​Our most recent columns have explored the risk management approach of Paul O’Neill and Stanley McChrystal and their creation of institutional learning systems. This column focuses on their leadership model and why an evolution in c-suite leadership is critical to the future of risk management.

The quotation from Peggy Noonan of the Wall Street Journal captures a pervasive sentiment at the moment: "the absence of purpose and trust that permeates all facets of society. "

The power in the example set by Paul O’Neill and Stanley McChrystal is that they offer hope that more leaders can build organizations that embody trust and purpose – the two most important qualities for building a confident relationship with an unknown and unpredictable world. This will only happen if we develop more leaders like O’Neill and McChrystal, so let’s take a closer look at their leadership traits.

Unless we better understand their thinking, leaders of today and tomorrow will be less apt to do what is necessary to build the kinds of risk management systems needed now and in the future.

  • "America is in so much and so many kinds of trouble . . . . [Business leaders have] a historic opportunity – a timely and perhaps final one . . . . They can in some new way see themselves as citizens – as members of America, as people with a stake in this nation, a responsibility for it. They can broaden, invest, hire, expand and start the kinds of projects that take the breath away. They can literally get young men and women out of the house, into the workplace, learning something. They can change and save lives. . . .
  • This may be the last opportunity for business leaders to do what hasn’t been done in a generation and that is defend the reputation of capitalism. Wall Street once had statesman; it wasn’t dominated by dumb quarterly-report jockeys. Shareholders were assumed to be patriots, and grateful ones, because they had so profited from the luck of being born here, into a system where the quick and sturdy could go from nothing to everything.
  • That system is troubled. If they cannot see private interest as utterly aligned right now with public interest, then they are truly as stupid and venal as their enemies take them to be. Are they? I hope not. But I also hope they see this moment for what it is.”

– Peggy Noonan, This Tax Bill May Do Some Good, Wall Street Journal, Dec. 24-25, 2017.

One of the most striking things about O’Neill and McChrystal is their humility. When O’Neill became CEO of Alcoa, he didn’t know anything about aluminum manufacturing. Likewise, McChrystal felt ill-equipped by his training and past experience to deal with threats posed by the network structure of Al Qaeda – a structure that was incredibly fast, allowing the terrorist organization to learn quickly and apply lessons in the same day.

Although working in different environments, both leaders figured out that they alone didn’t have enough brain power to sift through all the data and moving parts to understand the complexity of their situation, make decisions and predict what would happen. In a nutshell, both men rejected the idea of heroic leaders who could single-handedly solve problems, even if they had unprecedented opportunities through computers and technology to gather information and direct operations.

To thrive in a world that is increasingly unpredictable and uncertain, a new model of leadership and better leadership development processes are needed. McChrystal’s metaphor for the old leadership model is chess master – an unrealistic expectation that one person possesses the knowledge to micromanage and control each move of the organization. The chess master metaphor needs to be replaced by the metaphor of leader as gardener – someone who learns the art and science of tending (selecting the best crops for the environment, planting and cultivating, including pruning, shaping and harvesting). A gardening/tending approach to leadership is not passive; instead, the leader-gardener acts as an “Eyes-On, Hands-Off” enabler who creates and maintains an ecosystem in which the leader nurtures people. This type of leader inspects and adjusts the structure and processes that shape the ecosystem. The people in the ecosystem, a la the plants, are filled with trust and purpose and, therefore, have the motivation, ability and responsibility to act and flourish.

This state of flourishing leads to what McChrystal calls “empowered execution.” In O’Neill’s experience at Alcoa, it emerged when employees called him, not to talk about safety or accidents but all the other great ideas they had to improve the company. For McChrystal, it meant reversing the model where subordinates provided information and leaders disseminated commands. He required leaders to provide information “so that subordinates, armed with context, understanding, and connectivity, could take the initiative and make decisions. Shared consciousness meant that people at every level on our org chart now enjoyed access to the kind of perspective once limited to senior leaders.”

What is remarkable is how McChrystal realized that he needed to fight his perfectionistic instincts to control everything. In today’s world with the technology to see everything that is going on (e.g., being able to watch and speak to operators in the middle of a firefight), there is a tendency to for leaders to create an endless cycle of gathering information to issue directives with the function of workers reduced to feeding the cycle and awaiting the next round of directives. McChrystal, like O’Neill giving out his home telephone number to Alcoa employees, recognized that the risks of not learning quickly enough and acting too slowly were higher than the risks of letting competent people make judgment calls (like calling O’Neill at home). McChrystal explained:

"I began to reconsider the nature of my role as a leader. The wait for my approval was not resulting in any better decisions, and our priority should be reaching the best possible decision that could be made in a time that allowed it to be relevant. I came to realize that, in normal cases, I did not add tremendous value, so I changed the process. . . .

We concluded that we would be better served by accepting the 70 percent solution today, rather than satisfying protocol and getting the 90 percent solution tomorrow."

In sum, the lesson to be learned from O’Neill and McChrystal is that the leader’s primary responsibility is to the whole – to create and maintain a network that allows people to achieve shared consciousness and yet operate in a decentralized manner that pushes authority out to the edges, to every node in the network. Our next few columns will place O’Neill and McChrystal into historical context and further explain why the network concept is important to the future of risk management.