A seismic shift in perspective is happening at the CEO level
Top row from left to right: Cook, Barra, McCain. Bottom row from left to right: Musk, McDonald, Fraser (Photos by Getty; McCain by Frank Neufeld)
The business world is changing more rapidly than ever before. In the past 20 years, constant technological innovations and the rise of social media have transformed society and how businesses operate within it. Throw in a devastating recession in 2008, the growing impacts of climate change—as well as a global pandemic—and our increasingly interconnected planet has also become more volatile and unpredictable.
In order to be effective in this complex landscape, today’s business leaders need to transition from the autocratic model of yesteryear to become collaborative and communicative servants of their organizations. Think Netflix co-CEO Reed Hastings, who adopted a laissez-faire leadership approach at the streaming giant after starting his career with a far more dictatorial streak at his first company, Pure Software. Many other top current CEOs, such as Apple’s Tim Cook and Lululemon’s Calvin McDonald, also successfully employ the servant model to varying degrees—out of necessity, if nothing else.
“It simply takes too long in today’s fast-changing world to relay everything up to the decision maker at the top of the hierarchy,” says Ingo Holzinger, a Schulich School of Business professor whose research focuses on executive leadership. “Instead, there’s a growing trend toward distributed leadership models that share decision-making with teams and experts on specific contexts or fields.”
Compare that to the past when business leaders used to solely focus on serving shareholders and the bottom line, adds Daniel Skarlicki, a professor of organizational behaviour at UBC’s Sauder School of Business. “But today, having a high-performing, profitable company isn’t enough. In the boardroom, there’s a broader set of concerns that includes sustainability, climate change, equity, diversity and inclusion, and an overall commitment to ethical and responsible leadership.”
While many of the above concerns had been addressed by CEOs of the 20th century, Skarlicki says they were usually viewed through a predominantly business-oriented lens. The environment, for example, was treated like an external variable that could boost or reduce profit, rather than as something that possessed value beyond quarterly reports. In many ways, he adds, this made life easier for a CEO.
Modern corporate business management first arose during the 1910s, with the first generation of corporate leaders including the likes of Henry Ford, owner of Ford Motor Company, and John Rockefeller, philanthropist and oil tycoon. In those early days, these heads ran their company like autocrats, with lower-level managers and workers mere extensions of their will.
Since they were often making up the rules for nascent industries that didn’t have them, these bosses relied on decisiveness and self-confidence to plot their course through uncharted waters. And, of course, they had an impact. Ford revolutionized car manufacturing—and mass production as a whole—by developing the moving assembly line system in his factories. Meanwhile, simultaneously with the labour movement, Ford increased his workers’ wages and reduced their hours to create something resembling the contemporary work week. As for Rockefeller, he played a major role in shaping the budding oil and gas industry before running afoul of antitrust laws that led to the breakup of his industrial behemoth, Standard Oil.
In subsequent decades, the personalities running the business world remained largely the same: charismatic and bold visionaries who made all the big decisions and ruthlessly executed their plans, à la Howard Hughes, the eccentric aviation magnate. Perhaps inevitably, these leaders tended to be heavily involved in every aspect of their businesses, shunning the delegation of responsibilities whenever possible.
By the 1960s, however, the growing complexity of large organizations that were now operating throughout the world meant the autocrat model was no longer practical or desirable. While the pyramid-shaped hierarchies of yesteryear were still in place, the CEO at the top had become what the Harvard Business Review defines as an “organization man”—which is also a recognition of the reality that very few women attained the position of CEO during this era.
Rather than concentrate on innovating their respective industries, CEOs shifted to building their careers within established fields, with business school attendance and industry specialization becoming the norm for those in the C-suite. More akin to a prime minster than dictator, the organization man relied on management and people skills to supervise executives who handled the various branches of a company’s operations.
The role of the shareholder had also risen in significance over the course of the 20th century. Once upon a time, many CEOs only had to worry about keeping a handful of key investors happy, but the prosperous post-Second World War period spread capital to a larger cross-section of the population, who were then investing their earnings in stock markets worldwide. Accountable to a bigger number of shareholders, as well as a board of directors, CEOs had to add pragmatic compromise and deal-making to their skill set, if they were to maximize investor returns and stay in their positions of power.
CEOs also had to contend with a growing level of government regulation when confronted by growing calls for issues like consumer rights, worker safety, affirmative action and environmental protections. This expanded regulation came hand-in-hand with a greater media scrutiny, as more households had access to television news. Consequently, leaders were becoming more image-conscious, especially those heading large multi-national corporations with substantial presence and sway in society. The public persona of a CEO was now a vital part of how their company was perceived. The importance of businesses giving back began taking root, with CEOs grabbing headlines with a steady stream of charitable works and donation pledges—motivated by a sincere desire to spread the wealth and contribute to a better world in certain cases, and occasionally by a calculated attempt to mitigate or counter bad press.
These evolutions in leadership culminated in the 1980s and 1990s with the Jack Welch style of leadership, which represented a synthesis of the autocrat and the organization man. To many, the longtime General Electric chairman and CEO perfectly encapsulated a great business leader: a classic “my way or the highway” alpha male who could wheel and deal with the best of them. Welch was also adept at delegating key responsibilities to his trusted subordinates in an intricate organizational pyramid he held together with an iron fist.
During his 20-year tenure at the helm of GE from 1981 to 2001, Welch turned a company mainly known for household appliances into one of the most profitable conglomerates the world had ever seen, with a portfolio containing holdings in virtually every major industry. GE’s success became a visible endorsement of the Welch leadership model in business schools and boardrooms across the planet.
However, Welch—who died at the age of 84 in 2020—has a complicated legacy. In 2000, GE peaked at about US$600 billion. Today, after a series of calamitous business decisions, its value has plummeted to less than US$100 billion and it is currently in the process of being broken up into three separate entities.
While Welch personally blamed GE’s downfall on his erroneous choice in successor, observers have since called out the toxic results-oriented culture he’d created at the company. Pitting employees against each other in a survival-of-the-fittest world could boost short-term profits, but it can also contribute to a toxic organization that can derail a company from within, says Sauder’s Skarlicki. “When you’re high-performing, all is well, but if your company stops performing, then the house of cards is going to collapse pretty quickly,” he says, highlighting the misfortunes of GE as a chastening lesson for business leaders today.
Skarlicki also notes there’s been a historical conflation of effective leadership with high corporate performance. He points to the leadership approaches of both Welch and Apple’s Steve Jobs, two celebrated success stories who were both known to treat their employees poorly behind the scenes, and in certain instances, with behaviour tantamount to abuse. Were their companies successful because of their abrasive management styles, or in spite of them?
“If you scratch the surface of a company like Apple, you’ll discover that Jobs had a team of unsung heroes doing all the work he took the credit for in his public presentations,” says Skarlicki. “Jobs played the all-important role of visionary and he set the tone for the company, but would Apple have been successful without the contributions of people like [future Apple CEO] Tim Cook, the man responsible for its remarkably consistent and effective supply chain?” In that sense, poor leadership can potentially be masked by success due to a variety of other factors. “Certain leaders were also given latitude to be jerks because they were performing well,” adds Skarlicki. “If their companies weren’t successful, they would be gone just like that.”
Nowadays, Tesla’s Elon Musk is grabbing the lion’s share of media attention with his “draconian” overhaul of Twitter since acquiring it for US$44 billion last fall. After becoming the new owner and CEO, Musk laid off half of Twitter’s staff, including several high-level executives and previous CEO Parag Agrawal. Hundreds more employees subsequently resigned in protest to an ultimatum from Musk calling for their commitment to “long hours at high intensity.” Despite these controversial maneuverings, Musk still draws some praise for being an uncompromising visionary, while still facing much-warranted criticism in the face of plummeting Twitter stock and losing a record-breaking $182 billion in 2022. Skarlicki argues that Musk is in a class of CEO of his own, an anomaly among a growing number of whom he classifies as the “servant model of responsible leadership.”
As the name suggests, CEOs in this model, in addition to being visionaries for their companies, operate as servants to the organization and its employees, devoting their efforts to providing support, coordinating activities, and instituting a nurturing culture where employees can all thrive. Gone are the pyramid-style hierarchies with the Welches of the world at the top. Instead, this model thrives on more flexible flatter hierarchies that revolve around shared leadership built on a clear mission and purpose. “Today’s leaders are enablers,” says Schulich’s Holzinger. “Enablers put their team first by tackling questions like, ‘How can I put my employees in roles where they can make the most positive impact?” What resources do they need? What obstacles can I eliminate?” However, that doesn’t mean a sole leader isn’t needed anymore, Skarlicki cautions. “There still has to be somebody at the helm who sets the tone and says ‘the buck stops here’,” he says.
The servant model works best with CEOs who possess a high degree of emotional intelligence: a leader’s emotional intelligence extends to understanding their own emotions, abilities and values, as well as the emotional needs of their employees. While it’s a useful trait to have in any field, Skarlicki points to organizational research that has consistently shown that emotional intelligence trumps cognitive ability when it comes to leadership effectiveness.
In reaction to the unpredictable challenges of running a business in the 21st century, current CEOs are also more dynamic, adaptable and agile than the previous generation of business leaders. Five-year strategic plans are no longer practical since global markets and a company’s value can change in an instant. That’s why strategy has evolved into an ongoing process of continuous re-evaluation. Throw in 24/7 news coverage and CEOs also have to contend with every possible mistake going viral, no matter how minor.
To establish just how drastic this transformation of the business landscape has been, Skarlicki equates the tasks of past CEOs to the challenge of sending a rocket to space. “How do you do that? It requires a linear, systemic and controlled approach,” he says. However, current CEOs face a challenge more comparable to the one parents face when raising a child, which entails a non-linear approach that can tackle a vastly greater number of variables, nuances and harder-to-predict pitfalls. “Success in the previous context doesn’t always lead to success in the other, and vice versa,” says Skarlicki. With so much change happening today, a strong and enduring corporate culture is incredibly vital. To assist leaders in creating this culture, traits that would have been perceived as weaknesses a few decades ago, like humility, are now prized. “When you’re humble, you begin to see and support greatness in others,” says Skarlicki.
Part of this culture change in leadership personalities also has to do with a recent demographic shift in people who are becoming CEOs. For example, as they retire or move on to new ventures, the “organization men” and “autocrats” are sometimes being replaced by female CEOs, with PwC in 2014 estimating that by 2040 women will represent some 30 per cent of the top 2,500 global CEOs—a remarkable rise compared to the average of 2.1 per cent between 2004 and 2008. Women like GM’s Mary Barra—the first female CEO of a Big Three U.S. automaker—as well as Oracle’s Safra Catz and Citigroup’s Jane Fraser have shaken up the conventional wisdom surrounding leadership. What have traditionally been characterized as feminine traits are now being steadily adopted by current CEOs. Along with generally scoring higher when it comes to emotional intelligence, female leaders tend to also value interpersonal relationships to a greater extent compared to their male counterparts. “As the world becomes more and more complex, a leader’s effectiveness will depend on the quality of relationships that he or she has developed,” says Skarlicki.
Relationship-building skills are now emphasized at business schools worldwide. For example, Holzinger is coordinator of Schulich’s core “Skills for Leadership” course. “We introduce students to the notion that the complex problems they’ll be facing as leaders are highly unpredictable and don’t typically have obvious solutions that everyone will agree on,” he says. “To address these problems, we highlight the need to build relationships with people they may disagree with in order to get as many diverse inputs as possible.” And a key part of building relationships is great communication skills, adds Holzinger. “Some people may be very good at specific fields like accounting or finance, for example, but if they can't effectively listen and communicate their knowledge to different stakeholders who come in with different perspectives and knowledge bases, then it's hard to make an impact as a leader,” he says.
The attributes of a CEO employing the servant model tie in to an overarching concept of responsible leadership that takes on issues like climate change, human rights and diversity, equity and inclusion—even if that potentially chips away at profits. One prominent Canadian example of a leader who’s a trailblazer in this regard is outgoing Maple Leaf Foods CEO Michael McCain. In 2015, McCain committed to an extensive sustainability plan that aimed to dramatically improve the treatment of animals and reduce the company’s environmental footprint by half within 10 years. Four years later, Maple Leaf Foods became the world’s first major carbon-neutral food company. “It became clear to us that we needed to be part of the solution, and not an ongoing part of the problem, for the benefit of future generations,” reflected McCain in early 2022. While investor pressure on CEOs have seen them traditionally focus on short-term gain rather than long-term responsibility, McCain has long challenged the primacy of shareholders above all other stakeholders including the environment itself.
Companies are now also ramping up their charitable efforts, with business leaders seeing them as a primary focus of their work. Last fall, Patagonia founder Yvon Chouinard and his family committed to dedicating all profits from the US$3 billion apparel maker to projects that tackle climate change and protect the environment. The Chouinard family’s privately held stock is now owned by a trust and a group of non-profits that expect to donate roughly US$100 million annually. Around the same time, Lululemon founder and billionaire Chip Wilson donated $100 million to protect B.C. forests and a further $100 million to muscular dystrophy research. In a similar vein, CEOs are increasingly taking ethical stances that could potentially scare away investors—an unthinkable tactic to many who led publicly traded companies in the past. After Roe v. Wade was overturned by the U.S. Supreme Court in June 2022, leading to abortion rights being rolled back in nearly half the country, Salesforce CEO Marc Benioff offered to help pay travel costs for employees seeking access to abortions and other medical procedures out-of-state.
Skarlicki predicts that the servant model will continue to grow in popularity over the next decade. While there is no one right approach to good leadership, he notes that the servant model and its values of responsible leadership have helped many leaders adapt to the pandemic, and will likely continue to do so when the next unexpected global shock comes along, especially as the climate crisis is projected to worsen over the course of the 21st century. “Responsible leadership is the future largely because we don’t have a choice otherwise,” says Skarlicki.
At the same, Holzinger notes there’s a pandemic-inspired trend of “deglobalization” in the political sphere as global superpowers look inward in an attempt to become more self-reliant. Simultaneously, many people are turning to charismatic populist politicians who can guide them through periods of uncertainty in our fragile and fragmented world. Holzinger is worried this trend could spread to the next generation of business leaders. “I don’t believe we can get rid of our global problems by leaning on that strong, charismatic leader who solely makes all the decisions,” he says. “The better approach is to embrace our diversity and listen to different stakeholders for solutions to tackle the existential threats that impact us all.”
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