Leadership and the global economy

 

More changes are expected in the business environment over the next five years than we’ve seen in the past fifty.

For business leaders, as well as any manager aspiring for a top job, that’s become the most important thing they need to know. A lack of attention to what’s coming, rigid and uncompromising attitudes, an inability to adapt or find the right balance between profit and social responsibility, will mean leaders being knocked over by tidal waves of change.

The problem goes back to that old misunderstanding over what Charles Darwin really meant by “survival of the fittest.” Not the strongest or the fastest or even the smartest at all, but the success of those who best “fit” the changing situation (sometimes the smallest or the slowest). Traditional leadership culture has been built on hard triangles, the spearheads and arrowheads and pyramids that dramatise the principle of striking out from the front, maximising growth and profits and achieving dominance. The leaders are at the head of the pack, equipped with technical knowledge of finance and accounting and giving the orders.

But there are a growing number of reasons why this approach won’t work anymore - certainly in the West - and an urgent need for new kinds of leadership. There must be a different model that’s better suited to dealing with the wake of change (and the waves that will keep coming); less taut and less military in manner.

In business we need to be alert to the ‘World Beyond the Horizon’, what we know is coming but the implications aren’t yet clear, they are rumbles from the swell of change drawing up from the ocean bed. That includes what’s already here but we haven’t seen the fall-out yet, such as the introduction of AI and robotics. Organisations are working out applications and cost-saving benefits but will next have to manage the threat from damaged employment relations, job losses, strike action and, over time, the consequences in terms of the higher corporate taxes needed to fund the financial schemes, like Universal Basic Income for example, that will be needed to avoid social breakdown as a result of mass unemployment. The choice between protecting jobs versus making efficiencies won’t be simple or straightforward. Steep contributions from business are likely to also be needed to deal with the ageing population, and the demands for healthcare and improved public services more generally across the world, as populations become wealthier, better educated, and expect ever-higher standards of living.

The balance of power in the global economy is shifting at breakneck speed. The position of the USA as the post-war economic and cultural superpower has been undermined, and that has been accompanied by recent adjustments in its attitude to free trade and the role of protectionism. The EU constitutes another source of trade power, but one that has been weakened by Brexit and internal problems with particular national economies. China, meanwhile, has been progressing its global strategies, forming important alliances and growing its influence in Africa and elsewhere, building its control over supplies of resources and raw materials. Developing countries don’t have to look to the USA or the EU as the only solidly wealthy allies anymore, or as the only model politically or for doing business. Who’s to say whether autocracy doesn’t have advantages over democracy for improving sustainability and the welfare of populations for the future?

Overall, what this means is that the developed economies of the West have reached a stage of maturity where strong, steady and sustainable growth is less likely. Developing countries (and their business enterprises) can leapfrog other nations in their adoption of new technologies and approaches because they don’t have the same obstacles, whether that’s legacy tech and infrastructure to replace, worker or customer expectations or the bureaucracy and legislation involved around standards. There is enormous economic potential for countries like India (once the way to political stability is clearer), Indonesia, and nations in Africa such as Nigeria.

Over the next few years almost a quarter of the world’s population will be members of Generation Alpha – those born since the arrival of the iPad in 2010. We don’t yet know how they will differ as employees, or what attraction, motivation and retention will involve. We just know they are digital natives, with short and restless attention spans, likely to be looking for more project-based work with the kind of instant gratification (recognition and rewards) offered by social media, more affected by the employer brands and what they mean in terms of social role and sustainability, and entitled to have a voice on those issues. Alphas, of course, will also make more demanding customers, expecting speed of response and personalisation with every click.

So, we need leaders who look to the world beyond the horizon, who can both manage current challenges and think forward. But also, that have a different type of outlook and set of capabilities. Examples from business history demonstrate how foresight isn’t enough in itself. In the early Nineties, one of the world’s oldest surviving major businesses was Encyclopaedia Britannica. Kodak had already invented the digital camera. Both had global market-leading positions and the foresight and financial clout to transform themselves and beat emerging competition - but they didn’t because they weren’t able to change their basic DNA: selling books and making chemicals.

Critically, leaders will need to be able to convert complexity, messy complexity, into something simple and more inspiring for employees and for customers - because it will be unnecessary complexity that will drive people away from business propositions.

Those leaders and the people around them will need fluidity in terms of mindset and skills. That means more investment in training and development, often for change and addition of skills. More bits and pieces of specialisms. Encouraging the development of internal entrepreneurs over transactional staff. New forms of trust need to be constructed, not around what leaders say, but what they do. Those decisions around cutting staff for AI, the potential for profit-sharing schemes, the investment into future circularity, are going to be more scrutinised and taken seriously.

Emerging future leaders will no longer be the forceful, profit-maximising hero. As the ancient Chinese thinker Lao Tzu observed, the best leadership happens when people barely know the leader exists, and they think they’ve achieved everything for themselves. Eastern organisations have taken so much from Western counterparts in terms of business operations and thinking over the past century, so it will be ironic, or maybe only natural, if the West begins to prosper from these kinds of principles of Taoism: the importance of working with the flow of events and not fighting them, finding their own level, like water.

 

 

Notes

A version of this article has been published in People Management (CIPD) and Board Agenda.

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