Master Complexity Before it Masters You

We and our colleagues have had a privileged view of how CEOs and other executives are navigating the complexity and uncertainty of the COVID-19 crisis. Worldwide, Egon Zehnder has convened discussions with over 1,200 executives since the crisis began—and the authors of this article have taken a closer look at the responses of more than 20 leaders in sectors ranging from consumer goods to automotive to oil and gas.

One thing has struck us in these conversations: the large majority of business leaders tell us they feel energized by the crisis, not overwhelmed by it. As the leader of a global consumer goods company told us:
 

As companies move from short-term crisis management to the task of recovery and reimagination, it will be critical for leaders to distill and “bottle” the essence of the culture shift that has occurred during the crisis. We observe that this elixir has three essential ingredients: purpose, curiosity, and emotional commitment. Leaders who embrace these enablers of vitality have the potential not only to strengthen their organizations’ resilience in and beyond the crisis, but to renew and even reinvent them. They can master the complexity around them—not be mastered by it.

How the COVID-19 crisis is changing organizations

Many leaders say that during the COVID-19 crisis the workload has been immense and the challenges complex and seemingly never-ending. These executives feel a deep sense of responsibility for keeping customers and workforces safe, contributing to the societal response to the crisis, and ensuring their companies’ survival and long-term sustainability. At the same time, however, many leaders are experiencing—and helping to inspire—a transformation in their companies’ ways of working. And several of the CEOs we interviewed said that they saw exciting future possibilities in this shift.

Given the big uptick in remote working during the crisis, it’s no surprise that accelerated digitization is a recurring theme reported by companies. But the scale of that acceleration has been remarkable: most executives said their firms had achieved between three and six years of advancement in digitization in just two months.

The new, digitally enabled ways of working are proving to be more effective than many executives anticipated. They told us that widespread use of remote working had improved efficiency rather than hampering it. More importantly, they have also experienced better dialogue and decision making, which have broken through long-established silos and hierarchies. These companies are also driving rapid digitization in their engagement with customers and suppliers. For example, they are pioneering different approaches in virtual customer engagement, which could transform both customer relationships and internal organizations for the long term. 

Another big shift that is energizing CEOs is the new degree of collaboration between the private and public sectors, forged in the urgent search for solutions to the health and economic challenges of the crisis. Several executives told us they had experienced unprecedented openness and pragmatism in the dialogue between decision-makers in business and government—and that this had created a new level of trust on both sides.

Although the COVID-19 crisis is unprecedented in many ways, it is not the first that leaders have faced. Several said that the 2008-09 financial crisis, as well other major disruptions in recent years, had prepared them for the COVID-19 crisis in important ways. As one executive told us: “Past crises have taught me some valuable lessons: identify who can help you, communicate with frequent, stable messages, and focus on one thing at a time.”

Purpose, curiosity, emotional commitment: the elixir of transformation

Many of the leaders we spoke to said their companies had embraced a broader role of care for society during the crisis. For example, an executive at a global food-services company spoke of its role as a major employer at a time of job losses—and said the firm had taken the decision to keep hiring staff, even with customer demand sharply down. A leader at a consumer-goods manufacturer told us his firm was proud of its role in helping societies deal with the crisis, including ramping up production of disinfectants, toilet paper, and personal protective equipment.

For some companies, a doubling down on their broader societal purpose has come naturally. As one executive told us: “High ethics and high integrity are rooted in our principles and are easily activated in the crisis.” We observe that companies and leaders that cultivated a strong sense of shared purpose before the crisis are tapping into it quite automatically—it is natural for them to think beyond themselves and align their people for action. Indeed, our research shows that having a shared purpose is akin to a muscle or a practice that needs to be developed over time: those who have honed it in past years can now apply it in a time of great challenge.

Purpose is also proving to be a springboard to curiosity: a commitment to help solve societal problems is sparking new levels of ingenuity in companies in a wide range of sectors. And for many leaders, connecting purpose to personal meaning also leads naturally to emotional commitment to the organization, its people, and its stakeholders. As Egon Zehnder Chairwoman Jill Ader puts it: “Now is the time for leaders to choose vulnerability over invincibility.”

Indeed, our research and our leadership advisory work shows that a conscious effort to strengthen purpose, curiosity, and emotional commitment is one of the most powerful approaches to accelerating organizational transformation. In particular:

• Anchoring a company’s future direction in shared purpose is the most consistently effective answer to the challenge of creating alignment in a complex environment. Leaders who embrace purpose go beyond linear approaches like strategic planning and invest real effort in clarifying to their employees and other stakeholders why it is meaningful to join the “quest” that the purpose represents.

• Increasing curiosity on all levels is the path to building comfort with complexity and translating challenge into innovation. That includes curiosity about the world, curiosity in the face of surprises and disconfirming evidence, curiosity about small signs of change that might lead to exponential growth and, most importantly, the curiosity to learn and grow as an individual. A leader plays an important and conscious role in creating a safe place where curiosity can thrive. Allowing for failure and celebrating experiments that disprove the hypotheses are crucial.

• Growing emotional commitment flows from connecting an individual employee’s personal meaning to an organization-wide shared purpose. A shared purpose is no good if it is not pulled through in daily habits and decisions that individuals make. And leaders need to play a conscious role in creating such collective meaning.

This three-part “elixir” generates energy and vitality—and so is also an essential contributor to resilience, better enabling leaders and organizations to navigate the challenges and uncertainty that the crisis has brought to their markets and operations. It can help in the effort to consciously build resilience so that the organizations and their people can get through difficult situations, bounce back from failure, try new routes, and keep going when their approaches and strategies are challenged. In the complexity of the crisis and the “next normal” that will follow it, these behaviors will need to honed and choreographed as a permanent practice.

Going beyond improvement—to renewal and reinvention

Leaders who cultivate purpose, curiosity, and emotional commitment can also unlock tremendous power for change. They have the potential to move beyond traditional organizational-improvement approaches and renew or even reinvent their business models and ways of working. Our research on organizational transformation suggests that companies can operate at one of three levels of change—improvement, renewal, or reinvention—and that the most highly skilled leaders can make conscious choices to move between those levels when appropriate.

At the improvement level, the modus operandi is to pursue steady progress using known and controlled pathways; this is often the approach when an organization’s operating environment is known and predictable. At the renewal level, companies and their leaders rely on well-honed practices from past experience but are also eager to adopt and hone new practices—and they see challenges such as the COVID-19 crisis as a spur to do so. At the level of reinvention, companies and leaders look at such crises as a catalyst to rethink their practices and drive far-reaching change in their business models.

There are fundamental differences between the levels of improvement, renewal, and reinvention. Consider the question of how leaders define the boundaries of the organization:

• At the improvement level, the question of what belongs to the organization is answered by “ownership.” The organization is what it owns—assets, patents, employment contracts, and so on. Leaders therefore tend to focus on organic growth or inorganic acquisition or divestiture to reshape the business.

• At the renewal level, the system under consideration is the entire value chain connected by financial transactions. Ownership of assets is less important than structured collaborations with other organizations to make the entire value chain prosper. The focus of leaders electing to operate on this level is on enabling and growing true partnerships with other organizations which lead to “win-win” outcomes for all participants.

• At the reinvention level, the system includes everybody and everything touched by the company’s activity; “ecosystem” is currently the best terminology we have for this view. Leaders at this level are driven by a strong sense of purpose to make an entire ecosystem prosper. They shape organizations which can take into consideration the multitude of views of all stakeholders—and these include not only customers, but everybody touched by their activity as part of the system. They draw a circle of “belonging” around all participants in the system and aim to make everybody prosper.

Likewise, organizations at different levels tend to define success, attract talent, and orchestrate internal coordination in quite different ways. The figure below provides the leaders with an indicative self-assessment tool, allowing them to identify which level their organization operates at today on these key dimensions—and which level they want it to operate at in the future. That, in turn, can help leaders identify where to start the hard work of organizational transformation.

This self-assessment points to an important insight: it is the leader’s conscious choice to select the level of responsiveness at which their organization will need to operate if it is to survive and prosper. As much as the levels of renewal and reinvention call for the entire organization and the external world to participate in the creation of the future state, the very act of defining the ambition level of the collective endeavor and the fundamental rules of play continue to be a genuine act of leadership from the top and cannot be left to chance. This sounds controversial, but it is not. Co-creation needs a context, a direction and some meaningful and collectively accepted boundaries to prosper—to establish these it needs more, and more sophisticated, leadership than ever.

We should emphasize that there are times when it is appropriate for organizations and leaders to operate at the improvement level—for example, when stabilizing operations or ensuring their firms’ immediate survival in a crisis such as the present one. But even in sectors that have seen demand hit hard during the COVID-19 pandemic, such as travel, tourism, and automotive, there are opportunities for leaders to consider and consciously embrace renewal and reinvention. Indeed, the long-term survival and success of many such firms may well depend on their capacity today to meet and master the complexity and challenge that the crisis has brought to their markets and business models.
 

Learning to meet and master complexity

As we observe business leaders navigating the COVID-19 crisis, the analogy of sea kayaking comes to mind. Kayakers who are masters of their sport are well prepared to meet a sudden storm out at sea, where giant swells and wild winds threaten to capsize and sink their boats. They know how to “go with the flow.” Novice paddlers would react to the danger, narrow their focus, and seek to tighten control of their craft. Experienced paddlers are much more resilient: they would be more likely to stay present and attuned to the bigger picture unfolding around them, and find ways to harness the power of nature rather than resist it. And while novices might be overwhelmed by fear, master paddlers would be more likely to experience energy and even exhilaration—and would look to this test of their capabilities as an opportunity for growth.

Our research on leadership in the crisis brings into relief our work over years with many organizations on leadership and complexity. This work suggests that the capabilities of an organization and its leaders to deal with complexity—the ability to ask the right questions and to quickly adapt and grow based on the answers—is much more likely to determine future success than a planning-focused approach that bets on a few possible scenarios.

This is what we are observing today in the leaders who are responding to the crisis with a new-felt sense of empowerment and an agenda for action—and an approach to leadership that fosters a sense of vitality across the organization. These leaders, like the master kayakers, are meeting external complexity rather than reacting to it. They do not look at the world and feel overwhelmed and disempowered as they see complexity multiplied by the crisis. Rather, these leaders are capable of selecting consciously the level of responsiveness of their organization to the external world.

In so doing, such leaders can dare to embrace a perspective that systems theory adopted a long time ago: the world is not complex per se, and it has not become more complex through the COVID-19 crisis. The world is just what it is: an infinitely interconnected reality of facts, in relation to which we, as social beings, have the privilege to create objects, relations, and meaning. The complexity of the world is what we decide to see when relating to it. Accordingly, any form of our collective representation of “what is out there” is radically more simple then the world itself. We decide to take some objects and interconnections in focus, we call them into existence through our action. We decide to ignore many others, and we often do not know the consequences of “not seeing” them.

The widespread feeling that “the world is ever more complex” is simply the expression of our intuition that we need to upgrade the complexity of our way of relating to the world in order to survive. The COVID-19 crisis can be a prompt to leaders to increase the sophistication of their organizations to develop more sophisticated senses and reactions to survive and thrive in changing environments. In this view, complexity is not the enemy “out there”; it is an instrument that leaders need to design and to tune to the world. The responsibility of leaders is to consciously create the inner complexity they need in the organization to meet the world.
 

In the COVID-19 crisis, important shifts are already underway in organization and culture. But there is no guarantee that such shifts will translate into lasting, long-term change. Some leaders we spoke to have already stabilized business operations and are actively connecting with stakeholders and thinking collaboratively about how to evolve their organizations to meet the “new normal.” But others are exhibiting less curiosity and imagination, and there is the risk that the energy and speed they are experiencing in the crisis will result in nothing more than better implementation of their pre-COVID-19 strategies and practices—alongside restructured supply chains that are less globally interdependent than before.

In the months ahead, it will be critical for leaders to hone and strengthen their capacity to meet and master complexity. That, in turn, will open pathways for them to renew and even reinvent their businesses—and, ultimately, to engage more deeply with their broader societal purpose while fostering curiosity and strengthening resilience for the long term.