The Humble Leader

Leaders are people in positions -brought there through formal processes or not- that enable them to shape the fate of social systems, like companies, political entities, families or even societies.?

There is growing research suggesting that leader-selection processes run on “authority” (behind-closed-doors, with little to no participation of most members of the social system) are losing legitimacy and therefore efficiency of the leaders.

The deterioration of power of leaders traditionally appointed by authority is what Moises Naim described in his excellent book “The End of Power”.

I would say that we see a de-centralization of power, on two levels:

• The power that determines “success” -however that is defined for the social system at hand;
• The power to determine real, i.e. effective (as opposed to “appointed”) leadership

The first point is similar to the notion of more complex environments and that the velocity of change is increasing and, thus, the requirements of the social system to change adequately (in reaction or anticipation) as well. I will focus on this aspect and what it implies for companies.

The other point -leadership selection- as well as applications to political or other spaces, I will leave out here.

Companies as social systems in complex environments

As for companies, “changing” means adjusting the offered products & services as well as the structure and fabric of the system itself: organization, processes, governance, talent.

Consumers as well as employees (!) can -and do- shift preferences more often, due to ubiquitous information and a strong desire to fulfill their needs in terms of scope, quality and timing. It′s simply because they can – instant gratification has trickled down to many aspects of life (for better or for worse).

As for companies, they usually operate in a competitive environment: someone else will most likely act if I don′t. A competitor might seek that market opportunity and catch a bulk of market share.

In this context, time-to-market is a crucial factor. It will probably be the most important attribute of companies in the future.

For the organization to react to shifts in the environment, it has to:

• Notice the threat or opportunity;
• Define a reaction;
• Implement the reaction.

The total time-to-market can be defined as the time to complete all three steps.

A decentralized structure is the most appropriate, if (and because) noticing, defining and executing lies within the same unit.

That doesn’t just mean “flat hierarchy” – it also means that the decentralized units are as autonomous as possible in that sense that they should not depend too much on other units. In more complex value chains, this coordination is certainly a challenge.

Coming back to the three steps?- notice, define, implement-, the “defining” step is traditionally the one attached to positions higher up in the hierarchy; the more budget it implies (or the more strategic the nature), the more “high-up” you have to ask for authorization.

The justification for this design is simple: the more high-up, the more qualified the decision-maker is supposed to be. However, as a rule of thumb, “time-to-decide” is proportional to the “hierarchical distance from noticing to defining” - the notice has to "trickle up" and, subsequently, the "decision" has to trickle down.

Another reason to locate the three steps in the same unit is that “distance between decision-maker and implementer” and “engagement of implementers” are negatively correlated – if someone distant to you in the organization defines if, when and how to execute some concept they defined, you feel more like a robot than someone with meaningful impact on the organization.

“Humble” Leadership: Empowering others

The importance of Organizational Design grows with the size of the company. In a small startup, the coordination between functions and the decision making process are not as complex as in scale-ups or large companies. Total time-to-market is shorter, because Notice, Define and Implement all happens in a small team.

When the organization grows to 50 employees or above – it′s time to consciously manage Organizational Design. Choosing to build a decentralized organization basically means saying: “I don′t know and see everything” and “I am not the right person do decide everything”. It means resigning to the notions that:

• The CEO knows exactly who is doing what in the company;
• He/she always knows what to do next;
• They can reliably and precisely forecast (revenue, profits…) on a macro-level;

Or in other words: the humility to admit that, in complex environments, one human can not know and adequately act on every topic. The humility to delegate power to decentralized cells and empower others to do the jobs, as Dan Cable explains here.

The more decentralized, flexible and agile a company becomes, the less predictable it is on a macro-level. This creates a conflict between Agility and Innovation on one hand and Predictability on the other - I have written about these conflicting pressures on corporate CEOs here.

Humility is also an important trait in the early days of the company, when searching for product-market fit and “crossing the chasm”: you have to experiment quickly and learn from failure, as Alejandro Diez Barroso lays out here.

“Humble” does not imply “shy”, “unsympathetic” or “uninspiring”. In fact, the “humble leader” dominates well rallying people around a common purpose – he/she just admits they don′t know all the details yet. And, the vision is not about them – it′s about what they want to change in the world. After all, the vision, mission and values are what hold the organization together, despite all decentralization.

Humility is the trait – together with “ferocity of will”- that Jim Collins identified in his excellent book “Good to Great” as common to the leaders of the “10X companies” (companies 10 times as successful as their peers).?

If the leader decides less (business decisions) herself, her role essentially comes down to Empowerment through:

• Organizational Design: Making sure the business units can quickly react on threats and opportunities;
• A common purpose (Vision, Mission, Values) that rallies the people in the organization;
• Individual empowerment: making sure the right talent is attracted, developed and retained for the organization.

I believe these are the three core leadership tasks for CEOs in the future.

A decentralized organization is certainly not without challenges; one of them being: as the organization grows, how do you make sure best practices are exchanged and certain functional standards or defined across business units?

To differentiate "business decision" leadership from "empowerment / functional" leadership, McKinsey has developed a framework called The Helix Organization. “Value Creation” leaders are those leading the decentralized squads, while “Capabilities managers” focus on people development and exchange of functional best practices.

When products and services offered by a company are "1st level" competitive advantages, the organizational structure, culture and purpose are "2nd level" competitive advantages - harder to create, sustain and copy - as described in the various works from in the Musterbrecher ("patter-breakers") initiative (German only).

While financial performance of a company is traditionally the main criteria to assess CEOs, humility and the focus on three core leadership tasks as described above are usually not on top of the agenda. They should be, as I tried to explain.

Further reading tips:

Moises Naim: The end of power

Jim Collins: Good to Great

Dan Cable: How Humble Leadership really works

McKinsey Quarterly: The Helix Organiation

Alejandro Diez Barroso: The gift of failure

Stefan Kaduk et al: Musterbrecher (German only)