28 Jun 2020

By Navi Radjou and Prasad Kaipa

Over the past 30 years, we have studied and consulted for nearly 100 CEOs in Europe, Asia, and North America who had to deal with large-scale crises. Based on these CEOs’ responses to various emergencies, we have identified three ways leaders tend to think during emergencies.

Functional smart leaders rely on their survival instincts. Focused on the bottom line, they do whatever it takes to keep their companies afloat. Business smart leaders are opportunistic. They find clever ways to leverage a crisis and develop strategies to capture post-disaster opportunities. We estimate that 90% of corporate leaders we observed went into one of those two modes during past crises.

A smaller number — just 10% — navigated crises by relying instead on context-aware intelligence to benefit society at large. Rather than simply reacting to — or leveraging — an emergency, these leaders consciously used intuition, logic, and their emotions to choose appropriate responses. Instead of asking anxious workers to simply keep doing their jobs, they helped broaden their perspectives. They inspired employees to use ingenuity to contribute to the greater good of society and to cocreate a higher purpose for the organization.

We call these people wise leaders, and we think they present the best role model for leaders to successfully deal with today’s crises. Endowed with an entrepreneurial mind, a social heart, and an ecological soul, wise leaders are best fit to build the agile, inclusive, and sustainable businesses of the 21st century.

Four Key Capabilities of Wise Leaders

We believe that as businesses grapple with the COVID-19 crisis, CEOs have a historic opportunity to demonstrate wise leadership and positively reshape the mindsets of their employees to serve the larger good.

CEOs can transform their businesses into wise enterprises by leveraging four key capabilities: making a broader purpose an explicit part of company vision, embracing frugal innovation that cleverly reuses existing company resources, framing sustainability and corporate responsibility as mission-crucial adaptability, and channeling radical openness to build strong feelings of connection.

Broaden employees’ perspective and purpose.

COVID-19 makes all of us realize how interdependent and fragile human civilization is. A disruption in one part of the world can have devastating ripple effects across the entire planet. CEOs need to broaden the perspective of employees by explaining that their company doesn’t exist in a vacuum but is part of an interdependent whole, where every event in the world impacts the business, and every action of the business affects society.

CEOs can invite employees to serve society at large rather than narrowly focus on customers. In March, James Dyson, founder of the vacuum cleaner and household appliance manufacturer Dyson Ltd., inspired company employees to design and build a ventilator for COVID-19 patients in just 10 days. Dyson said that the company will fulfill an order for 10,000 units from the U.K. government and donate another 5,000 units to international relief efforts.

CEOs should continue their company’s societal focus even after COVID-19 is over and could learn something about how to do so from Siemens, the German industrial manufacturer. Under CEO Joe Kaeser’s leadership, Siemens is evolving from a business-to-business company to a business-to-society (B2S) company. As a B2S company, Siemens is vocally focused on leveraging all of its assets, talents, and partnerships to have a positive social impact in the 200-plus countries in which it operates. That has meant enabling local economic growth and job creation, reducing greenhouse gas emissions, and including more women and minorities in the workplace. The company’s goals have spilled over into its partner companies: In mid-March, the Siemens-backed global teleradiology company USARad launched a global screening program to help clinicians diagnose the coronavirus faster and more accurately.

The message that CEOs should deliver to their stakeholders is both simple and complex: It’s in our enlightened self-interest to maintain the integrity and unity of our world. That means creatively addressing global issues such as social inequality, climate change, and health emergencies.

Embrace frugal innovation.

It can be easy to forget our abundant resourcefulness during crises when the scarcity mindset takes over. But leaders like James Dyson know that when employees are asked to tap into their inner resources — like ingenuity and compassion — they are capable of radically reinventing company products, supply chains, and business models for the better.

Specifically, leaders should ask employees to practice frugal innovation — the agile art of ingeniously simplifying and repurposing existing products and assets to serve a higher purpose. We’ve seen this in the past month with carmakers Ford, Tesla, and Toyota repurposing factories to make ventilators; clothing companies Zara and Gap adapting their apparel factories to make hospital gowns and masks; and cosmetic giants LVMH and L’Oréal using their factories to make hand sanitizer.

To innovate frugally, companies also need to collaborate with diverse partners. For instance, GM and Ventec Life Systems, a startup in Washington state, teamed up to mass-produce Ventec’s ventilators. Also in late March, French industrial giants Air Liquide, Groupe PSA, Schneider Electric, and Valeo joined forces to produce 10,000 ventilators in 50 days.

Reframe sustainability as creative resilience.

Sustainability and corporate responsibility are about moving forward while reshaping priorities. The most sustainable companies are the ones that continually adapt and progress in a shifting environment yet remain steadfastly loyal to their core values. Like a bamboo tree, these agile businesses stay deeply rooted in their essential values so they can bend with the strongest wind but never break.

When asked in March why the company took the initiative to make masks and ventilators, Ford’s executive, chairman Bill Ford Jr., said: “We’ve been around 117 years. We were the arsenal of democracy during two World Wars, we built iron lungs for polio victims. Whenever we’re called on, we’re there.” He also noted: “Nobody’s talked about the financial implications [of making masks and ventilators], because this is a national emergency. We’ll sort all of that out later.”

Ford is spot on. Studies show that companies that prioritize social and environmental sustainability over short-term monetary gains financially outperform profit-obsessed businesses by as much as 40% in the long run. A CEO could use the current crisis to enshrine sustainability in the DNA of his or her organization by becoming a B Corporation, a type of for-profit company that uses the power of business to solve social and ecological problems. Danone, a world-leading sustainable food producer, is working to become the world’s biggest B Corp by 2030.

Channel radical openness to foster connectedness.

Many employees are feeling demoralized and fearful for their lives and economic stability as the number of coronavirus cases and deaths escalate and the economy collapses. It feels awful.

The origin of the word awful is aghe, an old English word for awe. Hence, an awful event is one that fills you with awe, causing respect or fear, or both. What we pay attention to allows us to be either afraid or filled with admiration. So instead of freaking out by constantly checking the coronavirus death rate, we can choose to pay attention to the millions of health workers worldwide who are selflessly serving COVID-19 patients. Their bravery and devotion can fill us with the kind of awe that feels good.

Researchers at the Greater Good Science Center at the University of California, Berkeley found that awe-inspiring experiences can have eight major positive impacts on our lives, including helping us transcend our limited sense of self and connect with a larger reality. We end up experiencing the larger dimension of life inside us and feel more connected to everyone because we sense the whole humanity within us.

Wise CEOs channel radical openness to cocreate a connectedness among their employees, along with a cooperative corporate culture that cares for the well-being of humanity. They create a vision for their organizations to build a better world. And they empower employees to innovate fearlessly toward that vision.

This is what Paul Polman did. Polman became CEO of the consumer goods giant Unilever in early 2009, during the height of the financial crisis. Company revenues and employee morale were in free fall. Rather than downsizing the company by selling off dozens of brands and laying off thousands, Polman upsized the company’s purpose by launching the Unilever Sustainable Living Plan (USLP). USLP established the goal of improving the health and well-being of over 1 billion people and enhancing the livelihoods of millions by 2020, and halving the company’s ecological impact by 2030.

Polman acknowledged that he didn’t have all the answers on how to implement USLP. When the company stopped issuing quarterly reports (a practice that isn’t required in the European Union) to focus on the longer term, its share price initially dropped 8%. Polman invited all employees to find creative ways to turn the ambitious vision into a reality. His authenticity and humility inspired Unilever employees to undertake the Herculean task of reinventing Unilever’s massive supply chain — with thousands of products and suppliers and hundreds of factories and warehouses globally — for increased sustainability.

At this point, Unilever has achieved most of its USLP targets, including gender parity in management and the use of 100% renewable electricity worldwide. Its shareholders have had cause to be happy, given that Unilever delivered a total shareholder return of 290% during Polman’s 10-year tenure as CEO, which ran through 2018. Unilever is now raising the bar higher on sustainability by aiming to become carbon-neutral by 2030. And in March, Unilever teamed up with the U.K. government to target 1 billion people in a global handwashing campaign to fight the coronavirus.

As the COVID-19 crisis worsens, we expect the majority of CEOs to either hunker down (as functional smart leaders do) or selfishly pursue business opportunities (as business smart executives do). But a few enlightened CEOs will use the framework of wise leaders to empower their employees to tap into their ingenuity and resilience. In the process, they will fundamentally reinvent their companies’ cultures and business models to serve a higher purpose.


Read the full article here.
This content was originally published by MIT Sloan Management Review. Original publishers retain all rights. It appears here for a limited time before automated archiving. By MIT Sloan Management Review

Covid-19 – Johns Hopkins University

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