What kind of leaders do we need now?

Q: In recent years you’ve been looking at leadership in several areas, including large, values-based corporations, with your book Supercorp, and efforts to create smarter cities and communities. Can you explain some of the commonalities that you see in the leadership challenges today?

One common thread in all the work I’ve done has to do with the complexities of advanced leadership. By advanced leadership I mean not just having an impact within a single organization, but having a positive social impact that creates not only wealth but also well-being and changes to society.

Supercorp is all about companies that manage to make money, grow, create profits, innovate, and create social good. That requires a kind of leadership that’s much more systemic in orientation and understands how to situate the company within the wider world. A very famous Yale SOM alum, Indra Nooyi, is trying to do exactly that at PepsiCo by talking about performance with purpose. That’s a kind of advanced leadership, because it requires new collaborations with NGOs around the world and it requires looking at health and nutrition, not just how to sell the current product.

IBM’s new value statement has as one of the core values, "Innovation that matters, for our company and for the world." The addition of the words "and the world" is permission to look much more broadly. And one of the ways IBM is looking more broadly is through its Smarter Cities/Smarter Planet initiatives, where they’re really examining how society is organized and where it’s possible to improve communities through the kinds of products and services that the company offers.

Advanced leadership requires operating in an environment with multiple stakeholders, with no clear authorizing authority, no consensus around goals, and no clear pathway for how to operate. It’s working outside of the boundaries of an organization.

Just as we use "thinking outside the box" as a metaphor for creativity, I call this thinking outside the building. And I think it’s what’s required now, whether you are a middle manager or the CEO. This applies to business, healthcare, or government agencies. You have to think about the wider world, think outside the building, to have an impact on society.

That’s the new kind of leadership that we need for the 21st century.

Q: Is the current context so different that it really is calling on different sorts of leadership? Could the approach you’re describing have been used 50 years ago?

There have always been leaders who have operated this way. Think about Cummins Engine’s home city, Columbus, Indiana, where the company created a supportive community surrounding its workers.

But I think business lost its way a little bit, starting in the 1980s, maybe earlier, with a set of theories that came to dominate that said only economic logic matters. Enlightened leaders still engaged in positive actions, even during that period, but the emphasis was on financial management. Many of the heroes were heroes because they made a lot of money.

Now, because of the financial crisis, there’s a rethinking of whether that model of running purely on a short-term financial logic is the right way to ensure sustainable economies. We’re adding back a social logic. It’s not that it’s totally new; it’s a matter of emphasis.

I would say that there are some new forces in the 21st century. One is globalization. And globalization in the 21st century is a little different than what we predicted it would be in the 1990s when there was a widespread view that the world would become more similar. That hasn’t happened, except in some superficial ways. Instead we’re faced with a very interconnected world of very different cultures and value systems in which leaders have to know how to forge a consensus and some universal way of working, despite those differences.

The emerging markets are now sources of great companies. They’re not just people in need of development. They’re sources of talent and new models. It’s an era of greater connectedness through information and communication technology, which means that bad ideas can spread just as fast as good ideas. It means that rumors can spread quickly. It means that employees can organize themselves. So leaders have to know how, again, to forge coalitions of people of independent minds, who are sophisticated and have options and also come from many different parts of the world. That multiplies the challenges for leaders.

Q: With some of the companies that you analyze in Supercorp, it appears that CEOs can be more effective if they’re willing to be less certain and more willing to make mistakes.

In a world of great complexity, uncertainty, and lots of moving parts, people at the top can’t always know what’s happening everywhere, but they are responsible for the system they oversee. CEOs have offered their resignation for mistakes made much lower down in the organization. If they are really good CEOs, the board will reject the resignation, but the action says, "I’m accountable." It’s very important for leaders to demonstrate accountability.

Leaders also need to be setting direction. They don’t need to have all the answers. They don’t need to create the perfect plan. But they need to be setting direction and guiding people. Increasingly, in far-flung global enterprises, there’s no way that people at global headquarters could or should monitor every action going on in the field. That’s why values and principles become even more important as a management tool in the 21st century, because they become the universal basis for communication, for uniting us as one cohesive organization, and also for a dialog about what’s the right thing to do, so that people in the field can be trusted to do the right thing without being monitored every minute by corporate.

Q: How do companies make sure that values are more than just words?

Authenticity definitely matters. Employees, customers, and the public can see very quickly if leaders are not being authentic. It’s not the words that leaders say. It’s not even the words on statements of values. What matters is the kind of conversation that goes on throughout the company. In discussing an issue, people might interpret the company’s stated values in somewhat different ways, but they’re having a conversation about purpose, about what’s the right thing to do, not just about finance or what will make the most money. Of course, if companies don’t make money, they’re not sustainable, and they do owe a return to their owners, their shareholders. But the use of values, purpose, and principles is to create an additional conversation that says, will this lead us to long-run good outcomes? Using a statement of values to guide decisions is a good form of risk management.

The values have to inform the decisions, and manifest in actions to show they’re really serious. So the company allocates resources that do things that don’t bring an immediate return but that have a longer-term value, like fixing up the environment surrounding the headquarters, or investing in the schools that are going to produce workers for the future, even if other companies will also share that benefit. Those investments are like R&D investments, but, instead of learning in the laboratory, they’ll be learning by going out into the community and finding out what the needs are and actually living with members of the community.

Q: In a number of things you’ve just been describing, the middle managers play a big role. They’re enacting the values. So what does leadership mean for the middle manager, and how does it differ from somebody in the executive suite?

The principles of leadership are pretty much the same because they’re not about how much power you have, how much authority you have, but whether you can mobilize people behind a vision, encourage them to do the best possible work, forge collaborations among members of your own team and also across parts of the organization. You may not be as visible as the people at the top, but you can be as innovative and entrepreneurial.

Cisco is now very active in smart grids, and the idea for a big project around the smart grid came, in part, from a leadership development program where people from the mid-level professional and managerial ranks were asked to find projects that they could work on as part of the leadership development program.

IBM is developing leaders through their Corporate Service Corps. High performers are put on diverse global teams and sent to a geography they’ve never been to, to work on solving a problem that has a social dimension. There’s no immediate commercial payback to IBM, but it’s creating people who are global leaders and have a global mindset, even earlier in their career. Their ability to understand what the CEO, Sam Palmisano, is doing grows that much more. And they are better leaders because they understand teamwork, they understand how to make relationships with diverse people, they understand problem solving, they understand having a vision and sense of purpose.

Q: When and how should these kinds of leaders be assessed?

I have put forward what I call Kanter’s Law, which is that everything can look like a failure in the middle—meaning projects, change efforts, or innovations—because anything new takes time to develop. There’s always a point where you have more barriers than accomplishments. But even then leaders can certainly be looked at in terms of whether they’ve built a team, whether they have a coalition of backers and supporters behind them, whether the vision seems plausible.

A good leader definitely brings long-term returns, but I don’t think you have to wait until the very end to judge leaders. We may say you can’t judge the impact of a U.S. president until 20 years after they’ve left office. On the other hand, you can certainly assess whether they are leading the process in a way that seems more promising rather than less promising.

I’m a big believer that great leaders think big and they also think small. They think long-term, but they also think short-term. You need the big vision, but you also need small wins or people don’t believe the vision.

Interview conducted and edited by Ted O'Callahan

Editorial Note: Another aspect of Rosabeth Moss Kanter’s work on advanced leadership has been her involvement with creating a forum for leveraging the skills of highly-accomplished, experienced leaders for working on complex social problems. For more on that work, see the website of the Advanced Leadership Initiative at Harvard University.