Any athlete who transitioned from amateur to professional status (in soccer, basketball, and so forth) notes that the major difference is the pace and speed of play. Likewise, the pace of business change has increased dramatically in recent years. If we were to bring back a business leader from the 1980s or 1990s, he would be surprised by the velocity and intensity of change in globalisation, technological advances, information ubiquity, customer expectations, employee demographics, and so forth. Businesses that anticipate and respond to these changes thrive. Those that do not die. Since 1955, some 87% of the Fortune 500 companies have disappeared and the average life expectancy of Fortune 500 firms have decreased from 50 years on average, to less than 14 years – and continues to decrease. Each decade, an increasing percent of the Fortune 500 are being merged, acquired, or made bankrupt. These are indeed changing times.
In the last 100 years in business, everyone recognises the centrality of leaders. Leaders instill confidence to employees, customers, and investors. Leaders make informed choices that help or hinder business success. Leaders matter.
So what should leaders do in this Volatile, Uncertain, Complex, and Ambiguous (VUCA) business world?
To answer this question, we suggest six fundamental leadership principles that need to be adapted to current VUCA business conditions. These six leadership principles synthesise our studies of leadership and our experience coaching and developing leaders. These six principles are timeless. Leaders from previous decades and centuries would recognise the principles, but the application of these principles in this VUCA setting require new skills to be an effective leader in today’s world.
Principle 1: Be a strategist who can shape the future
Leaders who are strategists think about what’s next, even beyond what customers today know and want. In VUCA worlds, leaders as strategists seek more market influence than market share. To influence markets, leaders need to know and anticipate external contexts (e.g., social, technological, economic, political, and demographic global trends). They also need to know and anticipate customer expectations by co-creating with customers rather than listening or responding to them. When leaders know and anticipate contexts and stakeholders, they build a cross-cultural and global mindset where they are more open to flexibility and change. They are also able to focus strategies so they can make key strategic choices and allocate resources against those choices.
An Asian Consumer Electronics firm managed the global versus local trade off by shifting design of all leadership development solutions from headquarters to having multi-cultural teams from different regions responsible for future programs to better suit the needs of a local audiences. At the same time the firm also instituted a “One Global Passport” philosophy stating that leadership competencies and values, technical competence and English language skills would define people’s potential, irrespective of nationality.
Principle 2: Be an executor who can get things done
Strategy without execution is fantasy. Execution without strategy is misguided. Leaders who are executors in VUCA worlds change and adapt quickly, face and boldly make decisions, and increase transparency.
These leaders learn to collaborate with those who are different from them so that they can learn and adapt.
These leaders also have explicit and timely accountability where they hold themselves and others responsible for success and failure. These execution traits are important for a VUCA world where agility is as important as aspiration, where action counts more than vision, and where processes are as valued as protocols.
Many Asian leaders are admired for their world-class ability to execute. But, the challenge of sustained execution is to shift from execution through coercive or paternalistic leaders who control the execution to shared leadership where employees execute because of shared commitment. A traditional Asian conglomerate gained increases in productivity of 7% and accelerated innovation and globalisation by making social collaboration tools available. These social collaboration tools enable execution by sharing information that shapes action without coercion. In less than one year over 30,000 employees were leveraging these tools to change the way they worked and collaborated without any official orders to do so.
Principle 3: Be a talent manager who can engage today’s talent
In study after study, leaders have to leverage themselves through the talent they guide. As suggested, the traditional leadership models from the top down are about command and control, where leaders set direction and others act on it. In a VUCA world, leaders have to coach, communicate, and collaborate so that employees are connected to the business goals because of the leader, but not through the leader. These leaders shift from management by objectives to management by shared mindset. When leaders manage talent, they increase productivity through three processes: competence, commitment, and contribution. By building competence, leaders identify future technical and social skills to succeed. By ensuring commitment, leaders create an employee value proposition that captures employee engagement. By generating contribution, leaders help employees find meaning and purpose from their work. When competence, commitment, and contribution are managed well, productivity follows, multiple generations of employees work together, and talent is embedded throughout the organisation.
Asian leaders have to continue to think about future competencies, to find ways to engage employees, and to retain the best employees by helping employees find personal purpose from their work. In our book The Why of Work, we summarise seven principles for leaders to become meaning makers.
Principle 4: Be a human capital developer who can build next-generation talent
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