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The Culture Of Leadership

Speeches and Opinions
Nov 12, 2007

John Holden, head of culture at Demos – the UK think tank for everyday democracy – reassesses the concept of leadership in a world driven by creativity and innovation.

The latest Australian business and leadership survey came out in April and its headline was this: ‘More vision and Leadership needed’. The detail was more worrying: ‘Leadership vision is slipping away’, ‘the lack of vision and strategy is a concern’ and ‘vision and strategy does not enjoy a priority status in most leadership and senior management responsibilities’.

This was a survey of senior managers, and I wonder what the junior managers would have said?

In a major survey of managers across a broad spectrum of public, private and voluntary organisations in the UK, Demos uncovered a great deal of dissatisfaction among junior staff. 55 per cent of them said that what they most rated in a leader was inspiration, but only 11 per cent said that they experienced it in reality. What they found most often in their leaders was ambition. Overall, leadership in UK organisations received a low rating: a third of all managers, and half of junior managers rated it ‘poor’. The proportion of junior managers who rated the quality of their leadership as high was a shameful one per cent. There is no equivalent survey in Australia, but there’s no reason to suppose that your fine country is an exception to what seems to be a global crisis of leadership.

And there can be no doubt at all that it’s tough at the top. Leaders are scrutinised and vilified in the media as never before. I could quote dozens of examples from the business world of CEOs being feted on Monday and ridiculed on Tuesday. Gurus such as Jack Welch of General Motors move from the bestseller lists to the remainder pile overnight. In other sectors too, the transition from hero to zero can be devastatingly swift – you don’t have to look any further than the New South Wales legislature to realise that. Even the world’s top job is going the same way – George Bush’s approval ratings have slipped from 88 per cent to 35 per cent in just over three years.

It is no exaggeration to use the word crisis in relation to leadership. We seem to be getting something radically wrong on a massive scale, so let’s try to think through what it might be.

Let’s begin with the context of leadership. We all know that there has been a decrease in deference in our society, and that consumerism has taught everybody to challenge poor performance. Leaders can no longer expect their title, or the position that they occupy, to confer automatic authority. They have to re-validate themselves every day.

Just as important, we can see that the shape and characteristics of our economy are undergoing a fundamental change, in turn affecting the ways that people work, the shape of the organisations that they work in, and the challenges that leaders face.

I would pick out four features as key:

The first is the shift away from a relatively steady state, predict and provide organisational model. We no longer live in a world where manufacturers can test market products and then gear up for production. The world is too fast for that. We now rely on invention, innovation and creativity to generate new products, new services, new processes and new solutions.

The US economist Richard Florida wrote this: ‘Human creativity is the ultimate economic resource. The ability to come up with new ideas and better ways of doing things is ultimately what raises productivity and thus in turn living standards’. That is obviously right – our competitive advantage these days lies in our heads not in our hands. But I just want to make a couple of observations. The first is that the need for innovation is not confined to the so-called cultural and creative industries. It’s needed in manufacturing, in social services, in the not-for-profit sector and in government as much as in new media and design. One of the world’s most innovative companies, Semco in Brazil, famous for its extraordinary industrial democracy, makes air conditioning units.

Having said that, it is true that the creative economy is growing at a faster rate than the rest of the economy. In Australia creative employment is estimated at 212,000 people – five per cent of total Australian employment contributing $21 billion to the economy. This has important implications for the country, for states, cities and individuals. One feature of the creative economy is that there is increasing inequality between those at the forefront of creativity and those left behind. The mean income of creative employees in Australia is estimated to be 34 per cent higher than the average. Creative work tends to concentrate in clusters and cities – you can see this in London, Austin Texas, and Sydney. With higher growth rates of income, it doesn’t take a PhD in maths to work out that, as time passes, the prosperity gap between these sorts of places and the rest is likely to get bigger.

So my first point about leadership, flowing from that argument is this: leaders need to be able to stimulate and to manage creativity in a fast-paced and unpredictable world. Organisations, cities and regions need leaders who are capable of doing that.

The next thing to observe is that this speeded-up economy has changed the shape of most organisations. No longer is everything done in-house. I imagine that every organisation that everyone in this room works for relies on a network of outsourced labour and services – be it consultants, sandwich vendors, computer engineers, or photocopying services – in a way that they did not a decade ago. More than that, many organisations find that the only way to satisfy the rapidly changing demands of customers or citizens is to stitch together different products, services, resources and skills in flexible combinations to deliver solutions where and when they are most needed. That means co-operating with a lot of people outside the firm itself. In business, Cisco systems is perhaps the shining example of this way of working. In the public sector, this collaborative approach is played out through partnership working – which has become not just a catchphrase but a vital way in which to get things done. So, across all sectors, splendid isolation is out, collaboration is in.

The consequence is that leadership must now operate across networks and not just within organisations. You used to be able to point to the top of an organogram to see who was leader, but there are no such easy answers when you are talking about networks. The leaders of today and tomorrow need to be able to get things done in circumstances where they have no direct controlling authority.

My third point is that in a knowledge economy, a highly educated workforce will not simply be told what to do – nor will they put up with being treated badly by an organisation when their skills are in high demand within a marketplace. A couple of years ago Demos invited Richard Florida – remember him? – to visit the UK and we arranged for him to address public audiences and to meet various people in government. Briefly put, his thesis is that economies thrive in places that attract creative people: primarily those people need cultural stimulation and tolerance. Companies then gravitate to where this creative workforce is found and a virtuous economic circle results.

(Let me just mention a really interesting example of this that I came across recently, in a report about the economic impact of public libraries in the State of Florida. Apparently, in the 1950s the Ford Motor Company decided not to locate a plant in the town of Tampa, because there had been no public support for building new libraries.)

But let’s get back to leaders. Their job is to lead creative people who are constantly questioning what they do, and they must somehow provide the conditions in which those creative people can flourish. Believe me, speaking as someone who works with 20 very bright people all in their mid-20s, this can be a real challenge. The regional implications of this are obvious: part of the task for leaders is to make sure their region attracts and keeps creative people.

The fourth feature is that we live in an increasingly specialist world, where specialists find it more and more difficult to talk to each other. We operate in professional, institutional and functional silos with their own cultures. Leaders can no longer have a knowledge base that encompasses the full range of functions that they lead. I know this from personal experience. In an earlier life I was a merchant banker, and twenty five years ago I was involved in the early days of the swap options market. I had a wonderful time because the directors of the bank where I worked did not have a clue about what a swap option was. Neither of course did the leaders of Barings, and as we all know, they unwittingly bet the bank and lost it.

The implication for leaders is that they now have to lead despite the fact that their store of knowledge is always going to be inadequate. As I will argue later, much leadership training is devoted to a vain attempt to deny this truth, rather than trying to equip leaders to deal with it.

What does all this add up to?

These three fundamental changes in the way that the world operates: basically the end of predictability, the end of deference, and the inadequacy of the command and control model, spell trouble for many of the assumptions we have about what leadership means, what it is for, and how we might develop it. Our conceptions are all too often still rooted in an outmoded ‘great man’ theory that mistakes the formal authority of status, rank and station with the exercise of leadership. I recently spoke to one of the UK’s leading headhunters who specialises in finding CEOs for Footsie 100 companies. He subscribes to the theory that all you need is ‘the right man at the top’ – his words, and of course it’s always a man – but I think he’s wrong. The average tenure in office of a Footsie 100 Chief Executive is just eighteen months, which is why they all have three year contracts, and why headhunters get rich.

But old ideas about leadership die hard. Just like the junior managers who I mentioned at the beginning of this speech, we still expect leaders to somehow provide certainty in an uncertain world. As the Harvard professor Ronald Heifitz puts it ‘We call for someone with answers, decisions, strength and a map of the future – someone in short who can make hard problems simple’. So in many countries we see increasing powers being ceded to prime ministers, we find desperate faith being placed in football managers, and business leaders being called gurus and given cult-leader status. What is striking about all these is that our collective response to a crisis in performance is to turn to a traditional model of leadership that has already failed us.

So what should we do about all this? We need to begin with a fundamental rethink about leadership itself. We need to recognise that you become a leader through something you do, not because of who you are: that leadership is an activity not a position. And what is that activity? Heifitz calls it ‘mobilising people to do adaptive work’, by which he means forcing people to confront the gap between the rhetoric of what they are trying to achieve and the reality of their current capacity to achieve it. The new style of successful leaders do not try to impose change, instead they make the case for why change is necessary, and then create the conditions, and make the space, for it to occur.

This simple insight has profound implications for the practice of leadership, and turns many of our current ways of doing things through 180 degrees. Let me offer some brief examples:

Traditionally, organisational cultures have been focused inwards, with strategies flowing outwards from ‘core strengths’. The questions that get asked are: what is unique about our product/our service/our region? But new leaders work from the outside in. They start with the deepest needs of their users or customers in their market, and then work back to establish what organisational configurations and capacities are needed to meet them.

Traditionally, it has been the job of leaders to define a vision and pursue it decisively. But in an unpredictable world that may be of little use, particularly when the best ideas about how to adapt and improve are embedded in the tacit knowledge of front-line staff rather than in the CEO’s office or the boardroom. A critical task for new leaders is to find ways of unlocking and harnessing this knowledge, and of sharing it amongst the whole organisation. Rather than defining a vision, leaders need to structure a conversation.

Traditionally, the reverse side of the coin of decisiveness has been inaction. Stasis through committee; the hopeless search for consensus in the absence of strong leadership. New leaders recognise that agreement is not a precondition for action. But sufficient trust is. New leaders understand that in a complex world the correct course of action is not always clear. But by building trust and confidence they enable people to act, and create systems that are robust enough to cope with reverses and changes. Tim Smit, the Managing Director of the Eden centre in Cornwall called his staff together on the day before it opened and said this to them: ‘Tomorrow, people will ask you for things that we haven’t thought of. If you respond in a way which goes wrong, no-one will blame you. If you do nothing, I’ll sack you.’ The point here is that Tim Smit expects his staff to act autonomously – in other words as leaders in their own right. Inaction – not failure – invokes sanctions.

Traditional leaders are expected to be all-knowing; they have learnt a lot and are now in a position to exercise authority because of that accumulation of knowledge. New leaders don’t pretend to have all the answers – but one thing they do know is that they, and everyone in their organisation, must be constantly listening and learning.

Traditionally, the deal with leadership was ‘I lead, you follow’. New leaders have a different kind of contract with their followers. They reach back to an ancient idea of self-government as the ultimate goal of leadership. They understand that most systems are too complex and unpredictable to be controlled from the top down and that leadership is distributed. As the Chinese philosopher of war Sun Tzu put it ‘ The good leader is the one people adore, the wicked leader is the one people despise, and the great leader is the one where people say ‘we did it ourselves’.

In summary then we can see that leaders today need a new set of competencies and a different world-view. They must:

Be driven by external circumstances and contexts rather than following the internal logic of their own organisations

Be able to harness and manage creative people who cannot simply be ordered about

Be constantly open to new learning. Be adaptable, flexible and willing to change

Be able to create trust between people in an organisation, and to destroy cultures of blame, because blame is the enemy of innovation and improvement

Be confident enough to distribute leadership out of their own hands and across a wider group of people

Be able to work across networks as well as within organisations.

This is a radically different list than we would have come up with if we were answering the question – what makes a good leader? – twenty years ago.

Clearly, it offers as many challenges to followers as it does to leaders. The junior managers I mentioned at the beginning need to re-think some of their own ideas. They should still rate highly, as they did in our survey, characteristics such as being forward-looking, honest, fair-minded, courageous and supportive, but they, and all of us, need to recognise that in today’s complex world they should expect leaders who push them outside their comfort zones, who look to them for solutions, and who ask the right questions rather than provide all the answers.

If what we want is a vibrant, creative and expanding economy then we need to act quickly in relation to leadership. The rest of the world is not standing still. We may have a lead in using our brains but it won’t last for long. Already China has a thriving design industry, the Indian software sector is huge and growing rapidly, South Korea has probably the best digital infrastructure of any country, and even Russia has a vibrant fashion sector.

Competitor countries are rapidly expanding their turnout of graduates: two million in China, three million in India. Every year. Intellectual capacity is growing globally, but that raw capacity needs to be harnessed: at an individual level by nurturing entrepreneurship, at an organisational level by developing new forms of leadership. In other words, it will be the mobilisation of capacity, and not just the generation of capacity, that will enable a country, a city or an organisation to maintain its competitive position.

Leadership is therefore a vital part of success in the new knowledge economy, but where might we look for some answers to the question of how we can develop leaders?

I choose the word ‘develop’ carefully. With leadership there is no simple training formula that will produce the desired results. Most training budgets around leadership concentrate on teaching knowledge, but that sets the bar too low: knowledge is only the most basic thing that a leader needs, and as I’ve said, it’s pretty well impossible to teach someone all the knowledge in an organisation these days. And yet so often we train for knowledge not leadership. Where are the budgets for leadership development? The Australian survey of leadership says this: ‘There is a lack of willingness to invest in the resources that can better ensure a focus on vision and long-term strategy’ which I take to mean that there is a lack of investment in leadership.

Beyond knowledge and skills, leaders need other things to help them develop. A couple of years ago I interviewed 30 ‘top leaders’ in the UK – people running very large organisations in the private and voluntary sectors, and virtually all said that they had become leaders through aspiring to follow the example of someone else – a family member, a boss, even a scoutmaster. So mentoring is important. As is time out, time for reflection. That same group had nearly all developed their values through a process of internal reflection – be it at a summer business school, at a religious retreat or on a long journey.

But I want to offer an example of somewhere that I think might illuminate some of the answers: the cultural sector. Now, I am not trying to claim that every theatre and art gallery is led in the new way that I have been talking about, nor that the sector has got everything right in the way it develops leaders, but there are some things that we can learn:

First, we can learn about leadership from cultural content, especially literature, film and theatre: the qualities of leadership are reflected on from Homer’s Odyssey to the TV series the West Wing. I think that the UK is in the forefront here. We are doing a lot of it and there is a growing practice of using cultural resources in leadership development, such as the Royal Shakespeare Company’s workshops analysing Henry the Fifth’s speech at Agincourt.

Second, we can look at some parts of the cultural sector and realise that their leaders have been working for years with exactly the practices of new leadership that I have been talking about. Conductors don’t tell orchestras what to do; the players are too independent-minded for that, plus they are all perfectly capable of playing the notes without anyone waving a baton at them. The conductor’s role is not to get the piece of music played, it is to enable the players to work together to get the best results.

In a jazz ensemble we can see that what is going on is exactly what needs to happen inside companies: the constant adaptation to change, and levels of co-operation, mutual respect and trust that make constant, organised innovation possible.

In theatre, the process of rehearsal brings teams together for first time to achieve a specific purpose People who have never met each other before have to work together to produce something extraordinary. In my experience, I have never seen better examples of managing teams than the way some theatre directors operate – although the opposite is also true!

Third, the cultural sector has always had to do some of things that other organisations are now having to do, like

Managing creative people

Allowing innovation to flourish

Managing the risks of creativity

Managing on few resources

Satisfying multiple stakeholders

Being sensitive in relation to workforce and social issues such as diversity and equality

Articulating a moral purpose that drives organisational ambition and performance.

And finally, culture is a learning environment, in

two senses: the cultural infrastructure offers

everyone a place to learn; and working within the creative parts of culture is, by definition, a learning experience.

We could learn a lot from mutual exchange between the cultural sector and other sectors, but there is very little interchange of people, or of ideas. Perhaps the higher education sector could help develop better linkages between culture and business, between culture and the public and wider voluntary sectors.

For one thing is certain: we need to get better at leadership. If Australia – its states, its cities and its people – are to flourish, it needs leaders with the capacity to thrive in a world where creativity and innovation are the drivers of prosperity.

About the author

John Holden is an internationally recognised expert on cultural policy. He is currently head of culture at the UK think tank for everyday democracy – Demos. He is the author of several important publications including Cultural Value and the Crisis of Legitimacy and Capturing Cultural Value.