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Punched in the Face: A New Leadership Contract Emerges

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"Everybody has a plan until they get punched in the face." The Mike Tyson quote elicited a ripple of laughter at the Davos breakfast last week - but the somber truth is that traditional leadership approaches have been punched in the face. The world has changed. Profound economic, social and technological forces are rapidly transforming businesses. And the corporation has changed from being viable on its legal and financial construct, to being viable on its social contract.

There's a permeable membrane between business and an increasingly complex group of stakeholders -- boards, regulators, activist investors, media and consumers. In our social media-powered ultra-networked world, corporate behavior is driven externally as much as internally. New technology tools means the consumer voice is heard in different and more relevant ways. And increasing governmental regulations means the rules of the game have quite literally changed.

The scaffolding of relationships has shifted and it's possible we do not yet realize just how radically it's changed. But we do know the pressure has ratcheted up on today's CEO. A new leadership contract is emerging: an implicit agreement between CEOs and stakeholders to ensure long-term, sustainable value creation and legitimacy.

In Davos last week, Oxford's Saïd Business School together with Heidrick & Struggles launched a global initiative to explore how successful companies develop innovative, transformational leaders--and to find gaps and opportunities for completely new approaches. We invited the CEOs of Alcoa, DuPont and EY and the chair of Flextronics International to meet with a select audience gathered during the World Economic Forum annual meeting. In the lively panel discussion moderated by Maria Bartiromo, these top global executives honed in on stark realities leaders face today.

"This job is always painful," DuPont CEO Ellen Kullman explained. "There are always shocks. Leaders can't always simply stick to the plan. You have to be able to make adjustments. You need people who can see around corners. And you need leaders who can connect the dots. Shocks help you learn a lot about people's flexibility and their ability to incorporate new thinking."

Flextronics International Chairman Ray Bingham, agreed, stressing "the speed at which business cycles are moving and speed at which report cards come out on leaders is faster than ever. Agility is needed. Relevance to stakeholders is critical. The ability to talk to an assemblyman in Malaysia or a Wall Street reporter or a Congressman are all important."

Leaders must boundary-span and navigate contradictions, complexity and constituencies in a networked world where the spotlight's glare is always on. Interestingly, in conversation after conversation in Davos, executives believed such tensions between courage and compliance could be resolved by focusing the organization on a higher purpose.

"In my view, you have to be a purpose-driven company," EY CEO Mark Weinberger emphasized. "At EY we have 175,000 people and we're growing -- and we talk about our purpose of a 'better working world' when recruiting. People want to do well and do good. They want to understand how they're making a difference in the world. Things change all the time, but your organization's purpose transcends any individual product or service."

Clarity on who and what the leadership is serving is vital, says Dr. Andrew White, Oxford Saïd Business School Associate Dean, Executive Education. "Who we put into running big companies is critically important, not just to the companies but to society. Obesity, poverty, conflict and climate change are all examples where the right type of leaders can lead business in a way that they become part of the solution -- not the problem -- whilst also delivering sustainable shareholder performance."

This assertion resonates with The B Team's 'Future of Leadership' challenge -- and the 'Five Principles of a Purpose Driven Business' by Blueprint for Better Business -- both seeking to address the significant trust deficit corporate leaders face today.

The seemingly paradoxical demands are much greater today, and the expectations -- the implied 'contract' -- much more tangible. According to Valerie Germain, Heidrick & Struggles Global Managing Partner, the implications for leaders' skills and preparedness are profound. "Historically, CEOs didn't have to traverse such a complex set of ravines and many are unprepared. In the past, talent development focused on core themes -- growth, restructuring, change, product development, innovation, etc. -- but not all at once in one individual. Today the requirements of a CEO include politician, strategic navigator, regulator, negotiator."

Her colleague, Jeffrey Cohn, author of 'Why Are We Bad at Picking Good Leaders?,' adds "it's not just the necessary skills of leaders that have changed, it is also the underlying attributes - their ability to handle paradox, complexity, empathy, self awareness -- and what is expected of their values and motives."

In her breakfast remarks Ellen Kullman underscored these attributes, emphasizing that "[Leadership today] requires self-awareness and an awareness of what drives people in different cultures around the world. To get most out of people you have to know what drives them."

Alcoa CEO Klaus Kleinfeld agreed, adding, "The evaluation of leaders is [based on] values and performance. Leaders need more cultural diversity and sensitivity given the way the world is changing and coming together at the same time."

Klaus' closing remarks in Davos were especially astute: "In today's world, talent is the only sustainable competitive advantage." Given the dizzying demands from a myriad of interconnected stakeholders -- and the vital role large corporations play in society -- talent at the top must embody the skills, attributes and purpose-centered behaviors that are sustainable in our times.