<\/p>\n
ALISON BEARD: I\u2019m Alison Beard.<\/p>\n
ADI IGNATIUS: I\u2019m Adi Ignatius, and this is the HBR IdeaCast.<\/em><\/p>\n ALISON BEARD: Adi, how do you think about the difference between being a great functional leader and a leader that\u2019s ready to take on a larger, more enterprise wide role? What differentiates the two in your mind?<\/p>\n ADI IGNATIUS: You could be a great team leader, right? You\u2019re sort of in charge of your folks, you\u2019re trying to maximize what they do. You go to an enterprise role, suddenly it\u2019s far more complex. You have to make trade-offs, things that might not favor the team that you worked with. You have to have that holistic sense of what the enterprise needs.<\/p>\n ALISON BEARD: Yeah, and because of the pace of change now, all the technological, geopolitical, economic uncertainty, these transitions are getting trickier than ever. Even the best managers need more skills than they did before to make the leap.<\/p>\n ADI IGNATIUS: Yeah, look, I think there\u2019s a whole skill set you need, and I assume AI fluency is now pretty high up there.<\/p>\n ALISON BEARD: Yes, absolutely, among other things. And that\u2019s why we wanted to talk to the expert in transitions, Michael Watkins. He\u2019s a professor at IMD and best known for his book, The First 90 Days, but he just recently wrote a new HBR article, The Three Forces That Are Redefining the Transition from Manager to Leader. He\u2019s going to explain what\u2019s changed and what that means for those aspiring to C-level roles. Here\u2019s our conversation.<\/p>\n So before we dig into the practical advice for leaders, I would like to talk about those dynamics that made you want to update your thinking from a decade ago when you first wrote about this functional to enterprise transition. So I guess we have to start with AI, right?<\/p>\n MICHAEL WATKINS: We do, because AI is changing everything as we know. Start with the reality that virtually every leader today is working with AI personally and working with organizations that are using some form of AI, increasingly agentic AI at the same time. So the use of the technology becomes almost indistinguishable from the work the leader does to a degree, and I think as soon as you realize that that\u2019s the case, then the nature of moving up to the enterprise level also changes in important ways, because you have to be prepared to use those tools to make a successful transition.<\/p>\n ALISON BEARD: And then the second force that you cite is geopolitical turbulence. Why is that having an impact on broader swaths of companies and leaders than it did in the past?<\/p>\n MICHAEL WATKINS: I think for a long time a period of relative stability when the geopolitical environment was kind of relatively static and wasn\u2019t a high level driving factor for what leaders at the top needed to do. And obviously that\u2019s just completely been blown up by all of what\u2019s happening. It started, I think, really with the Ukraine war, which has been going on for a while, but it\u2019s only accelerating. And between tensions between trading blocs, China, US, Europe kind of caught in the middle of it all with additional conflict erupting in the Middle East, leaders now have to be treating geopolitics as a primary focal point. And they need to be thinking about how to orient their businesses to deal with likely geopolitical turbulence.<\/p>\n ALISON BEARD: Yeah, and I feel like that almost started during COVID with supply chain disruptions. It was like the first time that you were hearing stories about companies that you always thought of as being pretty much domestic being really adversely affected because they couldn\u2019t get parts or products.<\/p>\n MICHAEL WATKINS: 100%.<\/p>\n ALISON BEARD: And then finally, the third force is compressed leadership pipelines. So what do you mean by that? Why is it happening? And what\u2019s the impact on managers who have higher level aspirations?<\/p>\n MICHAEL WATKINS: So this is also connected to the technology and AI piece, and more generally all the work that\u2019s being done and has been done to flatten organizations out to embed digital technologies. And what that basically means is there are, and it\u2019s a good thing, Alison, fewer levels of leadership through which decision-making needs to flow. But it also means that there\u2019s less opportunity career-wise for leaders to really prepare themselves for those very senior positions.<\/p>\n And AI is exacerbating this in a very interesting way because it\u2019s increasingly eliminating entry level positions, and while there\u2019s still a real premium on the senior level people, but of course many people, not just me, are asking the question, how are we going to develop those senior level people if they don\u2019t go through the apprenticeship basically of doing the entry level work?<\/p>\n But the basic story is really, I think, as much as anything, less time and less experience before you reach levels of responsibility that are really pretty high. And the notion, the traditional sort of succession planning notion of readiness and ready now, I see organizations kind of throwing that out the window. It\u2019s ready enough and what can we do to support you when we\u2019re making big bets on talent because we have to.<\/p>\n ALISON BEARD: Okay, so now let\u2019s dig into what leaders can do about it, how we get people from ready enough to ready. There are seven transitions. Some of them have changed more than others, but let\u2019s go through each of them one by one. So first, moving from specialist to generalist. Why is that different now?<\/p>\n MICHAEL WATKINS: So the specialist to generalist transition was related to what I think is widely described as T-shaped leadership. You\u2019re deep in a function, but then you have to broaden out and understand enough about other business functions, was the way we used to think about it, in order to be able to successfully integrate them.<\/p>\n That doesn\u2019t mean you know as much about those functions as you do about your function of origin, but it means you\u2019ve learned enough to know how to select good people in those functions, sometimes with the right support for doing that, but critically integrate, make the right trade-offs when you\u2019re doing that work at the top, and we\u2019ll talk about integration in a minute.<\/p>\n But there\u2019s now so many new, they\u2019re not functions anymore, Alison, but they\u2019re specialties of machine learning pieces, data sciences pieces. So suddenly it\u2019s not enough anymore just to understand sales, marketing, finance, operations. You\u2019ve also got to be deep enough in core technologies to operate as a generalist across the organization. And that\u2019s a really big change. I mean, the way I describe it in the article is the generalist now has to speak three languages. Business, technology, but the interaction between the two of them is the third piece.<\/p>\n ALISON BEARD: And I feel like that is reflected in the rise of these engineer CEOs as opposed to MBA CEOs. They need to be both.<\/p>\n MICHAEL WATKINS: 100%.<\/p>\n ALISON BEARD: Explain the second shift from analyst to integrator and how leaders can do it differently or better today.<\/p>\n MICHAEL WATKINS: So in the article I mostly talk about the impact of AI on this, but the other forces, geopolitics being an example, are also impacting this one. The core of the work of the integrator is to synthesize the perspectives and data and information that is available to a leadership team and reach good decisions, conclusions, bases for action. That\u2019s what integrator is always meant.<\/p>\n But today, obviously, AI generates way more analysis than any leader or any leadership team can absorb. And it\u2019s not so much today about designing specific decisions. It\u2019s really about in the end how you create an architecture is the way I think about it for decision-making in your organization, including the governance of the AI systems, which is turning out to be a very big issue, and making judgements about which inputs are going to get processed by various forms of AI, which is going to continue to require human judgment. How do you maintain accountability when recommendations emerge from these systems and no one\u2019s fully accountable?<\/p>\n So the whole notion of what it means to be an integrator I think in the organization has altered. In the good old days, you\u2019d sit down with \u2026 To ask your team the different perspectives and you\u2019d talk about it for a while and then either you reach a consensus or you\u2019d make a decision. That is not at all the way it works anymore with the leadership teams that I work with.<\/p>\n ALISON BEARD: Right. So it\u2019s really integrating human intuition from many different stakeholders with all the data that\u2019s coming at you.<\/p>\n MICHAEL WATKINS: And deciding what remains that humans need to be exercising oversight on, and recognizing that you\u2019re often making decisions based on conclusions produced by machines for which you don\u2019t really understand why it reached the conclusion it did, which is creating certain kinds of vulnerabilities. I just was with a group at a global food products company yesterday and we were having a discussion about the governance risks associated with this. When you\u2019ve got networks of AI agents making decisions that have consequences for customers or others and something goes wrong, first of all, how do you measure the potential risk of that happening in the first place? But second, how do you assign accountability?<\/p>\n ALISON BEARD: So the next shift from tactician to strategist, that\u2019s probably pretty intuitive for most people. Is this increasing political, economic, technological uncertainty that we\u2019re talking about making it more difficult to develop strategy? And if so, how do you prepare to do it well?<\/p>\n MICHAEL WATKINS: I think there\u2019s two big changes here. One is the speed at which things are happening, which is making traditional plan and execute cycles much more difficult. I did some survey research on this, and close to 75% of the leaders that I surveyed at senior levels said events were moving faster than they could account for in the planning cycles that the organization was engaging in. And this was creating a real sense of vulnerability. So the speed piece is certainly one dimension of it. But the other is the move from what you might think of as static sources of competitive advantage to dynamic sources of competitive advantage.<\/p>\n Now it\u2019s always going to be the case that certain things, whether it\u2019s IP or just scale in your manufacturing or production facilities, is going to remain a form of competitive advantage. But increasingly it\u2019s about, I think of it as adaptive advantage. You\u2019ve got to be able to move faster than the environment and competitors are moving. And it may be that the only durable form in the long run of competitive advantage is that capacity to be adaptive. So beginning to think about as a strategist moving from a world to plan and execute to more of a world in which learning and adaptation is the essence of strategy, that\u2019s a very large shift in thinking.<\/p>\n ALISON BEARD: How do the executives that you work with pick up those skills? It seems something that you\u2019re either naturally suited to or not.<\/p>\n MICHAEL WATKINS: I think as you know I\u2019ve done a lot of work on strategic thinking and I think strategic thinking underpins both traditional strategy, but it\u2019s probably even more important when you\u2019re doing more dynamic adaptive strategy. Because, for example, a core piece of strategic thinking is your ability to identify and respond to weak signals. Well, there\u2019s a whole lot more weak signals. You need to do a whole lot more integration of the various signals coming in.<\/p>\n Where this takes you, by the way, and it\u2019s, again, some research or writing I\u2019ve been doing is down the road of how you build, I think of it as intelligent organizational sensory systems, amazon being a classic example of literally designing the architecture through which you understand what\u2019s happening out there and inside your organization and how you distill all that data into some form of actionable intelligence.<\/p>\n ALISON BEARD: Well, that\u2019s a good transition to the next transition, which is bricklayer to architect. What do leaders need to know about organizational design now?<\/p>\n MICHAEL WATKINS: This is really front of mind because I was with this group of senior HR leaders at this global food products company yesterday, and this was exactly what we were talking about, which is that increasingly, traditional notions of transformation are no longer cutting it for the speed of what\u2019s happening. I mean, in the good old days we used to think about things like taking an organization from a current state through a transition to a new state with the idea that that state was going to be somewhat durable until we did that again. And we have technology methodologies for how you manage that kind of transformation. But in a world where things are changing so quickly and you\u2019re moving from plan and execute to learn and adapt, the premium becomes on building organizations that are able to adapt continually.<\/p>\n Now, you may still need to do major changes along the line. I don\u2019t want to say that\u2019s not going to be the case. But it\u2019s so much more important I think these days to build both adaptability and resilience directly into the organization. Again, some of the work I\u2019ve been doing is what are the elements of adaptive organization? And it turns out, and this is I think a bit surprising given all the talk about technology, is that in the end, adaptive talent and psychological safety and trust turn out to be the absolute essential foundations of adaptive organization. You can build small teams on top of that. You can build human AI hybrids on top of that. You can think about governance frameworks, you can begin to think about how you engage in coordination. You can implement things like elements of agile methodologies. But if you haven\u2019t built the adaptive human foundation of the organization, none of that stuff is really going to work.<\/p>\n ALISON BEARD: Okay, transition five, from problem solver to agenda setter. With so much going on today, and we\u2019ve addressed this a bit already, that prioritization piece seems like the most challenging. So what advice do you give executives that you work with on how to do it well right now? How to actually make the call on what is most important when things are changing so quickly?<\/p>\n MICHAEL WATKINS: And this is exactly right, which is leaders are now being forced to make consequential changes when there\u2019s really not a lot of evidence about what the right way to go is. And I think that\u2019s a very large shift from more stable times. And the example I use, by the way, for this Alison, is that the capability frontier of AI is receding in front of us, and we leaders need to make choices about technology and larger issues around organizational design and strategy in a world where the frontier itself is shifting very rapidly forward and how do you do that? And it puts a premium surprisingly on things like developing good options that you can act on as you learn more, placing selective bets, being very, very careful about irreversible long-term commitments that you need to make. I mean, sometimes it\u2019s inevitable. You need to decide to build a facility or not, and it\u2019s a 10-year or more commitment.<\/p>\n But I see more and more organizations and leaders at senior levels looking for more contingent ways to make commitments and begin to think about if the world tends to go this way and we though it was going to go that way, can we reverse that commitment in a way that doesn\u2019t cost us too much either time or money? It\u2019s a different world in which you think about setting priorities as essentially making bets and creating options for yourself. It\u2019s just a very different mindset.<\/p>\n ALISON BEARD: Yeah, that reminds me of the, I think it\u2019s Jeff Bezos, that there\u2019s the one-way door and the two-way doors. Am I getting that right?<\/p>\n MICHAEL WATKINS: Absolutely.<\/p>\n ALISON BEARD: Next is moving from warrior for your own projects, people, functions, to a diplomat who artfully manages all stakeholders. How has that diplomacy role widened and how do leaders get better at it?<\/p>\n MICHAEL WATKINS: It\u2019s true that that role has widened and it\u2019s widened both externally, but also inside organizations for reasons that I can point to. Externally, it\u2019s back to the turbulence and the external environment, the geopolitical impacts. The need to basically think through how you\u2019re going to build alliances to try and shape what\u2019s happening when the environment externally is just so incredibly turbulent.<\/p>\n ALISON BEARD: Yeah, that includes with competitors. You need industry coalitions, particularly on AI, to figure out how to do it well and responsibly.<\/p>\n MICHAEL WATKINS: Exactly right. So very early in my career, I was a professor of negotiation at the Kennedy School at Harvard, and I taught international diplomacy and studied major diplomatic negotiations at the time. And one of the things you learn about diplomats is they reflexively think coalitionally. They think in alliance terms. And they don\u2019t just think about building alliances with people they like or friends or they have common wide ranges of interest with. They build coalitions of convenience around specific issues. And the example you just gave, Alison, is a great example. You may have organizations, businesses that are vigorously competing with each other, but they have a shared interest in establishing certain kinds of protocols for AI implementation. I\u2019m kind of making that up, but I think you know what I mean. So that sort of cooperation competition combination and how you make that work requires thinking of yourself as a corporate diplomat.<\/p>\n ALISON BEARD: And then internally?<\/p>\n MICHAEL WATKINS: So internally what\u2019s happening is because there\u2019s so much more uncertainty and ambiguity, what it means, and it\u2019s back to that conversation about needing to build options and place bets. You need to build a kind of a trust level and consensus level at the top of the organization that\u2019s more extensive than it used to be. Because in the end, you\u2019re making very consequential judgements and you need support. You need a sufficient level of support to be able to do that. So thinking in terms of who are your critical allies internally, whose support is make or break for you, that\u2019s bringing that same kind of stakeholder thinking and alliance-building logic into the most senior levels of the organization.<\/p>\n ALISON BEARD: And finally, you changed the words for your last transition. It used to be supporting cast to lead role, but now it\u2019s unit leader to enterprise leader. So why did you want to use different language and what does that practically mean for someone who\u2019s trying to make the move?<\/p>\n MICHAEL WATKINS: What I was thinking of was the need to have a different kind of presence as a leader, to step up to being an enterprise leader meant having a broader range of visibility, embodying a different sort of presence, which is required at the top. And I think that\u2019s still true to a degree, but there\u2019s more I think today of a kind of a cognitive reorientation mindset shift that has to go on when you hit that enterprise level because you\u2019re responsible for a much broader range of decisions than you ever were before. You\u2019re dealing with environments that are far more uncertain and ambiguous and complex and generally a mess than they were previously. So how you begin to really rethink the core of what your value added is in that kind of situation changes.<\/p>\n At the top of organizations, we still have many examples where people have come up primarily through functional silos. They\u2019ve been a CFO, and lots of examples, and then they become a CEO and that requires a complete rethink of how you\u2019re orienting yourself. All of what you learned to be a good CFO may in fact be a liability when you\u2019re trying to operate as a good CEO.<\/p>\n ALISON BEARD: You need to say yes to a lot more things.<\/p>\n MICHAEL WATKINS: You need to bring a broader set of mindsets into play. You can\u2019t afford to be continuing to be anchored in that financial discipline. The people who do this the best, by the way, make as an example, a transition from being a CFO or a general counsel or other key functions into being a CEO. One thing that absolutely they share in common is they stay as far away from that function as they possibly can. And they put good people there to run it because that\u2019s critical, but they know they have to let go of that and they know they have to take the broader view. And that\u2019s to me the essence of what it means to step up to enterprise leadership.<\/p>\n ALISON BEARD: Do you have any general advice for people who want to position themselves for larger roles in the future right now? Are there one or two specific things they should do to build skills that they need?<\/p>\n MICHAEL WATKINS: So yes, and I think I\u2019ve been trying to implement that along with some colleagues at the business school I work at, IMD. And the way we\u2019ve come to think about it is in terms of outer leader skills and inner leader skills. And the outer leader skills I think are things that most people recognize. The strategic thinking, disciplined decision-making, adaptive influence to get things done, stakeholder navigation. Those are all critical, somewhat traditional competencies that you need to have at the top. But they\u2019re also modes of thinking and that\u2019s important, transversal skills people sometimes call these. But the most important work, and it has to happen actually a long time, I believe, before you end up at the very top, is the inner leader work.<\/p>\n Do you have the capacity to have the mental agility to look at things from multiple perspectives? Do you have the ability, we talked about it, to understand that things sometimes are about finding the right balance between polarities and not solving problems in the end. Emotional regulation. Are you able to deal with the incredible stresses, triggers, things that happen to you emotionally that can really undercut your leadership?<\/p>\n One I think about is real-time self-awareness. I mean of course we want leaders to be self-aware, but being self-aware about your strengths and vulnerabilities is different than building a sense of real-time self-awareness about what\u2019s going on in the environment around you. I guess the bottom line here is I think that organizations need to start building those core outer and inner capabilities earlier, because otherwise you\u2019re never going to get the feedstock that you need to have people be effective at the top.<\/p>\n ALISON BEARD: How are the best organizations trying to build those skills in their potential leaders right now?<\/p>\n MICHAEL WATKINS: The answer is unsurprisingly a mix of things. To me, one of the most critical, though, is designing, I think of them as crucible experiences that really test and hone some of those skill sets. And I think as you know, Alison, transitions has kind of been a focal point for me for a long time \u2013<\/p>\n ALISON BEARD: The First 90 Days is on that bookshelf over there.<\/p>\n MICHAEL WATKINS: Stay tuned for the new edition coming out early in the new year. So one example of a crucible experience is being put into a turnaround scenario, where you\u2019ve got to move very quickly. But an equally important crucible experience is being put into a successful business and figuring out how to take it to the next level. So I think there\u2019s a piece of it that\u2019s really critical that\u2019s about curating those crucible experiences for the future tier of leaders that you\u2019re trying to build. I think leadership development of the right kind continues to be important, but I increasingly believe that more of it needs to focus on the inner leader work than we\u2019re currently doing.<\/p>\n And then finally throwing away this idea that people are going to be ready for roles. They\u2019re not. The roles are too complex, too demanding, and the talent needs are too great to think we\u2019re going to build leaders that are ready to do X, Y, or Z. As I said at the start of the discussion, ready enough. Or are we willing to make a bet on you?<\/p>\n Traditional succession planning, I just think it\u2019s not what organizations need today. They need a much more nuanced and dynamic sense of what talent really is and how you build it.<\/p>\n ALISON BEARD: So what\u2019s the alternative to traditional succession planning?<\/p>\n MICHAEL WATKINS: I said that and then I\u2019m going to pull back slightly, which is there still is important pieces of work you do that underpin traditional succession planning. What do we imagine the roles we\u2019re going to need to fill are? What do we imagine the skill sets we\u2019re going to need to have? How do we think about recruiting the kind of talented people that we need? Where I think it breaks down is that in this core idea of assessing readiness.<\/p>\n By the way, this is not a new observation, because at lots of organizations I\u2019ve worked in, there\u2019s kind of a standing joke that leaders are deemed ready right to the point where a position opens up and suddenly they\u2019re not so ready anymore because someone else is viewed as being better suited to fit the role in real time.<\/p>\n Traditional succession planning is driving towards creating a bench of \u201cready now\u201d leaders, as opposed to thinking about there being much more dynamicism in what you\u2019re going to need in terms of talent, in terms of building more of those transversal capabilities so that people are inherently more able to go into a broader range of roles, and thinking about ready enough with the right support to be successful when you go into one of these key challenges.<\/p>\n ALISON BEARD: And do you think that organizations are doing a good job of evaluating people on all of these capabilities that we\u2019re talking about right now, both inner and outer?<\/p>\n MICHAEL WATKINS: So I\u2019m going to make myself extremely unpopular with what I\u2019m about to say, which is that I think a lot of traditional approaches to assessment, while maybe still having value associated with them are not enough anymore, especially with regard to the inner leader capabilities. To be a good strategical thinker you need to have what I think of as a tensional range.<\/p>\n You\u2019ve got to be able to shift your perspective between different levels, the cloud, the ground, the big picture, the details, the now, the future. There\u2019s not much out there I\u2019m aware of that is able to measure one\u2019s capability to do that, if that makes sense. The other one we talked about, tension tolerance, the ability to hold opposing views at the same time. I\u2019m not aware of any assessment that does a good job of doing that.<\/p>\n There are ones that do get emotional regulation. So the Hogan Development Survey, the so-called Derailers, or sometimes people call it the dark side, can give you useful insight into potentially challenges that people can face in terms of emotional regulation and that can be helpful. Real-time self-awareness. We can look at does the leader understand certain things about themselves? I mean, when I do assessment debriefs, that\u2019s what I\u2019m doing. I\u2019m basically saying, does this leader understand this about themselves?<\/p>\n But that\u2019s different than that ability to stay, I think of it almost as the grounded leader, in a state of awareness in real time that allows you to adapt to what\u2019s happening around you. So it feels to me like there\u2019s a new set of potential assessments, of what kind exactly I\u2019m not sure. But I\u2019m pretty sure we need them. We need to be able to think about how to assess early whether you have the potential to do some of what I just described.<\/p>\n ALISON BEARD: Yeah, it\u2019s almost like right now people are given a crucible experience and then it\u2019s real time, do you have these skills or not?<\/p>\n MICHAEL WATKINS: Did you succeed or did you fail, yeah, is I think a big part of it.<\/p>\n ALISON BEARD: Sink or swim. What does this all mean for organizations\u2019 willingness to bring people up through the ranks versus look outside for their most senior leadership roles?<\/p>\n MICHAEL WATKINS: So I\u2019ve always thought that healthy organizations always bring in some percentage of outsiders because they bring perspectives in, they keep things fresh to a degree, they keep everyone else on their toes. There is a healthy balance even in really, really well-run organizations. So I think that the current conditions have required organizations to increase the percentage of people they\u2019re bringing in like that into the organization even as they try to develop people internally that can do it.<\/p>\n ALISON BEARD: What about right at the top, though? With those compressed leadership pipelines, you\u2019re not necessarily creating a bench of future CEOs. So it does seem easier for a board to then look externally and say, \u201cDo I have someone who\u2019s already needed to do everything that you\u2019re talking about?\u201d<\/p>\n MICHAEL WATKINS: So I think when boards look at CEO succession today, they always have to look at outside candidates as well as inside candidates. And the recruiting firms that do this are very good at helping organizations set up the right slate of outsiders and insiders for comparability purposes. I think it\u2019s also the case too that with very large organizations, most of them are multi-divisional, multi-business organizations, and you\u2019ve got people who are basically running businesses that if they were standalone would be very large businesses. So you\u2019ve kind of got almost a built-in layer of potential people to do it. So I think it\u2019s a nuanced story.<\/p>\n ALISON BEARD: Well, Michael, thank you so much. It\u2019s been such a terrific conversation and I always love talking to you.<\/p>\n MICHAEL WATKINS: And vice versa.<\/p>\n ALISON BEARD: That\u2019s Michael Watkins, a professor at IMD and author of the book, The First 90 Days. He also wrote the HBR article, \u201c3 Forces That Are Redefining the Transition From Manager to Leader.\u201d<\/p>\n Come back Thursday for the third installment of our special series featuring conversations from the HBR Leadership Summit. I\u2019ll be talking to AT&T CEO John Stankey about technology and talent in the AI era.<\/p>\n