The author and his colleagues interviewed dozens of c-suite leaders to uncover the best way to build a sustainable organization. The answer: a mix between managing your present and creating your future.
By Ashley Harshak
Two years ago, we decided to start talking to our clients. I mean, really talking to them. My consulting partners and I started having deep conversations with senior executives about how they sought to build a sustainable organization in an ever-changing world.
We conducted about 40 conversations with board chairmen, CEOs, CFOs, HR directors, and other c-suite leaders in different industries from all over the world, ranging from major global companies to government to NGOs. We asked: What are the burning issues you face today? Which new topics keep you up at night? Has your organization adopted different practices? How has the global stage affected business?
We based our discussions around the critical functions of leadership. This framework is called the “trialogue”—a whole-system view of how to manage an organization. The idea is that every executive in every business faces the challenge of understanding and balancing between creating the future, nurturing identity, and managing the present. We wanted to understand how different senior executives think about and achieve this.
Before our colleagues could talk about their practices, they dished about the challenging environments in which they were operating, and how different they were from even 2 or 3 years ago. They told us about the intensity of change, the impact of technology, their thoughts on globalization, the complexity of managing up to five generations in a workforce, and the uncertainties surrounding their geopolitical environment.
Most striking, perhaps, is the pace and intensity of change. It’s quickened, with many sources of changing hitting at the same time, so organizations have to react rapidly across multiple dimensions. Technology is breaking down the status quo and challenging traditional business models, reducing barriers to entry and transforming the competitive landscape.
But technology hasn’t only been a source of disruption—it’s also enabled greater transparency of information for all. Consumers are better informed and more demanding, so organizations have nowhere to hide. End-users want the moon on a stick, and companies like Airbnb, Uber, and Amazon are eager to give it to them. In turn, this means more competition, less brand loyalty, and products and services that are easily commoditized by new entrants.
The online revolution poses opportunities and challenges with Big Data. If organizations can make sense of it, this can be a useful tool to inform business strategy. All too often, though, there’s so much data that it’s difficult to see clearly. Executives are also concerned with making sure valuable and confidential data doesn’t fall into the wrong hands.
Increased globalization means many organizations find themselves with added exposure to emerging markets, while traditional markets have matured or shrunk. Businesses are grappling with the challenge of setting up facilities in unfamiliar territories, as well as finding the right people. Globalization also poses a degree of uncertainty: Will an ever-expanding world open new, cooperative markets, or will growing nationalism put up barriers and lead to an era of protectionism?
As if the external environment isn’t challenging enough, relationships and expectations between organizations and people are changing on both sides. From the recruitment perspective, this means the tables have turned, with employers having to sell themselves to top talent.
Managing the balance between generations in the workplace is a challenge. How do you bring in the leaders of the future while balancing youth with experience? Considering that many organizations could have up to five generations in their workforce, this is no small feat.
New generations are increasingly seeking portfolio careers and entre-preneurship, driven by a desire to make a difference. At the same time, research has shown that millennials are just like their older counterparts when it comes to motivation, recognition, and reward.
In addition, the increasingly tough regulatory environment is a double-edged sword. On one hand, regulation restricts an organization’s ability to act, particularly with regard to risk-taking and innovation. On the other, it protects industries by increasing barriers to entry.
Geopolitical risks continue to pose a significant threat. Societal shifts are magnifying the gap between the haves and the have-nots. This isn’t new, but the established political structures and authority seem to be completely breaking down as well. Never has there been a greater need for democracy, and yet never has democracy seemed to serve us so badly. In light of this, we think there’s an opportunity for businesses to reflect on what they can do for society, and how this links in with their higher purpose.
As organizations are bombarded with changes in the external world, our clients are forced to make an increasing number of decisions at pace. However, when trying to move fast, many companies fall into the trap of either acting without thinking, or thinking without acting—that is, getting stuck in analysis and paralysis and failing to move forward. Proceed with caution.
How to Create Your Future
Start with a simple question: Where is your organization going? This covers areas like strategy, business development, renewal, and succession. In our conversations, our colleagues discussed the importance of ambition, their definitions of success, and the need for adaption and innovation.
Ambition is what drives the seed of an idea at startup stage into a flourishing enterprise, but the executives we interviewed were split on where ambition should actually reside: with the CEO, the top team, or collectively across the organization. As one leader put it, “The CEO is ultimately responsible, and that responsibility cannot be delegated.” Another told us that successful organizations need a shared ambition rather than a cascade from above. “Somehow it needs to be infused across the whole organization.”
What happens when ambition shifts? Did L’Oréal have the same ambition as Anita Roddick when the organization took over The Body Shop? What happened at Cadbury Schweppes when it was acquired by Kraft Foods? Would a different individual with a different ambition have resulted in a different outcome?
The role of the leader is to define what success looks like, grow the organization’s ambition, and take the people and the company with them. It wasn’t surprising to hear that all too often, definitions of success are too narrow and based on the short term. Executives told us they were unable to dedicate the time to create the future because of the needs of the present.
So what does creating a successful future look like? From our conversations, it seems clear that sustainable success requires organizations to:
• Be close to end-users. Have a customer-centric focus with an outside-in perspective so that they’re alert to changes in end-user preferences.
• Remain flexible and innovative. Create and maintain an innovation mindset and fertile environment to foster it within the organization.
• Have a sense of purpose and values. Build trust by signifying what an organization stands for to its end-users, and to inform decision-making.
Our conversations also revealed that adaptation and innovation are necessities. “Conditions change rapidly,” one leader told us. “Volatility is accelerated, and an organization’s ability to adapt is now a core capability for competitive advantage.”
The opportunity for innovation lies not just in new products and services, but across a whole range of activities, like processes, profit model, and channels to market. This means the innovation agenda should be as broad as possible, and everyone in the organization has a part to play.
Creating the future also requires a considered approach to renewal and succession. As the average CEO tenure is 6 years, many executives admitted the long-term needs of their organizations go beyond their own shelf lives. The challenge, then, is how to pass the baton successfully.
Finally, many leaders recognized that the foundation for the future is identity: an organization’s lived purpose, culture, and values.
How to Nurture Your Identity
Your organization’s identity defines who you are, rather than what you do. Many organizations focus on managing the present and planning for the future, but exert less effort nurturing their identity. Surprisingly, the senior executives told us identity was extremely important, both as a source of differentiation and competitive advantage. “The greatest defense to being sustainable are the walls of culture that underpin a brand,” said one. “Everything else can be copied.”
Rapid changes in the business environment and constant bombardment of noise lead to decisions being made in the moment, which exposes pitfalls for the unprepared. To avoid this, it’s extremely important for organizations to know where true north is for them—and that’s where identity comes in.
Many leaders talked about the importance of culture in providing a solid foundation for their business. Strategy and the operating model then provide the method or means of implementation. Although our counterparts held different views about the importance of these components, all agreed that the three are vital and must work in harmony.
A clear sense of identity, in our view, sets the boundaries for the organization to work within, provides a cornerstone for decision making, and ensures actions are consistent with words.
How to Manage Your Present
Managing the present is about doling out resources, optimizing performance, and delivering results—often easier said than done. To what extent do existing processes and systems support or hinder the sustained performance and success of organizations? Unsurprisingly, our colleagues were split.
“Our processes now do a really good job of capturing best practices, and I believe that our people can use mature processes quite well,” said one leader. But another told us that his company’s systems got in the way of what they were trying to achieve. “A lot of our processes are manual, and we have no single version of the truth.”
What this shows is that systems, when executed well, can act as a strategic advantage—but the opposite is also true.
Flexibility and innovation are seen as core capabilities in a fast-moving, digital, customer-centric world. But since systems and processes are often driven by risk control, this poses a dilemma. We heard that innovation and all it encompasses (creativity, flexibility, entrepreneurialism) can become pitted against compliance (systems and processes)—that innovation and process cannot coexist. We see this as the “process-innovation paradox.”
Several respondents noted that, like many other aspects of an organization’s capabilities, systems and processes are a constant work in progress—they’re never complete and certainly never perfect. Furthermore, systems and processes are often expensive and difficult to change. This leaves organizations facing a difficult choice: Do you stick with legacy systems and workarounds, or do you shift to a complex new system without knowing whether the necessary changes will actually work?
We learned that systems and processes that are intended to provide control and mitigate risk may actually sit in conflict with an organization’s ambition and values, especially when companies are trying to build capability around innovation. Furthermore, it’s abundantly clear that systems and processes that can keep pace with the digital revolution don’t come cheap. Investment in this area is significant and will continue to grow.
For all these reasons, we think it’s vital for organizations to be crystal clear on what they’re trying to achieve. What is the organization’s purpose? What is its end goal? Once again, clarity of organizational identity is crucial, not only to inform strategic direction, but also to ensure effective alignment of systems and processes with overall goals.
How to Do All Three at Once
As our colleagues noted, we live in turbulent times, where seismic events of a once-in-a-lifetime nature now seem to occur daily. Nevertheless, good leaders deal with these issues in stride. As Yogi Berra once said, “When you come to a fork in the road, take it!”
The ability for leaders to balance the present, future, and identity is vital. Having a whole-system approach allows them to identify adaptive challenges and game-changing opportunities; anticipate the impact of the changing environment; decide how best to intervene, if at all; and apply purpose and values to guide the desired behaviors that will support the business.
In our experience, we think leading the system requires leaders to be clear on these key areas:
• Having a personal ambition that drives collective success. This is fundamental. This singular ambition can be the basis for a collective vision that must be infused throughout every part of the organization. To be effective, this ambition must be inspiring and motivating. It isn’t enough to simply want to make the existing situation a little bit better.
• Being ready to act quickly across multiple dimensions. As the future and present become increasingly blurred, leaders must be ready to act quickly across multiple dimensions. Many of the people we spoke with are struggling with this. As the pace of change increases, timescales compress.
• Identifying a clear purpose and set of values to provide a true north. It’s what makes each company unique, and we see more and more organizations come to recognize that this isn’t simply “nice to have,” but critical to the business.
If you’re trying to balance the conflicting demands of leading the whole system, our advice is threefold.
- Recognize Where You Are » Success is contextual. As one of our colleagues said, “It’s based on where you’re starting from, and where you want to get to.” Leaders are typically brought in to deal with a crisis, and the expectations are all about the present financials. But as leaders dig their organizations out of holes, they earn the right to act for the long-term and in the interests of wider sets of stakeholders.
The more you progress on your journey, the more you shift people’s time horizons and expectations. Instituting long-term prospects that deliver for multiple stakeholders—customers, employees, partners, and communities—results in financial success.
- Determine the Rules of the Game » We believe that if an organization clearly devises an operating framework, it can create the right environment to flourish. This framework needs to be made up of the organization’s identity, values and behaviors, strategic direction, and core processes and systems.
Imagine a sandpit in which everyone in the company can play and succeed. It has to be large enough for people to operate freely, but not so big that the boundaries become lost and people are unable to work together. Creating such an environment enables organizational learning, where trial and error is an accepted part of the organization’s approach. Understand the boundaries and you’ll pave the way for autonomy.
In this approach, where systems and processes don’t define or limit the way the organization operates, they provide a vital support role in the operating framework.
- Demonstrate What You Expect of Others » Leadership necessitates that what leaders say is matched by what they do. They must be role models. This has to be infused and enthused across the business, starting from the top. As one of our clients put it, “Organizations often have people in senior positions who don’t walk the talk. They believe they have a unique culture, but actually, they don’t act the way they preach.”
This effect is called the leader’s shadow. Internally, the effect of the leader’s shadow means that to be authentic and credible, their actions must be consistent with their words and aligned with the organization’s values. Otherwise, being off message can create mistrust and confusion.
It’s worth remembering that the leader’s shadow also applies externally. In an increasingly transparent world, end-users are driven by values, meaning it’s not just about what you do, but how you do it. Business conduct is more important and transparent than ever, so leaders must carefully consider what they want to portray and how to effectively convey it.
While uncertainty presents a challenge, there are great opportunities for those who are able to ride the wave and harness the latest technology and enthusiasm of new generations. Rapid change blurs the lines between the future and the present, so leaders must be ready to act across multiple dimensions. This means that identity and all it encompasses—purpose, values, beliefs—is critical.
Additionally, leaders need to embody the organization’s ambition. Establishing a sound operating framework with clear boundaries and processes paves the way for autonomy, which is vital in today’s business environment.
To succeed means aiming for sustained performance over the long term. If you want to truly balance your organization between the present and the future and suitably navigate the challenges of an ever-changing world, you’ll need to nurture your identity.
So, who are you going to be?
Ashley Harshak is a partner at Telos Partners. An economist, management consultant, and qualified executive coach, he helps leaders in global organizations navigate their way through complex transformations.