Leading in Times of Crisis E-Book

David L. Dotlich

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: J-B US non-Franchise Leadership
• Sprache: Englisch

Seitenzahl: 363

Veröffentlichungsjahr: 2009

Beschreibung

LEADERS TODAY ARE GRAPPLING with complex choices, diverse customers and employees, and unprecedented uncertainty in the economic environment. Business models are becoming obsolete, cost and performance pressures are growing, regulatory requirements are changing, and trust in institutions is declining. Tackling these and other growing demands requires every leader to radically rethink what constitutes effective leadership. Leading in Times of Crisis presents a new approach and concrete steps to compete in this complex, diverse, and uncertain marketplace. Drawing on compelling research and more than twenty interviews with CEOs and top-level executives, former executives and professors David Dotlich, Peter Cairo, and Stephen Rhinesmith highlight the growing urgency to evolve from a traditional, one-dimensional leadership model to what they term "whole leadership." Whole leadership allows leaders to act in three ways that are important now but absolutely essential to their business in the future: * RETHINK YOUR BUSINESS * CONNECT WITH STAKEHOLDERS * LIVE YOUR VALUES In an accessible, no-nonsense style, the authors provide new and experienced leaders with specific action steps for facing difficult choices, engaging diverse customers and employees, and acting in the face of uncertainty to deliver results and move companies forward in a turbulent, demanding, and resource-constrained world. Leading in Times of Crisis will help you become a "whole leader" by aligning your purpose, skills, and decisions with the outcomes your business requires. Read it and find out how every leader has the potential to make a difference in this new world.

Leseprobe

Table of Contents

Title Page

Copyright Page

Introduction

PART ONE - The Challenge

CHAPTER 1 - Navigating the Perfect Storm Complexity, Diversity, and Uncertainty

TRANSLATING METAPHOR INTO META-CHALLENGES

A VIEW FROM THE BRIDGE: WATCHING COMPLEXITY, DIVERSITY, AND UNCERTAINTY IN ACTION

THE WHOLE LEADERSHIP IMPERATIVE

CHAPTER 2 - What You’re Up Against as a Leader Today

VIEWING COMPLEXITY THROUGH A DISTORTED LENS

DIVERSITY AS A STRATEGIC IMPERATIVE

UNCERTAINTY: ACTING WHEN NOTHING CAN BE FULLY KNOWN

THE IMPLICATIONS: WHAT WE NEED TO KNOW AND DO

PART TWO - Nine Ways to Navigate the Perfect Storm Through Whole Leadership

Section One: Navigating the Wave of Complexity

CHAPTER 3 - Destroy and Rebuild Your Business Model

WHAT IS A BUSINESS MODEL, AND WHAT DOES CHANGE DO TO IT?

A GREAT MODEL FOR A WORLD THAT NO LONGER EXISTS

WHY IT’S WORSE TO DO NOTHING, BUT SEEMS TO BE BETTER

IT’S NOT JUST ABOUT GUTS: A WHOLE LEADERSHIP APPROACH TO DESTROYING AND ...

CHAPTER 4 - Focus, Simplify, and Network Your Organization

COMPLEXITY OF ORGANIZATION SIZE AND SCOPE

CENTRALIZATION AND DECENTRALIZATION

MATRIX MANAGEMENT: A JOURNEY, NOT A DESTINATION

WHOLE LEADERSHIP AND MATRIX MANAGEMENT: FOCUS, SIMPLIFY, AND NETWORK

CHAPTER 5 - Build a Climate for Innovation

A SIX-DIMENSIONAL APPROACH

MANAGING THE PARADOX OF ORGANIZATIONAL CLIMATE

WHOLE LEADERSHIP APPROACH TO BUILDING A CLIMATE FOR INNOVATION

Section Two: Navigating the Wave of Diversity

CHAPTER 6 - Differentiate and Integrate Your Markets

COMMUNITIES OF INTEREST AND VALUE MIGRATION

THE DANGERS OF BEING TOO DIFFERENTIATED

WHOLE LEADERSHIP APPROACH TO DIVERSE MARKETS: DIFFERENTIATE AND INTEGRATE

CHAPTER 7 - Learn to Lead Everyone

BEYOND DIVERSITY

LEVERAGING NATIONAL CULTURAL IDENTITY

LEVERAGING DIFFERENCES IN THE SEARCH FOR MEANING

THE MONEY-MEANING GAP

LEARNING TO LEAD EVERYONE FOR COMPETITIVE ADVANTAGE

WHOLE LEADERSHIP AND LEARNING TO LEAD EVERYONE

CHAPTER 8 - Become Stakeholder Savvy

TURNING GREEN WITHOUT TURNING RED: THE ENVIRONMENTALIST AND THE SHAREHOLDER

WHOLE LEADERSHIP AND BECOMING A STAKEHOLDER-SAVVY LEADER

Section Three: Navigating the Wave of Uncertainty

CHAPTER 9 - Redefine Risk and Uncertainty

OPERATIONAL, STRATEGIC, AND PERSONAL RISK

DEGREES OF UNCERTAINTY

HOW TO TAKE RISKS WHEN UNCERTAINTY IS EVERYWHERE

WHOLE LEADERSHIP APPROACH TO REDEFINING RISK AND UNCERTAINTY

CHAPTER 10 - Balance Conflicting Priorities

THE WAY YOU SEE THE FUTURE DEPENDS ON YOUR VANTAGE POINT

BALANCING PRIORITIES OF ATTENTION

BALANCING PRIORITIES OF CHOICE

WHOLE LEADERSHIP APPROACH TO BALANCING CONFLICTING PRIORITIES

CHAPTER 11 - Be Clear What You Have the Courage to Stand For

PARTIAL LEADERS AND BELIEFS

A WHOLE LEADERSHIP APPROACH TO BEING CLEAR ABOUT WHAT YOU HAVE THE COURAGE TO ...

PART THREE - Developing Whole Leaders and Teams

CHAPTER 12 - Aligning Your Company’s Talent to Navigate the Storm

ENTERPRISE LEADERSHIP: A LARGER FOCUS

BUILDING A TALENT STRATEGY

OBSTACLES TO DEVELOPING WHOLE LEADERS

DEVELOPING WHOLE LEADERS ACROSS AN ENTERPRISE

CHAPTER 13 - Aligning Your Team Around Whole Leadership

GETTING THE RIGHT PEOPLE ON THE TEAM

CREATING VALUE TOGETHER

DEVELOPING TRUST AND OPENNESS

CHAPTER 14 - Developing Yourself as a Whole Leader

UNDERSTANDING YOUR LEADERSHIP AGENDA

UNDERSTANDING YOUR LIFE AGENDA

UNDERSTANDING YOUR LEADERSHIP EFFECTIVENESS

UNDERSTANDING YOUR IMPACT ON OTHERS

UNDERSTANDING HOW YOU LEARN

UNDERSTANDING AND MANAGING YOUR ENERGY

CHAPTER 15 - Navigating the Perfect Storm A Final Thought: Why Whole Leaders ...

TOO MUCH SPEED, TOO MANY SURPRISES, TOO LITTLE TIME TO DECIDE

HOW WHOLE LEADERS CAN RESPOND: THREE WAYS TO MEET THE CHALLENGES OF THE PERFECT STORM

CONTINUOUS ASSESSMENT FOR CONTINUOUS LEARNING

Bibliography

Acknowledgements

About the Authors

Index

Copyright © 2009, Delta Organization & Leadership LLC.

Published by Jossey-Bass A Wiley Imprint 989 Market Street, San Francisco, CA 94103-1741—www.josseybass.com

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Library of Congress Cataloging-in-Publication Data

Dotlich, David L. (David Landreth).

Leading in times of crisis : navigating through complexity, diversity, and uncertainty to save your business / David L. Dotlich, Peter C. Cairo,

Includes bibliographical references and index.

eISBN : 978-0-470-47142-5

1. Leadership. 2. Management. 3. Success in business. I. Cairo, Peter C. II. Rhinesmith, Stephen H. III. Title.

HD57.7.D676 2009

658.4’056 -dc22 2009001146

Introduction

WHEN WE MET WITH THE CEO OF A MAJOR corporation recently, we asked him how things were going. Rather than giving us a typical response—“fine” or “good, except for problem x”—he responded with a sigh. He began talking about how his job never stops; how he’s under incredible stress; how there’s too much information to digest and too many decisions to make; how he feels as if the credit crisis, stock market fluctuations, and global economy are weighing him down; how it’s impossible to know the right thing to do. Obviously, we had caught him on a bad day.

We should add that this is a prominent CEO with outstanding business results, a global brand with huge equity, and a top-tier team around him. His complaints were revealing that day, but given his success we could only imagine how other leaders, less successful and well resourced, must feel.

Actually, we don’t have to imagine it. In our work with top executive teams and interviews with global executives, we’ve talked to leaders in a variety of industries about their perspectives on the complexities, diversity issues, and uncertain situations they face. What we’ve found is that the contradictions, challenges, and opportunities of the leadership role continue to multiply each year. Each day seems to bring new complications, and the conflicting needs of investors, customers, employees, and regulators increase with globalization, technology, and regulation. Many leaders worry that the global meltdown in credit and the worldwide need for governments to shore up the banking system have created new levels of complexity and uncertainty for leaders at all levels and in all industries.

Leaders tell us that in a world of unpredictable and uncharted events they worry about what’s going to happen next. They worry that when they walk into the office or go online, watch CNN, or answer their cell phone, a surprise will be waiting that would force them to rethink their entire business. It might be global financial uncertainty, lack of alignment in a matrixed organization, limited viability of a current business or profit model, or the increasing expectations (and options) of major customers. And the quarterly, monthly, even weekly demand to deliver better results does not stop. As a leader, you can probably relate to these challenges. Uncertainty is going to be with us for a while.

As stressful as your current business environment is, it probably also contains an almost sinful abundance of opportunities. New technologies enable convergence and connection, and rapidly emerging global markets and innovative, breakthrough services and solutions all create strategic growth opportunities that never existed before. Taking advantage of them in a volatile, unpredictable world, of course, requires leaders who can make savvy decisions and move quickly even as the earth shifts beneath their feet. The constraints imposed by credit restrictions may also hold competitors back. The new shape of financial services, banking, and government involvement in lending is putting new emphasis on efficiency, return on assets, and cash flow. Smart leaders will get ready for this—and will thrive as a result.

Unfortunately, some leaders are more likely to become unbalanced by these seismic shifts than to think clearly, feel deeply, and act decisively. This is understandable, since a good percentage of today’s leaders have been selected, developed, and rewarded for a more stable time. In most companies, intelligence, fitting in, perseverance, and results—however short term—have been the ticket to the top. These are admirable qualities—but they are no longer enough. We have found that successful CEOs are using a range of leadership skills that constitute an almost holistic leadership style, one not easily described by most corporate competency models.

In the past, gradual experience—gained over time in a variety of situations—was the best predictor of success in a senior corporate role. Companies defined and replicated effective leadership by investing heavily in competency-based leadership development, parsing leadership behaviors and skills, assessing leaders against those behaviors, and prescribing experiences and assignments to produce those behaviors. But today a lot of incremental, similar experience from the past may not be relevant in addressing current challenges; skills gained in a more stable environment may not produce the judgment necessary in the newly complex, diverse, and uncertain business context.

Many CEOs have told us that if they had listened to their gut, they might have satisfied themselves with lower returns, even if their job was on the line for insufficient growth. Two years ago we published a book based on extensive research titled Head, Heart, and Guts. The thesis of the book, as the title suggests, is that effective leaders are whole leaders, leaders who use their head to set strategy, their heart to connect with the world, and their guts to make instinctive and intuitive decisions based on clear values. Since then, and despite the book’s wide acceptance as a leadership model by a number of large global companies, we still too often see top business executives attempting to solve problems or seize opportunities using only their head . . . or their heart . . . or their guts.

We’ve learned that no matter how smart you are, you can’t outthink every problem. Likewise, no matter how empathic you are, people skills will be ineffective when you try to deal with complex trade-offs, and no matter how quick you are to roll the dice and take action, getting things done may not grow or move the business if you’re doing the wrong things. Given the increasing demands on organizations and those who lead them, becoming a whole leader will become as important as experience in determining leadership success in the future. Using your head to anticipate, understand, analyze, and respond to new strategic directions, your heart to see the world from the perspective of a diverse range of stakeholders, and your guts to make tough decisions based on clear values will be the key leadership navigation tools that you will have as you make your way through the storms of uncertainty, diversity, and complexity that will constitute the environment for all leaders in the future.

We’ve written this book as an extension of our earlier work. We believe that there continues to be a shortage of talented leaders in most organizations. Most companies continue to rely on, promote, and reward one-dimensional leadership. Leaders and companies are unprepared for the increasing technological, environmental, and global demands on leadership that, combined with increased regulations and decreased credit, will require radical rethinking of what constitutes effective leadership and how to produce it. Our hope is that this book will give you the insights and tools to prepare yourself and others to succeed in the complex and uncertain business world we all face.

PART ONE

The Challenge

CHAPTER 1

Navigating the Perfect Storm Complexity, Diversity, and Uncertainty

IT STARTED LIKE ALL STORMS—THE BREEZE BEGAN TO PICK UP, but people didn’t notice it right away. Then as technology made home computers and more efficient work systems a reality, people sensed that something was in the air. Everyone began talking about how these new inventions would reduce costs and allow people to enjoy life more with less effort.

As technology’s impact grew stronger, it generated waves of new information, access to new markets, and the ability to incorporate diverse views and interests when making decisions. People grew excited about these changes because things seemed to be coming together—integrated solutions, integrated organizations, global perspectives combined with local needs—all addressed simultaneously in increasing detail through integrated technology.

But sometime around the turn of the twenty-first century, the speed of technology joined with the increased diversity of perspectives and possibilities, and the climate became highly uncertain. Old assumptions about business began to be swept away, new voices entered the discussion, and leaders began to feel challenged and worried.

Suddenly, even the most accomplished leaders became uncertain about how to lead in this volatile, unpredictable environment.

The metaphor of a perfect storm captures the current environment perfectly. We are witnessing the rare convergence of complexity and diversity, a convergence that challenges all our leadership assumptions. Imagine leaders as captains steering ships through this perfect storm. The old charts are outdated, and even the smartest strategists have not yet been able to adequately map a new world. Every time someone conducts a study of the new territory, the storm starts shoaling the terrain and changing the navigation lanes. As fast as leaders develop new strategies, powerful external forces render them obsolete.

In such times, leaders need to rely on their own beliefs and instincts, and on those of their people. During a perfect storm, things move too fast amid too much chaos to permit long periods of study and deliberation. Like the best captains trying to keep their ships afloat during the fiercest storms, leaders have to depend on what they know to be true. They also have to depend on the advice and suggestions of others. Judgment can be skewed when things get rough and it’s impossible to see any blue sky ahead. In these difficult moments, leaders must lean on a range of advisers and then make their decisions. This is true not just for a day or two, but for weeks, months, and even years, since the storm shows no sign of abating. Even though goals may change and directions shift, leaders must keep moving.

These are not times for average leaders or for those who cannot appreciate and use the skills of all their key people. If this perfect storm is to be navigated, it will take whole leaders who use their full potential to move the enterprise through an enormously complex, diverse, and uncertain era.

TRANSLATING METAPHOR INTO META-CHALLENGES

Leaders now confront huge challenges that must somehow be understood and acted upon. As formidable as these challenges might be during normal times, during a perfect storm they appear insurmountable. They’re not, but that’s not to deny how confusing they are when you can’t get your bearings. Consider these very real scenarios, which senior executives we know have recently faced:

• You would like to charter a new team to look at business prospects in an emerging market. None of your direct reports have lived or worked extensively outside your home country, but your growth projections for emerging markets next year are expected to triple.

• You have been asked by colleagues in another sector of your company to work together to develop a global franchise of products that will cut across country business units. You wonder if getting involved in such an intangible project is wise, given the daunting numbers you must achieve by year-end and the amount of effort that will be required to get country managers on board.

• Your top team of analysts is proposing a business idea to sell a new type of financing to accompany your major product line. The underlying debt will be repackaged and sold to various investors and financial institutions. You’re familiar with business finance but don’t fully understand the debt structure and degree of risk. However, you have watched your competitors make huge profits by offering financing to their customers and you have confidence in the “quants” proposing this product. Do you follow the herd and, if so, how much of your own balance sheet are you willing to commit? What is your appetite for risk?

• You are preparing next year’s business plan, and your strategic planning group is unable to predict with any degree of precision the price of commodities for the next twelve months.

• You want to visit some key customers who have called to complain about the lack of innovation in your product offerings. You open your electronic calendar and realize that every hour of every day is scheduled for the next three months.

• You work in a regulated industry and are leading a task force reviewing clinical trials of a future product offering. The clinical results are ambiguous. Sponsoring additional trials will cost millions of dollars and cause months if not years of delay before introducing the new product, which may generate millions in new revenue. However, product liability could also create years of litigation.

These are simple, even simplistic, examples of the types of challenges leaders face every day in dealing with complexity, diversity, and uncertainty. But they are real and capture the dilemmas of leading in modern companies. The perfect storm is here. The extent to which leaders are able to meet these new challenges will determine whether they (and their companies) survive, much less succeed.

A VIEW FROM THE BRIDGE: WATCHING COMPLEXITY, DIVERSITY, AND UNCERTAINTY IN ACTION

We have served as business advisers to CEOs and boards on issues of talent and leadership for many years in many companies and in many countries. We have built one of the premier firms for educating senior executives outside business schools; every week, around the world, we work closely with CEOs, executive teams, and individual leaders. We have had the privilege of working with some of the best leaders in some of the best companies, including Nike, Johnson & Johnson, Avon, Colgate-Palmolive, Fidelity, Doosan, Merck, Novartis, and many others. We routinely hear that the intersection of technology, media, regulatory bodies, shareholder activism, politics, people, and competition has created a dynamic playing field with almost unfathomable risk and uncertain opportunity. Everywhere leaders are saying the same thing: The complexity, diversity, and uncertainty of their world have increased, and their leadership ability is not keeping pace.

The complexity of issues faced by leaders at each level of every company today is significant. More information, more opinions, more connectedness, and more options have made understanding what is going on difficult; it is even more difficult to make decisions, often quickly, about matters that you don’t understand. Organizations now comprise multiple reporting relationships, often in far-flung geographies, that all require numerous inputs before decisions can be made. New information appears daily—even hourly—over the Internet. Customers, competitors, and partners often overlap, and loyalties are often unclear.

As a result, many leaders feel trapped and sometimes overwhelmed by complexity. They try to figure it out by increasing the amount of information they digest each day, or holding more meetings, or reading and responding to all the e-mail they receive. They search for decision tools, time-saving approaches, and new ways to organize themselves. They recognize the leader’s job is to sort through complexity, but are unclear how to read the ever-changing environment.

Complexity multiplies upon itself. Organizations, information, markets, globalization, and people all come together to confuse and confound many leaders today. More than one leader has told us, “I try to focus on the high-priority, high-payoff activities.” But this usually means sacrificing the long term in favor of the short term—in effect, giving up efforts to find a map through the storm and concentrating on getting to the nearest shore.

For leaders, the world has become flatter, faster, more interdependent, and riskier. Regulatory decisions in one country now spread worldwide. The outcomes of clinical trials in China now influence regulatory approvals in the United States. Consumer reactions to product introductions are now instantly global. Financial decisions made in one country by one company—and even one leader—can shake the global financial system. Large corporations such as Bear Stearns, Countrywide, Lehman Brothers, Merrill Lynch, Arthur Andersen, and (as everyone knows) Enron, can disappear overnight as a result of a few wrong decisions. Brands that have enjoyed trust and allegiance for decades can be eroded instantly by the actions of a few people. In the face of increasing complexity, is it any wonder leaders tread more carefully as they assess their choices?

But what feels like a trap is really a paradox, and there is an important difference. For example, no one disputes the importance of knowledge—but too much knowledge can be a bad thing. Most leaders look for the “sweet spot” between making problems overly complex by analyzing them to death and overly simple by ignoring critical facts that can tilt a decision in one direction or another. We’ll talk a lot about understanding paradox as a tool for managing complexity, because facing a range of conflicting choices is often what drives the perception of complexity.

No one will argue that the diversity of people—diverse in terms of their backgrounds, values, and cultures—has increased exponentially and also presents a challenging piece of the new leadership environment. Because of globalization, immigration, and, yes, technology, diversity has become a priority for every company and leadership team. Leaders who fail to acknowledge and capitalize on the increasing differences among their employees, customers, and markets run the risk of losing touch with these key stakeholders. Changing consumer tastes, widening generation gaps, and intensifying cultural differences, accompanied by proliferating product and service choices, create daunting diversity and complexity.

Most leaders have never had to operate in such a complexly diverse and diversely complex environment. Just consider one issue to glimpse the magnitude of the problems (and opportunities) for leaders. Immediate access to information through multiple channels has put the power of choice in the hands of consumers, customers, clients, and patients, placing extraordinary pressure on leaders to truly understand their needs at a deep level. Companies such as Nike, Kraft, Harley-Davidson, and Colgate are all focusing on developing markets as an important source of growth. However, simply exporting U.S. products and marketing to developing countries does not do the job. Leaders in these companies are working hard to see the world through the eyes of their diverse new consumers. We take senior leaders in our action learning programs to India, China, Vietnam, and Brazil and immerse them in the lives of their future customers—sitting on the beds in one-room huts to understand the daily routines and grasp the hopes and dreams of the people they hope to serve. Diversity today is mastering the art of walking a mile in someone else’s shoes—someone with whom you have little in common—so you can adapt to their expectations and appreciate their strengths—or else prepare to be overtaken by competitors in emerging markets who will soon be expanding into the developed world. Diversity is both an urgent challenge and an urgent opportunity.

Leaders tell us constantly about the challenge of taking action in the face of uncertainty. Or, more specifically, they complain about the difficulty of doing so. The world is becoming a less predictable place, but the demand for action in the face of uncertainty is unrelenting. One executive recently said that in his job, complexity creates uncertainty. While the overall amount of information is increasing, he must make highly complex decisions based on less information than he’s used to having. Because the speed of change has increased exponentially, he lacks the time to agonize about what he doesn’t know. As he put it: “All you can ask is whether you’re missing something that is available.” At that point you have to rely on your personal beliefs, values, and sense of purpose to move forward. Otherwise, you will be left standing on the sidelines while your customers, competitors, stakeholders, and employees move on.

One aspect of uncertainty for all leaders, whether they realize it or not, is the intersection of climate change, oil prices, environmental concern, and alternative energy, which may impact every business model of every company throughout the world. In Flat, Hot and Crowded, Thomas Friedman points out that destabilizing climate change and competition for energy will soon affect everyone—especially companies seeking energy, transporting products, and producing waste—and will forever change how business is conducted. Friedman also points out, however, that the opportunities created by the demand for alternative energy will be as significant as those of the information revolution.

The other aspect of uncertainty for leaders today is the global financial and credit system, which has absorbed significant shocks recently, consolidated in the aftermath of many bank failures, and faces a period of regulation, conservative decision making, and credit tightening likely to last for years. The global credit crisis, which began with sub-prime lending in the United States, has demonstrated that the financial system, including derivatives, hedge funds, collateralized debt, currency trading, and energy speculation is now fully global, not very transparent, and extends around the world. The business plan of a leader in Iowa to acquire a competitor in Denmark is subject to disruption by the lending practices of a bank in New York with a creditor in Thailand. Of course, no leader can be expected to track all this interdependency, but the resulting complexity is a structural factor that creates insecurity and more uncertainty today than ever before.

THE WHOLE LEADERSHIP IMPERATIVE

We work with many global companies to prepare their leaders for the future. The first step is to define what successful leaders will look like. Here’s what one of our Fortune 100 clients expects its successful executives to be able to do:

• Find continued sources of innovation and growth with an emphasis on emerging markets.

• Navigate through a set of complex external legal challenges, regulatory hurdles, media onslaughts, and policy threats.

• Demonstrate resiliency in the face of uncertain challenges.

• Be accepted by employees as a reputable steward of the firm.

• Represent the company externally and be its credible public face to multiple stakeholders.

• Display the will and physical energy to do the job.

It’s a long list, but this description is not unique given the future environment most companies anticipate, and it acknowledges that complexity, diversity, and uncertainty will be the ongoing context for leading. Given the increasing demands on organizations and those who lead them, becoming a “whole leader” will be critical to navigating this perfect storm.

We’ve watched successful leaders manage this new environment, from companies as diverse as BP, Nike, Novartis, Doosan, Fidelity, and many others. Many of their stories are contained in the following pages. One lesson emerges as a starting point: you can’t break down complexity, diversity, and uncertainty into piece parts and manage each separately. Too often, we see top business executives attempting to solve problems or seize opportunities using only their head . . . or heart . . . or guts. We’ve learned that no matter how smart you are, you can’t outthink every problem; that no matter how empathic you are, your people skills will be ineffective in certain situations; that no matter how quick you are to roll the dice and take action, getting the wrong things done will not help the business.

As a leader you must bring it all together by bringing yourself together. You must use your head to anticipate, understand, analyze, and respond to new strategic directions, your heart to see the world from the perspective of a diverse range of stakeholders, and your guts to make tough decisions based on clear values. This is a simple description of “whole leadership,” and one companies such as Bank of America, Kraft, KPMG, Colgate, Merck, and many others are adopting because it captures in simple terms the complicated components of leading today.

Keep our metaphor in mind: A perfect storm requires leaders to possess a wide range of navigation tools. You can’t lead as you have in the past. You must tap into the capacities of your head, heart, and guts as increasingly volatile and unpredictable situations dictate.

We’ve written this book because we see a shortage of talented leaders in most organizations to deal with the perfect storm, and we see so many companies continuing to rely on, promote, and reward one-dimensional leadership. Leaders and companies are unprepared for the spiraling technological, environmental, and global demands on leadership, which require radical rethinking of what constitutes effective leadership and how to produce it.

In the next chapter, we present what we mean by complexity, diversity, and uncertainty. Subsequent chapters describe the how-to when it comes to navigating the storm. At the end, we provide ways you can develop yourself, build your team, and lead your company through the tumult and confusion ahead.

The challenges that leaders face today have no easy answers, and what works for one leader may not directly apply to another. But we hope this book will give you some ideas, insights, and even tools that will help you survive and thrive in uniquely challenging times.

CHAPTER 2

What You’re Up Against as a Leader Today

HAVEN’T THINGS ALWAYS BEEN COMPLEX, DIVERSE, AND uncertain? For at least the past thirty years or so, haven’t leaders struggled with information overload, issues involving minorities, and a volatile marketplace?

Yes, to a certain degree. But not to the degree of today’s perfect storm. It is absolutely impossible to overestimate the turbulence and chaos that leaders now confront every day. If leaders are honest, they’ll admit that they don’t always know what to do; that they’re constantly facing right-versus-right choices; that they are leading a growing number of people with whom they have little in common; that their businesses and industries are so unpredictable that even if everything seems to be going great, it can all go to hell in a hand-basket overnight. Remember the three leaders of the auto industry trying to explain how and why they needed a government bailout for a market that had crashed in a matter of months?

This perfect storm of complexity, diversity, and uncertainty is here to stay, at least for the foreseeable future. It therefore behooves every leader to understand its elements and how they have come together to create such a challenging and confusing climate. To that end, this chapter digs deeper into each of these elements, starting with complexity.

VIEWING COMPLEXITY THROUGH A DISTORTED LENS

Leaders long for clarity, and in most cases, they’re not going to get it. This isn’t just because they have too much information to process—the standard definition of complexity. Rather, it’s because various other elements distort the view of complex matters.

Take the case of the recent home mortgage crisis: Very smart, very experienced CEOs, including Chuck Prince, Peter Wuffli, Kerry Killinger, and Stan O’Neal, lost their jobs because their skill and experience did not serve them in navigating the forced choice of lower returns or higher, almost unfathomable risk. Sub-prime financial modeling has devastated more than one prominent financial services firm and killed others such as Bear Stearns and Lehman Brothers, and it’s not because firm leaders were stupid.

Many industries have become highly specialized, and the greater the degree of specialization, the more complex things get. Very smart product developers lower down in the organization create new approaches that rely on such complex technical knowledge that senior leaders cannot possibly make judgments about the efficacy of the final product. In the banking system, problems developed because lenders didn’t understand the risk portfolio of sub-prime loans, and many people at all levels lost their jobs because of these complexities.

It’s also tough to focus on complex matters when anxiety and fear distort your view. Because of these challenging times, anxiety and fear are rampant. The answers to most problems are not obvious. When leaders try to deal with enormously complicated problems such as how much to centralize their business operations, what long-term investment is required for innovation, how to meet the regulatory requirements of Sarbanes-Oxley or increase minority representation in senior management, they face the uncertainty of choosing between two right causes. This, in turn, makes people anxious. Resources and time are limited, opportunities come and go quickly, and small problems can spiral into big ones. We have seen executives for whom this anxiety turns into outright fear when a crisis like a downsizing, acquisition, or lawsuit occurs. In such a fearful atmosphere, employees also resist change, making it difficult to implement anything new. We have worked with many CEOs and senior leaders to align their culture with a new business strategy only to have its implementation undermined not by rational analysis but by subtle and unspoken fear about change and the future.

Leaders themselves complain they can’t figure things out, and often it’s because their own fear and resistance cloud their vision. Leaders can’t see patterns that would help them determine what to do because the atmosphere is thick with anxiety. But what is it that people want from their leaders during times like these? You don’t have to look further than Yahoo chat boards and internal employee surveys for the answer:

• Where are we going and how will we get there?

• Are we going to be all right?

• What should my priorities be when there are so many demands?

• What do our leaders truly think and can I trust them?

We have also noticed this same confusion in senior management team meetings. We’ve witnessed back-and-forth debates about questions without clear answers as senior leaders argue for different outcomes, some of which are contradictory. One CEO we work with says that one by-product of this ambiguity is greater stress and conflict on management teams. The lack of clear answers to important questions leads to heated debates. A common example we have seen recently in U.S. or European companies is the debate about doing business in China. On one hand, people see enormous advantages in the opportunities China presents as a partner, supplier, and customer. On the other hand, Chinese companies also represent a huge threat to their business. Knowing how to handle these uncertainties is critical. The ability of a team to sort through alternatives and achieve alignment in the face of uncertainty can be a hallmark of its success.

The environment becomes even more complex when you add “new business models” into the mix. More and more organizations are shape-shifting to fit emerging realities, so it’s tough to know how to restructure, let alone when and why. When leaders see a company like Lenovo emerge on the world scene, it has to make them stop and think . . . and wonder if they are hopelessly behind the times. Lenovo is a self-described “new world company,” designed to blend best practices of both West and East. Originally a company called Legend founded by eleven Chinese computer scientists, it acquired IBM’s PC business in 2004; it now has operations all over the world and is targeting emerging markets such as Brazil and India. Lenovo doesn’t fit any previous model, and its existence forces leaders to question their own models. In Globality: Competing with Everyone from Everywhere for Everything, three Boston Consulting Group consultants have documented some of the new ways of thinking that market leaders in emerging economies are using to enter the global marketplace. With a fierce emphasis on costs, education, local market knowledge, innovation, and thinking big while acting fast, these companies are turning many old Western assumptions and business models on their heads.

Complexity would be easier to deal with if Western leaders used more than their brains to grapple with it. Unfortunately, many extremely bright executives fall into the trap of trying to outthink complexity, and all they get for their efforts is a giant headache. Yes, leaders should use their head to understand evolving complex industry trends. But they should also rely on their heart to put themselves in the shoes of different customers and competitors. And they should have the guts to question conventional thinking and assumptions about their own business model and the future.

Whole leaders handle complexity well because they use a framework or filter to sort through existing data and are not paralyzed by having less information than they need or want. They possess a theory of the case, a way of viewing the world, and this allows them to strip away a lot of distracting and confusing elements of complex matters. They can focus in a way other leaders cannot. They can also take action in the midst of paralyzing complexity. And they can forge the trust that keeps a team together and moving forward during confusing times.

Johnson & Johnson is a company that is experiencing as much complexity as any other large global pharmaceutical and device manufacturer—regulatory requirements, fast-changing technologies, pricing pressures, growth in developing markets, and almost ongoing litigation. What does the chairman and CEO, Bill Weldon, do in response? He gathers his top hundred leaders together for an intense three-day discussion—to review, debate, and align around their corporate credo. He knows he can’t teach his senior leaders everything they will need to know to manage the new complexities. But he believes that building and keeping trust with key constituencies will be critical for the future. His view is that leaders who combine head, heart, and guts in a shared understanding of and commitment to the J&J Credo will do better in managing the new complexities than leaders who are rigorously trained in the latest analytical tools and business acumen. Johnson & Johnson has navigated some of the recent perils of the pharmaceutical industry better than most.

Colgate-Palmolive is one of the most successful consumer products companies in the world. Under the leadership of former CEO Reuben Mark, the company established a nearly unparalleled track record of growth over the past two decades. While new CEO, Ian Cook, has continued the same, proven core business strategies, he recognizes that the challenges of leading today require additional capabilities. He is challenging Colgate leaders to find the right blend of skills between the old model that served the company so well and new competencies that will be required in the face of new challenges. He knows that the company must maintain its financial strength, ability to execute, and the strong values that have made it successful while becoming faster, more innovative, and even better at translating consumer needs into new products. He does not underestimate the complexity of the issues he faces in meeting these challenges. At the same time he knows that responding to them will require a combination of well-informed beliefs, business discipline, constant communication, and a culture that relies on people to do the right thing.

DIVERSITY AS A STRATEGIC IMPERATIVE

It is ironic that as the world of work becomes increasingly diverse, many leaders still grimace when you mention the word diversity. To them, the word connotes uncomfortable initiatives, political correctness, and forced rules. However, the importance of diversity is not going to diminish. But it must be redefined beyond traditional focus on internal diversity and seen as a strategic imperative that requires

• Understanding other cultures, stakeholders, and consumers

• Demonstrating real empathy and understanding of community concerns for sustainability and economic development

• Taking risks to do things differently by building the strategic alliances, coalitions, and relationships necessary to manage effectively in a complex world

Nike is a company with prospects for enormous future growth in China. Millions of Chinese consumers are learning the fun of sport, the pride of winning, and the power behind the Nike swoosh on shoes and apparel. China is one of Nike’s biggest growth engines. To prepare for this explosive growth, we’ve helped Nike conduct many leadership programs in China during which their senior leaders spend time with young consumers, study a variety of retail formats, and interact with Chinese athletes. Nike’s Chinese employees spend time with their counterparts in the United States, and Nike’s board of directors has met in China. Diversity and inclusion mean different things in different countries and to different people. At Nike, diversity and inclusion are what drive creativity and innovation around growth, especially in a growth market like China.

We are in the midst of a diversity revolution. The topic has been around for years, but has recently taken on greatly expanded and altered meaning. When diversity first became an issue in organizations, it was primarily defined in racial terms. Then it broadened to encompass gender, ethnicity, and age. Nevertheless, it was still basically viewed by many companies as a compliance issue, a response to pressures from external constituencies or institutions like the federal government.

Recently, however, the topic has moved to a higher and more meaningful level—diversity has become the right thing to do for right-thinking organizations. Many factors have driven this evolution, especially the increasingly global way in which companies conduct business and the need to partner with people from a wide variety of countries.

During this evolution, all sorts of diversity training programs were created and everyone within an organization became aware of the need to create diverse teams and other integrated groups. However, the implementation of conventional diversity programs proved to have little impact. Seen as obligatory by many people, enrollment was often mandatory and participation was met with grudging acceptance. These programs were a defensive response to social inequities. More than that, diversity often became highly politicized, with people divided into the haves and have-nots. Contention was at the heart of diversity discussions, not collaboration. The adversarial aspect of many diversity programs created discomfort, even among those who were supportive. Furthermore, in a recent study of eight hundred companies reported by Kalev and others in the Journal of Sociology, those that had implemented standard diversity programs were actually found to be less diverse than they were before!