I once asked a CEO to draw what his working day felt like.
He conceded he wasn’t much of an artist, but his illustration spoke volumes: he drew himself with his hair on fire.
Leadership has become much harder over the last twenty years and there are good reasons for this, none of which suggests it is a passing phase. With the spread of globalization and advent of pervasive communications, the business environment has largely moved from being very complicated to highly complex and the difference is profound.
Complicated environments have clear, sturdy hierarchies, rules and regulations, are linear and predictable; they can be planned, managed, repeated and controlled, 9 maximized by routine and efficiency. But complex environments are non-linear and fluid, where events may repeat themselves but not predictably and small actions can produce disproportionate effects without warning. The classic comparison is that between the Gulf War (1990 – 1991) which was complicated – an intensely planned application of overwhelming force, executed by the book – and the Iraq War (that began in 2003) which was complex: a fluid volatile environment of profound and shifting opacity where a lone individual with a cell phone could tip the balance. In complex environments, there are too many factors influencing too many causes too erratically to know what or where their combined impact will be. It’s like moving from a golf game to a multi-player
The key difference is that we have lost the ability to predict. Where once management depended on a cycle of ‘forecast-plan-execute’, now even the most expert forecasters say that the ineradicable uncertainty of complexity means they can’t accurately see much more than a year out. Digital disruption is just one manifestation of the change. No hotel CEO saw Airbnb coming and now that it is here, the competitive defense of real estate and armies of workers now appear a burden. Businesses that developed sophisticated supply chains to reduce costs, take advantage of labour specialisms, employment conditions, currency fluctuations and tax breaks now find themselves exposed to natural disasters, economic volatility, social turmoil, religious strife, trade wars and political discontent – all factors over which they have no control. Traditional scientific management, in which everything could be calibrated, measured, planned and assessed, fails now because it forces rigidity on systems that need swiftly to become fluid and adaptable. Ironies compound: with more information than ever, it’s harder to know where to pay attention.
The key difference is that we have lost the ability to predict.
We have more data but less insight. Employees are more educated than ever, but often with skills that date fast, acquired through systems that prize obedience over creativity and flexibility.
Complex systems are characterised by risk (which can be quantified) and uncertainty (which cannot). What’s so striking about the annual risk report from the World Economic Forum isn’t just the scale of the risks facing the business environment, nor the degree to which they are inter-connected, but how 12 dynamically they’ve changed in just ten years, not because any has gone away but because new ones keep emerging. Leaders have had time to think about terrorism, the failure of financial institutions and cyber-attacks, but few have seriously come to terms with climate change and fewer still are contemplating the impact of quantum computing, weather manipulation and pandemics. At the same time, the rising generation of leaders follow a completely different agenda, prioritising climate change, inequality, local economies and education. How is all of this to be addressed?
The temptation is to turn a blind eye to all of these challenges and to focus instead on the day job. One leader I know is more concerned with how to get the traditional side of the business to collaborate with the digital; she knows the failure to do so loses the firm millions every year. Another is routinely thrown off course by his investors’ attempts to time the market, eager to sell the company when political events trigger a decline and to hold when the market is booming. A Head of Strategy struggles to be optimistic about shifting from a product to a services business, anxious that neither people nor culture can adapt. These are urgent priorities, beyond which they know they must think about their employees’ mental health and the poor diversity of their organisations.
Depending on one superhero deprives organisations of the collective intelligence that complexity demands.
In this context, being the smartest guy (or gal) in the room is no longer a viable leadership option. Depending on one superhero deprives organisations of the collective intelligence that complexity demands. Leaders now must be expert convenors: of talent, insight, exploration and debate. The rise of leadership teams recognises that the critical capacity to sense, adapt, experiment and persist demands a wide spectrum of mindsets, expertise, experience and imagination.
Leaders are learning to live with paradox, recognizing that they must both create a culture of safety and take risks; that they must scan the horizon constantly and be able to focus; that they need to be humble in learning and bold in action; that listening needs to be as insightful as speaking; that having power is best manifested by not needing to use it.
Superceding all of this is one more demand. It isn’t just young people who expect leaders to develop a healthy relationship to society; investors like Blackrock do too. In the past, the theory that ‘the business of business is business’ maintained that society flourished whenever companies did. But rising inequality, the discrediting of trickledown, the 2008 crash and populist anger have left the theory in tatters.
Today, 76 percent of people expect Chief Executives to take the lead on change, rather than waiting on government to impose it. That is an 11-point increase in just one year. Leaders are under intense scrutiny as they conduct the delicate negotiation between their organisations and the society they serve. Is the company a net contributor to, or detractor from, social wellbeing? Is it healing or hurting the planet? Is the culture just? Does this organisation make society safer or more precarious? In confronting the existential threat of climate change, who will be able to say that they protected the world we live in? Only in wartime have we seen the demands on leaders around the world expand so fast and so far.
Leaders are under intense scrutiny as they conduct the delicate negotiation between their organisations and the society they serve.
Are they up to the challenge? Not alone they won’t be. The complexity of the environment demands leadership on so many levels, in such diverse disciplines, that the champions will be those whose imagination, social capital, willingness to experiment and ability to create coalitions bestows legitimacy on their institutions. Then, and only then, might they put out the fire.
Margaret Heffernan is a former CEO and author of Wilful Blindness: Why we ignore the obvious at our peril. She also leads the Faculty at the Forward Institute.