Corporations are wise to prepare for bumpy post-recession journeys. Chief executives should think Mother Teresa—not Sun Tzu
One of the most frequent points I heard at this year's World Economic Forum in Davos cropped up during offline discussions in which business leaders revealed that they were eager to lead their organizations on a journey. The undertakings they described sound less like the linear trajectory most businesses follow quarter-to-quarter and much more like the curvilinear journeys we pursue in life. Each time I heard this message, I would raise a question: Hasn't your organization endured a bruising ride for the past three years, during the worst economic crisis since the Great Depression? These chief executive officers—let me refer to them as an amalgam named "Howard"—responded by nodding wearily, with a hopeful gleam. "We sure have," Howard would say. "But if we commit to this journey to significance, it will prevent us from lurching from crisis to crisis and help us generate sustainable business value in ways that our competitors cannot." Howard gets it because Howard is transforming his organization from a "can" company to a "should" company. January's World Economic Forum clearly laid out the stakes for 21st century business. The conference's theme, "Shared Norms for the New Reality," stressed that we have entered a new reality. We live in an interconnected world, an ethically interdependent world. That means that norms (i.e., tangible business practices based on shared values) reign, not just rules. Business sustainability is no longer about what organizations can and cannot do; it is about what organizations should do. Normative means "should." "Risk," "Innovation," and "Growth"
Howard is choosing the right path forward as he—like every other global leader—stands at a fork in the road. When I ask Howard why he has committed to this journey, he responds with terms like "risk," "innovation," and "growth." I think of the Einstein quote: "We can't solve problems by using the same kind of thinking we used when we created them." Howard has figured out that he cannot lead his organization to sustainable success in the 21st century by himself. Howard recognizes that he needs help to address some of the biggest problems—intensifying global competition, looming talent shortages, dwindling natural resources, ongoing geopolitical volatility—and he can get that help by connecting with his employees, value-chain partners, governments, communities, and even the environment through shared values. Not every CEO is a Howard, however—at least not yet. Many leaders are not certain we have confronted a fork in the road. They are not even sure they need to lead their organizations on a journey. When some business leaders see any signs of improvement in the economy, notes World Economic Forum presenter and innovation and technology expert Don Tapscott, "they have a natural inclination to fall back on old ways and conclude it is business-as-usual." These executives (let's call them Future Howards) remain unconvinced that the world and the global economy are undergoing a structural change. They hope "normal" business conditions will return as soon as this cyclical hiccup concludes. The Journey Not Taken
This is a natural response. After all, it takes time to respond to a structural change. Future Howards also tend to point to one of the following reasons to explain why they are not taking the same journey as Howard: 1) The journey matters less than other strategic imperatives. The fact that the world's most important gathering of leaders chose as its theme "Shared Norms for the New Reality" suggests otherwise. So do I. As a CEO who has promoted principled performance since 1994, I have witnessed a sea change in responses to this business philosophy, which was often deemed "too soft." That resistance has largely disappeared on the heels of corporate scandals such as that of Enron, as well as the mortgage-underwriting shenanigans that helped spark the global economic crisis.
2) We are in the grip of bad ideas, false assumptions, and wrong values. In other words, our thinking and 20th century habits of thought and behavior are getting in the way of responding to the new realities that require attention in the 21st century. For example, our 20th century focus on "how much" (how much product can we manufacture; how much revenue can we squeeze into this quarter; how much market share can we take?) frequently obscures "how" questions (how can we create sustainable relationships with trading partners; how can we forge deep and meaningful connections with our people; how can we out-behave the competition?) The "how" questions more accurately frame what is necessary to thrive in the 21st century. This grip marks a tough-but-common obstacle during times of change—one that requires leaders to distinguish between past and present, as well as between right and wrong. 3) The "should world" contains intangibles that are difficult to measure. This is true. Yet Howard views this as a challenge, rather than an insurmountable obstacle. A growing number of businesses are overcoming this measurement difficulty to the delight of their shareholders. The mantra that we can't manage what we can't measure has echoed through companies for the past century. Yes, the key competitive differentiators of the 21st century—employee and organizational behavior, talent, innovation, ethical leadership, and organizational culture, among other assets—are less tangible and more amorphous than say, factories, office equipment, internal controls, CAGR, Ebitda, and compensation packages, but that's changing. In fact, Howards and their companies are developing these measures on their journey right now, which I wrote about in "Upgrade to the Human Operating System." In addition to the progress of new and better cultural, behavioral, and human metrics, we see more and more examples and calls for Howardesque leadership every day. The "Tyranny" of Short-Termism
In a March Harvard Business Review article entitled "Capitalism for the Long Term," Dominic Barton, McKinsey & Co. global managing director, challenges fellow leaders to fight the "tyranny" of short-termism. One way Barton does so is by pointing out that nearly 70 percent of all U.S. equity trades are conducted by "hyperspeed" traders, many of whom hold stocks for "only a few seconds." Executives, Barton suggests, might find new ways to filter input from shareholders while giving more weight to those who favor a longer-term, buy-and-hold approach. Paul Bulcke, CEO of Nestlé (NESN), an avowed "true believer in a principle-based approach to business" describes shared norms based on specific global principles as "the very ingredients we need to fuel development." Cisco (CSCO) CEO John Chambers asserts that "great companies have very strong and great cultures. A huge part of a leadership role is to drive the culture of the company and to reinforce it." Chambers also credits his success as a leader with his decision to leave behind the command-and-control model for a more collaborative leadership mode, one that he says "means 'letting go' by involving others in decision making, listening to ideas, finding common ground, and striking compromises." Unilever (UN) CEO Paul Polman has spoken out against the pressures of short-termism by encouraging those he leads to measure success in terms of progress, rather than in terms of an end state. Asked to identify his leadership models, Polman passes over Sun Tzu and Machiavelli (embraced by the Neutron Jacks and Chainsaw Als of yesterday) in favor of Gandhi, Nelson Mandela, Mother Teresa, and Man's Search for Meaning author Viktor Frankl. Polman quotes the Dalai Lama to describe the style of leadership needed in the 21st century: "If you seek enlightenment for yourself just to enhance yourself, you missed the purpose. If you seek enlightenment for yourself by helping others, you are with purpose." I agree. Howard is committed to a journey to create an organization rooted in values and pursuing significance. By pursuing significance, Howard believes his organization should achieve success. It doesn't take an Einstein to see that Howard's choice is enlightened; it takes only the courage and conviction to embrace thinking that reflects 21st century realities.