Top 3 challenges facing leaders today

“The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” When F. Scott Fitzgerald penned these words in an essay published in Esquire in 1936, little could he have foretold how prescient they would be for the leaders of today.

Over the last decade, leaders have had to deal with one disruptive challenge after another. The accelerating rate of digitalization and technology advancement has increased complexity in every industry.

Global politics and trade policies have increased nationalism and regionalism. Stakeholders, both internal and external, expect organizations to be more socially responsible and adopt more environmentally sustainable practices. Younger generations are joining the workforce and challenging organizational values, advocating for more inclusion and meaning in their work. Meanwhile, consumers have never had higher expectations of companies, wanting speed and convenience at the best price from a company whose purpose resonates with them. And while stakeholders expect ever-better returns from companies, all these forces make it even more challenging to turn a profit and to achieve transformational business goals.

A new type of leader: The Enterprise Leader

To succeed in this new world, organizations need a new type of leader: the Enterprise Leader. This leader is defined by their ability to both perform - to run the organization - and to transform - to change the organization. They lead horizontally as well as vertically and have an impact on all the company’s stakeholders. They think expansively about the context in which their entire sector is changing, and deliver, not just across the enterprise, but across the entire ecosystem.

But our data from Korn Ferry 360 assessments and interviews of 2,218 senior leaders shows that just 14% of leaders can be considered Enterprise Leaders.

Most remain tied to the traditional view of leadership and are not ready to hold “two opposed ideas” in their head simultaneously. They are still true executives. They haven’t yet cultivated the skills and mindsets needed to handle the three key challenges facing businesses today:

• Performing while transforming
• Leading across the ecosystem as well as the enterprise
• Resolving the tension between profit and purpose

These challenges are daunting. Complicating this further is that for today’s leaders, visibility is high and relentless. Their every decision is scrutinized. It takes unparalleled bravery to make bold choices — and sometimes any choice at all — amid dynamic change and threats from new and unexpected sources of competition.

The leaders of today are sophisticated in many ways. They’re highly skilled at leading vertically, directing employees, and driving strategic planning, decision-making, and business outcomes. But this isn’t always enough to guide organizations through disruption, to reframe these paradoxes.

The 3 challenges facing leaders today

Challenge 1: Transforming the business while maintaining strong performance

Change is a constant, but never before has change been as dramatic and unexpected as in the last few years. To remain competitive, businesses must keep transforming: our organizational transformation research shows that a company’s ability to continually disrupt and reinvent itself is the key to unlocking extraordinary growth.

Businesses must address the now and the next at the same time — a concept that, until recently, seemed to be a paradox. In the past, making sure a business hit its growth targets would surely require leaders to lose focus on how to pull ahead of the competition. The skills required for each goal seemed to sit at opposite ends of the business spectrum, requiring different competencies if not entirely different people to execute them.

The CEOs we interviewed felt this tension too. Investors and other stakeholders are pressuring leaders for faster business cycles and quicker returns. Some CEOs observed that activist investors prefer to force short-term changes instead of taking a long view that would benefit all stakeholders. But CEOs are beginning to realize that they must be able to address two competing demands: optimizing near-term performance and investing in transformative, innovative capabilities for the future.

This is easier said than done. It isn’t as simple as setting a strategic plan for the next three to five years and executing it day after day. Today, a strategic plan can become irrelevant in a matter of months, if not weeks, given the state of disruption and interconnection. Versatility is essential to pivoting between what’s here and now and what’s anticipated five years, five months, and even five days from now.

Take, for example, the CEOs who took the helm at the end of 2019, just before the pandemic hit. Within a matter of months, their growth maps were useless as they had to pivot to crisis management and cost reductions amid lockdowns and supply chain shutdowns.

Leaders today thus must be ready to flex between performing and transforming both now and next. These imperatives must be approached in tandem, not in sequence, and without sacrificing one for the other.

Challenge 2: Leading the enterprise and the ecosystem

The global environment is more volatile, interconnected, and competitive than ever before. Indeed, over 85% of CEOs interviewed for our CEOs for the Future study told us the historical “line” between business and society is ever more porous. As a result, senior executives must respond to multiple stakeholders simultaneously: shareholders, employees, communities, and their environment.

In many organizations, traditional views of leadership — consisting of vertical, top-down power structures — still prevail. Those views don’t mesh with the organizational structures of today. Modern organizations consist of a variety of entities that create value. That value often arises outside the formal boundaries of a company because structures are more fluid and networks are broader.

The interconnectedness of everything requires leaders to think more expansively, spanning the organization’s context, across the public and private sector, across supply chains and competitor networks, and across boundaries that have traditionally separated organizations from their ecosystems.

In this way, CEOs wield power, but so do groups scattered across the ecosystem. Leadership is now a team sport, according to more than half of the leaders (57%) who participated in our CEO for the Future interviews. The majority (71.9%) of C-suite executives in our Leadership Survey reported that their role requires “influencing others without having formal authority over them.” And most (69.3%) perceived the necessity of “bargaining or negotiating with others to win their support.” In other words, before they can move forward, leaders must amass support from across the enterprise and build momentum for change by leading with purpose.

Managing and leading in a highly interconnected environment requires leaders to understand the business more comprehensively. They must recognize how different parts of their enterprise fit together. Realizing that leadership is about “we” instead of “me,” Enterprise Leaders must look beyond considerations of just their company to the drivers of short- and long-term business success for both the company and its ecosystem.

Challenge 3: Delivering for people, planet and profit

Over the last few years, we’ve interviewed nearly 200 CEOs from EMEA and North America to take their pulse on the business and leadership challenges that they face. The vast majority — 85% — of the interviewees believe that business and society are coming together. In other words, they suggested that businesses must achieve twin goals: creating economic value while generating social impact, both internal and external.

That social impact comes in a variety of forms. Leaders must put their people first; their well-being must be a priority. Above that, people must feel that they are working for a purpose greater than themselves — leaders must strive to ensure people find meaning in their work and have a line of sight to the role they play in building a more optimistic future. Yet the required social impact transcends individuals too. Simultaneously, leaders must think more holistically, creating an organizational culture that values and celebrates differences and that empowers people to contribute, innovate, and fail.

In a traditional business model, profit, or economic value, and purpose, which is social value, have not been able to co-exist. So, when companies do the “right thing,” whether for the environment, their employees, or their community, it will come at a cost to investors. On the other hand, if they focus on maximizing their profits and driving down costs, they can’t possibly do business in a sustainable way.

Enterprise Leaders, by contrast, realize that the “opposed ideas” of profit and purpose aren’t mutually exclusive. They know they must find a way to release the innovative potential of the business and optimize both economic and social value at the same time. They think about the fundamental elements that drive business success and allow the organization to contribute to its ecosystem. They keep the impact they want to generate as their North Star, asking questions such as what needs the organization intends to meet, what values they share with other key players in their ecosystem, and what purpose holds the ecosystem together.

By focusing on the impact of their actions, Enterprise Leaders can harness their organization’s full potential to create value for all stakeholders. Take, for example, the push for ESG initiatives in the last few years. ESG started as a government requirement. It’s also become a requirement for attracting top talent, who want to see that their work is supporting the greater good.

The push toward greater sustainability has transformed the ESG movement from a compliance initiative to one where enterprises are seeking out new ways to collaborate with competitors to achieve sustainability goals and working in the supply chain to influence regulators — steps that weren’t contemplated even just a few years ago. And, in turn, leaders have greater authenticity and credibility when they speak to current and prospective employees about what they care about: saving the planet.

So, what does it take to become an Enterprise Leader capable of solving these three challenges?

The 3 elements of Enterprise Leadership

As we studied what makes today’s leaders different, and in particular what makes a certain subset of those leaders most successful, we isolated three ideas that separated the best from the rest. We incorporated these ideas into our three-layer Enterprise Leadership framework.

1. Enterprise impact

Impact is what you can count on a leader to deliver for the enterprise, both now and in the future. Enterprise Leaders differ from Executive Leaders because they start with a broad focus on the impact they want to generate for all stakeholders — including employees, customers, partners, communities, and the environment — not a narrow focus on performance metrics.

2. Perform-transform capabilities

Enterprise Leaders move from vertical, top-down leadership to agile, horizontal leadership across the enterprise. Recognizing that their organization consists of a series of complex, interdependent networks, they work to influence stakeholders inside and outside the organization. They can master optimizing the business’s current performance while adopting new, innovative business models that allow the business to take advantage of future opportunities. Enterprise Leaders see the value in both and have the skills necessary to address the urgent priorities of the now while visualizing future needs.

3. Agile leadership mindsets

The third aspect of Enterprise Leadership encompasses the beliefs and assumptions that influence executives’ thoughts and behavior. We’ve distilled these beliefs into five Agile Mindsets: purpose, courage, self-awareness, inclusion, and integrative thinking. Leaders can use these Agile Mindsets to understand their capacity to grow into an Enterprise Leader, capable of simultaneously performing and transforming.

Developing leaders for the new world of work

The executive role has become too complex for any one individual to perform today. That’s especially true when leaders can’t reconcile, as Fitzgerald said, the “two opposed ideas” of performing and transforming, enterprise and ecosystem, and profit and purpose.

The good news is that it is possible to shift from Executive Leadership to Enterprise Leadership, which not only embraces but thrives in these tensions. It requires organizations to focus on the development of the whole person, from the outside-in through external feedback and from the inside-out based on self-reflection, insight, and mindset development.

To learn more about our Enterprise Leadership model, download our whitepaper, Enterprise Leadership: Developing New Leadership for a New World. And to discover how we can help you develop leaders who can run your business while changing it, check out our Chief Executive Institute, Executive Coaching and custom leadership development programs.

Download our Enterprise Leadership whitepaper