What are the critical competencies needed to lead in our fast-changing business environment? This question was the focus of a study jointly conducted by the professional services firm Heidrick & Struggles and the University of Oxford Said Business School. The study was based on over 150 conversations with CEOs from a wide range of sectors around the world. Its findings were recently published in The CEO Report: Embracing the Paradoxes of Leadership and the Power of Doubt.
“Declining tenure rates and levels of public trust suggest that CEO leadership has not kept pace with increased expectations,…” notes the report in its opening paragraphs. “Indeed, the role of the CEO is becoming more complex as competing and increasingly vocal stakeholders permeate organizations.” Leading in today’s world requires new thinking: “past experience is no longer a reliable guide for future action… success as a CEO today hinges on continual growth in the role, even more than on the preparation beforehand.”
The key challenge confronting CEOs, - and senior executives in general, - is the relentless pace of change. But, while speed is the major dimension of change, it’s not the only one. Beyond speed, executives must also focus on scope and significance. They must carefully consider a few fundamental questions about each:
- Speed. Is the change evolutionary or revolutionary in nature? Sustaining or disruptive? While ignoring major changes is bad, acting before understanding its implications could be worse. Organizations need a modicum of stability to function effectively. Wise leaders consider the implications of a major change, formulate the appropriate strategy, and then act.
- Scope. Is the change contained within a technology, product or business unit or is it systemic in nature, that is, affecting the overall business, perhaps even a whole industry sector? While systemic changes require a business-wide strategy, others may generate substantial short term attention but end up having a more contained impact. It’s not so easy to discern the scope of a potentially disruptive change in its early days.
- Significance. Are we talking about a foundational change, e.g., the Internet, mobile devices, cloud computing? How deep is its potential impact on the business? Is it the kind of change that will inevitably happen, whether we like it or not, so in the end we have no choice but to embrace it? If so, how can we best embrace the change without abandoning our existing assets and customer base?
Company-wide, transformational innovations require the attention of the CEO and other senior executives, while evolutionary, incremental ones are best handled within a line of business. “Understanding the potential scope and significance of change, in addition to speed, allows CEOs to prioritize where and on what they spend their time. How far-reaching is it and how deeply will it shake the business?”
Leading in turbulent times is very difficult indeed. Based on its more than 150 CEO interviews, the study identified 4 critical competencies that transformational leaders must have: ripple intelligence, power of doubt, authenticity and balancing paradoxes. Let’s take a close look at each.
Ripple Intelligence. Ripple intelligence is “the ability to predict how trends and contexts may intersect, interact, and change direction, helping CEOs anticipate disruptions, make time to plan, and protect against unexpected events.” It’s the ability to see through the turbulence of multiple interacting changes, - as if they were ripples spreading across a pond. Ripple intelligence acts as a kind-of early warning system, helping leaders understand the impact and risks of a systemic, fundamental transformation.
In general, executives get promoted because they’re good at managing operations. Operational excellence requires detailed analysis of technologies, quality, processes, competitors, customer satisfaction and market segments. But, the skills that served them well when dealing with relatively concrete, well-defined operations are much less effective when dealing with highly complex, fast-changing problems, where it’s often not clear what’s going on in the present, let alone how things will evolve going forward.
A more holistic, collaborative approach is now required to pull together everything that’s known about a problem. Leaders must be able to think systemically to help them appreciate what in the world is going on. “Anticipating complex interactions gives CEOs the time to plan a range of responses, and then choose and execute as appropriate. Faster identification of incoming ripples could help mitigate delays in execution. Moreover, developing a keener sense of ripple intelligence assists in strategy development, as it helps CEOs better understand risks and connect the dots to reveal new business opportunities at the confluence of multiple emergent trends.”
The Power of Doubt. “Doubts are to CEOs what nerves are to elite athletes: a source of focus and insight when harnessed constructively, a threat to peak performance when not.” We often think of doubt as a weakness to be overcome. Why then is doubt an important capability when facing really difficult decisions?
The power of doubt, the report explains, can best be appreciated by looking at a 2x2 matrix, with fearlessness and anxiety along one dimension, and knowing and not-knowing along the other. Understanding which quadrant a problem fits in helps executives better tailor how to go about making a difficult decision.
- Fearlessness & Knowing: Key here is to avoid hubris and overconfidence by encouraging a diversity of views and open debate, and strongly challenging the information and advice they’ve been given to make sure it stands up to scrutiny.
- Fearlessness & Not-Knowing: Sometimes we have a strong feeling about a decision, - i.e., we know what to do despite limited information, based on intuition rather than logical reasoning and analysis. Such cases call for additional gut checks, such as discussions with experts and other people whose opinions we trust, as well as additional preparations to protect against the negative consequences of a wrong decision.
- Anxiety & Knowing: What if you’re not comfortable with the decision despite the availability of good information? This often happens with decisions on a subject beyond our comfort zone. Additional validation is then required to make sure that we are making the right decision, including discussions with trusted colleagues, mentors, friends or family; and benchmarking against what others have done under comparable circumstances.
- Anxiety & Not-Knowing: What should you do when a decision must be made despite insufficient information and no good gut-instinct? Such cases call for expanding your horizons, gathering information from a wide selection of sources, and talking to a diverse set of people whose different points of view might shed light on the problem at hand.
Authenticity: The CEO interviews didn’t include questions dealing directly with authenticity. Yet the topic kept coming up either explicitly or when discussing leadership qualities like integrity, honesty, personal values, self-awareness, and trustworthiness. As the report succinctly puts it - “authenticity is the fuel that drives trust.”
But, it’s not so easy to be an authentic leader. Stakeholders often view authenticity as a commitment to stay the course. This runs counter to the equally important requirement to be pragmatic and capable of adapting to a changing environment. Given the competing demands of an ever-widening group of stakeholders, leaders have to carefully navigate these authenticity-adaptability conflicts.
“The capacity to adapt authentically is critical for maintaining trust and buy-in when responding to competing demands and volatility.” Doing so successfully requires an overriding sense of purpose or risk becoming everything to everyone. In the end, authenticity means being true to one’s personal purpose while avoiding indiscriminate adaptation.
Balancing paradoxes: Balancing authenticity-adaptability conflicts is just one of the seemingly irreconcilable demands faced by leaders. Almost two-thirds of the CEOs interviewed raised the challenge of balance as a major concern.
“As more stakeholders make competing - yet equally valid - demands, CEOs face perplexing choices between right and right, as one put it, rather than simply right and wrong. It is these dilemmas that make decisions so vexing and alignment so difficult. How can CEOs give their various internal and external stakeholders confidence that they are choosing the right right, and get support for their decisions?”
To raise the organization’s confidence in their decisions, leaders must carefully balance the various personal paradoxes involved in the decision-making process, including:
- doubt - anxiety versus fearlessness, omniscience versus ignorance;
- conviction - openness versus self-sufficiency, hubris versus humility;
- realism - realistic optimism, i.e., pragmatism, versus blind optimism, i.e., gambling; and
- patience - the right pacing or timing of decisions versus detrimental haste and hesitation.
“The CEOs we interviewed lead some of the largest companies around the world,” notes the H&S-Oxford report in its concluding section. “Collectively, their conduct and performance affect everyone: employees, investors, consumers - all citizens of an increasingly interconnected world. Future leaders therefore need to embrace the challenge - but especially the responsibility - of leadership to do justice to a multitude of accountabilities and societal expectations.”