Yvonne Sell, leadership and talent practice leader, Hay Group.
There are times when it’s hard to escape the impression that change is in the air.
We live in such a time. We are witnessing a fundamental shift in the balance of global economic power, and in working practices around the world. The established order is being turned on its head.
But exactly what is changing? Where is it leading us? What will the world look like a decade or two from now? And what will it mean for companies, their workforces and their leaders?
The world turned upside down
Last year, an iconic symbol of London – the onetime global centre of commerce – came under Chinese ownership.
The maker of the city’s famous black cabs, Manganese Bronze, was bought by Chinese car manufacturer Geely. More accurately, Manganese Bronze was rescued by Geely, having gone bankrupt a few months before.
Geely had already shaken the world economic order back in 2010, when it acquired the western automotive giant and pride of Swedish industry, Volvo.
Geely is just one headline example of the radical changes taking place. China is on the verge of eclipsing the US as the world’s largest economy. Philips divested its TV division to Hong Kong’s TPV Television. IBM sold its computing division to Lenovo. And an Indian has become co-CEO of Deutsche Bank.
But change is also being reflected in myriad less dramatic trends.
Indian and Chinese graduates are increasingly choosing to work for domestic rather than western corporations. Senior executives in emerging markets frequently earn more than those in the West. Employees around the world are becoming as concerned about their work-life balance as they are about their pay packet. Many younger employees object to working long hours, while happily ‘friending’ their managers on Facebook.
The fact is that change is happening around us. True, the business environment has always been in a continuous state of flux, but this is different. Something more deep-seated is at play.
My Hay Group colleague Georg Vielmetter and I describe the changes affecting the global business landscape in our new book, Leadership 2030: The Six Megatrends You Need to Understand to Lead Your Company into The Future.
The book is based on research pinpointing six ‘megatrends’ that are creating unparalleled complexity and enormous challenges for corporations and their leaders.
Megatrends are long-term, transformational processes that have global reach, broad scope, and a fundamental and dramatic impact on societies and organisations.
The six megatrends we highlight are:
- Globalisation 2.0
- The environmental crisis
- Individualism and value pluralism
- The digital era
- Demographic change
- Technological convergence
The power of six
The implications of the megatrends become clear when looking at each development in a little more detail:
1. East goes west: A new world order is emerging. Globalisation 2.0 is fundamentally different from its predecessor, which saw western corporations export their manufacturing operations, management systems and executive talent eastwards.
Today, economic power is shifting in the opposite direction. As Geely’s acquisitive forays demonstrate, the East is no longer merely a sweatshop for the West. Trade is booming between developing markets, leaving ‘old’ economies out of the loop.
What’s more, rapid economic development in emerging markets is giving rise to a new global middle class. This is generating intense competition for new markets with highly localised dynamics.
The old adage, ‘think global, act local’, has never been more relevant: a single, centralised strategy will no longer suffice under globalisation 2.0. Businesses will need to fine-tune their radars to local trends and tastes. The need to embrace diversity – in all its forms – will therefore be greater than ever.
2. Less is more: The signs of climate change are becoming frighteningly real.
Extreme weather events are more common, and wreak more havoc, each year. Swiss Re estimated that they cost some $218 billion in 2010 alone.
In addition, critical natural resources – oil, water and minerals – are running short. Commodity prices have shot up over the last decade, as raw materials have become rarer and extraction more difficult.
The environmental crisis will lead to heightened volatility, inflated costs, squeezed margins and frustrated shareholders. Coping with the environmental crisis will require revolutionary strategies and new forms of collaboration – at times with competitors – to achieve the complex solutions required.
Sustainability will become critical to survival, and carbon reduction essential to market competitiveness. Firms will therefore need to restructure their operations, as environmental concerns move from CSR to the bottom line.
Leaders must embed sustainable operations and cultures, communicate a clear rationale for such dramatic change, and decode what it means for employee’s roles and performance.
3. Power to the person: Under globalisation 2.0, millions will discover a widening range of life and career options. And they will have the freedom to make choices that are based on values, not economics.
Growing affluence will transform people’s motives as consumers and employees. Lifestyle, recognition, self-expression and beliefs will begin to take priority over price, pay and promotion. Talent will have the option not to pursue traditional career paths.
Increasingly, individuals will demand to be treated as just that. They will expect employers to recognise their unique needs, preferences and contribution to the business.
As such, firms can no longer expect loyalty. They will need to get closer to their markets and workforces than ever before. They must understand every employee and customer as an individual, or lose out on talent and custom.
Quick-thinking organisations will seize local market opportunities and capitalise on a growing demand for more customised products and services. Smart employers will design ways of working to suit the individual, not the organisation. This will necessitate flatter, more flexible and less centralised structures.
4. Remote possibilities: Technology is shifting the balance of power between corporates and their customers and employees.
In the digital era, consumers can readily pick and choose where they buy, compare providers, and trade between themselves online.
Meanwhile, employees can operate anywhere, anytime, on any device, challenging the need for conventional workplaces and hierarchies. As work goes remote, and social media erodes the boundaries between our private and professional lives, current working practices are being called into question.
At the same time, reputations – corporate and personal – are at risk from disgruntled individuals who think nothing of holding others to account online. At HMV last year, staff tweeted a running commentary to the outside world while being made redundant.
The virtual domain appeals particularly to younger generations who readily embrace digital technology, giving them a technological edge over older colleagues. However, these ‘digital natives’ can lack respect for corporate conventions. Organisations need to accommodate and cross-skill both groups.
Amid heightened transparency, leaders must display high standards of integrity and sincerity. They will need to manage dispersed and diverse individuals with different degrees of digital competence, while fostering unity, engagement and collaboration among loose-knit teams who rarely meet.
5. Social insecurity. The global population is expanding and aging. Demographic change is reshaping the world’s workforce.
An aging populace – in the West in particular – will mean a shrinking recruitment pool, chronic skills shortages and a fierce war for talent.
Businesses will need to go all out to attract, develop and retain a highly diverse talent pipeline. Structures, cultures and practices must harness diversity and enable each individual to thrive. A single rallying cry to the workforce will no longer suffice.
Leaders must learn to live with conflicting trends and staff demands, and be sensitive to their employees’ needs. Attuned listening skills and high levels of empathy will be needed to understand the motivations of each team member.
6. Vorsprung durch technik: The race for innovation is on. Advanced technologies are joining forces to transform everyday life beyond recognition.
The convergence of nano, bio, information and cognitive (NBIC) sciences will prompt quantum leaps in important areas such as health, medicine, manufacturing, communications, energy and food production.
NBIC technologies will generate untold new product markets, leaving others obsolete. Businesses must ensure that short-term financial pressures do not obscure the need to invest in long-term, pioneering research and development.
The need for innovation will usher in an era of ‘big’ collaboration – between divisions, companies, and whole scientific disciplines. New, open forms of corporate structure will be needed to foster knowledge-sharing between professions which have long considered themselves the exclusive guardians of unique expertise.
This will require exceptional collaboration and influencing skills. Leaders will need to strike the right balance between empowerment and control; between fostering ideas and driving product development. They will need to know enough about individuals and their disciplines to create harmony, but avoid disrupting the creative tension that leads to breakthroughs. This will require enormous cognitive capacity, a genuine human touch and the ability to listen.
Leaders will also need to stay abreast of mind-boggling technological progress, to spot killer applications in fields they may not fully understand. They will need to manage uncertainty, as the outcomes of NBIC convergence are highly unpredictable. And they must remain sensitive to society’s reaction to radical technological leaps.
Get with the programmer
So what will the six megatrends mean for businesses and their leaders in everyday terms? Let’s take the example of Arvi.
A friend of mine, Arvi (not his real name) encapsulates life under the megatrends. A computer programmer, he is a member of the new global middle class, whose talent allows them to negotiate working conditions on their own terms. He exemplifies the need for organisations to think beyond conventional structures and traditional employment relationships.
At 30, Arvi has never had what he would consider a ‘real’ job. He doesn’t do nine-to-five. He chooses when and where he works, and how he communicates. And he retains the copyright on his work.
Arvi doesn’t really ‘live’ anywhere. His flat is in London, but only because of its travel connections. He will write code lying on the beach in Bali, or at a music festival on the Black Sea. Most of his communication is virtual. The boundaries between his professional and private life are fuzzy, which is just how he likes them.
He is one of his firm’s most skilled programmers, and has just published his first book on the subject. But he has no desire to climb the corporate ladder. Leadership responsibility leaves him cold. With his talent, he knows he can afford not to pursue the usual career paths.
Fortunately, his bosses realise this too. They allow the flexible working that provides the work-life balance talented workers like Arvi demand. His employer knows that treating them as individuals is the only way to recruit the skills companies need for a global, tech-savvy, highly mobile, increasingly individualised marketplace.
The rise of the altrocentric
To steer their organisations through the effects of the megatrends, and manage people like Arvi, tomorrow’s business leaders will need to be very different from those of today.
Twenty years from now, leaders will be tasked with generating loyalty among diverse, independent and remote employees, despite little direct authority over them. Teams may comprise octogenarians, 40-something ‘Gen Y-ers’ and 25-year-old ‘digital natives’, located across four continents, and with different nationalities, backgrounds, cultures and values.
Traditional, command-and-control leadership will fall short in the face of such a challenge. The leaders of the future must be willing to trade personal power for collaboration, and to keep their egos in check.
The leaders of the future will be ‘altrocentric’.
Altrocentric individuals focus primarily on others, seeing themselves as just part of the greater whole. They treat people as individuals – as humans, not just resources.
Altrocentrics display high levels of empathy, maturity, integrity, self-awareness, openness and emotional intelligence. They have strong ethical standards and strategic capabilities. They instinctively understand the changing business landscape, and know how to make sense of it for those around them.
Developing tomorrow’s leaders
The need for altrocentric leadership will call into question much of what we think we know about developing and motivating leaders. Traditional ways of encouraging leadership performance will not tap into the altrocentric psyche.
Current thinking is based largely on the assumption that leaders are driven by personal power: influencing others in line with their own interests.
But this isn’t what gets altrocentrics out of bed in the morning. Their focus is on empowering others. They rely on the very opposite of personal power – socialised power: enabling others to perform.
Leadership development will therefore need to be based on a new model of potential.
Essential attributes for future leaders will include: maturity, empathy and openness; integrity, intellectual curiosity and ethical standards; breadth of perspective, concern for diversity and contextual awareness; not to mention the ability to recognise, manage and collaborate with an expanding stakeholder community.
Setting the boundaries
As well as demanding a new style of leadership, the megatrends will force organisations to rethink how they operate. As we’ve seen, flatter, less centralised and more open structures will be crucial, as will low-carbon operations.
This presents a dilemma. Greater complexity will call for tighter management and co-ordination. But at the same time, employees will be demanding more flexibility and control over their work and lifestyle.
To square the circle, leaders will need to establish ‘bounded autonomy’ – autonomy defined by a clear direction and distinct boundaries – to empower and guide employees in an individualised and digital world. They will need to embed the behaviours, values, and competencies that signal what the company stands for.
However, bounded autonomy will look different in different corporations, and even in different parts of the same business.
Bounded autonomy may entail enabling remote working. It may mean fostering cross-division, or possibly cross-company, collaboration. It might call for more flexible job roles, titles and descriptions – or possibly doing away with these altogether.
And of course, bounded autonomy may mean all of the above.
The benefit of foresight
Life under the megatrends will be different depending on where in the world you sit.
For western firms, it will require structures that enable them to adapt to new cultures and react to local dynamics. In emerging markets, it will mean working out how to work in western contexts. Either way, it will drive the need to adapt global strategies to local markets, by bringing local territories into the decision-making fold.
But understanding the consequences of the megatrends will be critical to survival. Designing strategy with them in mind will make it easier to adapt and survive in the coming decades.
Ultimately, success will come down to being as agile as possible. That will require organisations to embrace diversity in all its forms, and leaders to unite a dispersed and demanding workforce behind a single sense of purpose.
Standing on the brink of great change is always frightening. But I am excited about the future and its possibilities. It may take a huge leap of faith to embark on the necessary change, but it will be worth the risk.