Dealing with complexity is emerging as the key challenge for business in the 21st-century. As leaders face the need to reinvent themselves, business schools globally are embarking on intensive research and reinventing their offerings to support them on this journey.
Research shows that many business leaders are having a great deal of difficulty in adjusting to a new type of role to tackle complexity.
Andrew Wilson, director of research and development at Ashridge Business School in the United Kingdom, one of Europe’s leading business schools, explains in a recent article that in the traditional hierarchical organisation the role of leading people was relatively straightforward.
‘Influence and authority came with position and status, the boundaries of decision-making were prescribed by functional silos, and the business itself operated in a relatively stable and orderly system,” he says.
Today, the picture is entirely different, he continues. ‘Companies recognise they are actors in large, complex systems and need to interact in a web of relations with different stakeholders. They are realising corporate success requires a delicate balance of dialogue and action with groups and individuals inside and outside the organisation. Leadership is now about balancing competing demands and engaging people in collective goals.”
Christophe Gillet, the former director of business innovation for Sony Business Europe, who will be in South Africa in September to facilitate on the UCT Graduate School of Business’s executive leadership programme, echoes this assessment.
He says organisations cannot operate efficiently anymore on the same basis as before in terms of hierarchy, management, decision-making and teamwork.
‘In today’s complex and uncertain business environment, the consequences are that people often do not feel engaged, emotion often overcomes logic, traditional planning doesn’t work anymore, budgeting processes are made obsolete, risk management becomes the main factor of success and rigid strategies do not make sense — for leaders today ‘doing what we’ve always done’ does not mean, ‘getting what we’ve always got’,” says Gillet.
The issue of leading in complex times is currently at the centre of a study being undertaken by Ashridge with the support of the European Academy of Business in Society.
The study involves a series of in-depth interviews within leading companies, including IBM, Johnson & Johnson, Microsoft, Shell and Unilever. The research focuses on how to develop managers with the knowledge, skills and competencies to operate effectively in today’s complex business environment.
Another body of research at IMD Business School in Switzerland has shed more light on the key drivers of this complexity in today’s business world. According to Professors Martha Maznevski and Ulrich Steger of the business school and former research fellow at IMD, Wolfgang Amann, there are four major sources that interact together to create the current environment:
- ‘Diversity — executives must manage and respond to more diversity in the human resources pool, more variety in the management systems, more variation in means and ends, and a greater range of approaches from competitors, suppliers and customers.”
- ‘Interdependence — the less clear cut the boundaries of a company become, the more it is exposed to impacts on the value chain through actions of various stakeholders, including activity in markets far from those the company operates in. Mistakes, friction, reverse trends or even shocks must be taken into account.”
- ‘Ambiguity — the business world today is characterised by too much information with less and less clarity on how to interpret and apply insights. Studies, scenarios, survey results and reports become less reliable due to ever-increasing uncertainty.”
- ‘Flux — continuous, unpredictable and fast change. Even if you figure out temporary solutions regarding interdependence, diversity and ambiguity for your specific company, industry and personal situation today, the situation may change the next day.”
Dealing with these challenges, according to both bodies of research, requires an entirely different leadership mindset.
Wilson says that the Ashridge findings suggest that dealing with complexity requires action and understanding on four interrelated fronts.
Firstly, he explains, ‘leaders need an appreciation of the interdependency of systems across the business and between the business and society. This requires a deeper understanding of internal organisational relations and external social, economic, environmental and cultural dynamics. Managers need to shift the way they view the world. They need to recognise that the company is not operating in a closed system, interpret the signals given by actors in the market and respond accordingly.”
Secondly, leaders need to be able to embrace diversity. At one level, Wilson says this is simply about building corporate teams that reflect the diversity of the societies in which they operate.
‘Although this is considered necessary, it is not sufficient for managers to be truly responsive. In order to deal with complexity, managers need to be aware of potential risks and opportunities, have the ability to spot difficulties and recognise the legitimacy of other viewpoints.”
The third competence is the ability to maintain meaningful dialogue with others by listening, asking and responding. This can be described as ‘moving from a position where a manager ‘decides, announces the decision and defends the decision’ to a process of ‘dialogue, deciding and implementing’”.
The fourth area is emotional intelligence. Wilson says it is the ability to understand the broader implications of decisions and actions. ‘This capacity to identify the inter-relationship between emotions, thoughts and behaviour is considered a vital skill when reactions to business decisions are often not based on rational analysis, but on feelings and perceptions.”
With this challenge for leaders to reinvent themselves, many of the leading business schools globally are taking a close look at their offerings and how best to nurture these qualities in executives. The result has been an explosion of innovation in the realm of executive education design.
For South African leaders there are unique pressures to take into account as well as South Africa gets to grips with a host of social and economic development challenges and redresses past imbalances.
It is precisely an adeptness at reinvention, though, that stands South Africans in good stead in dealing with the growing complexity of the business landscape.
A reflection of this is the remarkable programmes being developed at local business schools that are becoming world renowned for their relevance and impact. The UCT Graduate School of Business, for example, was recently listed by the International University Consortium for Executive Education as one of six leading business school innovators.
South African business schools are proving themselves leaders rather than followers in giving leaders today the tools to reinvent themselves. The country is an exciting laboratory for innovation and local business schools can expect growing global attention to be paid to the creative solutions developed here to tackle the complexity challenge.
Elspeth Donovan is director of the executive leadership programme at the UCT Graduate School of Business. Email [email protected]