In November 2010, to big fanfare at Unilever's London headquarters, chief executive Paul Polman boldly articulated a new strategy. The company would double the size of its business, he said, by channeling its efforts toward achieving eight ambitious goals by 2020 — among them, doubling the proportion of Unilever's portfolio that meets the highest nutritional standards, and halving the water associated with the consumer use of its products.
To most of us, this did not sound like typical corporate strategy, but Polman's reframing of what it means to succeed in business is not an isolated example. It is indicative of a new generation of leadership emerging at the top of many of the world's largest organizations.
Over the past few years, we've all become much more aware of the forces that will powerfully shape global society over the next decade. We see billions of people around the world striving to improve their quality of life, and ideas about what constitutes an improved quality of life shifting. (For many people it's about better access to food, water, and shelter and less vulnerability to disease, but for others it's about better governance, freedom from corruption and oppression, and respect for basic human rights, as we saw in the Arab Spring. For many more it's about healthier lifestyles, mental health, self-esteem and wellbeing, and better family and community relationships.)
At the same time, as material consumption in emerging economies rises, we also face the fact that, as of the end of 2011, the Earth now contains seven billion people; by 2050, that global population is projected to reach nine billion. Undeniably there is more pressure on the things we all depend on: finite resources like water, energy, food, certain metals and minerals, and ecosystems like fisheries and forests. And of course, more pressure on climate.
Unilever's strategy for 2020 is formulated in direct response to that quest for improved quality of life in a much more resource-constrained context. It recognizes this new reality will spell decline for some commercial activities, but growth for others who find better ways of operating.
So in one sense, Polman is only being a good businessman. But clearly, Polman's approach is also a dramatic departure from past practice—and he is not alone. Across the board we see the top executives of some of the world's largest organizations talking about, taking action on, and defining their success in terms of things that have conventionally been the realm of political leaders and NGO activists. The change has not gone unremarked by management's leading thinkers. Witness Chris Lazslo's work on sustainable value, and Michael Porter's theorizing about shared value.
In research led by Ashridge Business School and the International Business Leaders' Forum to be published later in 2012, we've been exploring this emerging new approach to leadership. We are engaging with executives who've sat at the top of globe-spanning organizations over the past decade — people like Neville Isdell, former Chairman & CEO of the Coca Cola Company; Paul Walsh, CEO of Diageo; John Brock, Chairman & CEO of Coca Cola Enterprises; Lord Browne, former CEO of BP; Sir Mark Moody Stuart, former Chairman of Shell and Anglo American; Frederick Chavalit Tsao, Chairman of IMC Pan Asia Alliance Group; and Mark Foster, former Group Chief Executive, Accenture.
From these explorations, a consistent theme has emerged: today's global business leaders have needed to adopt a different perspective on their role and purpose.
A generation ago, the prevailing attitude was that it was the role of political leaders to address the big societal issues of the day, and definitely not the role of business leaders. For them to take on such concerns would only be a distraction and source of cost.
Fast forward to today's generation of business leaders and you hear a very different attitude being expressed: that it is essential for senior executives both to have a nuanced understanding of the major societal forces shaping our world, and to know where and how to respond for the good of their organization and for society as a whole.
Thus we now hear about Andrew Witty's GSK transforming business models to grow by broadening access to medicines in developing countries, and Sam Palmisano's IBM seeking to grow through its Smarter Planet initiative. We saw BP, under John Browne's leadership, decide that to protect and grow value it should put climate change on the agenda for the oil industry and take the lead on establishing the Extractive Industries Transparency Initiative and the Voluntary Principles on Security and Human Rights (PDF). A sizeable cohort of business leaders — Wal-Mart's Lee Scott, GE's Jeff Immelt, Petrobras's José Gabrielli, the list goes on — now evidently believes that, far from being a source of cost, their efforts to understand and respond to the major forces shaping society are central to their creation and protection of value.
The other consistent theme to emerge from the research is that acting on this new perspective has required a certain set of competencies, many of which are not featured in traditional management education and leadership development experiences.
All of our interviewees spoke about the soft skills that come to the fore at this level of change leadership: having the courage to raise difficult issues in the face of vested interests; enabling leadership to emerge through convening dialogue; encouraging innovation and framing challenges that inspire it; using language and symbols effectively; creating appropriate metrics; and recognizing and rewarding positive new behaviors and outcomes.
But the leaders also identified an important change in the scope of their work. The new generation of business leaders, they emphasized, must be able to engage meaningfully with multiple constituencies and relate well with all kinds of different actors in society. They must be able to engage in public and political debate with a point of view. Not only has it become far more important to know how to engage with policymakers, but now they increasingly see it as their role to proactively energize government policy, industry competitors, and wider society, and get people pulling together. Here's how John Brock, Chairman of Coca Cola Enterprises, talked about the change:
I think the role of a business leader today is much more challenging because you've got so many other constituencies out there that you didn't have before. Certainly the hierarchical approach — let's just lead from the top and if other people don't like it, that's their problem — that does not work anymore. You've got to engage with these multiple constituencies and make decisions in a more consensual way. And that requires a real skill. As the leading drinks manufacturer in several countries, and as a major player in the industry itself, we believe we have an important leadership role to try to figure out how to bring government, NGOs, and industry all along. We as a company will invest a huge amount of time. And not just me, our whole leadership team.
In a previous study Ashridge conducted in partnership with the Academy of Business in Society — Developing the Global Leader of Tomorrow (PDF) — we found a high level of consensus on the capabilities required. Senior executives we surveyed told us that leaders at their level must be able to:
- understand the business risks and opportunities of environmental and social trends — and how their sector and other stakeholders (regulators, customers, suppliers, investors, NGOs) are responding to them (82%)
- align social and environmental objectives with financial goals (81%)
- integrate social and environmental trends into strategic decision-making (70%)
- identify key stakeholders that have an influence on the organization (73%)
- understand how the organization has impact on these stakeholders, both positively and negatively (74%)
- engage in effective dialogue (75%)
- build partnerships with internal and external stakeholders (80%)
- engage in and contribute to public policy (60%)
Of course, when the requirements of leadership change, so must the focus of leadership development. It is clear that new measures of success have begun to apply to the emerging generation of global leaders. How well do they understand the broader forces at play in the world? How do they conceive their role as business leaders? Do they have the capabilities to be effective?
At Ashridge, we are now studying fascinating leadership development initiatives at IBM, HSBC, IMC Pan Asia Alliance Group, Ernst & Young, Sky Broadcasting, InterfaceFLOR and Lend Lease. All are actively experimenting with how to build greater leadership capacity for this way of thinking, as well as the skills to act on it. We look forward to sharing their case studies in a third research study, to be published later this year. In the meantime, in your own organization, the way to start is by asking the same question these firms did of their leadership development programs: As global leadership is increasingly held to a new standard, are we developing leaders who can meet it?
This post is part of the HBR Insight Center The Next Generation of Global Leaders.