arc to meet it. A much less certain world, with more complexity along with its partner, is ambiguity. How are leaders supposed to take decisions in the face of such exaggerated levels of uncertainty? Decision, decisions The good news is that a lot more is known about how the brain works today. The 2002 Nobel Laureate Daniel Kahneman provides ground-breaking research in his book, Thinking, Fast and Slow. A central part of his book is about System 1 and System 2 thinking. System 1 thinking is fast and dislikes ambiguity, so it suppresses doubt and quickly searches for information to confirm its first, instinctive decision. System 2 is slow, ponderous and can result in tunnel vision as leaders focus down on one topic. To analyze data and to think through ideas and draw conclusions needs System 2, but it is lazy. So in practice, managers take many everyday decisions using System 1, their instinct. Instinct and emotion According to Nigel Nicholson in his 2009 book Executive Instinct ‘the brain doesn’t so much calculate, as seethes and waves’. That is the first blow to what most managers have historically considered as rational, evidence-based decision-making. The brain
searches for and retrieves evidence and facts to support an idea or a decision that someone has already instinctively taken. The second blow to traditional thinking is that decision-making is driven by emotion. There has been a series of studies looking at the impact of damage to the emotional centres of the brain, the ventromedial prefrontal (VMF) cortex and the amygdala. VMF patients appear rational, but enter a continuous and endless System 2 loop over even simple decisions, such as which date to agree a meeting. Perfectly rational, but completely indecisive. In this condition, there is no emotional nudge towards what feels like the most advantageous choice, so no decision is reached. How Asia worked it out An aside. The ventromedial frontal lobe is located in the brain just behind the bridge of the nose. In Asian countries, it is common to paint a coloured dot, called a bindi, in
the centre of the forehead close to the eyebrows. Traditionally, this area is said to be the sixth chakra – the seat of ‘concealed wisdom’. According to followers of Hinduism, this chakra is the exit point for kundalini energy. The bindi is said to retain energy and strengthen concentration. How did the ancients ever work that out? ‘Modern’ research giving the scientific explanation is dated 1999. Comfortable in discomfort Books on management will say managers are paid to take decisions. Early in their careers, they are rewarded for crunching the data, analyzing the pros and cons, presenting the case and making the call – yes or no. As they become more senior, the decisions get bigger and more complex. Globalization has brought with it giant organizations that outrank small and mediumsized national governments in revenue and
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power. The way forward is often unclear and strategic thinking has become the ability to peer through fog. Being comfortable in discomfort means learning to operate in a grey area, where an individual may not have all the data he or she needs to take a decision. It is about instinct, speed and assuming that the future will not be the same as the past. It is about embracing ambiguity and the possibilities in a ‘yes’ world, rather than an ‘either-or’ world. Tom Albanese, who stepped down as CEO of the mining giant Rio Tinto in 2013, advises: ‘We muddle accuracy and precision – accuracy is getting the right answer, precision is getting the numbers in the cash flow model right, to the decimal point. The system drives towards precision, but from the CEO perspective, the information only gets you to solve one part of the puzzle.’ In other words, it is about letting go of accuracy and certainty, and having the courage to take a decision when you do not have all the information. And it is also about living with the discomfort it brings – the uncertainty, the nervousness, the tension.
We muddle accuracy and precision – accuracy is getting the right answer, precision is getting the numbers in the cash flow model right, to the decimal point Tom Albanese, former CEO of mining giant Rio Tinto
a large part of the meeting arguing about whether it should be 20% or 21%. They were clinging to unreality and the following year, their industry ranking plummeted – it was as if they fell off a cliff. Three steps to mastery How can managers and leaders then best manage themselves and their work so that they can ride with ambiguity rather than be overwhelmed by it? The first step is to own your time proactively. Don’t get sucked into busyness in response to all the white noise, step back, focus and take charge of how you manage your days. Read through your last 200 emails and work out what and who is wasting your time. The second step is to embrace the grey. Learn to love uncertainty, teeter on the edge of known knowledge with a sense of experimentation and adventure. And the third step to mastery is to trust your instinct; it’s often right. l Liz Mellon is chairman of Dialogue’s
One chairman, who has asked to remain anonymous, takes the idea further: ‘You have to recognize that there is no truth or objectivity in what you do as a manager. Sometimes, if the data tells you it’s 49/51, take the 49. Most of the decisions I make are in areas of uncertainty that don’t have easily discernible, guaranteed, right or wrong answers. You won’t find answers in policies or rule books. If it were that easy, someone else would already have made the decision. In a changing world, the past is not always a good predictor of the future, so you can’t simply rely on historical evidence. I can’t remember the last time I wasn’t discomfortable.’ Clinging to the data wreckage Sometimes managers cling to the data because it gives them false hope. A colleague was working with a multinational company Phillips in the late 1990s, and told me at the time its economic performance compared with the performance of its competition was dire. Its return on investment was running at about 19%, compared with the competition’s 32%. It was the legendary ‘burning platform for change’. But the management team could not bring themselves to believe it. The managers fastened onto the figure of 19% and spent
editorial board Further reading Henry Mintzberg, The Nature of Managerial Work, Harper & Row Publishers, New York (1973) A research paper by Pace Productivity Inc, presented at the International Association of Time Use Researchers (ATUR) Conference, Halifax, (November 2005) Gary Hamel & Liisa Välikangas, ‘The Quest for Resilience’, Harvard Business Review (2003) Max Nisen, ‘Fortune’s Most Powerful Woman Shares Her Leadership Philosophy’, businessinsider.com, (October 3 2012) Nigel Nicholson, Executive Instinct, Random House (2000) Antoine Bechara, Hanna Damasio, Antonio R. Damasio & Gregory P. Lee, ‘Different Contributions of the Human Amygdala and Ventromedial Prefrontal Cortex to Decision-Making’, The Journal of Neuroscience (July 1 1999) Liz Mellon & Simon Carter, extract from The Strategy of Execution, forthcoming McGraw-Hill (2013) Liz Mellon, Inside the Leader’s Mind, FT Prentice Hall (2011) Paul Goodwin & George Wright, Decision Analysis for Management Judgment, John Wiley & Sons Ltd (2009)
FOCUS More complex, more ambiguous?
The joys of juggling accuracy and precision
The hidden side of complexity
The masters of complexity
Step-back! Complexity and mindfulness
The hidden side of complexity Many in the business world have a tendency to make things more complex than they need to be, when simple solutions are faster, less expensive and often more desirable. Ron Ashkenas explains how it is up to individuals to break the cycle of complexity
+ DIGITAL EXCLUSIVE Ron shares some additional thoughts on complexity and simplification.
For thousands of years, civilization has been struggling with the challenge of how to make things work in the simplest possible way. As Confucius noted long ago: â€˜Life is really simple, but we insist on making it complicated.â€™ To counter this complexity in the corporate world, many companies try to include simplicity as part of their image, hoping that if they can give the impression that their products and
services are simple, elegant and easy-to-use, it will provide a competitive advantage. Others emphasize simplicity in their vision and value statements, with the idea that they should strive to make it easier for customers to access the firm and for employees to get things done. Why is it necessary, however, for individuals to be constantly fighting a war against complexity?
Why do we continually make things more complex than they need to be, especially when we know that simple solutions are faster, less expensive and often more desirable? As Leonardo da Vinci said: ‘Simplicity is the ultimate sophistication’ – something the late CEO of Apple Steve Jobs and his designers demonstrated over and over. So given this knowledge, why don’t leaders just design simple products and run our organizations more simply from the beginning? The answer to this question is that everyone, individually and collectively, unconsciously and unintentionally, creates unnecessary complexity – and when society puts together dozens, hundreds and thousands of complexitycreating people in organizations, you end up with companies that struggle to make things simple. However, the good news from this dynamic is that if individuals create complexity, then individuals can do something about it. As the cartoon character Pogo used to say: ‘We have met the enemy and he is us.’ So with this in mind, the purpose of this article is to help managers better understand how they create complexity, both individually and collectively – and what they can do about overcoming it. From complicated to complex To understand managers’ role in creating complexity, it is important to differentiate between the terms ‘complicated’ and ‘complex’. Modern organizations produce complicated products that have thousands of parts, such as jet engines, automobiles or electronics, often with supply chains and distribution networks that stretch across the globe. These products need to be put together in just the right way, often involving many people in different locations. Making this happen is indeed complicated. However, when the parts are put together correctly and everyone follows the prescribed routines, the outcomes are predictable. The engine (or car or electronic device) works and the organization that makes it functions effectively. Organizations, however, are not machines, but instead are composed of human beings who often do not follow prescribed routines.
What many managers do not realize is that the way we respond to inevitable complexity sometimes, completely unintentionally, creates even more complexity
Sometimes this is because of human error, lack of training or insufficient skill. At other times, a person thinks of a better or different way to get something done. And in other cases, there is no prescribed routine in the first place. In addition, people in the workplace interact with each other in rational and emotional ways, and influence each other’s behaviour, sometimes positively and sometimes not. In other words, when human beings are involved, the outcomes become less predictable – and more complex. In many ways, the manager’s job is to dampen down and control this human tendency to create complexity, variability and surprise. Organizational structures, rules, procedures and standards are all meant to keep people’s behaviour within certain limits; audits, controls, performance measures and rewards create incentives to behave in defined ways; and tools such as Lean and Six Sigma continuously squeeze behaviour into defined boundaries. But all of this effort only goes so far because, after all, people are people. They do not always follow rules. They have good days and bad days. They get angry or overly excited. They have new ideas and take initiative. In addition, we live in an environment that is changing faster than ever before in human history, and they have to adapt to these changes. So while many organizational forces push us towards conformity and predictability (which are necessary to produce complicated products and services), their human nature as well as their creative and adaptive response to the changing environment creates unpredictability and complexity. It is a continual balancing game, with pushes and pulls between standardization and uniqueness, controls and innovations, constraints and freedom, simplicity and complexity. How complexity gets multiplied What many managers do not realize is that the way they respond to inevitable complexity sometimes, completely unintentionally, creates even more complexity. For example, the CEO of a global consumer products company was concerned about variations in sales performance across different product categories, distribution channels
from Fortune Global 200 companies about the nature of complexity in their organizations. Their finding was that a certain amount of complexity is not only inevitable, but actually good for performance. This is the complexity that is created in response to changes in the environment, customer requests or competitive threats. In other words, this kind of complexity is adaptive and helps organizations navigate human and external ups and downs. But the study also found that most organizations contain some amount of complexity that is not performance enhancing, but drains value out of the company. Collinson concluded that this type of ‘bad complexity’ reduced profitability (EBITDA) by more than 10% (see figure 1).
and geographies. To reduce the variation and increase predictability across this farflung, complex empire, he initiated a monthly operating review for his senior management team. In preparation for this review, hundreds of finance people at the corporate office and across the divisions pulled together performance data and then sliced, diced and analyzed it in every way possible. While useful for a while, eventually the preparation of the monthly operating report became an industry unto itself, with many staff members devoted to it full time; and the monthly meeting became more of a ritual than a discussion. Only when the CEO retired, did his successor decide to do away with the process and just review performance exceptions – which freed up hundreds of financial analysts and senior executives to do more productive work. The point of this story of course is not that the CEO was a bad manager. In fact, the company did very well under his watch. But his approach to controlling and managing the complexity inherent in his business actually multiplied the complexity, increased costs and made it more difficult for people to get things done quickly and efficiently. Many of the most egregious, wasteful and unnecessarily complex activities in organizations have their origins in wellmeaning attempts to control variability and unpredictability. Many years ago, for example, I saw a lathe operator, whose gloves had worn out, turn off his machine and spend two hours securing a new set of safety gloves. The procedure involved going to a different building, filling out forms, showing the worn-out gloves to a procurement clerk, signing out the new gloves and then returning to his machine. When asked why the procedure was so time-consuming and convoluted, he explained that once upon a time a box of gloves had gone missing. So management decided not to trust operators to replace the gloves on their own (and have them available) but rather to create a more controlled, centralized procedure. The result of course, was even more complexity, and a minimal saving in lost gloves – offset by major reductions in productivity and morale. Two years ago, University of Warwick Business School professor Simon Collinson, in conjunction with the Simplicity Partnership in the UK, interviewed 2,000 business leaders
10.2% Good Complexity Improves your performance
Bad Complexity Increases cost and destroys value
Fig.1 Complexity graph based on interviews with 2,000 business leaders of Global 200 companies by Simon Collison, Professor of International Business at Warwick Business Schooland The Simplicity Partnership, March, 2011
Over the past several years, my colleagues and I have also conducted surveys about the sources of complexity in organizations. Using a web-based instrument in a dozen different companies, we collected the views of more than 1,400 managers about where complexity comes from, using the framework from my previous writings as a starting point. What we discovered when we analyzed 1,602 comments with 2,100 distinct, coded examples of complexity was that the most often-cited source of complexity is managers’ own behaviours, followed by poor processes, changing structures (e.g., reorganizations or too many layers) and too many products/services. In addition, however, the survey respondents noted that complexity also derives from the way managers respond to the complexity of processes, structures and products. We call this ‘behavioural aggravation’ because it amplifies complexity instead of reducing it. For example, in talking about the issue of having too many
‘complexifiers’, they are predisposed towards simplicity. I call these people ‘simplicityminded managers’, and they tend to have some or all of the following five characteristics:
products, a manager noted: ‘We could support an even broader product portfolio if there was less ambiguity and uncertainty of ownership.’ Similarly, in regard to structural complexity, a manager described how behaviour exacerbates the issues, as follows: ‘The divisional structure has created a range of silos that do not communicate. As a result, there is a lack of clarity as to who is responsible for what. Few people are in a position or capable of taking responsibility and making things happen in an effective manner which will add value across the organization. So the culture is to do nothing and form a committee.’
1 Ruthless prioritization: One of the most common ways that managers create or amplify complexity is to take on too much, which not only makes it difficult to get anything finished, but also makes it difficult for subordinates and partners to know what is really important. In contrast, simplicity-minded managers focus on the few most critical priorities and make sure that all activities contribute directly to their accomplishment.
In short, although complexity comes from a number of sources, the main source is managerial behaviour – most (or all) of which is unintentional. The reality is that most managers try hard to adapt to the changing environment of their firms, and adjust to the individual needs and idiosyncrasies of their people (and themselves). But in doing so, they often create even more complexity (see figure 2).
Fig.2 Schaffer Research: 2,100 responses to Complexity Assessment:
800 700 600
2 Ability to say ‘no’: To stay focused on the critical priorities, simplicity-minded managers do not get distracted by extraneous assignments and opportunities. They are able to push back on people who want to give them other things to do, even when they sound enticing or come from ‘on high’. They know that taking on another task/activity/ meeting will push something else out of the queue, and that therefore it should be a conscious decision, instead of a kneejerk reaction or something done out of deference. This does not mean that simplifying managers shirk work or do not do their fair share; rather they raise the question about the trade-offs involved in adding something else. 3 Willingness to iterate: Complexity-creators tend to be focused on perfection – not wanting to move forward until all of the data
200 100 0 Behaviour
Breaking the vicious cycle There is no easy answer or magic formula to help managers avoid creating complexity. It is part of being human, and we all do it, probably more often than we care to admit. But some managers have an innate ability to cut through complexity, get to the essence of an issue, and find ways of making things simpler and more straightforward. Instead of being
Complexity comes from a number of sources, the main source is managerial behaviour. Most managers try to adapt to the changing environment of their firms, and adjust to the individual needs and idiosyncrasies of their people (and themselves). But in doing so, they often create even more complexity. There is no easy answer or magic formula to help managers avoid creating complexity. But some managers have an innate ability to cut through complexity, get to the essence of an issue, and find ways of making things simpler and more straightforward. Instead of being ‘complexifiers’, they are predisposed towards simplicity.
Simplification skills questionnaire Rarely
Ruthless Prioritization 1. Do I give my people more than they can handle? 2. Do I push deadlines further and further out? Ability to Say ‘No’ 3. Do I add projects and initiatives without taking something away? 4. Do I defer to senior people when they want something that doesn’t make sense? Willingness to Iterate 5. Do I try to make things perfect vs just ‘good enough’? 6. Do I delay decisions in order to get more information? Communicate the Essence 7. Do my presentations have lots of words and slides? 8. Do I try to explain everything vs just the basic story? Engage the Team 9. Do I try to do everything myself? 10. Do I feel that I can do the work better than anyone else? Instructions: Check the appropriate box in regard to how frequently these questions apply to you. Try to provide examples where behaviours have caused complexity
is collected, all of the questions answered, all the dots connected and everything is ready to go. Unfortunately, there is almost always some new information out there or a new development that needs to be taken into consideration – so more often than not, complexity-creating managers take a long time to get things done, frustrate people around them, change definitions of what is needed, and do not produce what is needed. But simplifiers embrace imperfection and treat projects like rapid-cycle experiments and start-up ventures. They do ‘just enough’ to move into action, get feedback, learn, modify and improve. They adapt to the constantly changing environment and accept the fact that progress is not always in a straight line. 4 Communicate the essence: Complexitycreating managers like a lot of data, and a lot of words. They often try to communicate everything, in great detail, to make sure
everyone understands everything. If you have seen PowerPoint slides that look like Word documents, or presentations with dozens of slides, then you know the issue. This kind of over-done communication, while well intentioned, is often driven by the fear of not being able to answer every question or of appearing stupid. So to compensate, complexifying managers will try to address every possible issue in advance – which usually leads to wasted time and effort, and too much information for anyone to absorb. But simplicity-minded managers have a knack for cutting to the chase and conveying what is important, and nothing more. They are also comfortable admitting they do not know everything and may be wrong about some things – which allows communication to be interactive, genuine and effective. 5 Engage the team: Since complexity-creators try to make things perfect, they often feel no one can do a job better than they can. So instead
of delegating work, or reaching out for help and input, they become bottlenecks, making others wait until they have got things right. This is exacerbated by the tendency to take on too much and not prioritize, which is why complexity creators often seem to be overwhelmed, over-worked and frazzled. In contrast, simplicity-minded managers are comfortable engaging others, and letting colleagues and associates find better ways of getting things done. They also have a high degree of self-confidence that allows space for other people to shine, without trying to be the smartest one in the room. Not everyone is born with simplification in their bloodstream, which is why most of us struggle with complexity. Managers can learn to develop simplification skills over time and gradually break the vicious cycle of responding to complexity by creating more complexity. To do so, here are three simple (but not necessarily easy) steps: First, hold a mirror up to yourself and consider the extent to which you create unnecessary complexity. You can use the questionnaire (left) as a starting point, or just do some self-reflection. Try to be as honest with yourself as possible. It is OK to say: ‘My name is _ and I create complexity.’ Second, ask some trusted colleagues, friends or even subordinates to give you feedback about your tendencies to create complexity. Perhaps ask them to fill out the questionnaire and compare their answers with yours.
Managers can learn to develop simplification skills over time and gradually break the vicious cycle of responding to complexity by creating more complexity
Finally, based on what you learn from the selfassessment and feedback, experiment. Select an area where you tend to create complexity and try to approach it more simply. One manager focused on prioritization by getting her team to list all of their activities and projects on Post-it notes, putting them on the wall, and then sorting them to see which ones were directly supporting the department’s key strategies. This led them to eliminate a number of non-critical initiatives and consolidate several others, which simplified everyone’s work. Another manager instituted a ‘two-slide limit’ for presentations to force himself and his team to communicate more simply. A third manager reinforced the use of iteration by having more frequent 10-minute ‘work in process’ updates with her team rather than waiting for formal monthly reviews. Not everyone is born with the ‘simplicity gene’ and, in fact, many of us respond to the complex world around us by creating more complexity. But it does not have to be that way. By becoming more aware of the ways that you create complexity, and experimenting with ways of countering it, over time you too can become a simplicity-minded manager. l Ron Ashkenas is a senior partner
of Schaffer Consulting (Stamford, Connecticut) and an internationally recognized consultant and speaker on organizational transformation, acquisition integration,simplification and innovation
You might even bring this group together and have a collective discussion of ways that you (and they) unintentionally create complexity. The reality is that none of us can see our own patterns in the same ways that others see us. So to make sure the mirror you hold up is not distorted by your own biases, you need to get some help.
Ron Ashkenas, Wes Siegal and Markus Spiegel, ‘Mastering Organizational Complexity: A Core Competency for 21st Century Leaders’, in Research in Organizational Change and Development, 29-58, Volume 21 (2013) Ron Ashkenas, “Simplicity Minded Management” Harvard Business Review (December 2007) Ron Ashkenas, Simply Effective: How to Cut Through Complexity in Your Organization and Get Things Done. Harvard Business Review Press (2009)
FOCUS More complex, aore ambiguous?
The joys of juggling accuracy and precision
The hidden side of complexity
The masters of complexity
Step-back! Complexity and mindfulness
Game-changers: the masters of complexity In todayâ€™s challenging environment, game-changing companies are shrewdly mastering the complexities of doing business in an uncertain world. Doug Ready speaks exclusively to leaders in some high-growth firms for Dialogue to find out what sets them apart Doug provides some insight into his research of reslilient organizations.
Game-changing companies are special places. They create a unique sense of differentiation from their more traditional competitors. In addition to being different, they feel different. The buzz, the pride and a feeling of being a special place is palpable. But what makes a company a gamechanging company? Letâ€™s look deeper to understand why some companies stand out from the rest.
There are a number of companies that would be characterized as game-changers, such as Tata Group, Four Seasons, Standard Chartered Bank and Danone Group. Asset management firm BlackRock illustrates how a company becomes a game-changer in the first place. But to understand a game-changer, it is important to understand that most would characterize themselves as purpose-driven
enterprises. BlackRock is the world’s largest asset management firm by the measure of assets under management, which number nearly four trillion. BlackRock has a singular and clear mission: ‘To create a better financial future for our clients’. But in addition to being purpose-driven, game-changers are also superior performanceoriented companies. Good – even very good – is simply not good enough for these exemplars. Finally, the third attribute of a game-changer is while the company might be maniacally focused on delivering high performance, its leaders are equally proud that their firm is led by a set of guiding principles. Simply put, game-changing companies are purpose-driven, performance-oriented and principles-led. They do not view the world in a ‘zero sum’ fashion. Rather than ‘compromise’, they ‘reconcile’; they find the right win/ wins in a variety of complex situations and circumstances. Achieving game-changing status does not just happen. In conducting the research and interviews with a variety of companies on this topic, I found there to be an interesting condition underlying each of these gamechanging companies: they were supported and guided by a game-changing talent strategy that enabled the company to master the complexities and ambiguities of doing business in today’s uncertain world. Rather than mandating one global talent process, for example, they identify the processes that must be agreed globally (high potential identification, performance standards, for example), but then enable other key talent processes to be executed locally (recruiting, on-boarding, junior to mid-level management development, for example). They have talent strategies that embrace a series of paradoxes. They do not just accept these paradoxes; rather, they understand that mastering these paradoxes is the key to building a fresh kind of competitive advantage. Strategic and operational Game-changing companies have talent management policies and practices that are guided by the firm’s senior level line leaders from all of its businesses and in all of its key locations around the world. This sends a
Gamechangers understand that getting the right talent in the right roles at the right time will be one of the differentiators that will enable them to stay out in front
powerful message that talent is not only a strategic and scarce resource in the company, but a matter considered to be a critical accountability for line management. At the same time, game-changers understand that getting the right talent in the right roles at the right time will be one of the differentiators that will enable them to stay out in front. They combine a strategic, capability-building perspective with the edge required to execute effectively. The mastery of this paradox extends through every facet of the talent management value chain. • Talent planning and recruiting: they conduct global capability requirements, but execute hiring at the local level, often in partnerships with local universities and business schools, which are more in tune with local customs and customer requirements. • Driving a high-performance culture: they have common performance standards, but manage performance of employees in keeping with local cultural sensitivities. • Behavioural indicators matter: common leader behaviours are agreed, but with an appreciation of how those behaviours might be demonstrated in different cultural settings. • Employee development: common development programmes for employees at the ‘enterprise leadership level’, but local programmes for technical talent and middle management staff. • Networks and collaboration tools: gamechangers often have common technology platforms for communications and message roll-out purposes, but these roll-outs will be led by local leaders to drive home the messages in the local context. • Talent reviews and succession planning: game-changers will have global talent review processes, but with talent flowing from local business and regional talent pools and calibrated accordingly. Consider BlackRock once again. BlackRock boasts a talented team of HR professionals, two of whom are Jeff Smith, global head of HR, and Donnell Green, global head of talent. Together,
this team has built a talent management and leadership development powerhouse. The company has a talent review process that is completely hard-wired into the strategy of the firm and also guided by pure, executionoriented meritocracy. Like the game-changers, future enterprise leaders at BlackRock will be purpose-driven, performance-oriented and principles-led. Talent is assessed against these criteria, roles are calibrated, regional and functional reviews are conducted to ensure fairness, and succession plans are presented to the firm’s global executive committee (GEC) and to BlackRock’s board of directors.
Collective and individual Collectivism, collaboration, trust and respect are not just words at game-changing companies. They are the foundation stones of the company’s belief system. And these beliefs can usually be traced back to the founding of the firm. It embodies who these companies are, what they believe, what they stand for and how they expect their employees to behave. This sense of collectivism is the glue that binds these companies together. ‘What makes BlackRock a game-changer is
‘Game-changing’ organizations Four Seasons Isadore Sharp, founder and chairman at Four Seasons Hotels and Resorts, explains: ‘We look for employees who share the golden rule – people who, by nature, believe in treating others as we would have them treat us.’
Danone Group Franck Riboud, chairman and chief executive of Groupe Danone, says that in today’s complex environment, his organisation’s strength is its ability to find solutions quickly when times are tough, as well as its competitive spirit.
As Four Seasons works towards what it describes as ‘phenomenal growth’ in the next 10 years, it believes the company’s most valuable partners continue to be employees, with whom it has a solid relationship based on the golden rule.
He says: ‘The European perspective is one thing, but I see countries around the globe where poverty is retreating and people aspire to healthier, safer products that really do taste better – countries whose economies are growing, and where we have a strong presence. It’s paradoxical for these markets to be outpacing the more developed ones, but we are prepared to respond to the situation.
At Four Seasons, each learning activity aims to have an impact on the guest experience and support the culture of the company. By investing in and committing to effective training at all levels, we build competence and confidence in our employees, thus enabling us to sustain a competitive advantage in service excellence. For training to add significant value, each function in a Four Seasons hotel or resort strives to enhance the quality, retention and application of learning in the workplace, thereby creating a ‘learning organisation’. A focused learning resource then works hand-in-hand with management to develop and enhance the skill levels of employees. Acting as an internal consultant, the learning resource assesses the causes and effects of communicated needs and advises on appropriate solutions. These solutions may not always be training solutions, however, but could be related to management, morale, equipment or systems. The company believes it is through this philosophy of treating training as a dynamic process that true development occurs.
It’s part of our business culture to build on solidarity, to work with these growing countries and help the slower ones get up to speed. This is the benefit of having a geographically diverse group. ‘First, our operations in emerging economies – markets that we were among the first to bet on – continued to record spectacular growth rates. Next, in mature economies, we managed to reverse the slump in consumption in some of our traditional markets. This was the case in France: we had every reason to worry that our results would suffer there, but they rebounded sharply and ended the year up. On the whole, our business in Europe came through this testing period well, growing by 2.4%. And that didn’t happen by chance: it was a direct result of strategic choices made a few years back, when we set our geographical priorities and defined our business lines. Our positioning is perfect.’
that our clarity of purpose is crystal clear, has never changed, and never will,’ says Larry Fink, principal founder, CEO and chairman. ‘We are a fiduciary to our clients. We serve them. We have zero-tolerance for clientendangering mistakes.’ Leaders of game-changing companies do a variety of things to build a spirit of collectivism and collaboration. ‘We do a lot of storytelling around here,’ adds Rob Kapito, BlackRock’s president and one of its founding partners. ‘We lead by example and then
reinforce those examples through telling stories.‘ At the same time, BlackRock is committed to ensuring employees have the opportunities to enjoy a robust career within the firm – no need to leave to get to that next level. This includes setting the expectation that leaders will be held accountable for developing the next generation of leaders. BlackRock is not alone among these game-changers. In such firms, there will be on-going coaching; many employee networks; open job postings; a stated value of giving up the best talent so they can move forward; active employee
Standard Chartered Bank Standard Chartered Bank takes the view that its distinctive culture and values, which act as its moral compass, are the reason why clients and customers choose to bank with it, and employees want to join and stay with the organization.
Tata Group Bob Thomas, who heads Accenture’s High Performance Institute, has done a great deal of research and advisory work with the Tata Group. Here is what he has to say about some of the things that make Tata a game-changer.
The bank’s five core values are about openness, collaboration and putting the needs of the customer first. At all times, employees are encouraged to aspire to be courageous, responsive, international, creative and trustworthy.
‘Although it remains rooted in India, the Tata Group has expanded its horizons far beyond the country where it originated. The group has operations in more than 80 countries across six continents – Asia, Australia, North America, South America, Africa and Europe – and products and services from the Tata stable are exported around the world.
Standard Chartered has plans to be the world’s ‘best international bank’, leading the way in Asia, Africa and the Middle East. As such, the company places a focus on building deep and long-standing relationships with clients and customers, and constantly looks to improve the quality of products and services. Through its international network and expertise, Standard Chartered facilitates trade across markets, enables multinational clients to conduct complex business transactions and service the needs of an increasingly international consumer base.
‘The geographic spread of the Tata brand rides on the size and strength of its companies. The group understands global competitiveness as the capacity to access global resources and global markets and connect the two with best-in-class processes. In people terms, two major imperatives emerge: developing enablers for accessing global people resources, and developing a global mindset among existing managers. ‘The group has a framework that enables its managers to orient themselves to changing international realities, and to hone their knowledge and skills in a manner that helps them maximise their potential on the global stage.’
Mastering the four paradoxes These game-changing companies have talent strategies that:
• Are both strategically insightful and operationally effective
• Generate a strong sense of collectivism and individualism
• Are globally scaled and locally relevant
• Enjoy enduring commitment and regenerative responsiveness
development programmes; and a highly visible employee engagement process, so important to generation Y talent who want optimal transparency and meritocracy to guide their company’s talent practices. Global and local BlackRock is on its way to becoming a globally integrated asset management firm, perhaps the first to achieve that status. This would mean that the organization is not ‘silo-driven’. It works from a common playbook. In BlackRock’s case, it is the analytical framework that assesses risk. Most asset management firms have grown from a series of mergers and acquisitions, including BlackRock. But what makes BlackRock different is that it integrates all of its businesses onto a common technology platform. This creates transparency and reduces complexity and ambiguity. Consider if a company had ten different technology platforms that it used to assess risk. There is a great deal of room for politics and confusion.
With BlackRock, it actually brings people together – it is the glue that binds, so to speak. The firm’s clarity of purpose and its guiding principles will serve as the cultural glue that will enable it to fulfil its one company ambition: ‘We are one-BlackRock’. These strategic, operational and cultural ambitions are supported by well thought out and targeted talent policies and practices, characterized by being globally scaled and locally relevant. It rolled out the ‘We are BlackRock’ and the ‘Four Principles’ workshops, but made sure they were facilitated by local leaders in various locations around the world. Instead of rushing into China prematurely, the company built relationships with the Chinese government and has recently hired Wang Hsueh-ming, a highly connected former Goldman Sachs partner, to be its first chairman of BlackRock’s China operations. This is an example of a company that is able to combine strategic insight with a global vision, while also able to execute the hiring of a seasoned senior executive to increase
the odds that this vision will turn into operating reality. Enduring and regenerative Prior research that I conducted several years ago culminated in a Harvard Business Review article entitled ‘Make Your Company a Talent Factory’. It basically states that talent factories have two traits, and they do them well: ‘high functionality’ (meaning what talent processes they do, they do exceptionally well) and ‘high vitality’, as defined by three characteristics – deep commitment, broad-based engagement and rigorous accountability. I used Procter & Gamble and HSBC as the examples. That research supported the first half of this paradox: that great talent-building companies demonstrated an enduring commitment to people practices, regardless of business cycles, which CEO was in place at the time, or how thick or thin the margins were. These talent factories had CEOs and top teams that were deeply committed to people development. They were not just there to open up a programme, but were deeply engaged in all aspects of their company’s talent management practices. Finally, they held themselves and their reports accountable for the ongoing development of their companies’ next generation of leaders.
It is Darwin’s theory of evolution applied to business principles: those that endure have a superior regenerative capability
enduring part. But we are constantly looking over our shoulder, challenging ourselves to be better, to do more – and more creative things for our clients. That’s the regenerative part.’ This notion of enduring through being regenerative translates readily to talent management policies and practices. Scanning for innovations These game-changers are constantly scanning for innovations in HR and talent management practices, while keeping a close watch on ensuring that their company’s guiding principles are well understood and practiced. An example of this scanning activity might be to conduct an annual engagement survey that addresses, among other items, the quality and effectiveness of the company’s HR and talent practices. And a way to support the enduring nature of a company’s culture is evident in its central roles in helping the company’s CEO and top team to disseminate the company’s core values and guiding principles. In fact, two of BlackRock’s four guiding principles capture the essence of the firm’s capacity to excel in managing this paradox: ‘We are fiduciaries’ (enduring) and ‘We are innovators’ (regenerative).
Game-changers are not only committed to continuing the journey, but to staying fresh, to scrubbing processes clean, to never being so satisfied as to completely believe their own press releases as one executive put it.
It is tough enough to be purpose-driven or performance-oriented or principles-led, but it is incredibly difficult to build all three of these organizational capabilities simultaneously. These combined capabilities are such stuff that game-changing companies are made of and the essence that allows them to cut through complexity and ambiguity – but it doesn’t just happen.
Our observation is that the companies that have endured are those that embrace and execute change and innovation most readily. It is Darwin’s theory of evolution applied to business principles: those that endure have a superior regenerative capability.
These capabilities are supported by a gamechanging talent strategies. The companies with game-changing talent strategies are those that are capable of mastering a series of paradoxes that keep their people processes running smoothly over time.
Fink explains: ‘If you were to ask me how to describe myself, at least in the context of business, then I’d use the word “neurotic”. In a more general sense, I’m a student – I’m learning every day. But in a business sense, we use the word “neurotic” around here. We can’t stand still.
Global organizations can learn a lot from them. What they do is not magic. The only magical part is that they actually invest the time to execute their talent strategies better and more creatively than their peers. That’s what makes them the masters of complexity. l Doug Ready is president of the
‘I want BlackRock to be even more successful than it is now after I’m gone. That’s the
International Consortium for Exeuctive Development Research
focus More complex, more ambiguous?
The joys of juggling accuracy and precision
The hidden side of complexity
The masters of complexity
Step-back! Complexity and mindfulness
Step-back! Complexity and mindfulness Following the ‘Miracle on the Hudson’ in 2009 when a plane was hit by a flock of geese and crash-landed in the Hudson River, Sudhanshu Palsule examines the lessons leaders and managers can take from its captain on how to lead in a crisis of complexity On January 15, 2009, at 3.24pm, flight US Air 1549 took off from La Guardia Airport in New York on a routine flight to North Carolina. Ninety seconds later, it was hit by a flock of geese. The pilot, Captain Chesley “Sully” Sullenberger, a veteran of 43 years of flying, would later describe the sound of the geese hitting the plane as louder than the worst thunderstorm he had heard growing up in Texas. With both engines down, the plane stopped climbing and losing all forward
momentum. With a full tank of fuel and 150 passengers on board, the Airbus 320 was headed for disaster. The captain took control of the stricken aircraft and tried without luck to switch on the auxiliary power. Reacting instantly to the situation, he contacted Tower Control with a Mayday signal saying: ‘We are turning back towards La Guardia.’ He was cleared straight away, but then made the choice not to turn back to La Guardia.
He quickly deduced that he wasn’t sure of making it back to the runway. Seconds later, he checked with Tower Control if there was any other airport available in New Jersey and asked for the coordinates for Teterboro. He was cleared for that too. Once again, he worked out that he would not make it there either. After what was a protracted silence in the cockpit that cabin attendants later described as like being in a library, the captain calmly told Tower Control that he was ‘going in the Hudson’. Once he had done that, Sullenberger pulled off a remarkable feat. He landed the Airbus in the river. Lowering the nose gently to counteract the loss of airspeed, he glided the plane to the northern end of the Hudson where he had seen boats that would come in handy for rescuing the passengers. Keeping both wings perfectly horizontal, with an airspeed just sufficient to make the landing and keeping the nose just above the water, the 320 hit the water, scooted along for a while and came to a standstill. The two cabin crew members heard the captain give a one-word order – ‘evacuate’ – and they leapt into action. Every single passenger was escorted out onto the wings as they waited for rescue. The captain walked twice through the length of the aircraft even as the plane was starting to fill with water. Only when he was sure that no one was left behind did he leave the sinking aircraft. Complexity and mindfulness Captain Sullenberger’s landing provides powerful lessons for leading in complexity. Complexity increasingly defines the business landscape. It is the opposite of linearity and happens when unforeseeable factors converge together to create a situation that is not only unpredictable, but immune to the traditional rules of decision-making. It’s where command and control leadership just doesn’t work. Complexity has three main characteristics. One, a complex system is self-organizing, which means it consists of agents whose actions cannot be controlled or predicted (like the geese that hit the plane). Two, it is adaptive, which means that the diverse agents make decisions to interact with each other and cannot be controlled. And three, it is emergent, in that the result will always be greater than the sum of its parts. The outcome ‘emerges’ as the situation evolves. In a nutshell, complexity is the absence of data points and information that we traditionally rely upon to take decisions. It does not mean that there is
Complexity happens when unforeseeable factors converge together to create a situation that is not only unpredictable, but is immune to the traditional rules of decisionmaking, and command and control leadership
no information. There may be weak signals that are hard to pick up as long as we are stuck in the mindset that we traditionally rely upon. Leading in complexity It requires a Mindful Mindset so that the leader can sense and actualize emerging possibilities that would otherwise be inaccessible. The leader’s state of mind becomes the vital link in addressing a complex situation, accessing a field in which decisions get taken without complete information and action happens effortlessly. It is more a process of discovery than the implementation of a strategy. To use the words of economist Brian Arthur: ‘For the big decisions, you need to reach a deeper region of consciousness. Making decisions then becomes not so much about “deciding”, but about letting an inner wisdom emerge.’ Access to a Mindful Mindset is not easy. Nokia was the world leader in the telecom industry in 2008, with an enviable profit picture and the largest global sales of mobile phones. With a ringtone that had reached iconic status, a powerful global brand and the cinematic backing of Keanu Reeves flipping open a new Nokia phone in The Matrix, the company seemed destined for long-term success. Today, it is battling to win back the market it has lost to Apple and Android. What went wrong is precisely what had led Nokia to its success: expertise in the cell phone manufacturing business. Over time, this had become an orthodoxy – a fixed mindset – that began shaping the decisions and judgement calls taken by its leaders. Once companies form an orthodoxy, it becomes the locus around which routines and processes get organized. Nokia’s orthodoxy prevented its leaders from anticipating the radical disruption initiated by Apple through its development of a digital eco-system involving developers and designers. Android soon followed suit. Android was a ‘weak signal’ in 2008 when Google bought this Silicon Valley start-up, but by 2010 it had become a major disruptive force. The market had begun moving away from hardware manufacture to user experience, and Nokia’s Symbian was falling short of what the developers wanted. When the threat of Apple and Android became evident, Nokia reacted to the pressure of complexity by going back to what it knew best: manufacturing quality cell phones and tweaking its operating system, Symbian. What Nokia leaders needed to do at that time was radically disrupt their
thought processes and respond to the challenge posed by Apple and Android from a completely different mindset that could tackle the complexity. It needed someone at the top to step back from the situation and ask some fundamentally challenging questions, that dealt with purpose and meaning, that would guide Nokia through this challenging phase. Instead, the questions were all around functionality, technical improvement and manufacturing. What was needed was leadership at a Mindful level; instead reactivity and logic ran rampant. Mindsets – reactive, logical and mindful The challenge of complexity highlights a fundamental problem in the way leaders respond to disruptions. In fact, the ability to perceive clearly, interpreting the perception without bias or the need to be right, and choosing a response that generates positive impact is the number one leadership challenge of our times. The perceive-interpret-respond equation is a powerful leadership function and forms the basis for an organization’s strategy and how it is led. What and how leaders perceive influences the information they pick up. Bias and deeply ingrained orthodoxies shape our perception to the point that all perception becomes a projection of what we know, thereby filtering out the huge amounts of information available. The second stage – interpretation – poses another hurdle. The brain is now under biological pressure to be right. Once a perception has been formed, there is a biological impulse to select the information that can prove the original perception right. This is the second stage of the filtering process aided by a strong emotional urge to be right, and is part of an ancient reward mechanism in the human brain. Based on this, we form our response to the situation. We don’t have to proceed in this automatic way. Fortunately for us, our brains have the ability to step back and move up the mindset ladder to change the equation. The secret? Higher levels of awareness. The reactive mindset (M1) When we are faced with complexity, the brain has a tendency to immediately default into a Reactive Mindset (M1) whose sole purpose is survival. Higher thinking functions become sub-optimized as the brain prepares for danger through an automatic mechanism that has been working smoothly for millions of years.
Nokia’s orthodoxy prevented its leaders from anticipating the radical disruption initiated by Apple through its development of a digital eco-system involving developers and designers
Much needed adrenalin and cortisol flood the body as the brain starts reacting to the perceived threat. In M1, the brain addresses problems on one-to-one correlation and is primed for fast and efficient action. However, this means it is unable to deal adequately with complexity. Also, because the brain now operates on an ancient auto-pilot mechanism, the emotions that start surging through make it vulnerable to old habits and fears. In an interview, Captain Sullenberger mentioned how after he took control of the aircraft (a positive M1 reaction to danger), he had a strong ‘physiological reaction’ (an uncontrollable M1 reaction). His first thought was ‘Why is it happening to me?’ (an obstructive M1 victim reaction), by which he meant that he had not thought his career would end in him crashing an airplane. M1 rearranges the biochemistry of the body and prepares it for what is known as the fight-or-flight mode. The body starts producing glucose, immunity and digestive systems shut down, pupils dilate, the heart pumps furiously and the brain locks onto the perceived threat. Higher-level cognitive functions shut down to make way for the brain’s ancient survival mechanism to take control. (Women react differently, with ‘tend and befriend’ hormones instead). What was remarkable about the captain was that he was able to make a quick exit from the M1 mindset after it had served its purpose of
Captain Chesley “Sully” Sullenberger speaking at the 2012 University of Kentucky Sanders-Brown Center on Aging Annual Dinner
kick-starting his reaction to the danger. He quickly climbed up from the reactive mindset M1 to the logical mindset M2 in a matter of seconds, as he desperately needed to seek new information and think of a solution to the problem. He said later in an interview that ‘it just took some concentration’. Strange as it may sound, thinking is a counter-intuitive process when in the grip of M1. Mindset M1 is not just activated by danger or crisis; it can also be activated by hubris. Nokia’s biggest obstacle to dealing with the sudden complexity in which it found itself was its very success. Hubris had taken over and as it always does, it dulled the vital function of higher awareness in its leaders, thereby diminishing the ability to pick up weak signals. It had also perpetuated the deadly executive malady of the need to be right. Once, reacting sharply to the suggestion that Nokia partner with Android, the executive VP of marketing at that time retorted: ‘Nokia joining Android is like Finnish men peeing in their pants for warmth during the winter.’ Brain MRI scans would have registered a spike in the reward areas of the brain, which get activated when dearly held view-points are further endorsed. The logical mindset Captain Sullenburger was cleared to turn the plane back to La Guardia, but he had to quickly step back in order to think. And he had to do it all over again for Teterboro. Running a complex algorithm in his mind involving plane speed, distance from base, turning radius and angle of elevation meant that the brain had to be free of distracting emotions and the fear of failure. He had to keep calm and not succumb to the temptation to turn the plane back. He had to find a solution without falling into the trap of the familiar, which in this case was heading to either of the two airports. M2 allows the brain to perform two important functions: one, it frees us from the immediate grasp of needing to act under emotion and, two, it allows access to new information. This is exactly what he did. But the logical mindset M2 brings its own limitations. While it opens up the doors to new information, it does not have an easy mechanism to shut those doors after. Without awareness, information begets more information, thus opening up a new trap. The problem with M2 is that once it starts taking in information, it becomes a victim of the same. Once an organization gets stuck in M2, it turns into an
information sink. A magnet for consultancies, information-hungry organizations in M2 get flooded with analytics, KPIs and a process for everything under the sun, until data becomes overwhelming. What happens is the proverbial paralysis, and what suffers is the ability to take quick decisions. Something else happens: leaders get into a state of ‘cognitive depletion’, which starts affecting them at a behavioral level. Cognitive depletion is known to produce selfish behaviours. Selfishness key points includes, among other behaviours, the inability Neurology and cognitive psychology are to listen to any other helping scientists understand the brain point of view but one’s in new ways. I have drawn upon this own. Focused on detail, knowledge and combined it with insights we miss the wood for from perennial philosophies and my own the trees. Habituated exploration of human consciousness to satisfying the ‘how’, and leadership. A clear picture seems we stop asking ‘why’. to be emerging: as globalization and Logic overused dries digitization reshape the world, the way we up the emotional and think as human beings and as leaders has purpose channels not changed that much. A shift is not only that help leaders stay imminent, it is critical that it happens. inspired and, in turn, inspire others. Tackling complexity requires huge reserves of mindful energy: mindfulness of the role one is being called upon to play, of the nature of things as they are and as they ought to be, and of the need to have an impact. The mindful mindset M3 Sullenberger did not have the luxury of wallowing in M2. He had used it to free himself from the M1 grip and he had gone through the process of using information to select and reject two options until he had no choices left. He had to make yet another shift: this time to a mindset that is characterized by a state of Mindfulness. In M3, the brain sheds the burden of habit and becomes highly sensitive and adaptable to the emergent. Thought becomes clear, emotions are intelligently deployed and a strong belief in the possible guides the brain to action. The gap between stimulus and response that was hijacked by the need to be right in M1 and by need for information in M2 is suddenly freed up, allowing the leader to be guided by a sense of higher purpose and meaning. Sullenberger made the calm pronouncement to tower control: ‘We are going in the Hudson’ – and brought all his skill and expertise in landing the plane on water. l Sudhanshu Palsule teaches at Duke CE and the advanced management programme at INSEAD and at other business schools globally
Cracking the code for women in business Although many global organizations have good policies to nurture talent, progress on increasing the number of women at senior levels is slow. Liz Mellon looks at the reasons why leaders should seriously consider the gender mix in organizations Illustrations: Eva Tatcheva
+ DIGITAL EXCLUSIVE Liz gives an exclusive interview where she delves deeper into the perennial issue of the lack of senior women in business.
hy is a substantial part of the workforce not represented in equal proportions in most parts of organizations? Why is it that so many women either self-select out before moving into the very top echelons of organizations or do not even have an opportunity to fill these leadership roles? It makes no sense to lose female talent while good talent today is so hard to find and retain. Theories and initiatives abound, but organizations are still stuck. The world is full of self-aware global organizations that have good intent and policies to nurture talent. Despite this, progress on increasing the proportion of women at senior levels is woefully slow and painful – no organization has yet cracked the code.
What is going on? Sheryl Sandberg is the chief operating officer of Facebook and is on Forbes’ list of the most powerful women in the world at number six. She tells a story about visiting a client and meeting their senior executives in the boardroom. During a break, she asked to be directed to the ladies’ restroom and no one knew where it was. There were no women in the room other than her and no senior women in the company. She was astounded that even today, there are still global companies with no women at the top. When I was a professor teaching MBA students at the London Business School in the 1990s, the young female participants assured me that my ‘feminist ideals’
were out of date. The message was, ‘relax, that was in your day, we’re beyond that today. Equal opportunities have arrived’. But evidence suggests this is not true. The Grant Thornton International Business Report (IBR) 2013 showed that women hold only 24% of senior management roles globally, just getting back to levels last achieved in 2009. (Interestingly, this is roughly the highest level of female participation achieved in the best business school MBA programmes.) The proportion of female CEOs increased from 9% in 2012 to 14% in 2013, and only 19% of board roles are held by women. The statistics are stuck. And while there is a saying at work that everyone agrees with – ‘what gets measured gets done’ – 55% of the 3,500 executive respondents to the IBR disagree with quotas. Women seem particularly concerned that a quota system could be used to question the validity of their appointment and that they would be accused of being in place just to make up the numbers. And Brussels dropped its plans for women board quotas across the EU in October 2012. So there is a lack of regulatory push behind equality.
Good business sense An article in the McKinsey Quarterly in September 2008 demonstrated again that companies with more women at senior levels have higher levels of organizational and financial performance. More recently, a March 2011 Research Report from Catalyst showed a 26% difference in return on invested capital (ROIC) between the top quartile companies (with 19% to 44% women board representation) and the bottom quartile companies (with zero woman directors). An April 2012 McKinsey report – a three-year multi-country study from 2008 to 2010 of 180 publicly traded companies – showed that financial returns were higher in companies that had greater diversity (female and culture) on their executive boards. The findings were remarkably consistent. Companies ranking in the top quartile of executive-board diversity had return on equity statistics (ROEs) 53% higher than those in the bottom quartile. At the same time, Earnings Before Interest and Tax (EBIT) margins at the most diverse companies were 14% higher, on average, than those of the least diverse companies. With such strong and consistent evidence of the positive impact that female leaders have on financial results, why are we still stuck? What is stopping us from getting more women onto the roster?
Progress on increasing the proportion of women at senior levels is woefully slow and painful – no organization has yet cracked the code
Why care? Why should leaders worry about the gender mix in organizations at all? Why don’t they just treat it as the natural order of things? After all, men have a tradition of work (fathers, grandfathers, great grandfathers and men back through the ages have been raised as breadwinners), while women do not always have a female role model working outside the home, because many women choose to raise children and run the household for the family. Most of us care about the gender mix for reasons of equity and fairness. Why should one gender be advantaged over the other? But there are also financial business reasons to care about. Dr Roy Adler, a professor of marketing at Pepperdine University, reported in 2007 that a study tracking the profitability of more than 200 Fortune 500 companies over 19 years found that the 25 firms that most aggressively promoted women to executive positions had 34% higher profits as a share of revenue than the industry median. What’s more, 10 firms with excellent records of promoting women – including Google, Apple and Johnson & Johnson – posted much higher profits than even the firms whose records were merely very good. Catalyst research conducted between 1996 and 2002 also showed a strong correlation between the number of females in top executive positions and the financial performance of their Fortune 500 companies.
+ DIGITAL EXCLUSIVE “Boards that are not capitalizing on diverse leadership are boards destined to be lag profit leaders. The presumed inability to ‘find capable women’ is no longer an argument. With initiatives such as Global Board Ready Women, now with a list of certified global boardready women in the thousands, capable women are now found. I am heartened by the male tendency for competitiveness to become a force for gender equity... winning is everything, even for the old guard. As for those women who believe they are making any kind of sacrifice to become leaders, or the men who perceive that this is the case, rest assured that the only sacrifice determined women make is the lack of sleep. Leaders, whether male or female, have exactly the same characteristics in common and they are not innate to gender. As Lars Thunnell, who was executive vice president and CEO of the International Finance Corporation until 2012, so aptly said: ‘The exclusion of women from business opportunities is one of the greatest market failures of all. It cuts across every sector of the economy in developed and developing countries.’” VIEWPOINT Lisa Kaiser Hickey, president, The International Alliance for Women
There are three primary reasons. The first is unconscious bias at play. Discrimination is not intended or enacted out of malice – companies generally play by the ‘fairness and equity’ rules. Most senior men are puzzled as they look around the room and see only other men looking back at them. They have no clear idea why it has happened that way and shake their head in puzzlement over why policies designed to play fair by female employees are not working. They tend to conclude that it must be because the women have chosen to opt out. In fact, the villain of the piece is unconscious bias. Whenever there is a majority or predominance of one type, whether of gender, age or race, the minority has to play by the unwritten rules of the majority. Historically, we have more senior men than women in senior executive positions. Women are playing by male rules and losing. Organizations designed as hierarchies with ladders to climb, suit the male need for competition, but work less well for the female leader’s inclusive style. This is not personal prejudice, like everything else in this article; it is based on research. A meta-analysis by Eagly and Johnson in 1990 of 160 studies found that women use more participative and transformational management styles compared to men. (Previous research has shown that the transformational style is most effective when companies rely on innovation to stay competitive.)
Men and women lead differently Groups asked to describe the attributes of a male leader come up with the adjectives strong, arrogant, intelligent, ego-driven, bravado, powerful, dominant, assertive, single tasking, focused, competitive, stubborn, physical, self-righteous and direct. When asked to describe a female leader, the adjectives change. The list became multitasking, emotional, empathetic, strong, intuitive, compassionate, relationship-building, verbal, consensus-building, collaborative and gossipy. Our expectations and experience of male and female leaders differ. Male executives look at women being affiliative and inclusive, rather than competitive and egotistical, and do not understand or value what they see, despite the positive outcomes. So when it comes to promotion, women do not come first, or even high, on the list. The second reason is that companies are not making progress in micro-inequities. The impact of women failing to get on the promotion or candidate list, when judged by male standards of acceptable executive behaviour, is that their ranks are depleted, gradually and unnoticeably. A micro-inequity – a list without a female candidate – becomes a macro-inequity when multiplied a hundred fold and eventually leads to a lack of women in senior levels of leadership. The third reason is that even when women ask, they do not get. Originally, we thought that women didn’t get ahead because they didn’t ask, but just kept their heads down working hard and doing a good job (for example, see Harvard Business Review, October 2003). It is true that women do soften or generalize requests for promotions, raises or moves. But we do ask. Among others, Professor Tim Judge at Notre Dame’s Mendoza College of Business has undertaken research that shows that when women ask for more, they are more likely to have their motives questioned, which can neutralize some of the advantages. Harvard uses a case study of an employee getting restless and wanting to move on. When the case is given a male name, the class (men and women) concludes that they had better agree to his demands, in case they lose him. When the case has a female name, the class recommends that the employee is told to spend more time in the current job and not to be so ambitious. The fact is, women went through a phase of trying to out-tough the men, but it does not work. Male and female expectations of female behaviour mean that women playing at being like men lack credibility. It is a lose-lose game.
With such strong and consistent evidence of the positive impact that female leaders have on financial results, why are we still stuck?
How to address the issue of gender equality • Treat the issue as systemic. It is not because women are not as talented or because they choose to drop out for family reasons. It is much more complicated than that. Acknowledge and address unconscious bias in the system and train the male majority to confront and address it. We all have bias, it is nothing to be ashamed of. • Deal with micro-inequities. If we all ensured that a woman’s name is on every candidate list, progress would be accelerated. • Get sponsors for women – not mentors, but sponsors who will shepherd them through a system currently biased against them. • Allow ﬂexible working. It helps men and women deal with the demands work places on us in a world where the conference call can come in at any time of day from the other side of the world. • Put quotas in place. What gets measured gets done. Join the Dialogue – have your say on our gender equality polls.We ask what strategies your organization has for gender equality and whether you believe in boardroom quotas.
+ DIGITAL EXCLUSIVE
The language of sacrifice The situation is further complicated because somehow, women choosing to work outside the home have become
tangled up in the language of sacrifice. There is no talk of a man choosing to ‘sacrifice’ something through being at work, even though a tough job, lots of travel and long hours may mean he rarely sees his children or wider family. When a woman looks at the same situation, she talks about balancing her innate desire to support her family against job demands and then considers what she will need to ‘sacrifice’. The language is emotive. Is it because women feel out of control? Do they have no choice? There is a need for more research on this issue. Anne-Marie Slaughter wrote an article for The Atlantic in July/August 2012 that received huge amounts of coverage and comment. She titled it ‘Why Women Still Can’t Have It All’ and the opening line ran: ‘It’s time to stop fooling ourselves, the women who have managed to be both mothers and top professionals are superhuman, rich or self-employed.’ Is that the sacrifice? What about women who choose to remain unmarried, without a partner, without children or with a husband who looks after the home? If this is how we frame the issue, as a sacrifice between children and work, we limit the debate. Do men even consider the notion of ‘having it all’? The real battle now is that ennui has set in. After years of concentrated effort, with so little progress to show for the investment, women and business are giving up. Businesses shrug and point to everything they have tried, from equal opportunities policies to appointing a head of diversity and inclusion, and conclude, ‘we did our best’. Women sent on all-female development programmes are suspicious and resent the idea that they need to be singled out for special treatment. ‘We are executives first and our gender is immaterial’ is the complaint that we have heard repeated over the generations of continued lack of progress.
Rising to the challenge In May 2012, the Financial Times ran an article on healthcare company Novartis entitled ‘Women take the fast track’. It started contentiously, with a picture of CEO Joe Jimenez smiling out from the page, over the opening paragraph: ‘In May 2010, a New York jury ordered Novartis to pay $250 million in punitive damages… in what the plaintiffs’ lawyers claimed at the time was the largest gender discrimination case in the country.’ Yet Jimenez personally and Novartis as a corporation believe in gender equality. They decided to take a different approach to this challenge, with a new strategic initiative to develop female leaders. It was not without risk or controversy. The good news is that the initial results look promising. Indeed, in July 2013, Diversity Journal profiled Novartis receiving an Award of Excellence for its innovative Executive Female Leadership Program. The next issue of Dialogue will cover the journey Novartis AG started to ensure that women are as well represented at all levels in the company as they are in society.
l Liz Mellon is chairman of Dialogue’s editorial board Further reading Grant Thornton International Business Report (2013) bit.ly/UMH6JN Roy Adler ‘Women in the Executive Suite Correlate to High Profits’ (2007) www.w2t.se/se/filer/adler_web.pdf McKinsey and Company Is there a payoff from top-team diversity? (2012), , bit.ly/1cCAbfP Research shows men get ahead for being ‘disagreeable’ in the workplace; women don’t, (2011) Timothy Judge, bit.ly/1emUJXJ Anne-Marie Slaughter ‘Why Women Still Can’t Have It All’ (2012), bit.ly/NJYf5f Haig Simonian ‘Women take the fast track’ (2012) on.ft.com/14tGlyf
CEO perspectives on the changing leadership context As part of an exclusive qualitative study of CEOs by Duke Corporate Education, Jared Bleak and Tony O’Driscoll outline the seven sense-abilities leaders need to survive and thrive in the supernova that is the 21st century business environment
he business world has undergone major changes in the past five years. The environment is dominated by interdependence, complexity and unpredictability as has been documented in many studies. For a better understanding of what is different, Duke Corporate Education interviewed CEOs from all over the world and from a diverse set of industries about their past and present experiences. In the study of nearly 40 global CEOs, the general consensus among them is that the change the business world is experiencing
post-2008 is more of a supernova than merely a ‘perfect storm’. Recent global events have dramatically accelerated the move to a more interdependent world and have untethered many of the assumptions and beliefs that leaders have historically depended on to frame their leadership context.
The new leadership context From these conversations, two main issues were identified contributing to a ‘new leadership context’.
First, challenges are less predictable and, second, competitors as well as collaborators. A CEO from China knowledge is less reliable. Known constants in leadership stated: ‘The biggest challenge we’ve faced recently are changing, if not vanishing. When asked how is how do we deal with increasing complexity in the change is different these days, CEOs explained that it is global economy.’ almost impossible to predict future changes and, due Furthermore, the new leadership context involves to increased global interconnection, current mental a transition in authority. Command and control is models are no longer accurate as the nature of change decreasing, and the act of influencing is more important. accelerates. High complexity increases the need for teams and For the first time in the modern era, emerging and collaborative structures. A CEO from a company in developing countries account for more Turkey explained: ‘It’s getting tougher than a third of total world output. In today’s to lead, you have to influence more. The digital exclusive interconnected world, not only do nations business environment has become more depend on each other, but organizations egalitarian, not only with our customers, Jared Bleak looks and their leaders do so as well, often in ways but also with our staff. There are fewer further into the findings that are not anticipated or easily interpreted. levers to pull to get things done.’ of our exclusive study Many of the mental models held by With these less predictable challenges, of CEOs globally. leaders have been turned upside down. there is a shift in the type of change. This Leaders cannot predict the issues they will is seen in the enormous increase in the face because not only is the playing field different, but so speed and volatility of change, which we refer to as a are the players, often with unfamiliar notions of power shift from first order to second order change. The CEO playing out in different cultures. of an Australian company stated: ‘We used to evolve quite slowly… People now expect instant gratification… You don’t have the time for slow evolution. Not every move Challenges are less predictable you make will be right, so the tolerance for mistakes has CEOs admitted that they are no longer able to effectively to be greater, and sometimes you have to fix it later. That determine what is coming. Because change is happening is a hard thing to do.’ so fast, leaders need to decipher the current context while simultaneously preparing for how future developments may evolve. As one CEO from India described: ‘I think Knowledge is less reliable the notion of doing a five-year plan and then measuring As challenges have become less predictable along myself against that plan is going out the window.’ the dimensions described, the nature and reliability One reason it may be hard for leaders to see the entire of knowledge have also changed dramatically. Four picture is that the act of driving solutions has changed dimensions concerning the value and the nature of from being technical or uni-dimensional to increasingly knowledge emerged through Duke CE’s interviews. multi-dimensional. It is more important than ever to take First, the ‘shelf life’ of knowledge is getting more and multiple factors into account – for example, domestic and more unstable. Leaders’ knowledge bases are being foreign markets, your own industry and other industry’s added to constantly, thus leading to shorter life-spans
or durations of knowledge. A CEO from The Netherlands stated: ‘You get exposed continuously to the outside world. You make statements. You might very quickly not be in tune anymore with reality if you’re not very broadly interested in what happens around the world.’ Closely related to that, access to knowledge is uncontrollable. Social media, for example, can have a very high impact on the image of a company, and the information there is hard if not impossible to control. A CEO from a Turkish company explained: ‘Social media has become really hard… The difficulty is how do you manage social media in today’s world? Anyone can go on Facebook and say “I hate this company”.’ Moreover, identifying systemic interconnection was described as critical to understanding and solving problems. CEOs reported more successful decisionmaking through a systemic approach rather than relying solely on technical knowledge. For example, an Indian CEO related: ‘Thinking systemically has never been more important than it is now. I cannot solve a marketing problem in technical terms only because the business is not fractured or fragmented. Successful businesses are those that operate networks consistently and well.’ Related to this, tacit knowledge is also becoming more crucial, compared to the explicit knowledge leaders have relied on in the past. A US CEO highlighted this: ‘We used to say knowledge should be 80% technical and 20% social political. However, complexity is now in the fungibility of information. Eighty per cent is social political and 20% is technical.’ Overall, the interviews showed that the changes in the business world have resulted in a new leadership context. The world is interdependent, which leads to unpredictable challenges and less reliable knowledge to solve these challenges. This ongoing transition causes some difficulties and complications for CEOs.
are increasingly challenged. The CEO from a Brazilian company mentioned: ‘Today, more than in the past, it is very difficult for leaders to lead.’ They have to deal with continual disruption and are required to make decisions without having complete information or knowledge at hand. Referring to this, a US CEO noted: ‘The leadership team was asking me to make decisions, but I didn’t have any idea what to do. It was really challenging for me, the hardest job for me since coming out of college.’ Even with these challenges, leaders are required to take a step into the breach of uncertainty; otherwise the company will not succeed. A CEO from a South African company articulated this difficulty: ‘Leadership is going into the unknown and working your way through it, you have to navigate, keep your balance and be courageous without ever losing your integrity.’ To be more specific, CEOs reported challenges on several topics, some more direct than others. Many reported loneliness, pressure and even negative feelings while facing this new leadership context. First, reacting to unknown events is not easy. An American CEO said: ‘It is hard to adapt if you don’t know what you are adapting to.’ In addition to unpredictability, another US CEO referred to complexity: ‘How do you configure a company to face up to this external complexity. It is quite nerve-wracking.’ Not only is complexity an issue, but the stress resulting from high pressure on leaders has grown in this context. Coming from another angle, a Brazilian CEO replied to the question about what CEOs need to do differently in the future: ‘Be comfortable with being uncomfortable. A leader can’t know it all, so they have to be comfortable with ambiguity.’ In addition to being uncomfortable, loneliness is a difficulty for CEOs. Even though collaborative structures and teams are encouraged, it is still ‘lonely at the top’, as a US CEO stated. The CEOs described the need for resilience and persistence. More than once, the analogy to a marathon was given, such as by the CEO of a company in South Africa: ‘Leadership is more like a marathon than a sprint. CEOs must have the perseverance to run the marathon, not the 100 meter dash.’ CEOs are also facing the paradox of decreasing authority and control with continuous high responsibility. The high complexity and interconnectedness make it nearly impossible to decide alone. Leaders have to influence more, and have little to no direct control over outcomes anymore. This was highlighted by a CEO from a Brazilian company: ‘Control has been lost. Leaders can’t control the issues or the outcomes.’ He even went so far as to say: ‘Command and control is gone – really gone.’ So on one side, leaders have a decrease in authority and control and must involve a lot of people in the decisionmaking process. But on the other side, they bear the
Leadership in this new context requires managers to seek the right question, not just the right answer
Difficulties and complications The volatile, complex and interdependent business environment requires companies to adapt constantly and deal with unknown issues daily. But the structures of organizations are not well suited to cope with these developments; they are too big and inflexible. An Australian CEO phrased it like this: ‘You don’t have the time for slow evolution. You have to evolve on the fast track. The big organizations are not nimble.’ Relating more to pure size, a CEO from the US said: ‘One of my challenges is that our management has not been able to keep pace with the growth.’ Most companies have structures in place for maintaining their status, or hopefully improving it, but within known areas. However, processes for dealing with unknown and unpredictable events are not incorporated. Therefore, high pressure is put on the leaders as the last resort in handling complex and unfamiliar issues – CEOs
responsibility for the outcome mostly alone. A statement from a Turkish CEO shows this ambiguity and the reality of being blamed for mistakes: ‘You’re still the guy at the top, and everyone is questioning why you are there. You’re only at the top when someone has to take the blame, but you don’t get any credit or the kudos, or have any of the levers to pull because society has become egalitarian.’ The new leadership context creates a tough and complicated place for CEOs. Negative feelings, like high levels of stress, loneliness and not knowing what to do while being less in control are results of the new business environment. A CEO from the US summarized: ‘Courage is important – you do need a lot of courage to keep going in troubled times. It’s a lonely place to be a CEO. The decision and responsibility stops with you.’ All this prompts the question of how to react to these occurrences. What do leaders have to do differently, and what new skills and abilities might be required to be a successful leader? In understanding that the context is driven by constant change, it is inevitable that leaders must cultivate fresh ‘sense-abilities’ to be effective and succeed. As opposed to plain capabilities, sense-abilities refer to a person applying abilities in a certain context, whereas a capability refers to the individual ability alone. In this complex and interdependent environment, it is necessary for leaders to develop their own process for understanding the unfamiliar at a systemic level that can guide them in a variety of contexts. To successfully
achieve this development, leaders need to ‘rewire’ some old thinking and behaving mechanisms. Leadership in this new context requires managers to seek the right question, and not just the right answer. Additionally, they must change from developing assumptions to discovering context. Asking about one situation is insufficient; leaders need to instead ask how things work. Identifying stakeholders is not enough anymore; local and global interdependencies between countries and industries have to be identified. Leading by authority and control is not suitable anymore; influence and orchestration are now essential modes of behaviour. Control is decreasing and leverage instead is more important. In the context of high interdependencies and a complex business world, being right will not always be possible. Being well positioned instead gains more and more importance, enabling a leader to better react to new and complex events. Finally, the unpredictable nature of the leadership context makes it nearly impossible to gain great power over external events. It is therefore important to turn to gaining power over one’s own mind and how one reacts to events.
Seven sense-abilities The processes of rewiring mindset and behaviour can be embedded in the cultivation of the seven sense-abilities described below. Duke CE’s research revealed they are essential for leaders to survive and thrive in the new leadership context.
Develop the ability to grapple and grok Grappling and groking form a process of sensemaking that enables the leader to more quickly see leverage for action. ‘Groking’ requires that all previous knowledge, capabilities and experiences are framed and folded in real time to enable the leader to rapidly make sense of the current and unfamiliar context they find themselves in. To ‘grok’ means to understand context, as well as one’s own position within that context in a deep and meaningful way. The key question leaders must contemplate to develop this sense-ability is: ‘How long can I hold on to multiple conflicting hypotheses about which course of action to take until I can see a way forward that gives me the most leverage?’ ‘I think we are moving from technical challenges to adaptive challenges. With technical challenges, I know the problem and the possible solution. An adaptive challenge is something that has happened for the first time, so how do you navigate through that ambiguity and solve for what you need to solve?’ CEO, India Lead through successive approximation Leaders must cultivate the ability to make forward progress even though complete information is absent. The leader of the future is the one who gets the best answer for the context she is in through figuring out a way with multiple future options to be able to react flexibly to different possible events. The key question leaders must contemplate to develop this sense-ability is: ‘How can I quickly figure out the next move that will leave me the most options for subsequent moves?’ ‘You should change your working efforts and mindset to be more sensitive towards any external changes instead of staying static and unconcerned. If you are not concerned with changes around you, you will always fail.’ CEO, China Build and influence collectives For many leaders, the muscles they have used to drive decisions or actions (for example position, dominance, economic or military clout) are not as effective as they have been in the past. They need new ways of influencing and orchestrating decisionmaking and problem-solving that cross economic and cultural boundaries. The new skills involve a deep appreciation for context and the ability to form collectives of individuals and entities across the system that can take on questions together, solve problems and break through barriers to growth. The key question leaders must contemplate to develop this sense-ability is: ‘How do I engage people in a way that builds understanding and movement? Essentially, how do I inspire and bring people with me?’ ‘It’s getting tougher to lead. You have to influence more. The business environment has become more egalitarian.’ CEO, Turkey
Develop reliable sources of knowledge and insight The continuing increase in the velocity of change in the world and the number and kind of outlets for information make the development of new and reliable sources of knowledge inevitable. Leaders must cultivate and curate a more diverse personal network and broader set of trusted knowledge resources to help ‘widen their lens’. These resources need to go beyond their company and business. The key question leaders must contemplate to develop this sense-ability is: ‘How good is my radar for picking up weak signals that could undermine my business or for identifying new opportunities to grow my business?’ ‘In the past, I thought if I asked the right question, they would give me the right answer. In the future, you have to assume that they don’t even know the right question. In the future, if you only ask the questions, you are limiting yourself by your own world view.… In the future you must be an orchestrator of a diverse group of individuals from inside and outside the company to break that view.’ CEO, Switzerland Engage the organization in the new rational In a world of instability, it is not only leaders who lose their footing. Tremors from the turbulence of the past few years have defined rational behaviour in many organizations as avoidance of risk and following the rules. The fallout from this is a loss of confidence and the inability to see or the fear of acting on a new opportunity. Leaders must be able to see what inhibits the pursuit of opportunity in their organizations, correct it and redefine rational behaviour through their messages and actions. A shift from avoidance of risk and following the rules to seeing and seizing opportunities that will advance the business is necessary as a new rational. The key question leaders need to ponder to develop this sense-ability is: ‘How do I move the default position of the organization from avoidance of risk to the pursuit of opportunity when the context seems less certain?’ ‘The change in culture and habitual change internally and externally is a big challenge… it is very difficult for people to move and change the way they do things.’ CEO, South Africa Understand how to understand Leaders are dealing with new and complex issues in unfamiliar contexts. In this situation, it is impossible to consistently be armed with the right answers. One CEO explained: ‘Senior leaders have to be able to look at the big picture, and that picture now has no frame.’ This emphasizes that knowledge of how one goes about understanding the unfamiliar (tacit knowledge) is more valuable and practical than trying to absorb what might be known today in a technical sense. The most valuable knowledge is often not ‘what is’, but ‘why it is’.
The key question leaders must contemplate to develop this sense-ability is: ‘How can I make sense of unfamiliar contexts as quickly as possible?’
These sense-abilities enable leaders to make sense of what is going on in an increasingly unfamiliar and unpredictable business world, and invoke the appropriate set of resources and capabilities to take collective action to achieve the desired ‘There is no playbook that you pull out of digital exclusive outcome. the bottom left-hand drawer that says: The insights from the CEO study reveal “Okay, now we all go left.” So I think from Join the Dialogue – challenges facing leaders have changed that context, it is really trying to understand tell us how you survive in material and less familiar ways. They the dynamics of how to operate in an in the leadership are less predictable and knowledge is environment where the things that were supernova on the forum. less reliable. Given the nature of these valued before are valued completely challenges, it is imperative that the way differently today.’ CEO, US leaders develop and prepare for this interdependent world, also undergoes fundamental reform. Preparation Broaden systemic self-awareness to lead when less is predictable, familiar and reliable, Understanding the leader’s impact on systems requires more than just new knowledge; a change in and situations that go well beyond the walls of how we think, act and interact is vital. the company is central to building that leader’s ability to navigate unfamiliar contexts. Through ● Jared Bleak is VP, global business development and it, leaders learn to see themselves and their companies marketing, at Duke Corporate Education as actors in a broader ecosystem that surrounds a problem or opportunity. The key question leaders need to ponder to develop this sense-ability is: ‘What could ● Tony O’Driscoll is regional managing director (Asia) at be the systemic consequences should I choose to take a Duke Corporate Education particular course of action?’
‘The degrees of freedom you have to control the variables that determine the business are less. Your direct influence on those variables is also much less. Increasingly, business is being done, not in terms of hierarchical structure, but more in terms of circles.’ CEO, India
Further reading We invite you to download the full report of the CEO study here: http://www.dukece.com/elements/docs/LeadingInContext.pdf
Global leaders: conquerors or collaborators? Following a period of decline, globalization is on the increase and corporates are preparing to expand their international empires. In our first Dialogue article, editor David Woods talks exclusively to business leaders who have ‘gone global’ and moved abroad in a bid to expand their businesses’ reach – and have reaped dividends Illustrations: Ian Murray
engaged in a dialogue addressing the issues affecting down-to-earth mentality among leaders is the global corporates and suggesting ideas for solutions. key to a global approach to leadership, along with an agile and pragmatic – cosmopolitan – mindset. A new breed of conqueror The above sentence will read like an understatement According to member based research organization for some, but research published in McKinsey Quarterly in Corporate Executive Board’s (CEB) study, while CEOs are 2012 reveals 30% of organisations in the US alone admit increasing their investment in international growth, few they have failed to exploit global because of insufficient are confident they have the leaders in place to execute on leadership and personnel. Failures in a grasp of cultural these strategies. CEB’s report, based on a global survey savvy – outlined in the following pages – and even a of business leaders, found 61% of CEOs are putting more reluctance to travel abroad, have placed some managers emphasis today than they were four years ago on growing in the precarious position of attempting to lead globally globally in a bid to improve revenue. while thinking locally. Back in 1994, in his Manager’s Guide to Globalization, The ‘great global leader’ Stephen Rhinesmith attempted to integrate the impact The report defines ‘great global leaders’ as those who: of people (employees, managers, and leaders) with the shape a vision for regional growth and re-emphasise it; process of developing global organizational structures. take more risks early on in their new-market tenure and learn from failures; aspire to leadership responsibility and Rhinesmith advised six managerial skills for success in ownership; are networked in the organisation and across a changing world: maintaining a global mindset; having a silos; have enough cultural sensitivity that it will not derail stakeholder viewpoint; trusting processes over structure; them in their role or paralyse decision-making; spend being able to adapt and change; valuing diversity; and more time with external stakeholders developing lifelong global learning. than with internal stakeholders to gain He concluded that to be a competent DIGITAL EXCLUSIVE critical market intelligence; and identify manager, leaders must find ‘new and develop rising local talent to lay the perspectives’ for living and working in Join the Dialogue – have your say with our poll: What foundation for longer-term sustainable global organizations. are the stumbling blocks to success in the market. But almost 20 years after Rhinesmith’s successful global leadership It is hardly a straightforward job work, how close are companies sticking in your organization? description – and there is one surprising to this advice and are their plans working revelation: most global leaders do not in making their leadership strategies truly want to globe trot. CEB shows only 35% of those who – and effectively – global? are, by this definition, considered ‘great global leaders’ In 2013, following a period of decline in 2008 and even want the opportunity to live abroad, although 51% 2009, globalization is on the increase and corporates are want more global responsibilities and 78% want more preparing to expand their international empires. To do leadership responsibilities. this, they need strong, decisive leadership from managers Taking the argument forward, another piece of who think ‘truly globally’. Given the cultural idiosyncrasies research from professional services firm Ernst & Young, that must be navigated, the concept of a ‘truly global published in 2012, revealed that among the obstacles to leader’ is debatably more of a dream than a reality. building effective international management teams are This article will attempt to sketch out the reality, issues around cultural differences, difficulties in balancing drawing exclusively on the views of managers and leaders local and global talent, retention problems and the lack of on the ground (and overseas) in global organisations a leadership pipeline. including Bosch and Fujitsu (see case study, page 71)
and taking advantage of growing demand for luxury goods in Asia. Another theme that emerged from the Ernst & Young report is that cultural intelligence is not yet a widely accepted Cosmopolitan global concept. leadership The term is relatively recent: early But could a business leader without definitions and studies of the concepts as much global exposure run a were given by P Christopher Earley successful international business? and Soon Ang in the book Cultural If an observer were to visit a Intelligence: Individual Interactions restaurant in any country in the Across Cultures (2003) and more fully world and watch businesspeople developed later by David Livermore pitching to prospective foreign in the book Leading with Cultural clients, he or she would witness Intelligence. significant differences in how According to Earley, cultural business is conducted. intelligence can be defined as ‘a Perhaps global leaders can take a person’s capability to adapt as he or leaf out of the politician’s book. Prior she interacts with others from different to the G8 summit, which took place cultural regions’, and has behavioural, in a remote town in Northern Ireland motivational, and meta cognitive in June, several weeks of discussion aspects. Without cultural intelligence, took place – about dress code. It was businesses seeking to engage foreigners decided that world leaders, including are susceptible to mirror imaging. Russia’s President Vladimir Putin, But according to the Ernst & Young Conquistador: Juan Rodríguez Cabrillo UK Prime Minister David Cameron, report, fewer than three out of 10 (28%) explored California US President Barack Obama and of those surveyed felt that their top Japanese Prime Minister Shinzō Abe, management team had sufficient experience outside of their home country or a sufficiently international outlook on decision-making. Do global leaders need to relocate? While recruiting locally would help to redress this balance, in many emerging markets the supply of talent • The most effective global leaders do not need lags behind demand. This situation is exacerbated by rapid to be based in market to drive positive business salary inflation as companies vie with their competitors outcomes, according to a survey of 11,500 global for suitable candidates. leaders by member-based advisory company This is especially true the higher up you go – seasoned Corporate Executive Board (CEB). executives ready to take on critical roles are in short • This means that hiring managers need to rethink supply in many territories. traditional relocation requirements in order to In fact, only 14% of this year’s Fortune Global 500 source candidates most likely to enhance corporate CEOs come from countries other than their corporate performance. homelands. But those leaders who have ‘gone global’ and • The CEB study showed just 18% of global leaders moved abroad in a bid to expand their businesses’ reach claim to be effective in their role. While most have reaped dividends. organizations look for leaders who have a ‘global For example, Indra Nooyi, CEO of PepsiCo, was born mindset’ and are willing to relocate, that job and educated in Chennai, India, and, although she is description ultimately leads companies to hire the based in the US, she has focused on bolstering PepsiCo’s wrong candidate for the position. The competency reputation abroad. ‘I grew up in an emerging market, and I that actually differentiates successful global cannot forget that,’ she says. leaders is their ability to influence others – and it Carlos Ghosn, the man at the helm of car manufacturers is four times more important than having a ‘global Renault (French) and Nissan (Japanese), was born in Brazil mindset’. into a Lebanese family, educated in France and is fluent • While relocation has typically been a requirement in four languages. He has been described by CNN as the for global leadership roles, companies have other ‘quintessential international businessman’. options that should be explored. For example, And luxury brand Dior’s CEO, Sidney Toledano, was CEB’s survey showed that while the majority of the born in Casablanca, Morocco, and graduated as an best leaders do not want to relocate, almost threeengineer from the École Centrale in Paris. He has focused quarters of them are willing to travel more than 60 on giving the brand an increasingly international footprint, days a year to spend time in the various geographies expanding the number of fashion outlets across the world that they oversee.
have failed to realize this. Global leadership requires a combination of strong business skills along with robust intelligence from regions around the world.’ Alexander Collot d’Escury is CEO of Desso, a global carpets, carpet tiles and sport pitches company, operating in more than 100 countries. He believes it is vital leaders think globally. ‘What is challenging today for many business leaders is that we are going through immense economic and social change as a result of the recession and the rebalancing of global wealth towards the rising economies in Asia, Latin America and elsewhere. It is creating tensions and different realities depending on where you are,’ he told Dialogue. So what, in the executives view, is the ‘Holy Grail’ of global leadership and what should corporates strive for in their c-suites? Andorfer, a German native, is based at Bosch’s UK head office The realities facing Alexander Collot d’Escury, CEO of Desso, a global carpets, carpet tiles and has completed a number of global leaders and sport pitches company international placements for the Dialogue spoke exclusively to organization, as well as having business leaders in organisations a previous role as sales and marketing director at United taking the tentative steps towards beginning Automotive Electronics Shanghai, based in China. global expansion, and to managers that have been He believes that to achieve truly global leadership, responsible for building international business empires, corporates have to offer their senior managers to find out from them the elusive secrets to global international placements to prepare them to make the leadership success. right decisions. What are the issues facing global business leaders on a ‘At Bosch, we are constantly adapting in order to help day-to-day basis? our people to develop and move toward true global Andreas Andorfer, global general manager, power leadership qualities.’ tools – lawn and garden, at engineering and electronics He is of the view that having localized leaders helps company, Bosch, explains: ‘One of the realities of today’s to bring into the company, market needs and the world is that it is getting more and more global. People understanding of the country’s own people. are travelling more often and further afield than ever In 2011, Purple Cubed’s Sunley appointed Lynne before, and products and components are being sent to Bellinger as managing director of the company’s branch and received from every corner of the world. in Dubai. ‘A business, no matter how small or big, is directly or Bellinger explains: ‘A global leader should demonstrate indirectly affected by the global conditions. how an international mindset will benefit individual ‘For a company such as Bosch, internationalization is regions, looking at the areas where parity is essential and reflected in our business environment, which means we where there can be global variations. This is all about have customers, suppliers and colleagues from all over exploring the benefits of working together and identifying the world. In such a multinational and diverse company how regions can impact upon one another. To do so, a as Bosch, the leadership structure is global – with all the global leader will need an open, sharing mindset and this benefits and challenges that come with it.’ comes down to establishing a healthy culture.’ But Jane Sunley, global CEO of people engagement organization PurpleCubed, is concerned about the failure of global leadership to date. ‘There’s little doubt that the Culturally savvy European financial crisis, which started in 2008, came as Bellinger adds: ‘To further support staff, recruit the right a result of leadership failures,’ she explains. cultural and businesses fit in all locations. Then allow ‘It could be argued that traditional leadership models capable and trusted teams and organizations to put their have become less relevant and many organizations regional spin on things and share experiences/results. would have the ‘forced informality’ of having their meetings without neck ties to ensure that all the leaders were dressed similarly – and no one was insulted. These are, of course, generalisations, but they form only the beginning of the lengthy list of potential pitfalls for global businesses and, as such, corporates need strong, decisive, informed leaders to steer them through the international minefield. Take US electronics giant Best Buy, for example. It closed its UK operations in 2011, just 18 months after launching there, because its leaders were unable to quickly and effectively adapt their US-style retail model, for a UK client base during a recession. Best Buy wanted to offer great customer service, but failed to recognise UK customers wanted to buy electrical products online. The evidence oulined above suggeststhat managers are still failing to think globally.
What is challenging today for many business leaders is that we are going through immense economic and social change as a result of the ongoing recession and the rebalancing of global wealth towards the rising economies
‘Companies employ intelligent and capable adults, but it is not unusual for them to be handed down policy “from head office” that has little resonance in their location, yet they feel unable to challenge it. They need to look towards a more nurturing, collaborative and trusted work environment where their talents and expertise are truly valued and respected.’ Sunley interjects: ‘It’s not about “an ideas box”, it is about substantial day-to-day information which, if harnessed, can provide a real competitive advantage – an upwards cascade, which is very necessary. Global leaders need skills to listen, ask the right questions, assimilate the information strategically, take action (or not) and give feedback. It’s a fine balancing act and one which leaders at all levels will need to learn before it’s too late.’ But while this fine balancing act has proved a success for PurpleCubed – an organization that employs less than 200 people – can it work for Bosch, which employs 42,800 around the globe? Andorfer says leaders can aim to leverage a global mindset by having regular visits and exchanges with colleagues from different countries. Being receptive to feedback and advice from the local people can help. ‘To be a well-respected and successful global leader, one should have an open mindset and be an active listener in combination with cultural sensitivity. These qualities are fundamental,’ he explains. Taking the point further, Collot d’Escury recognises that since consumers and markets are ‘literally emerging before our eyes’, 21st century leaders must know how to compete in this environment and how to hire the best talent to help take them forward. The importance of providing added value products and services in markets to customers remains the same, except now many of the customers are new to the market.
Frugal innovation ‘One example is how “frugal innovation” [the process of reducing the complexity and cost of a good and its production] has been developed in rising markets such as China, India, Brazil and so on. Western companies like Nestlé, GE, Procter & Gamble and Unilever have learnt lessons from the smart approaches taken locally to simplify products and tailor them for consumers
at the “bottom of the pyramid”. At Nestlé, for example, where I gained my earlier experience as a global manager [Collot d’Escury has held roles including regional director of Nestlé Purina Petcare and Nestlé Beverages and Confectionery in central Europe], we developed new ways of producing and delivering products in countries such as India.’ An example of this is the case of the branded chocolate product Kit Kat, where for an Indian market, Nestlé developed ways to ensure it did not melt, made it smaller than products in the UK, making it more affordable, and ensured it was set up for transport on the small bikes used throughout India to distribute goods. Collot d’Escury adds: ‘Having sensitivity to this helps business leaders place the right emphasis on hiring and developing managers who will be openminded and sensitive to other cultures. Outside of that, you need to ensure the organization has a worldclass operational system so that you offer fast, flexible and flawlessly executed service to all markets. Innovation is spurred on by connections between people from all markets.’
The conquerors In the year fourteen hundred and ninety two, Columbus sailed the ocean blue. As a result of this simple rhyming couplet, schoolchildren remember that this is the year that Europe began to create its empires in the Americas. The conquerors (or in Spanish, ‘conquistadors’) – Columbus, Pizarro and Cortez – sailed to worlds unknown, building their new civilisations and enforcing their cultures on the natives they encountered. Your views on their methods of doing this will depend on where you live, but almost 600 years later, it seems as if businesses from the east, west, north and south are developing their own empires globally. Evidence suggests that, in many cases, history is repeating itself, as a natural instinct in business is to conquer.But it would be a failing of leadership in the literal sense if the ‘global leaders’ were to depend too much on the advice of others. ‘Global leaders need to put together strong, collaborative teams that are consulted and respected,’ says Sunley. ‘This takes some nerve, especially in a period of economic difficulty, where it is easier to resort to risk-averse, control tactics. Short-termism is a key issue here, yet some investment in change will be required
to forge the winning businesses of the near future.’ Global leaders of the future Collot d’Escury agrees with Sunley Andorfer adds: ‘Future leaders should be considering that decisiveness is a quality that is ever a different way of working to operate in a truly global more important in global leaders marketplace, but this applies in than experience. general as our world is changing ‘Ensuring you have worldall the time. Only the speed beating operational excellence might get faster due to the requires decisive leadership. modern media. Equally, pushing for long-term The key qualities of a good visions needs constant and global leader are being receptive, unwavering determination to be a good listener, having continuous able to stand up against critics training, and being flexible and and the short-term pressures,’ quick enough to adapt to changes. he muses. ‘Nevertheless, a vision and ‘At the same time, to bring the direction helps the people to best out of all the talent in different gain knowledge from a network departments and different markets of resources across the world.’ requires great patience and As such, he dismisses the diplomacy, and, more critically, view that global leaders will the ability to listen. Then I would not succeed by imparting an also say it is important to balance already held set of beliefs, but the short-term goals with the sharing ideas with locals and Jane Sunley, global CEO of people engagement organization, Purple Cubed long-term, all the time meeting businesses already positioned the needs of today, while taking in untapped regions. care of the future in the right way. In short, it is the outlook and attitude of a manager ‘You can start when you are at the top to close your that is key; a willingness to learn about other cultures, a mind to alternative views and not have people around willingness to ask questions and investigate market trends, you who challenge you.’ rather than having training in international leadership ‘Fortunately, in our case, we have a strong and although the executives such as Collot d’Escury points very down-to-earth corporate culture where people out that international placements have been shown to are not afraid to say what they think. We put a lot of increase cosmopolitanism, a fundamental aspect of store by common sense and initiative in our people, global leadership. and this helps to keep us all open to new ideas and When the new world explorers and conquistadors, different concepts.’ such as Cortez and Columbus set out to expand their political empires in the 15th century, they had no idea what they were sailing into, who they would meet and what they would encounter – for the modern day business leader, ignorance of other cultures, markets and ATTRACTING GLOBAL LEADERS potential recruits is no excuse. Building a global business empire is no longer just How can organisations attract the best about conquering, but collaborating. global leaders?
Global leaders need to put together strong, collaborative teams who are consulted and respected. This takes some nerve, especially in a period of economic difficulty where it’s easier to resort to risk-averse, control tactics
• Highlight the leadership responsibilities and opportunities associated with the role, rather than the global aspects. • Focus on the skills required for success, including the ability to influence others, vision and decision-making. • Tailor travel and relocation aspects of the job to the preferences of the candidate.
FURTHER READING Stephen H Rhinesmith, A Manager’s Guide to Globalization. Six Kkills for Success in a Changing World (Second edition, McGraw Hill, 1996) The Great Global Leader, Corporate Executive Board (2012), http://bit.ly/15YFuRE P Christopher Earley and Soon Ang, Cultural Intelligence: Individual Interactions Across Cultures (2003)
• Integrate new leaders into global networks to provide critical market and organizational information.
DDI Global Leadership Forecast (2011), http://www.ddiworld. com/leadershipforecast/
(Source: Corporate Executive Board, 2012)
Paradigm shift: building a new talent management model to boost growth, Ernst & Young (2012)
The next big thing in global leadership The time has come for companies to focus on developing leaders to fulfil global leadership roles. Ella Bennett, HR director at Fujitsu, looks at how collaborative ways of working will be needed to operate in a global marketplace in the future.
lobalisation is increasingly becoming a powerful force with regards to leadership considerations. But to my mind, at least for the time being, the majority of leadership roles are not ‘truly global’. This is because each company and country is unique. Also, the extent of international leadership integration we are seeing in the market at the moment is heavily dependent on the culture of the organisation you are working within – and more often than not, there isn’t just one global leadership function to manage multi-nationals. However, global-leadership capacity is an element that is becoming of concern to many companies and it is time we focus on how we identify and develop leaders to fulfil these roles. This sentiment was echoed in a 2012 McKinsey study on developing global leaders, which found that as many as 76% of senior executives believe their organisations need to develop global-leadership capabilities. This study also showed that only 7% of these executives thought this was done very effectively – suggesting that we are not there yet with regards to making leadership truly global. Within Fujitsu, we have found that leaders who exhibit and role model certain qualities will help drive a change in mindset in the business the most and, therefore, be more effective – whether on a local or global level. First, leaders need to visibly demonstrate that they believe the business can change and can realise its goal, and show they are passionate about the people who work there. They must be willing to demonstrate the right behaviours. Changing a mindset starts with changing
behaviours and leaders need to know, use and encourage these new behaviours in their work and within their teams. Leaders need to communicate continuously and consistently through multiple channels. In business, corporate messages are easily drowned out among the mass of communication your people receive. The more communication that can be personalised and delivered personally, the better. Leaders should be comfortable to use as many channels as possible and ensure they stay on message. They must also be firm and have authority. At points of change, it is vital to have leaders that inspire confidence. When decisions need to be made, they should be made thoughtfully, but decisively, and leaders must be prepared to hold the line on new ways of working. Leaders need to have the ability to sense when things need to change – and have the confidence to change them. And finally, the need the ability to have difficult conversations. This does not come naturally to everyone, even experienced leaders. Along the way, it is always necessary to have difficult conversations at all levels.
Unlike many Western-owned businesses, our Japanese colleagues trust us to make the right decisions for our markets, instead of centralising all functionality
Building a global leadership pipeline is complex. Companies have to assess their current leaders, develop a succession pipeline and actively move leaders around the business to develop growth to assess whether one person should lead a company globally or whether each country needs its own leadership team. Within Fujitsu, we operate on a lean management principle. Each country or region reports regularly to the
global HQ, but for the most part we are autonomous – with each country being equipped with its own leadership team. This enables us to make the best decisions for our individual markets. It takes into account that each region has its own cultural differences, and that business is driven in very specific ways. Overall, this ensures that we are all doing our best in our own markets, while still focusing on delivering on the overall business objectives set by our Japanese HQ. I think that our Japanese heritage in this way gives us greater flexibility. Unlike many Western-owned businesses, our Japanese colleagues trust us to make the right decisions for our markets, instead of centralising all functionality.
Executives are beginning to understand that cultural differences really do matter. As such, many realise that different and more collaborative ways of working will be needed to operate in a truly global marketplace in the future.
Future leaders need to realise that they will need specialised leadership skills— such as the ability to manage and work with people from different backgrounds and customs
Executives are beginning to understand that cultural differences do matter. Many realise that different and more collaborative ways of working will be needed to operate in a truly global marketplace in the future
The right talent
From my perspective, future leaders need to recognise that to be able to execute a global business strategy will require them to have the right talent in the right places. Future leaders need to realise that they will need specialised leadership skills— such as the ability to manage and work with people from different backgrounds and customs. These leaders must also consider that different kinds of organisational and governance structures will have to be put in place by them to operate as a global company rather than just a company that happens to have a lot of different locations around the world – and change is never easy. To leverage a global mindset, a leader must first and foremost understand how his or her own cognitive, motivational and behavioural propensities impact them as individuals and their leadership style. A key to leveraging a global mindset lies within a leader’s ability to create a culture that encourages diverse thinking within their company that will ultimately bring about positive shifts. But building a culture that encourages diverse thinking is hard work. Individuals that want to do this will have to learn how to become transformational leaders. To achieve this, they will have to figure out what cultural shift they want to bring into their organisation and identify the means by which to do so. They will have to work closely with HR teams to proactively develop diverse teams, identifying talent in unexpected places. Ultimately, to leverage a global mindset, leaders have to be people who can anticipate the ‘next big thing’ and help their employees to embrace it. Good leaders, global ones included, come from many diverse backgrounds. But the one thing they have in common is that they have a multitude of skills that help them get the best performance out of their business.
Ella Bennett joined Fujitsu in 2000 and was appointed HR director in April 2009
Are You Globally Connected?
Combining worlds of knowledge for the advancement of women. The International Alliance for Women (TIAW) is a global organization that’s dedicated to the economic empowerment and advancement of women worldwide. We bring together the knowledge, resources and connections women need to develop their leadership capacity on a global level. TIAW’s Women’s Leadership Network Program: • Support and build connections for women at
the global level • Connect members with corporate and government leadership • Ensure strong support for women in leadership positions • Provide online “Women on Boards Toolkit” • Identify key areas of expertise for women to make transition • Assist associations in determining specific governance issues • Ensures qualified women connect with CEOs and nominating committees for leadership positions TIAW’s partnership with Global Board Ready Women (GBRW) The GBRW initiative is an international list of women who are qualified to sit on a board. This list is compiled and updated by the European Schools/Women on Boards Task Force in association with The Forte Foundation. The GBRW consists of women who: • • • • •
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Learning and development
The 21st century learning organization Competitive forces, changing job requirements, emerging technologies, an aging workforce, new ways of working and a shorter shelf life of knowledge are driving the need for re-skilling and up-skilling the workforce. The talent management pendulum is swinging from recruitment to development, says Nick van Dam Illustration: Shaw Neilsen Infographics: Lauren Haskins
rganizations around the world are under pressure to stay competitive and drive innovation. Enterprises have to work differently, faster, better and at lower costs so learning strategy must be aligned with business strategy. Globalization, increased competition, complexity, uncertainty and the accelerated advancement of technology will drive the need for more tacit work. Tacit work, which is a combination of the common sense
and intuition that provide the ‘know how’ required to achieve expert performance, demands a high level of judgement and involves frequent, multifaceted interactions. This has been a game-changer in terms of the skills requirement of an organization’s talent, with a shift from the ‘know what’ routine manual and cognitive tasks, towards the ‘know how’ expert thinking and complex communication. Tacit skills are different from the past, where workers
needed a high level of hands-on technical skills that enabled them to get the work done efficiently. And this explicit knowledge was able to be passed on in manuals and written instructions. Today the war for talent, the global dimensions of increasingly critical and complex problems, the new perspectives of gen Y, the impact of the internet, mobile computing and high speed networks, and the market valuation of intangible assets demand performance based more on behavioural skills that augment a person’s
education and experience. In addition, this tacit knowledge is more problematic to pass on to develop in the workforce. According to Capitalizing on Complexity, Insights from the Global Chief Executive Officer Study by IBM in 2011, creativity was identified by 1,500 CEOs as the number one leadership competency priority in the future because creativity might enable innovation. Creativity in its pure form does not necessarily produce solutions that are useful and actionable. This is where creativity driving innovation comes into play. Innovation is defined as ‘the
Fig.1 Skills in high demand from employers: 2017-2022
Digital skills Digital business skills
Ability to work virtually
Understanding of corporate software and systems
Digital design skills
Ability to use social media and Web 2.0
Ability to consider and prepare for multiple scenarios
Dealing with complexity and ambiguity
Managing paradoxes, balancing opposing views
Ability to see the ‘big picture’
Agile thinking skills
Interpersonal and communication skills Co-creativity and brainstorming
Relationship building (with customers)
Teaming (including virtual teaming)
Oral and written communication
Ability to manage diverse employees
Understanding international markets
Ability to work in multiple overseas locations
Foreign language skills
Global operating skills
Source: Global Talent 2021, How the new geography of talent will transformhuman resource strategies. Oxford Economics 2012
application of new solutions to meet new requirements, inarticulate needs or existing market needs’. Innovation is creativity applied effectively to problems, processes, products, persons or places. Leaders must be innovation architects, creating a work environment that supports people engaging in innovation behaviours as part of their daily job. In addition, the shelf life of knowledge and skills is getting shorter. Figure 1 shows the skills that will be in high demand between 2017 and 2022.
The learning organization
and systematic dissemination of this knowledge among the workforce. Another innovation that supports knowledge sharing is the development of internal networks that are analogous to LinkedIn or Facebook. These networks are searchable, enabling all to find specific capabilities across the entire knowledge base of the enterprise, significantly supporting individual and collective learning.
The strategic role of learning and development
Shareholders will look more and more at the role of these intangible assets when they value knowledge-based Organizations need to align their people capabilities with organizations. For example, according to a 2012 Deloitte the external environment to stay successful. report, at least 70% of market capitalization in global Peter Senge, author of The Fifth Discipline: The art and public companies is based on a vibrant practice of the learning organization, skilled workforce and know-how coined the concept of ‘the learning DIGITAL EXCLUSIVE (intangible assets). organization’ in 1990. It is a term given My own research (2011) illustrates to a company that facilitates learning, VIEWPOINT that in the 21st century, people expect continuously transforms itself and Richard Crouch, president of the Public Sector People interesting and challenging work becomes a place that employees feel a Managers’ Association and with opportunities for growth and commitment to. Director of HR, organisational development. They like to work in According to Senge, a learning development & communications at Somerset County Council. value-based and sustainable enterprises organization exhibits five characteristics: that contribute to the welfare of overall systems thinking, personal mastery, society. They also want respect for their mental models, a shared vision and team individual talents and an open communication with their learning. The concept has gained uncritical acceptance management. and has become a priority on the business agenda in More and more people value a deep investment in a growing number of companies. The execution of a their personal life in addition to enjoying a challenging strategy happens through people and is possible only if work environment. It is also becoming widely employees have the right capabilities. Many companies recognized that the most important way to engage are striving to become true ‘learning organizations’, but employees is to provide them with opportunities to have achieved this yet in varying degrees. learn and develop new skills, providing ways to improve One of the most difficult challenges in creating the their capabilities. Highly engaged employees have a learning organization is capturing the tacit knowledge of significant impact on the productivity and performance experienced workers and conveying these capabilities to of an organization. Furthermore, engaged employees the next generation. Thus, forward-looking enterprises are more likely to stay with the organization where have implemented knowledge management platforms
Fig.2 The stretegic role of learning and development in organizations
Building critical people capabilities
Instrument to attract and retain talent
LEARNING AND DEVELOPMENT
Building a global culture
Developing the next generation of leaders
Protecting your brand
they are being challenged and given the skills to grow and develop in their chosen career path. According to Deloitte’s 2013 report Resetting Horizons Human Capital Trends, after leadership development, ‘sustaining employee engagement/morale’ is the most pressing talent concern for executives worldwide. There are many ways that a strategic focus on learning and development enhances an enterprise-wide talent culture (Figure 2).
The strategic role of the chief learning officer For decades, corporate universities and life-long learning programmes have sought to lead internal talent development. However, the overall architecture of talent management development has often taken a back seat to recruitment, compensation and performance management. As businesses struggle to fill critical positions and as the requirements for the leadership pipeline change rapidly, companies are putting renewed focus on building capabilities, not just finding them. According to Deloitte’s 2013 Human Capital Trend’s report, the ‘war for talent’ is shifting – and is becoming the ‘war to develop talent’. This requires a radical rethinking of the internal ‘learning function’. This involves creating a fresh learning organization architecture, by moving the leadership of the learning function closer to the boardroom and executive team, and realigning and reconfiguring learning functions to make them more responsive to business needs. In the process, the role of the chief learning officer (CLO) is coming of age to lead the way. The CLO will be the chief architect of the learning organization and must design learning interventions and solutions that support both individual learning as well as organizational learning. The primary task of the CLO is to articulate and execute a compelling vision of the role learning and development can play in driving business results. Some question the need for a CLO and believe that the chief human resources officer (CHRO) should be directly responsible for learning and development. Indeed, the CHRO is responsible for the oversight of learning and development in most organizations, as it is a substantial contributor to the continuum of the talent strategy, which includes among other CHRO responsibilities: identification of the talent required to successfully achieve organizational strategy, recruitment, talent allocation, organizational and performance excellence, HR services, retention, compliance with government regulations and succession planning. In enterprises where the CHRO is solely responsible for learning and development, the learning function has
frequently been decentralized into different geographies, business units and functions, resulting in talent capability development that is not aligned with overall business strategy, an overlap of learning initiatives and promotion of isolated learning technology platforms, leading to an overall inconsistent quality of learning and inefficiencies in spending among others. In contrast, the CLO as the architect of the learning and development strategy provides essential and critical competencies to the enterprise, including mastery of the 21st century ‘learning domain’. This multifaceted ‘learning domain’ demands a distinctive skillset combining the ability to: • Demonstrate knowledge and understanding of emerging learning theories and best practices • Analyze the business strategy and create a relevant learning and development strategy that provides the capabilities and competencies to drive business success • Employ the multiple technologies available to direct and support learning pathways and skills development, such as learning management systems as well as mobile learning • Collaborate with the multiple stakeholders to align the learning capabilities in the organization, especially critical in global enterprises where cross-cultural competence is required as well • Develop agile and creative leaders at all levels of the organization • Communicate the vision and the contribution of the learning and development strategy to business results • Manage multiple reporting lines both into the CHRO and the business. As such, the role of the CLO drives learning effectiveness and efficiency. Since the overall learning strategy for an organization is part of a complex talent/HR strategy, the CHRO and the CLO must work closely together to leverage their complementary skills, both essential and critical to 21st century enterprise success. The challenges are mounting for the CLO to strategically support success for their companies and people. The upcoming retirement of the generation of baby boomers will bring significant knowledge gaps in organizations, and the new generation of employees now entering the workplace has a very different learning style – more technology-enabled and team-oriented than previous generations. Most enterprises will expect people to develop competencies at a faster pace than before, as product life cycles are getting shorter and organizations are becoming flatter, more
The ‘war for talent’ is shifting – and is becoming the ‘war to develop talent’. This requires a renewed focus on development and a radical rethinking of the internal ‘learning function’
people throughout the organization. In today’s world, knowledge-driven, technology enabled, complex it is expected that information and knowledge flow and global. through the entire enterprise bottom-up, horizontally Executives in all industries are seeking to leverage the and top-down. Universal access to the tools and untapped talent of their people and they are turning to applications that enable distribution of knowledge the CLO to ensure this talent is energized and engaged and sharing of expertise within the organization is through sophisticated, advanced learning systems and approaches. mandatory. Examples of these In the 21st century, companies technology-supported tools have the opportunity to deliver include: collaboration platforms, learning through cutting-edge virtual classrooms, learning channels, resources and tools. apps, online performance Learning must be integrated into the support, learning video’s and execution of strategy, developed rapid e-learning development collaboratively, extended through platforms, among others. both time and geographies in a • Designing blended learning rapid, seamless execution, and must solutions. Learning solution demonstrate valuable bottom-line designs provide people results. with the most efficient and The CLO role involves strategic effective way to acquire and performance in a number of share knowledge and develop significant areas including: skills. True blended learning • Developing an enterprise-wide solutions include one or more learning and development of the following components: strategy (Figure 3). It is critical physical classroom, workshops, to engage business leaders and individual learning plans, 360° talent/HR leaders to develop and assessments, web-based training shape a vision for learning and jointly make decisions. modules, webinars, virtual classrooms, massive This network of aligned leadership will optimize the open online courses (MOOCs), discussion forums, implementation and adoption of initiatives. programme portal, shadowing leaders and action • Building an employer brand through investments in learning initiatives. learning. A company brand is one of the most import • Developing the value proposition and measurement assets of an organization. Investments in learning of learning. Enhancing learning capabilities requires and development can help to enhance the employer significant investments that can only be approved if brand and position the organization as an employer a sound business case has been developed. To retain of choice. The CLO must play an active role in making investment levels year-over-year, it is important to this a reality. show the business impact that investments have • Integrating learning with performance management achieved in enabling the talent to perform effectively practices. The learning function must be involved in and efficiently to achieve strategic goals. a number of areas including: developing competency frameworks, mapping courses to competencies and Learning strategy the design of individual competency assessments. One of the key roles of the CLO is to develop and shape This enables employees to a learning strategy. The learning build their personal learning strategy derives from the business DIGITAL EXCLUSIVE plans, gaining certifications and strategy and the talent/people building critical competencies strategy. The objective of a learning VIEWPOINT in their desired career path. strategy is to develop the right Vlatka Hlupic, CEO of the Drucker Foundation in the • Creating and supporting an people capabilities globally, in UK and professor of business enterprise-wide learning time, and in a cost-effective way. and management at Westminster and collaboration platform. In addition, the learning strategy Business School. An enterprise-wide learning supports the enhancement of a and collaboration platform learning culture. provides the foundation for access to knowledge and There are three performance indicators that indicate learning, the capacity to track and report learning how well a learning strategy has been executed. activities, and the opportunity for people to share knowledge through communities of practice and 1. Strategic alignment with the business expert networks. The first indicator looks at how well all learning initiatives • Providing decentralized capabilities to create and share and investments are aligned with the business strategy. knowledge. Previously, learning programmes were Example assessment questions: for the most part centrally developed and delivered to • Do the learning solutions support the business strategy?
The CLO will be the chief architect of the learning organization and must design learning interventions and solutions that support individual learning as well as organizational learning
Example assessment questions: • What is the percentage of digital learning hours as part of total formal learning hours? • How is informal learning encouraged and supported? • To what extent are curricula and vendors optimized? • Does the organization use centralized learning technology platforms? • Does the organization have overlap in programmes/ DIGITAL EXCLUSIVE initiatives? VIEWPOINT A high performance on eﬃciency supports operational excellence. Dr Bernd Vogel, associate
• Have the learning solutions been prioritized to match business priorities? • Do learning interventions enhance the ‘learning culture’? A high performance on strategic alignment supports business excellence.
2. Effectiveness of learning solutions The second performance indicator looks at whether learning indentations change behaviours of people. Example assessment questions: professor of leadership and • Are the correct learning modalities organisational behavior and chosen to support the learning The development agenda requires director Henley Centre for Engaging needs? more than tinkering at the margins. Leadership, Henley Business School, University of Reading. • Do the learning solutions support CLOs should move away from the unique learning needs of a the traditional training agenda, diverse (and global) audience? but should implement learning • Do the learning solutions enhance people interventions that create behavioural change and foster performance and have an impact on the business? talent that can assume new and evolving roles. The A high performance on this dimension supports learning focus should be on continuous learning that harnesses excellence. structured experiences, with a goal of linking training and development to business and customer priorities. 3. Efficiency of learning solutions Maximizing the capacity of each individual through The third performance indicator looks at how well targeted and personalized learning and development over investments and resources in learning are leveraged. time is crucial to business excellence and this deﬁnes the
Fig.3 Learning Strategy Framework
Learning culture Talent / people strategy
Developing people capabilities Learning strategy
Strategic alignment with business objectives
Effectiveness of learning solutions
Efficiency of learning solutions
£ BUSINESS EXCELLENCE
Fig.4 Learning Solutions Framework
Social networking & expert directories
Micro-sharing & TweetChats
Innovation & crowdsourcing
Gaming and simulations
Co-create with Wikis
Publish and feedback on blogs
Self-practiced web-based training
Podcasts and e-books
Career moves and assignments
Job aids and EPSS
E-courses and recorded webinars
Coaching and mentoring
SPONTANEOUS LEARNING ON THE JOB
new role of the CLO. With a seat at the C-Suite table, there is a requirement that learning creation and execution are linked specifically and intentionally to the business goals of the organization, and that the CLO speaks the language of business. There are major opportunities and challenges to build an enterprise equipped to meet the demands of the 21st century, and the CLO has a pivotal role to play in creating the vision, the architecture and the business results that ensure success in the dynamic global business environment. â—? Nick van Dam is chief learning officer and director, human capital, for Deloitte
FURTHER READING Peter Senge The Fifth Discipline: The art and practice of the learning organization (1995) Capitalizing on Complexity, Insights from the Global Chief Executive Officer Study, IBM (2011) Resetting Horizons, Human Capital Trends, Deloitte (2013) Planting the Seeds of Recovery Perspectives of Talent Management in the UK, Towers Watson (2013) Innovation Business as Usual: Paddy Miller and Thomas WedellWedellsborg, Harvard Business School Publishing (2013) The Leadership Premium, How Companies win the confidence of investors, Deloitte (2012) Next Learning Unwrapped, Nick van Dam, Lulu Publishing (2011) Human Capital Trends, Deloitte Development (2013)
BOOKS AND APPS UNDER THE SPOTLIGHT
Reviewed in this issue: Are you interested in learning about innovation from a shark or keeping track of your online files from an app with an elephant? If you’re intrigued read on. Over the next six pages, global thinkers, practitioners, techies and bookworms give their views on some of the latest literary offerings, as well as the apps and technology for the savvy 21st century manager.
Technology reviews A look at the latest apps and software that aim to enhance your business
Recommended A round-up of some books available on this issue’s theme of complexity and ambiguity
In association with
Back to the Future Books that changed the way we think. This issue, we look back at Jim Collins’ game-changers
The Shark’s Paintbrush Biomimicry and How Nature is Inspiring Innovation Jay Harman Nicholas Brealey Publishing
The shark has placoid scales that enable it to move faster through water – why don’t boats? The human heart is a one-and-a-half-watt power pump that services 60,000 miles of plumbing in the cardiovascular system without fail for 90 years – what human invention is that efficient? Jay Harman has a passion to help us innovate as well as preserve the dwindling resources of our planet by learning from nature’s own ways of adapting and surviving. Nature is curved for efficiency, business works in straight lines. These are lessons, he opines, to drive new thinking and challenge the conventions of innovation in business today. We need to learn to mimic nature’s efficiency. Triggered by a ‘eureka moment’ encounter with a seashell, he has combined his own research with the experiences of others to produce a well structured piece to explain his desire for a new corporate order. The book sets the tone by positioning the fact that there are no straight lines in nature; everything is curved and in trying to answer the ‘why does that matter?’ question, he suggests we are on the cusp of a new golden era for innovation. The main text in the middle section is rather long, but contains fascinating examples of how medical, pharma and engineering products and solutions have been developed directly
from mimicking or copying examples found in the natural world around us. Looking at examples from hippos to bees and sharks to butterflies, he believes we have only just scratched the surface of what we might learn. Nature uses the least energy combined with the fewest materials to engineer solutions – so why can’t we? He is a great storyteller of his own experiences and if occasionally a little ‘Indiana Jones’ in style, he lands the points he wants to make. The last third of the book translates lessons for the corporate world, but it is hard to find any new lessons being offered about the perennial challenges for the innovator and the entrepreneur: being taken seriously, stakeholder rejection, funding challenges, and so on. With a final nod to a ten-point plan for making sure your own business conforms to a robust ‘industrial ecology model’, his passion and enthusiasm remain intact. It’s not a book about science and it has little to share with the theory of corporate strategy and organisational behaviour. Harman’s curiosity for connections and his sense of adventure might irritate or just keep you reading. Simon Carter is managing director of Transition Strategies and a visiting fellow at Cranfield University Business School
Talent Intelligence What You Need to Know to Identify and Measure Talent Nik Kinley and Shlomo Ben-Hur Jossey Bass
The talent measurement industry is huge and a plethora of methods and practices exists. While there are plenty of books about talent management, there are fewer on the theme of talent measurement and how to develop and apply the emerging talent ‘intelligence’. Written for practitioners in an accessible style by an academic and a consultant, it offers a demystifying tour d’ horizon of this often confusing landscape and puts the client/ commissioner of talent measurement processes onto the ‘inside track’. It highlights how talent measurement theory and practice have developed over time and where further research is needed. The authors provide some useful guiding principles for designing talent measurement systems. They examine many of the ‘bear traps’ implicit in commissioning talent measurement processes and suggest questions to ask of suppliers. They also explore the sensitive issues of culture and diversity, and the use of psychometrics in the acquisition of talent intelligence.
Implementation is a key theme. Talent measurement is often approached as a demand-driven exercise – for instance, when one part of a business decides to assess its people as part of a change project. The authors argue for a strategic, integrated approach built on solid foundations that need to be designed, for instance, by collecting data centrally, using common data points and linking with other talent data such as performance scores, promotion dates, business unit, location and key demographic data. Peppered with practical checklists and case studies, it should make a useful read for managers and HR practitioners looking to develop and improve their talent processes. Linda Holbeche, professor of leadership, University of Bedfordshire
Only Connect The Art of Corporate Storytelling Robert Mighall LID
Only Connect is a great title. We talk too much about communication at work, code for ‘I tell you’. To connect, as Mighall explains, is to tell the story from your audience’s point of view, making them, not you, the hero. The contents are wittily titled Beginning, Middle and End, so the narrative holds throughout. Mighall spends a long time at the start making the case for stories (yet interestingly omits the statistics on recall when stories instead of, or as well as, facts and data are used), which sounds like he has found storytelling a hard sell. It’s also an interesting start tackling broader issues such as faith versus evolution as the basis of the human story of meaning. The storytelling guide proper starts on page 40 and if you want to cut to the chase, go to page 71. Here he explains story structure and how to script a story with the WIFM (What’s In it For Me) of the audience front of mind. This is followed by advice you don’t usually
get in storytelling books, about how to use the art in different corporate settings, from annual reports to PowerPoint presentations. He closes with a look ahead at web-enabled co-creation of stories and how this will transform the art. His style is discursive, with many side stories and anecdotes and covers a lot more ground than storytelling. His core theme is that business is good at talking to consumers through the brand story and that this art should be spread more widely. He’s right. Storytelling is an under-utilized part of the corporate armoury and should be used more. If you like the idea of interesting anecdotes about how the brain works and the evolution of branding wrapped around storytelling, with some useful ideas about how to use the dark art in different settings, this is a good choice. Liz Mellon, chairman, Dialogue Editorial Board
The “I” of Leadership Strategies for seeing being and doing. Nigel Nicholson Jossey-Bass
Yet another leadership book, or so I thought. I was therefore pleasantly surprised to see that Nigel Nicholson had pre-empted this thought process and tackled it head on by humorously labelling one of his first chapters ‘What? Another book about leadership?’ He hazards the guess that readers will question what this addition to the leadership genre can add; as well as be honest enough to understand that not everyone will be a business leader in the traditional sense. Some will be self-proclaimed leaders; others will be aspiring leaders; and some will have either suffered under or been thankful for a leader.
to be a leader as a human being, rather than at a boardroom table.
The author brings in excellent examples of leadership from politics and sport as well as business. We’re not talking about the business case studies and leadership profiles senior leader may be familiar with from reading other management tomes; instead he uses personal and more famous examples that any reader would be able to relate to. So, the title looks at what it means
This is an engaging book with some fascinating examples of leadership – good and bad (Josef Stalin, Steve Jobs, Abraham Lincoln and even Hannibal get a mention). It could be accused of being more of a story book than a management text – but that’s not always a bad thing.
Nicholson frames his writing as a guide to managers, consultants and ‘people everywhere’; therefore you could argue he is casting the net too widely trying to find an audience. However, as he argues that leaders fail through lack of insight, the crux of his thinking is that leaders can only better themselves by having conversations – with others and themselves – and for that reason his wider view of leadership works well for leaders at all levels.
Mike Sunley, CEO, Lexington Catering
reviews complexity – Bluebottle biz’s top five
Embodied Leadership Pete Hamill Kogan Page
Embodied Leadership deconstructs our thinking about the body using key discoveries in neuroscience to demonstrate the uses and benefits of a somatic approach, particularity in the area of emotional intelligence. There are practical exercises throughout to develop embodied leadership skills and personal development.
Making the Matrix Work Kevan Hall NB Publishing
Making the Matrix Work will show you how to establish and engage networks that do not depend on role, control or authority to get things done. It will help you to cut through complexity and build the skills you need for matrix management success.
Seeing the Forest for the Trees Dennis Sherwood NB Publishing
Systems thinking can help you tame the complexity of real-world problems by providing a structured way to balance broad views with a selection of relevant details, allowing you to accurately ‘see the forest for the trees’. With this handy guide, you can turn the old adage on its head and get ahead in business at the same time.
What If? Steve Robbins NB Publishing
Hiring and retaining the best and brightest talent is what defines market leadership today. What If delivers a creative and innovative way to explore the issues that dominate today’s multicultural workplace: leadership and mentoring, creativity and innovation, organizational culture and engagement.
The New Management William E. Halal Berrett-Koehler Publishers
Only small entrepreneurial teams operating from the bottom up can master today’s exploding complexity, and gaining stakeholder support is now essential because a knowledge-based economy has made cooperation a competitive advantage. Rather than fussing over quick fixes, The New Management points the way toward more fundamental solutions to the massive changes that will confront all institutions as the transition to a knowledge society rolls on into the 21st century.
reviews apps for leaders There’s probably a book one could write about all the apps that leaders might find useful with ‘how to’ guides, but the world doesn’t work that way anymore. Dynamic, fast-paced, ever-changing, new disruptive players in the market. By the time you’ve written it, it’s all moved on. So I have the pleasure of featuring a showcase app – what it is, why it’s good and how you could use it as a leader, and then a mention of some helpful apps you might want to consider alongside that on your tablet/mobile/ultrabook and, if you still use one, a desktop PC. I’ll start with the one I really hope all leaders are using: Evernote. How I survived before Evernote, I’ll never know. What is it? Evernote is a to-do list plus a note-taking and bookmarking tool. By bookmarking, if you’re pretty technology savvy you’ll have mastered creation of bookmarks and favourites on your browser (be it Explorer, Firefox or Chrome). Evernote takes saving great web content to another level. Cleaning the page of ads, you get the article/blog/thread alone with perhaps accompanying images/graphics. Why it’s good? When you need that quote, that report, that piece Malcolm Gladwell did on Steve Jobs, it’s in your Evernote account. Using search and related categories, Evernote is an augmentation of your brain with a shareable/ printable element to boot. Researching for that speech you have to give to your board at the AGM? Store the results of your search in Evernote and refer back to it on the train home, when you’re sat quietly late one night or over a coffee waiting for the next flight. How does it work? You have a basic function of to-do lists, making and storing your own notes and reminders. Alongside that, the jewel in the crown I use is the web clipper tool. It does grabbing at the click of a button on your browser and if you use another iOS app Penultimate (a handwriting/doodling app that Evernote acquired two years ago), it will save those sketches and mind maps to your Evernote account for future access. It synchronises across your devices and means when you have an internet connection, all your saved pages, notes and images are available to you. Storage space for the free app is ample (40Mb per month, which is reset each month) and you can upgrade to the paid Evernote Premium for even more space and functionality. Other apps of note Pocket (formerly ReadItLater) is a similar bookmarking/storage tool and Scoop.it is a news feature app that also allows you to store information you find on topics it knows you are interested in from past browsing habits. My tip for storing all that fab stuff you find that you may need, Evernote is a way to create your treasure trove of insight that is searchable, retrievable and ultra portable. Perry Timms is an independent HR/OD practitioner, writer and speaker, and is the CIPD advisor on social media & engagement. Follow him on twitter @PerryTimms
reviews back to the future
A retrospective of Built to Last and Good to Great by Jim Collins Jim Collins published Good To Great in 2001 and, over a decade later, some of the things he uncovered remain relevant. Following the million-selling success of 1994s Built to Last, he had embarked on a mammoth five-year research study to work out how companies can migrate from being merely good to being great. But by the time he had finished, he wondered whether it should in fact have been the prequel to Built To Last rather than the sequel. In other words, first you raise your company standards from good to great, and then the resulting organisation will truly be built to last. This is what he found out: 1. Level 5 leaders build enduring greatness through a paradoxical blend of personal humility and professional will. 2. First who… then what: get the right people on the bus, then decide where to drive it. 3. Confront the brutal facts (yet never lose faith).Work out what you are good at, and do that. 4. The hedgehog concept: the hedgehog does one thing well (curling into a ball), while the fox rushes around, creating the impression of speed. 5. A culture of discipline: when you have one, you do not need hierarchy. When you have disciplined thought, you do not need bureaucracy. 6. Technology accelerators: these are never the origin of greatness, merely enhancers of it. Great companies never use technology as the primary means of igniting a transformation. 7. The flywheel and the doom loop: moves to greatness happen gradually. Despite case histories suggesting so, there is no miracle moment. Also of particular note were the ‘dogs that didn’t bark’ – factors that do not play a role in taking a company from good to great, including larger-than-life celebrity leaders, high executive pay, amazing strategy (all firms claim to have one), mergers and acquisitions, transformation programmes or themes, and being in sexy sectors or industries. None of them apparently make a shred of difference. Kevin Duncan is a business author
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Doug Ready, CEO of the International Consortium for Executive Development, provides some insight into his research into what it means for organisations to be resilient and stand the test of time And Jared Bleak, VP global business development at Duke Corporate Education looks further into the findings of our exclusive study of CEOs globally asking what the qualities and ‘sense-abilities’ of the leaders have to be in the ever-changing and volatile business environment.
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Private wealth and its role in financial services organizations
Coming up in the next issue... From guerilla groups to terror cells; some of the most resilient organizations in the world are not necessarily the most ‘ethical’, but do leaders have anything to learn from them? Dialogue’s focus for December will investigate the notion of the ‘resilient organization’, what this means for managers and how organizations can toughen themselves up to survive in the tough and rugged business environment.
Former director general of IATA talks about the biggest turnaround in aviation history
How can it generate business leads and benefit the bottom line?
The companies that can adapt to change. What can they teach us?
Our regular columns, research, news and much more
Alan Wyn-Davies Chairman, DFx Technology
Taking a small business to a global market During my career in industrial design, spanning 35 years, innovation has always been at the heart of what I do. Creating new and innovative tools that solve a problem is my passion – and now it’s also my business. DFx Technology started its life in a room of my Oxfordshire home in 2003. After starting a manufacturing company to fulfil some of my designs, I created the business to design and manufacture energy efficient products, from LED lights to energysaving controls. With individuals and corporations across the globe constantly looking for new ways to be more energy efficient, I wanted to create a business to serve this need, underpinned by the belief that technology can make the world a greener, safer and better place.
that we need to meet our export objectives. And the input and support from experts who have gone through a similar growth process themselves has been essential.
It’s not enough to just be an innovative business - you need to remain innovative
But it’s not enough to just be an innovative business – you need to remain innovative. And this requires a constant drive for new ideas, but also an injection of expertise that can help you take those ideas to the next level. With the huge market for LED lighting getting even bigger, both in the UK and around the world, a major focus for our business is how to capitalise on the increasing global appetite for green technology. Throughout 2013, we have been working with business coaching service GrowthAccelerator, which has given us valuable insight into how to take advantage of these new opportunities and expand the business. We’re expecting to grow our exports from 10% to up to 40% in the next three years. Deciding how and where to grow exports is a challenge in itself – we’re testing exports with Asia Pacific, US and European markets. But growth in one area requires work in so many other areas; from the development and management of our sales team to the upscaling of our manufacturing operation to facilitate the five-fold increase in output
Looking to the future, we are taking on another 15,000 sq ft of manufacturing space and installing a state of the art ‘surface mount’ line capable of increasing manufacturing throughput tenfold. This facility will create a minimum of 50 new manufacturing jobs. Export tests are going well with significant sales in the southern hemisphere and Europe, which will soon be followed by new US orders.
As a hands-on management team, we wear many hats – in the past this has meant we have been distracted from conversations about how we turn our aspirations into reality. But it is important for us to step outside of the day-to-day running of the business and look at the ‘bigger picture’. GrowthAccelerator has provided us with the focus and discipline to create a robust three-year plan and the momentum to start executing it.
+ DIGITAL EXCLUSIVE
Left-field innovation balanced with perspiration “‘New ideas on their own are worthless.’ This was a statement I heard when I was starting out and it has taken me 20 years to understand it. In the vast majority of cases, competitive advantage is actually gained by turning new concepts into reality and bringing them to market. This is a skill, which is much less glamourous and often starved of top-level resources. Companies that develop an expertise in this realization process are usually closer to each step of their business chain and more likely to see profit from innovation rather than loss.” VIEWPOINT Jim Banting, CEO e-Digitial Design, author and entrepreneur
When the best leader's work is done the people say, "We did it ourselves." Lao Tzu
Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy consultancies. With more than 2,700 employees working in 51 offices in 36 countries worldwide, we are successful in all major international markets. Consulting is our passion. Along with Partnership and Entrepreneurship, Excellence is one of our company's core values. We deliver excellent results and develop world-class approaches. In this way, we create tangible and lasting value for our clients. We advise major international companies and public institutions on all issues of strategic management â€“ from strategy to new business processes and structures. For more information on who we are and what we do, go to: www.rolandberger.com Join the discussion on strategic management and read our latest thoughts on leadership at: www.think-act.com/blog It's character that creates impact!
Published on Nov 14, 2013
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