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E S T

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H B R

The Work of Leadership

by Ronald A. Heifetz and Donald L. Laurie

Included with this full-text

Harvard Business Review

article:

The Idea in Brief—the core idea

The Idea in Practice—putting the idea to work

Article Summary

The Work of Leadership

A list of related materials, with annotations to guide further

exploration of the article’s ideas and applications

Further Reading

Followers want comfort,

stability, and solutions from

their leaders. But that’s

babysitting. Real leaders ask

hard questions and knock

people out of their comfort

zones. Then they manage the

resulting distress.

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E S T

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The Work of Leadership

The Idea in Brief The Idea in Practice

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What presents your company with its toughest challenges? Shifting markets? Stiffening competition? Emerging tech- nologies? When such challenges intensify, you may need to reclarify corporate values, redesign strategies, merge or dissolve busi- nesses, or manage cross-functional strife.

These

adaptive challenges

are murky, systemic problems with no easy answers. Perhaps even more vexing, the solutions to adaptive challenges

don’t

reside in the executive suite. Solving them requires the involvement of people

throughout

your organization.

Adaptive work is tough on everyone. For

leaders

, it’s counterintuitive. Rather than providing solutions, you must ask tough questions and leverage employees’ collec- tive intelligence. Instead of maintaining norms, you must challenge the “way we do business.” And rather than quelling conflict, you need to draw issues out and let people feel the sting of reality.

For your

employees

, adaptive work is painful— requiring unfamiliar roles, responsibilities, values, and ways of working. No wonder employees often try to lob adaptive work back to their leaders.

How to ensure that you

and

your employees embrace the challenges of adaptive work? Applying the following six principles will help.

1. Get on the balcony.

Don’t get swept up in the field of play. Instead, move back and forth between the “action” and the “balcony.” You’ll spot emerging patterns, such as power strug- gles or work avoidance. This high-level per- spective helps you mobilize people to do adaptive work.

2. Identify your adaptive challenge.

Example:

When British Airways’ passengers nick- named it “Bloody Awful,” CEO Colin Marshall knew he had to infuse the company with a dedication to customers. He identified the adaptive challenge as “creating trust throughout British Airways.” To diagnose the challenge further, Marshall’s team min- gled with employees and customers in baggage areas, reservation centers, and planes, asking which beliefs, values, and be- haviors needed overhauling. They exposed value-based conflicts underlying surface- level disputes, and resolved the team’s own dysfunctional conflicts which impaired companywide collaboration. By under- standing themselves, their people, and the company’s conflicts, the team strength- ened British Airways’ bid to become “the World’s Favourite Airline.”

3. Regulate distress.

To inspire change— without disabling people—pace adaptive work:

•

First, let employees debate issues and clarify assumptions behind competing views— safely.

•

Then provide direction. Define

key

issues and values. Control the rate of change: Don’t start too many initiatives simulta- neously without stopping others.

•

Maintain just enough tension, resisting pressure to restore the status quo. Raise tough questions without succumbing to anxiety yourself. Communicate presence and poise.

4. Maintain disciplined attention.

Encour- age managers to grapple with divisive issues, rather than indulging in scapegoating or de- nial. Deepen the debate to unlock polarized, superficial conflict. Demonstrate collaboration to solve problems.

5. Give the work back to employees.

To instill collective self-confidence—versus de- pendence on you—support rather than control people. Encourage risk-taking and responsibility—then back people up if they err. Help them recognize they contain the solutions.

6. Protect leadership voices from below.

Don’t silence whistle-blowers, creative deviants, and others exposing contradictions within your company. Their perspectives can provoke fresh thinking. Ask, “What is this guy

really

talk- ing about? Have we missed something?”

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E S T

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The Work of Leadership

by Ronald A. Heifetz and Donald L. Laurie

harvard business review • december 2001

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Followers want comfort, stability, and solutions from their leaders. But

that’s babysitting. Real leaders ask hard questions and knock people out

of their comfort zones. Then they manage the resulting distress.

Sometimes an article comes along and turns the conventional thinking on a subject not upside down but inside out. So it is with this landmark piece by Ronald Heifetz and Donald Laurie, pub- lished in January 1997. Not only do the authors introduce the breakthrough concept of adaptive change—the sort of change that occurs when people and organizations are forced to adjust to a radically altered environment—they chal- lenge the traditional understanding of the leader-follower relationship.

Leaders are shepherds, goes the conventional thinking, protecting their flock from harsh sur- roundings. Not so, say the authors. Leaders who truly care for their followers expose them to the painful reality of their condition and demand that they fashion a response. Instead of giving people false assurance that their best is good enough, leaders insist that people surpass them- selves. And rather than smoothing over conflicts, leaders force disputes to the surface.

Modeling the candor they encourage leaders to display, the authors don’t disguise adaptive change’s emotional costs. Few people are likely to

thank the leader for stirring anxiety and uncover- ing conflict. But leaders who cultivate emotional fortitude soon learn what they can achieve when they maximize their followers’ well-being instead of their comfort.

To stay alive, Jack Pritchard had to change his life. Triple bypass surgery and medication could help, the heart surgeon told him, but no technical fix could release Pritchard from his own responsibility for changing the habits of a lifetime. He had to stop smoking, improve his diet, get some exercise, and take time to relax, remembering to breathe more deeply each day. Pritchard’s doctor could provide sustain- ing technical expertise and take supportive action, but only Pritchard could adapt his in- grained habits to improve his long-term health. The doctor faced the leadership task of mobilizing the patient to make critical be- havioral changes; Jack Pritchard faced the adaptive work of figuring out which specific changes to make and how to incorporate them into his daily life.

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The Work of Leadership

• B

EST

HBR

harvard business review • december 2001

Companies today face challenges similar to the ones that confronted Pritchard and his doc- tor. They face adaptive challenges. Changes in societies, markets, customers, competition, and technology around the globe are forcing organizations to clarify their values, develop new strategies, and learn new ways of operat- ing. Often the toughest task for leaders in effecting change is mobilizing people through- out the organization to do adaptive work.

Adaptive work is required when our deeply held beliefs are challenged, when the values that made us successful become less relevant, and when legitimate yet competing perspec- tives emerge. We see adaptive challenges every day at every level of the workplace—when companies restructure or reengineer, develop or implement strategy, or merge businesses. We see adaptive challenges when marketing has difficulty working with operations, when cross-functional teams don’t work well, or when senior executives complain, “We don’t seem to be able to execute effectively.” Adap- tive problems are often systemic problems with no ready answers.

Mobilizing an organization to adapt its be- haviors in order to thrive in new business envi- ronments is critical. Without such change, any company today would falter. Indeed, getting people to do adaptive work is the mark of leadership in a competitive world. Yet for most senior executives, providing leadership and not just authoritative expertise is extremely diffi- cult. Why? We see two reasons. First, in order to make change happen, executives have to break a longstanding behavior pattern of their own: providing leadership in the form of solu- tions. This tendency is quite natural because many executives reach their positions of au- thority by virtue of their competence in taking responsibility and solving problems. But the locus of responsibility for problem solving when a company faces an adaptive challenge must shift to its people. Solutions to adaptive challenges reside not in the executive suite but in the collective intelligence of employees at all levels, who need to use one another as re- sources, often across boundaries, and learn their way to those solutions.

Second, adaptive change is distressing for the people going through it. They need to take on new roles, new relationships, new values, new behaviors, and new approaches to work. Many employees are ambivalent about the ef-

forts and sacrifices required of them. They often look to the senior executive to take prob- lems off their shoulders. But those expecta- tions have to be unlearned. Rather than fulfill- ing the expectation that they will provide answers, leaders have to ask tough questions. Rather than protecting people from outside threats, leaders should allow them to feel the pinch of reality in order to stimulate them to adapt. Instead of orienting people to their current roles, leaders must disorient them so that new relationships can develop. Instead of quelling conflict, leaders have to draw the is- sues out. Instead of maintaining norms, leaders have to challenge “the way we do business” and help others distinguish immutable values from historical practices that must go.

Drawing on our experience with managers from around the world, we offer six principles for leading adaptive work: “getting on the balcony,” identifying the adaptive challenge, regulating distress, maintaining disciplined attention, giving the work back to people, and protecting voices of leadership from below. We illustrate those principles with an example of adaptive change at KPMG Netherlands, a professional-services firm.

Get on the Balcony

Earvin “Magic” Johnson’s greatness in leading his basketball team came in part from his ability to play hard while keeping the whole game situ- ation in mind, as if he stood in a press box or on a balcony above the field of play. Bobby Orr played hockey in the same way. Other players might fail to recognize the larger patterns of play that performers like Johnson and Orr quickly understand, because they are so en- gaged in the game that they get carried away by it. Their attention is captured by the rapid motion, the physical contact, the roar of the crowd, and the pressure to execute. In sports, most players simply may not see who is open for a pass, who is missing a block, or how the offense and defense work together. Players like Johnson and Orr watch these things and allow their observations to guide their actions.

Business leaders have to be able to view pat- terns as if they were on a balcony. It does them no good to be swept up in the field of action. Leaders have to see a context for change or cre- ate one. They should give employees a strong sense of the history of the enterprise and what’s good about its past, as well as an idea of

Ronald A. Heifetz

is codirector of the Center for Public Leadership at Harvard University’s John F. Kennedy School of Government in Cambridge, Massachu- setts.

Donald L. Laurie

is founder and managing director of Laurie Interna- tional, a Boston-based management consulting firm. He is also a founder and partner at Oyster International, an- other Boston-based management con- sulting firm. He is the author of

Venture Catalyst

(Perseus Books, 2001). This article is based in part on Heifetz’s

Leadership Without Easy Answers

(Belknap Press of Harvard University Press, 1994).

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harvard business review • december 2001

the market forces at work today and the re- sponsibility people must take in shaping the future. Leaders must be able to identify strug- gles over values and power, recognize patterns of work avoidance, and watch for the many other functional and dysfunctional reactions to change.

Without the capacity to move back and forth between the field of action and the bal- cony, to reflect day to day, moment to mo- ment, on the many ways in which an organi- zation’s habits can sabotage adaptive work, a leader easily and unwittingly becomes a pris- oner of the system. The dynamics of adaptive change are far too complex to keep track of, let alone influence, if leaders stay only on the field of play.

We have encountered several leaders, some of whom we discuss in this article, who man- age to spend much of their precious time on the balcony as they guide their organizations through change. Without that perspective, they probably would have been unable to mo- bilize people to do adaptive work. Getting on the balcony is thus a prerequisite for following the next five principles.

Identify the Adaptive Challenge

When a leopard threatens a band of chimpan- zees, the leopard rarely succeeds in picking off a stray. Chimps know how to respond to this kind of threat. But when a man with an auto- matic rifle comes near, the routine responses fail. Chimps risk extinction in a world of poachers unless they figure out how to disarm the new threat. Similarly, when businesses cannot learn quickly to adapt to new chal- lenges, they are likely to face their own form of extinction.

Consider the well-known case of British Airways. Having observed the revolutionary changes in the airline industry during the 1980s, then chief executive Colin Marshall clearly recognized the need to transform an airline nicknamed Bloody Awful by its own passengers into an exemplar of customer ser- vice. He also understood that this ambition would require more than anything else changes in values, practices, and relationships through- out the company. An organization whose people clung to functional silos and valued pleasing their bosses more than pleasing cus- tomers could not become “the world’s favorite airline.” Marshall needed an organization dedi-

cated to serving people, acting on trust, re- specting the individual, and making team- work happen across boundaries. Values had to change throughout British Airways. People had to learn to collaborate and to develop a collective sense of responsibility for the direc- tion and performance of the airline. Marshall identified the essential adaptive challenge: creating trust throughout the organization. He is one of the first executives we have known to make “creating trust” a priority.

To lead British Airways, Marshall had to get his executive team to understand the nature of the threat created by dissatisfied customers: Did it represent a technical challenge or an adaptive challenge? Would expert advice and technical adjustments within basic routines suffice, or would people throughout the com- pany have to learn different ways of doing business, develop new competencies, and begin to work collectively?

Marshall and his team set out to diagnose in more detail the organization’s challenges. They looked in three places. First, they listened to the ideas and concerns of people inside and outside the organization—meeting with crews on flights, showing up in the 350-person reser- vations center in New York, wandering around the baggage-handling area in Tokyo, or visiting the passenger lounge in whatever air- port they happened to be in. Their primary questions were, Whose values, beliefs, atti- tudes, or behaviors would have to change in order for progress to take place? What shifts in priorities, resources, and power were neces- sary? What sacrifices would have to be made and by whom?

Second, Marshall and his team saw conflicts as clues—symptoms of adaptive challenges. The way conflicts across functions were being expressed were mere surface phenomena; the underlying conflicts had to be diagnosed. Dis- putes over seemingly technical issues such as procedures, schedules, and lines of authority were in fact proxies for underlying conflicts about values and norms.

Third, Marshall and his team held a mirror up to themselves, recognizing that they em- bodied the adaptive challenges facing the orga- nization. Early in the transformation of British Airways, competing values and norms were played out on the executive team in dysfunc- tional ways that impaired the capacity of the rest of the company to collaborate across func-

Solutions to adaptive

challenges reside not in

the executive suite but in

the collective intelligence

of employees at all levels.

The Work of Leadership • BEST OF HBR

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harvard business review • december 2001

tions and units and make the necessary trade- offs. No executive can hide from the fact that his or her team reflects the best and the worst of the company’s values and norms, and there- fore provides a case in point for insight into the nature of the adaptive work ahead.

Thus, identifying its adaptive challenge was crucial in British Airways’ bid to become the world’s favorite airline. For the strategy to succeed, the company’s leaders needed to un- derstand themselves, their people, and the potential sources of conflict. Marshall recog- nized that strategy development itself requires adaptive work.

Regulate Distress

Adaptive work generates distress. Before put- ting people to work on challenges for which there are no ready solutions, a leader must re- alize that people can learn only so much so fast. At the same time, they must feel the need to change as reality brings new challenges. They cannot learn new ways when they are overwhelmed, but eliminating stress altogether removes the impetus for doing adaptive work. Because a leader must strike a delicate balance between having people feel the need to change and having them feel overwhelmed by change, leadership is a razor’s edge.

A leader must attend to three fundamental tasks in order to help maintain a productive level of tension. Adhering to these tasks will allow him or her to motivate people without disabling them. First, a leader must create what can be called a

holding environment.

To use the analogy of a pressure cooker, a leader needs to regulate the pressure by turning up the heat while also allowing some steam to es- cape. If the pressure exceeds the cooker’s ca- pacity, the cooker can blow up. However, noth- ing cooks without some heat.

In the early stages of a corporate change, the holding environment can be a temporary “place” in which a leader creates the condi- tions for diverse groups to talk to one another about the challenges facing them, to frame and debate issues, and to clarify the assump- tions behind competing perspectives and values. Over time, more issues can be phased in as they become ripe. At British Airways, for exam- ple, the shift from an internal focus to a cus- tomer focus took place over four or five years and dealt with important issues in succession: building a credible executive team, communi-

cating with a highly fragmented organization, defining new measures of performance and compensation, and developing sophisticated information systems. During that time, em- ployees at all levels learned to identify what and how they needed to change.

Thus, a leader must sequence and pace the work. Too often, senior managers convey that everything is important. They start new initia- tives without stopping other activities, or they start too many initiatives at the same time. They overwhelm and disorient the very people who need to take responsibility for the work.

Second, a leader is responsible for direction, protection, orientation, managing conflict, and shaping norms. (See the exhibit “Adaptive Work Calls for Leadership.”) Fulfilling these re- sponsibilities is also important for a manager in technical or routine situations. But a leader engaged in adaptive work uses his authority to fulfill them differently. A leader provides direc- tion by identifying the organization’s adaptive challenge and framing the key questions and issues. A leader protects people by managing the rate of change. A leader orients people to new roles and responsibilities by clarifying busi- ness realities and key values. A leader helps ex- pose conflict, viewing it as the engine of cre- ativity and learning. Finally, a leader helps the organization maintain those norms that must endure and challenge those that need to change.

Third, a leader must have presence and poise; regulating distress is perhaps a leader’s most difficult job. The pressures to restore equilibrium are enormous. Just as molecules bang hard against the walls of a pressure cooker, people bang up against leaders who are trying to sustain the pressures of tough, conflict-filled work. Although leadership de- mands a deep understanding of the pain of change—the fears and sacrifices associated with major readjustment—it also requires the ability to hold steady and maintain the ten- sion. Otherwise, the pressure escapes and the stimulus for learning and change is lost.

A leader has to have the emotional capacity to tolerate uncertainty, frustration, and pain. He has to be able to raise tough questions without getting too anxious himself. Employees as well as colleagues and customers will care- fully observe verbal and nonverbal cues to a leader’s ability to hold steady. He needs to communicate confidence that he and they can tackle the tasks ahead.

A leader must sequence

and pace the work. Too

often, senior managers

convey that everything is

important. They

overwhelm and disorient

the very people who need

to take responsibility for

the work.

The Work of Leadership • BEST OF HBR

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harvard business review • december 2001

Maintain Disciplined Attention

Different people within the same organiza- tion bring different experiences, assumptions, values, beliefs, and habits to their work. This diversity is valuable because innovation and learning are the products of differences. No one learns anything without being open to contrasting points of view. Yet managers at all levels are often unwilling—or unable—to ad- dress their competing perspectives collec- tively. They frequently avoid paying attention to issues that disturb them. They restore equi- librium quickly, often with work avoidance maneuvers. A leader must get employees to confront tough trade-offs in values, proce- dures, operating styles, and power.

That is as true at the top of the organization as it is in the middle or on the front line. In- deed, if the executive team cannot model adaptive work, the organization will languish. If senior managers can’t draw out and deal

with divisive issues, how will people elsewhere in the organization change their behaviors and rework their relationships? As Jan Carlzon, the legendary CEO of Scandinavian Airlines Sys- tem (SAS), told us, “One of the most interest- ing missions of leadership is getting people on the executive team to listen to and learn from one another. Held in debate, people can learn their way to collective solutions when they un- derstand one another’s assumptions. The work of the leader is to get conflict out into the open and use it as a source of creativity.”

Because work avoidance is rampant in orga- nizations, a leader has to counteract distrac- tions that prevent people from dealing with adaptive issues. Scapegoating, denial, focusing only on today’s technical issues, or attacking in- dividuals rather than the perspectives they rep- resent—all forms of work avoidance—are to be expected when an organization under- takes adaptive work. Distractions have to be

Direction

Protection

Orientation

Managing Conflict

Shaping Norms

Adaptive Work Calls for Leadership

Technical or Routine Adaptive

Define problems and provide solutions

Shield the organization from external threats

Clarify roles and responsibilities

Restore order

Maintain norms

Identify the adaptive challenge and frame key questions and issues

Let the organization feel external pressures within a range it can stand

Challenge current roles and resist pressure to define new roles quickly

Expose conflict or let it emerge

Challenge unproductive norms

Leader’s Type of Responsibilities Situation

In the course of regulating people’s distress, a leader faces several key

responsibilities and may have to use his or her authority differently

depending on the type of work situation.

The Work of Leadership • BEST OF HBR

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harvard business review • december 2001

identified when they occur so that people will regain focus.

When sterile conflict takes the place of dia- logue, a leader has to step in and put the team to work on reframing the issues. She has to deepen the debate with questions, unbundling the issues into their parts rather than letting conflict remain polarized and superficial. When people preoccupy themselves with blaming external forces, higher management, or a heavy workload, a leader has to sharpen the team’s sense of responsibility for carving out the time to press forward. When the team fragments and individuals resort to protecting their own turf, leaders have to demonstrate the need for collaboration. People have to discover the value of consulting with one another and using one another as resources in the problem- solving process. For example, one CEO we know uses executive meetings, even those that focus on operational and technical issues, as opportunities to teach the team how to work collectively on adaptive problems.

Of course, only the rare manager intends to avoid adaptive work. In general, people feel ambivalent about it. Although they want to make progress on hard problems or live up to their renewed and clarified values, people also want to avoid the associated distress. Just as millions of U.S. citizens want to reduce the federal budget deficit, but not by giving up their tax dollars or benefits or jobs, so, too, managers may consider adaptive work a pri- ority but have difficulty sacrificing their famil- iar ways of doing business. People need lead- ership to help them maintain their focus on the tough questions. Disciplined attention is the currency of leadership.

Give the Work Back to People

Everyone in the organization has special ac- cess to information that comes from his or her particular vantage point. Everyone may see different needs and opportunities. People who sense early changes in the marketplace are often at the periphery, but the organization will thrive if it can bring that information to bear on tactical and strategic decisions. When people do not act on their special knowledge, businesses fail to adapt.

All too often, people look up the chain of command, expecting senior management to meet market challenges for which they them- selves are responsible. Indeed, the greater and

more persistent distresses that accompany adap- tive work make such dependence worse. People tend to become passive, and senior managers who pride themselves on being problem solv- ers take decisive action. That behavior restores equilibrium in the short term but ultimately leads to complacency and habits of work avoid- ance that shield people from responsibility, pain, and the need to change.

Getting people to assume greater responsi- bility is not easy. Not only are many lower-level employees comfortable being told what to do, but many managers are accustomed to treat- ing subordinates like machinery that requires control. Letting people take the initiative in de- fining and solving problems means that man- agement needs to learn to support rather than control. Workers, for their part, need to learn to take responsibility.

Jan Carlzon encouraged responsibility taking at SAS by trusting others and decentralizing authority. A leader has to let people bear the weight of responsibility. “The key is to let them discover the problem,” he said. “You won’t be successful if people aren’t carrying the recogni- tion of the problem and the solution within themselves.” To that end, Carlzon sought wide- spread engagement.

For example, in his first two years at SAS, Carlzon spent up to 50% of his time communi- cating directly in large meetings and indirectly in a host of innovative ways: through work- shops, brainstorming sessions, learning exer- cises, newsletters, brochures, and exposure in the public media. He demonstrated through a variety of symbolic acts—for example, by elim- inating the pretentious executive dining room and burning thousands of pages of manuals and handbooks—the extent to which rules had come to dominate the company. He made himself a pervasive presence, meeting with and listening to people both inside and out- side the organization. He even wrote a book,

Moments of Truth

(HarperCollins, 1989), to ex- plain his values, philosophy, and strategy. As Carlzon noted, “If no one else read it, at least my people would.”

A leader also must develop collective self- confidence. Again, Carlzon said it well: “People aren’t born with self-confidence. Even the most self-confident people can be broken. Self-confidence comes from success, experi- ence, and the organization’s environment. The leader’s most important role is to instill confi-

Management needs to

learn to support rather

than control. Workers,

for their part, need to

learn to take

responsibility.

The Work of Leadership • BEST OF HBR

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harvard business review • december 2001

dence in people. They must dare to take risks and responsibility. You must back them up if they make mistakes.”

Protect Voices of Leadership from Below

Giving a voice to all people is the foundation of an organization that is willing to experi- ment and learn. But, in fact, whistle-blowers, creative deviants, and other such original voices routinely get smashed and silenced in organizational life. They generate disequilib- rium, and the easiest way for an organization to restore equilibrium is to neutralize those voices, sometimes in the name of teamwork and “alignment.”

The voices from below are usually not as articulate as one would wish. People speaking beyond their authority usually feel self- conscious and sometimes have to generate “too much” passion to get themselves geared up for speaking out. Of course, that often makes it harder for them to communicate effectively. They pick the wrong time and place, and often bypass proper channels of communication and lines of authority. But buried inside a poorly packaged interjection may lie an important intuition that needs to be teased out and considered. To toss it out for its bad timing, lack of clarity, or seeming un- reasonableness is to lose potentially valu- able information and discourage a potential leader in the organization.

That is what happened to David, a manager in a large manufacturing company. He had lis- tened when his superiors encouraged people to look for problems, speak openly, and take responsibility. So he raised an issue about one of the CEO’s pet projects—an issue that was deemed “too hot to handle” and had been swept under the carpet for years. Everyone un- derstood that it was not open to discussion, but David knew that proceeding with the project could damage or derail key elements of the company’s overall strategy. He raised the issue directly in a meeting with his boss and the CEO. He provided a clear description of the problem, a rundown of competing perspec- tives, and a summary of the consequences of continuing to pursue the project.

The CEO angrily squelched the discussion and reinforced the positive aspects of his pet project. When David and his boss left the room, his boss exploded: “Who do you think

you are, with your holier-than-thou attitude?” He insinuated that David had never liked the CEO’s pet project because David hadn’t come up with the idea himself. The subject was closed.

David had greater expertise in the area of the project than either his boss or the CEO. But his two superiors demonstrated no curiosity, no effort to investigate David’s reasoning, no awareness that he was behaving responsibly with the interests of the company at heart. It rapidly became clear to David that it was more important to understand what mattered to the boss than to focus on real issues. The CEO and David’s boss together squashed the viewpoint of a leader from below and thereby killed his potential for leadership in the organization. He would either leave the company or never go against the grain again.

Leaders must rely on others within the busi- ness to raise questions that may indicate an im- pending adaptive challenge. They have to pro- vide cover to people who point to the internal contradictions of the enterprise. Those indi- viduals often have the perspective to provoke rethinking that people in authority do not. Thus, as a rule of thumb, when authority fig- ures feel the reflexive urge to glare at or other- wise silence someone, they should resist. The urge to restore social equilibrium is quite power- ful, and it comes on fast. One has to get accus- tomed to getting on the balcony, delaying the impulse, and asking, What is this guy really talk- ing about? Is there something we’re missing?

Doing Adaptive Work at KPMG Netherlands

The highly successful KPMG Netherlands pro- vides a good example of how a company can engage in adaptive work. In 1994, Ruud Koedijk, the firm’s chairman, recognized a strategic challenge. Although the auditing, consulting, and tax-preparation partnership was the in- dustry leader in the Netherlands and was highly profitable, growth opportunities in the segments it served were limited. Margins in the auditing business were being squeezed as the market became more saturated, and com- petition in the consulting business was in- creasing as well. Koedijk knew that the firm needed to move into more profitable growth areas, but he didn’t know what they were or how KPMG might identify them.

Koedijk and his board were confident that

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they had the tools to do the analytical strategy work: analyze trends and discontinuities, un- derstand core competencies, assess their com- petitive position, and map potential opportu- nities. They were considerably less certain that they could commit to implementing the strategy that would emerge from their work. Histori- cally, the partnership had resisted attempts to change, basically because the partners were content with the way things were. They had been successful for a long time, so they saw no reason to learn new ways of doing business, either from their fellow partners or from any- one lower down in the organization. Overturn- ing the partners’ attitude and its deep impact on the organization’s culture posed an enor- mous adaptive challenge for KPMG.

Koedijk could see from the balcony that the very structure of KPMG inhibited change. In truth, KPMG was less a partnership than a collec- tion of small fiefdoms in which each partner was a lord. The firm’s success was the cumula- tive accomplishment of each of the individual partners, not the unified result of 300 colleagues pulling together toward a shared ambition. Success was measured solely in terms of the profitability of individual units. As one partner described it, “If the bottom line was correct, you were a ‘good fellow.’” As a result, one part- ner would not trespass on another’s turf, and learning from others was a rare event. Because independence was so highly valued, confronta- tions were rare and conflict was camouflaged. If partners wanted to resist firmwide change, they did not kill the issue directly. “Say yes, do no” was the operative phrase.

Koedijk also knew that this sense of auton- omy got in the way of developing new talent at KPMG. Directors rewarded their subordinates for two things: not making mistakes and deliver- ing a high number of billable hours per week. The emphasis was not on creativity or innova- tion. Partners were looking for errors when they reviewed their subordinates’ work, not for new understanding or fresh insight. Although Koedijk could see the broad outlines of the adaptive challenges facing his organization, he knew that he could not mandate behavioral change. What he could do was create the con- ditions for people to discover for themselves how they needed to change. He set a process in motion to make that happen.

To start, Koedijk held a meeting of all 300 partners and focused their attention on the

history of KPMG, the current business reality, and the business issues they could expect to face. He then raised the question of how they would go about changing as a firm and asked for their perspectives on the issues. By launch- ing the strategic initiative through dialogue rather than edict, he built trust within the partner ranks. Based on this emerging trust and his own credibility, Koedijk persuaded the partners to release 100 partners and nonpart- ners from their day-to-day responsibilities to work on the strategic challenges. They would devote 60% of their time for nearly four months to that work.

Koedijk and his colleagues established a stra- tegic integration team of 12 senior partners to work with the 100 professionals (called “the 100”) from different levels and disciplines. En- gaging people below the rank of partner in a major strategic initiative was unheard of and signaled a new approach from the start: Many of these people’s opinions had never before been valued or sought by authority figures in the firm. Divided into 14 task forces, the 100 were to work in three areas: gauging future trends and discontinuities, defining core com- petencies, and grappling with the adaptive challenges facing the organization. They were housed on a separate floor with their own sup- port staff, and they were unfettered by tradi- tional rules and regulations. Hennie Both, KPMG’s director of marketing and communi- cations, signed on as project manager.

As the strategy work got under way, the task forces had to confront the existing KPMG culture. Why? Because they literally could not do their new work within the old rules. They could not work when strong respect for the individual came at the expense of effective teamwork, when deeply held individual be- liefs got in the way of genuine discussion, and when unit loyalties formed a barrier to cross- functional problem solving. Worst of all, task force members found themselves avoiding con- flict and unable to discuss those problems. A number of the task forces became dysfunc- tional and unable to do their strategy work.

To focus their attention on what needed to change, Both helped the task forces map the culture they desired against the current cul- ture. They discovered very little overlap. The top descriptors of the current culture were: de- velop opposing views, demand perfection, and avoid conflict. The top characteristics of the

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desired culture were: create the opportunity for self-fulfillment, develop a caring environ- ment, and maintain trusting relations with colleagues. Articulating this gap made tangible for the group the adaptive challenge that Koedijk saw facing KPMG. In other words, the people who needed to do the changing had finally framed the adaptive challenge for themselves: How could KPMG succeed at a competence-based strategy that depended on cooperation across multiple units and layers if its people couldn’t succeed in these task forces? Armed with that understanding, the task force members could become emissaries to the rest of the firm.

On a more personal level, each member was asked to identify his or her individual adaptive challenge. What attitudes, behaviors, or habits did each one need to change, and what spe- cific actions would he or she take? Who else needed to be involved for individual change to take root? Acting as coaches and consult- ants, the task force members gave one another supportive feedback and suggestions. They had learned to confide, to listen, and to advise with genuine care.

Progress on these issues raised the level of trust dramatically, and task force members began to understand what adapting their be- havior meant in everyday terms. They under- stood how to identify an adaptive issue and de- veloped a language with which to discuss what they needed to do to improve their collective ability to solve problems. They talked about di- alogue, work avoidance, and using the collec- tive intelligence of the group. They knew how to call one another on dysfunctional behavior. They had begun to develop the culture re- quired to implement the new business strategy.

Despite the critical breakthroughs toward developing a collective understanding of the adaptive challenge, regulating the level of distress was a constant preoccupation for Koedijk, the board, and Both. The nature of the work was distressing. Strategy work means broad assignments with limited instructions; at KPMG, people were accustomed to highly structured assignments. Strategy work also means being creative. At one breakfast meet- ing, a board member stood on a table to chal- lenge the group to be more creative and toss aside old rules. This radical and unexpected behavior further raised the distress level: No one had ever seen a partner behave this way

before. People realized that their work experi- ence had prepared them only for performing routine tasks with people “like them” from their own units.

The process allowed for conflict and fo- cused people’s attention on the hot issues in order to help them learn how to work with conflict in a constructive manner. But the heat was kept within a tolerable range in some of the following ways:

• On one occasion when tensions were un- usually high, the 100 were brought together to voice their concerns to the board in an Oprah Winfrey–style meeting. The board sat in the center of an auditorium and took pointed ques- tions from the surrounding group.

• The group devised sanctions to discourage unwanted behavior. In the soccer-crazy Nether- lands, all participants in the process were issued the yellow cards that soccer referees use to indicate “foul” to offending players. They used the cards to stop the action when someone started arguing his or her point without listen- ing to or understanding the assumptions and competing perspectives of other participants.

• The group created symbols. They com- pared the old KPMG to a hippopotamus that was large and cumbersome, liked to sleep a lot, and became aggressive when its normal habits were disturbed. They aspired to be dolphins, which they characterized as playful, eager to learn, and happily willing to go the extra mile for the team. They even paid attention to the statement that clothes make: It surprised some clients to see managers wandering through the KPMG offices that summer in Bermuda shorts and T-shirts.

• The group made a deliberate point of hav- ing fun. “Playtime” could mean long bicycle rides or laser-gun games at a local amusement center. In one spontaneous moment at the KPMG offices, a discussion of the power of peo- ple mobilized toward a common goal led the group to go outside and use their collective le- verage to move a seemingly immovable con- crete block.

• The group attended frequent two- and three-day off-site meetings to help bring clo- sure to parts of the work.

These actions, taken as a whole, altered atti- tudes and behaviors. Curiosity became more valued than obedience to rules. People no longer deferred to the senior authority figure in the room; genuine dialogue neutralized hi-

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erarchical power in the battle over ideas. The tendency for each individual to promote his or her pet solution gave way to understanding other perspectives. A confidence in the ability of people in different units to work together and work things out emerged. The people with the most curious minds and interesting ques- tions soon became the most respected.

As a result of confronting strategic and adap- tive challenges, KPMG as a whole will move from auditing to assurance, from operations consulting to shaping corporate vision, from business-process reengineering to developing organizational capabilities, and from teaching traditional skills to its own clients to creating learning organizations. The task forces identi- fied $50 million to $60 million worth of new business opportunities.

Many senior partners who had believed that a firm dominated by the auditing mentality could not contain creative people were sur- prised when the process unlocked creativity, passion, imagination, and a willingness to take risks. Two stories illustrate the fundamental changes that took place in the firm’s mind-set.

We saw one middle manager develop the confidence to create a new business. He spot- ted the opportunity to provide KPMG services to virtual organizations and strategic alliances. He traveled the world, visiting the leaders of 65 virtual organizations. The results of his innova- tive research served as a resource to KPMG in entering this growing market. Moreover, he represented the new KPMG by giving a key- note address discussing his findings at a world forum. We also saw a 28-year-old female audi- tor skillfully guide a group of older, male se- nior partners through a complex day of look- ing at opportunities associated with implementing the firm’s new strategies. That could not have occurred the year before. The senior partners never would have listened to such a voice from below.

Leadership as Learning Many efforts to transform organizations through mergers and acquisitions, restructur- ing, reengineering, and strategy work falter because managers fail to grasp the require- ments of adaptive work. They make the classic error of treating adaptive challenges like tech- nical problems that can be solved by tough- minded senior executives.

The implications of that error go to the

heart of the work of leaders in organizations today. Leaders crafting strategy have access to the technical expertise and the tools they need to calculate the benefits of a merger or restruc- turing, understand future trends and disconti- nuities, identify opportunities, map existing competencies, and identify the steering mecha- nisms to support their strategic direction. These tools and techniques are readily available both within organizations and from a variety of con- sulting firms, and they are very useful. In many cases, however, seemingly good strategies fail to be implemented. And often the failure is misdiagnosed: “We had a good strategy, but we couldn’t execute it effectively.”

In fact, the strategy itself is often deficient because too many perspectives were ignored during its formulation. The failure to do the necessary adaptive work during the strategy development process is a symptom of senior managers’ technical orientation. Managers fre- quently derive their solution to a problem and then try to sell it to some colleagues and bypass or sandbag others in the commitment-build- ing process. Too often, leaders, their team, and consultants fail to identify and tackle the adap- tive dimensions of the challenge and to ask themselves, Who needs to learn what in order to develop, understand, commit to, and imple- ment the strategy?

The same technical orientation entraps business-process-reengineering and restructur- ing initiatives, in which consultants and man- agers have the know-how to do the technical work of framing the objectives, designing a new work flow, documenting and communicat- ing results, and identifying the activities to be performed by people in the organization. In many instances, reengineering falls short of the mark because it treats process redesign as a technical problem: Managers neglect to iden- tify the adaptive work and involve the people who have to do the changing. Senior execu- tives fail to invest their time and their souls in understanding these issues and guiding people through the transition. Indeed, engineering is itself the wrong metaphor.

In short, the prevailing notion that leader- ship consists of having a vision and aligning people with that vision is bankrupt because it continues to treat adaptive situations as if they were technical: The authority figure is supposed to divine where the company is going, and people are supposed to follow.

As a result of confronting

strategic and adaptive

challenges, KPMG task

forces identified $50

million to $60 million

worth of new business

opportunities.

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Leadership is reduced to a combination of grand knowing and salesmanship. Such a perspective reveals a basic misconception about the way businesses succeed in addressing adaptive challenges. Adaptive situations are hard to define and resolve precisely because they demand the work and responsibility of managers and people throughout the organi- zation. They are not amenable to solutions provided by leaders; adaptive solutions re- quire members of the organization to take responsibility for the problematic situations that face them.

Leadership has to take place every day. It cannot be the responsibility of the few, a rare event, or a once-in-a-lifetime opportu- nity. In our world, in our businesses, we face adaptive challenges all the time. When an executive is asked to square conflicting aspi- rations, he and his people face an adaptive challenge. When a manager sees a solution to a problem—technical in many respects except that it requires a change in the attitudes and habits of subordinates—he faces an adaptive challenge. When an employee close to the front line sees a gap between the organiza- tion’s purpose and the objectives he is asked

to achieve, he faces both an adaptive chal- lenge and the risks and opportunity of lead- ing from below.

Leadership, as seen in this light, requires a learning strategy. A leader, from above or be- low, with or without authority, has to engage people in confronting the challenge, adjust- ing their values, changing perspectives, and learning new habits. To an authoritative per- son who prides himself on his ability to tackle hard problems, this shift may come as a rude awakening. But it also should ease the burden of having to know all the answers and bear all the load. To the person who waits to receive either the coach’s call or “the vision” to lead, this change may also seem a mixture of good news and bad news. The adaptive de- mands of our time require leaders who take responsibility without waiting for revelation or request. One can lead with no more than a question in hand.

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