Watching Wise Leaders Deal With Complexity

Harvard Business Review

In a survey conducted by IBM in 2010 with more than 1,500 CEOs worldwide, 80% of leaders anticipated greater complexity in the future, but fewer than half of them felt confident to deal with that complexity. The business environment today has indeed become mindboggling complex due to accelerating globalization and rapid technology changes.

Intelligence alone won't be enough to deal effectively with the escalating complexity. Rather, what leaders need is practical wisdom — that is, a set of new capabilities that enable them see the potential benefit in complexity, and turn complexity into an opportunity to bring value to their organizations and the society at large.

These new wise leadership capabilities include the aptitude to shift and broaden one's perspective by connecting to a noble purpose — and the ability to systematically decide and act in alignment with a noble purpose. A noble purpose transcends personal gain and ego and allows one to act authentically and appropriately for the common good.

John Mackey, co-founder and co-CEO of Whole Foods Market, discovered his noble purpose early in his life. In 1978, when he was just 25 years old, Mackey and his girlfriend borrowed $45,000 from family and friends to set up a small natural foods store in Austin, Texas. Eventually, the store expanded to become a nationwide supermarket chain specializing in natural and organic products. In an interview with us, Mackey told us how his noble purpose — building a healthier and sustainable society — gave him the resilience and fortitude to overcome the numerous personal and professional obstacles he encountered as he scaled up his business.

Mackey's noble purpose also shaped his holistic perspective: he believes that businesses should strive to create value for all stakeholders, have a moral obligation to give back to society, and be environmentally responsible. In practice, this noble purpose translates into strong values ̬ such as respect for people — and high standards for quality and sustainability that permeate all business practices at Whole Foods — ranging from sourcing to employee engagement to customer service. For instance, Whole Foods is a strong advocate of organic agriculture and a staunch supporter of small-scale farmers. Whole Foods also supports humane methods of meat and poultry production and in 2000, it introduced the first ecologically certified seafood carrying the Marine Stewardship Council's "Fish Forever" label.

Mackey told us in our interview that he believes that in recent decades, capitalism has lost its ethical mooring and that the explosion of corporate scandals is evidence of this drifting. Aiming to fortify the ethical foundation of capitalism and reconnect corporations to their noble purpose, in 2007 Mackey initiated — along with Dr. Raj Sisodia at Bentley University — the conscious capitalism movement. The goal of this movement is to form communities of socially-responsible companies with enlightened leadership that are driven by a higher purpose and a stakeholder orientation. In recent years, the conscious capitalism movement has grown rapidly and now includes leading firms such as Whole Foods, Southwest Airlines, Google, Costco, Patagonia, UPS, Trader Joe's, Panera Bread, and The Container Store. Based on their experience, Mackey and Sisodia have coauthored a book, Conscious Capitalism, that was published in January 2013.

By connecting to a noble purpose, you can broaden your perspective and gain in ethical clarity — which can act as a compass to navigate a complex and volatile business environment. The next step will be to use this compass to systematically align all your decisions and actions with your noble purpose. This tight alignment will give you the discernment, courage, and focus to do the "right thing" rather than fretting about doing things the "right way."

Alan Mulally, CEO of Ford, is a leader who has consistently decided and acted in alignment with his noble purpose. Having observed Mulally closely for the past twenty years in various leadership positions, we have been struck by how his systemic and visionary perspective informs and shapes all his decisions and actions.

When Mulally took over Ford in 2006, the iconic carmaker was in trouble. It was steadily losing market share and brand equity and suffered deep losses due to escalating global competition. Employee morale was taking a nosedive and the company as a whole seemed to have lost its sense of purpose. After carefully assessing the complex internal and external context, Mulally made a daring but controversial decision to mortgage all of Ford's assets to obtain a $23.6 billion loan. He believed such loan was needed to invest in R&D and would act as "a cushion to protect from a recession or other unexpected event." This decision was criticized by many who deemed it unwise given that the economy was doing well at that time.

But Mulally maintained his equanimity and stayed on the path that he believed was right for the long-term good of the company. "We have to control our own destiny," he pointed out. Two years later, at the height of the recession, Mulally's decision proved to have been sensible. GM and Chrysler had to file for bankruptcy and had to be bailed out by the US government. On the other hand, Ford, thanks to the loan, was able to withstand the recession without taking federal bailout funds and emerged from the crisis stronger. According to DailyFinance, "Ford has been performing incredibly well as a company over the past few years — it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt."

Both Mackey and Mulally are smart individuals. But these leaders don't rely on their intelligence alone to help their organizations navigate the complex business environment in which they operate. Instead they tap into their wisdom — the stuff that gives you ethical clarity and a sense of purpose. When wisdom provides the ethical compass, intelligence can become even more potent. Mackey and Mulally apply wisdom in their day-to-day work to find opportunities in complexity. They are not just smart, but also wise leaders.

Wise leadership requires cultivating a broader perspective, responding to external events with discernment, and acting out of enlightened self-interest to create value for shareholders as well as society. Can you think of — or do you know — leaders who demonstrate practical wisdom in their day-to-day actions and decisions? We'd like to hear about them in the comments below.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.