This blogpost is written for the Global Drucker Forum 2020, Leadership Everywhere
She was not the obvious leader in the room. As a female CFO, she was not the obvious go-to-leader, but it was very clear once you got to know her and the work she did, that for all practical purposes, she was the one that was driving the transformation at this oil and gas service company.
When the transformation program had first started a couple of months ago, everyone looked to the CEO, a long-term industry executive, to own and lead the transformation. Neither the staff nor the board was particularly engaged in, nor did they see the need for transformation. When my team and I was first invited in, we quickly got the impression that the CEO was leading the strategic transformation process, with the rest of the organization following many steps behind him.
But working with the management team up close, following the interactions with the board and, notably, seeing the interaction with financial markets, it became clear to us that the CEO was not the one in charge. It was, if you will, a strategic CFO that was leading the transformation journey. Together with the internal strategy team, she was clearly out in front, taking the lead to reinvent the firm.
It was a powerful reminder that transformational leadership does not always sit at the top of the hierarchy. Transformational leadership can be found everywhere.
Figure 1: Self-Assessment with the strategic CFO, using the Transformation Starters Map (Rangen, 2020)
Over the last 10 years, we have worked extensively with large-scale corporate transformation in industries and geographies around the world.
While the traditional literature may imply the big man CEO theory with a CEO firmly leading the transformation, our experience has been that there are, in fact, five distinct and quite different way of leadership or organizational power dynamics that create and shape successful transformations.
In this blogpost, we will explain these five and share our insights on them. In doing so, we will follow the Transformation Starters Map, a visual tool that was developed during the research on Building the Transformation Company.
The Transformation Starters Map helps visually identify where transformation starts, who leads it and who is actually in charge of leading the transformation successfully. It allows the CEO, strategy leader or a consultant to map out and identify who is driving – and who is blocking – the transformation.
The map is built on nine groups, that all can have critical roles to play in leading a transformation.
Figure 2: Transformation Starters Map (Rangen, 2020)
In our work we have often come across various scenarios. They may not be clearly visible at first, but they always emerge over a period of time. Five of these scenarios on transformational leadership is mapped out below.
Scenario One: The Existing CEO
Figure 3: CEO Leadership
‘’It should be illegal to focus (only) on the core business’’, a favorite slogan of CEO of Lyse, a Norwegian utility-turned-technology company.
Under the two-decade leadership era of Mr. Eimund Nygaard, Lyse has transformed from a traditional local utility to a rapidly growing energy- and technology company. Nygaard has been leading the transformation by following a structured approach to innovation, new market opportunities and making strategic industrial deals. One of the secrets to his success has been the collaboration and engagement with the board during these two decades.
This is a common scenario, with the CEO clearly leading the transformation. He is working well with the management team, and collectively they involve the board in the transformation process. Based on frequent interaction between the management and board, the management team engages the wider organization throughout the transformation journey.
This scenario follows the traditional CEO-led, top-down approach to transformation, possibly with the board waking up late to the need for transformation.
In our experience, external orientation and an early recognition of industry shifts is a core capability in CEOs who are able to reinvent the firms they lead.
Scenario Two: CFO Leadership
Figure 4: CFO leadership
As suggested in the opening story, in some companies we see the CFO leading the transformation, even to the extent of leading the entire ‘future-oriented’ part of the management team’s agenda. The CFO also takes the point in activating and collaborating with the strategy team.
This is a rare kind of strategic CFO, being the connecting part between the management team and internal strategy team. Over the past decade we have had the pleasure of working with this strategic CFO across several industries, over time growing to really appreciate this transformational leadership.
One benefit; it is much easier for the CFO to understand the full financial implications of introducing the Core-Growth-Explore framework. Niel, one of the CFOs we worked with in Denmark, was instantly able to assess both cap.ex (capital expenditure), op.ex (operational expenditure), impact on revenue, impact on margins and finally impact on market cap when we worked through various business model portfolios for his firm.
One challenge; in this scenario the CEO if often more in the background, sometimes causing a potential conflict on who is actually in charge.
Scenario Three: Bottom-Up Leadership from Employees
Figure 5: Bubbling up leadership
When Norwegian energy giant Equinor announced a range of open positions in their new New Energy Solutions unit, the small team was flooded with internal applications. Across the company, the new positions in the fields of solar, battery and offshore wind generated a massive buzz. But the high interest did not come as a total surprise.
For years, the conversation had been bubbling up. ‘What should we do with renewables?, ‘what is our position in the energy transition?’, ‘how do we position ourselves for an accelerating energy transformation?’, these questions had been surfacing in small pockets across the firm for years, both forcing and inspiring a larger conversation across the firm.
We call this phenomenon bubbling up organizational conversations. In this scenario, the transformation journey really begins with a 1000’s of questions being asked, and small conversations being had. Over time, this conversation spreads from the frontlines, to managers and eventually finding its way to the management team and up to decisionmakers.
To quote Professor Rita McGrath, ‘’snow melts at the edges’’ , and the people at the edges are also the leaders that are driving the bubbling up scenario.
Granted, this scenario can take years to emerge and may not be suitable in more formal high-power cultures. But in highly innovative, decentralized organizations, the bubbling up transformational leadership relies on leaders to emerge from anywhere.
Scenario Four: The Board Selecting a New CEO (Internal)
Figure 6: Board leading the transformation
When Equinor was recruiting for a new CEO recently, the board was left with four candidates, all internal. When one of the candidates, Mr. Anders Opedal was announced as the upcoming CEO, the media reported ‘’It was Opedal’s presentation to the board of directors about a clear reinvention of the company in the direction of greater renewable investment that made an impression on the board. The leading candidate at the time, Mr. Lars-Kristian Bacher, placed a greater emphasis on a gradual transition in line with the company’s current strategy.’’
In this scenario, the board takes a leading role in driving the transformation journey. Transformational leadership starts with the board. In hiring a new transformational CEO, the board puts a new leader in place to drive a top-down transformation.
In the case of Mr. Opedal, he is currently working with a large transition team. The team is a larger-than-usual number of company leaders, supporting the new CEO’s transition phase into the official CEO role later this year.
Scenario Five: Activist Investors Changing the Board, Recruiting an Outside CEO
Figure 7: Activist investors forcing the transformation through
“The most feared investor in America” has Twitter’s CEO in his sights, read the headline on the Verge. Activist investor Elliott Management Corporation had just taken a 4% stake in the social media platform and was pushing for a new CEO.
Step one, assemble a new board. ‘’Elliott Management quickly put forth four new nominees for the company’s board, with the goal of replacing Jack Dorsey as CEO’’, leading to the headline ‘’Jack Dorsey is in for the fight of his life’’.
With Twitter stock wildly underperforming other social media platforms, investors had had enough. It was time for a CEO change. It was time for an activist investor.
Figure 8: Facebook vs. Twitter 2015 – 2020, Bloomberg Chart
In a December 2019 letter, investor and marketing guru Scott Galloway penned a letter to the board of Twitter. “To be clear, my primary objective is the replacement of CEO Jack Dorsey,” Galloway said in an open letter to the company’s executive chairman, Omid Kordestani. “However, your firm’s weapons of mass entrenchment include a staggered board that may force shareholders to seek to replace other directors, including yourself, first.”
Welcome to activist investors. When leaders – and boards – do not perform and transform, the stage is set for the activist investor. The transformational leadership is violently different in a scenario of activist investors forcing through an early transformation.
Often, we see the activist investor replacing the entire board before swiftly recruiting a new, outside CEO. This CEO will come in, expecting to change most if not all of the management team, needs to engage with the wider organization, the frontline staff and the lower ranks of the company. She may engage with operational issues on the frontlines, not strategizing in the headquarters, all a part of engaging the wider organization in the accelerated, investor-initiated transformation journey.
The activist fights over Darden Restaurants and Red Robin are great illustrations of the transformational powers of an activist investor, all the way down to how the new management spends weeks on the frontlines, transforming customer experience, employee engagement and removing internal blockers by actively leading through the transformation.
While this scenario is not frequently recognized in the leadership literature, there is little doubt of the power and impact of the right activist investors. But, as in the case of Blockbuster’s demise, an activist investor is not guaranteed to lead to a successful transformation.
Conclusion
Despite popular ideas of a visionary, strong-willed CEO, we find there are multiple kinds of leadership to drive a successful transformation. In this blogpost we have identified five such scenarios.
In our work with transformation in organizations around the world, we frequently find that transformational leaders can emerge from anywhere. From strategy leaders in Brazilian unicorns, to young managers in oil & gas to middle managers in Asian utilities, transformational leadership does not have to start at the top, in fact, it frequently does not.
As we strive to gain a better understanding of successful transformational leadership, we hope that the ideas and visual tools shared can help companies create more successful transformational leaders for the future. Looking ahead, we are firm believers that truly transformational leadership can and will be found everywhere.
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About the Author
Christian Rangen, founder and CEO of Engage // Innovate and Strategy Tools – the Modern Strategist’s Platform, is a strategy and transformation advisor to companies and leaders around the world.
He has developed more than 120 visual strategy canvases helping leaders everywhere solve their top strategy and transformation challenges. His upcoming book on Building the Transformational Company is out in 2021.
This article is a part of the Drucker Forum’s “Shape the Debate” series.