What does a recent study by experts from Harvard, the London School of Economics and The World Bank reveal about Leadership for the 21st Century?
Today’s businesses operate amid a hot house of evolutionary pressures: collapsing industries, distrust of institutions, automation, artificial intelligence, rising inequality, climate change, and resource depletion. Not surprisingly, many leaders and organizations find it difficult to respond to this unprecedented degree of change. However, a small but growing number are exhibiting new leadership reflexes and organizational adaptations to ensure their business impact is conducive to life in the 21st century and beyond. We stand at a fork in the road. Over the next few years, both leaders and organizations will face two choices: rapidly evolve toward an equitable and sustainable relationship with our planet’s life support systems, or delay and face the wrath of angry citizens and alienated customers.
“The goal that I put out there – of 500 million people and 40 Million small merchants – I had no Idea how I’d get to 500 million people. Most people in my company thought I was crazy. Even I thought I was crazy. It’s amazing what’s possible once you put the target out there and let enough creative people at it. To date, we’ve reached more than 300 million individuals.” – Ajay Banga, CEO Mastercard
These leaders realize that, in an era of accelerating change, organizations need to innovate rapidly. After all, the choices businesses make today have the potential to either vastly improve the lives of future generations – or end them. There is no road map and the stakes have never been higher. So where do we go from here? Leaders on Purpose is a cross-sector international collaborative dedicated to recognizing, analyzing, and developing innovative leadership strategies related to the Sustainable Development Goals (SDGs). Combining expertise in the fields of business (Unilever), international organizations (World Bank), social impact (LSE) and sustainability leadership (Harvard), Leaders on Purpose have conducted a comprehensive and in-depth study of purpose-driven leadership. Here’s what they found.
The speed of socio-economic change is accelerating at an exponential rate. In the 1950s, the average time a company spent on the S&P500 was approximately 35 years. By 2027, experts predict this will have fallen to just 12 years. 50% of the companies listed today are expected to fall off the list within 10 years. Disruption is the new norm, and it is redefining the role of the CEO. Carlos Brito, the CEO of Anheuser-Busch InBev, highlighted: “The only reason we exist is because we are adding to the communities where we live, and because we are part of the solution… we have to think hard about how we can be part of a solution, and how can we be more active in issues that communities face. Then we become indispensible, and that’s what will guarantee that we will have a role to play.” The CEOs of the forward-thinking corporations interviewed for this report agree that the risks and opportunities arising every day as a result of increased global complexity need to be met with a new mindset as well as innovative collaborations.
It is increasingly evident that achieving and sustaining corporate success is linked to a commitment to solving societal problems. Climate change, malnutrition, inequality of income and opportunity, pollution, and the lack of governance and institutional trust are just some of the pressing issues identified by CEOs as critical for their organizations to tackle as they make sense of their changing role in society. Furthermore, thanks to technological developments, it is now easier to make informed decisions about the trade-offs of various business decisions. As Grant Reid, the CEO of Mars, reflected: “I wish 5-to-10 years ago, I had some of the measurements on gender and climate that we have now – to help us understand the economics and the impact of our efforts better. The Stengel 50 ROI is much higher than the S&P 500. In hindsight, I would have had different measures, involved science more, talked more to external people when we were setting our original targets.”
“I think traditionally some big corporations tended to use a certain amount of their profits to reduce environmental pollution or they might try to minimize their pollution footprint by reducing energy consumption. Those are not permanent solutions to the problems. On the one hand, a manufacturer engages in production which pollutes the world, and on other hand, spends money to help solve the problem. We’re doing things differently. We’re trying to achieve a sharing of values, which means we connect to the community and work with them to achieve a sharing of benefits. To bring this together in a way that can benefit society.” – Zhang Ruimin, CEO Haier
In 2015, 193 countries committed to making the world more prosperous, resilient and sustainable by adopting the Sustainable Development Goals (SDGs). With this pledge, businesses accepted the responsibility and opportunity to play their part. The SDGs provide a common language and framework for business, government, and civil society to address the world’s most pressing challenges. They establish a shared understanding that makes sense of the challenges posed by global complexity. In this way, they assist companies in describing how they add value and communicate non-financial requirements and successes. For example, achieving the global goals can create US $12 trillion in opportunities around just four sectors: agriculture, cities, energy and materials, and health and wellbeing.
Furthermore, it can also generate an estimated 380 million jobs. Forward-thinking CEOs are aware of the opportunities the SDGs present, and 90% of those we spoke with have begun to align their strategies accordingly. According to Lorna Donatone, Sodexo’s CEO for Geographic Regions: “It’s about improving the quality of life of our employees and those that we serve. In our ‘Better Tomorrow 2025,’ we have nine commitments that we have made to align with the UN SDGs. They absolutely hit innovation and push us to act differently.” To fully benefit from the SDGs, businesses must embed them at the heart of their organizations. Many of the CEOs interviewed explained that linking the SDGs to their company’s core mission was important, and that supporting the national and local SDG goals gave them an opportunity to connect with the community at a deeper level and offered them a license to operate“Companies who can demonstrate a strong purpose are more successful. It takes the right leaders – today’s generation wants transparent, genuine leadership.”
“Companies who can demonstrate a strong purpose are more successful. It takes the right leaders – today’s generation wants transparent, genuine leadership.” – Lorna Donatone, CEO For Geographic Regions, Sodexo
At Mars, a set of “Five Principles” helps to guide the organization. Mars’ CEO Grant Reid told us: “It starts with the fact that this is in the very fabric of Mars… The ‘Five Principles’ is something we talk about every day. Every meeting we’re in, somebody will talk about, ‘Hey, what’s the decision we’re making, and how do the five principles guide that?’ We actually test that with our Associates every year through a survey. We ask them; ‘Do you feel you’re using the Five Principles?’ ‘Do you feel like Mars is working towards those?’ ‘Is your manager a leader using the principles?’ That gives us a very good gauge through our almost 100,000 associates to get a feel and vibe of how The Five Principles are working.”
Successful companies often find or rediscover their higher purpose in the legacy of their organization. John Fallon, CEO of Pearson, told us: “Pearson’s been in business for 180 years. It was in many very, very different industries, different sectors, before it came into education. But it always had a sense of this wider role in society. That’s the story we’ve always told about the company. My predecessor as CEO, Marjorie Scardino, would always say that profits are the byproduct of doing something useful in society, and that the profits sustain the company. They don’t define the company, and what defines the company is empowering people to progress through their lives through learning.”
One of the findings that emerged from the research is that transforming purpose into a “living state” requires two complementary ingredients: long-term perspective and adaptive strategy. The former relates to thinking ahead to ensure that actions taken today have a positive impact in the future. However, this is not enough – given that technology companies such as Google or Alibaba might disrupt any market at any given time, staying adaptive is crucial for companies across sectors. In the words of Haier’s CEO Zhang Ruimin: “
“You can, of course, give people a pay raise when they are being a good ambassador of your culture and values. Maybe, most importantly, you also promote based on values. You make sure that the best ambassadors are actually the ones that are getting bigger and bigger assignments as the company grows.” – Peter Agnefjall, CEO Ikea
We need to disrupt ourselves before we get disrupted.” In other words, successful 21st century leaders need to be both visionary and adaptive. This suggests a new business understanding: an adaptive mindset working in dialogue with long-term orientation at the highest level, within corporate strategy. While the North Star serves as a long-term aspirational goal, its achievement is tied to short-term markers of developmental progress, or “milestones.” Focusing on these allows stakeholders to respond to rapid changes, social contexts, and technological developments.
Milestones also provide the benefits of immediate deadlines, trackable progress, and measurable results. IKEA’s CEO Peter Agnefjäll explained: “It starts with a vision. It continues with a plan to grow and develop IKEA towards 2020. We want to do it in a way that is people-and-planet-positive… That’s the way we work it through from
A to Z.” The study found that successful companies define their milestones based on a rigorous context-assessment: What do people in this region care about? What is the political and economic landscape? What are the specific problems related to our core competencies?
This trend can be observed across industries. As AIG’s CEO Brian Duperreault told us: “A culture of collaboration and integrity is truly important. We are moving ahead toward a more decentralized structure, not moving back to a siloed structure – and that’s an important distinction. We want to be aggressive
but collegial, not competing against ourselves, but pulling together to solve problems like no other insurer can. At no time was this more evident than during all of the natural disasters last year. In Houston, Puerto Rico, Mexico, California, and other places, our employees were often heroic in their response to customers and communities, but also in how they were there for each other.”
Grant Reid, the CEO of Mars, shared some of the concerns driving this change: “What do we think can make the biggest difference? How can we use science to help? And how can we move quickly?” He then explained how addressing these questions is likely to transform his organization: “It will mean that there’ll be more failures, but we can’t give up progress waiting for perfection.”
Conclusion: A New Leadership Paradigm
Growth is fundamental to every business strategy, but not all growth is good. The world’s top CEOs are increasingly aware that the well-being of their organizations, of society, and of the entire planet are all intrinsically linked. In an era of increased political isolationism, these innovative leaders are thinking more expansively and collaboratively than ever. This begins with rejecting traditional performance metrics focused solely on the organization’s short-term financial performance. These CEOs view leadership as a process that is increasingly global, connected, and context-dependent. Throughout the study, these leaders discussed the innovative strategies they employ to promote both responsible business growth and planetary well-being and through this process found new ways to unleash organizational potential and promote positive social change. To deliver on this, progressive senior leaders are engaging their workforces, supply chain partners, and sometimes, even competitors to find innovative solutions to complex issues. As organizations continue to reject short-termism and embrace the SDGs, creative tensions inevitably arise around the hard work of promoting ‘growth we can be proud of’ (Mars CEO Grant Reid).
The leaders in our study agree that the complexity of this endeavor should be addressed with non-traditional development strategies. Often this involves finding ways to fully deploy their organizations’ expertise by activating the potential of all employees. As Inditex CEO Pablo Isla states, “these challenges are not conceived as ‘external issues’ that could be dealt with through charity or donations, but should rather be addressed by every part of the company and throughout the whole value chain.” Former Novo-Nordisk CEO, Lars R. Sorensen elaborates on this idea, stating, “If the company doesn’t somehow try to reflect all of those developments into the way that we perform, and communicate, and interact, then we (Novo Nordisk) will not be successful at all in the future.”
The Leaders on Purpose research team found a consistent and encouraging correlation between economic success and a suite of new leadership approaches and strategies. CEOs embracing this new approach are finding that their organizations are finding significant rewards for their efforts ranging from increased revenues, improved resilience, heightened employee performance, and higher levels of trust across their broader stakeholder ecosystem.
This report was compiled by the co-founders of Leaders on Purpose: Christa Gyori, Harvard University; Dr. Christian Busch, London School of Economics; Leith Sharp, Harvard University; Maya Brahmam, World Bank Group and Dr. Tatjana Kazakova, Chief of Strategy, Leaders on Purpose.
Leaders on Purpose is where leaders, experts and top innovators across sectors turn ideas into action for a more just and sustainable world. Founded by experts & practitioners from Harvard University, The World Bank, The London School of Economics and MIT, Leaders on Purpose celebrates purpose-driven leadership – the kind of leadership that embodies the wisdom, agility and conviction to manage a growing population on a planet with finite resources.