At a time when the cost of capital is essentially zero, the success or failure of a business is determined more than ever by its leaders, in particular the CEO and top team.
It is estimated that leadership accounts for 30% of bottom-line performance—yet most companies say they tap only half of employees’ potential. Our research into more than 3,000 teams, summarized in our new book Accelerating Performance, found that top teams deliver 22.8% more economic benefit compared with teams that are laggards. Some companies find even greater benefits: Google says its best-managed teams deliver 38% more economic benefit than lagging teams do. When you roll up all the leadership issues, the 23 top-performing companies that we identified delivered more than three times the increase in wealth over the past seven years compared with the rest of the FT 500—a $337 increase on a $100 investment for the best performers versus a $111 increase for the rest. What these companies share in common is the ability to reduce time to value by building and changing momentum more quickly than competitors do. In other words, they accelerate.
While no leader can know what the future will hold, our analysis suggests that leaders of accelerating organizations think and act differently: they prioritize the growth and performance of their peers to make the top team better, and they learn how to be agile as change erupts all around them.
The graphic below highlights eight mind-sets that differentiate the best from the rest. You are in danger if you exhibit the ones on the left and are likely moving in the right direction if your mind-set is described on the right.
Let’s look at three in detail:
1) “I need to know the answer” vs. “I need to constantly discover patterns and connect the dots”
An academic study found that, on average, 45% of a company’s profitability depends on external and industry events outside the company’s control. Unsurprisingly, CEOs and most other leaders tend to focus on the rest—the 55% they can manage. But there is a huge opportunity in focusing on the events that can’t be controlled, because leaders who can sense what’s happening sooner can react faster and better than the competition can. But that means giving up on the need to know a definitive answer and, instead, developing what we call “ripple intelligence” by looking for patterns and connecting the dots.
Ripple intelligence requires deliberate steps. For instance, leaders must delegate and clear enough time in their schedules for a top-down review of the trends and events causing ripples in the company’s environment. Companies also need to run their strategists through a series of exercises to show them how bad they can be at predictions (we are hardwired to be bad at predictions) and to provide them with techniques that will greatly improve their abilities.
2) “These are my resources” vs. “My job is to optimally match resources to opportunities”
Businesses assign resources to business units, and it’s hard to ever get them back (possession
being nine-tenths of the law). That approach would be fine if the external environment stayed just as it is. But it doesn’t. Whatever assignment of resources is made today will soon be out of phase with the market. Companies try to coordinate across business units to adapt to the changing environment, but the effort is complex and time-consuming; often, it doesn’t even
work because the units guard their resources so jealously.
To counteract the natural tendencies of people and organizations, leaders need to build what we call “resource fluidity” by focusing on three enablers: continually reallocating capital resources; keeping people mobile; and rigorously sharing and reusing resources.
3) “It’s either/or” vs. “How do I dissolve the paradox?”
Senior executives face many conflicting pressures. For instance, there is the simultaneous need for authenticity, which means holding fast to values, and adaptability, which means changing. Leaders need a degree of narcissism to believe that they can do things that others cannot, but they also need to be humble so they can learn from mistakes and course-correct.
What we call “dissolving the paradox” can turn conflict into opportunity, but leaders must move beyond the usual modes (or levels) of thinking. Level 1 thinking sees problems as binary. Decision making is about choosing between two options, and one option must lose. Level 2 thinking recognizes that there are shades of gray. When asked to choose between two options, the level 2 thinker will probably try to find a compromise. Level 3 thinking looks for a mutually beneficial arrangement that is not just about splitting the difference. If there are two projects fighting for limited resources, the level 3 thinker will try to find synergies so that, for instance, the projects share costs. Level 4 thinking finds ways of making two objectives—apparently at odds—not only compatible but also reinforcing. It doesn’t try to optimize the current reality; it builds a new one. It reframes the issue. In a discussion about whether to allocate funds to customer service or to product development, a team might come to see how the investment in service could improve insights into customers, which would, in turn, improve products while reducing development costs.
These three mind-sets are just the start. As our analysis shows, even getting all eight right is only part of the puzzle. But they’ll at least get you started on the right path toward becoming the kind of leader that the future will require.
Colin Price is the coauthor of Accelerating Performance: How Organizations Can Mobilize, Execute, and Transform with Agility. He is an executive vice president and the global managing partner of the Leadership Consulting Practice at Heidrick & Struggles. Colin has advised many of the world’s largest companies, as well as a number of national governments and charitable institutions.