Toward a New Capitalism

Modern capitalism is under fire—even the US political debate rings with it. Questions include what is simply “good business” vs crony capitalism, and what about the interests of the consumer? The business world is being forced to come up with new ways to respond. Whether it’s the public resistance to the autocratic regime in Venezuela or the vehement anti-capitalist rhetoric of Occupy Wall Street and the Sanders movement that took it up, capitalism as we know it is feeling a bit of an earthquake, and the corporate world is feeling some aftershocks. Naturally, there will always be a contingency that blames big business for perpetuating the worst woes of capitalism such as the income gap, global warming, or the economic collapse of 2008. For years, companies have fought long and hard to put to rest any negative associations with terms like “profit,” “corporate,” and “bottom line.” But this approach only enforces the binary. Now, some businesses are taking a more creative approach in which they fully own and embrace the power of capitalism to make money and a positive impact.

I’ve ventured into this territory before in writing about top business executives who are channeling their social and financial capital toward a greater good. Powerful figures like Sheryl Sandberg, Tim Cook, and Marc Benioff, to name a few, are pioneers of this fascinating new trend: the CEO-turned-activist. We’ve seen this in Sheryl Sandberg’s mission to empower women, Howard Shultz’s Race Together Campaign, and Mark Benioff’s protest over the recent “religious freedom” act in North Carolina. The message is evident: this isn’t your father’s capitalism.

This type of activist social change is not the typical corporate responsibility policy we usually see, but instead a scalable business strategy with long-term benefits. Changing the world has become profitable. Fortune seemed to agree when they released “Change the World,” a list recognizing fifty companies with measurable positive social impact in their core business strategies. With corporate behemoths like GlaxoSmithKline, Nike, and Nestle—yes, Nestle—in the top ten, the criteria extend beyond “doing good” and focus on practices that strive towards social change and profit.

The “Change the World” list was formed with the help of Harvard Business School professor Michael E. Porter. In an article originally published in Harvard Business Review, Porter and his colleague Mark R. Kramer introduce the theory of “shared value,” a management strategy focused on creating measurable value by acknowledging and addressing social problems. “Shared value” lays the foundation for Fortune’s “Change the World” list and sheds light on the increasing popularity of CEO activists.

When the article was published in 2011, Porter and Kramer reported that public trust in corporations was extremely low. Tune in to any news cycle and you’ll find the statement still applies today—in spades. Porter and Kramer blame it on businesses’ focus on short-term profit, a move that may delight shareholders in the short run but could also “overlook the greatest unmet needs in the market as well as broader influences on their long-term success.” The charges Porter and Kramer leverage against corporate America rival those of any disgruntled everyday Joe. If companies weren’t blinded by short-term profit and this outdated notion of value creation, they ask, “why else would [they] ignore the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of suppliers, and the economic distress of the communities in which they produce and sell?” Why indeed.

Fortune’s eye-opening “Change the World” list demonstrates that what makes the selected firms’ social impact so valuable is that they did not set out to be do-gooders. In fact, many corporations on the list—such as Mastercard, Coca-Cola, and Bank of America—are of the ilk that make those skeptical of corporations turn away in disgust. For those firms on Fortune’s list, social change is a secondary result of improved business models and realigned visions, which is exactly what Porter and Kramer called for years ago when “shared value” was in its genesis.

Today, smart business leaders and CEOs are recognizing that even after the customer is served, a modern company’s work isn’t done. Socially conscious firms that practice “shared value” have the potential not only to generate profit, and quite a lot of it, but also to reshape modern capitalism’s relationship with society. These changes aren’t taking place through full-scale business transformations. Rather, businesses are taking new approaches to their corporate visions and transforming the ways in which they approach their markets, customers, suppliers, and communities. While these changes often start small, the impact can be huge. If “shared value” becomes what it takes for businesses to get to the top, everybody wins.

The Wisdom Behind GameStop’s Bold Move

“If we have good chemistry, and we have a shared vision, then there’s a good chance we can partner for long-term success.” —Mark Stanley, GameStop VP of Internal Development & Diversification

It’s been a busy few weeks over at GameStop. The video game retailer—owned by Barnes and Noble from 1999 to 2004—has seen a host of financial struggles due to the precipitous drop in the video game retail market in 2015. With the news just last week that the company was being dropped for the S & P 500. shows just how predictive the S&P “topple rate” —the rate at which firms lose leadership standing in the index—can illustrate veracity of market disruptions. And reinvigorating its leadership position is exactly what Mark Stanley hopes GameStop’s new venture, GameTrust, will accomplish.

With the launch of this new digital platform, GameStop is making a foray into intellectual property development and cross-channel distribution, both growing sectors in the gaming ecosystem. GameTrust is designed for smaller video game developers who don’t have the resources or bandwidth to distribute their games to a broader audience without support. Rather than continuing to bet on the sagging retail market, with GameTrust, GameStop hopes to throw its hat in the ring alongside companies such as Steam, Xbox Live, and PlayStation Network.

For companies in an industry undergoing as much disruption as gaming has, evolving is vital, but transitions and growth can take a big toll on an organization if poorly executed (see the ongoing debacle with Zenefits). Can GameStop dramatically expand its core business offerings while remaining true to its overall vision? Leading this new venture is Stanley, who in a recent interview with Gamespot explained the importance of giving the new developers creative autonomy: “By allowing developers to fully focus on their craft,” he said, “GameTrust can focus on all other aspects of bringing a new IP to market, leveraging our deep expertise and retail channel leadership to support each developer and connect their games with a broader global audience.”

Having a clear and shared vision that gives team members the freedom to create and function within the structure of an organization will be critical during this upcoming period of change and growth for GameStop. I believe Stanley’s public commitment to respect the creative process bodes well for the company’s future. In a move consistent with that of a vision-driven leader, the executive explained that GameStop would not have any form of creative control over the developers they bring on or the games they create. This is a big plus for independent developers, who have traditionally had to use third-party distribution and relinquish a great amount of creative control, not to mention deal with the tension that often develops across teams when an organization is not operating according to a cohesive vision.

In the practical sense, it’s more crucial than ever for top management in quickly changing industries (which includes most industries at this point) to recognize the necessary shifts from a model of top-down control to one in which employees can innovate, be flexible, and adapt quickly over the longer term. This works when leaders embrace the notion of a structure that focuses on teamwork and cooperation. Grouping people based on the core processes they engage in—as GameStop is doing with this new venture—allows employees from diverse disciplines to know and understand one another and ultimately, hopefully, create something greater than the sum of their parts. This approach encourages tighter social relationships, joint decision-making styles, and collaborative work. Together, these serve to melt away the boundaries that result from employees working in silos, which stifle communication and creativity.

GameStop is a good example of the shrinking time frame for visions in some industries. The rule of thumb I use for clients—which is based on research I conducted back in 2000—is that organizational visions need at least a decade to take a firm down the runway. For the discombobulating technology shifts and consumer trends in video games, that life span is shrinking. But visions are still essential.

The business world has become an infinitely more complex, fluid, and unpredictable place, even for long-established organizations. By bridging the divide between brick-and-mortar and digital channels, GameStop is betting that this new venture will carry them into the digital marketplace with enough oomph to convince shareholders to stick with them for the long haul.

We’ll watch to see if they can use this revised vision for a return to market leadership.

What Trump Can Learn from Successful Organization Transformations

In my last book, Guiding Growth, I talked about what can happen when a company doesn’t have a coherent, effective vision. And I’ve found that before most managers can commit to growing an organization that is driven by vision, they need to recognize the characteristics of a company without vision. More importantly, they must recognize what happens when a company pushes forward into hyper-growth mode absent a cohesive vision. In an ongoing conversation regarding the characteristics of a leader, I thought it interesting that the current “missteps” in the Donald Trump campaign are illustrative of what happens when a leader—be they politician or CEO—cannot clearly articulate their vision, even within their own ranks, and execute the vision in the day-to-day operations of their organization.  

Many fast-growing organizations encounter a similar problem: the lack of an effective, embedded vision at the crucial juncture where scaling meets speed. The research I’m currently up to my eyeballs in focuses on the unique capabilities of firms that successfully transform themselves in response to market disruptions. These organizations are on the receiving end of disruption caused by start-ups—incumbents who risk becoming irrelevant if they do not adapt. We are finding—no real surprise—that a guiding vision is essential before the transformational process begins, and without it, the trauma of transformation can literally kill off an organization.

National campaigns are like start-ups in that their trajectories point to size but not necessarily longevity. Rather than formulating a robust vision, then implementing ambitious strategies that lay the groundwork for a sustainable, thoughtful platform, some of the political campaigns we’re seeing rely on drama and vitriol to exploit media opportunities, which until now has served Trump well. We’ve also seen (and I’ve recently written about) how business start-ups fueled by drama and emotion but no vision just end up in a fizzle.

Trump’s political organization needs (or, more accurately, needed) a transformation not unlike the ones he should know about as a CEO.

Nowhere is a lack of vision more apparent than in his campaign’s organizational kerfuffle. Just ask Corey Lewandowski, Donald Trump’s campaign manager—a major player in disruptive politics, who was recently arrested in Florida for simple battery. And Trump himself—taking three different views on abortion in one day, angering and alienating constituents on both sides, and touching a nerve that just may be the undoing of his campaign. With accusations of misogyny still ringing from these scandals, the candidate supported, and then recanted, a view that should abortion become illegal, women deserve punishment.

Much like the development of a start-up, this transition of a reality TV star into a serious contender for the Republican nomination requires nothing less than a series of fundamental yet relatively seamless transformations. Well-articulated visions guide these transformations so they don’t include too many nasty surprises and errors along the way. Unfortunately, there are relatively few exceptional leaders with the capacity to conceptualize, articulate, and relentlessly manage with a clear vision and survive the steep challenges brought on by accelerated growth. But a direct correlation exists between the competency of vision management and the rate at which firms (and campaigns) can successfully grow and sustain themselves.

The one candidate with seemingly endless airtime to explain his views to the American people should give everyone, supporters and nonsupporters alike, pause as to his ability to lead.

Trump may even be a believer in vision. But he lacks the understanding of how to integrate “vision” in the daily demands of leading the race for, and then winning, his party’s nomination. The highs and lows of each day—the crises, the opportunities, the ever-evolving scandals—have clearly pushed vision to the back burner. Meanwhile, as the tension mounts during primary season, the Trump campaign seems less and less to agree on what they’re really about. “Make America Great Again” is neither a vision nor the raison d’être component of a vision. We need to hear a far more nuanced aspiration—perhaps closer to the existential level—of what this country can become, how he plans to achieve it, and the values that will undergird the executive branch, Congress, and the American people. The question, “What is your position on X?” elicits different responses from the campaign, and in short order, perhaps those who used to see him as a hero-iconoclast are left wondering, “What does he believe in?”

What We Can Learn About Culture from Zenefits

The story of Zenefits’ spectacular growth and downfall is the start-up train wreck du jour that no one can stop watching. An extensive piece in Business Insider last week cataloged once more the lurid details many have been poring over—tequila shots in the office, young employees treating their Arizona outpost as a frat house—and a former sales manager is quoted as saying: “When we were smaller, we could act the way we were acting in the office. I don’t think Parker did a good job of growing up. He let things get out of control. There comes a point where hypergrowth achieves diminishing returns.” The story also outlines some more subtle cultural failures that plagued the start-up over the last year, the pulling back of vacation time, and the clawbacks on sales bonuses that demolished morale. It’s easy to see how the superfast growth—spurred on by Vegas-style VC funding—taxed the company’s resources to the breaking point; but did it have an even more deadly effect on the young company’s culture, destroying it before it had the chance to grow to maturity?

When Aristotle declared that “nature abhors a vacuum,” he was speaking to the way in which nature requires every space to be filled with something, even if only air. The same principle goes for cultures, as they too abhor a vacuum. Organizations growing quickly without a core set of clearly articulated and reinforced values to guide the behaviors necessary for sustaining the growth will experience a cluster of values that saturates the culture anyway. As we saw at Zenefits, this osmosis-like effect draws in values that communicate to everyone “This is the way we do things around here.” And this is why it seemed acceptable for guys to leave their used condoms in the office stairwells.

Weak cultures are those in which little agreement exists and where the effort toward the vision is fragmented and often dissipated through conflicting agendas, blaming, and unclear communications. Another Zenefits employee is quoted in the BI article as saying that a “culture of dishonesty” had emerged, in which industry regulations were ignored and products were mischaracterized to customers. It’s easy to see how such a culture wouldn’t be sustainable.

Strong company cultures are those consciously embedded with only the values that support the organizational vision, where everyone agrees about their importance. In these organizations, you can feel the human energy that flows from this alignment.

In the broadest sense, culture is the personality of the organization, the shared beliefs, and the written and unwritten policies and procedures that determine how the organization and its people behave and solve business problems. Culture provides meaning, direction, and clarity; it is the human glue that mobilizes people to aim for the vision.

To understand an organization’s culture is to remain focused on the five elements that create it and their attendant questions:

• Shared values: What do we think is important?
• Beliefs: How do we think things should be done here?
• Norms: What are the unwritten rules: the dos and the don’ts?
• Heroes: Who are the people who personify our culture and serve as role models for others?
• Systems: What do we do to influence people through our written and unwritten policies?

In the end, it all comes down to behaviors: “the way we do things around here.” The answers to these questions need to be put into action as a living, breathing part of the organization’s day-to-day functioning. Zenefits suffered from what is practically a Silicon Valley cliché at this point: a company culture that—infused by too much money and too much growth too fast—went from fun and inspiring to chaotic and dispiriting in a heartbeat.

The gap between the plan and reality of organizational performance is often significant and has been the subject of countless articles and books on motivation, leadership, management skills, and other elements heaped onto the “soft side” pile of organizational performance variables, in other words, the culture. At its most rudimentary, a “hard” strategy may look concrete, with its definitive goals, data, and spreadsheets, but it’s actually an abstraction. It is an idea for the future and has no real existence in the organization or in the marketplace. The organization’s culture, however, is a living, breathing, dynamic force that has a life of its own, operating independently of all plans and projections yet determining the success or failure of those plans.

I am currently a co-investigator of a large study of Fortune 500 CEOs aimed at exploring how these men and women are managing change in a world turned upside down by massive disruptions. One unexpected finding from my interviews is the extent to which they understand the importance of a perfectly “tuned” culture that’s aligned with the organizational transformation these disruptions demand. Our preliminary results, and countless other studies over the past fifteen years, continue to be sobering. They dispel the myth that culture is not a “hard” business issue. Cultures with values, beliefs, norms, heroes, and systems that support high performance significantly impact the financial metrics that matter to most executives.

The importance of company culture cannot be minimized, because a growth vision will fail unless the culture directs and sustains individuals’ behaviors, on a daily basis, in pursuit of strategy. While these intangibles may be far harder to measure than sales volume or return on equity, they are often the key factors in one organization’s competitive advantage over another. The difference between success and failure can often be attributed to a limited set of organizational characteristics. When they are combined, they create culture.

Many organizations emphasize values such as quality, customer service, teamwork, respect for the individual, and innovation—themes with broad appeal that can help people feel they are reaching higher goals for themselves. But all too often these values are communicated merely as organizational spin control in the form of annual reports, recruitment sections of the corporate website, and token discussion at management retreats. They fail to become alive, to be fully infused in the fabric of their culture. And nothing is more dangerous to a company’s survival.

What Comes Before a Fall: Lessons from the Growth and Crash of Zenefits

If you have even a passing interest in the tech industry and start-up culture, you’ve certainly heard about the unfolding crisis at formerly golden start-up Zenefits. The company—a producer of web-based software to help small businesses manage their human resources operations—made big news last year when they raised $500 million in one round of funding, at a valuation of $4 billion. The growth of the company over the past couple of years has been astronomical: they went from a total of fifteen employees at the end of 2013 to a reported sixteen hundred late last year. Perhaps unsurprisingly, the growth has caused some serious issues, and CEO and founder Parker Conrad was asked to step down two weeks ago amid scandalous reports of employees being encouraged to cheat on their insurance broker licensing exams (even being given software to help them do so), overimbibing during the workday from company-provided kegs, and having sex in the stairwells of the office building.

Conrad’s resignation from the company allegedly brought tears of relief—not sadness—from beleaguered employees, many of whom are wholly unqualified for the work they’ve been asked to do (a reported 80 percent of Zenefits’ Washington transactions were claimed to be unlicensed). Strangely for a technology company, Zenefits seems to have attempted to solve its woes by adding even more employees to fix problems manually, rather than fully debugging systems when breakdowns took place.

Some of the details of Zenefits’ (and Conrad’s) downfall may be shocking—drinking on the job as a company norm, disregard for regulations in a company that handles something as sensitive as health insurance—but to anyone accustomed to working with entrepreneurs, especially those operating in the high-stakes pressure cooker of Silicon Valley, this outcome is anything but a surprise.

Certainly Zenefits’ rise and crash was helped along by the trend of outrageous VC funding for Silicon Valley start-ups, but the heart of their problems is nothing new. This is simply what happens when there is not an effective, embedded vision at the crucial juncture where scaling meets speed. Zenefits began as a Software as a Service company devoted to helping small businesses combat the onerous red tape of HR issues, health coverage in particular. An honorable enough mission. But as they scaled with lightning speed, they began taking on businesses with hundreds of employees, long before they were equipped with the culture necessary for handling them and the organization’s scaling to that level. Growth became the only imperative, at the cost of quality, employee morale, and even lawful practices.

The current climate in Silicon Valley prizes the “get big fast” mentality, but it’s worth asking, is growth always the ultimate goal? David Packard, the cofounder of Hewlett-Packard (HP), wrote in his memoirs that over the years he and Bill Hewlett had “speculated many times about the optimum size of a company.” They “did not believe that growth was important for its own sake” but eventually concluded that “continuous growth was essential” for the company to remain competitive. One reason growth was a matter of survival was because HP “depended on attracting high-caliber people” who wanted to “align their careers only with a company that offered ample opportunity for personal growth and progress.” Growth for the sake of attracting and keeping great people would become a factor for virtually all firms in technology-driven fields. When the firm introduced “the HP way” in 1957—essentially a manifesto for its future—it emphasized growth “as a measure of strength and a requirement for survival.” While Carly Fiorina trash-talked the original culture and called it an adorable artifact of an older time, she was no paragon of leadership during her tenure there, and the company suffered under her watch.

Most companies understand that growth is essential for survival for the very reasons Packard put so succinctly above. But few know how to reconcile the need for growth with the external and internal pressures to grow very quickly—especially with a group of big-time venture capitalists breathing down one’s neck. Building any large and sustainable corporation requires a considerable organizational transformation rather than a predictable set of linear stages. Building it quickly diminishes the odds that it can weather the growing pains of that transformation, as we can see so clearly in Zenefits’ unraveling. “More businesses die from indigestion than from starvation,” Packard said.

Start-ups are not just large businesses in miniature, and their trajectories do not necessarily point to either size or longevity. Rather than relying on opportunistic adaptation to exploit niche opportunities, their existence depends much more on formulating and implementing ambitious strategies that prepare the firm for the longer term. Put another way, the transition of a fledgling business into a large, well-established corporation requires nothing less than a series of fundamental yet relatively seamless transformations, nearly impossible to pull off in a period of eighteen months or so as Zenefits attempted to do.

Well-articulated visions guide these transformations so they are not experienced as traumatic surprises. Unfortunately, there are relatively few exceptional entrepreneurs with the capacity to conceptualize, articulate, and relentlessly manage with a vision and survive the steep challenges wedded to accelerated growth.

Maybe—just maybe—there’s a degree of maturity, insight, and future focus that’s not just about EBITA growth. Zuckerberg got that in his twenties, and he turned Facebook into a growth machine. The Google guys got it too, in their youth. They were smart enough to turn the reins over to Eric Schmidt, who would successfully guide the firm’s growth.

But perhaps the real lack of maturity rests with shortsighted venture capital firms and boards. They’re the ones who drove the wild growth and then kept Mr. Conrad in place until the shooting star was crashing back to Earth.

Why Culture Should Be at the Center of Your Organizational Vision

When Gordon Bethune took over Continental Airlines in 1994, it was the lowest-ranked airline company in the country. It had been through ten presidents, suffered two bankruptcies, and posted a $200 million loss by the time Bethune stepped in. Needless to say, he had his work cut out for him. With the company on the brink of collapse, Bethune believed that what most urgently needed to be changed was Continental’s culture. In the past, scaling initiatives were usually squelched before getting the chance to come to fruition. But perhaps the most stifling effort to unite the team on behalf of the former management was a nine-inch-thick book of rules—mocked throughout the organization as the “Thou Shalt Not” book and, with a more Orwellian tinge, “The Book.”

The Book was a visible symbol of what was dragging the company down. Continental’s corporate culture had stripped employees of the freedom to make decisions, take initiative, and speak out. So what was Bethune to do? The first order of business was to literally set the book on fire, a ceremonious representation of the end of the company’s “Big Brother” culture. Bethune wanted to show employees that they would now have permission to think for themselves.

Lo and behold, between 1994 and 2001, Bethune led one of the most impressive turnarounds in US corporate history and created an organization that began to not only scale up, but thrive. Until it was taken over in 2010 by United Airlines. Continental was an attractive target to airtarget to airlines driven by consolidation in the industry.

I find many organizations don’t think deeply enough about their culture when they’re in the process of building their vision, choosing instead to focus on things that feel somehow more concrete like revenue goals, growth targets, and being the leading something or other in the industry. Organizational scholars didn’t start paying attention to culture until the beginning of the 1980s, in large part because culture was often experienced as ephemeral, intangible, and unmeasurable. Culture refers to the taken-for-granted values, underlying assumptions, expectations, and definitions of the present in an organization. It represents “the way” and provides a prevailing sense of identity to employees. The culture is the living, breathing—and often invisible—part of what keeps the company aloft. So, as you can imagine, when researchers began to grasp that culture was the crux of organizational performance, it changed everything.

Now, culture is accepted as a critical determinant of success. Company culture isn’t static; it’s a muscle that needs to be exercised, trained, and changed as needed. A healthy company is not stagnant, so naturally a company’s culture has to grow and adapt for the organization to be able to keep moving forward. Without consistent maintenance of its culture, a company is at risk of ending up where the pre-Bethune Continental Airlines was—which is why culture is both a central element of vision itself as well as the framework for building one.

In my research and consulting experiences, I’ve found a glaring omission in organizations that claimed to have a vision but were not using that vision as a management process. The disconnect was apparent: the desired culture was never articulated. Perhaps the organization would go as far as posting a nicely worded statement in the office kitchen or corporate boardroom, but the executive group rarely held one another accountable for ensuring that “the way things are done around here” was consistent with their vision.

We often hear about strong and weak cultures in corporate jargon. But what do those distinctions actually mean? Strong cultures are those that support the organizational vision, those in which everyone agrees about the importance of specific, high-performance values tied to the vision. In these organizations, you can feel the energy and the collective drive for success. Weak cultures, then, are those in which little agreement exists. Like the former culture at Continental, the effort toward the vision is dissipated through conflicting agendas, blaming, and poor communication.

A culture is the human glue that brings people together and mobilizes them toward the vision. In order to understand a company’s culture, try starting with these four questions:

1. What do we think is important?
2. How do we think things should be done here?
3. Who are the people who personify our culture and serve as role models?
4. What do we do to influence people through our written and unwritten policies?

In the end, it all comes down to behavior—as I said earlier, “the way we things are done around here.” As the company changes, so will the answers to these questions. Nonetheless, the importance of the culture will never diminish.

The Mindset That Will Take You from Vision to Reality

  Do you have a vision for your organization for 2016? If you do, you’ve crossed the first hurdle, but for many organizations I’ve worked with, putting these visions into practice is the more challenging piece of the puzzle. I’ve found that there are three particular areas of emotional dissonance that can seriously impede the vision process. It can cost an organization valuable time—and even lead to overall failure—if each key participant doesn’t embrace these three powerful ideas right from the start:

1. Live in the past, present, and future simultaneously.

Visions work when those who develop them are able to constantly juggle the past, present, and future. A study of firms with rapid, sustained growth found that their most senior executives were able to stay focused on the state of the firm’s desired future. Yet, at the same time, they remained attentive to day-to-day activities that continually reinforced the vision and philosophy guiding their growth (e.g. organizational processes like the structure, culture, and people processes), which created a powerful framework to support the vision itself. With a clear and robust vision as their beacon, these teams also held on to what had worked in the past, modifying or supplementing existing structures and processes, rather than completely replacing old techniques that worked well simply for the sake of starting fresh. These executives had the ability to continually analyze and reconcile the firms’ recent past with their intended future.

2. Acknowledge emotion and disorientation.

Strategic vision depends on the ability to feel one’s way into an intended future. It cannot be developed by looking coldly at words and numbers on pieces of paper or computer screens. In working with executives who truly want to create adaptive, growth-oriented organizations, I’ve found that they begin the process first by looking deep within themselves. They need to know who they are and what they want their organizations to be so that when they articulate their vision to those who work for them, it comes from a conviction that combines their personal need for action with a larger purpose. This signals to themselves and everyone around them that they are open to changing the way they see themselves and the company. For most, this part can be scary as hell.

Leaders who successfully implement their visions don’t simply think about themselves in the context of the future they’re defining. They allow themselves to feel enthusiasm and passion for that future, which reinforces their commitment and determination and that of those around them. This makes it easier to overcome the often-daunting challenges and roadblocks that prevent the vision from becoming a living reality.

Niall FitzGerald, former cochairman of Unilever and cocreator of its vision-driven transformation process, spoke openly about the abyss for him. “You feel anticipation, even deep uneasiness, but the excitement of the vision calls on you to take that leap, then build a bridge for others . . . At Unilever, the bridge we needed to build was all about people: we needed to tap into their passion; we needed them to see their business in entirely new ways; and we needed them to develop very different leadership styles.”

Antony Burgmans, FitzGerald’s counterpart, reflected similarly, “As we launched into our growth strategy, I realized that I didn’t feel right: something was missing . . . What I saw was that even though we had an excellent change strategy, and an inspiring vision, what was really required to bring about change at Unilever was a new culture, a new leadership mindset, and new behaviors.”

In other words, as Burgmans was to discover, what Unilever needed was passion at the top to fuel change throughout the organization. Innovation and risk-taking are necessary for crossing the abyss and bringing an ambitious vision to life.

Conceptualizing a vision raises goal-oriented thinking to the next level—one that may easily induce feelings of inadequacy. Too often, business is a place reserved only for cold, practical reality and dealing with the problems of the present. But visions begin as dreams of the kind of life we want, the things we want to create, or the part of the world we want to change. Embracing them requires a level of vulnerability that many executives find hard to bear.

3. Accept that the process is, by nature, imprecise, frustrating, and sometimes tedious.

The process of developing a vision runs counter to the way most people in organizations normally operate. Visioning cannot occur without starts, stops, and some confusion. Confusion is a natural reaction when confronted with an entirely new way of doing things. This is merely a sign that the brain is trying to process new information. Unfortunately, those in senior-most positions too often relate confusion to a lack of mastery, to not being professional, and hence avoid it at all costs. Acknowledgment that visioning is not a clean, easy undertaking will help overcome resistance to creating a full-range vision.

Just as you would never go run a marathon without any training, nor should you jump into the process of creating a strategic vision without any preparation. Making sure that you and your team know what to expect when heading into this exciting—but often unsettling—process will help set you up for success.

Finding an Appetite for Vision

As we discussed last week, there is plenty of evidence that a leader with a strong vision can help an organization thrive. Increasingly, the need for an organizational vision is conventional and accepted wisdom. So why does the gap between believing in this and doing it persist? Why is it so hard for leaders to develop and implement a vision? Over the past decade, I’ve found that leaders who overcame this gap were adept at being able to see far into the future; they also had a greater capacity for introspection and were able to see and understand their own feelings as the vision evolved. They could articulate the vision and their passion for it both to themselves and to others. They were willing to face the reality that if the vision process at their organization stalled, it was perhaps because of their own inertia. And, most important, they were willing to be true to their own values and refrain from placing blame for inaction on some institutional imperative or “resistance to change.” Rather than viewing the vision dispassionately from the outside, they engaged in a full exploration of how they thought and felt about the vision and what would be required of them to implement it.

These leaders were willing to ask themselves a critical question: “Where does my appetite for vision, with all the risk inherent in its development, come from?” The response to this question provides important insight into where your particular passion stems from.

The “appetite” often comes from living through life-changing events that trigger unique insights, and emerging with a new resolve. It comes from finding the passion on a personal level and harnessing it to hold on to, even before the vision development process gets under way.

Many people have been forced to look inward for meaning in response to an emotionally charged event such as the death or serious illness of a loved one, a divorce, growing up poor or discriminated against, rejection by a role model—things beyond their control that were integral to who they became. These experiences may leave them with feelings of profound separateness, perhaps anger and disorientation. For these people, what often emerges is the need to examine goals, values, and how they want to live in the world. The question, “Why did this happen to me?” evokes emotional energy, which can either be turned on oneself in a counterproductive way or applied in a creative burst of productive energy.

Two wonderful examples of leaders who used this energy for good are Andy Grove and Dave Thomas. Grove is the former CEO and current chairman of Intel. He escaped Nazi Europe with his parents, learned new languages to survive, came to the United States with virtually nothing, worked his way through college and a doctoral program, and waged a winning fight against prostate cancer. Thomas, founder of Wendy’s, was an adopted orphan and high school dropout who ended up leading a chain of six thousand restaurants. He had the audacity to think he could improve on the fast-food burger, and he dedicated his life to helping abandoned children.

Theories and research that attempt to explain the success of organizational leaders express a similar theme: leadership is less about sheer talent than about introspection forged from events that caused great discomfort or even suffering. It is more than a coincidence that so many people who have successfully built and run complex organizations have been shaped into leaders by great personal trials. At one time or another they have had to let go of something they thought was important.

Now, they seek to help others cross the abyss between where they are—the status quo—and where they want to be: that highly defined vision of the distant future. Perhaps they can do this for others because they have had to do it for themselves. They have the capacity to speak to the depths of another person because they are in touch with their own deeper conflicts. They found support along the way through the intensity of their convictions and their awareness of the impressions they left on others.

In 1987, serial nonprofit executive director Elisabet Eklind got married and moved to the United States from Stockholm, Sweden, where she had lived all her life. In March 1993, her husband died after a long battle with cancer. She told me that as she sat in her home after his death, she realized that she could either “die” then and there as well—simply continue going through the motions of living—or she could rebuild herself. Start again, in other words, and work through the pain. She chose the latter and, as she says, has emerged “a stronger, better person for the effort.”

Eklind’s effort to find a new awareness has shaped her life in ways she never imagined. It has also shaped the way she approaches her work, first as executive director of HIPPY USA, a nonprofit whose purpose is to enhance the potential for educational success of low-income children, then with other nonprofits she led, and now as the executive director of the international NGO VGIF. She realized that to truly realign the values of her organization, she would have to bring the effects of her personal journey to bear on the effort. “You carry significant experiences with you, and they shape the way you look at the world,” she said. “And if you let them, they shape the way you approach your work and think about what your organization or company needs. I began using my own personal experiences at HIPPY to help see the organization with greater clarity than I ever could have before.”

Those who create and implement visions that serve as engines for guided corporate growth know who they are and what they want their organizations to be. Their articulated vision comes alive from a conviction that not only meets their personal need for action but is also part of a much larger purpose. In this way, all of us may turn the worst moments in our life into an opportunity to become something greater.

What significant event in your life has helped you better understand your core values, and how might those values play a part in your organization’s vision?

How Myopia Can Stall Your Vision

One reason that many CEOs remain skeptical of the vision process despite copious evidence that it leads to success is because they’ve seen it fail many times before in other organizations they’ve worked for, or perhaps even in their own. So where does the process break down? How can you avoid the pitfalls that keep an organization from successfully implementing a vision? To begin with, let’s consider two data points that seem, at first blush, to be contradictory. One study found that 94 percent of CEOs report “a great deal of discomfort working with the vision process.” A second study, conducted by the Conference Board, polled seven hundred global CEOs and found that, for the past three years, their number one marketplace and management issue was “engaging employees in the vision.” Perhaps what both studies are saying, from the executive perspective, is that “I believe in the need for vision, but I cannot get myself in gear to make it happen.” Connecting the desire to create and implement a vision with the internal energy necessary to get over all the barriers can be immensely frustrating, as I’ve seen over and over again in my work as a management consultant.

I remember a conversation I had at a dinner years ago that has stuck with me ever since. I was seated next to the chief marketing officer of a Fortune 50 company, who confided to me how alone he felt at the top: “We’re hitting our revenue targets, we have obscene share of market in most of the areas in which we operate, but our stock price doesn’t reflect how well we’re doing. The outside world doesn’t understand who we are, why we’re unique, how all our pieces fit together, and what we stand for. On the inside, we’re operating like sixty different silos. My CEO says our vision is to provide shareholder return . . . but that’s no vision; shareholder return is something that we get rewarded for as a result of executing against a proper vision. I’ve got to believe he has some vision of who we are. [long pause] But he can’t unlock his thoughts and feelings about it to us. And if he can’t begin to get us thinking about a real vision, then I’m afraid of what lies ahead.”

When it comes to executing a plan for growth, most CEOs can talk the talk. Vision committees crank out vision statements and post them on their websites and on the walls of conference rooms. Usually, however, this is about as far as the process gets. And that is where the cynicism so many have for the corporate vision takes root. Having a shiny paragraph that articulates a vision is far cry from weaving that vision into the daily fabric of organizational life, which is what makes the difference.

When relatively superficial—what I call myopic—visions are used as a rallying cry for the troops, the vision process isn’t unleashed with the full force and power it’s capable of, and the transformative power of the vision is left untapped.

My experiences with CEOs and executive groups have made me realize that it’s often difficult for them to stretch their thinking toward the future. They’re grounded, realistic people, more drawn to the idea of a mission, which enables them to describe what an organization does, rather than toward a vision, which forces them to describe why their organization does what it does. The former feels comfortably action oriented and masculine, whereas the latter is more thoughtful, vulnerable territory.

My Fortune 50 dinner companion commiserated further: “Just because we’re so obsessed with planning, tinkering with our plans every year, and holding division leaders accountable for achieving their plans, the executive suite has a collective mentality that we’re very strategic. Because the culture has us so focused on planning, they think that’s visionary! As head of marketing, I need to position the corporate brand with a far longer horizon, but I’m clueless how to do that when everyone’s thinking about next year or barely five years out.”

Henry Mintzberg, a management professor at McGill University, found that strategic plans invariably fail when there is no overarching vision driving them. Not only do they fail to motivate those within the company to reach further and be their most innovative, and to pull together disparate parts of an organization, but they also fail as analytic planning documents. (The Rise and Fall of Strategic Planning, Free Press, 1994).

Visions that truly motivate an organization must describe the desired long-term future of the organization, a future that typically feels out of reach in the moment, but also not so fantastic as to seem like a pipe dream. Developing a vision requires imagination, a mental capacity for synthesis, a trust in intuition, and a deep emotional commitment to that desired future. And this is partially why the vision development process is such a leadership balancing act—and another reason why it can be so hard to implement. Visions need to challenge people and evoke feelings that draw them toward wanting to be a part of something greater than themselves.

When a vision is framed as something that is achievable within a set amount of years, particularly less than a decade, then it falls into the terrain of a strategic plan. That is why the overwhelming majority of organizational visions fail to deliver the impact: they are rational, time-bound, and highly impersonal. For vision to inspire, it has to reach—if only ever so slightly—beyond one’s grasp.

Why Having a Clear Vision Is Crucial to Success

I’ve spent lots of time on this blog discussing what makes a bad leader, enumerating all the ways that CEOs can undermine those who report to them by being controlling, manipulative, and undermining. But what about the flip side? What makes an inspiring leader? I’m not talking about charisma, which plenty of mean men possess in spades. Every effective leader I’ve seen in my decades of working as a management consultant has had one huge thing in common that differentiates them from all the others: vision. A confession. Though it’s fairly accepted that vision is a necessary element of leadership now, I didn’t believe in “the vision thing” when it first became a trend in management circles in the 1980s. When the idea first started getting buzz, I suspected the notion of organizational vision might be just another fad. I’m inherently skeptical of any new silver bullet that promises to cure a range of organizational ills, and back then vision was the cure-all du jour. Yet, after a few years as a cynical consultant, I found myself intrigued by the staying power of the idea. However, broad studies analyzing the impact of vision were nonexistent at the time. I still found the idea of vision as a management tool a bit “squishy,” but I didn’t have the data to prove it. A good vision seemed to be something that—similar to the old saying about pornography—one knew when one saw it; the criteria were too vague to be useful.

As a management professor, I decided to take it upon myself to confirm my own suspicions and prove that having a vision would have no noticeable difference on organizational performance. But a year into the first leg of my research project on the impact of vision, I started to see some very surprising data. My hypothesis, I began to realize, was dead wrong. Contrary to my expectations, I found that a well-articulated vision, when implemented throughout an organization, had a profoundly positive impact. Data doesn’t lie, and I found myself converted from skeptic to true believer. As my research continued and I uncovered some of the key characteristics of a successful vision (which I will enumerate in a separate post), I was able to begin testing some of the best-practices results with a range of organizations in the private, nonprofit, and public sectors. Consistently, I found that once senior executives were able to break through the natural barriers of resistance that often bring the process of developing a coherent vision to a screeching halt, they too became believers.

The data is convincing for any CEO invested in the bottom line. Publicly owned firms that use a vision to guide their growth have significantly higher market-cap, top-line, and bottom-line growth in comparison to their competitors who aren’t driven by the vision process. Firms with a vision were twice as profitable as the S&P 500 as a group, and their stock price grew at nearly three times the rate of others. An analysis of average compounded total return found the vision-driven firms earning their investors 17.69 percent more than the S&P 500 overall. A well-conceived and well-implemented vision doesn’t yield this kind of bottom-line performance magically. It results from the ways in which employees are challenged by the vision and remain focused on a clear, yet distant target. These firms had higher productivity per employee, greater levels of employee commitment, increased loyalty to the firm, greater esprit de corps, clearer departmental and/or organizational values, and a greater sense of pride in the organization.

Some executives I meet still regard vision as “squishy,” assuming it will be too difficult to quantify. But my research and experiences over the past decade make a nearly incontrovertible case that the vision process has a profound impact on organizational performance. Better still, that performance is measurable.

So what gives? Why do so many CEOs believe in the need for vision yet fail to follow through on the process to develop and implement one? The reason there is cynicism about “the vision thing” is less about the actual failure of a vision than it is about a leadership failure I call The Believing-Doing Gap: while there’s a lot of talk about vision, few at the helm actually follow through on the work required to bring their vision to life.

The vision process—when fully executed—demands a considerable amount of emotional engagement that I find many executives are ill prepared for. Most become myopic when it comes to vision. A successful vision is not simply a question of crafting a few paragraphs of verbiage that sound snazzy on a website’s home page. A successful vision requires personal passion about how you want to make an impact on the world—whether you run a corporation, a nonprofit, or a government agency. Regardless of the organization’s motive (to make money or provide social good), there must be clarity about what you want to change or create. Without substantive ideas and concrete actions, the process becomes a joke, often backfiring on the leader responsible as others become cynical. As long as the gap between believing and doing persists, no vision will be effective.

So what does a successful vision look like? A guiding vision should be broad enough that it speaks to everyone in the organization, while telling an engaging story that people want to be a part of, one that challenges them and creates a sense of urgency. But the words are not enough. Success comes when the vision becomes embedded in the daily decisions made and actions taken by leaders at all levels of the company. A vision is not merely an extended strategic plan or mission. If a mission is what you do, a vision is why you do it. When we see a vision that is working, guiding an organization to sustained growth, we know that behind it are leaders who are comfortable leading with their hearts as well as their heads.

In the next few weeks, we’ll take a closer look at common pitfalls of the vision process, as well as some secret shortcuts and tension reducers that I’ve used to help executives frame the vision that fits both them and their organizations. I hope to help you hone in on your own vision for the coming year.