Posted in Aktuellt, Executive Team / Ledningsgruppsarbete, Strategy implementation / Strategiimplementering on April 20th, 2018 by admin

Eight shifts that will take your strategy into high gear

Developing a great strategy starts with changing the dynamics in your strategy room. Here’s how.

1. From annual planning to strategy as a journey
Messy, fast-changing strategic uncertainties abound in today’s business environment. The yearly planning cycle and the linear world of three- to five-year plans are a poor fit with these dynamic realities. Instead, you need a rolling plan that you can update as needed.
In our experience, the best way to create such a plan is to hold regular strategy conversations with your top team, perhaps as a fixed part of your monthly management meeting. To make those check-ins productive, you should maintain a “live” list of the most important strategic issues, a roster of planned big moves, and a pipeline of initiatives for executing them. At each meeting, executives can update one another on the state of the market, the expected impact on the business of major initiatives underway, and whether it appears that the company’s planned actions remain sufficient to move the performance needle. In this way, the strategy process becomes a journey of regularly checking assumptions, verifying whether the strategy needs refreshment, and exploring whether the context has changed so much that an entirely new strategy is necessary.
To grasp what this process looks like in action, consider the experience of a global bank whose competitive context dramatically changed following the financial crisis. The CEO realized that both the bank’s strategy and its approach to refining the strategy over time as conditions changed needed revamping. He instituted biweekly meetings with the heads of the three major lines of business to identify new sources of growth. After making a set of “no regrets” moves (such as exiting some noncore businesses and focusing on balance-sheet optimization), the bank’s strategy council devoted subsequent meetings to confronting decisions whose timing and sequencing demanded close evaluation of market conditions. The top team defined these choices as “issues to be resolved,” regularly reviewed them, and developed a process for surfacing, framing, and prioritizing the most time-sensitive strategic challenges. In doing so, the team not only jump-started its new strategy but launched an ongoing journey to refine it continually.

2. From getting to ‘yes’ to debating real alternatives
The goal of most strategy discussions is to approve or reject a single proposal brought into the room. Suggesting different options, or questioning the plan’s premise and therefore whether it should even be under consideration, is often unwelcome. Without such deeper reflection, though, you are less likely to make hard-to-reverse choices about how to win—which is problematic, because those choices are the essence of real strategy, and the planning process should be geared to shining a spotlight on them.
The conversation changes if you reframe it as a choice-making rather than a plan-making exercise. To enable such discussion, build a strategy decision grid encompassing the major axes of hard-to-reverse choices. Think of them as the things the next management team will have to take as givens. Then, for each dimension, describe three to five possible alternatives. The overall strategic options will be a few coherent bundles of these choices. Focus your debate—and your analysis—on the most difficult choices. One company we know recently brought two very different plans into its strategy discussion: the first plan assumed the present, low level of resourcing, and the second one represented a “full potential” growth scenario, which necessitated dramatically higher investment levels. The latter option was a new possibility resulting from a positive demand shock. Alongside one another, the two plans stimulated vigorous debate about the company’s road ahead and what its posture toward the business should be.
If you want real debate, you also need to calibrate your strategy. As we show in our book, the odds of a strategy leading to dramatic performance improvement are knowable based on analysis of your company’s starting endowment, the trends it is riding, and the moves you are planning. If your odds are poor, you should consider alternatives, which often will require making bigger moves than you made in the past. Forcing discussion about real strategic alternatives—such as different combinations of moves and scenarios with different levels of resources and risk—help you move away from all-or-nothing choices, as well as from those 150-page decks designed to numb the audience into saying “yes” to the proposal.
Even a simple calibration can stimulate debate about whether a strategy has a realistic chance of getting you where you want to go. Consider the experience of a consumer-goods client with $18 billion in revenue and the aspiration of achieving double-digit growth. The company did a great deal of planning, and the aspiration, which rested on a bottom-up aggregation of each business unit’s plans, looked reasonable. However, publicly available information showed that among industry peers within the same revenue range, only 10 percent generated sustained, double-digit growth over ten years. The questions became: Is our strategy better than 90 percent of our peers? Really? What makes us stand out, even though we have performed like an average company over the prior five years? These questions were uncomfortable but important, and they contributed to a strategic reset for the company.

3. From ‘peanut butter’ to one-in-ten wins
It is nearly impossible to make the big moves that successful strategies require if resources are thinly spread across all businesses and operations. Our data show that you are far more likely to achieve a major performance improvement when one or two businesses break out than when every business improves in lockstep. You have to identify those breakout opportunities as early as possible and feed them all the resources they need.
Identifying those winners is easier than you might think. If you were to ask your management team to pick them, they would probably agree strongly on number one and maybe number two—much less so on, say, numbers seven and eight. The difficulty starts when discussion shifts to resource allocation. In fashion, movies, oil exploration, and venture capital, people understand that it’s the one-in-ten win that matters, but most other businesses do not have this “hit mentality.”

To stop spreading resources too thinly, you and your management team need to focus on achieving a few breakout wins and then work to identify those potential hits at a granular level. Excessive aggregation and averaging into big profit centers can prevent you from seeing the true variance of opportunity. One CEO we know had traditionally framed strategy discussions around growth of 4 to 6 percent and accordingly meted out resources to divisions. One year, he did a much more granular analysis and realized that one geography—Russia—was growing at 30 percent. He swamped the Russian operations with resources, created a more favorable environment, and subsequently enjoyed even faster growth from that unit.
We’ve seen many senior teams move away from “peanut buttering” by using some form of voting to pick priorities. In some cases, that’s a secret ballot in envelopes. In others, CEOs set up a matrix showing all the opportunity cells and let executives allocate points to various initiatives by applying stickers to the matrix. Such a matrix can help you look at the market in ways that are different from how your organization is structured—which boosts the odds of achieving radical resource shifts. One company, for example, recently decided to examine plans one level down from the business unit and created a detailed curve of 50 or so specific, investible opportunities. The result was a much bigger shift in resources to the best opportunities.

4. From approving budgets to making big moves
The social side of strategy often makes the three-year plan a cover for the real game: negotiating year one, which becomes the budget. Managers tend to be interested in years two and three but absolutely fascinated by year one, because that is where they live and die. You need to put an end to the strategy conversation being little more than the opening act to the budget.
One of the worst culprits in these budget-driven discussions is the “base case”: some version of a planned business case anchored in various (largely opaque) assumptions about the context and the company strategy. The base case might obscure the view of where the business actually stands, which could make it hard to see which aspirations are realistic and, certainly, which strategic moves could deliver on those aspirations.
A practical way to avoid this trap is to build a proper “momentum case.” This is a simple version of the future that presumes the business’s current performance will continue on the same trajectory—the highly probable outcome absent any new actions. In this way, you get a sense of how much impact your moves need to deliver to change that trajectory.
It is also critical to understand explicitly why your business is making money today. At a retail bank in Australasia, for instance, the leaders wanted to expand into overseas markets. The logic was, we are very successful, so we must be better operators than our competitors. We will move into other markets, where the operations are not nearly as efficient as in our home markets, and we will clean up. When the team looked at how the bank really made money, however, the operating metrics were unimpressive. The company’s success was largely due to its product strategy: the bank had a big exposure to residential mortgages, for which demand was very strong in Australia at the time. Another big source of profit was the bank’s excellent record of picking branch locations. But those choices were made by two people at the head office, so there was no reason to suspect that they would be as successful in Indonesia or other new countries.
The bank gained these insights by doing a “tear down” of its results. This is a crucial part of sharpening the dialogue around big moves, and it is not that hard to do. Simply take the business’s past performance and build a “bridge,” isolating the different contributions that explain the changes. Most CFOs regularly do this for factors such as foreign-exchange changes and inflation. The bridge we are talking about considers a broader array of factors, such as average industry performance and growth, the impact of submarket selection, and the effect of M&A.
Armed with a thorough, unbiased understanding of where your business stands and what has been driving performance, you can focus on what it would take to change your trajectory. Instead of asking for a target or a budget in the strategy meeting, ask for the 20 things each of your business leaders wants to do to produce a series of big moves over the coming period. Then debate the moves rather than the numbers expected to result from them. Why should we do this big move? Why shouldn’t we? How different does the company look depending on what risk and resource thresholds we set for it? Above all, talk about moves first, budgets second. Over time, your managers will come to recognize that if they do not have any ideas for big moves or cannot inspire confidence about their ability to pull off big moves, they will lose resources accordingly.

5. From budget inertia to liquid resources
The handover between strategy and execution happens when the resources are made available to follow through on the big moves you identify. Execution can then begin, and managers can be held accountable.
To mobilize resources and budgets, a company needs a certain level of resource liquidity. And you have to start early—the date your fiscal year begins. That is when serious productivity-improvement initiatives should be under way to free resources by the time allocations are decided later in the year. Then you must hold onto those freed resources so they will be available for reallocation, which requires determination. As soon as an engineer has time, your R&D organization will have creative new product ideas; the sales organization will identify attractive new business opportunities as soon as a productivity program has freed up part of the sales force. You need to be incredibly clear about separating the initiatives that free up resources from the opportunities to reinvest them if you hope to make big moves.
Another way to enable resource reallocation is to create an “80 percent–based” budget: a variant on zero-based budgets in which you make a certain sliver (say, 20 percent) of the budget contestable every year, so money is forced into a pot that is available for reallocation when the time comes. Yet another option is to place an opportunity cost on resources that seem free but are not. You identify scarce resources, such as shelf space for retailers, and make sure they are measured and managed with the same rigor as conventional financial metrics, such as the sales and gross margins for which many retail managers are held accountable. This can be as simple as shifting to ratios (such as sales per square foot and returns on inventory for a retailer) that encourage managers to cut back on lower-value uses for those resources, thereby freeing them up for other opportunities.
US conglomerate Danaher strongly emphasizes resource liquidity and reallocation. Originally a real-estate investment trust, the company now manages a portfolio of science, technology, and manufacturing companies across the life sciences, diagnostics, environmental and applied solutions, and dental industries. To avoid budget inertia, senior management at the company spends half its time reviewing and recutting the portfolio—much like private-equity firms do. The company even has a name for its approach: the “Danaher Business System.” Under this approach, which is based on the kaizen philosophy of continuous improvement, Danaher has institutionalized the resource liquidity required to chase the best opportunities at any point in time. It systematically identifies investment opportunities, makes operational improvements to free up resources, and builds new capabilities in the businesses it acquires. Over the past decade, the company has dynamically pursued a range of M&A opportunities, organic investments, and divestments—big moves that have helped the company increase economic profits and total returns to shareholders.

6. From sandbagging to open risk portfolios
When business units develop strategic plans, they often set targets that they can be sure of reaching or exceeding. As you aggregate these plans on a corporate level, the buffers add up to a pretty big sandbag. The mechanism of aggregating business-unit strategies also explains why we see so few big moves proposed at the corporate level: individual unit heads tend to view M&A initiatives and other bold programs as too risky, so these moves never make the final list they bring into the strategy room.
To make strides against sandbagging, you need to manage risks and investments at the corporate level. In our experience, a key to doing this effectively is replacing one integrated strategy review with three sequential conversations that focus on the core aspects of strategy: first, an improvement plan that frees up resources; second, a growth plan that consumes resources; and third, a risk-management plan that governs the portfolio.
This approach triggers a number of shifts. People can lay out their growth plans without always having to add caveats about eventualities that could hamper them. You could ask everyone for growth or improvement plans, possibly insisting on certain levels to make sure everyone is appropriately imaginative and aggressive. Only after executives put their best ideas on the table do you even begin to discuss risk. By letting business leaders make risk an explicit part of the discussion, you change their perception that their heads alone will be on the block if the strategic risk cannot be mitigated. They will share what they know of their risks rather than hiding them in their plans—or not showing you an initiative at all because they deem the personal risk to be too high.
Consider the experience of a retailer whose traditional strategy approach was to roll up the plans of each of its different brands. One year, the company instead racked up the full set of about 60 investible opportunities and assessed them against one another, regardless of the brand or business unit with which they were connected. The dispersion between opportunities was striking. A portfolio-level view also led to a different answer about the right risk/return threshold than had emerged from assessments made earlier by individual divisional leaders. It turned out, perhaps counterintuitively, that there was too much capital going to the smaller businesses, while the biggest business had major, underfunded opportunities.

7. From ‘you are your numbers’ to a holistic performance view
Whatever shifts you make, you cannot make them alone; you need to bring your team along. We often see managers being pushed to accept “stretch targets”—with perhaps a 50 percent chance of being achieved, what we would call a “P50” plan—only to have these low, up-front probabilities ignored when it comes to the performance review at year end. People know that they “are their numbers,” and they react accordingly to attempts to set aggressive targets.
Bringing probabilities to the fore can reset these dynamics. You need to have a sense of whether you are looking at a P30, a P50, or a P95 plan if you hope to have a reasonable, ex post conversation about whether the result was a “noble failure” or a performance failure. You also need to dig down on what drove the outcomes. Although you don’t want to punish noble failures, you don’t want to reward dumb luck, either. Rather, you want to motivate true high quality of effort. At W. L. Gore, maker of Gore-Tex, teams get data on performance and vote on whether the team and its leader “did the right thing.” This vote is often closer to the truth of what happened than the data itself.
Ultimately, you also need a sense of shared ownership in the company’s fortunes and a clear alignment of incentives to get the full commitment of your team to the big moves you need to make. To deliver the message that people will not be punished simply because a high-risk plan did not pan out, we suggest developing an “unbalanced scorecard” for incentive plans that has two distinct halves. On the left is a common set of rolling financials with a focus on two or three (such as growth and return on investment) that connect to the economic-profit goals of the division and enterprise. On the right is a set of strategic initiatives that underpin the plan. The hard numbers on the left help establish a range for incentives and rewards, and the strategic initiatives on the right can be a “knockout” factor, with P50 plans getting treated more softly on failure than P90 moves. In other words, the way you get the results matters as much as the results themselves.
Playing as a team counts here, too. The right thing to do at a portfolio level does not always mean every individual “scoring the goal.” For example, it’s a good idea to have fire stations strategically located throughout your city, but you don’t heap rewards on the one fire station that happened to be near the big conflagration. You look at the performance of the system as a whole. The urge to push individual accountability can actually be counterproductive when it comes to strategy, which is really a team sport.

8. From long-range planning to forcing the first step
We see it all the time: big plans that excite leaders with grand visions of outcomes and industry leadership. The problem is that there is no link to the actual big moves required to achieve the vision—and, in particular, no link to the first step to get the strategy under way. Most managers will listen to the visions, then develop incremental plans that they deem doable. Often, those plans get the company onto a path—but not one that reaches the vision or exploits the full potential of the business.

That is why the first step is crucial. After identifying your big moves, you must break them down into what strategy professor Richard Rumelt calls “proximate goals”2: missions that are realistically achievable within a meaningful time frame—say, 6 to 12 months. Work back from the destination and set the milestone markers at 6-month increments. Then test the plan: Is what you need to do in the first 6 months actually possible? If the first step isn’t doable, the rest of the plan is bunk. One insurance CEO worked on a vision with his team that concluded there would be no paper in the insurance business in ten years. But when he asked for the plan for the upcoming year, paper consumption was set to increase. So, he asked, “To connect to our vision, would it be viable to be flat in paper next year and go down in the next?” Of course, the team had to say yes. By framing a first-step question, the CEO forced the strategy.

Pursuing these shifts should increase your chances of making big, strategic moves, which, in turn, increases your likelihood of jumping from the middle tier into the elite ranks of corporate performance. In fact, our research shows that making one or two big moves more than doubles your odds (to 17 percent, from 8 percent) of achieving such a performance leap. Making three moves boosts these odds to 47 percent.
But keep in mind that the eight shifts are a package deal—if you don’t pursue all of them together, you open the field to new social games—and that it takes a genuine intervention to jolt your team into this new way of thinking. How? Here’s an idea: Create a new strategy process that reserves ten days per year for top-team conversations and introduce the shifts one meeting at a time. If things go wrong in a meeting, they go wrong only in one place, and you can “course correct” for the next conversation. And if you discover at the end of the ten days that you have not been able to free up all the resources you feel are needed, that’s OK. Take the resources you were able to free up by the end of this first planning cycle and allocate them to the highest priorities that emerged from it. You will have made progress, and, more importantly, your team will now understand what this new process is all about. That is a first step in its own right, and if you want to boost the odds of creating a market-beating strategy, it’s probably the most valuable one you can take.
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Source: McKinsey.com
About the authors: Chris Bradley is a partner in McKinsey’s Sydney office, Martin Hirt is a senior partner in the Greater China office, and Sven Smit is a senior partner in the Amsterdam office. This article is adapted from their book, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds (Wiley, February 2018).
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Linking talent to value

Posted in Aktuellt, Allmänt on April 16th, 2018 by admin

To understand how difficult it is for senior leaders to link their companies’ business and talent priorities, consider the blind spot of a CEO we know. When asked to identify the critical roles in his company, the CEO neglected to mention the account manager for a key customer, in part because the position was not prominent in any organization chart. By just about any other criterion, though, this was one of the most important roles in the company, critical to current performance and future growth. The role demanded a high degree of responsibility, a complex set of interpersonal and technical skills, and an ability to respond deftly to the client’s rapidly changing needs.

Yet the CEO was not carefully tracking the position. The company was unaware of the incumbent’s growing dissatisfaction with her job. And there was no succession plan in place for the role. When the incumbent account manager, a very high performer, suddenly took a job at another company, the move stunned her superiors. As performance suffered, they scrambled to cover temporarily, and then to fill, a mission-critical role.

Disconnects such as this between talent and value are risky business—and regrettably common. Gaining a true understanding of who your top talent is and what your most critical roles are is a challenging task. Executives often use hierarchy, relationships, or intuition to make these determinations. They assume (incorrectly, as we will explain) that the most critical roles are always within the “top team” rather than three, or even four, layers below the top. In fact, critical positions and critical people can be found throughout an organization.
Roles that drive or enable value can be found across an organization.
Fortunately, there is a better way. Companies can more closely connect their talent and their opportunities to create value by using quantifiable measures to investigate their organizations’ nooks and crannies to find the most critical roles, whether they lie in design, manufacturing, HR, procurement, or any other discipline. They can define those jobs with clarity to ensure that top performers with the appropriate skills fill the roles. And they can put succession plans in place for each one.

The leaders at such companies understand that reallocating talent to the highest-value initiatives is as important as reallocating capital. This is not an annual exercise: it is a never-ending, highest-priority discipline. In a survey of more than 600 respondents, we found the talent-related practice most predictive of winning against competitors was frequent reallocation of high performers to the most critical strategic priorities. In fact, “fast” talent reallocators were 2.2 times more likely to outperform their competitors on total returns to shareholders (TRS) than were slow talent reallocators.1
Those results are consistent with the experience of Sandy Ogg, founder of CEOworks, former chief HR officer (CHRO) at Unilever, and former operating partner at the Blackstone Group. While in the latter role, Ogg began paying attention to which Blackstone investments made moves to match the right talent to the important roles from the start. He observed that 80 percent of those talent-centric portfolio companies hit all their first-year targets and went on to achieve 2.5 times the return on initial investment. Ogg also noted that the 22 most successful portfolio companies out of the 180 he evaluated managed their talent decisions with an eye toward linking critical leadership roles to the value they needed to generate. He recalled using similar value-centric talent-management approaches in his previous roles at Motorola, Unilever, and Blackstone, and he now had even clearer evidence of their impact. In partnership with McKinsey, he set out to codify this approach for linking talent to value.

Real-world examples best describe our learnings. In this article, we describe the journey of a CEO of a consumer-products company, “Company X,” who recently found herself reflecting on how to achieve dramatic revenue growth. The effort would demand reimagining how Company X generated value and then redefining critical roles and the people who filled them.

Define the value agenda
The first step in linking talent to value is to get under the hood of a company’s ambitions and targets. It is not enough just to know the overall numbers—the aspiration should be clearly attributable to specific territories, product areas, and business units. Company X already understood its overriding goal: to grow revenue by 150 percent within the next five years in its highly disrupted industry. When taking a more detailed look, however, the CEO and her team found that some small business units were likely to grow out of proportion to their size, making the value at stake in these businesses greater than in the larger ones. Design and manufacturing innovation would clearly have a positive impact on all business units, but if the two largest ones were to grow, they would also have to take advantage of international opportunities and digitally deliver their products and services.

Disaggregating value in this granular fashion set the table for a strategic discussion about which roles mattered most and about the skills and attributes needed by the talent who would fill those roles and drive future growth. Even at this early stage of the process, it was clear that the company’s future leaders would need to be comfortable in an international environment, leading teams with a high degree of cultural diversity; have experience in cutting-edge design and manufacturing processes; and possess digital fluency. The leaders would also have to be flexible and comfortable adapting to unforeseen disruptions.

Unfortunately, these character traits were not common across Company X’s cadre of leaders at the time. The CEO now understood the serious issue she had to confront—the profiles of Company X’s current top talent did not necessarily match the ideal profiles of its future top talent.

Identify and clarify critical roles
Identifying and quantifying the value of the most important roles in an organization is a central step in matching talent to value. These critical roles generally fall into two categories: value creators and enablers. Value creators directly generate revenue, lower operating costs, and increase capital efficiency. Value enablers, such as leaders of support functions like cybersecurity or risk management, perform indispensable work that enables the creators. These roles are often in counterintuitive places within the organization. Typically, companies that consciously set out to pinpoint them find about 60 percent are two layers below the CEO, and 30 percent are three layers or more below the CEO.

The ability to achieve true role clarity is closely tied to overall organizational performance and health, according to McKinsey research. In the pursuit of such clarity, it is critical to think first about roles rather than people. The initial goal is assessment of where the greatest potential value is and what skills will be necessary to realize that value—not identification of the top performers. This approach allows leaders to think more strategically about matching talent and value rather than merely focusing on an individual’s capabilities.

Each of Company X’s business-unit leaders had defined their value agenda; now they needed to map, in collaboration with their HR teams, the most critical roles. In each unit, leaders addressed the following series of questions:
– Where did the value for this unit come from?
– Which roles have been most critical?
– Would the new strategy entail new roles?
– What big disruptions might change role responsibilities?
Then they went into even more detail. They mapped potential financial value to each role using the metric of projected five-year operating margin. Value creators were assigned the full economic value of their business’s operating margin. Value enablers were assigned a percentage of value based on human judgment of their relative contribution to the relevant operating margin combined with an analytic perspective on which value levers those functions influenced.

Through this fact-based process, leaders identified more than 100 critical roles across all business units and corporate functions. In line with our experience, 20 percent were three layers or more below the CEO, often in counterintuitive places. More than 10 percent of the critical roles focused on digital priorities, advanced analytics, and other capabilities in very short supply in the current organization. About 5 percent focused on cross-functional integration. And at least 20 percent were entirely new or greatly evolved in scope.

The CEO, CHRO, and CFO sifted through the list to identify the 50 highest-value roles (for more on collaboration opportunities for these three executives, see “An agenda for the talent-first CEO”). The choice of 50 was not because it is a nice, round number. It is hard for a CEO to have clear visibility into more than about 50 roles. Also, in our experience, the top 25 to 50 roles can typically orchestrate the bulk of a company’s potential value. The hiring, retention, performance management, and succession planning in these critical roles should all be of personal interest to the CEO.

The company’s top managers then worked with business-unit leaders to create unique “role cards” for these top positions. Each card specified the role’s mission; a list of jobs to be done, with a checklist of what was needed to capture the role’s outsized share of value; and key performance indicators (KPIs). The KPIs were quite detailed. For instance, the KPIs assigned to the role of the general manager for one site were percent of on-time delivery, product- and account-specific earnings, percent share of spot volume, and share of volume from new customers. Creating such specific KPIs allowed leaders to articulate objectively the role’s requirements, such as extensive sales and negotiation experience, demonstrated financial acumen, proven results as a strong team leader, experience in a corporate staff function, and a history of profit-and-loss ownership in a manufacturing setting. This objective articulation of requirements enabled both a fact-based assessment of incumbents in the role and a clear set of criteria against which to select new general managers.

Role identification and clarification is a process that works with any kind of organizational structure, including those based on agile principles. In fact, the potential rewards of value-based role clarity might even be greater in agile organizations, because flatter organizations build themselves around the principle that empowered talent in the right roles is the key to unlocking value. Pinpointing where a critical role sits in an organization chart is not important. What matters is knowing the potential outcomes of any given role, anywhere in the organization.

Match talent to roles
Business leaders at Company X next turned to the job of finding the right people for the more clearly defined critical roles. Their search process was more efficient and effective than those associated with traditional “high potential” talent reviews thanks to two types of benefits that generally emerge from taking a more rigorous approach.

First, the articulation of value and roles for Company X allowed for objective comparisons between candidates across a variety of specific dimensions rather than relying on subjective hunches or a perfunctory succession plan. When a company uses such an approach, the talent-selection process becomes an evaluation of specific evidence. The CFO of a business unit that aims to increase value through a strategy of acquisitions, for example, should have a different background and experience base from the CFO of an organization that aims to increase value through aggressive cost reduction.

Second, the specificity of role requirements for Company X encouraged a more objective view of incumbent managers. Rigorously assessing incumbents against value-linked role requirements typically leads a company to realize that 20 to 30 percent of those in critical roles are not well matched. The data-driven process makes it hard to ignore the uncomfortable realizations that some incumbents might not be up to the future demands of the job and that leaving them in place would put a significant amount of value at risk.

Over time, some organizations come up against a happy problem: unexpected value that was not part of the strategic plan starts emerging. For instance, a product might enjoy a serendipitous viral uptake or a new service might enable the delivery of breakthrough customer experiences that shake up the competitive balance. Fortuitous, big moves such as these, which both reflect and necessitate strategic flexibility, also reinforce the power of linking talent to value (for more on what it takes to make breakout moves, see “Eight shifts that will take your strategy into high gear,” forthcoming on McKinsey.com).

How so? For starters, once a new source of value becomes clear, the company’s understanding of its value agenda can shift to mine the potential of this new source—a move accompanied by a corresponding shift in the company’s talent priorities. For example, a senior vice president of supply chain might have been reliable for years, but can he or she quickly activate the new set of reliable suppliers needed to get that unexpectedly hot product from R&D into the market as soon as possible? The discipline of understanding the requirements of key roles throughout a company helps give the CEO the agility to respond to such questions with alacrity.

The concept of matching talent to value is often a precursor to breakthroughs. These innovations commonly occur in contexts deliberately set up to enable them. Consider Tesla’s effort to create a culture of fast-moving innovation, Apple’s obsessive user-experience focus, and Corning’s goal of easing “barriers to creativity and serendipitous advances.” These cultural priorities are at the core of these companies’ value agendas. The roles created to turn such priorities into value are often related to R&D (such as the chief technical officer, chief design officer, and chief technologist) and filled with talented, creative people, such as Apple’s Jony Ive, who thrive in the freedom of those particular roles.

The linking-talent-to-value process at Company X did more than just put the best people in critical roles. As the CEO tried to match the company’s existing talent to these roles, she and other leaders realized that the company needed to retool its leadership development. Future leaders would have to develop the expertise (such as global line management or cross-functional collaboration) that would be high priorities in the new roles. Furthermore, these new leaders would need the mind-set and determination to accelerate breakthrough innovation. As often happens, the rigorous effort to match talent to value led the company’s top executives to a deeper understanding of their business.

Operationalize and mobilize
Linking talent to value is not a process that stops when roles are identified and matched to the appropriate top talent. To garner the expected value, leaders must manage these roles as assiduously as they do capital investments and use real-time critical metrics. An HR-leadership team might meet monthly to identify trends across business units—for example, the lag of certain role-specific KPIs, such as digital fluency. Working alongside business leaders, the team might also assess changes in the performance of individuals in critical roles, asking questions such as, “Is this individual delivering the value expected? What interventions (for instance, coaching or better-aligned incentives) can support this individual?” The leadership team might even meet daily or weekly to manage real-time talent crises, such as a moment when people-analytics software identifies an immediate risk of attrition in a critical role.

Companies must also examine whether the HR team is up to the task of managing talent as rigorously as the finance team deploys financial capital. The following questions can help make this determination:

Does the HR group have sufficient analytics capability?
Can the department mine data to hire, develop, and retain the best employees more effectively?
Do the HR team’s business partners consider themselves internal service providers, or are they value coaches ensuring a high return on human-capital investment and driving outcomes for the external customer?
At one company that exemplifies the necessary rigor for matching talent to value, the HR team plans to develop semiautomated data dashboards that track the most important metrics for critical roles. Each critical role will have a customized dashboard to trace progress on relevant operational and financial KPIs (for example, segmented earnings before interest, taxes, depreciation, and amortization) against development activities (for instance, an instructional course). The metrics will tie to back-end organizational data, resulting in a mixture of automated and manual updating. The HR leadership team is learning how to use these dashboards to engage business leaders in regular talent reviews. Such a data-driven and technologically enabled review should ensure that the HR group provides targeted support through value-centered talent management.

Company X’s CEO knows that her job is not complete. Talent and overall strategic planning must have a tighter link. Talent evaluation must be constant rather than sporadic. Her organization must learn to flex its new muscle linking talent to value continuously. At her company and every company, the set of critical roles is dynamic rather than a “one and done” process—it must be reevaluated each time strategic imperatives change. Talent management must become a frequent, agile process in which the CEO and executive-leadership team participate as actively as they do in financial-investment decisions. In the survey mentioned earlier of more than 600 respondents, we found that in a majority of companies identified as fast talent allocators, top business leaders met at least quarterly to review talent placement.

About half of the companies identied as fast talent allocators review talent placement at least quarterly.
Even though its talent-to-value effort is a work in progress, Company X is better positioned than ever to achieve aggressive growth aspirations. Its ambitious plans have a much better chance of succeeding now that the company’s leaders have done the difficult work of identifying where future value is at risk and mitigating that risk through more value-centric talent management. They are augmenting their strategic vision with a clear understanding of the kinds of leaders they will need to meet their goals. This kind of proactive linkage of talent to value must be the new normal for business leaders.

Source: McKinsey.com
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By Mike Barriere, Miriam Owens, and Sarah Pobereskin
About the authors: Mike Barriere is a partner in McKinsey’s New York office, Miriam Owens is a consultant in the Chicago office, and Sarah Pobereskin is an associate partner in the London office.

Leadership development as a competitive advantage

Posted in Aktuellt, Leadership / Ledarskap on April 4th, 2018 by admin

Talent should be part of every conversation in an organization, says the CEO of Majid Al Futtaim Group.

Dubai-based Majid Al Futtaim Group has its roots in the asset-heavy world of real estate. Since opening its first mall in 1995, the group has become a leading developer and operator of shopping malls in the Middle East. It also owns VOX Cinemas, the region’s largest movie-theater chain; several leisure and entertainment centers; and the Carrefour franchise in 38 countries.

Yet CEO Alain Bejjani believes the long-term success of the business depends on its ability to develop not only compelling retail and entertainment destinations but also effective leaders. “If we want to succeed in business we have to succeed in our people agenda,” he says in this interview with McKinsey Publishing’s Rik Kirkland. Below is an edited transcript of Bejjani’s remarks.

Elevating human capital
Majid Al Futtaim is a lifestyle conglomerate. Our business is all about adding value to the customer from the lifestyle standpoint. What this means in practice is [developing and managing] shopping centers that are more like “experience centers” where we stage the whole experience, not just the act of shopping.

We spend a lot of time looking at the monetary/commercial aspect of our businesses. We manage it. We analyze it. We understand it. We try to read it in as granular and effective a way as possible. But the element that allows all of this to happen is people. And when you look at how much we spend on people versus how much we spend on the asset side of the business, you see a huge imbalance.

For example, we might spend three years looking at a project. By the time we decide to go ahead, we will have cut it, sliced it, and diced it in every possible way. We will have analyzed it, understood it, and it’s under our skin. Then it might take us a week to determine who’s going to lead the project. My point is that the element that is going to determine whether the project is a success or a failure takes up the least amount of time.

The problem is not what we’re doing on the monetary side. We should continue to do it and do it better. But we should be at least as good on the people side.

Talent in every conversation
A very simple way to look at it is you need to get to a point where you have an ongoing conversation on talent in your organization throughout the year. You need to move from having a rigid schedule or timeline for talent: you hire someone, they go through training or leadership development, there are anniversaries through the year at which you review performance, have a performance dialog, and do 360s. These activities need to happen. But what’s important is how these activities are driven and the mind-set behind them.

To shape this mind-set, you need to get to a point at which talent is an ongoing conversation. This is the role primarily of the chief executive—to make sure that talent is part of every conversation in an organization.

Developing leaders
If you look at the business community today, the amount of investment in leadership is not going up; it’s going down. Yet the biggest issue [we are facing] is leadership, not technical skill set.

We have a whole generation (or generations) of business executives that are now living through a transformation. They are living in a world where the customer is becoming much more demanding, much more informed. In many cases, customers are better informed than the executives themselves about their own business because of digital technology. They are living in a world where the customer expectations are not shaped anymore by your industry. It’s not good enough anymore to be better than your direct competitor. You need to be better than the sources of inspiration who are setting the standards for your customer. This is something that [most managers] have never been trained to master.

So, we’re going through two or three tectonic shifts that are happening in parallel. This requires an amount of leadership and a level of sophistication that is much higher than it was ten or 15 years ago. This is true even for more junior business executives.

I don’t think that the answer lies in who you hire. The reality is that whatever we know, whatever experience we have, is going to be obsolete in three to five years. So, experience is overrated. What’s important is the capabilities that you develop in your business to accompany and support your talent during their tenure with you. How do we make sure that we accompany our people in their leadership development and career development so they can face the challenges of today and tomorrow, and steer our business in the right way?

Redefining leadership
We had to define what leadership means for Majid Al Futtaim, and one of the most valuable pieces of work we have done was defining and articulating our leadership model. Leadership is not about just leading others. One of the most difficult and daunting tasks is leading yourself.

We always look at leadership through the lens of leading teams, leading others, leading businesses, and leading change. But the most daunting task, for the most junior and the most senior among us, is leading ourselves. It’s a duty we have, first, toward ourselves, and then toward our business and toward our people, to support them in their leadership journey and development.

Historically this was left to what I call “the hazards of life.” In other words, it was left to personal initiatives and personal commitment. But I think businesses can shape their future by implementing their people agenda and making sure that their teams are like no other. It’s not just about a senior person in the organization, whether the chief executive or the human-capital officer, doing it. It is about each and every one of us being a human-capital officer. The people agenda in an organization is everyone’s agenda.

Source: McKinsey.com, SApril 2018
About the authors: Alain Bejjani is the CEO of Majid Al Futtaim Group. Rik Kirkland is the senior managing editor of McKinsey Publishing and is based in McKinsey’s New York office.
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Leading with inner agility

Posted in Aktuellt, Leadership / Ledarskap on April 3rd, 2018 by admin

Disruptive times call for transformational leaders with a knack for addressing complex problems. To navigate effectively, we must learn to let go—and become more complex ourselves.

We live in an age of accelerating disruption. Every company is facing up to the profound changes wrought by digitization. Industry boundaries have become permeable. Data, algorithms, and artificial intelligence are changing the nature of forecasting, decision making, and the workplace itself. All this is happening at once, and established companies are responding by rethinking their business models, redesigning their organizations, adopting novel agile-management practices, and embracing design thinking.

We’ve had a front-row seat at many such transformation efforts. Their importance, and the challenge they pose for institutions, has been well documented by management writers. But comparatively little attention has been paid to the cognitive and emotional load that change of this magnitude creates for the individuals involved—including the senior executives responsible for the success or failure of these corporate transformations. What makes the burden especially onerous is the lack of clear answers: the very nature of disruption means that even the best, most prescient leaders will be steering their company into, and through, a fog of uncertainty.

You aren’t alone if you feel threatened by this—everyone does, whether consciously or subconsciously. Even seasoned leaders internalize the acute stress of such moments—so much so that their judgment and decision-making skills seem insufficient. The result? They fall back on old habits, which, unfortunately, are almost always out of sync with what the current context demands.

The problem isn’t the problem; our relationship to the problem is the problem. In other words, we have many of the skills needed to handle what’s being thrown at us. But when faced with continual complexity at unprecedented pace, our survival instincts kick in. In a mental panic to regain control, we fight, flee, or freeze: we act before thinking (“we’ve got to make some kind of decision, now!”), we analyze an issue to the point of paralysis, or we abdicate responsibility by ignoring the problem or shunting it off to a committee or task force. We need inner agility, but our brain instinctively seeks stasis. At the very time that visionary, empathetic, and creative leadership is needed, we fall into conservative, rigid old habits.

You can’t steer your company through constant change if you are relying on the safety of your own cruise control. To spot opportunities—and threats—in this environment, we must teach ourselves how to have a more comfortable and creative relationship with uncertainty. That means learning how to relax at the edge of uncertainty, paying attention to subtle clues both in our environment and in how we experience the moment that may inform unconventional action.

Developing this kind of inner agility isn’t easy. In some ways, it goes against our very nature, which wants to simplify a problem by applying our expert mind-set and best practices. To address complex problems, we need to become more complex ourselves. We need to recognize and appreciate emergent possibilities. That’s how the complexity we face can become manageable, even exciting.

In our experience, five personal practices can meaningfully contribute to the mind-set needed for leadership effectiveness during transformative times. They are extensions of timeless principles of centered leadership; taken together, they can be the building blocks of your personal inner agility:

a. Pause to move faster. Pausing while remaining engaged in action is a counterintuitive step that leaders can use to create space for clear judgment, original thinking, and speedy, purposeful action.
b. Embrace your ignorance. Good new ideas can come from anywhere, competitors can emerge from neighboring industries, and a single technology product can reshape your business. In such a world, listening—and thinking—from a place of not knowing is a critical means of encouraging the discovery of original, unexpected, breakthrough ideas.
c. Radically reframe the questions. One way to discern the complex patterns that give rise to both problems and windows of emergent possibilities is to change the nature of the questions we ask ourselves. Asking yourself challenging questions may help unblock your existing mental model.
d. Set direction, not destination. In our complex systems and in this complex era, solutions are rarely straightforward. Instead of telling your team to move from point A to point B, join them in a journey toward a general direction. Lead yourself, and your team, with purposeful vision, not just objectives.
e. Test your solutions—and yourself. Quick, cheap failures can avert major, costly disasters. This fundamental Silicon Valley tenet is as true for you as it is for your company. Thinking of yourself as a living laboratory helps make the task of leading an agile, ever-shifting company exciting instead of terrifying.
To be clear, these steps are not panaceas but a set of interrelated touchstones. Nor are they trivial to tackle. (See sidebar, “Micropractices that help you find stillness.”) But with conscious, disciplined practice, you stand a better chance of rising above the harried din of day-to-day specifics, leading your team effectively, and surveying your company and its competitive landscape with creative foresight. Let’s look now at how this played out in some real-life examples, starting with two leaders who were trying to save a merger that had unfolded in unpredictable, troubling ways.

1. Pause to move faster
Anticipating tough questions at an upcoming board meeting, the CEO and CFO of a global manufacturer met to review the status of a substantial merger they had engineered about twelve months earlier. It wasn’t a pretty picture. Despite following the integration plan closely, despite intensive scenario planning, and despite clear, achievable targets, productivity was falling. The more the two dug into the results of their grand plan, the more heated the discussion. The CFO wanted to shutter a dozen factories in the company’s expanded portfolio. The CEO, who had promised that the merger would lead to bold innovation, wanted to increase funding of those very plants, since they were making the ambitious products the company would need in the long run. Despite having worked together for quite a while, the two men had such differing views that neither knew how to move forward together.

The stakes were highly personal. The CFO feared that the board and his executive colleagues would blame him for failing to identify the true cost structure of the combined companies. He gave serious thought to resigning. The CEO feared that the board would begin to doubt his strategic rationale for the merger. With their competence threatened, each had reverted to fallback positions, insisting that their own experience justified the solution they proposed. That’s why their two days of nonstop meetings had led to an impasse.

Then they agreed to temporarily halt their discussions. Given the urgency each man felt, this was not an easy decision. But they believed they had no other choice—they weren’t going to arrive at a solution by continuing to butt heads. They agreed to cut off their conversation for a week and committed to spending the time investigating the productivity failure on their own, hunting for clues they might have missed.

The two leaders had decided to pause, in order to move faster. This kind of pause isn’t an abdication; it isn’t even a concession that finding an answer will take a long time. Instead, it’s a real-time pause that allows you to decouple from the immediate challenge so that you can find new ways of responding. Instead of being limited by old habits, you’re trying to give yourself greater freedom of choice.

Most executives have trouble pulling back from obsessive engagement with the issue at hand; for many, in fact, that focus has been a key to success. But trying to survive one crisis after another by relying on the tried and true isn’t enough these days. Pausing in the chaos of great change is a counterintuitive action that can lead to greater creativity and efficiency. It carves out a safe space for self-awareness, for recentering yourself, for something new to emerge.

Claiming this space is hard, and there are no silver bullets. Some CEOs like daily meditation. We know one CEO who takes a ten-minute walk through the neighborhood around his office—leaving his cell phone on his desk. Others regularly catch a minute’s worth of deep breathing between meetings. The repetition of such practices helps them pause in the moment, interrupt well-grooved habits that get triggered under duress, and create space to practice something different.

Pausing requires substantial self-awareness, and you may not get immediate results. Every bit of benefit counts, though, and if you don’t start the journey of learning how to decouple from your context and the immediate response it provokes, you’ll find it harder and harder to be open to new ideas, or to become a better listener—both traits that are critical at moments where your own vision is clouded.

2. Embrace your ignorance
During their week apart, the CEO and the CFO dug around for answers. The CFO met with plant managers, who described a pattern of project delays caused by costly reworking of product designs. Several HR leaders told the CEO that people at all levels—hourly workers, supervisors, and managers—were frustrated. Trying to meet the unrealistic assumptions made during the merger process, managers were serving up impossible and confusing directives to supervisors, who in turn were leaning heavily on workers.

The information was interesting. But the CEO and CFO agreed that they were still largely in the dark. They decided that they would next meet with all the members of the executive team. They needed the help of many voices.

With the whole team gathered, the CEO and the CFO listed their assumptions about what might have caused the productivity slump. Then they went around the room, asking questions: How may we be wrong? What else is happening? Who sees this differently? The chief human-resources officer, a quiet fellow during most discussions about operations, spoke up to say that absenteeism was at an all-time high. The vice president of marketing mentioned that the company’s largest customer had complained recently about the call center. As more managers weighed in, patterns started to emerge, patterns that had nothing to do with numbers. The vice president of strategy, who was in the process of moving into a new house with her new husband and children, said, “This reminds me of my kids. Joe and I were so focused on making the move happen efficiently that we completely missed the fact that our kids were anxious. They needed to be reassured, not told they were moving into the perfect room! I wonder if fears and anxieties in our employee base could be driving this.” Together, the managers came to a jarring realization: they had failed to reassure employees about this massive change in their lives.

The CEO and CFO would never have uncovered this answer without acknowledging their own ignorance, and without listening carefully and openly. Furthermore, as everyone around the table acknowledged, their conclusion raised a whole set of new questions, some potentially more important than the productivity problem. How could the executive team have missed this? How could they have been so wrong? Even more broadly, what kind of culture were they creating at this company? A productivity problem had become an existential question about the mental health of the company. Sometimes, ignorance can push you further than expertise. In fact, ignorance is a necessary asset in this age of disruption. Expecting that you can know everything is a hubristic concept of the past.

But embracing your ignorance is hard. Letting go of your need to know means challenging your own identity as exceptionally competent. One CEO we know pretends to have a long dinosaur tail that represents all her life experience. In meetings, she imagines that she tucks it away beneath her. It’s comforting that it’s there. It allows her to lean back and access a sense of self-sufficiency that can be summed up by the thought, “I am enough.” That comfort shifts her into a deeper listening mode, where she’s unencumbered by the urge to provide a quick answer. She feels that she’s able to hear not just the words and ideas of others, but the subtext of conversations. Since adopting this practice, she’s received feedback that people feel more empowered and creative when meeting with her.

A dinosaur tail isn’t for everyone. Another CEO makes a conscious practice of listening with his heart instead of listening with logic. He finds himself more fully digesting what the other person is saying. His curiosity is piqued as he pays better attention to their concerns, needs, and ideas. He believes he has become more patient, which has created more space for creative dialogues.

The embrace of ignorance cuts against the grain for most of us and can take a lifetime to master. To get started, ask yourself some probing questions. First: “Do I suspend judgment and listen for what is below the words, or do I listen for what I already know or believe?” If it’s the latter (as it is for so many of us), go on to this second one: “What would I have to let go of to truly listen?” Third: “What is the very worst that could happen?” The answer to that can help you find the hidden fear that you may need to befriend. And, finally, there’s a fourth: “Am I the leader I want to be?” If the answer is “not yet,” then you know why embracing ignorance must become a priority. Asking these questions may not dissolve the reactive habits that hold us back, but they can begin a process of letting go to find new capacities within ourselves.

3. Radically reframe your questions
The CEO and CFO of our global manufacturer could have reacted in two ways to that boardroom discussion. They might have said, “Let’s get back to basics and just attack productivity. After all, that is the problem we set out to solve.” But they chose to pursue a bigger question: “What kind of culture do we want to create?”

After the meeting with the executive team, the CEO and CFO set out on a “listening tour”—a valuable executive response that becomes even more important as technology increases the clock speed of our lives. For ten days, the two leaders toured plants and visited regional offices, listening to shop-floor workers, managers, division-level HR executives, and operations specialists. They didn’t go in with predetermined questions. Instead, they posed open-ended questions designed to surface multiple, and often hidden, perspectives. They relentlessly asked, “and what else?” to unearth viewpoints that had gone untapped for so long.

Then the CEO and CFO again assembled the executive team. Now, armed with a panoply of varied, often colliding perspectives, the team could dig into the root causes of those productivity decreases. This wide-open, wide-ranging dialogue reset the direction of the merger. New goals were set on new timetables, based on a better understanding of what employees needed and the way employee networks in the merged company fed off one another. The CEO and other leaders revived the sense of purpose that employees had felt for so long by transparently recentering the company’s transformation on the customer. They also empowered a set of shop-floor change agents to drive the shift through every layer of the company. It wouldn’t be hyperbole to say that answering the bigger question—what kind of culture do we want to create?—saved the merger.

Radically reframing the question isn’t just good for the company. It’s a critical skill for any modern executive, and it takes time to build. Start by challenging yourself. Revisit the diversity of your personal network, which for many of us looks too familiar, too much like us, to provide significant exposure to alternative viewpoints. Another useful prod is asking yourself challenging questions, such as, “What is wrong with my assumption? What am I missing? Am I expanding the boundaries of the problem, to allow for unexpected factors?” Identify those who most oppose your view, and understand the story from their point of view. These kinds of questions and conversations take you into the unknown, which is where you’ll find the most valuable answers.

When you step into the unknown, you also boost your odds of getting a glimpse of “inner blockers” that can inhibit you from leading with inner agility. The CFO realized that his initial stubbornness was driven by a deep fear of failure that had been with him for years. The CEO came to understand his own actions in very personal ways. Ever since he was 16, when his father had passed away, he had assumed responsibility for providing for his mother and for his extended family. Providing for those around him was a value that carried through to his work life and had helped him succeed. But in this case, he had been overprotective. Too focused on his own need to deliver on his promises, he hadn’t listened carefully and openly to his people. After working his way through this crisis, he would never infantilize his workforce again. Since then, his people have become his most important source of innovation and ideas.

4. Set direction, not destination
Let’s turn to another situation. The new CEO of a supplier to a major manufacturing sector wanted to signal quickly and clearly where the company was headed. The 150-year-old company had lost ground to overseas competitors, so he believed a transformation was in order, and fast. He replaced 60 percent of his executive staff with newcomers from entrepreneurial companies and announced that the company would be the low-cost provider of its most important part. He dubbed it the “three-dollar plan.” He was sure that this clear, concrete plan would pay off in many ways: existing customers would be pleased, new ones would be won, profits would rise, and employees would be cheered by the turnaround.

One year later, however, the numbers told a different story. Expected cost savings from manufacturing efficiencies weren’t showing up. Profits and sales were flat. Employee engagement, as measured by participation in the annual survey, had dropped by 20 percent. Uncertain about how to respond, he took a step back: he and some top advisors began asking a lot of questions of people at all levels of the company.

As he listened, he came to understand his big mistake: instead of sharing a vision of the general direction for the company, he had pointed employees to a destination, and given them no context for his decision. The company had long been admired for its great customer service, and many longtimers didn’t understand how the “three-dollar plan” could coexist with that reputation. His clarity had denied their creativity: they saw the plan for what it was, a productivity goal, not a vision that demanded their best work and thinking. Without a supportive, engaged workforce, the plan had failed.

Fast forward to today: two years after that realization, pride in the work has been reestablished, and the company is on solid financial ground. What changed?

The CEO changed. As he was reflecting on why his staff had lost motivation, several family portraits that adorned his office caught his eye. Family was important to him, and he suddenly realized that he managed that part of his life very differently from his company. He didn’t give deterministic outcomes to his children. Instead, he tried to point them in certain values-based directions and give them the tools to succeed, knowing that the outcome would depend much more on their talents than his dictates. He accepted his children’s independence, but not his workers. He determined to manage his company the way he parented. He engaged the staff in determining the direction of the company; he tasked a diverse group of employees with figuring out whether the three-dollar plan could coexist with the customization that had given the company such a great reputation for customer service and innovation. They came to believe it could, and even developed a tagline that nodded to the past while pointing to a new direction: “Building the business together for the next 150 years on a proud heritage.”

We’d be the first to acknowledge that applying techniques from the home front won’t work for everyone: after all, some executives are more autocratic at home than in the office! Still, we think any leader of a business that depends on the creativity of its people will find value in bringing this directional mind-set into the office.

Setting a direction that is rooted in purpose and meaning can inspire positive action and invite others to stretch out of their comfort zone. Make it personal by starting with your own personal vision: What really matters for you? What do you want to create through your leadership? What do you want to be remembered for? What do you want to discover? These are the kinds of questions that help you set a meaningful, values-based direction, for yourself and others.

5. Test your solutions, and yourself
Developing inner agility is a process of accepting less control than makes you feel safe. But that doesn’t mean you’re embracing chaos.

Most Silicon Valley companies are networks, designed so that ideas will spark from many different corners of the organization. How do they surface the best ones? By testing often, creating “safe to fail” experiments and then rewarding learning. Testing fast and small is critical for agile companies. It ensures that you can respond quickly to technological shifts or changed market conditions. And microfailures reduce the chance of macrofailures.

Applying this testing concept to yourself is a critical part of developing inner agility. Try to create mindful experiments for yourself. A baby step: ditch your PowerPoint presentation for an important meeting, and instead try to stimulate unconventional thinking by telling a story. You may bomb, but that’s OK—you’re starting to learn how to unearth new viewpoints. Using everyday leadership situations as a practice ground can help you build comfort with uncertainty and develop the learning mind-set needed to provide leadership at a time when, as Andy Grove once said, “None of us have a real understanding of where we are heading.”

Testing and experimentation is tightly intertwined with the other four practices of inner agility. The experiments we conduct move us in the direction we have set, while the process of setting a direction that’s rooted in purpose helps us build the courage to experiment. Pausing helps us to decouple from our context and develop comfort with not knowing, a necessary condition for any meaningful experiment. And reframing and expanding the questions we ask ourselves gives us the broad perspective we need to create experiments that will move us in the right direction.

In times of complexity and high stress, we find our sense of our own competence (and sense of self!) continually challenged. We have two choices: try to reduce discomfort by falling back on trusted habits, or embrace the complexity and use it to learn and grow. Bold leaders will develop a new relationship to uncertainty. We must grow more complex from within. Taken together, the five practices we have discussed here are the foundation of a mind-set that is comfortable with leading despite, and through, uncertainty. The more you practice these steps, the more you will develop inner agility, tap into creativity, and enjoy the ride! Each small failure will teach you something, and each success will help confirm that it is possible to lead effectively without having all the answers. Today’s leaders must be like eagles, who don’t flap their wings harder or strain against the wind stream when they encounter great turbulence. Instead, they become even more still, knowing that they have the agility and self-possession to soar even higher.

Source: McKinsey.com, March 2018
By Sam Bourton, Johanne Lavoie, and Tiffany Vogel
About the authors: Sam Bourton is the cofounder and chief technology officer of QuantumBlack, a McKinsey affiliate based in London; Johanne Lavoie is a partner in McKinsey’s Calgary office and coauthor of Centered Leadership: Leading with Purpose, Clarity, and Impact (Crown Business, 2014); and Tiffany Vogel is a partner in the Toronto office.
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