Developing the Global Leader of Tomorrow

The 2006 Stern Review on the Economics of Climate Change highlights that the expected increase in extreme weather, with the associated problems of agricultural failure, water scarcity, disease and mass migration, means that global warming is likely to precipitate crises on a scale we have never witnessed. Stern extrapolates the costs and suggests that climate change could swallow up to 20% of the world's GDP. Current recession concerns, the most serious for nearly a century, are dwarfed by comparison.

The shift to a low carbon economy is just one of a wide range of issues and trends that business leaders increasingly agree will impact on their companies, both in terms of risks and opportunities. There are wider concerns relating to the natural environment – finite and increasingly scarce resources, biodiversity and species loss – and also around globalisation – doing business in markets marked by poor public infrastructure, widespread poverty and inequality, corruption, violent conflict and human rights violations.

What is increasingly clear is that the scale of these risks and opportunities means that it is not simply a case of business as usual with a few tweaks here and there, but that the time has come for real transformational change – addressing these issues is no longer just the responsible thing to do but an urgent business imperative.

Transformational change requires more than changing a few lightbulbs. To make the necessary step, 'change' means putting these issues at the heart of strategic decision-making and integrating them into all the key business systems and processes, coupled with influencing policy-makers to create new market structures and rules of competition. It also means reaching the hearts and minds of individuals working right across organisations, changing the nature of the conversations within organisations and equipping people with the knowledge and skills they need to enable them to respond.

Management education and leadership development have an important role to play in meeting this challenge. It is this role that lies behind the new United Nations Principles for Responsible Management Education (PRME) initiative, developed by a global taskforce of 60 business schools and launched in 2007.

Recently, Ashridge has worked with the European Academy of Business in Society and a number of other leading business schools to understand just how important this agenda is to companies. The research, based on an extensive global survey of CEOs and senior executives conducted during the height of the financial crisis, presents a stark message: "76% of senior executives polled say it is important that leaders in their organisations have the knowledge and skills to respond, but only 7% believe these knowledge and skills are being developed very effectively by either their own organisation or business schools more broadly."

Research findings indicate that there is a whole host of knowledge and skill sets required that underpin management ability to respond effectively. These can be grouped into three clusters. The global leader of tomorrow needs to understand the changing business context – 82% of those polled say senior executives need to understand the business risks and opportunities of environmental and social trends. They also need to know how their sector and other actors (regulators, customers, suppliers, investors, NGOs) are responding. Senior executives also need the skills to respond to this information – 70% says the global leader of tomorrow needs to be able to factor social and environmental trends into strategic decision-making. In different contexts and industry sectors this can mean knowing how to factor these issues into processes such as capital expenditure decision-making and brand development.

The second cluster of knowledge and skills centers around the ability to lead in the face of complexity and ambiguity. The challenges and opportunities these issues and trends present, tend by definition, to be complex – there is often little certainty and little agreement about both their precise nature and the response that is required. Leadership in these circumstances requires a range of skills: 88% of those polled say senior executives need the ability to be flexible and responsive to change, 91% - the ability to find creative and original ways of solving problems, 90% - the ability to learn from mistakes, and 77% the ability to balance shorter and longer term considerations. The global leader of tomorrow needs to be able to understand the interdependency of actions and the range of global implications that local level decisions can have, and also to understand the ethical basis on which business decisions are being made.

The final cluster of knowledge and skills centers around connectedness – the ability to understand the actors in the wider political landscape and to engage and build effective relationships with new kinds of external partners - regulators, competitors, NGOs or local communities. The mindset with which our current leaders are groomed does not encourage productive engagement with partners outside the organisation – leaders receive plenty of training in negotiation skills, for example, but on the whole lack the skills for engaging for effective dialogue and partnership. To survive and thrive, 73% of senior executives say the global leader of tomorrow needs to be able to identify key stakeholders who have an influence on the organisation and 74% says they need to understand how the organisation impacts on these stakeholders, both positively and negatively.

If these are the kinds of knowledge and skills needed, how can they best be developed? Again, the research sends a clear message – traditional approaches are not enough and we need to use a broad range of learning approaches to develop the global leader of tomorrow. Because the issues are complex, senior executives believe the most effective learning and skills development comes through practical experience, whether through on-the-job learning, project based learning or some other form of experiential learning. These learning experiences can be enhanced by structured reflection through coaching or Appreciative Inquiry.

The research identifies examples of leading companies who have already taken steps to develop these kinds of knowledge and skills among their senior executives. Unilever runs a programme for high potentials on its emerging market strategy. Teams of executives build their engagement skills at the same time as researching current social and environmental trends and the business implications by spending time in emerging markets, collaborating with NGOs, microfinance organisations and other grassroots groups.

InterfaceFLOR, the US modular flooring and carpet tiles manufacturer, has introduced an education programme for all employees, which progressively raises awareness of key environmental and social issues and develops the skills that individuals need for it to be able to fulfil its vision of being an environmentally restorative organisation by 2020.

While these examples can provide some direction, there is still a long way to go. Really achieving the transformational change needed in management education will require reaching the hearts and minds of every single member of faculty engaged in research, teaching and consulting. It also means that the management education world collectively must reassess each and every one of the key principles, models and frameworks that inform our thinking.

The task is daunting, but the need is great and as this research demonstrates, the companies we are developing people for are demanding it. We must rise to the challenge.