Nurture Complex and Dynamic Systems with a Leadership Cycle

Executive Series #4

The Organic Enterprise

I described two foundational concepts of businesses in previous articles. The first is that businesses are complex systems; too complex to fully understand or control. The second is that businesses are dynamic systems that continuously change and evolve in response to their environment; predicting exact outcomes is impossible. Conventional thinking leads executives to believe that they are in control as if they are driving a car. However, a more accurate analogy would be a shepherd guiding a flock of sheep. The smooth flow gives you the illusion of control, but it never is fully in your command.

You Aren’t at the Top

Organizational charts are traditionally drawn in a hierarchy, with the CEO at the top of the chart. Many CEO see themselves that way and think of inexperienced and unskilled workers as being at the bottom. This thinking suggests that a business has a fixed, rigid form made up of unchangeable parts; however, this is just an illusion. The organic nature of an enterprise means that its shape and behavior are continuously morphing in response to the forces, internal and external, that are acting upon it. The components of a business, the people, processes, and systems are continuously evolving. Instead of an object with a defined shape, it is more like a balloon filled with water. Push it in on one side and it bulges out another. Add water it expands; release water, it shrinks. The inputs, outputs, and interactions of business work in this manner.

The Leadership Cycle

Leading an evolving organization toward high performance requires a Leadership Cycle. The Leadership Cycle is as much a philosophy as it is a process. The idea is that a CEO must constantly flow from the big-picture vision and strategy to strategic execution across the enterprise. The process is governed by rhythm and prioritization. The prioritization is guided by constant vigilance on the lookout for strategic obstacles. The skill of a CEO moving smoothly and efficiently, between the long-term vision and the immediate obstacle of the day, is the key to success.

The Cycle Never Repeats

Discipline in business, and life, is built upon rituals. The Leadership Cycle similarly requires discipline, but with the understanding that the cycle will never exactly repeat.

You start by looking from the top of the mountain towards the future 5-10 years out, then descend to the valley to focus on specific obstacles that you detect. These hurdles might be in Sales or Operations this time. You guide these teams to help them break through the obstacles, then you head back to the mountaintop to see the results.

The next time, the view is different. You might have been expecting more obstacles in Sales or Operations, but you see no problems there. Instead, you see problems in Logistics and IT.

You repeat the cycle and when you get to the top you see the advancing troops of a competitor you have never seen before. Where did they come from? Back to the valley, you head to prepare the Sales team for the assault.

This is the nature of the Leadership Cycle. Always repeating, but never the same.

Creating the Environment

The smooth and efficient movement between the big picture and tackling strategic problems does not happen without a deliberate shaping of the environment.

First, you must have a solid foundation of strategic tools that will keep you oriented each time you are focused on the big picture. These tools include:

1. Extensive market data and intelligence that is carefully organized and cataloged,
2. Strategic forecasts with clear documentation of assumptions,
3. Detailed long-term business and financial plans that can be easily updated and tested with new assumptions,
4. A strategic planning process that is a ritual and emphasizes idea-sharing throughout the organization.

Second, you need a Strategic Execution Engine that links the strategic intent to the actions (and results) of the organization. (I will talk more about execution and the Strategic Execution Engine in coming articles).

Thirdly, you have to remove organizational obstacles that interfere with the process:

1. Trust – You need to think of organizational trust as a strategic asset that requires investment. Ignored, managers build silos to defend their “turf”. The consequence is a breakdown in the quick and transparent flow of information,
2. Fear – Executives and managers often see the engagement of a senior executive as an indication that there might be a lack of confidence in their abilities. Instead of leveraging the senior executive for knowledge, experience, or resources, they focus on deflection. The hope is that they can distract the executive to focus elsewhere. The consequence is that the managers don’t get the benefit of all the resources of the company and they fail to get to the root of strategic problems,
3. Losing Control – Managers want to feel in control. When you swoop in to engage unexpectedly, they will assume that you are there to take control. Instead of being a mentor and a coach, you will be “in charge”. When you leave, a vacuum is left behind.

Overcoming these obstacles requires very transparent communication and engagement where you don’t take control. Instead, you need to focus on asking questions and coaching instead of issuing orders. All of this is easier said than done; the only way to get good at it is through routine practice and reflection.

Why CEOs Fail in the Leadership Cycle

There are several reasons why CEOs fail in the Leadership Cycle. Overcoming these obstacles is critical to be effective as a CEO, but it is also essential to enable a High-Performance Business.

1. Delegation – Traditional “best-practices” leadership doctrine advocates delegation. I don’t like that term because executives often translate the idea into a “hands-off” approach. The consequence is a CEO who is disengaged with the workings of the business and managers wondering where they stand. Delegation turns into “not my problem”. But for a CEO, every problem is your problem if you are to have a High-Performance Business. Understanding the difference between engaging with employees to enable and empower them, versus letting them fend for themselves hoping they come to the right conclusion, is a critical concept.
2. Micromanagement – The opposite of enablement and empowerment is micromanagement. There is nothing that will turn off your high-performers more than micromanaging them. You want to coach and mentor them, and you also want to knock down obstacles in their path. But letting them manage through the problems, including making mistakes, while supporting them is a Key to High-Performance Leadership.
3. Living by Example – Sending a message in your actions that say, “Do as I say, not as I do”, will undermine everything needed to enable high-performance habits. The concept of trust is completely undermined if the CEO and her team fail to exhibit trust-building behaviors consistently. The idea is not about words (although your words should support your intent), your actions will be the basis upon which everyone will judge you. The culture change starts with the CEO, but behavior at any level of the organization that undermines trust cannot be ignored. You must take responsibility for the whole organization living by this principle. This topic is so important that I will cover it more in subsequent articles.

Avoiding these mistakes will set the foundation for you to engage in the Leadership Cycle.

The Rhythm

The success of the Leadership Cycle is premised on discipline and routine. You need to have the discipline to establish and maintain an environment that cultivates high performance. You need the routine to make the Leadership Cycle a sustainable habit. Establishing a rhythm is more difficult than you might imagine because the cycle is different each time around.

While no rule defines the period for each cycle, I like a monthly rhythm. Most businesses have a natural monthly cycle that corresponds to financial planning and accounting conventions. Information that comes from those processes is a key input into the Leadership Cycle and can help support the rhythm of the Leadership Cycle. However, some advocate weekly intervals, and I would do the same in rapid change circumstances (i.e., turnarounds, crises, new business launches).

Bringing yourself, and your leadership team, “to the mountain top” to review strategic direction, test assumptions, and re-validate your vision is easily done in the same window as your normal financial review. However, you need to be careful to delineate tactical business problems with strategic execution issues. Both are important, but the former should be solved by the managers and functional leaders. The CEO’s attention should be limited to issues that are directly connected to achieving long-term strategic objectives. These issues will govern the priority setting during the “trip to the valley” during the subsequent weeks.

During this “deep dive” period, the CEO should be focused on providing support and encouragement to the “boots on the ground” in such a manner that they will be fully enabled and empowered to solve the obstacle of concern. If the Leadership Cycle is working, the next month the CEO’s attention will be drawn to other problems.

Quarterly or Annual Rituals

While the monthly Leadership Cycle (or more frequently if you can handle it) needs to be maintained, there are times when you need to squeeze in some concentrated planning periods. Typically, these are associated with establishing budgets (or plans, as some call them) and opening up and reworking the strategic plan. I will talk about the processes in much more detail in future articles, but I wanted to emphasize the need to make them happen AND maintain the Leadership Cycle.

Most businesses fail at this habit, and candidly, most are terrible at strategic planning. The core reason is that the leadership team treats strategic analysis and planning as an event instead of a continuous process. The key to having success in your Quarterly and Annual rituals is to build small bites of these processes into your routine Leadership Cycle. It doesn’t eliminate the need for these events, it just makes those events much more effective.

Strategy Execution Engine

The effectiveness of your Strategy Execution Engine will also play a key part in the success of your Leadership Cycle. This engine provides the framework that connects the long-term vision and strategic goals with the execution activities that drive them to reality. Most companies do not have any structure around strategic execution, and those that do, almost always are ineffective. This is arguably one of the most overlooked processes in companies and the primary reason they fail at achieving their strategic goals.

Making it All Work

The success of the Leadership Cycle depends largely on the routine and the comfort throughout the organization. The routine should be consistent and predictable. This ritual is partly related to effectiveness, but also critically connected to trust. The more predictable you are, the more the organization will trust your intentions. Your discipline in the process is also critical, you must stay focused on issues that are directly connected to strategic goals. Show your team that you trust them with the other problems. Finally, when you are working on a specific problem, make sure your energy is focused on facilitating, coaching, and guiding and not on being “in charge”. Your team will appreciate it, and you will be more effective.

Copyright © 2021 Douglas C. Fergusson