What Makes a World-Class Leader?

26 February 2015

What Makes a World-Class Leader?

An Insight into the Balance of Intellectual, Human, Political and Emotional Skills a World-Class Leader Needs Today. Deloitte’s state-of-the-art city offices provided the venue for a fascinating Breakfast Forum organised by Henley Business School, which looked at the various skills that make a world-class leader.

An Insight into the Balance of Intellectual, Human, Political and Emotional Skills a World-Class Leader Needs Today

Deloitte’s state-of-the-art city offices provided the venue for a fascinating Breakfast Forum organised by Henley Business School, which looked at the various skills that make a world-class leader.

Professor John Board, Dean at Henley, opened the event by welcoming the attendees to the Business School’s third such panel discussion and expressing his expectations of a lively debate. John went on to thank Deloitte for hosting the event and, in particular, he acknowledged Keith Leslie, Head of Leadership Practice at Deloitte, who was one of the speakers on the panel.

The five Qs of leadership

Professor Andrew Kakabadse, Professor of Governance and Leadership at Henley, was the first speaker to give an overview of the topic and his own personal view. Andrew began with a personal anecdote about an HR Director who had approached him about the application of systems thinking in her organisation. Their discussion went into some of the tensions that were developing within that organisation’s top team. The HR Director described a very uncomfortable strategic circumstance, where many of the team were against the CEO for a number of reasons. Andrew interviewed the whole team, who all agreed with the HR Director’s evaluation of the situation. However, when Andrew came to discuss the situation with the CEO, a very different perspective emerged. Instead of appearing to be the ‘ogre’ that had been described, he was in fact a very gentle man who had thought through the evaluation process.

Andrew noted that there wasn’t just a difference of strategy and perspective but a major difference on strategy execution. That led him into a series of different studies, the results of which are detailed below:

  • From a database of around 15,500 organisations across 21 countries, just over 33% of the world’s top teams are permanently divided on the mission, vision and strategy of the organisation and deep politicisation of the way things are done has become part of the culture of these organisations.
  • All top team members know which sensitive issues should be discussed, but 66% daren’t raise them. Andrew observed that the organisations under their charge experience a slow deterioration, because they didn’t know how to act under the circumstances.
  • When Andrew looked at boards in the UK, in particular at FTSE 100, 200, 300 and 350 companies, 80% of board directors either didn’t know or couldn’t describe the competitive advantage of the firm on whose board they sat.
  • Boards are often unaware of the culture of the organisation and too many board directors treat board meetings as though they were committee meetings, having neither the insight nor the courage to ask the really critical questions about how the firm is going to succeed.
  • Some very interesting tensions exist, as board members, top teams and general managers are not difficult or awkward, but clever people who think things through carefully, but just happen to have a different perspective on what is happening. A complexity emerges; a diversity of views.
  • Putting all the data together, what is experienced as ‘highly personal tensions’, is revealed, in reality, to be some very different views on two topics: competitive advantage and differentiation.

Andrew noticed when he went into the history of some these concepts, that the Chicago School of Economics was a deeply influential platform and many business schools have now taken their learning. But when he looked at how high performing organisations functioned they weren’t practising the notion of: (1) getting the strategy right; (2) creating a structure following the strategy; and then (3) having got the entire infrastructure together, cascading the message throughout the organisation. 

This was seen as bad practice. Getting the strategy right was step 1 and step 2 is (and was) to know their context, knowing what their organisation was really like. What were the fault lines in their business? Where did the engagement challenges not work out?

A few organisations had taken a very different approach. They didn’t go down the road of ‘get the strategy right, structure follows strategy, then cascade the message down the line’ – the path that is more easily understood. Instead these enterprises looked to strategy as a guide. Then they identified what was unique about the organisation and how they could now they could realise competitive advantage and differentiation when in fact those concepts pulled them in many directions.

Andrew gave the examples of a major car manufacturer, a medical company and pharmaceutical company trying to reach a clear view on competitive advantage when operating in China, Africa and Eastern Europe. What does differentiation mean in those places? If someone is the general manager in those places, what do they feel about the corporate centre and its processes and controls? Do such processes and controls really help the general manager to operate in China, with the reality of what China is like?

Andrew then took this to the personal level: what does it take to be an outstanding leader today? Based on his research, Andrew has concluded that there are five Qs, or quotients, that make a world-class leader:

  • IQ – Intellect
  • EQ – Emotional intelligence
  • PQ ­– Political skills
  • RQ – Resilience
  • MQ – Moral judgement

The one factor that stood out for Andrew was IQ, whether leaders really understood the tensions, diversities and different perspectives that existed within their company and respected them. 

As an example, Andrew described how Marks & Spencer Chairman Robert Swannell is trying to introduce massive changes at the company. One of the first things he did when he joined the board was make sure that all board directors had quarterly meetings with the management team, so that they could get a view on the diversities that really make the difference.

From the data, Andrew was expecting the traditional viewpoints on EQ to emerge, and it did at middle management levels. But, at the top level, it was not EQ that shone out, but a derivation – the political and negotiation skills, as well as the ability to integrate different perspectives, sometimes contrasting agendas and positions, in such a way that proved useful. As well as EQ, Andrew therefore introduced a third Q: PQ i.e. political quotient or ‘the ability to negotiate the impossible to the possible’.

From the data, a fourth Q emerged. Living in such an environment can wear you down. The greatest casualties of this are the general managers. However, the outstanding leaders had resilience, not an aggression but a calm ability to foresee and work through some of these tensions.

There was finally a distinctly uncomfortable fifth Q. We talk a great deal about ethics and the morality of what we are doing in business. What Andrew noticed in many corporations was that one thing was said while another thing was done. The fifth Q was therefore a moral quotient. He asked the audience to imagine working for a major corporation perhaps in food or medicines, operating in a country such as Romania, Georgia, Russia, Chile or Ecuador. What would it be like to operate and agree contracts there? What would it be like to work through the supply chain?

What Andrew found was that instead of bribery being on the decrease, it was at the highest level he had ever known. Bribery has been professionalised. It’s hidden in the supply chain through an agency relationship, so you can have two or three agencies making sure that the corporation is quite ‘clean’ but actually you are facilitating contracts in an unwelcome environment. Does that make people bad? No. It is the reality of what it means to work in organisations or places that are not under your government’s control and where the institutions are weak, but you still have to work your way through them.

So the fifth Q is how you deal with the uncomfortable circumstance of trying to be an ethical organisation, in an environment that is not, and still defend your reputation and minimise risk.

The capacity to work through unattractive and sometimes unwelcome diversities so that you can achieve two things: (1) have a sense of competitive advantage that is unique to you and (2) understand the differentiation that means different things in different parts of the world or different parts of the structure, but integrate that and pull it together – these are the skills that enhance competitive advantage and differentiation.

What’s wrong with the ‘world-class leader’?

The Dean then introduced the second speaker, Keith Leslie, Head of Leadership Practice at Deloitte and Chair at the Mental Health Foundation and Build Africa.

Keith also began with a personal anecdote concerning certain phrases about leadership that are often used in organisations, but which he intensely dislikes. He asks junior consultants not to use these phrases around him, which include ‘buy-in’, ‘best practice’ and ‘world-class leaders’! The latter being a phrase that is often bandied about by consultants and which usually comes with a lot of baggage, which is the problem rather than the concept itself.

Part of the baggage, according to Keith, is the idea that the leader is the sole, heroic leader of the organisation. The second piece of baggage is that it gives the impression of an overblown importance to the ‘man at the top’. The reality is that often the ‘man at the top’ is not a man and that the person at the top’s primary task is the engagement of the masses. The third issue is that there is a great deal of mysticism about the task of the leader, resulting in a misguided belief that their primary task is to give direction, but that is only a small part of the work of a leader.

Keith’s final issue is that the phrase ‘world-class leader’ tends to assume that the rest of the organisation is a well-oiled machine consisting of a series of cogs all moving very predictably and smoothly in response to what the leader does, which is of course not always the case.

Instead, Keith stated that what he does like is the integration of diverse perspectives and roles in an organisation. He’d rather hear much more about ‘leadership’ than about ‘leaders’. Most organisations have plenty of leaders but are desperately short of leadership. That ranges from the general election campaign we’re seeing right now in the UK, to the military, to corporate life and even to charities.

What is effective leadership? According to Keith, it is incredibly context specific and, as an illustration of that, people who have been great business leaders are not those who have moved from organisation to organisation. This is shown to be ineffective, as leaders who have grown up in one culture can be ineffective in another.

Part of the problem with ‘the man at the top’ idea is that leadership actually needs to be at all levels. Challenging leaders about how they make this happen in their organisation is the key point: a leader can’t do it all. In an increasingly complex world, we need more people exercising leadership throughout an organisation.

Keith therefore posed the question as to how leaders encourage delegation. In his opinion, they need to step back from exercising the role of leader at every possible opportunity. Hand in hand with that is the need to move away from the traditional technical or programmatic roles of leadership – recognising that leaders can’t make everything happen when they need to and that their organisations are part of much more complex systems.

Taking the current debate about healthcare in the UK as an example, Keith argued that the real issue is around how we integrate acute care in hospitals with social care and how we repair general practice and primary care with each successive government. With all the complexities of the Department of Health, there is no one leader. Simon Stevens, CEO of NHS England, has direct authority over a tiny piece of the system and we can see him exercising leadership without authority, using his profile to pull other people into decision-making, so that he has a range of people who can effectively, as a group, try to steer something as complex as the healthcare system.

Keith’s final point about leadership was that all of us as leaders are incomplete. Effective leaders recognise that they need to complement their own skills with those around them.

Developing leaders – the 70-20-10 approach

John Board then introduced the final speaker, Kim Lafferty, VP in Global Leadership Development at GSK. Kim has been in the business of leadership development for over 20 years and she wanted to look at how we make leaders. Having spent eight years at the Centre for Creative Leadership, which publishes extensively on the subject of leadership, she asked: what are the frameworks that help us understand what makes leaders?

Kim began by defining the terms ‘leader’ and ‘leadership’. These terms are used very loosely and often we are not talking about the same thing. A ‘leader’ is someone who leads people and the classic definition of ‘leadership’ is demonstrated by three things: setting direction, creating alignment and gaining commitment.

Among all multiple frameworks that we have, organisations will typically have 12 behaviours or capabilities. But what is distinctive and unique?  We talk about leaders as a hierarchical powerful role but everybody is capable of an active leadership.

Considering her own role, Kim explained that there are three things that she does in leadership development: build capability, build capacity and build confidence.  So how does she do it? In answer to this, Kim made reference to the ‘70-20-10’ model of learning.

This model suggests that 70% of our learning is based on our experiences. Part of Kim’s role in leadership development is therefore giving leaders, particularly new graduates, the breadth and depth of experience that develops their capability and competence for when they get to senior roles.

But for any job throughout the organisation: are we good at spotting the opportunities that give developmental ‘heat’, that allow us to learn the capabilities and build the capacity that we need to be very good at our jobs?

The 20% in the model relates to our developmental relationships. What are the relationships that surround a leader as they practice leadership? Do they have excellent role models? Do they have a diversity of styles? Do they have people with very different experiences from whom they can learn? Are they themselves reaching out for supportive relationships, such as a mentor or senior leader who can guide them through the organisation, or an external coach who can hold a mirror up and challenge and support them in terms of how they digest some of their experiences?

Kim then explained that quite a lot of her work is devoted to the final 10% of the model, which is the formal training that we give our leaders. She feels, perhaps controversially, that we have become stale in our thinking on leadership development. We are increasingly looking at the experiential things we can do for our leaders that give them a visceral experience of the differentiators of our organisation. What brings them into touch with the purpose of the organisation? What gives them the opportunity to build relationships across the organisation, so that they feel that they are connected as a cohort of leaders, rather than as an individual leader, battling their way through the challenges of the day?

The 10% has to affect mindset and values, not just what training departments have traditionally done, focusing on knowledge, skills and behaviour. They are important, but the mindset also is important: what is a world-class or global leader? And what are the values that you need to navigate global organisations and environments?

At this point, Kim made it clear that context matters massively. There are only two ‘speeds’ for leaders and environments: change or reorganisation; gone are the days when we talked about steady state. As a demonstration of world-class leaders, all leaders need to believe that they are unfinished. Instead, they need to be curious, constantly learning and want to reach out and sense what’s going on in the environment in which they are working, so that it’s a journey not a destination.

So, how do you demonstrate who you are to people who may never know you, because in larger organisations, you are actually quite distant? According to Kim, excellent relationships come very high up on the list; and it’s about trust at the core.

Creating shared value in partnership is vital and it’s about being generous and not selfish. In today’s world, that’s important. Kim explained how she prefers the term ‘resourcefulness’ to ‘resilience’ and how it’s unequivocally one of the things that our leaders need to learn, demonstrate and understand. They are making tough decisions, making judgements every day and the pace at which they are working is extraordinary. Leadership development is looking hard at how to make sure our leaders keep themselves healthy and look after the health and wellbeing of their staff.  

On systems thinking, Kim explained that the idea that leader can hold many things in their head and can see the whole pattern, rather than just a piece of it, is particularly difficult within matrix organisations, where you may see the matrix from the node that you are standing on but you may not be able to see what it looks like from another person’s point of view. That requires great headspace.

On complexity, one thing that Kim said she feels leaders have to do, particularly at GSK, is have the ability to simplify, rather than adding to the fog that we experience regularly. As Kim illustrated through a very apt quote: ‘Complexity is the cholesterol of organisations’.

Referring to a recent article by Andrew Hill in the Financial Times, Kim noted that one of the significant things we focus on now and teach our most senior leaders and general managers is ‘paradox management’: the ability to hold two apparently contradictory things true at the same time, and navigate a path through both, rather than see them as a problem to be solved.

The most typical example would be how to operate both globally and locally, but another one that is very pertinent to GSK is: how do we give access to medicines that people cannot typically afford in countries that have very low incomes and, at the same time, reward our shareholders and other staff? You have a paradox: you must do both, you can’t do one or the other. That’s the job, but it’s a tall order.

Kim ended by saying that those that lead well, do it exceptionally well and most of the best leaders that she’s worked with are really very unfinished.

What makes a leader: nature or nurture?

Having heard from all three speakers, John then opened the floor to questions. One member of the audience began by posing three questions at once: ‘Are leaders made or born? Is today’s global leader any different to the global leader of yesteryear, e.g. Churchill? And if you are looking for a global leader, where would you look: the military or a business school?’

Keith responded that leaders are shaped by their experiences so that, irrespective of what they are born with and assuming they were born with a reasonably high IQ, they are made not born.

He went on to explain that, in terms of types of leaders, there are two paradoxical thoughts. One is that context matters to a very high degree. Having had a lot of experience working with the military and military leaders, Keith believes that they are no better and no worse at shifting context, with a fair proportion of them finding it very difficult to work outside the military context but some being very effective at doing so. While Deloitte wouldn’t specially look at that area, it does recruit from the military.

On the other hand, commenting on what has been happening in the army, he mentioned the former Chief of General Staff who initiated a programme called ‘Army Transition’, which looks at the competencies of army officers. The most interesting thing about this programme is that the competencies of army officers of the future are essentially the same as those of civil servants of the future and similar to global leaders of the future.

Keith concluded that an increasing consensus of knowledge, skills and experiences is needed for leaders of the future, irrespective of their background. The military in particular are conscious of needing to expand their core business skills and face the same complex context. They need to lead without authority. Looking at the military’s role in Sierra Leone, Iraq or Afghanistan, it has been about building coalitions and having the skills to demonstrate success.

Kim felt that leadership today is more demanding and especially the role of a global leader. One of several things that has amplified is the transparency with which organisations are now run. In GSK, they have approximately an hour’s lead time ahead of general press releases responding to any headlines about the company, making it a demanding task for her to ensure that her team are well briefed and aware of what’s going on. Kim recognised that social media and technology have advanced the whole area of transparency, while the velocity of organisational life is immense. As a result most of us struggle with meeting agendas, email and the daily job that we are paid to do, a situation that, based on her own experience, Kim argued is getting worse.

Developing your fledgling leaders

The next question came from a member of the audience who was ex-military and now in professional services practice who asked whether leadership itself is more important than personal skills when on the first rung of the ladder.

Kim discussed what age and stage GSK invests in and selects leadership. At GSK, they are now more focussed on bringing in younger people and they have won awards for entry-level apprenticeships.

For the 450 graduates who joined GSK this year, the emphasis has been on giving them the breadth and depth of experience by moving them around different locations before they begin to settle down and start families. GSK recruit from top universities but the 70-20-10 rule still applies in terms of giving them experiences and finding out what support they need to fast track them. Therefore, the capability of line managers is key; if graduates have a good one, they can succeed. But, Kim argued, it’s important not to look only at the person they work for; they need a good leader or head of team.

Is it time to legislate leadership?

The next question from the audience related to accountability. In reference to the tax scandal surrounding HSBC senior management, the question was posed as to whether society helps form new leaders.

Having written for The Tablet regarding the economic crash in 2008, Keith concluded that we are all to blame; it was bound to happen and it was predicted and known to the authorities. He argued that if we put criminal penalties in place for directors of banks who put customers at risk, we would see convictions.

In reply, John suggested that accountability affects the role of risk taking, and he wondered what the effect would be if we were to constrain risk taking.

Andrew responded with his view that legislation wouldn’t make any difference with regard to HSBC; instead, we need to look at responsibility not accountability.

His belief was that general managers and the supply chains should be spoken to first, before the CEO and Chairman are interviewed and challenged. According to Andrew, the issue for board members is whether they are asking relevant questions in difficult circumstances, as it seems responsibility is diminishing and accountability is decreasing. Andrew expressed the concern that legislation will overemphasise accountability.

Diversity in action

Another audience member asked about global dilemmas, such as the 2008 crash, with regard to paradox management. In these cases, people who take risks may be rewarded but can’t then be held accountable for the risks they took.

Kim commented that leaders must take account of past history before they join an organisation. They can’t just start as though it’s a blank page. Banks have a diversity of styles and perspectives. Recent McKinsey research shows that if you want to manage risk, you need diversity around the table to improve decision-making. Kim added that diversity is about different styles of working, not just gender and ethnicity.

The issue of diversity was taken up by a member of the audience who asked ‘What does different mean? Do senior leaders know what it is like to walk in another person’s shoes?’ They suggested that senior leaders should be coached to sponsor people who are ‘different’ but not label them.

Keith replied that it is critical for leaders to draw people into the conversation. They need to cultivate that effectively and be coached in order to get people to contribute.

The next question came from a member of the audience who worked in the UK for a Chinese organisation, and felt there was a culture divide. The panel were asked whether they had any suggestions for businesses understanding local culture.

Andrew replied: ‘Research indicates that whether the manager is Chinese, British or American, it makes no difference. If you know about the culture of the company locally, it becomes your organisation’s culture. Running the company according to local culture ultimately helps the head office. Less than 20% of organisations run their company according to local culture, though 100% say that they do.’

Kim added that GSK pay attention to cultural intelligence to help move away from stereotyping and it was important for leaders to embrace and invite others to help, rather than doing everything themselves.  She suggested that bias can be a problem, ‘We may have certain stereotypes of China and we need to make leaders aware of their own biases in unfamiliar environments. They need agility or adaptability, whether cultural or contextual. They need to understand local history when arriving there.’

The value of extra-curricular experience

Moving on to the subject of education, the next question came from a member of the audience who had a background in the charity sector: ‘I believe that education drives future leaders, but education itself is going through change. When leaders, individuals, or organisations are challenged, do they fit around the challenges or get the challenge to fit around them?’

Kim said that, with regard to the charity environment, GSK came in the top ten in an EU survey on using the NGO environment to develop leaders. Anyone in the organisation can apply to work in an NGO for six months either in the UK or abroad, allowing them to apply their skills but in a very different environment. Many come back to GSK having changed enormously as a result of their experience. Kim felt that this gave employees an important opportunity to meet new people and have new experiences, rather than just gravitate towards the type of people and experiences they already know. For example, GSK takes groups into the poorest of African communities to look at what leadership in healthcare looks like.

Keith added that, on leaving McKinsey in 2006, he became a healthcare consultant to a number of charities. He now constantly asks people whether they have thought about becoming a school governor or treasurer of a local charity. He believes that this type of experience builds better leaders, and it’s becoming even more important as there has been a squeeze in the charity sector in the last five years.

John commented that all Henley MBA students visit Southern Africa to work with NGOs as part of the programme and come back saying that it was the defining point of their Henley experience. He added that he believes that the earlier you do it, the better.

Taking control of the future

The final question of the day concerned the paradox of managing the current core business while moving the business into a new area, level or sector, e.g. as EMI are doing in the music business. The panel were asked: ‘What do we need to be better at in order to do this effectively? How do leaders grow organisations into new areas, if they risk destroying the previous business model?’

In response, Andrew noted that top teams usually know beforehand that they need to change. The key to achieving it is the clarity of knowing what steps to take to get to the new area and move away from the current customer base. He suggested that it may not be the CEO who does this but could even be the FD, by gathering evidence for the direction in which they want to take the business and then deciding whether they can or can’t do it.

Keith added: ‘It’s hard to learn for future change. My clients are mainly government or digital and they are both going through enormous change. Politicians obviously promise a lot at election time! In the public sector, you can’t change the current organisation; you need to look for future change somewhere else.’

For Kim, the answer lay in segmentation and partnerships: ‘Tomorrow is about community. We need peripheral vision and leaders need to look externally and visit other organisations in far-flung places, especially in areas where the company is struggling.’ And she summed up with the quote: ‘It’s important to invent the future, not be a victim of it.’

John brought the forum to a close by thanking Deloitte for hosting the event and all the speakers and audience for attending. As a final thought, he reminded attendees that 2015 is Henley’s 70th anniversary, having been established in 1945, and noted that the Business School was founded to examine the same questions and challenges that still exist today.

 

Post-event comments and feedback:

‘Fascinating.’

‘Informative, engaging and provocative.’

‘Interesting and a good discussion. It’s usually difficult to get below the surface into some “meat” in 90 minutes, but they achieved that today.’

‘Impactful. The mix of speakers was particularly refreshing.’

‘Fabulous! Good contrast between the academic and business speakers.’