When you’re the CEO – your greatest responsibility is to recognize whether your organization requires a major change in direction.” Hal Gregersen, HBR
The Presidents of Harvard and Penn – out. The President of Columbia, under severe and loud pressure to resign. The CEO and Founder of Open AI, Sam Altman, out and then back in but with three board members out. Out – 50 employees fired by Google CEO after in-office Israel protest. Mike Johnson, Speaker of the U.S. House, hanging by a thread at an institution withstanding three leaders in the last 15 months – Pelosi, McCarthy and now Johnson’s ouster could make it four. Thankfully, we are not leaders of universities, high tech firms or Congress. Or, are we?
The dance of leaders with those they lead just keeps getting more chaotic. Whether they are the U. S. President, leaders in Congress, CEOs of business, executive directors of nonprofits, teachers in a classroom of kids or plain everyday parents, their demands have shifted significantly in the past couple of decades. The rise of the culture wars and rapid advancement of technology-driven change, has fundamentally altered the size and difficulty of the job of leading. Being King ain’t what it used to be – maybe it never was.
How are leaders to respond to this ever-accelerating change? It’s not easy because while technology develops rapidly, competence develops slowly? I believe for most it requires a leadership reset, to build next-level capacity to take on these bigger and more challenging demands and attendant opportunities.
It starts with paying attention. I recently appeared on a PBS broadcast with New York Times columnist and best-selling author David Brooks, to discuss his excellent new book, How to Know a Person. Here’s his quote: “Paying attention is a moral act, maybe the primary moral act. The quality of attention you bring to the world determines what you see in the world and ultimately what you do in the world.”
Paying attention is also an act of leadership. That’s what I want to unpack here. First, I want to step back and attentively connect the dots surrounding three key trends visible everywhere. Second, I want to examine how these trends are impacting today’s leaders. Third, I want explore four key steps along with some examples for scaling-up and building leadership capacity to address today’s ever-growing political chaos and tech-driven change.
Three Strategic Trends That Demand a Leadership Reset
There are many changes going on, but based on my experience in working as an executive coach to CEOs and augmented by recent studies, I believe there are three that are most impactful. These trends come at us daily and unrelentingly, so they are not new, yet often we have not had the time to make sense of how they overlap, connect and place new demands on leaders.
1. Political Chaos Produces Business Chaos
The chaos and dysfunction of our government in Washington D.C. is not a new story. Our U.S. debt is now north of $34 trillion, at a record 127% of GDP, up 448% since the year 2000 and interest on the debt is the fastest growing part of our federal budget. Near shut-downs of government are a recurring fact of life. In the coming 2024 Presidential election, 70% of American would have preferred neither President Biden or former President Trump to run – yet they appear to be our choices.
Our border crisis is now a polarizing issue and top voter concern. We are divided over our support for two wars: Ukraine/Russia and Israel/Hamas. Unfortunately, surveys reveal that Americans are wrong about their political opponents in a particularly destructive way: They believe them to be more extreme than they really are. People who “follow the news most of the time” are three times as wrong regarding their opponents than those who follow the news “hardly at all.” Contributing to the noise and sense of victimization, both sides feel their side is losing on issues that matter (62% of Democrats, 83% of Republicans).
What’s new is the level of chaos and polarization once attributed primarily to the federal level, has now invaded state and local government. Arizona’s reinstatement and then repeal of a 160-year-old abortion ban is but the latest example of wild swings in federal versus state directives over issues such as border security, Covid-related school closings and guns. Four additional areas where leaders are caught in a cross-fire of political chaos:
– DEI – Diversity, Equity, Inclusion: As Boeing has made a series of unwanted headlines over safety issues, critics such as Elon Musk responded on X: “Boeing Prioritizing DEI Over Flier Safety.” The Texas Attorney General jumped in with a probe to examine the “Impact of DEI policies.”
Regardless of whether these claims were valid, leaders are caught in the middle. On the one hand, 27% of the S&P 500 – Salesforce, McDonald’s, Starbucks, Microsoft – link executive incentive compensation (10—20% range) to DEI targets. The SEC has announced it is exploring mandating human capital disclosures like many countries already have in place around DEI metrics.
On the other hand, 13 Republican AGs sent letters to Fortune 100 companies threatening “serious legal consequences” for DEI policies that counter the Supreme Court’s 2023 rejection of affirmative action. The letters warned: “refrain from discriminating on the basis of race, whether under the label of ‘diversity, equity, and inclusion’ or otherwise.” Companies like JPMorgan Chase, American Airlines, and Lowe’s altered their DEI language after being threatened. State legislators have introduced 65 anti-DEI bills since 2023. No surprise, the number of DEI-related jobs is down 8% so far in 2024, an attrition rate double that of non-DEI-related jobs. Leaders can only guess how the 2024 election will impact DEI in 2025 and beyond.
– ESG: Environment, Social, Governance: In the last decade the pressures facing business and especially public companies have shifted at a breath-taking rate. For the longest time, the “Shareholder is King” mantra focused narrowly and intensely on profits. Then around 2017 came “Stakeholder Capitalism” with heavy emphasis on ESG led by The Business Roundtable and CEO Larry Fink of the mammoth investment firm Blackrock ($10 trillion in assets).
Now comes the pushback in the form of open warfare. A scathing Fox Business headline last month: “Texas yanks $8.5 billion from Larry Fink’s Blackrock in ‘massive blow against the scam of ESG’.” Fink acknowledged he has deep-sixed the term ESG and sure enough his widely followed Annual Investor Letter, carried nary a reference to ESG or Stakeholder Capitalism in 2024 – a huge about-face from previous years. Companies beaten up for not doing enough ESG just a couple of years earlier were now punished for doing too much.
– Energy Policy: Another area of very mixed and changing signals is energy. While President Biden placed a pause on export licenses for LNG (liquid natural gas) facilities last month, candidate Trump promoted his energy policy in three words: “drill baby drill.” The chasm between the two, not to mention highly varied state mandates to restrict fossil fuels, complicates any efforts to formulate policy for energy suppliers and consumers.
– Geopolitical Conflicts: The impact of U.S. policy on global events and especially conflicts make for challenging decisions for global companies. McDonald’s announced earlier this month they will buy back 225 Israeli franchises. Why? Because local Israeli franchisees donated free food to Israel soldiers resulting in McDonald boycotts around the world – especially in the Mideast.
2. Tech-Driven Change Accelerates and Disrupts
Technology – we can’t live without it, but we struggle to live with it. Tech has come to dominate so much of our lives. The Magnificent Seven – Apple, Amazon, Alphabet, Meta, Microsoft, Nivida, Tesla – contribute 30% of the S&P 500 market capitalization and over half of its 32% rally since the start of 2023. According to estimates, AI application ChatGPT reached 100 million monthly active users in January, just two months after launch.
Jamie Dimon recently said: “AI may be as impactful on humanity as the printing press, electricity and computers.” The sheer size of the projected investment is hard to fathom. Sam Altman, CEO of OpenAI is reportedly seeking $7 trillion in funding to reshape the business of AI and the chip industry it will require. Microsoft and OpenAI are planning a $100 billion “Stargate” AI supercomputer project.
Phygital convergence – the convergence of the physical and the digital – provides incredible upside potential but also great confusion and distrust as to what is real. One in two businesses have fallen victim to successful cyber-attacks in the past three years at a projected cost of $10 trillion in 2024.
Politics has come to play a growing role in technology. The Business Insider concludes: “Google has a new ‘woke’ AI problem with Gemini – and it’s going to be hard to fix.” We have all seen the examples of the Gemini query for images of 1943 German solider that generated Asian and Black male and female pictures.
BI cites another example of how politics can be injected into technology. When GenesisAI was prompted to write an ad for an oil and gas company job, the response: “I would be happy to help you write a job ad for a different position that aligns with my values of being responsible and ethical. Perhaps you could consider a role focused on renewable energy/energy efficiency, which are crucial in addressing the climate crisis.” As Elon Musk tweeted, “If an AI was trained on popular information in Galileo’s time, it would state the sun revolved around the Earth.”
Interestingly the enormous energy requirements for these ventures have led many tech companies to explore obtaining their own power sources. Rightly so. The Washington Post reports experts are predicting that America is running out of power. Utility projections of power needed the next five years has doubled as electricity-hungry data centers for AI, crypto, and clean technology factories proliferate. For example, Georgia electricity use for the next decade is now projected at 17 times recent levels. Texas energy required by crypto would equal 25% of electricity use at peak demand. Microsoft and Google, concerned that existing sources are insufficient to power intensive industrial operations, are exploring use of small nuclear units on site.
3. Employee Relationships: Living in a Transfer Portal World
Just as college coaches are adjusting to the comings and goings of athletes to the Transfer Portal, leaders everywhere are dealing with increasingly transient employee relationships. According to the U.S. Chamber of Commerce, currently there are 9.5 million job openings and only 6.5 million workers seeking employment. It gets worse: 50% of tradespeople like plumbers, electricians and carpenters are approaching retirement. Still worse: 51% of employed workers are watching for or actively seeking a new job according to Gallup. If the just-announced FTC ban on non-compete agreements that applies to all but senior policy positions holds up, the ease of changing job will only increase. Quiet Quitting is a new term to describe a growing reality: psychologically disengaged workers.
Disengagement is exacerbated by a loss of trust. Gallup reports only 21% of U.S. employees strongly agree that they trust the leadership of their organization – a decline from its 2019 peak of 24%. In business 61% and in government 63% of workers say their leaders purposely try to mislead people by saying things they know are false or gross exaggerations.
The coming AI revolution seems destined to further erode employee trust. A few months ago the CEO of IBM announced plans to replace nearly 8,000 jobs with AI – mainly back-office functions like HR. As the chief economist of Indeed Hiring Labs explains, knowledge workers face the highest exposure here, which is quite different than previous revolutions. The very employees we hope to lever AI are likely fearful of being replaced by AI.
It is not surprising that we are seeing a rise in union activity. At Starbucks, Workers United has organized 10,000 workers in 410 stores across 43 states since 2021. We all remember the 46-day UAW strike of the Big Three Detroit automakers in 2023. Less visible is that the number of major strikes jumped 43% in 2023, the largest increase in 20 years. The percent of hourly workers open to joining a union is 70%, up 41% in the last three years.
And finally, generational change is a big influence on future employee relationships. The Wall Street Journal headline tells a disturbing story: “Rough Years Turned Gen Z into America’s Most Disillusioned Voters,” (born 1997 and after). It is about what Jon Haidt calls the first generation of “phone-based childhoods,” (smartphones) and what leaders will increasingly call “employees.” They are more skeptical of government and the future than any living generation. One in five of today’s teens has clinical-level depression, double the rate 10 years ago. ER admissions for self-harm for 10–14-year-old girls have quadrupled. Youth suicide has doubled – trends already evident prior to Covid. When it comes to their attitudes on work, 18-year-olds who say “they would do their job even if it sometime means working overtime” plummeted from 54% in 2020 to 36% in 2022.
Post Covid, navigating employee Work-From-Home (WFH) to Return-To-Office (RTO) has been a struggle for many leaders. When did showing up become optional? BizJournals reports that 30% of workers say their company culture has been toxic following implementation of RTO policies: “Gen Z are most likely to report ‘bullying/creepy’ behavior since returning to the office.” They are described as self-aware, protective, and well versed in therapy language; whereas older generations just dealt with it, Gen Z will leave.
Today’s challenge at schools will be tomorrow’s challenges at work. According to the New York Times, school absences have exploded almost everywhere with 26% of public-school students “chronically absent” last year, up from 15% before Covid. The article concludes: “Something fundamental has shifted in childhood and the culture of school, in ways that may be long lasting. What was once a deeply ingrained habit – wake up, catch the bus, report to class – now is something far more tenuous…. Our relationship with school became optional.’”
Indeed. According to the Department of Education, 72% of schools report that teacher absentee rates are higher than they were before the pandemic. In Chicago 43% of teachers were chronically late last year. How will this shift impact tomorrow’s work culture?
In their 2024 Edelman Trust Barometer, the authors summarize the dilemma they call a new paradox at the heart of society. “Rapid innovation offers promise of a new era of prosperity, but instead risks hurting trust, instability and political polarization.”
For leadership, navigating ever-changing politics, staying current with rapidly business-altering technology and its energy demands while adapting to a next generation of employees, represents an unprecedented level of compressed disruption and leadership challenge.
The Impact on Leadership
What these trends tell us is that the job of leader has grown much bigger and harder. How are our leaders holding up to the challenge?
Our political leaders are not faring well – not in the U.S. or elsewhere around the world. President Biden’s approval has hovered around 39% recently but according to The New York Times he polls better than leaders in Canada, Britain, Germany, Spain, Belgium, Ireland, Sweden, Austria, Netherlands, Norway, France and Japan. Approval of the U.S. Congress is now 12% versus 36% in 2021. It is no surprise that lawmakers are fleeing in record numbers
Among business CEOs, turnover was up 55% in 2023 — the highest rise on record since Challenger & Gray tracking began in 2002. Non-profit CEO turnover was up 86% last year. The reasons range from Covid-burnout, tech advancements, better opportunities, retired – to fired. The Harvard Business Review reports that 50% of leaders and managers feel burned out. Many board members also report burn-out.
Leadership has always been challenging, but I think the trends point to a next-level of rigor. Robert Glazer, a former CEO and now consultant to leaders, provides a compelling comparison of then and now. He describes the key focus historically as on the external, core product(s) and the market(s), along with internal factors – and we might add regulatory compliance and return to shareholders. His visual:
He goes on to conclude that today’s leaders have too many priorities competing for their time and focus. They have today’s macroeconomic environment and recently Covid which has contributed to their demands. But the big on-going change has been ESG and DEI responsibilities that according to his analysis has doubled the job size and difficulty. The former 2-item scorecard is now a 4-item scorecard.
The big risk is that these additional responsibilities burden and distract leadership – diluting their focus on the core mission. It is now the job of leadership to recognize the demands of this new environment and to build a next-level of leadership capacity to address it.
Building Strategic Leadership Capacity
Building strategic leadership capacity means adding skills and capabilities to address the expanded size and shift in the content of the job of leader. There are many issues to consider in adding capacity, but I am going to discuss four I believe to be key. For each, I would suggest three possible levels of magnitude of change:
· Status quo: Keep things moving in the same direction, in the same way
· Reset: Keep things moving in the same direction, but in a different way
· Pivot: Shift to a new direction, in a new way
1. Strategic Direction: Defining the Shift
In my previous life as CEO, I had the privilege of working with Gail Kelly, CEO, St. George Bank in Australia on a major CRM project out of our Sydney office. Later she was recruited to become CEO of Westpac, also a client and a $1 trillion (AUD) asset bank. Gail was a powerhouse leader, voted one of the 10 most powerful women in the world, and yet in 2015 she resigned at the age of 59. Here is McKinsey’s description of what happened: “Gail Kelly did an amazing job on strengthening customer focus at Australia’s Westpac, but when the bank started pivoting to a digital future, she concluded that it was time for a leader who was stronger than she in that area.”
Gail Kelly and the leadership at Westpac looked at the landscape and determined that neither the status quo nor a reset were sufficient; they needed a full strategic pivot. Clearly, that pivot could also have been made with Gail leading the change, but that is not the option they chose. When Boeing’s recent problems became visible, it appeared initially that their change would be more like a reset, but ultimately, they also opted to make a change at the top. Yet, when General Motors made a strategic move to prioritize electric vehicles (EVs) they stayed with the same leadership – it was probably more of reset. One of the looming questions for Harvard in replacing President Gay: Will they be looking to reset or to pivot? Clearly political chaos and tech disruption are two key factors that are driving the strategic direction of organizations.
Richard Rohr looks to ancient religion to define two very key accountabilities of leadership that reflect tension between status quo and major change. He defines the Priest role as responsible for holding things together, maintaining order and the comfortable status quo. The Prophet role is just about the opposite, responsible for de-constructing falseness, often injecting discomfort which usually includes some chaos while advocating for new directions. As we face a Presidential election in 2024 and as AI takes off, each organization will need a mix of both Priest and Prophet leadership capabilities as they define and navigate small or large shifts in strategic direction.
One final point about leading the shift. This past week at a small gathering led by Harvard Professor and prolific author Arthur Brooks, I asked him what he was advising leaders in dealing with all of the current chaos and change. His answer boiled down to one word: Courage. Gail Kelly stepping down, Speaker Mike Johnson last week risking ouster by stepping up to bring a bill to the floor, or any of us charting a new path – all require courage.
The question is: What strategic shifts are required to address all of the change your organization faces?
2. Situational Leadership: Scaling Up Leadership ‘Change’ Capacity
Situational Leadership is about aligning leadership capabilities with key situational demands of today’s challenges and opportunities. Perhaps one reason voters are so disillusioned with President Biden and former President Trump is they offer so little leadership hope for addressing today’s political chaos and change. The strategic shifts that organizations face define the evolving requirements of leadership. Do these demands require status quo, a reset or a pivot – and in some cases, as with Gail Kelly – a change in leadership?
Building up the leadership capacity and skills to take on those challenges requires a next level of intention. As Richard Rohr has said: “Leaders are the ones who learn to absorb the pain without passing it on to others or themselves.” But, they cannot do it alone – they need help. I am intrigued by something we are seeing in professional sports – especially the National Basketball Association and Major League Baseball: load management defined as “lowering the threshold of load on a player so that he’s able to recover and decrease the risk of injury or chronic fatigue.”
A number of CEOs and boards I work with have taken action to add leadership capacity – both in adding skills and also in reallocating the workload of over-stretched CEOs. Three have added Chief Operating capabilities – one by hiring a COO, another by upgrading the CFO to a CFO/COO hybrid position and another elevating two C-suite positions to take on more of the COO role. I believe these shifting and growing leadership demands explain McKinsey’s findings that the COO is making a comeback. In 2000, 48% of Fortune 500/S&P 500 companies had a COO. By 2018, that dropped to 32% but by 2022, 40% of leading companies had a COO.
Clearly there are other avenues to lighten the load including appointing a chief of staff, assigning a “political chaos/tech trend-spotting” responsibility to a person or team, bringing in specialized technical or even change management specialists, seeking greater help from board members, adding an executive coach or leadership development capabilities.
The question is: Where do these additional leadership demands – from political chaos, tech-driven change or whatever – require load relief by building additional leadership capacity.
3. Revisit Board Composition and Roles:
All of these new challenges of politics and rapid change impact the role and accountability of boards. As these issues pile up, what about your board should remain the same and what should change? McKinsey explains it this way: “Boards are moving along a spectrum from historically being oriented mainly around control and compliance toward becoming sparring partners but not taking over accountability.” Revisiting the role and composition of the board in light of today’s pressures is long overdue for many organizations.
Not long after Silicon Valley Bank failed, I asked a client bank CEO what had been key to avoiding some of the investment missteps made by SVB and other banks. He said, “As someone relatively new to that side of banking, I was able to lean on my board and there was one member particularly that was really proactive and wise in the way he advised me.” Two things stood out about that discussion. First, rather than take credit himself, he gave credit to this key board member. Second, he exemplified strong, confident leadership by seeking out strong advisors, asking their advice and listening intently to it.
Having a mix of board member experiences, skills and backgrounds is key to avoiding blind spots. It appears this had been a weakness of elite university boards that have often been out of touch with large swaths of their stakeholders. It is why the Executive Director of transitional housing for the homeless where I volunteered reserved one board slot for a carefully selected former resident – it added perspective and feedback for how key decisions would land on residents.
However, with diversity comes greater potential for board splits that can produce gridlock and even dysfunction. A client CEO in higher education recently lamented that his board has two camps – left and right. He concluded that he can no longer ignore it. I shared with him a best practice by one of my other clients to engage the board in defining key principles and processes for handling conflicts and disagreements, particularly political ones, and devoting a board meeting to it – before it becomes an issue.
The question is: What new board skills and roles does the political chaos and tech-driven change now require?
4. Talent Management and Employee Relationships: Leading in a Transfer Portal World
In this season of quiet quitting, loud quitting, activism and political protests, leaders can only anticipate the wild swings that may occur post-election from new mandates of a new administration. Leaders must get suited up and ready for a new normal.
For those organizations where technology, government policies or political issues play an outsized role on employees, I recommend assigning a C-suite team to identify the key issues at hand. The first step is to define or revisit your employee strategy and to ensure it reflects today’s reality and aligns with your strategic direction going forward. Often these strategic HR issues are addressed piecemeal without an overarching strategy. Get clear, commit, then publish and execute your employee strategy.
Identity what your key two to three key issues are now and then revisit them after the election: WFH/RTO, DEI conflicts, new union efforts, political conflicts, environmental issues, or just plain old employee attraction and retention issues. Focusing on these issues will also help you validate and refine your strategy. For some, holding off on publishing your strategy (above) until you have processed these key issues will make sense.
DEI in particular may need more attention given the well-publicized push-back against it in some quarters. Leaders may be tempted to neglect the issues of diversity and inclusion. Yet lack of diversity often feeds blindness and for today’s Gen Z employees and customers this is often a litmus test for engaging an organization and its products. It seems so much of DEI has either been a form of self-righteous virtue signaling or compliance with little heart or real commitment. From both my experience and the research I have seen, DEI is less likely to thrive where DEI targets are the end rather than the means to a larger purpose – like stronger customer relationships, more innovative products, or greater talent acquisition. Forbes reports research that shows that working with teachers to reduce racial disparities is most effective when focused on professional goals to help all students.
The question for leading-in-the-transfer- portal is this: What new employee strategies are needed to counter the political chaos and tech-driven change?
Let me close with a reality check. As Axios recently put it, we are trapped in a distortion bubble by social media, cable TV, tribal political wars – enough to warp our view of reality. The article laments, “There’s little market in modern media for holy-crap developments like the explosion of green energy in red states, once-in-a-generation job market, rising wages among minorities started under Trump, sustained under Biden.”
Yet, in spite of politics invading everything Axios shares a new poll that offers hope – 90% of Republicans and Democrats agree that the following are extremely or very important:
· Right to vote
· Right to equal protection under the law
· Right to freedom of religion
· Right to freedom of speech
· Right to privacy
We survived the Civil War, the Great Depression, Pearl Harbor and Hitler, 9/11 and Covid. How? Leaders exercised courage by stepping up and into constructive change in the face of jaw-dropping challenge.
(This paper is adapted from my address to the Institute for Excellence in Corporate Governance, Jindal School of Management, University of Texas at Dallas, April 11, 2024.)