As the downfalls of CEOs in the past three years illustrate, staying the course can lead to disaster. The times are certainly challenging, but today’s leader can succeed only be creating and promoting an environment in which he or she – and managers – learns to respond in new ways, in effect unlearning traditional responses, especially the one that sees the CEO say, “No, problem. I’ll fix it.”
We no longer live in a world where we can expect authorities to know the answers. While businesses today face challenges that can be met by applying technical expertise, they also face challenges that require many people in the organization to learn new habits, attitudes and values. These are adaptive challenges, problems for which there are no ready-made solutions, and problems that themselves challenge leaders to learn and develop untraditional, but decidedly dynamic approaches to improving their organization’s performance.
Effective leadership demands that we make two distinctions — between leadership and authority, and between technical and adaptive work. The first distinction provides a framework for developing leadership strategy, given one’s placement in a situation, with or without authority. The second points to the differences between expert and learning challenges, and the different approaches and operating styles that each requires. Clarifying these two distinctions enables us to understand the classic error that people in top positions of authority often make, and that makes them failed leaders: They treat adaptive challenges as if they were technical problems.
In mistaking technical problems for adaptive challenges, we really are looking for the wrong kind of leadership. We call for someone with answers, decisiveness, strength and a map of the future, someone who knows where we ought to be going—in short, someone who can make difficult problems simple. But instead of looking for saviours, we should be looking for leaders who can move us to face the problems for which there are no simple, painless solutions—the challenges that require us to learn new ways.
In our work with both large multinationals and small start-ups, we have seen a very strong tendency for leaders to focus on the technical aspects of work required to solve a problem — that is, the work that they either know how to do because there are prescriptions for doing it, or for which they can hire experts to find a solution.
Yet management cannot solve strategic or operating problems without undertaking adaptive work, that for which no satisfactory response has yet been developed, no plan of action specified, no technical expertise shown to be fully adequate. These are problems that require new adaptations and the learning of new organizational roles. Adaptive work is challenging because it requires that we relinquish some of our deeply held beliefs and learn new skills where old ones are insufficient.
We believe that the prevailing notion that leadership consists of having a vision and aligning people with it is bankrupt because it continues to treat adaptive situations as if they were technical: The authority figure is supposed to divine “where we’re going.” Leadership is reduced to a combination of omniscience and salesmanship. But adaptive problems are often intractable and not amenable to solutions that company “leaders” issue from on high; instead, they require disseminated experimentation and disseminated responsibility. For example, the lifting of protective tariffs generates an adaptive challenge that requires leaders to change a great number of structures and internal processes at the same time that they refashion their strategies. None of this will work unless both managers internalize the need for change and the changes themselves and workers, who must, in the end, implement the new way.
In this article, we describe five principles that leaders can use to mobilize people to do adaptive work:
- Identify the adaptive challenge.
- Regulate distress.
- Maintain disciplined attention.
- Give the work back to people.
- Protect leadership below.
These principles are interdependent. Managers cannot subscribe to one and exclude the others. They cannot say, “We will accept every one but not give the work back to people,” or “Fine, but we can’t afford to protect dissidents.” Adaptive work is difficult because it asks each manager to tackle business problems, hold people’s attention to the tough work issues, and be present for everyone as the work goes forward.
1. Identify the Adaptive Challenge
Many businesses risk extinction because they cannot learn to adapt to a new, adaptive challenge quickly enough. Clearly, the first task in adaptation is to spot the challenge and identify its implications for the organization. The following illustrations describe such a case.
Clients of KPMG Netherlands had come to see auditing as a commodity and began to negotiate substantially reduced fees. At the same time, KPMG’s operations-focused consulting business was not growing as fast as others in the industry. The future looked uncertain. In spite of those trends, KPMG had a record financial year in 1994, commanded its clients’ respect, and stood as one of the best-managed companies in the Netherlands.
Ruud Koedijk, chairman of KPMG Netherlands, believed the company needed to rethink its future and develop a strategy to reinvent the firm, becoming “a class apart.” With a new architecture, KPMG would migrate from audit to assurance, from operations consulting to a focus on strategy and ambition, from process reengineering to helping clients develop and manage competencies, and from skill-based training to creating organizational learning . Under this new organizational architecture, KPMG identified six major new business opportunities.
All of that was the good news. The “bad news” came in the form of self-doubt: “Are we capable of doing this?” KPMG’s board acknowledged that the organization usually had problems accommodating change and that it had a hard time discovering and exploiting new possibilities. The unstated ground rule was that no one should trespass on another individual’s turf. Accordingly, people either were unwilling or unable to collaborate with individuals from other units. KPMG was not a team of 300 partners pulling together.
As strategy development proceeded, each individual felt more inclined to assert a favourite solution to a problem rather than listen to the underlying assumptions of a competing perspective. At the same time, people avoided conflict; they simply did not want to discuss those far-reaching problems. Senior partners on the strategy integration team and cross-functional groups themselves grew more dysfunctional. Although the problem could be described, it became clear that these good people did not know how to solve the systemic problems they faced.
Source: Leadership On the Line: Staying Alive Through the Dangers of Leading
(Harvard Business School Press, 2002).
To once again make KPMG a smoothly functioning organization, Koedijk had to do four things. First, he had to mobilize a team to assess the environment and discern the nature of the threat: Did it represent a technical or an adaptive challenge? Would adjustments within the basic routines suffice to sustain success, or would people throughout the company have to learn new ways of doing business, develop new competencies, and work collectively? Koedijk had to get people to grasp the difference between technical and adaptive work, and shift modes of operating.
Second, he and his executive team had to identify the relevant community of interests and key stakeholders. What changes in values, beliefs, attitudes, or behaviours would promote progress on these issues? What would be the losses? Which units would have to shift priorities, resources, and relinquish some power?
Third, Koedijk and his team recognized that the initial conflicts were merely symptoms of distress that required adaptive solutions. Those superficial conflicts included issues such as procedures, scheduling, structure, and lines of authority. These seemed merely technical issues, but they were proxies for deeper conflicts in values and norms. Strategy development became part of the adaptive solution because no sharp distinction could be drawn between developing the required strategic understanding of the issues and implementing the strategic change.
Fourth, at KPMG, the executive team’s competing values and norms impeded people below from collaborating across functions and units. No one wanted to make any concessions. Thus, the top team had to do its share of adaptive work. If the top team cannot work its internal conflicts productively and therefore present more adaptive behaviours that can be emulated, the rest of the organization will languish.
Respect for conflict, starting at the top, allows people to learn from diverse perspectives. When each person defends a personalized, and therefore partial, view of the systemic challenges that the group faces, then leadership is rendered ineffective. The organization loses any chance to harness creativity and rigorously assess the business environment.
2. Regulate distress
People can learn only so much so fast, both to absorb the losses and to take on new responsibilities. We need to prioritize issues and structure the process. Experienced cooks know that they have to heat the pressure cooker gradually to avoid an explosion. As depicted in fig. 1, every organization has a productive range of distress and a limit to its capacity to tolerate disruption. A key leadership task is to keep people’s attention and responsibility focused on the tough questions through a sustained period of disequilibrium during which they learn to achieve a better way of operating, i.e., a new adaptation. We describe such a case below.
During his first two months as CEO of British Airways, Colin Marshall assessed the readiness of BA’s top 160 managers to become more customer-responsive. On what the British press called “the day of the long knives,” Marshall fired 60 of those managers, convinced that they were neither ready nor willing to make the necessary adaptive changes. Predictably, the level of distress within BA rose significantly.
Recognizing that few people undertake adaptive work if they don’t have to, Marshall made it clear throughout BA that the adaptive pressures in the marketplace demanded adaptive responses from within. Firing a large number of change-resistant managers delivered that message. But Marshall also had to have the personal credibility to persuade people that BA’s distress was caused not simply by pressure from top management, but by the market environment that posed new challenges for both the business and the people at British Airways. Yesterday’s technical solutions and norms would be insufficient if the company were to thrive in the future.
Marshall needed to give people a reason to make sacrifices. “Why suffer?” they asked. As Marshall put it, “You have to get people to understand and believe in their work — giving people confidence to do the things they know need doing.” Although people at BA were pessimistic and morale was low, Marshall saw that they were deeply loyal to the company and strongly desired it to succeed. “People,” he said, “want to work for a successful company.”
Moreover, they wanted to work for a company that stood for something. Marshall initiated a transformation that embodied new, explicit values, that moved and taught BA personnel how to serve customers, respect individuals, and work as team members across traditional business functions.
Marshall established this new orientation by identifying the disparity between the company’s current operating norms and the values it had to adopt in order to become “the world’s favourite airline.” That diagnosis helped the people at BA recognize what changes in behaviour they had to make. Performance reviews, for instance, became a fact of BA life. Marshall brought the top 150 managers together each quarter, at a minimum, to explain the ongoing changes, maintain commitment, focus on the next set of problems, set priorities, and foster openness across units. He used newsletters, videos, and other media to improve internal communications, and spoke frequently with the press — not only to establish new customer expectations, but also to generate external reinforcement for the internal change. Employees thus found another reason to trust Marshall’s commitment to change, and his public pronouncements legitimized their efforts to work adaptively in daily interactions with customers and colleagues.
As Marshall put it, “You have to let people know you are taking a real interest. You need to be visible — my way is to go around and meet people.” Accordingly, Marshall listened to employees talk about their main concerns. He met with flight crews, sometimes showing up in the 350-person reservation center in New York, wandering around the baggage area in Tokyo, or visiting the passenger lounge in London or Moscow. Both customers and employees of BA began to feel some relief from the stress of change, for the mere physical presence of the senior authority figure made them feel less disoriented in the changed work environment.
Marshall had to pace the work. From the inside, it seemed as if everything at BA was being tackled at once. In fact, the strategic change took place over a five-year period. Early on, Marshall and his executive team decided to shift BA’s focus from the organization to customers. That change took place on many fronts, including working with the British government to privatize the airline, building a credible team of managers, mobilizing a highly fragmented organization, and defining new measures of performance and compensation. Information systems had to change as well. This unit played a particularly important role in managing the customer base and monitoring the performance of the business.
People in operations and functions, areas in which formal rules and regulations had dominated thinking for years, felt the stress of change the most. In contrast, customer-oriented people scattered throughout the organization found the adaptive changes particularly refreshing. Indeed, some had been waiting a long time to take responsibility for doing the work that would warrant the slogan of “the world’s favourite airline.”
Every manager must regulate stress by attending to the social responsibilities of authority: direction, protection, orientation, conflict control, and norm maintenance. Effective leadership — mobilizing adaptive work — demands that managers fulfill these responsibilities differently than they would with technical problems. That is, in adaptive situations, those who lead provide direction by articulating key questions, clarifying issues, and presenting facts (not by issuing directives). Likewise, a manager who leads provides protection, paradoxically, by keeping people within an energizing discomfort zone, pacing their work, and sequencing the issues so that they can still be productive (not by sheltering them from threatening change.) A manager who leads orients people, not to the old procedures and role relationships, but to the realities that must drive the development of new role relationships and procedures. With adaptive leadership, a manager surfaces and orchestrates conflict, rather than squelches it, because conflict is the engine of creativity and learning. Finally, a manager mobilizing adaptive work gets people to distinguish those norms and values worth preserving from those that have become antiquated and dysfunctional.
3. Maintain disciplined attention
People in an organization bring diverse values, beliefs, and behaviours to their work. That is as it should be. Innovation and learning are products of differences. No one learns anything new without encountering a different point of view. Yet adaptive work requires a context: If diverse points of view are to lead to innovation, the innovators must have an orientation. Adaptive leadership, in other words, must be disciplined and pay constant attention to the central issues confronting the business. Otherwise, the collaborative effort can fragment into petty rivalries and secondary concerns.
Jan Timmer, the former chairman of Philips Electronics, describes the challenge of getting people to do adaptive work as both an intellectual and an emotional one: “At the intellectual level, you need programs, milestones, and discipline. At the emotional level, you need each person to put heart and soul into the effort. Engineers see “visions” as a waste of time. They have a bias towards “fixing” the current critical problem. “We’re macho, tough, numbers guys,” they say. “The other types really shouldn’t be here!” On the other hand there are the visionaries, who are more conceptual and have a sense of duty to shape the company for the longer term. They know that they cannot shape the company for the longer term if they control only today’s operations.
“Fire the engineers and you get harmony and daydreaming,” Timmer warns. Every business leader needs the cold shower of the engineering type’s numbers. Eliminate the visionaries and you have a business oriented to financial and production controls, but often without a clear purpose or meaningful work. Control-oriented people are highly suspicious. If something can’t be measured, it is not meaningful. The numbers people are much less at ease with discussions on how to satisfy the customer and mobilize everyone in the organization toward a common goal. The inevitable tension between the engineers and the visionaries seems to militate against complete consensus. My work as the leader is to help people understand the underlying logic of those competing perspectives and to move forward with the best possible decision.”
The dynamic tension and conflict, however, have to be actively orchestrated into a dialogue focused on the central issues; otherwise, work will be avoided as the conflicts remain beneath the surface and turf boundaries are reinforced.
4. Give the work back to the people
The story of Scandinavian Airways (SAS) shows how CEO Jan Carlzon coordinated the adaptive process by giving the work back to the people.
After 17 years of profits and growth, SAS sustained $30 million in losses in 1979 and 1980. Carlzon saw those losses as a sign of something very different than “poor cost control” or “flabby middle management.” To him, they signified fundamental changes in the industry. Rather than responding to losses in the usual way — looking for specific sources of waste and inefficiency — Carlzon began a campaign, not only to keep old customers, but also to win new customers from other airlines. For Carlzon, that meant SAS had to become much more responsive to customers’ needs. Thus, in 1981, he implemented a strategy for adaptive work aimed at promoting leadership on the front line and across the boundaries between divisions within SAS.
Meeting the needs of customers in a highly competitive environment presented both technical and adaptive challenges. They also had some technical components, which were amenable to routine response: Carlzon could rely on market research to assess general patterns of need and set general market strategy. Should SAS go after the vacationing traveler or the business traveler? What schedules would meet those needs? What routes of travel were in greatest demand?
Yet adaptive problems surfaced in the analyses of particular customers, who came in all shapes and sizes, all ages and incomes. In other words, particular customers looked nothing like the profile of the average customer market research had generated. Carlzon knew that SAS had to acquire a new approach to gathering information about customers in order to appeal to their specific needs.
Thus, Carlzon turned his company on its head, giving people on the front lines much greater latitude for decision-making. Also, middle and senior management would now support the front line instead of controlling it. Carlzon’s reasoning was elegant and simple. The front-line people knew the most about the needs of individual customers. Ticket agents, baggage handlers, and flight attendants were in the best position to discover the needs of real people.
Apart from having critical information about their customers, people on the frontline were in the optimal, and often only, position to respond to customers’ needs. They had to take action. There was no time to go up the line for permission to act when the customer was standing right in front of you waiting. Front-line employees had to define and solve problems in 15 seconds or so while customers were in direct contact with the company. Carlzon called these encounters “moments of truth.” SAS would succeed or fail each day during those 140,000 moments of truth when customers would be won or lost.
To accomplish this adaptive work, Carlzon needed to give the work back to people. He wanted ticket agents and others close to customers to take responsibility for making costly decisions on the spur of the moment, if they saw the need to do so. The front-line employees had to be able to take financial risks on behalf of the customer. While senior executives diagnosed overarching trends of the market — economic patterns, regulatory policies, the actions of competing companies, front-line workers diagnosed the specific situations in the market. Sometimes, people on the front line saw a new pattern of customer need emerging, one that required an organizational response — a new policy, a change in organizational structure, or a shift in the allocation of resources. In such cases, the ticket agent would report the need to middle management and mobilize the organization to respond adaptively. In short, the ticket agent would lead the organization from below.
Each individual in the organization had special access to information that was gathered from his or her vantage point. Each saw different needs and opportunities to fulfill. Frontline workers might not be able to assess changes in European politics that would lead to airline deregulation in Europe during the 1990s; by the same token, however, senior management was not in the best position to assess information from front-line workers that indicated a need for systemic change. That was the job of middle managers. But even the most astute middle manager could not see the faces of individual customers and have intimate knowledge of their needs. That was the job of the front-line employee.
In most organizations, developing widespread responsibility is a central feature of achieving a new adaptation. At SAS, letting the front line take the initiative in defining and solving customer problems meant reorienting much of management from a control to a support mindset, thereby establishing new norms and values for people throughout the organization.
Carlzon built widespread acceptance of the new approach by spending up to 50 percent of his time during the first two years by communicating directly, in large meetings, and indirectly, in workshops, brainstorming sessions, learning exercises, public media exposure, brochures, newsletters, and a variety of symbolic acts (He redesigned the pretentious executive dining room, for example). Finally, having identified the adaptive challenge, he saw that his leadership task was one of educating people, in the broad sense. He had an overall business strategy that oriented people, but he also had a host of questions requiring innovative approaches across boundaries throughout the organization.
To manage the disequilibrium, Carlzon bolstered the holding environment, the organizational space in which the conflicts and stresses of adaptive work take place.
Carlzon put it this way. “Before, leaders used to be authoritarian (command and control); now their emphasis is on vision, strategy, and having skilled people everywhere. The leader communicates strategy and objectives, and so the people take over. The leader is no longer engaged in the act of managing the business himself, but in creating an atmosphere and establishing the values so people can do their work.”
In addition to establishing values and a norm of frontline responsibility taking, Carlzon strengthened the containing vessel by bolstering his authority. To strengthen his formal authority, he made sure that his board of directors understood the magnitude of the change and the cost. In his first year, when the company was losing $20 million a year, Carlzon asked the board to invest $50 million more in improvements, even though he could not guarantee or predict how much revenue the proposed changes and marketing investments would bring in. He needed their commitment and full authorization. Unlike many leaders, Carlzon consulted openly and frequently with his board. That strengthened his formal hand.
The holding environment is built on relationships derived primarily from trust. If trust in Carlzon had been poor, he would have had to reduce the pressure, perhaps by slowing down the change process. Since the degree of trust was high, Carlzon could afford to turn up the heat by introducing tough challenges more quickly. Trust provided a critical resource, and he had to tend to it fastidiously.
To strengthen his informal authority, Carlzon made himself highly visible and ubiquitous, meeting with and listening to people intently inside and outside the organization. He wrote a book to explain his values, philosophy, and strategy. “If no one else read it, at least my people would,” he said. Moreover, he generated trust by trusting others, by decentralizing the authority. “The key is to prepare people’s mindset and let them discover the problem. You won’t be successful if people aren’t carrying the recognition of the problem and the solution within themselves.”
Perhaps most critically, Carlzon strengthened the holding environment by developing a collective self-confidence. As he often said, “People aren’t born with self-confidence. It comes through success and experience and the environment. Even the most self-confident people can be broken. The most important role of the leader is to create confidence among people. Look at authority figures in a public organization. Do they punish mistakes? Do they do nothing? The result is inefficiency. The real challenge is to build a management system related to the responsibility and the authority you give away. Demanding that people give good service, but then fixing severe limits on the resources they need to provide those services just won’t work.”
The purpose of the holding environment is not to eliminate stress but to regulate and contain it so that it does not overwhelm anyone. Eliminating the stress altogether is counterproductive, for it removes the impetus for undertaking adaptive work. In exercising leadership, a major task is to maintain a tolerable level of stress that encourages people to take responsibility. The example of Jan Carlzon at SAS demonstrates how productive such a holding environment can be.
5. Protect Leadership Below
When Ruud Koedijk engaged 100 people in the strategy creation process, they gave voice to people below and throughout the organization. The same thing occurred when Colin Marshall launched an initiative to make British Airways more customer-responsive.
In these strategy projects, leaders established a temporary structure in which the “architects” and “explorers” could work. Authority figures engaged in the work were expected to operate as part of the team; by and large they did. Ideas and dialogue became standards for measuring contributions. Openness became the norm, so much so that people willingly agreed that they could be open in ways not possible in their working groups within the business, where they had to have the right answers, avoid mistakes at any cost, always be involved in operational issues and could not exhibit curiosity or develop insights. People felt pulled in two directions. In their strategy work, they collectively stretched themselves; in their operating work, they felt like individual units of production performing tasks in a highly controlled environment. The new cultural norms by which strategy development was recognized and treated as adaptive work clashed with the old, prevailing norms that treated both adaptive and technical challenges like technical problems.
In the new culture of BA, front-line people were encouraged to take responsibility for, and act on behalf of, the customer. At both BA and SAS, this adaptive change created a revolution. The airlines created new classes of service, improved food service and check-in, lost fewer pieces of luggage, made special concessions for elderly and handicapped passengers, and provided all customers with more rapid and user-friendly solutions. People in each airline felt listened to, empowered to act, and responsible for improving service and performance. They began finding their work more meaningful and enriching. And management saw its role as encouraging, supporting, and guiding the work, not controlling it.
This is the foundation for that organization that wants to experiment and learn. It is a necessary pre-condition for being able to grow the business, not just manage the cost-to-revenue ratios. In contrast, whistleblowers, creative deviants, and other such voices routinely get silenced in the traditional command-and-control organization. Because these people generate disequilibrium, those in power believe that the easiest way to restore equilibrium is to neutralize them.
The voices from below might not be as eloquent or articulate as one might wish. After all, people speaking beyond their authority usually feel self-conscious, and sometimes they generate “too much” passion in order to gear themselves up for speaking out. Of course, that often makes it harder for them to communicate effectively. They pick the wrong time and place; they neglect proper channels of communication and lines of authority. But buried inside a poorly packaged “outburst” may lie an important insight that needs to be heard and respected. Tossing it off for its bad timing, lack of clarity, or unreasonableness can eliminate potentially important information and discourage someone with the potential to be a leader in the organization. Adaptive work cannot rely on “normal” people alone.
One manager, whom we will call Michael, listened when his seniors encouraged people in a large manufacturing company to look for problems, speak openly, and take responsibility. Believing in their sincerity, Michael once raised an issue that was “too hot to handle.” Swept under the carpet for years, the issue of the CEO’s pet project was tacitly acknowledged in the company, but Michael knew that maintaining this investment could damage or derail key elements of the company’s strategy. He raised the issue in a meeting with his boss and the CEO. He provided a clear description of the problem, a representation of the competing perspectives on the issue, and a summary of the consequences if the project were to continue.
The CEO squelched the discussion. He reinforced the positives of his pet project. He then asked Michael if he had discussed this with a particular task force — which he knew would shield him from this kind of challenge. Michael had not. The CEO then handed the problem over to Michael’s boss. The issue was not up for discussion.
When Michael and his boss left the room, his boss’s disapproval became apparent. Why hadn’t Michael discussed this with him before speaking to the CEO? The boss attacked Michael personally: “Who do you think you are, with your “holier-than-thou” attitude?” The subject was closed.
Michael had greater experience and expertise than either the CEO or his managers in this area. But they showed no curiosity, no effort to examine Michael’s reasoning, no sense that he was behaving responsibly with the best interests of the company at heart. The climate in the room had shifted from a friendly, “everything-is-going-fine” mood to a chilly “don’t-everbring- that-up-again” atmosphere.
The CEO and Michael’s boss had squashed the development of a potential leader. Clearly, then, authority figures are constrained from exercising leadership, not only by their own blind spots, but also by expectations from key stakeholders to “keep the ship on an even keel.” They must rely on others in the organization to spot and raise questions that indicate, early on, the presence of an adaptive challenge. They have to provide cover for people who point out the contradictions in the enterprise. These individuals often will have the latitude to provoke the rethinking that the people in authority do not undertake.
When an authority figure feels the urge to glare at or otherwise silence someone, he or she has to stop for the moment. That urge to restore the group’s equilibrium is understandably quite powerful, and it happens fast. But an authority figure who also wants to be an authentic leader has to get accustomed to delaying the impulse, and ask, “What is this person really talking about? Is there something we’re missing?”
Focusing management teams and front-line workers on recognizing and meeting the challenges of adaptive change are among a leader’s most difficult tasks. Most of the problems facing top management are highly interrelated strategic or operating issues and adaptive challenges that need to be viewed as systemic problems. Engaging key managers with different styles and agendas is necessary to create understanding, generate commitment, and solve complex problems.
Adaptive problems have no ready solutions. They require that people apply their collective intelligence and skills to the work only they can do. This, in turn, requires that they unlearn the habits of a lifetime spent as a manager, learn to meet challenges that they cannot meet with their existing skills, and develop the capacity to explore and understand the competing values at stake.
Leading adaptive change requires that one develop a strategy for learning. In order to learn the way forward, each manager facing an adaptive challenge must ask, “Who needs to learn what, and how?” The work begins by framing the challenge and effectively holding the people with the problem as they think together, engaging their conflicts and differences, and learning from each other. For this, those who have the courage to lead will need to be ready with good questions and have the will to manage uncertainty.