Courtesy of McKinsey & Company

by Aaron De Smet, Arne Gast, Johanne Lavoie, and Michael Lurie

Key takeaways

For decades, the attributes regarded as central to being a successful company have mirrored the qualities prized in leaders: focusing on earnings, demanding results, exercising authority and control, and being fiercely competitive. For organizations to thrive now, all these leadership characteristics must evolve.

We define the five shifts as beyond profit to impact; beyond expectations to wholeness; beyond command to collaboration; beyond control to evolution; and beyond competition to cocreation. Taken together, the five shifts redefine leadership for a new era.

What we focus on: Beyond profit to impact

Today’s organizations must go beyond profits and seek to maximize value and impact for all stakeholders, including contributing to society and a healthy planet.

To ensure that their companies successfully make this shift, leaders must evolve beyond being managers seeking incremental improvement to become visionaries with the courage to craft a resonant purpose and boldly imagine and pursue the future, key ingredients in moving from average performance to top-quintile success. From a leadership perspective, this requires the following components:

·      aligning people on a clear and shared purpose and aspiration

·      defining the value to be created for all stakeholders, as measured by key operating and financial metrics

·      contributing positively to wider society and the natural environment

How we show up: Beyond expectations to wholeness

Moving toward deeper personal authenticity is challenging, but it is a necessary evolution for today’s leaders, one that will only become more important in the years ahead as automation elevates the value of work that is inherently human.

Today’s leaders must move beyond their identity as professionals and show up as humans, with the courage to be, and to be seen as, their whole, best, authentic selves. It means recognizing and acknowledging the deeper inner essence of others and being unafraid to reveal one’s own essence, even the quirky bits. The intent is to move beyond task-driven and transactional relationships by taking the time to get to know one another and connect at a human level, sharing values, beliefs, hopes, and fears and enabling all to reveal the greatness that lies within. The following leadership practices can enable this shift:

·        expanding awareness and consciousness—the inner state, external context, and whole-system perspective

·        developing greater emotional regulation, choice of response, and adaptation to new situations

·        practicing well-being as a skill—physical, emotional, mental, and spiritual

What makes this shift hard is that we are wired for survival, and our fear-based reactions send us into old habits to restore a false sense of certainty. In other words, when adaptability is most crucial, we are least able to tap into it. But if we can evolve, we can move beyond a state where fear limits beliefs and mindsets to one where people can tap into their deepest passion, wisdom, creativity, relationships, and expertise. Unleashing the full human potential in an organization is why forward-looking companies work so hard to create environments of belonging and psychological safety and to develop compassionate relationships in teams.

How we organize: Beyond command to collaboration

New ways of organizing work are evolving that unlock organizational bottlenecks and enable people to work together much more effectively. Moving beyond siloed hierarchies to a network of autonomous teams working together with transparency, trust, and collaboration offers companies a more adaptable and powerful organizing construct.

This shift requires leaders to evolve beyond being directors that receive and give instructions up and down a vertical hierarchy to being catalysts that empower and guide self-managing teams, fostering connection, dialogue, and cooperation across traditional organizational boundaries. This evolved approach cultivates trust, respect, and compassion; requires letting go of the power that comes with positional authority to embrace a stance of openness; and enables human connection within teams and across formal hierarchies. The following leadership practices can help drive the shift:

·        encouraging and empowering people in small self-regulating entrepreneurial teams

·        fostering horizontal transparency and collaboration throughout the network and beyond

·        moving from a hierarchy of individual leaders to networks of leadership teams

How we get work done: Beyond control to evolution

Leading companies today seek to become learning organizations that are continually evolving, exploring, ideating, experimenting, scaling up, executing, scaling down, and exiting across many different activities in parallel. By accelerating change and allowing for positive surprises and innovations to flourish, they consistently outperform those companies that focus instead on always trying to deliver the “perfect” plan.

We are in the midst of a profound shift in how work gets done, one that asks leaders to go beyond being controllers with a mindset of certainty to becoming coaches who operate with a mindset of discovery and foster continual rapid exploration, execution, and learning. Leaders and leadership teams can learn how to set and work toward outcomes rather than traditional key performance indicators; to foster rapid experimentation and learn from both successes and setbacks; and to manage risk differently, through testing, learning, and fast adaptation. The leadership practices enabling this shift include the following:

·        operating in short cycles of decision, action, and learning

·        regularly reprioritizing the portfolio of initiatives to simultaneously execute today’s business, cocreate tomorrow’s business, and let go of yesterday’s business

·        engaging and leading people, helping them understand—and be excited by—the fact that there will be ongoing significant change

How we create value: Beyond competition to cocreation

Creating value for stakeholders lies at the heart of every organization. For decades, companies have focused on generating competitive advantage to gain an ever-increasing share of existing market value. While it remains essential to offer customers greater value than other options they might consider, in an era of collapsed product life cycles and rapid commoditization, organizations must move well beyond a focus on competitive advantage. They must create new levels of value for customers and other stakeholders by reimagining their business models and industry ecosystems.

This shift requires that leaders evolve beyond being planners operating with a presumption of scarce opportunities and resources to becoming architects who shape new business models and systems by understanding and utilizing the abundance of available opportunities and resources. For many leadership teams, this represents a sea change in the primary focus and content of their work, from tactical optimization and execution to deep strategic thinking, exploration, and social connection. The leadership practices that make up this shift include the following:

·        generating a strong and stable platform of core competencies that drive value

·        delivering value by applying these core competencies to a continually evolving business portfolio, both organically and through systematic merger and acquisition activity

·        amplifying value through creative partnerships with suppliers and competitors that shape and grow the organization’s industry ecosystems

Transforming leadership to transform organizations

Transforming an organization into a thriving entity that is able to deliver sustainable, inclusive growth requires a comprehensive approach to leadership transformation, beginning with the senior network of leadership teams. More specifically, this typically requires the involvement of the top-three levels of the organization: the enterprise leadership team, the leadership teams of the major business and functional units, and the leadership teams of primary units within each of the major units, as well as cross-unit governance groups. In large organizations, this may comprise the 500 to 1,000 most senior leaders in the company.

One key is that this change needs to take place voluntarily. Most of us cannot be instructed to change, so a good transformation process will develop emergently, allowing people to come to recognize they will be better off individually and collectively as a result of transforming themselves. This is how they will begin to embrace and adopt new mindsets, capabilities, and practices individually; to cocreate and implement new leadership role definitions, career paths, incentives, and performance management focused on working as a network of leadership teams; and to reimagine their businesses, organizations, and ecosystems to unlock new levels of performance and impact.

A leadership transformation program designed to engage and transform the senior leadership of a global enterprise may include the following elements:

·        Initial discovery and design. Stand up a leadership transformation team to guide the effort, define the goals and desired impact, and create the overall architecture for the transformation program. In this initial phase, assessing the readiness of leaders is also critical. Teams need to know where they stand today versus where they would like to be to realize their full potential.

·        Immersive introduction. An introductory experience of perhaps three to four days with mixed cohorts of leaders from across the enterprise will engage leaders, catalyze initial “aha” breakthroughs, and generate momentum and connection.

·        Leadership team journeys. Coaching support for each leadership team in the network, beginning with early adopters, at three levels: for individual leaders within the team, for the leadership team as a whole, and for how the leadership team engages people both within the organizational unit it leads and across traditional organizational boundaries.

·        Collective journey. A shift of the traditional siloed and politicized management hierarchy into a flat, open, and collaborative enterprise-wide network of leadership teams that over time evolves into a leadership community operating with the new approach across the organization.

·        Internal practitioner development. An internal community of leadership transformation coaches can help scale the new leadership approach to midlevel, frontline, and informal leaders across the enterprise.

As leaders become more self-aware and embrace new and more enabling mindsets and practices, they will build adaptive capacity by applying these practices to reimagine how they work within each leadership team and as a network of leadership teams. They will work collectively to evolve their foundation, operating model, and business model to become a thriving organization. Their progress toward building a thriving organization through collective leadership transformation should be measured at three levels, each building on the preceding one: changes in leadership mindsets and behavior; the launch or acceleration of business and organizational transformation initiatives; and holistic impact to all stakeholders.

Leaders who develop the new capabilities and mindsets discussed in this article can offer any organization enormous potential as catalysts and enablers of value creation. The emergent journey of leadership transformation invites senior leaders to embrace and apply new principles and practices personally, within their teams, and throughout their organization. By demonstrating new mindsets and behaviors, they are able to draw on reservoirs of organizational energy, passion, and ingenuity; enhance and accelerate the whole enterprise portfolio of performance and transformation initiatives; and unlock new levels of value for customers, employees, investors, and other stakeholders.

To read the full article, please visit https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/new-leadership-for-a-new-era-of-thriving-organizations  

About the author(s)

Aaron De Smet is a senior partner based in McKinsey’s New Jersey office. Arne Gast is a senior partner in the Amsterdam office. Johanne Lavoie is a partner in the Calgary office and Michael Lurie is a senior partner in the Southern California office.

The authors wish to thank Frank Barman, Erik Mandersloot, Nicola Murray, and Andrew St. George for their contributions to this article.