The corporation for the future

The great institutions of our age are global corporations. Their power and influence touch every life on earth. But how can we shape the corporations the world needs for the future? Lynda Gratton provides a roadmap to the corporation of tomorrow.

Over the last 40 years, from my own corporate initiation at British Airways to latterly as a business professor at London Business School, I have been both inspired and astounded by corporations and those who lead them. More recently, my own research into the way that the landscape of corporations has and will change has begun to highlight the extraordinary forces that are shaping corporations, bringing with them both challenges and opportunities.

It is becoming increasingly clear that corporations are dominating our world. They deliver goods and services to the outermost reaches of the globe, and their supply chains touch the lives of billions, shaping consumer aspirations as they do. For me, the corporate experience that began back in the early days of my career had a tacit promise that these ever-growing corporations would bring plenty to consumers and investors. In some aspects, this promise has been delivered.

These vast corporations have indeed brought plenty of goods and services and in doing so have forged the capacity to create extraordinary mechanisms of coordination and delivery. They have built the capability to bring together some of the most talented people in the world and have created places for them to research and develop ideas and to innovate. Moreover, the sheer variety across corporations – their unique structures, values, practices and processes – has created a gigantic Petri dish for constant experimentation and has bolstered their capacity to innovate and change.

It now seems that these corporate capabilities are becoming ever more crucial. Faced with a fragile and volatile world, intelligence and wisdom are the most valuable assets that any individual, group or society can have. The very best corporations are finely tuned to make the most of the intelligence and wisdom of millions of brains; indeed, some have created crucial collaborative tools for orchestrating this intelligence. Wellbeing and happiness are the most important goals that intelligence can be directed towards, and corporations can be one of the tools for delivering this. For most people, relationships are the source of much of what we value, and corporate life can create extraordinary opportunities for the formation of deep and profound, wide and diverse networks of relationships.

Corporations can also form the context for communities of people to make a positive diference in the world. They do this by seeing their role as stewardship and renewal rather than exploitation, and of interconnectivity and cooperation rather than independence and competition. We stand at the fork in the path. Now is the time to build a vision of what a corporation can be. To do this, we need profound imagination and radical ideas to ensure that the yet-unrealised positive potential of corporations can be brought to the fore.

Power to the people

And that requires the power of people. Ask yourself what role you can play in realising the potential of corporations.

If you are a current or aspiring leader, you may want to reflect on the words of Harvard University’s Barbara Kellerman in The End of Leadership: “Leadership is in danger of becoming obsolete. Not leaders — there will always be leaders — but leadership as being more consequential than followership.” As leaders of some of the most complex and sophisticated institutions currently in the world, it falls to you to make a difference.

It would seem that the very forces that are transforming corporations are also transforming what leadership is becoming – ever more transparent and ever more accountable. Indeed, there is a possible future where large corporations and those who lead them will become less trusted, less powerful, and more highly regulated.

Faced with becoming obsolete, now is the time to seize the opportunities these transformational forces are creating and to be willing to think bigger and more expansively. This thinking is not just about what happens inside a company. It will also be necessary to consider new forms of engagement outside the corporation to preclude corporations from ignoring issues as insidious as unemployment and gross income inequality. If you are to make a difference, then you have obligations to meet and commitments to fulfil.

The initial leadership commitment is to commit to employees and shareholders that you are building a corporation that is fit for the future. This means that it can withstand the external shocks that are an inevitable consequence of this volatile world and also reap the extraordinary benefits that a joined-up, innovative, and creative world is bringing. Leaders who meet their commitments to building a corporation fit for the future do so by continuously strengthening inner resilience. They do this by relentlessly amplifying the intelligence and wisdom of everyone in the community, by enhancing their emotional vitality and wellbeing, and by creating opportunities to harness the excitement and innovation of diverse networks and deep relationships.

Is this commitment enough? Will it be enough for you as a leader to feel that you have built for future generations and have devoted your time to a legacy that is worthwhile?

The answer to this question is less about organisational capability and more about the moral compass that guides you and the principles and values you strive to live by. Every leader knows (or at least should know) what it takes to build a resilient corporation. Moreover, as we have seen, the sophistication of the rapidly advancing technology of connectivity and knowledge transfer means that, increasingly, hierarchical leadership is obsolete. Highly connected and talented employees are ever more capable of doing much of the strategic heavy lifting that was previously the domain of those in the executive suite.

Faced with decentralised decision-making and resource allocation and with ever more active followers, the ‘obsolete leader’ label may on the face of it seem concerning. In fact, for those who are able to, it creates a wonderful space for leaders who aspire to more. This expansion of aspiration is crucial. What will differentiate leadership in the coming decades is not just what the leaders choose to do within their corporations but also what they choose to do in the world.

And it is here that the question of a moral compass comes in. Placing the corporation in the context of the whole world raises questions as to what the role of a corporation is, what the obligations are to those in the supply chain and whether those who lead a corporation should engage themselves and their resources in wider issues such as youth unemployment and climate change. There is a rational answer to these moral questions.

Neighbourhood watch

Large-scale studies of corporate return on investment show that those who take an active role in their communities tend to deliver higher capital returns. However, although these studies are important to know, I don’t think this is the whole point. It is the combination of an economic imperative and the moral compass of leadership that should act as a steer to ensuring that the corporation is anchored in its neighbourhoods and supply chain and has the will and the capacity to address global challenges.

To reach this potential, we have to think on a much bigger scale. Here corporations and those who lead them are at a distinct advantage. Perhaps more than any other institutional form in the world today, large corporations have extraordinary research and innovation capabilities, a deep capacity to scale and mobilise, and a growing understanding of what it takes to build alliances across multiple stakeholders. It is these capabilities that will enable the nascent ideas and projects to be scaled in such a way that the potential of corporations to be a force for good can be fully realised.

Looking more closely at almost every example of how corporations are building inner resilience, anchoring in the community, or addressing global challenges, there has been a significant role for leaders. These leaders are setting aspirational goals for others to follow, they are making resource-allocation decisions that encompass a wider community of people, they are supporting and role-modelling compassion and involvement, and they are reaching out to a vast array of stakeholders to join them on this grand adventure. These are leaders who are determined to create positive strength both within and outside the boundaries of their corporations. They are part of a rapidly growing vanguard of people who want to make a positive difference.

I can sense this momentum growing, I can hear it in the conversations leaders are having with their peers and I can read it in the plethora of books about these topics that have been published in the last couple of years. It seems that the zeitgeist is changing to embrace a wider role for corporations.

In thinking about this broader role, it seems to me that leaders are confronted with some important questions. The first is how to become part of this vanguard and how to join the narrative. As we know, when courage is required, joining with like-minded peers and developing a wide and diverse network of relationships are crucial. Of course, the question is also how best to avoid the sycophancy of power and the homogeneity of corporate success that can so easily blind one to the dangers ahead.

The second question is rather more profound. Leadership is a creative act – for which leaders are educated and for which they are prepared over a lifetime of learning. The way you choose to lead says much about your relationship with yourself. Do you have access to the courage to stand against short-term market pressure or to be courageous in the face of some of the worst aspects of capital markets? Are you able to listen to those within the corporation and the supply chain who want to create something they are proud of?

How can you make your leadership a lifetime of learning? What might this lifetime of learning mean for you? What are the crucible experiences that would have the potential to transform the way you see the world? What are the courageous conversations and group dialogues that would help you to think about yourself? What are the judgment calls that would strengthen your moral compass?

A working life

The world of those who work in corporations has changed and will continue to change profoundly. Over the course of your working life, you can expect the point at which you retire to move steadily later, and as a consequence, for many people, the extent of a working life will be a marathon rather than a sprint. This brings your capacity to develop and to access your inner resilience and emotional vitality to the fore.

At the same time, across the global labour market, the hollowing out of work will put an increasing premium on highly skilled work while making the early stepping stones to a career ever more difficult to find. Thus, for anyone with aspirations for a good working life, the capacity to amplify their intelligence and wisdom and to harness the knowledge embedded in diverse connections will be key. But this is not all. As workers, parents and caregivers, we are also guardians of a world that is becoming ever more fragile. It will be increasingly difficult to deny or indeed to avoid some of the more unpleasant aspects of this fragility.

In tandem with these broader changes has come a steady transformation of the relationship between employee and employer. More than a decade ago, I predicted the end of what I called the “parent-child” working relationship. What I meant by this was the end of a relationship where the tacit agreement was that the corporation is the “parent” and the worker is the “child.” In its place, I believed, would emerge an “adult-to-adult” working relationship, where both employer and employee would assume greater responsibility. Since that time, this transition in the nature of the relationship between employee and employer has been gathering momentum. I believe that, taking many factors into consideration, this constitutes the best way to manage this relationship.

However, it does have profound implications for working lives. It means that workers have to be prepared and able to take more responsibility for their own working life (with no parent to direct them) and at the same time be more accepting of the consequences of these choices (with no parent to shield them from these consequences).

Although the transition to the “adult-to-adult” relationship may be less cosy, it does have the effect of bringing to the fore the power of followership. In fact, there has never been a time when followership has been more powerful. Thus how best can you and your colleagues use this new-found power? Think about this in three ways – in how you think about your own working life, in how you think about those who lead, and in how you think about the relationship of the corporation to the wider world.

On this working marathon, it makes sense to engage in work that builds your inner resilience. You achieve this by amplifying your intellect, enhancing your emotional vitality, and creating opportunities to develop deep and broad networks. More specifically, you may want to ask yourself these questions:

• Does the work I do stretch my thinking and encourage me to engage in experimentation and innovation? 
   
• Is the relationship between my work and my personal life creating and enhancing a positive source of energy? 
   
• Am I working in a collaborative way with others and in a way that is creating rich and deep relationships?

If the answer to any of these questions is no, then you will want to think deeply about the work you are doing and the corporation with which you are working.

You also may want to consider your relationship with those who lead your team, your business and your corporation. This is a relationship that has changed profoundly and will continue to change. It is symbolised in the shift from “parent-to-child” to “adult-to-adult”. This is a positive and important transition, but it does have implications for followers.

As adults rather than children, you can expect that more decisions will rest with you. It is you who will have to actively decide how best to develop your skills, what roles will enable you to do this and which corporations will be best able to provide a context for resilient development. This entails a purposeful and active way of making decisions and acting. As adults, you also may want to be articulate about what it is you want from your leaders, what you can expect leaders to do, how you expect them to behave, and the leadership narratives that you will find most compelling.

Earlier I quoted Barbara Kellerman: “Leadership is in danger of becoming obsolete. Not leaders – there will always be leaders – but leadership as being more consequential than followership.” Her view is that joined-up, intelligent, insightful, purposeful followers will become more consequential than leaders. Looking back to the practices that support “wise crowds,” it is possible to understand her thinking on this topic. Collaborative technology has created a platform that has fundamentally tipped the balance from hierarchical command and control to peer-to-peer decision making and resource allocation. In reality, what this means is that the top-down and hierarchical relationship between leaders and followers has evolved into wise crowds of followers interacting more openly and purposefully with each other. My advice is to make full use of these collaborative technologies – join communities of practice, engage in crowd-sharing, and find interesting people. By doing so, you will discover that your collective voice on matters that you believe to be important will carry much farther and be listened to more carefully.

This leaves the question of what you personally believe to be important. For this, you will need to think into the future. Of course, the future is unknowable, but enough of the default path is known for us to have some understanding of the shape of the future.

This is a world of nine billion people and of extraordinary demographic swings. In Japan, more than 22 million people will be over 75 years of age by 2050, whereas the predicted growth rates in Nigeria will lead to a 50 per cent population growth, resulting in a country of over 390 million people, the  majority of whom will be under the age of 30.

It is a world of cities. By 2025, in Asia alone there will be ten hyper-cities with more than 25 million citizens, including Jakarta, Dhaka, Karachi, Shanghai, Mumbai and Lagos. In China by 2050, there will be 500 more cities and 100 more airports.

It is a world of unprecedented consumption that will suck in vast amounts of natural resources. Right now, the middle class in the United States buys 67 items of clothing a year; by 2050, that consuming class will be joined by billions of others; by 2030, the consuming middle class of China will rise from the current 300 million to 800 million, and in India it will be 583 million.

It is a world of rapidly diminishing natural resources. By 2050, many scientists predict that the major oil and gas reserves will have run out, followed by coal in 2112.

It is a world of water shortages. By 2030, global water requirements will be 40 per cent above the current supply; much of the current supply comes from ‘fossil water’ that cannot be replenished and from mountain snows that are rapidly melting, so by 2025, more than 1.8 billion people will be living in water-scarce regions.

It is a world of climate extremes. The 0.6 degree shift in temperature that occurred in the last century as a result of rising carbon dioxide levels will be dwarfed by global warming that the most optimistic modelling puts at 1.8 degrees and the more pessimistic at 4 to 5 degrees. This would lead to the melting of the Arctic icecaps and extreme drought conditions.

Of course, none of this default path could happen: we could live healthily into our 90s, learn to curb our consumption, invent new ways of feeding ourselves and new energy sources, innovate our way out of climate change, and learn how to provide meaningful work for our young people. Yet, as I have argued, if any of this is to happen, it will be in part because corporations – either acting on their own or in alliances with other corporations or in complex multi-stakeholder strategies with governments and NGOs – are able to make this work. It is in all our interests to have good companies doing good work.

What role could you play? In a sense, the key to this is in the move to the “adult-to-adult” relationship and the capacity to take more personal responsibility. This means, for example, when you are interviewed by a new company, asking it explicitly what the leaders of the company are actually doing in the three areas I have described – how they build resilience in their employees, what they are doing in their neighbourhood and supply chains and how they are addressing the challenges of a fragile world. And don’t take the public relations ‘greenwash’ – try to find out exactly what they are doing. These are important questions to ask because executives are very influenced by what people are interested in when they join their companies. There is a shortage of talented people with job-ready skills, so make your aspirations clear.

Next, when you are working for a company, find out what the company is doing in the three spheres of resilience. Most companies are doing something – although perhaps on a limited basis or at a piloting stage. Consider where your passion lies. Get involved, and join other communities that interest you.

Finally, as consumers, become more conscious of the values and purpose of the company from which you are buying. My guess is that in the coming years there will be an increased call for corporations to bring value to the world and a more sophisticated monitoring system to ascertain whether the rhetoric is followed by action.

There is no doubt that it is possible to destroy resilience within corporations – just as it is possible to destroy resilience in the communities and environments of the world. However, it is also possible to create places of work where people thrive, to build communities that are strong and positive and to create a world that we could be pleased to leave to the coming generations.

My greatest fear is that we are embarking on the default path with our eyes closed. My greatest hope is that the global corporations and those who lead and work in them have the innovation, courage and determination to provide the key that unlocks at least some of the problems of the world.

London Strategy Review