Transforming Leadership for the 4th Industrial Revolution

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What is the persona of a leader who will survive and thrive in the digital age?

As organisations everywhere begin to adapt and evolve to respond to the 4th Industrial Revolution (Industry 4.0)[1] and the new challenges it brings - the behaviour, capability and mindset of leaders (at all levels), is paramount to creating an environment for success.

In this blog we explore why leaders need to evolve and the qualities essential for the future. 

Why must leadership evolve?

By 2020 half the global workforce will be millennials[2]. Many will be en-route to leadership roles, some will already be leaders. The type of leadership valued and practiced by millennials is subtly changing, with transparency, commitment to cause and active championing of individual differences all ranked highly[3]. There are economic, environmental and social drivers leading to an evolution of leaders:

  • Pace and scale of change disrupting business models

  • Hyper-connectivity increasing accessibility and visibility of leaders

  • Informed customers expecting more responsive services and products

  • Diversity of talent shifting profiles and working preferences

As Klaus Schwab noted at the World Economic Forum, a technological revolution is underway “that is blurring the lines between the physical, digital and biological spheres” where a combination of technologies are changing the way we live, work and interact.

The pace and scale of this change is greater than most leaders have experienced, and they must harness insight from a diverse network to stay innovative. No longer can organisations rely on the ‘guy at the top’ for strategic direction; ideas need to be ‘crowd sourced’ from employees, consumers and the society at large.

Hyper-connectivity, where people have more visibility and desire to engage with leaders, means CEOs are now expected to be on the end of a Twitter feed. The accessibility of data has empowered customers to be more informed, leading to greater expectation of responsive services and more personalised products, and at competitive prices. Consumers will not hesitate to provide direct, damning and open feedback if they feel unheard, and up to 22% of customers can be lost by just one negative review[4], so leaders must be responsive and customer obsessed. 

The concept of ‘talent’ is also changing on many dimensions. As we noted in our Rethinking Talent blog, the rise of artificial intelligence (AI) will fundamentally shift the nature of work. Leaders will need to focus on nurturing the unique ‘value add’ skills that human employees provide, as well as establishing quality relationships that retain these critical skills in a competitive landscape.[5] They will need to learn to manage and motivate increasingly diverse and remote teams working a variety of flexible patterns. The teams of the future will have different development and experiential needs, where millennials want to stretch and grow fast, with social media setting the benchmark.

The combined impact of all these changes means that a different type of leadership behaviour, mindset and capability is essential to drive the culture needed to survive in the dawning era. Herein we explore the leadership personas we believe are vital in the future.

The Humble and Inclusive Leader

Research tells us that leadership behaviours account for 70% of the drivers of organisational culture. Yet in a recent survey, only 20% of 450 London based directors and board members felt they spent enough time managing and improving culture, despite it being a top three business priority.[6]

It’s not just about tone from the top, middle or bottom, it’s about action. A leader’s actions at all levels provide the co-ordinates of what behaviours are truly valued and recognised across an organisation.

We believe there are fundamental leadership behaviours needed to bring significant culture change to organisations entering Industry 4.0: openness; resilience; inclusiveness; humility; and self-awareness.

When Twitter CEO Jack Dorsey returned to Joe Rogan’s podcast[7] to discuss policing the platform, he (nominally) demonstrated a new version of leadership - one where openness and transparency dictate organisational direction. We are all living during a time when people want and expect their leaders to be more human, less perfect and at times a bit vulnerable – regardless of hierarchy or rank.[8]

“Usual suspects get picked for opportunities, are we thinking enough about the unusual suspects?”[9] A diverse workforce brings depth and breadth to decision making, increasing innovation, competition and economic performance. Gender parity alone would add $12 trillion to global GDP by 2025[10]. As we shared in our Gender Parity blog “it’s not just having the seat at the table - it’s about having a voice”. Leaders need to be supported and trained to actively listen to diverse points of view. According to research by Dame Fiona Woolf, whilst 84% employees agreed their leaders made a commitment to create a diverse and inclusive environment, only 15% of mid-level managers felt their leaders’ actions were consistent with their words.[11] Diversity is hard-coded into millennials and Gen Z, so to attract and retain top talent in order to shift your culture, it is essential leaders embrace diversity at all levels.

Are your leaders humble, encouraging diversity of thought and championing inclusivity?

The Curious and Connected Leader

At the FCA Discussion on ‘The Role of leaders in Transforming Culture’ earlier this week, the panel discussed the key skills they believed leaders require when transforming culture: understanding social needs and the importance of belonging; being self-aware, and having the ability to communicate openly. As Tom Blomfield, CEO Monzo, noted it’s not just answering the intellectual question, it’s also about reading the room and building human connections to create a high safety environment for teams.[9]

Beyond self and social awareness, we believe that the core skills needed to nudge organisational culture into Industry 4.0 are: adaptability; collaboration; curiosity; conviction; judgement; and most of all ‘listening’.

The ability to ‘speak truth to (those in) power’ is emerging as a critical organisational skill, and the ability to ‘listen up’ a key leadership skill.[12] Scandals such as Samsung bribery charges, Oxfam’s safeguarding flaws or even the Weinstein cover-up highlight the importance of transparency of action and establishing a culture where it is safe to ‘speak up’ without repercussions, safe in the knowledge that leaders will listen openly and action.

Our research partner John Higgins and his co-author Megan Rietz in ‘Being Silenced and Silencing Others’[12] highlight that leaders play two key roles; their individual ability to speak truths to others and their ability to enable others to speak truth to them. Even the most well-intentioned leader may unconsciously close down a conversation in which an alternative truth and insight is lost. Deepening a board’s understanding of their organisation’s culture towards truth and power can also facilitate stronger, more impactful conversations. Collective Intelligence depends on humility.”[12] Those in positions of knowledge and power need to be open to others having important insight. Particularly with the rise of Gen Zers who tend to believe that change must come from dialogue.[13]

How do your leaders deal with the inevitable silencing and distortion that comes with the effects of power and status?

The Purposeful & Customer Centric Leader

Organisations talk about working collaboratively, being congruent and creating agile tribes. We know that collective leadership reaps better returns and reduces risk of dependency on individuals. The challenge is how to drive collaboration in industries inherently based on individual performance and competitiveness where financial reward has been the primary incentive. The answer is purpose.

In a world where volatility is the new norm and change is a constant, the individuals and organisations that are flourishing are those with a clear sense of purpose based on authentic ethical values.[14] As Mme Christine Lagarde noted “we are all driven by a sense of purpose and that individual purpose should be linked to social purpose…it is only in the last 60 years that profit has emerged as the only purpose for businesses”.[15]

Consumers increasingly expect brands to “take a stand”.[13] CSR values undoubtedly influence millennials looking for an employer[2]. A broader collective purpose and responsibility embedded in leader’s tone and action, is fundamental for organisations to shift their culture and performance in order to be successful in a VUCA world.

In our recent conversations with chairmen and CEOs, we believe we are starting to see the shift in organisations, re-defining their purpose and considering the social and economic impact of their business not just shareholder value.

Does your organisation have a clear and broad purpose that resonates for your people and customers?

The Re-inventive and Disruptive Leader

The ripple of organisations trying to radically change their ecosystem, through agile engineering and ‘flipping the structure’ has transformed top management. Leaders must be a central hub and nurturing nucleus that primarily functions as a guardian; embracing their ability to empower others, manage hybrid and disparate workforce, encouraging people to flourish and learn.

Leaders in rapidly scaling companies need to learn to cope quickly with changing demands and may need help to develop their managerial and leadership talent. An important factor cited by scale up leaders as stopping them from growing their revenues faster is lack of capacity and experience in the senior leadership team. It is hard to grow a company hundreds of times faster than is ‘normal’ without the right training and support.[16]

To continually reinvent and disrupt effectively requires many of the skills outlined already: humility; curiosity; connectivity; adaptability. It also requires deep self-awareness, reflection and resilience.

“Often our blind spot is that we tend to think that it is other people that need to change”.[17] Leaders who are approachable and welcoming of feedback and coaching continue to evolve, those that don’t are left in the dark ages. Organisations such as Tesco and Microsoft[18] make effective use of reverse mentoring, where leaders are paired with more junior people, to open leader’s eyes and dismantle hierarchies. Facilitated ‘expeditions’ into different organisations or social enterprise can equally confront leaders with new ways of behaving and respect for diverse perspectives. 

Are your leaders continually reflecting, reinventing and sufficiently resilient to enable disruptive change?

Building your 4.0 Bench Strength

We believe it is not about sheep-dipping leaders with off the shelf development programmes. Instead development though peer to peer, social, experiential and reflective learning, focused on:

  • Align and engage leaders behind a common purpose and responsibility

  • Use the power of stories and narratives to motivate and inspire

  • Create a culture of speaking up to access the collective voice and manage risk

  • Encourage curiosity amongst leaders to access competitive advantage

If you or your organisation are implementing any initiatives to nurture these types of leaders then we would love to hear your story. Or if you would like to hear more from Wharton Business Consulting and our research partners on these personas, please contact Natalie Wharton

References and Footnotes

  1. 4th Industrial Revolution/Industry 4.0: first introduced by Klaus Schwab (Chairman, WEF) technologies that combine hardware, software, and biology (cyber-physical systems) and emphasizes advances in communication and connectivity

  2. Millennials at Work; Reshaping the Workforce PWC, 2011

  3. Divergent Views/Common Ground The Conference Board Inc, 2016

  4. Data Reveals 67% of Consumers are Influenced by Online Reviews D Hinckley, 2015

  5. As AI Makes More Decisions, the Nature of Leadership Will Change HBR, 2018

  6. Culture eats Strategy for Breakfast. So what’s for lunch A Cave, 2017

  7. Joe Rogan Experience #1258 Jack Dorsey, Vijaya Gadde & Tim Pool, 2019

  8. Powerful things happen when a leader is transparent G Llopis, 2012

  9. ‘The Role of leaders in Transforming Culture’ FCA Panel (Jonathan Davidson, Dr Doyin Atewologun, Hilary Scarlett, Tom Blomfield), 2019

  10. How advancing women’s equality can add $12 trillion to global growth McKinsey, 2015

  11. Unleashing the Power of Diversity Dame Fiona Woolf, City of London Corporation, 2017 

  12. ‘Being silenced and silencing others; developing the capacity to speak truth to power’, M Rietz & J Higgins, 2017

  13. True Gen: Generation Z and its implications for Companies McKinsey, 2018

  14. ‘The Power of Purpose’ J O’Brien & A Cave, 2017

  15. The Financial Sector: Redefining a Broader Sense of Purpose Worshipful Company of World Traders’ Tacitus Lecture, 2019

  16. Building Leadership Capacity Scale Up Institute, 2019

  17. ‘Speak Up: Say What needs to be said and hear what needs to be hear’ M Reitz & J Higgins, 2019

  18. The Same but Different’ The Edge, Spring 2019

Gender balance: is your organisation closing the gaps?

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No one can argue against the business case for organisational balance and gender parity. The McKinsey Global Institute (MGI) estimates that fully incorporating women into the economy would add $12 trillion to global GDP by 2025 [2]. Yet the gender gap is still vast on many levels and will continue to widen if we don’t stop “trying to fix the women”[1] and address the historical hangover of social engineering that has influenced our corporate culture and environment.

In this blog we explore the three commonly discussed gender gaps and present our view on how best to start addressing these.

The Opportunity Gap

Achieving a more gender balanced workplace boosts productivity, increases organisational effectiveness, enhances employee engagement, meets the diverse needs of customers and suppliers and improves brand reputation [3] yet organisations are still struggling to close the gender gap and meet conservative targets at all corporate levels.

Under-representation of women is not just an issue for the large corporates, the recent Rose Review stated that up to £250billion of new value could be added to the UK economy if women started and scaled new businesses at the same rate as UK men [6]. Yet research shows that female entrepreneurs are hugely disadvantaged in obtaining access to finance, a major contributing factor as to why only one in five new businesses in Britain are launched by women [9]. Men are 86% more likely than women to be venture capital funded, and 56% more likely to secure angel investment [10]. At recent IWD events we heard from female entrepreneurs their experiences, with one stating that in over 300 pitches 99% were to men [1]. There are vastly more men than women making funding decisions in the UK, suggesting there is an inherent gender imbalance that risks penalising female business innovators.

The issue is not just about setting up for entrepreneurs, it’s about maintaining and scaling business. Dame Stephanie Shirley demonstrated how positioning herself as ‘Steve’ led to significantly more opportunities. As a start-up management consultancy, in an industry dominated by the big-5 who have a privileged advantage of being on clients’ preferred supplier list, WhartonBC find the biggest challenge is large corporates’ appetite for engaging with small unknown businesses with flexible & agile working values. It was refreshing to hear Alison Rose share that Natwest are addressing this by embracing SMEs where ‘their solution meets the business problem’ and not just defaulting to the comfort of the big-5. Yet many organisations are still creating barriers for small businesses to thrive, through outdated procurement processes and perceptions.

A diverse workforce brings depth and breadth to decision making, increasing innovation, competition and economic performance. Engaging with SME’s can bring a fresh perspective and more agile working practices. What is your organisation doing to create organisational balance and encourage SMEs?

The Leadership Gap

In the IMF’s most recent publication, Christine Lagarde states that adding one more woman in a firm’s senior management or corporate board – while keeping the size of the board unchanged – is associated with an 8–13 basis point higher return on assets [4]. Yet currently 100 companies in the FTSE 350 either have no female directors, or have just one – while the remaining 250 companies are not on track to meet their gender diversity targets set in 2016, let alone improvements to sexuality, race, or social mobility [5].

Advancements have been made with campaigns like 30% Club and Everywoman, yet the issue still persists. In the Financial Services Industry, women hold fewer than 20% of board seats in banks and bank supervision agencies [7] and account for fewer than 2% of bank CEOs [8]. Yet banks with a higher proportion of women board members have thicker capital buffers, a lower proportion of nonperforming loans, and greater resistance to stress [8].

In the fast-growing technology sector, women are 15% less likely than men to be managers and professionals and 19% more likely to be clerks and service workers [8]. Yet evidence shows a more diverse workforce improved innovation and greater alignment to customer needs.

Speaking with several chairmen over the last few weeks, there is clear appetite and focus on building parity - yet it’s still a question of supply - recruitment agencies have a limited number of candidates and often it’s the same women on many boards. Should there be more focus on making recruitment agencies accountable for identifying new candidates rather than only positioning those who have board experience? Or, as raised several times at recent The Telegraph’s Women Mean Business event, is it more about self-belief and supporting women to have the confidence to put themselves forward?

As we shared at the World Traders Panel [1] “it’s not just having the seat at the table - it’s about having a voice”. We believe leaders need to actively listen to every voice to bring true diversity of thought to decision making. Boards need to make diversity appointments a priority and support people once on board to thrive. What is your organisation doing to increase gender parity and create the culture of diversity of thought?

The Pay Gap

According to the WEF it may take another 202 years to close the economic gender gap globally [14]. Statistics give us a stark truth: on average women across the world are paid just 63% of what men earn. In no country are women paid as much as men [11].

Many factors contribute to this, from the sectors women historically have chosen to work within (education and healthcare which tend to have more women and pay less [12]) to the smaller proportion of women in higher paying professional and leadership positions. Women have traditionally been the 2nd earner and therefore often required jobs with greater flexibility, which historically has meant more routine or less senior roles.

There is now a new concern emerging, the widening of the gap due to digitisation and AI. The jobs more eligible for automation and robotics are those involving routine and repetitive tasks, in which women are over represented. Therefore, a high proportion of women doing lower paid work are at greater risk of losing their jobs to automation in the digital age [8].

Interestingly, the WEF ranked the UK only 50th out of 149 countries for gender pay, with women collecting 70% of that paid to men; a sad reflection 100 years after suffrage. Without the fundamental step of gender parity in pay, gender differences in society will continue, as families are forced to make decisions around caring responsibilities based on income.

Parity in pay is a moral duty and fundamental step to strive towards organisational balance. What can we learn from countries like Iceland, Sweden and Rwanda [13] whose public policies have transformed women’s opportunities to not only be equally represented in the workforce, with the smallest pay gender gap but also be in senior positions? What is your organisation doing to highlight and address your pay gap?

Closing the Gap

Wharton Business Consulting believe it is not about hothousing diversity groups or programmes. These often only create further division and reinforce the ‘Mindset Gap’ that women need ‘fixing’. The focus should be on:

  • Insight - understand the gap at all levels and explore the root cause. Often the focus is on the ‘glass ceiling’ yet it’s important to look at the full employee lifecycle from attraction to exit and understand where your issue is and why.

  • Mindset - as Avivah Wittenberg-Cox noted [15] change is about ‘will and skill’ leaders need to understand the benefits of organisational balance and truly believe in it. Build the business case together, so all functions are involved not just D&I or HR. Equip all leaders with the knowledge and skills to embrace diversity and allow the minority voice to be heard. Set a clear example to your workforce that diverse people can and do thrive here.

  • Environment – create a culture that enables flexible working focused on output rather than input. Legacy policy and processes are often laced with unintended bias written many years ago by the dominant group. Explore your cultural levers such as recruitment, reward, promotion to eliminate bias, such as using skill-based assessment tasks rather than a reliance on interviews can ensure fairness across candidates.

  • Social and Economic Culture – it’s our responsibility as organisations and individuals to make change happen. Hold each-other to account when we show bias at work, home and in society. Engage with SMEs and female entrepreneurs to drive change for our suppliers and in society. Encourage social change by stepping up, embracing diversity and spreading the word. 

It is our responsibility to build a #balanceforbetter future, addressing the gaps and unlocking the potential to increase economic performance.

At WhartonBC we are a ‘Results Driven Organisation’ focused on output not input. This enables both our 74% female workforce and our men (of which 46% are working parents) to have flexible working and give our clients the greatest results. If you would like to hear more about how our points of view on closing the gaps please contact Natalie Wharton

References 

  1. Worshipful Company of World Traders International Women’s Day Panel (Devika Wood, Michael Cole-Fontayn, Dame Fiona Woolf and Natalie Wharton), 7 Mar 2019

  2. How advancing women’s equality can add $12 trillion to global growth McKinsey Global Institute, Sept 2015

  3. Shaping the Future Women and Work Commission, 2006 Women and Work FactsheetBITC, 2018

  4. Empowering women is critical for the world’s economy and people International Monetary Fund, Mar 2019

  5. International Women’s Day, Balance for Better Everywoman, Mar 2019

  6. The Alison Rose Review of Female Entrepreneurship, Mar 2019

  7. Women in Finance: A Case for Closing Gaps International Monetary Fund, May 2018

  8. Closing the Gender Gap International Monetary Fund, Mar 2019

  9. Female entrepreneurs typically start businesses with half as much capital as men The Telegraph, Mar 2019

  10. 'I was told I didn't look the part' The Telegraph, March 2018

  11. Global pay gap will take 202 years to close, says World Economic Forum The Guardian, Dec 2018

  12. Highlights of women's earnings in 2017 Bureau of Labor Statistics, Aug 2018

  13. How Rwanda beats the United States and France in Gender Equality World Economic Forum, May 2017

  14. Closing the Gender Gap World Economic Forum, 2019

  15. Gender-balancing Avivah Wittenberg-Cox TedTalk, 2018