One of the remarkable things about leadership is how little the underlying theory of it has changed for centuries. In around 580 BC, the Chinese philosopher Lao Tse wrote: “A leader is best when people barely know he exists. When his work is done, his aim fulfilled, they will say: we did it ourselves.” Just over two millennia later, Napoleon Bonaparte said that “a leader is a dealer in hope”. And just a few years ago this, from leadership guru Warren Bennis: “Leadership is the capacity to translate vision into reality”.
There have always been, of course, individual styles of leadership. There have been (usually, mercifully brief) fashions – around the time of the First World War, for example, one definition of leadership read that it was “the ability to impress the will of the leader on those led and to induce obedience, respect, loyalty and cooperation”. In spite of this, the ability of a leader to persuade and influence, rather than command and rule, has always been present and has become even more prevalent over the past 50 years or so.
The modern age, though, is a game changer for businesses and their leaders. The combination of globalisation, rapid technological development and the emergence of data and knowledge as the ultimate currency is changing everything. Entirely new business models are emerging and organisations becoming less hierarchical. Innovation and ideas can be born anywhere – the most important point is that organisations have the ability to encourage their development and recognise the best of them.
Arguably, competent leadership is the most important skill of all in the digital age. It is important because this is a rapidly evolving, messy, risky, unpredictable time and none of us can be sure where technological development will take us. In such an environment, outstanding leaders are the most important currency there is.
The vital importance of this role can already be seen in organisations on the front line of digital disruption. Australia Post, for example, has seen its business – revenues of A$6.8bn – ravaged by the disruptive impact of the internet and set about a new vision to become an e-commerce company. Change of this magnitude requires a transformation of culture and behaviour in every function, particularly critical functions such as finance.
Silvio Giorgio, appointed by the group’s CFO to a new role of general manager, data science and strategy, was given the task of preparing Australia Post’s finance function. His fundamental view was that it was not possible for any finance function to support an organisation embarking on change of this scale if it did not embark on change itself. “If we don’t prepare our people, our finance function will not be relevant to the business and our people will not be relevant to the market,” he said.
So what are the qualities that leaders need in the digital age? Are they so different from the qualities we have seen in leaders until now?
The list of attributes that theorists believe are essential in a good leader inevitably shift over time but a few core qualities are consistently at the top. A leader’s personality has always been and will always be predominant; meta-analysis of academic studies (see Intelligence and Leadership: A Quantitative Review and Test of Theoretical Propositions by Timothy Judge, Amy Colbert and Remus Ilies) carried out over the past 50 years has suggested that specific personality traits, including emotional stability and curiosity, are twice as important as IQ when it comes to predicting the effectiveness of a leader. Then there are the behavioural traits that help leaders to deliver results: motivational skills, team building and emotional intelligence, as well as that elusive and hard-to-define quality, charisma.
But in addition to these core requirements, new qualities are increasingly in demand. The Global Leadership Forecast 2018, jointly published by DDI, the Conference Board and EY, which integrates data from more than 28,000 leaders and HR professionals across the world, found that digital leadership skills are becoming critical; companies with the most digitally capable leaders financially outperform the average by 50%.
“No matter what business function you work in,” it states, “leaders today need to understand the impact of technology on their business. You don’t have to be a technical expert, but you do need to be able to predict both opportunities and potential negative effects of technology”.
It is already clear that some of the must-have attributes for leaders are being amplified by the digital age. The driving force is the impact of automation, artificial intelligence (AI) and machine learning in the workplace – partly because machines are already taking over the task-based elements of leadership. In an article in Harvard Business Review, Tomas Chamorro-Premuzic, professor of business psychology at University College London and Columbia University, Michael Wade, professor of innovation and strategy at the International Institute for Management Development (IMD), and Jennifer Jordan, professor of leadership and organisational behaviour at IMD, argue that AI “will supplant many aspects of the ‘hard’ elements of leadership – that is, the parts responsible for the raw cognitive processing of facts and information”.
At the same time, they add, AI will put a greater emphasis on the soft elements of leadership: “the personality traits, attitudes and behaviours that allow individuals to help others achieve a common goal or shared purpose”. The authors conclude that “in an AI age characterised by intense disruption and rapid, ambiguous change, we need to rethink the essence of effective leadership. Certain qualities, such as deep domain expertise, decisiveness, authority and short-term task focus, are losing their cachet, while others… are likely to play a key role in more agile types of leadership.”
This view was confirmed by a recent joint report from CA ANZ and PwC, The Future of Talent: Opportunities Unlimited. “The report highlights an increasing need for soft skills rather than technical skills,” explains Lee Whitney, chief transformation officer at CA ANZ. “Business leaders identified communication and problem-solving skills, collaboration, adaptability and agility, creativity and resilience as crucial to success in the coming decade.
“Leaders have realised that emerging technology will increasingly take over complex technical tasks and, as a result, the capacity of leaders to innovate, inspire and engage is coming to the fore. Preparing for the future is not just about learning new technologies but about adopting an attitude to change and innovation that allows for rolling technology and process changes.”
The critical leadership skills identified as vital for the future include:
Adaptability. On an individual level, adaptability means having an openness to new ideas and a willingness to change your mind even when doing so might threaten the ego of a leader. “In an AI age, changing one’s mind, which can often be regarded as a sign of weakness or lack of conviction, should be perceived as a strength when it comes to improved decision-making,” say Chamorro-Premuzic, Wade and Jordan. “Adaptable leaders are not afraid to commit to a new course of action when the situation warrants.”
Vision. A clear vision for the organisation becomes even more important in the digital world when business models are constantly disrupted and short-term uncertainty is high. The huge digital multinationals of the age all have vision (or mission) statements that are reasonably specific, while leaving wiggle room for future initiatives. Elon Musk’s mission statement for Tesla, for example, is “to accelerate the world’s transition to sustainable energy”, while the company’s vision is “to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles’. Google’s mission statement is ‘to organise the world’s information and make it universally accessible and useful”, although its chief executive Larry Page said in 2014, reported in the Guardian, that the company was beginning to outgrow its original vision and could be due for a change.
Humility. Recognising what you don’t know as a leader is as valuable as knowing what you do in a time of rapid change. Humility is an evolution of a leader’s need to keep learning; in the digital age, knowledge can come from anywhere – and often from someone 20 years younger than the leader or three levels down the organisational hierarchy – and so leaders need to be humble about the contributions of others and open to seeking input from everyone and everywhere, inside and outside the organisation.
Importance of trust
The automation of the workplace is having wider implications for leadership as employees – and wider society in general – are increasingly looking to business leaders for guidance and reassurance about the future of the workplace and of their jobs. According to research by PwC, 30% of jobs could be lost to automation by 2030 – so who owns responsibility for the people who will be displaced? PwC’s latest survey of the 21st Annual CEO Survey: The Anxious Optimist in the Corner Office, opinions of CEOs worldwide, found that 67% agreed that they have a responsibility to retrain employees whose jobs are automated out of existence.
Trust between company and customer has reached new levels of importance. According to the Edelman Trust Barometer, 69% of respondents believe that the most important role of a CEO is to build trust in their company. “The employer is the safe house in global governance, with 72% of respondents saying that they trust their employer to do what is right,” says Richard Edelman in his introduction to this year’s barometer report. “By nearly a two-to-one margin, a company is trusted to take specific actions that both increase profits and improve economic and social conditions. Nearly two-thirds say they want CEOs to take the lead on policy change instead of waiting for government, which now ranks significantly below business in trust in most markets.”
But trust in leaders can be damaged easily. At this year’s World Economic Forum in Davos, the internet entrepreneur Marc Benioff, CEO of the cloud company Salesforce, criticised the autocratic style displayed by the leaders of some new technology companies. Benioff named Uber as one company that, under its previous CEO, had forgotten to value trust among its customers. “What is the most important to you?’ Benioff asked. ‘Is it trust or is it growth? Because if anything trumps trust, then you are in trouble.”
Leadership in finance
So what does all this mean for finance leaders? Certainly the demands placed on finance leaders both in business and the public sector are already on a pathway to change – and this begins with the way in which the role of accountants generally is shifting. ACCA’s Drivers of Change and Future Skills report – part of its series Professional Accountants: The Future – points out that ‘all professional accountants will be expected to look beyond the numbers’ in the future. ‘They will need to collaborate and partner with people in other parts of the business and outside the business; interpret and explain the numbers; provide insight and information; help organisations to achieve short-term goals and longer-term objectives; think and behave more strategically and become more involved in decision-making than before.’
The need for more collaboration, communication, insight and strategic thinking is equally true of public sector accountants. ‘Although the corporate sector is more focused on improving customer experience and improving efficiency in order to gain competitive advantage, the result is the same,’ says CA ANZ’s Whitney. ‘Business and accounting leaders need the skills to apply rapidly emerging technologies to their challenges in ways that simultaneously improve experience and productivity. There is also pressure on government departments and agencies to streamline processes while improving customer experience.’
The importance of applying rapidly new technology is underscored in a recent ACCA report, The race for relevance: technology opportunities for the finance function. Finance leaders have an unprecedented opportunity as core contributors to the adoption of new technologies to drive business growth. If they don’t embrace this opportunity, says the report, they risk losing competitiveness and relevance.
“In this corporate race for future relevance, recognising the opportunity is essential,” says Maggie McGhee, ACCA’s director of professional insights. “The revolution has started and adaptation is critical.”
The fundamental finance skills required of CFOs will not change, which is why qualifications such as ACCA’s will always be relevant. What is changing – and rapidly – is the context in which these skills are being applied. Changes to the ACCA Qualification – notably the Strategic Business Leader case study (see panel) – are designed to recognise the new demands
CA ANZ recently undertook a review of its organisational strategy in order to identify what it needs to do to provide its members with the skills, connections and insight they need to carry their organisations into the future. ‘As a result, we are conducting a transformation process, which will result in a reform of our CA Programme to attract the best talent and to support the needs of employers,’ says Whitney. ‘We’ll also be developing and enhancing our online learning support for members and building an online community hub to connect members and support collaboration, and we will engage more actively with the start-up community.’
In other words, the leadership handbook for professional accountants across the world is being updated, but not entirely rewritten, to make sure finance professionals have the leadership skills to guide their organisations forward in the digital age.
ACCA students to be tested on leadership
A new Strategic Business Leader case study is part of a range of innovations to the ACCA Qualification designed to make it more relevant than ever to employers.
The new paper will test students on challenging real-world scenarios, requiring them to blend technical, professional and ethical skills in the evaluation and presentation of their responses.
ACCA director of professional qualifications Judith Bennett says: ‘Our changes integrate deep, broad and relevant technical expertise with ethics and professional skills, giving students the forward-thinking strategic abilities and advanced skillset that modern professional accountants need to shape the future of global business.’
The paper will be available from September; registration is already open.
Other changes include the introduction of an enhanced corporate reporting exam that provides ACCA students with a holistic view of reporting, and a new Ethics and Professional Skills module introduced into the ACCA Qualification last year. There is also an increased focus on technology-based testing.
Reproduced from Accountancy Futures, an ACCA publication.