There have been many debates of late about how we are experiencing a ‘crisis in capitalism’. But in my view, such discussions miss the point. The implementation of capitalism and its impact on organisations, society and individuals is directly driven by the decisions of political and organisational leaders, not some mystical entity.
The issue isn’t with capitalism. It’s with the leaders that implement it and how they do so – either effectively with ethics and integrity, or not. But leadership isn’t just an issue for CEOs, prime ministers and NGOs, the shortfall in both leadership skills and behaviour is pervasive everywhere.
Recent data from the Chartered Management Institute suggests only 40% of leaders in UK organisations are being effectively developed. In 1999, when I was on a government expert panel considering the same problem, only 30% were being developed. So in 14 years we have managed a pathetic 10% improvement.
This means that for a majority of leaders in organisations the basics, like effective task planning and management, are not in place. As a result, firefighting becomes common practice, leading to highly ineffective delivery and almost total loss of long-term perspectives.
And the more complex activity that’s piled on top, the worse the situation gets. It’s hardly surprising that in comparison to European peers, G7 and many G20 countries, the UK lags behind in leadership development and, consequently, productivity. If we had better leaders at all levels in organisations, it could increase UK GDP by around £65 billion, benefitting us all. The UK’s leadership lag means millions of people stand no real chance of ever realising their full potential at work.
Why this leadership crisis?
There is a business, social and individual imperative to improve leadership. There certainly isn’t any lack of evidence that good leadership produces high performance, which in turn produces organisational success and economic growth. The problem isn’t that good leadership doesn’t work.
Either the message isn’t getting through, or the implementation is ineffective, or a combination of the two. Leadership isn’t rocket science. Organisations have objectives, people have needs and aspirations; leaders just align the two.
One major problem is that the compelling evidence that good leadership delivers success isn’t getting across. When I showed some finance directors the potential financial benefits of getting leadership right they clearly hadn’t seen the data before. Their response: “This is a no-brainer. We should have been doing it for years. It’s virtually a licence to print money.” CEO responses are similar. Once people see the evidence they all want to develop better leadership – both individually and organisationally.
This imperative has got more urgent with recent changes in organisations, in particular headcount reductions, which mean fewer people having to do more. According to the Corporate Executive Board, 55% of employees say they don’t have enough time to do the work they are asked to do.
In addition, the growing importance of collaboration to profitability is significant. It has doubled since 2002, to 49% of profitability.
Time for a new approach
With these significant changes in the world of work, and the fact that the old approach to leadership isn’t working, a new way of looking at leadership is sorely needed. It has to be simple, practical and possible for anyone in any organisation, anywhere. No complex models, no list of 20 actions, it has to make sense to both a new line manager or a CEO, and they have to be able to implement it at once.
The first step has to be to make sure the leaders get maximum effort from everyone. If people want to proactively do the best for their organisation, they are engaged and will work harder and collaborate to do more than just their job. That is likely to improve the individual, team and organisational performance. This simple reality is reflected in the personal experience of all of us. I call this engagement ‘Mach 1 leadership’, or ‘engaging leadership’.
But engagement alone is not enough. My work as global head of leadership for UBS revealed too much effort was used on work that didn’t maximise organisational performance: 20% of effort was producing 80% of value, with the other 80% being sucked into things that really didn’t matter.
There needs to be the second step – to focus effort onto what really matters. This is where Mach 2 leadership comes in.
Leading to succeed: Mach 2 leadership
Mach 2 leadership is a common sense two-step approach. It simply means taking those two critical components: maximising effort (‘engaging’) and focusing that effort onto what really matters (‘entrepreneurial’).
In addition, two other key day-to-day requirements of leaders are important – being “ethical” (the how) and being “effective” (the what).
The progression is both simple and effective. First step (Mach 1): engage your people so they maximise discretionary effort by creating an environment where they want to give their best.
To achieve this is simple. Tell leaders to do for their people the things that they experienced from their most inspirational bosses, those things that made them give super performance. Simple things like “telling me what’s going on and how we fit into the bigger picture”, “listening to me and asking for my ideas”, “respecting me as a person and a professional”, “developing my skills and helping me grow”, “actually caring about me”. These are all simple, no cost actions that can be delivered immediately.
What really drives maximised discretionary effort is not being task-focused alone; above all it’s relationship-related. Pure delivery or task focus is actually counter productive to maximising performance.
Mach 2 takes that extra effort and focuses it on what really matters. But to decide what to focus the effort onto requires leaders to think more holistically, which inherently also requires greater knowledge, indeed also additional skills.
The key, and final, element of the Mach 2 step is to become an entrepreneurial leader. However, you can’t be entrepreneurial to focus effort effectively unless you understand the context and priority for such focus. I therefore developed a model of capability enhancement that built, stage on stage, skills and knowledge that enabled optimum focus. Sadly most leaders never progress above the lowest level.
The entrepreneurial leadership mindset is key to success, but it is only effective if the supporting elements are in place. Entrepreneurial leadership embeds the key drivers that entrepreneurs use for success into the larger organisation.
These day-to-day actions act to counter the cultural and system changes that tend to occur as organisations get larger, which eventually obstruct achieving their own objectives. It’s what entrepreneurs do day-to-day: having a total focus on the end customer, constantly seeking opportunities for innovation and improvement, keeping things as simple as possible, optimising and not minimising risk, taking personal responsibility, inspiring others to do their best, collaborating and delivering success.
However, with larger organisations it’s not possible for everyone to be entrepreneurial in an “ad-hoc” way and have everyone in the organisation acting in concert to deliver its objectives. A system needs to be created where leaders at higher levels enable, support and align this entrepreneurial activity to organisational requirements.
These system leaders, as well as being entrepreneurial with their own teams have to deliver other day-to-day actions to enable the entrepreneurial approach Mach 2 is trying to build. These include:
- Being a role model for collaboration, values and excellence inside the organisation;
- Being an ambassador outside the organisation;
- Driving integration and alignment to make the system work better.
The role of HR
Very few leaders need to lead just their direct reports. The majority also have to lead other leaders through those direct reports. They must have the skills and knowledge to create a mini organisational system within their departments, divisions or other structures. This is often forgotten in their development and in most leadership books.
Given that there is a critical imperative for organisations to develop more and better leaders – and not just in the UK – and that the current system isn’t working, HR is in a perfect position to act as the catalyst for a new approach.
My purpose in writing my book Lead to Succeed was not only to give individual leaders a roadmap to success, but to give the HR community a way to communicate the critical need and proven benefits of better leadership, get buy-in for transformation and create a simple system to deliver it successfully.
We are in a new world of work and we need a new way of thinking about and delivering leadership – successful leadership for a new world. In this new world leading to succeed in an effective, ethical, entrepreneurial and engaging way is key to success. After all leadership is about making a difference and transforming lives, not just making money.