Leadership2050 edition 10: Trajectory Decisions

Welcome to the 10th edition of the Leadership2050 Newsletter. Firstly, thank you to all those who gave me such positive feedback on the previous Newsletter and the encouragement to turn the ‘seven principles’ that I presented into a book. Also, thanks to everyone who has recently subscribed, taking the number of subscribers to 3500!

In previous editions of this Newsletter, I have presented several different ways for leaders to assess the external and internal contexts that they face. However important this activity is, it could be described by the Japanese koan as ‘the sound of one hand clapping’, i.e. just half of what these leaders need to do. 

Multiple stakeholders such as shareholders, regulators, customers, employees and society all expect leaders to make decisions. Given how hard it is to confront the complex challenges facing the world today, it can be too easy to ‘duck’ or ignore these hard decisions by being busy and just saying the ‘right thing’. Evidence suggests that, if leaders are not proactive in facing these decisions, then a constellation of stakeholders and situations inevitably come together and force them to be made – often with negative consequences for the individuals and organisations concerned. The business press is full of these examples, along with stories about the consequences. 

In Newsletter 7, I presented the mountain-to-mountain model and how this can be used to understand the context and position of the journey being undertaken by leaders and organisations. When using this model, I have often found that leaders want to know how to move forward, and the journey metaphor continues to be very helpful, alongside the concept of ‘trajectory decisions’ – something that I will develop and define later. 

In coming back to the journey metaphor, I have found four questions that bring focus to what decisions need to be made:

The first question – what do you want to take with you? When a company realises that it must make major changes, it is often all too easy to ignore those good aspects that it has at its disposal. Existing and specific people, values, assets, brands, customers, suppliers and technologies are all entities that can be used in the process of transformation, along with the trust, relationships and impact associated with them. When leaders wake up to the nature of change that stakeholders are demanding, appreciation of what has been built (often over decades and sometimes over centuries) can be a vital approach that is manifested by documenting and presenting these things anew. 

The second question – what do you want to leave behind? This can often be the hardest question to answer, as it often involves something that has gone wrong, or is no longer working or having the desired impact. Specific people, values, assets, brands, customers, suppliers and technologies are all entities that might need to be left in the past, as are certain beliefs, assumptions and parts of the company that don’t fit the desired future state. 

The third question – what do you need to transform? The core job of leadership is the transformation of the status quo (if the job of managers is to manage it). Therefore, we go back to the same list and ask: what needs to change to have more or different impact regarding specific people, values, assets, brands, customers, suppliers and technologies? More explicitly – what decisions and actions need to be taken to make this transformation happen? 

The fourth question – what do you need to create? This is often the most challenging for the current cadre of leaders running large companies, most of whom have been promoted into their positions because they were good at delivering performance within the status quo. We are in the territory of ‘start-ups’ with this question – something that is inherently risky, very much needed and historically alien to the large companies that have so much impact today and the potential (positive and negative) for the future. For many of today’s leaders, this will be like trying to write calligraphy with their non-dominant hand!

As you can imagine – answering these questions honestly results in a discussion that could create a deep awareness of the challenges and opportunities facing a leadership team, and an insight into what needs to be done. Often, what then comes out of such discussions is the need to take what I term trajectory decisions. These decisions:

1.     Are aligned with an explicit purpose for why a company exists and the impact that it wants to have – or with a broadly held and implicit understanding of what the company’s purpose is;

2.     Represent a significant departure from the current status quo or modus operandi of the company, and must set or contribute to a new strategic direction;

3.     Are often financially counter-intuitive in the short term; 

4.     Embody the exposed purpose of the company in a financially significant strategic decision;

5.     Often contain a high degree of personal risk for the CEO and senior leadership team, which requires bravery and courage; and 

6.     Seek to combine ‘doing the right thing’ with longer-term profitable growth. 

Examples of such trajectory decisions are listed below:

1.     CVS – the US retailer went through a process to understand and articulate its purpose to be about people’s healthcare. This articulation put it at odds with the $2bn annual sales that it generated from tobacco products. It made the bold decision to remove tobacco from its stores – and hence illustrates what I mean by this type of decision. 

2.     Shell – the European energy company made the decision to dispose of its tar sands operation, known to be one of the worst means of processing oil, at an estimated cost of $3.5bn. The CEO said ‘We believe climate change is real. We believe action is going to be needed. We believe we are in the middle of an energy transition that is unstoppable’. He went on to say that he ‘wants to be in the vanguard’ of that transition to cleaner energy. Shell created a new energy division last year, which is targeting an annual spend of $1bn by the end of the decade, or 4% of the $25bn capital expenditure that it plans for this year.

What we often see in the media regarding these types of decisions are the outputs from what is a complicated, multi-factor process, often full of paradoxes (see Newsletter 2), and challenges to ‘business as usual’. For me, what is interesting is how these decisions are made in a sustainable and repeatable way, and specifically:

1.     What role did the CEO and other key leaders and employees of the company play?

2.     What events triggered the process that led to the decision? 

3.     What risks were considered and why were they discounted or addressed?

4.     What outcome was hoped for and articulated?

5.     Which internal and external stakeholders needed to be considered? 

6.     What were the key enablers and activities that underpinned the process? 

7.     Does a new type of leadership emerge, as leaders and companies go through the process of making these trajectory decisions?

In summary, only by taking the right trajectory decisions will companies live up to the promise of their purpose, renew their social contract with their stakeholders and continue (or rediscover) profitable growth. To do this this takes bravery and courage, something that Dr Martin Luther King Jnr describes as ‘an inner resolution to go forward despite obstacles; cowardice is submissive surrender to circumstances. Courage breeds creativity: cowardice represses fear and is mastered by it. Cowardice asks the question, is it safe? Expediency asks the question, is it politic? Vanity asks the question, is it popular? But conscience asks the question, is it right? And there comes a time when we must take a position that is neither safe, nor politic, nor popular, but one must take it because it is right’. I am deeply aware that, as more and more leaders become aware of the challenges facing the world, there is a growing number who are making these types of decisions and manifesting the courage that Dr King spoke about.

Stand by for future Newsletters that put a spotlight on these people and companies…

Finally, you may be interested to know why I am asking these questions. As a Senior Fellow of Management Practice at Said Business School (SBS), University of Oxford, my research and teaching focuses on how leaders transcend 21st century challenges such as disruptive technology change and the climate crisis; also, how they create cultures that are diverse, inclusive, resilient and high performing, alongside the ongoing challenge of delivering profitable growth. At Oxford, I direct the Oxford Advanced Management and Leadership Programme and, in this capacity, work with leaders from many geographies, industries and governments. All this has given me a deep understanding of how good leaders create value and bad leaders destroy it, as measured from multiple perspectives. One could argue that never before has this been so important on a global stage; hence why I am undertaking this work. 

(c) Dr Andrew White September 2021