Leading at the Speed of Change

Everyone faces complexity driven by uncertainty and accelerating change. It is the “New Normal” making leadership more demanding and in demand.

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Accelerating Complexity places extreme demands on leaders. The leader’s ability to relate, energize, and develop their followers is critical to empower them to act without direction. It’s a competitive imperative and requires a new balance of more effective and affective leadership. It’s the ability to produce results by being affective. That ability to influence people, in the way they think, feel and act is now paramount
As Peter Senge said Leaders “…cannot afford to choose between reason and intuition, or head and heart, any more than they would choose to walk on one leg…”
The recent report by Deloitte’s confirms the trend of early surveys by IBM and KPMG

“After three years of struggling to drive employee engagement and retention, improve leadership, and build a meaningful culture, executives see a need to redesign the organization itself, with 92 % of survey participants rating this as a critical priority. The “new organization,” as we call it, is built around highly empowered teams, driven by a new model of management, and led by a breed of younger, more globally diverse leaders.”

Global HR Trends 2016 – Deloitte

Surveys from IBM and KPMG give us some clues.
Not surprisingly, CEO s are confronted with massive shifts caused by:

• New Government Regulations
• Increased information management.
• Changes in global economic power centers
• Accelerated industry transformation
• Rapidly evolving customer preferences

In the KPMG survey 1400 Corporate Decision Makers across 22 countries)  showed:

• 94% agreed that managing complexity is important to company success
• 70% agreed that increasing complexity is one of the biggest challenges their company faces
• Trying to manage complexity has had mixed success with only 40% of senior executives rating themselves as “very effective”

In IBM’s annual survey, they interviewed 1,500 CEOs from 60 countries across 33 industries.

• Most say that successfully navigating increasing complexity requires creativity. Yet….
• Less than half believed their enterprises are prepared to handle a highly volatile, increasingly complex business environment.

This sounds familiar. You’ve covered failed change statistics before. It doesn’t sound as if things are getting any better?

Good pick-up, surveys since 1996 have consistently shown that 60%-70% change initiatives in North America fail and now….
More than 60 percent of CEOs said that industry transformation is the top factor contributing to uncertainty, indicating greater challenges to find more creative ways of managing organizations, finances, people and strategy.
In IBM’s survey:

• 80% CEOs expect things to get much more complex but only49% believe their organizations are equipped to deal with it successfully – the largest leadership challenge identified in eight years of research.
• Most say such Constant Change Demands Creativity

CEOs see Innovation’s importance rising to overcome complexities by instilling “creativity” throughout their organization.

What sort of things did they suggest are needed to “instill’ creativity?

They say they need creative leaders that will:

• Focus much more on innovation
• Be more comfortable with ambiguity and experiment with new business models to realize their strategies
• Invite disruptive innovation and take balanced risk
• Consider changing their enterprise drastically to enable innovation
• Engage their teams to be courageous enough to alter their status quo

What have the “stand out” organizations been doing as this trend has emerged?

Over last 5 years, IBM showed that:

• 54% are more likely than others to make rapid decisions.
• 95 % identified getting closer to customers as a strategic imperative
• 20 % more of their future revenue will be from new sources than their more traditional peers due to their superior operating dexterity
• 61 % see “global thinking” is a top leadership quality.
• Most see the need for new industry models and skills as they can’t rely on models they use in their domestic markets

In parallel, 74% KMPG respondents see opportunity in complexity, like:

• Gaining competitive advantage,
• Creating better strategies,
• Developing new markets,
• Driving efficiency,
• Bringing in new products.

They also see complexity driving new approaches to HR, geographic expansion, mergers/acquisitions and outsourcing

This is a lot for leaders to absorb and must increase pressure on them, so how is it impacting leaders?

Typical reactions to increasing these complexities are curious.
As these surveys show, many leaders see their world as complex but my questions is: Do their organizations need to be complex as result? The increased pressure you find has an insidious effect of CEOs feeling that they need more control, more systems, more technology, more….complexity. Now they fall prey to

“The perfect becoming the enemy of the good”

Missed the Boat

(Voltaire)

Let’s unpack this. As technology gets faster and cheaper, pressured decision makers seek more data and information which locks them away from the future. The real danger is developing corporate myopia that focuses on refining existing products while competitors are developing  “Game Changers”
Added to this is a common view that more data and information gathering capabilities reduces uncertainty. But, time-compressed decision-making rests on identifying your competitors’ intentions with the least amount of information to take action first.  The need is for enough situational awareness to find competitive vulnerabilities and predeict their actions.
The problem is that time to create the future is compressed. Only wisdom deals with the future. But achieving wisdom isn’t easy. For people to acquire wisdom they must transition through data, then information, then knowledge to get to wisdom – “evaluated understanding” Let me explain
Wisdom is understanding where none has existed before. Unlike data, information and knowledge, it asks questions which have no known answer. Wisdom is a human state informed by technology not replaced by it and enabled by future perfect and future worse-case thinking. The challenge is leading people through transitions of understanding data, to information, to knowledge, and finally to wisdom – fast enough to be useful.

“The only sustainable competitive advantage is an organization’s ability to learn faster than the competition.”
— Peter Senge
 

This means that leaders need to create Learning Organizations that acquire wisdom fast enough to thrive in rapid change by:
1.  Creating cultures that support ongoing employee learning, critical thinking, and risk taking with new ideas
2.  Allowing mistakes and valuing employee contributions
3.  Learning by experience and experiment
4.  Dispersing newly gained wisdom through the organization and embedding it into the day-to-day
Once these elements are understood and consistently applied, different market and in-country leaders can respond according to their own realities.

I have heard of the Learning Organization before…how long has this concept been around?

It was first used in 1980 by Pascal. And all the evidence points to this as a core strategy to manage and exploit complexities. Crucially, it means learning and leading are  omnidirectional (Defined as: Capable of transmitting or receiving communications in all directions).

You mentioned that the US Military could give the corporate world some valuable lessons

Yes, asymmetrical warfare emerged, they developed Counter Insurgency (COIN) strategies and tactics to cope withsuch complex scenarios.
In Art Corbett’s paper he defines Mission Command as:

“….empowering the lowest possible echelon with the capabilities, competency, and authority to seize, retain, and exploit the initiative.”
“Success results from ….leaders at all (levels)… exercising disciplined initiative within the commander’s intent…..which requires an environment of trust and mutual understanding.”

It’s based on understanding that speed and dexterity depend heavily on the leader “on the spot”. So, subordinates need latitude to carry out their missions to pragmatically and creatively adapt their capabilities and talents.

Interesting, I see parallels with what CEO’s want to instill in their people. What’s the military’s view of complexity that could apply to developing leaders in this community?

The key is managing complexity through flexibility.
For example, decentralized decision-making is based on selecting the best “command methodology” depending on the situation. They recognize that there’s no single “best” style of leadership. Effective leadership is task-relevant and adapted to the person or group, and the situation.
Both in the military and these surveys endorse giving the widest latitude to subordinate judgment. This is the classic ‘centralized vision and decentralized decision-making’. But, the Military also stresses that when there is no central direction, subordinate leaders are expected to:

• Initiate planning
• Integrate assigned resources and capabilities
• Execute continuing action in accord with leader’s intent.

What does this approach demand of corporate leaders?

It demands leaders establishing command and control systems that give them competitive advantage. Despite technological hype, we cannot lead in complexity by technical means alone.

“There is no safety in unlimited technological hubris” (McGeorge Bundy).

It really takes “Intestinal fortitude” to trust and cultivate professional respect and mutual understanding to take full advantage. Without these subordinate leaders will not make effective and timely trade-offs between many variables to gain competitive advantage.

So, what do leaders need to find and refine to cope and exploit the ‘New Normal”?

Undoubtedly, many will have to absorb great adversity while staying true to their intent and retaining cohesion. Complexity is not going away – its exploding.
This underscores the criticality of moral qualities and shared values. So, leaders need to select those that have the right traits and competencies in these nine areas:
1.  Exercising Entrepreneurship
2.  Taking Initiative
3.  Valuing Local
4.  Adaptive Learning
5.  Distributed Decision Making
6.  Risk Acceptance
7.  Having Nerve
8.  Adaptable Command Relationships
9.  Established Trust

1. Exercising Entrepreneurship

Complexity challenges us to adopt a spirit of entrepreneurship which takes advantage and exploits opportunity, rather than maintaining the mindset of enhancing effectiveness and efficiency for its own sake

2. Taking Initiative

Faster decisions are essential to gaining the initiative. Initiative enables leaders to dictate the competitive context. By generating a higher competitive tempo through faster decisions, smaller and more nimble companies can wrest the initiative from an otherwise dominant players.

3. Valuing Local

Education and experience greatly contribute to speed and fidelity of decision. But, most of the time, local competent leaders will make a decisions on-par or better than remote leaders.
Often,

“What is significant is not common, but is unique and relevant to specific circumstances. Decentralized decision-making based on superior situational awareness enables greater operational dexterity”.  (Art Corbett)

4. Adaptive Learning

The “New Normal”, like Combat, are adaptive learning environments.   So, Leaders have to embrace that:
1.  Making mistakes is normal, even for our best leaders, no matter how hard we work to ‘reduce risk,’ reality often defies probability in competitive, complex and emergent opportunities.

• Experienced and intuitive decision makers will make fewer mistakes, only the risk adverse will make none.
• Making mistakes is not a good means of judging and selecting leaders. What is far more significant is creating the potential for leaders to learn and adapt from mistakes. Leaders who don’t make mistakes have not shown the ability to recover and adapt.
• We must cultivate a climate of risk acceptance. Our leader development processes should offer opportunities to refine judgment in the face of risk, with wide potential for failure in training to
• identify and develop resilient leaders capable of coping with setbacks.

When you make a mistake, don’t look back at it long. Take the reason of the thing into your mind and then look forward. Mistakes are lessons of wisdom. The past cannot be changed. The future is yet in your power.Hugh White (1773 – 1840)

2.  Identifying ‘decision windows’ is key in time-competitive environments is a key skill.

• Judging “How much time do I have to gain more information and situational awareness before  losing an opportunity to act?” The answer defines the “decision window” and frames possible alternatives.
• Judging the sweet spot in competitive decision making means an understanding the need to dictate and control tempo. While risking taking may be personality dependent, the ability for calculated risk taking is shaped by experience.

5. Distributing decision-making distributes risk, uncertainty and learning.

Decentralized decisions:

• Risk only a part of the organization, not the entire company,
• Means smaller units can inoculate other units by learning not to make the same mistake.
• Increased failure frequency accelerates learning and gives opportunity to assess the individual’s ability to recover, accept responsibility, learn and strengthen themselves.

6. Risk Acceptance 

Competition and uncertainty make risk unavoidable. “Risk acceptance is action in the face of uncertainty. Rashness is action in the face of improbability…”(Corbett)
f.    Calculated or prudent risk strives for advantage by timely exploitation or creation of favorable opportunity.
g.  Risk acceptance is an essential moral quality
h.  Risk tolerance reflects the character and nerve  of a leader.

7. Having Nerve

“Nerve aptly conveys the moral strength, emotional resiliency and predatory calculation that steels resolve and tempers impatience”.
It’s the ability to absorb great pressure with conspicuous calm and composed judgment. Nerve is the character trait that enables other leadership traits to thrive.

8. Adaptable Command Relationships

When subordinates gain mutual understanding they can empathize with their leader’s situation, understand the operational vision, and see the trade-offs they must make.‘Sharing the burden of command’ is the outcome of this established trust.
9. Established Trust
Dutiful subordinates ‘share the burden of command’ when mutual understanding enables them to empathize with the senior leader’s situation, understand their operational vision, and anticipate the trade-offs they must make.

What do you expect people to take away about leading in complexity?

When lives are lost because asymmetrical warfare’s complexity was not grasped, the Military responded. The result is a highly evolved command philosophy that produces disproportionate results.  Their learnings are valuable to the corporate world, in summary:

1. Senior leaders must  show the leadership…of trust, nerve and restraint to encourage initiative and a bias for action
2. Develop and select leaders who have the competitiveness  to wrest advantage away from agile competitors
3. Build cohesion by developing a spirit of entrepreneurship based on leaders having the nerve to trust, the time to teach, and the confidence to grow reciprocal relationships.
4. Develop junior leaders through opportunities for professional development and apprenticeship that exercises their judgment and examines the consequences of their decisions.

It is only by instilling these tenets that CEOs can support clarity, not perfection, because from clarity comes confidence, and from confidence comes the momentum to decide and act…. this is a competitive imperative and requires a new balance of more effective and affective leadership. It’s the ability to produce results by being affective. That ability to influence people, in the way they think, feel and act is now paramount
Next month, I cover the tougher piece on how leaders need to lead transformationally.

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