4 Actions Transformational Leaders Take
May 20, 2021
Successful business transformations are rare, and the pandemic has made them more necessary and more difficult. The difficulty, especially for “traditional” organizations, isn’t surprising. A substantive and irreversible shift in an organization’s identity, value system, and capabilities requires three difficult acts: Developing a deeper sense of purpose that guides strategic decisions and shapes the workplace culture, repositioning the core business, and creating new sources of growth.
The increases in online commerce and remote work requires upgrades to infrastructure, workflows, and tools. And the growth and diversification of digital platforms like Amazon, Alibaba, and Stripe raises important strategic questions about where and how to compete. Difficult economic conditions (low consumer demand in particular) challenge the viability of some business models.
Employees, customers, and investors also expect organizations to play a more prominent role in tackling other systemic issues, such as climate change and social inequality — while also making a profit. Employees, many of whom will have experienced trauma, loneliness, and burnout, expect to use smarter, more flexible working practices and to work for leaders who are effective, authentic, and compassionate.
A typical transformation is led by a CEO figurehead. It often involves major structural change (acquisitions, disposals, partnerships, and organizational redesign), widespread deployment of new technologies, considerable effort, and cultural change. These elements still play critical roles, but a more complex, sensitized context requires leaders to be wiser in what they say and do — and doing more of the same won’t cut it. The following four strategies, based on our collective experience in leading transformations over the last 25 years, will help leaders increase their chances of success.
Practice New Mental Models
Leading transformational change involves helping the organization transcend its current positioning, performance, and capabilities. This requires visionary thinking, the ability to tackle complex problems (like overcoming organizational inertia), and the courage to make difficult choices (like when to shut down or sell off assets that were once considered “core”). Leaders must think deeply and manage their emotions in intense situations, all while stakeholders expect to see results.
One of David’s clients described his role as being “on top of the business, and in the business.” This means being detached and able to take a wider perspective while being immersed in the details when required. Paul Polman, the former CEO of Unilever, told David, “You have to be able to have an enormous appetite for the detail to drive [that] sense of urgency, to make that purpose come alive with storytelling. Then you need to have that broader picture…by continuously being a few steps ahead, in terms of these systemic changes.”
Chris has often seen his CEO clients being unable (or even unwilling) to imagine the future, even when industry shifts happened much faster than they expected. They shared a common failing: Their extensive expertise and experience prevented them from practicing new mental models outside of their comfort zone. As a result, they missed out on value-creation opportunities (and hundreds of millions of dollars) in areas like solar energy, drones, electric flight, and EV charging.
To strike this balance between a wider perspective and the details, practice using your “Wise Advocate” — a term described in the book by Art Kleiner, Dr. Jeffrey Schwartz, and Josie Thomson. This means adopting a third-person perspective of your own experience: Taking in all the information you get from being an insider while being detached as if you were an outside observer. It also requires strength of character, integrity, and conviction; you need to manage your attention to achieve more significant, transformational goals. As the authors note, “The choice to attend to the Wise Advocate regularly — to focus your mind in that way, day after day — is one of the most important habitual decisions that an accomplished leader can make.”
In practice, this requires you to:
- Consider what other people are thinking and what they’re going to do (this is known as “mentalizing”). For example, think about the needs, feelings, and reactions of customers and employees.
- Regulate your impulses and emotions, which requires training the “executive function” part of your brain.
- Look after your personal health, relationships, and well-being so that you’re in a good position to reflect and think instead of feeling overwhelmed or distracted.
- Practice mindfulness:
- Ask yourself what the guide in your mind is telling you to do
- Think about what you’re thinking, feeling, and sensing
- Pay attention to what you’re paying attention to
These practices will help you answer critical questions in a transformation, such as: What is this organization here to do? What impact could we have if we reached our potential? What do we need to leave behind to make progress? Or, in the moment, what does this opportunity require? What do we need to overcome? What am I drawn to? What will the consequences be if we pursue this course, and if we don’t?
Transformational leaders — both in the C-suite and in critical roles in the organization (for example, a head of a business unit) — should clearly explain how they’ve reached decisions, describing the processes they used and how they felt. Doing this will send a positive signal to others to practice finding and using their own Wise Advocate.
Work the Edges of the Organization
Transformational leaders are continually thinking about what their organizations should become, anticipating how employees and customers will react and change. Proximity is critical, especially as the pandemic has shown us how quickly sentiment and behaviors can change, often permanently. Xavier Rolet, who led the transformation of London Stock Exchange (increasing its market capitalization from $1.1 billion to $19 billion in eight years), said: “To me what drives innovation is proximity…a really close relationship with your customers, understanding their deepest challenges, and they are not going to tell you what their deepest challenges are unless they really trust you and know you.”
Transformations are often, but not always, initiated and led by the “center”: the board and the CEO and their direct reports and supporting functions. At first, they reach out to customers, partners, and employees on the front line to understand their needs, frustrations, and problems in order to work out what needs to be addressed. Once they complete their diagnosis, they retreat to the center, staying there until they want input again. It may sound like a caricature, but it’s an all-too-familiar picture in many traditional organizations. It’s no wonder that their leaders don’t have their finger on the pulse and those at the “edges” don’t feel listened to.
If you’re in the center, stay present at those edges of the organization and beyond, and especially with existing and prospective customers. Get “out of the building,” as Steve Blank would put it, and make that your default.
To pick up weak signals of change:
- Ask questions and give encouragement to the stakeholders you interact with by applying positive psychology. This shows them that you’re open to their ideas and solutions to problems.
- Put in place mechanisms to solicit views systematically across the organization, for example, by crowdsourcing ideas.
- Deploy tools that sense, collate, analyze, and visualize that data so that leaders can act on it.
- Encourage the “bubbling up” of organizational conversations, as they did in Equinor, the Norwegian energy company, one of Chris’s long-term clients. They developed and maintained a company-wide community of strategy practitioners to identify and discuss questions like, “What should we do with renewables?” and “How do we position ourselves for an accelerating energy transformation?” These discussions were then moved from the edges to the C-suite. In this way, key strategists were instrumental in shaping the early parts of the transformation journey.
Share Leadership More Systematically
Successful transformation requires harnessing the leadership team’s and organization’s collective intelligence, energy, and experience. The degree of change and demands of the effort are too big to leave to an individual or small team to lead, especially considering it typically takes between seven to 10 years to take effect.
Selecting who should lead at what stage is critical and will depend on:
- Who commands the trust of the most influential stakeholder groups (for example, front-line workers and unions).
- The respective strengths of the individuals involved.
- The dynamics between individuals. Do certain individuals complement one another’s styles and skills?
While the CEO and chair are ultimately responsible (along with the board) for transformation, the CFO might lead the way when there’s a refinancing, or the HR director might take the lead when there are employee issues to deal with. Dame Moya Greene, the CEO who led the transformation of Royal Mail Group, said, “Sometimes the (trade) union will want you in the room, but lots of times, you are not the right person.”
Sometimes it’s even more effective when these efforts are led by groups of formal and informal leaders (the ones people look up to even if they’re not at the top of the org chart). For example, at one technology company, a sales director led a workstream on how to create a more inclusive, empowering culture with the HR director, supported by well-respected managers. This combination sent the employees involved a stronger signal of sponsorship and intent than if a single individual led the effort.
Use the Transformation Starters Map, developed by Chris, to visualize and identify the key transformation leaders — and blockers. The map has successfully helped transformation leaders unblock or even accelerate the progress of large-scale transformation programs, and today, it’s being used by leading academics in business schools like MIT and Duke to train a new generation of transformational leaders.
Make Empowerment Live Up to Its Promise
Transformational leaders, especially of organizations steeped in bureaucracy, often promise their people “empowerment.” They want to encourage them to think, learn, and act differently, finding new ways to create value for customers by activating their entrepreneurial spirit. But many struggle to actually release control. Rather than crafting their own roles, employees are forced to undertake repeatable activities in fixed roles (even as progressive organizations like Alibaba have demonstrated that many of these more rote activities can be automated). This control reduces employees’ ability to tackle complex problems and limits the organization’s potential to make significant strategic and operational shifts in performance.
Some organizations, like Haier the Chinese appliance maker, have managed to make empowerment work based on high levels of transparency, clarity, and accountability.
To bring that into your own company:
- Describe a clear purpose so employees know what they’re aiming for.
- Set out expectations for performance, behaviors, and self-care.
- Make performance data transparent to everyone.
- Give people the tools they need to do their work.
- Invest in their development and upskilling — in particular, decision making, new technologies, and creativity.
- Give them genuine autonomy to make decisions.
- Listen to — and act on — their suggestions.
In a changed, post-pandemic environment, employees, customers, and investors have high expectations for the companies they work with. Leaders who want their organizations to meet this moment and succeed long-term need to move away from the status quo and change their approach to how they’ll lead the necessary transformations.
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