Executive Summary. Stories of innovation in leadership development from IBM Ernst & Young IMC Group Lend Lease Interface HSBC

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1 1 Building leadership capability for a rapidly changing world What every business leader now needs to know about developing themselves and their people in a changed world Executive Summary Stories of innovation in leadership development from IBM Ernst & Young IMC Group Lend Lease Interface HSBC

2 2 N: Ashridge Business School All rights reserved. Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Ashridge Business School. Ashridge Business School Berkhamsted Hertfordshire HP4 1NS United Kingdom

3 3 What we firmly believe is that if we focus our company on improving the lives of the world s citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society, and ultimately this will result in good shareholder returns It is an enormous learning curve as no one has been trained for this. 1 So says Paul Polman, chief executive of Unilever, who in 2010 announced that the world s third biggest consumer goods company was aiming to double the size of its business by meeting eight ambitious goals by 2020: helping more than a billion people improve their hygiene habits bringing safe drinking water to 500 million people doubling the proportion of Unilever s portfolio that meets the highest nutritional standards halving the greenhouse gas impact of its products across their lifecycle halving the water associated with the consumer use of its products halving the waste associated with the disposal of its products sourcing 100% of its agricultural raw materials sustainably linking 500,000 smallholder farmers and small-scale distributors into its supply chain. In the research study Leadership in a Rapidly Changing World, produced for the 2012 UN Rio+20 Summit on Sustainable Development, Ashridge Business School and the International Business Leaders Forum mapped out how Polman s approach was indicative of a new generation of leaders emerging across many of the world s largest businesses. In response to emerging forces influencing the global business environment in the first decade or so of the 21st century, we have begun to see the role of business leaders changing, with growing numbers of top executives talking about, taking action on and defining their success in terms of things that have conventionally been the realm of political leaders and NGO activists creating value for wider society. The value created for shareholders in the process is now just one of a number of measures of success, not the exclusive one. This new commercial reality has required a new approach to business leadership. But people don t just step into a new way of leading, they need support. This shift raises a key question: how do we most effectively build the right kind of leadership capability for leading businesses in this new world? Based on in-depth research on innovation in leadership development at six organisations that have been experimenting with trying to answer this question in practice, this report outlines some key pointers for anyone interested in exploring this question. It offers important lessons for every business leader. 1 Quoted in Confino, J. (2012) Unilever s Paul Polman: challenging the corporate status quo. Guardian Sustainable Business.

4 4 The changing role of business leaders Based on a series of interviews with Chairs and CEOs who have been at the top of some of the world s most influential companies during this period of rapid change, the 2012 study by Ashridge Business School and the International Business Leaders Forum Leadership in a Rapidly Changing World outlined how business leaders saw the required role of top executives changing. They saw a shift both in the perspective that leaders needed about their role and purpose, and in the leadership roles they played inside and outside the organisation. A different perspective: reframing the business leader s role and purpose Today s global business leaders have needed to adopt a different perspective on their role and purpose. A generation ago, the prevailing attitude was that it was the role of political leaders to address the big societal issues of the day, not business leaders. Some engaged in philanthropic activities, either as individuals or through company contributions, but most would have argued such concerns would only be a distraction from their core role, and a source of cost. Fast-forward to today s business leaders and you hear a very different attitude being expressed: that it is essential for senior executives to have a nuanced understanding of the major societal forces shaping our world, and to know where and how to respond, through the way they go about their core business in a way that benefits their business and wider society. A sizeable cohort of business leaders now evidently believes that playing a leadership role in understanding and addressing the major forces shaping society far from being a source of cost is now central to how they create value. A familiar leadership role: leading change and innovation across the business All the interviewees in that study spoke about the kinds of activities that are now commonly accepted as vital (which is not to say easy) when leading any kind of change and innovation in organisations: seeing the connection between external trends and the implications for core business, creating the conditions to enable leadership to emerge throughout the business, encouraging innovation and framing challenges that inspire it, using language and symbols effectively, influencing mindsets and culture, creating appropriate metrics, and recognizing and rewarding positive new behaviours and outcomes. Many also spoke of the importance of courage in raising difficult issues in the face of vested interests, and making sure they have support in the places they need it.

5 5 A new leadership role: leading change beyond business boundaries A number of the interviewees also identified an important change in the scope of their work. More and more they now see it as their role to lead beyond the traditional boundaries of their organisation, proactively leading change in consumer and supplier behaviour, industry norms and government policy, for the mutual benefit of their organisations and wider society. Some are leading collaboratively with industry competitors, NGOs and government where challenges need to be tackled and only collective, systemic solutions will do. This new horizon to their role has required leaders to develop skill in areas that historically have not been a conventional part of the business leader s repertoire: contributing to public debate with an informed point of view, proactively leading change in consumer and supplier behaviour, industry norms and government policy, relating well with multiple constituencies, engaging in dialogue to understand and empathise with groups and communities with perspectives contrary to one s own, and engaging in multi-stakeholder collaboration with unconventional partners. What provoked and enabled this new way of thinking and acting? We explored the influences and enablers that had shifted the behaviour of our interviewees. While each individual s journey was unique, the clear theme was that certain key experiences were crucial in influencing and shifting perspectives, whether that be formative experiences around upbringing, university and business school study, or influential mentors, or more recent first-hand experiences like learning from experiencing crises, engaging with people living in poverty, personal experience of challenges like water stress or the impacts of climate change, or the changing interests of key stakeholders. How do we build the right kind of leadership capability for leading businesses in this new world? If this is how the role and required skill-set of business leaders are changing, what are the most effective ways of developing this kind of leadership capability in organisations? This is a question Ashridge Business School set out to explore, working in partnership with the United Nations Global Compact Principles for Responsible Management Education initiative. We set out to do this by working closely with six organisations that had begun to experiment with the question by innovating in their approaches to leadership development.

6 6 The six organisations IBM, IMC Pan Asia Alliance, Ernst&Young, Lend Lease, HSBC and Interface represent a range of different industries and geographies, as well as a range of different approaches. They are pioneers, experimenting with new approaches to leadership development to respond to the leadership requirements of a rapidly changing world. We wanted to understand what they were learning about how to do this well, and share that learning more widely for other organisations coming fresh to this challenge. To do this, a team of management researchers from across three research centres at Ashridge Business School engaged in in-depth qualitative interviews with key individuals leading these innovations at the six organisations. The researchers also interviewed their learning partners and a number of participants in the leadership development programmes. This was complemented by document analysis and, where possible, participant observation of the leadership programmes themselves. Key questions we explored were: Why are these organisations choosing to do this? What are they hoping to achieve? How did the idea of doing this turn into reality? What kinds of approaches are these organisations taking? What are they achieving? What are they learning about what works and what doesn t? This report sets out what we found in response to these questions. We have deliberately chosen to let the people we talked with speak with their own words through the pages of this report. We have distilled our headline findings into a series of key points that all business leaders, and all those working in talent management and leadership development, should be aware of.

7 7 The changing role of business leaders in a rapidly changing world Increasing need to work with other stakeholders A different perspective on the business leader s role and purpose Leading change across the business Leading change beyond business boundaries Source: Gitsham, M., Wackrill, J., Baxter, G., Pegg, M. (2012). Leadership in a Rapidly Changing World: How business leaders are reframing success. Ashridge Business School and the International Business Leaders Forum for the United Nations PRME. A different perspective on the business leader s role and purpose: Business, civil society and political leaders work in partnership to deal with societal challenges Business leaders engage through core business and see addressing societal challenges as central to creating value Business leaders need a nuanced understanding of major societal forces, and to know where and how to respond in a way that benefits their business and the wider world. Leading change across the business: Seeing the connection between external trends and the implications for core business Creating the conditions to enable leadership to emerge Encouraging innovation and framing challenges that inspire it Using language and symbols effectively Influencing mindsets and culture Creating appropriate metrics Recognising and rewarding positive new behaviours and outcomes Having the courage of one s convictions and persisting in the face of vested interests Ensuring support where needed. Leading change beyond business boundaries: Contributing to public debate with an informed point of view Proactively leading change in consumer and supplier behaviour, industry norms and government policy Relating well with multiple constituencies Engaging in dialogue to understand and empathise with groups and communities with perspectives contrary to one s own Engaging in multi-stakeholder collaboration with unconventional partners.

8 8 Building leadership capability for a rapidly changing world through leadership development Our inquiry with the six organisations involved in this study suggests that the following kinds of outcomes can be achieved by combining a variety of different actions. Intervention Integrating the following elements into leadership development interventions Awareness raising knowledge transfer about a range of global trends and issues and why a new approach to business leadership is now required. First hand visceral experiences of the forces that make this new approach necessary: both first-hand experience of global trends and issues and also first-hand engagement with diverse organisational stakeholders Support to make sense of these experiences Project-based challenges that enable participants to make sense of the issues and experiences through putting together a business-focused deliverable for their organisation Senior level management involvement during the leadership development intervention to offer commentary on how the content relates back to the business Excellent facilitation and sufficient time away from day to day pressures to reflect. Supporting context Nurturing a supportive organisational context Encouraging senior leaders, line managers and others across the organisation to be visibly and vocally supportive through the words and actions of the leadership programme s objectives Giving programme participants adequate time and resources to take on new activities Giving programme participants a new sense of identity or different or enhanced job role that gives them licence to take on new activities. Help new thinking to stay front of mind for participants by Pro-actively supporting and engaging them, perhaps through a dedicated coordinator Supporting them to stay connected with each other, perhaps through organising refresher events Proactively requesting updates on progress from participants, Ensuring desired new behaviours are recognised and rewarded, either financially or through other means. Outcomes that can be achieved Shifts in understanding, perspective and intent Greater familiarity with a range of global trends and issues and their business relevance A different perspective on the role of business organisations in responding to these issues and trends A greater understanding of their organisation s existing strategy and activities in this area A greater sense of empathy and personal connection with diverse stakeholder groups A greater commitment and strengthened intent to become involved and support these activities New activities Specific projects within the organisation Seeking out a new role or enhanced responsibilities Becoming a more vocal advocate of new ways of thinking and acting in the workplace A range of activities in their personal lives outside of the workplace.

9 9 What every business leader now needs to know 1. Recognise that a new approach to leading businesses has become required in light of changes in the wider world, and that you need to seek out opportunities for both yourself and the people who work around you to further develop the right kinds of mindsets and skillsets to lead in this way. 2. Recognise that, while not a silver bullet on their own, leadership development programmes can have a crucially important role to play in developing this kind of leadership capability alongside other activities, if done the right way. 3. Leaders at all levels in organisations play an important role in the success of leadership development programmes. Participants in programmes are more likely to be able to effectively act on their experiences if they feel supported and encouraged to do so by leaders at all levels, particularly the most senior leaders in organisations, and their own line managers. As a senior leader and a line manager Do what you can to understand what the leadership programmes are aspiring to achieve, and try to be consistent with that in your own words and actions Give time and resource to participants Perhaps enhance their job role to legitimise new activities Encourage them to stay connected with their cohort Ask how they are getting on Recognise and reward new desired behaviours.

10 10 What every talent management and leadership development professional now needs to know 1. Understand that there are a number of ways in which existing approaches to leadership development can be augmented so that they are developing this kind of leadership capability in addition to existing objectives. 2. Based on the experiences of others to date, key ingredients of effective interventions include the following: Participants need to be briefed on the reasons why a new approach to leadership is now required. But to be effective, this briefing needs to be complemented by first-hand visceral experiences of the forces that make this new approach necessary: both first-hand experience of issues and also first-hand engagement with diverse organisational stakeholders. Participants also need help to make sense of these briefings and first hand experiences in the context of their business. Ingredients that make a real difference here include: Project-based challenges that enable participants to make sense of the issues and experiences through putting together a business-focused deliverable for the organisation Senior level management involvement during the programme to offer commentary on how the content relates back to the business Excellent facilitation and sufficient time away from day-to-day pressures to reflect. 3. To maximise the impact of whatever intervention is organised, getting the supporting context right is probably even more important than the intervention itself. Encourage senior leaders and participants line managers to be visibly and consistently supportive of the objectives of the programme Encourage participants to act on new thinking by helping ensure they are given time and resource to take on new activities, perhaps supported by an enhanced job role Help new thinking to stay front of mind for participants by pro-actively supporting and engaging them, perhaps through a dedicated coordinator Support them to stay connected with each other, perhaps through organising refresher events Proactively request updates on progress from participants, and ensure desired new behaviours are recognised and rewarded, either financially or through other means.

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