Visualize a leader with virtues such as courage and integrity, as well as five key types of intelligence, and you’ve got a clear picture of the cross-enterprise leader. So equipped, such a leader has what it takes to adopt the enterprise-wide perspective that is necessary to make the right decisions for creating and delivering value to all stakeholders. These Ivey professors describe how an organization develops the type of leader to succeed in today’s dynamic and complex business environment.
The cross-enterprise leader is someone who, at any level of leadership, sees the issues and analyzes them, and then acts with the interests and perspectives of the total enterprise in mind, including any networks or alliances of other enterprises in which it helps create and deliver stakeholder value. He or she avoids narrow business unit, functional or geographical interests in favor of doing the right thing for the enterprise, even if compensation or other reward systems suggest something different.
What’s the “secret sauce” that these cross-enterprise leaders have and what can organizations do to develop them? We have pooled our scholarship in leadership, strategy and organizational effectiveness, and our experience as consultants and executive educators in and with organizations to propose a recipe for this sauce.
The five types of intelligence for Cross-Enterprise Leadership
At a minimum, the cross-enterprise leader needs four types of specific intelligence: strategic, business, people, and organizational. By “intelligence” we mean knowledge, understanding of key concepts, and skills in these four critical areas of executive competence1. These must be underpinned by a reasonably high general intellect, the fifth type of intelligence.
There is no short-cut to Business Intelligence (BI). Leadership is not developed in the abstract and leaders need to understand the nuts and bolts of the business they are in, whether it be a food bank or a commercial bank. Understanding the economics of the business model, how value is created, how the functions of the business relate to each other, competitive dynamics, customer needs and where the leverage points for improvement reside are essential leadership elements. There is much to know and every business has its nuances. Nick Leeson, the rogue trader whose actions took down Baring’s Bank, has suggested that leaders in his organization lacked the business competence to question his actions.
Lou Gerstner, the former CEO of IBM, who is largely credited with turning around IBM, is an example of a leader with high BI. Gerstner came from RJR Nabisco; he did not express an interest in the job of CEO at IBM. He felt that, as a non-technical person, he was not qualified to be at the helm of IBM. But within a short time he learned all he could about the organization and the environment in which it operated. He was a visible leader. A favourite expression of his was, “A desk is a dangerous place from which to view the world.”2
Many leaders tend to learn the ropes as they go. Thus, it is not surprising that MBA programs and leadership development efforts have served to fill this gap while leaders seek the knowledge they lack. Job rotations have become common in firms like GE and Nokia, to ensure that leaders experience the various facets of business, whether they are human resource management, finance or operations.
The pitfalls we have observed are several:
Leaders don’t know what they don’t know – Many underestimate the BI they need. We see many leaders who struggle with financial analysis or have difficulty understanding the drivers of operational excellence, or who may not fully grasp the levers that affect brand management, for example.
Leaders who are successful in a specialized area are often unwilling to stretch their comfort zone and learn about other facets of the business.
For those who develop strong BI, the challenge is in knowing these micro elements of the business without micro-managing. Leaders with high BI ensure that those who work for and with them develop BI as well.
Going up the hierarchy of BI, the more you know, the more challenging it is to prioritize – you see everything! Some call this “analysis paralysis.” Being able to prioritize comes from seeing those links across the functional areas of the business that create leverage.
Leaders who have strong BI can often become very insular in their own business, with little concern for others. However, you need to mind your own business while supporting other businesses.
Having high BI is not enough, as leaders need to understand the links to the three other types of intelligence as well.
Leaders must have the BI to work in the business, but they need the Strategic Intelligence (SI) to work on the business. Part of working on the business requires understanding the strategic context in which it is positioned. This tends to go beyond a simple understanding of customers and competitors, to more fundamental elements that drive short- and long-term business success. A leader has to be able to sense what’s coming, to see opportunities that should be the target of action and to see threats before they materialize. And the view has to look at a horizon well into the future.
In 2006, the Stratford Festival of Canada celebrated an important milestone — the performance of Harlem Duet. The show was the first black work to be produced in the festival’s 54-year history; it had an all-black cast. A critical consideration for putting the show on the playbill was the significant change in demographics over the years and those that would occur in the near future. Executive Director Antoni Cimolino felt that it was important for the future of the Festival that the organization commit to broaden the scope of the stories the Festival told. In his view, it was essential that the Festival take steps to better reflect the diversity of the people from which it drew.
As Richard Hodgson, a colleague of ours at Ivey used to say, “It’s no good mistaking the edge of the rut for the horizon.” BI can often be focused on the rut, but SI must be focused on the horizon. So what’s challenging about SI?
Accepted industry practices may not be based on a sound strategic foundation. Bucking industry norms requires thinking about the business from first principles in order to assess whether fundamental assumptions are valid.
The uncertainties around SI are significant, such as the severity of a downturn or the nature and timing of a competitive response. As well, leaders often fail to fully assess the risk/return trade-off.
Understanding that SI is rarely about designing one strategy but rather about designing a set of strategic options that create flexibility and resilience.
Seeing beyond the share price conundrum. The interests of investors are often not aligned with the interest of the company. A company needs to excel in the short-term while managing for the long-term, meaning that it may have to sacrifice short-term cash flow to generate long term profits. Why should investors wait for the return when they can buy other undervalued stocks, hold them while they appreciate, and then buy back into the stock at a more favourable time?
Great SI can lead to short-term pay-offs but leaders need to be mindful of the longer-term implications. As a tax professor once declared, “Pigs get fat and hogs get slaughtered.” Evidence abounds of stakeholders who don’t take kindly to the hog. Recording companies are being slaughtered by consumers who feel vindicated in being able to rip them off with “free” music. Many companies have felt the sting of regulators who can quickly turn the tables on a company/industry that has been “greedy.” And communities have turned on companies like Wal-Mart when they perceive a serious threat. Harlequin, having monopolized the industry for romance novels for years, found its market share cut in half when Simon and Schuster, offended by having their distribution agreement rescinded, invested millions to attract Harlequin’s authors and editors in its bid to buy market share.
Strong BI can drive out SI as the expertise and knowledge of the business may create an analytical base that devalues intuition and creativity. As Einstein once said, “The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honours the servant and has forgotten the gift.”
Conversely, great SI comes from strong BI and both can only be realized with strong OI and PI.
Even those leaders that have People Intelligence (PI) may not have Organizational Intelligence (OI). It is easy for leaders to miss this because the elements of OI tend to be less visible. Jack Welch used to refer to the “social architecture” that forms the foundation for action. Consider the structure, procedures, and compensation systems that tend to hardwire what individuals pay attention to and how they do their work. OI is fundamental and ultimately drives the culture of the organization. Leaders with strong OI understand how organizations work and how to work organizations. They know how and when to use power, influence and persuasion. They understand the dynamics of complex change and how to lead it.
The former CEO of Coca Cola, Douglas Ivester, is an example of a leader who did not measure up against this dimension. Evaluating his leadership, Business Week wrote: “The ex-accountant knew the numbers of the soda business cold, but he had a tin ear when it came to the intangibles of being a chief executive, particularly the ability to manage and nurture a cherished brand in a global market.”3
The pitfalls in acquiring and deploying OI are several:
As a strong leader, it is easy to underestimate the power and influence of the organization. After all, don’t strong leaders excel in spite of the organization? There is plenty of research to show that strong leaders wilt in poorly designed organizations.
Since much of organization is like the iceberg under the water, it is tough to see what to work on and how the pieces of organizational design relate.
An organization is indeed a type of social architecture, and like a ball of yarn where everything comes unravelled simply by pulling on one string, leaders need to be mindful of how the pieces connect when making changes.
It took Jack Welch two decades to build his social architecture. This was in addition to the two previous decades that had brought GE to the strong organization it was when Welch assumed leadership. Having OI is essential, but building the organization that one envisions takes time.
Most of what is written about leadership is about People Intelligence (PI). The charismatic, transformational leader is one who understands people and is able to motivate them to achieve extraordinary results. Twists are put on this relationship. One example is the servant leader, who actually serves followers rather than leads them. However, any twist relates to the same point, which is the need to understand individuals and teams, and what it takes to support and enable them to have the motivation, capability and direction to contribute. The great leader described by Jim Collins is one who, through “level-5” leadership, embraces the fierce determination and humility that lead to involvement and commitment by his or her followers. They develop a sense of self-efficacy, of value, of worth in their followers who want to be led by such leaders, not because they are sheep but because they understand that they can achieve their goals through those leaders. And they are prepared to exercise leadership themselves within the umbrella of the organizational leader who makes them feel good about themselves.
William Aziz, a turnaround leader, uses the following example to illustrate that leadership is about how you “get along with people.” He says that “I used to go to the docks at two in the morning at Interlink Freight Systems. I was the first president that they had seen in the dock in the middle of the night, and the reason I went there was to see what goes on. I went one time on a truck trip from Toronto to Kingston, switched trucks in Kingston and drove to Montreal. I learned what the truck drivers were talking about, their worries, and found out that if you’re a truck driver and you sit in a truck eight hours a day, with a rattle beside your head in the truck, you come out of that truck furious. I came out of that truck in Montreal and I went down to the basement where they had a place where these guys eat breakfast and I sat down by myself, ordered some bacon and eggs. Suddenly one guy came over and he wanted to know who I was. Pretty soon I had about a 100 guys around me, all truck drivers and dock workers who wanted to talk. They’d never seen a president of this company in their little cafeteria.”
Without PI leaders are either ineffective, or their effectiveness is limited to a narrow range of situations.
The criticism of many consultants is that while they have strong BI or SI, they haven’t had to develop enough PI to fully appreciate what it takes to effect change. Not having PI means that BI and SI often contain faulty assumptions. Even if OI is high, actually “making it happen” requires the kind of personal intelligence that may be lacking in many leaders.
The notorious “turnaround” leaders, who have great strategic and business intelligence, and even have the organizational intelligence to understand what needs to be done for the organization to survive, often fail once the immediate crisis passes. They lack the PI to run the surviving, often transformed entity.
Yet, it should be clear from the discussions above that PI alone does not make for a good, never mind a great leader. The effective leader of people who has the wrong strategy – formulated because SI and BI were lacking – merely hastens the demise of the organization. And one who can lead people as individuals or in teams, but who lacks the organizational intelligence to move the larger enterprise, will be equally as ineffective.
Being smart matters! Intellect plays a key role in leadership. It allows people to analyze cause-and- effect relationships, to understand multivariate models with complex interactions, to isolate the effects on some important, dependent variable, such as ROI, of those independent variables such as currency fluctuations, commodity prices, competitive actions, changing consumer demands, and a host of others. Strong intellect gives leaders confidence that they can understand complex issues and can encourage them to use their intuition.
Often, and perhaps surprisingly, the need for a high level of general intellect is either overlooked or wrongly assumed to be in place. Some suggest that the recent global liquidity crisis can be traced to a number of players who clearly did not understand what they were getting into or the risks they were taking. No doubt many articles and books will be written about this in the years to come, but our bet is that a simple lack of basic smarts will emerge as a significant variable underlying at least some of the behaviours of some key people in this situation.
While necessary, being intellectually smart is not a sufficient condition for cross-enterprise leadership; intellect can easily drive out the development of the other dimensions. We have encountered too many leaders and people in leadership positions who think it is all about how bright they are. Their very brightness is then used as an excuse or apology for not developing the PI, SI, BI and OI that they need to be effective cross-enterprise leaders.
Of our five “intelligences” four (BI, SI, OI and PI) can be learned; general intellect is something that you are born with … or not. Nevertheless, it is undoubtedly true that people of lesser intellect can become very good leaders by working hard at the other things that do not come naturally. Again, our own experience with MBA students indicates that those who score in the top 60-70 percent of the graduate management admissions test can develop the OI, PI, BI and SI required for a leader to be effective. Still, the higher the levels of intellect that one brings to the game, the better the likely outcome.
Cross-Enterprise Leadership Capability (CELC)
We have described the five basic ingredients of Cross-Enterprise Leadership Capability. However, it is the recipe itself that is the real secret sauce – the ability to synthesize, integrate and sequence the levers of SI, BI, OI, PI and the underlying GI. It is this ability which lies at the heart of cross-enterprise leadership.
Although many books have been written about SI, BI, OI and PI, few highlight the importance of having all of them. It is not surprising, since each has evolved from different disciplines. For example, the psychological base of PI is quite different from the economic and political base of SI. Organizational Intelligence finds its roots in sociology and anthropology. And BI tends to arise from specialized knowledge in areas such as operations, finance, marketing and IT. The point is that it takes enormous breadth to understand each of these areas. Therefore it is not surprising that they are compartmentalized when it comes to articles, books and even many leadership development programs.
But make no mistake about this: Considering or having just one type of intelligence without the others is not only sub-optimal, it can be dangerous. For example, having great PI without SI and BI generally means that people are engaged, but about the wrong things! SI without OI is what we tend to call good industry analysis without any understanding of how the organization will execute it. Many strategies fail because of poor execution, because leaders don’t understand the organizational capabilities and resources required to execute the strategy. There are many leaders with strong BI that can’t seem to grasp SI, and there are individuals with strong SI and weak BI. Neither type of leader will perform well, since they need to see both the forest and the trees to be effective.
Understanding the connection among SI, BI, OI and PI means more than being competent in each area. Having the capacity to anticipate the dynamics of the inter-relationships is critical to ensuring that leaders are able to sequence actions in a way that leverages or strengthens a particular area. Every leader and every organization will have strengths and weaknesses in each area. The leadership challenge is to diagnose those strengths and weaknesses to consider the best sequence of actions.
The synthesis and sequencing of SI, BI, OI and PI are core dimensions of Cross Enterprise Leadership Capability (CELC), but there are other aspects as well. In fact, we see the core of CELC as a set of leadership attributes that provide the engine for development of all of the areas. It has been said that the only sustainable competitive advantage for organizations is their capacity to learn. The same can be said for leaders. Below, we outline a set of attributes that are grounded in a learning orientation of the Cross-Enterprise Leader. Much can be said about these essential qualities. We draw on the extensive work of Christopher Peterson and Martin Seligman, who have amassed an 800-page compendium of research that helps to identify the character strengths and virtues that have global appeal. They identify six virtues along with their associated character strengths. When we put their list together with our experiences it creates a definition of the character elements essential to effective cross enterprise leadership:
Wisdom – Creativity, curiosity, open-mindedness, love of learning and perspective are critical to deepening and developing one’s leadership capability. A key aspect of this learning capability is dealing with complexity and ambiguity. As one executive described it, “It is okay to get caught in the headlights but it is not okay to be frozen in them.”
Temperateness4 – Being temperate involves curbing the tendency to excess, which entails having modesty, self-control and humility. The leader who thinks he or she knows everything is not in a very good position to learn. Furthermore, learning often arises from making mistakes and many leaders do not want to admit mistakes to themselves or others. Many leaders fall short in this area since they assume that being a leader means they have all the answers.
Integrity– Having an ethical worldview that you can articulate and rely on to wade through the messy and challenging leadership issues is essential. We have encountered many leaders who have no moral compass, and who tend to lose their way as a result. Peterson and Seligman referred to this as a sense of “justice”. It is the preparedness as a leader “to do the right thing in the right way” all of the time and to be a coherent, authentic person both in one’s persona as a formal organizational leader and as a private individual. The leader with integrity does not abandon that when he or she walks into the office, no matter how tempting it can be to take the most expedient approach when that road leads away from the ethical path.
Compassion – Often lost in discussions of leadership is the deep connection to those one leads. Peterson and Seligman referred to this as a sense of humanity and some of the most powerful forms of leadership have roots in humanity. We interpret it as respect for those one leads and a passion for the cause that is grounded in this respect.
Courage – What we see lacking in many leaders is the “fire in their belly” required to lead. Passion and courage are not abstract concepts but rather real manifestations of why an individual wants to lead and what he/she hopes to accomplish. Having courage also acknowledges that leaders face extremely challenging situations in pursuit of their aims. Having persistence and vitality to face obstacles is critical.
Transcendence – Often, achieving greatness requires having a level of aspiration that transcends the obvious. It is a rather rare and interesting collection of character strengths, in the form of hope, humour, gratitude, a sense of spirituality and appreciation of excellence that appear to foster the capacity to transcend. The challenge for leaders in many organizations is to appreciate the place for this kind of transcendence. However, apart from religious leaders, like the Dalai Lama, who embody this quality, many leaders find the grind of the daily leadership challenge drives out any possibility of transcendence.
When these six virtues are accompanied by the five “intelligences” we have described above they form the knowledge, understanding, skill, judgment and character required to be a cross-enterprise leader. This is the secret sauce!
Growing and Developing Cross Enterprise Leaders
How do leaders develop this capability and what can organizations do to stimulate this growth?
We have suggested that PI, OI, BI and SI can be learned. But only part of this, a small part, is book-based learning. PI and OI particularly are learned through critical experiences and reflection on those experiences. You need to try to persuade and influence people to learn how to do it effectively; you need to experience and manage organizational change to learn how to do it well. You need to practice and get feedback and coaching to learn how to be an effective communicator; you need to experience group dynamics to learn how to manage teams for high performance. You need to move yourself outside of your safety zone and experience new challenges, escalating in complexity and the associated risk of failure.
You have to be a constant learner. Almost every minute of every day is an opportunity to deepen these intelligences. While acting to achieve results, leaders have the opportunity to learn and develop. We have a video case series that has become the favourite of many students. It depicts a young leader in Sabena Airlines – the former national airline of Belgium – who faces a series of decisions/actions, most of which take place on the spur of the moment without much time to think or plan. Students realize that it is through this pattern of actions that the organization develops, the strategy unfolds, the business achieves (or fails to achieve) its goals and the leader develops in the process, refining his or her abilities by making the ordinary extraordinary.
It is important to note that developing many of these areas is a pain-free process in that it involves acquiring more intelligence and capability based on the learning experiences arising from day-to-day activities. However, a lot of learning comes from the uncomfortable stretch and difficult experiences that challenge us. While there is opportunity to develop through the ordinary every-day decisions, it is often significant decisions and life experiences that both test us and develop us.
Many leaders look to leadership development programs to accelerate their learning. While this can be achieved, it needs to be recognized that such leadership development is truly a life-long process. Many leaders and organizations are starting to map that journey, to try and orchestrate the types of experiences that will generate the necessary learning to round out a leader. There is both purpose and happenstance in leadership development and leaders need to embrace both.
Organizations play a vital role in this development. They should be hiring people who are smart and then giving them the critical experiences that are tailored to develop their strengths and weaknesses. We argue that developing strengths alone is insufficient if you want people to have cross-enterprise leadership capabilities. It can be argued that an absence of PI, OI, BI and SI can somehow be compensated for by others in the executive team who may have what one leader lacks. But, in practice, we find this to be rare. The exceptional cross-enterprise leaders that we have seen possess all of them, though they are neither developed nor manifested to the same degree.
Organizations can make planned interventions when they see that people lack these essential requirements; performance and developmental coaching, coupled with effective mentoring, can be used aggressively to develop strengths and shore-up weaknesses; programs can be used selectively, especially to increase business and strategic intelligence; the right kinds of project work and selective assignments can be used to develop organizational intelligence; internal programs can reinforce the need for these intelligences and help develop them.
Organizations can and must get their executive messaging about this topic right: “Here’s what you need to be to get ahead in this organization.” And they must manage the credibility associated with this statement; every time a person who lacks PI, for example, is promoted to a senior leadership role the organization is sending the message that “PI doesn’t matter.”
The hardest thing is to develop an individual’s ability to synthesize and deploy the five types of intelligence into a true cross-enterprise capability. Running a business unit, with responsibility for a bottom line provides a tremendous learning opportunity. A conglomerate or multi-business unit operation has clear advantages here; they often have small business units that they can use as training grounds for those that they think have “the right stuff” to be cross-enterprise leaders but who need to be tested and developed further. The availability and use of such challenging opportunities is one of the reasons that companies such as GE have developed so many cross-enterprise leaders. Those companies who lack these opportunities have to create special roles or assignments, rich with the kinds of sequencing and synthesizing challenges that are essential to cross-enterprise leadership development.
The desire for simplicity in both description and prescription has led many authors and researchers to attempt to describe “the great leader” in simple terms. We think that such simple explanations are neither possible nor desirable. For us, leadership – particularly cross enterprise leadership – will always be an amalgam of character and a multitude of intelligences, with each embodying the knowledge, understanding and skills to do the job at hand and plan for the challenges of the future. Those that have these characteristics and who learn to sequence and synthesize them well in a given context will be the effective cross-enterprise leaders of tomorrow.
1 The terms “executive” and “intelligence” have appeared in prior literature, notably in the work of Justin Menkes in Executive Intelligence: What All Great Leaders Have. 2005 Executive Intelligence Group, HarperCollins. However, our use of the terms extend his more restricted view of the competencies, knowledge, values and judgment required by leaders, especially those that hope to lead cross-enterprise.
2 Who says elephants can’t dance: inside IBMs turnaround. Louis V. Gerstner Jr., HarperCollins, 2004.
3 Coke Didn’t Go Better with Ivester, Business Week Online Briefing, December 6, 1999
4 Peterson and Seligman refer to this as “temperance”; however, the common use of temperance does not convey the appropriate meaning.