The Work of Leadership

More and more companies today are facing adaptive challenges: Changes in societies, markets, and technologies around the globe constantly force businesses to clarify their values, develop new strategies, and learn new ways to operate. The most important task for leaders in the face of such challenges is mobilizing people throughout their organizations to do adaptive work. In this HBR article from 1997, the authors suggest that the prevailing notion that leadership consists of having a vision and aligning people with it is bankrupt; this approach ignores the fact that many work situations are adaptive rather than technical. Heifetz and Laurie instead offer six principles for leading adaptive work. The authors say leaders need to get on the balcony–they should be able to spot operational and strategic patterns from high within the organization, as though on a balcony, and set or create a context for change rather than get caught up in the field of action. They need to identify the adaptive challenges–with input from throughout the company, leaders need to pinpoint just how a company’s value systems or methods of collaboration need to change. They need to regulate the inevitable distress that adaptive work generates-people invariably resist change. They need to maintain disciplined attention among employees, getting workers to confront the fact that they come together with different work habits, procedures, and beliefs; tough trade-offs may be necessary. Leaders need to give the work back to people, letting employees take the initiative in defining and solving problems. And finally, they need to protect the voices of leadership coming from below. An example of adaptive change at KPMG Netherlands, a professional services firm, illustrates these principles.

To stay alive, Jack Pritchard had to change his life. Triple bypass surgery and medication could help, the heart surgeon told him, but no technical fix could release Pritchard from his own responsibility for changing the habits of a lifetime. He had to stop smoking, improve his diet, get some exercise, and take time to relax, remembering to breathe more deeply each day. Pritchard’s doctor could provide sustaining technical expertise and take supportive action, but only Pritchard could adapt his ingrained habits to improve his long-term health. The doctor faced the leadership task of mobilizing the patient to make critical behavioral changes; Jack Pritchard faced the adaptive work of figuring out which specific changes to make and how to incorporate them into his daily life.

Companies today face challenges similar to the ones that confronted Pritchard and his doctor. They face adaptive challenges. Changes in societies, markets, customers, competition, and technology around the globe are forcing organizations to clarify their values, develop new strategies, and learn new ways of operating. Often the toughest task for leaders in effecting change is mobilizing people throughout the organization to do adaptive work.

Adaptive work is required when our deeply held beliefs are challenged, when the values that made us successful become less relevant, and when legitimate yet competing perspectives emerge. We see adaptive challenges every day at every level of the workplace—when companies restructure or reengineer, develop or implement strategy, or merge businesses. We see adaptive challenges when marketing has difficulty working with operations, when cross-functional teams don’t work well, or when senior executives complain, “We don’t seem to be able to execute effectively.” Adaptive problems are often systemic problems with no ready answers.

Mobilizing an organization to adapt its behaviors in order to thrive in new business environments is critical. Without such change, any company today would falter. Indeed, getting people to do adaptive work is the mark of leadership in a competitive world. Yet for most senior executives, providing leadership and not just authoritative expertise is extremely difficult. Why? We see two reasons. First, in order to make change happen, executives have to break a longstanding behavior pattern of their own: providing leadership in the form of solutions. This tendency is quite natural because many executives reach their positions of authority by virtue of their competence in taking responsibility and solving problems. But the locus of responsibility for problem solving when a company faces an adaptive challenge must shift to its people. Solutions to adaptive challenges reside not in the executive suite but in the collective intelligence of employees at all levels, who need to use one another as resources, often across boundaries, and learn their way to those solutions.

Solutions to adaptive challenges reside not in the executive suite but in the collective intelligence of employees at all levels.

Second, adaptive change is distressing for the people going through it. They need to take on new roles, new relationships, new values, new behaviors, and new approaches to work. Many employees are ambivalent about the efforts and sacrifices required of them. They often look to the senior executive to take problems off their shoulders. But those expectations have to be unlearned. Rather than fulfilling the expectation that they will provide answers, leaders have to ask tough questions. Rather than protecting people from outside threats, leaders should allow them to feel the pinch of reality in order to stimulate them to adapt. Instead of orienting people to their current roles, leaders must disorient them so that new relationships can develop. Instead of quelling conflict, leaders have to draw the issues out. Instead of maintaining norms, leaders have to challenge “the way we do business” and help others distinguish immutable values from historical practices that must go.

Drawing on our experience with managers from around the world, we offer six principles for leading adaptive work: “getting on the balcony,” identifying the adaptive challenge, regulating distress, maintaining disciplined attention, giving the work back to people, and protecting voices of leadership from below. We illustrate those principles with an example of adaptive change at KPMG Netherlands, a professional-services firm.

Get on the Balcony

Earvin “Magic” Johnson’s greatness in leading his basketball team came in part from his ability to play hard while keeping the whole game situation in mind, as if he stood in a press box or on a balcony above the field of play. Bobby Orr played hockey in the same way. Other players might fail to recognize the larger patterns of play that performers like Johnson and Orr quickly understand, because they are so engaged in the game that they get carried away by it. Their attention is captured by the rapid motion, the physical contact, the roar of the crowd, and the pressure to execute. In sports, most players simply may not see who is open for a pass, who is missing a block, or how the offense and defense work together. Players like Johnson and Orr watch these things and allow their observations to guide their actions.

Business leaders have to be able to view patterns as if they were on a balcony. It does them no good to be swept up in the field of action. Leaders have to see a context for change or create one. They should give employees a strong sense of the history of the enterprise and what’s good about its past, as well as an idea of the market forces at work today and the responsibility people must take in shaping the future. Leaders must be able to identify struggles over values and power, recognize patterns of work avoidance, and watch for the many other functional and dysfunctional reactions to change.

Without the capacity to move back and forth between the field of action and the balcony, to reflect day to day, moment to moment, on the many ways in which an organization’s habits can sabotage adaptive work, a leader easily and unwittingly becomes a prisoner of the system. The dynamics of adaptive change are far too complex to keep track of, let alone influence, if leaders stay only on the field of play.

We have encountered several leaders, some of whom we discuss in this article, who manage to spend much of their precious time on the balcony as they guide their organizations through change. Without that perspective, they probably would have been unable to mobilize people to do adaptive work. Getting on the balcony is thus a prerequisite for following the next five principles.

Identify the Adaptive Challenge

When a leopard threatens a band of chimpanzees, the leopard rarely succeeds in picking off a stray. Chimps know how to respond to this kind of threat. But when a man with an automatic rifle comes near, the routine responses fail. Chimps risk extinction in a world of poachers unless they figure out how to disarm the new threat. Similarly, when businesses cannot learn quickly to adapt to new challenges, they are likely to face their own form of extinction.

Consider the well-known case of British Airways. Having observed the revolutionary changes in the airline industry during the 1980s, then chief executive Colin Marshall clearly recognized the need to transform an airline nicknamed Bloody Awful by its own passengers into an exemplar of customer service. He also understood that this ambition would require more than anything else changes in values, practices, and relationships throughout the company. An organization whose people clung to functional silos and valued pleasing their bosses more than pleasing customers could not become “the world’s favorite airline.” Marshall needed an organization dedicated to serving people, acting on trust, respecting the individual, and making teamwork happen across boundaries. Values had to change throughout British Airways. People had to learn to collaborate and to develop a collective sense of responsibility for the direction and performance of the airline. Marshall identified the essential adaptive challenge: creating trust throughout the organization. He is one of the first executives we have known to make “creating trust” a priority.

To lead British Airways, Marshall had to get his executive team to understand the nature of the threat created by dissatisfied customers: Did it represent a technical challenge or an adaptive challenge? Would expert advice and technical adjustments within basic routines suffice, or would people throughout the company have to learn different ways of doing business, develop new competencies, and begin to work collectively?

Marshall and his team set out to diagnose in more detail the organization’s challenges. They looked in three places. First, they listened to the ideas and concerns of people inside and outside the organization—meeting with crews on flights, showing up in the 350-person reservations center in New York, wandering around the baggage-handling area in Tokyo, or visiting the passenger lounge in whatever airport they happened to be in. Their primary questions were, Whose values, beliefs, attitudes, or behaviors would have to change in order for progress to take place? What shifts in priorities, resources, and power were necessary? What sacrifices would have to be made and by whom?

Second, Marshall and his team saw conflicts as clues—symptoms of adaptive challenges. The way conflicts across functions were being expressed were mere surface phenomena; the underlying conflicts had to be diagnosed. Disputes over seemingly technical issues such as procedures, schedules, and lines of authority were in fact proxies for underlying conflicts about values and norms.

Third, Marshall and his team held a mirror up to themselves, recognizing that they embodied the adaptive challenges facing the organization. Early in the transformation of British Airways, competing values and norms were played out on the executive team in dysfunctional ways that impaired the capacity of the rest of the company to collaborate across functions and units and make the necessary trade-offs. No executive can hide from the fact that his or her team reflects the best and the worst of the company’s values and norms, and therefore provides a case in point for insight into the nature of the adaptive work ahead.

Thus, identifying its adaptive challenge was crucial in British Airways’ bid to become the world’s favorite airline. For the strategy to succeed, the company’s leaders needed to understand themselves, their people, and the potential sources of conflict. Marshall recognized that strategy development itself requires adaptive work.

Regulate Distress

Adaptive work generates distress. Before putting people to work on challenges for which there are no ready solutions, a leader must realize that people can learn only so much so fast. At the same time, they must feel the need to change as reality brings new challenges. They cannot learn new ways when they are overwhelmed, but eliminating stress altogether removes the impetus for doing adaptive work. Because a leader must strike a delicate balance between having people feel the need to change and having them feel overwhelmed by change, leadership is a razor’s edge.

A leader must attend to three fundamental tasks in order to help maintain a productive level of tension. Adhering to these tasks will allow him or her to motivate people without disabling them. First, a leader must create what can be called a holding environment. To use the analogy of a pressure cooker, a leader needs to regulate the pressure by turning up the heat while also allowing some steam to escape. If the pressure exceeds the cooker’s capacity, the cooker can blow up. However, nothing cooks without some heat.

In the early stages of a corporate change, the holding environment can be a temporary “place” in which a leader creates the conditions for diverse groups to talk to one another about the challenges facing them, to frame and debate issues, and to clarify the assumptions behind competing perspectives and values. Over time, more issues can be phased in as they become ripe. At British Airways, for example, the shift from an internal focus to a customer focus took place over four or five years and dealt with important issues in succession: building a credible executive team, communicating with a highly fragmented organization, defining new measures of performance and compensation, and developing sophisticated information systems. During that time, employees at all levels learned to identify what and how they needed to change.

Thus, a leader must sequence and pace the work. Too often, senior managers convey that everything is important. They start new initiatives without stopping other activities, or they start too many initiatives at the same time. They overwhelm and disorient the very people who need to take responsibility for the work.

Second, a leader is responsible for direction, protection, orientation, managing conflict, and shaping norms. (See the exhibit “Adaptive Work Calls for Leadership.”) Fulfilling these responsibilities is also important for a manager in technical or routine situations. But a leader engaged in adaptive work uses his authority to fulfill them differently. A leader provides direction by identifying the organization’s adaptive challenge and framing the key questions and issues. A leader protects people by managing the rate of change. A leader orients people to new roles and responsibilities by clarifying business realities and key values. A leader helps expose conflict, viewing it as the engine of creativity and learning. Finally, a leader helps the organization maintain those norms that must endure and challenge those that need to change.

Third, a leader must have presence and poise; regulating distress is perhaps a leader’s most difficult job. The pressures to restore equilibrium are enormous. Just as molecules bang hard against the walls of a pressure cooker, people bang up against leaders who are trying to sustain the pressures of tough, conflict-filled work. 

Although leadership demands a deep understanding of the pain of change—the fears and sacrifices associated with major readjustment—it also requires the ability to hold steady and maintain the tension. Otherwise, the pressure escapes and the stimulus for learning and change is lost.

A leader has to have the emotional capacity to tolerate uncertainty, frustration, and pain. He has to be able to raise tough questions without getting too anxious himself. 

Employees as well as colleagues and customers will carefully observe verbal and nonverbal cues to a leader’s ability to hold steady. He needs to communicate confidence that he and they can tackle the tasks ahead.

Maintain Disciplined Attention

Different people within the same organization bring different experiences, assumptions, values, beliefs, and habits to their work. This diversity is valuable because innovation and learning are the products of differences. No one learns anything without being open to contrasting points of view. Yet managers at all levels are often unwilling—or unable—to address their competing perspectives collectively. They frequently avoid paying attention to issues that disturb them. They restore equilibrium quickly, often with work avoidance maneuvers. A leader must get employees to confront tough trade-offs in values, procedures, operating styles, and power.

That is as true at the top of the organization as it is in the middle or on the front line. Indeed, if the executive team cannot model adaptive work, the organization will languish. If senior managers can’t draw out and deal with divisive issues, how will people elsewhere in the organization change their behaviors and rework their relationships? As Jan Carlzon, the legendary CEO of Scandinavian Airlines System (SAS), told us, “One of the most interesting missions of leadership is getting people on the executive team to listen to and learn from one another. Held in debate, people can learn their way to collective solutions when they understand one another’s assumptions. The work of the leader is to get conflict out into the open and use it as a source of creativity.”

A leader must sequence and pace the work. Too often, senior managers convey that everything is important. They overwhelm and disorient the very people who need to take responsibility for the work.

Because work avoidance is rampant in organizations, a leader has to counteract distractions that prevent people from dealing with adaptive issues. Scape-goating, denial, focusing only on today’s technical issues, or attacking individuals rather than the perspectives they represent—all forms of work avoidance—are to be expected when an organization undertakes adaptive work. Distractions have to be identified when they occur so that people will regain focus.

When sterile conflict takes the place of dialogue, a leader has to step in and put the team to work on reframing the issues. She has to deepen the debate with questions, unbundling the issues into their parts rather than letting conflict remain polarized and superficial. When people preoccupy themselves with blaming external forces, higher management, or a heavy workload, a leader has to sharpen the team’s sense of responsibility for carving out the time to press forward. When the team fragments and individuals resort to protecting their own turf, leaders have to demonstrate the need for collaboration. People have to discover the value of consulting with one another and using one another as resources in the problem-solving process. For example, one CEO we know uses executive meetings, even those that focus on operational and technical issues, as opportunities to teach the team how to work collectively on adaptive problems.

Of course, only the rare manager intends to avoid adaptive work. In general, people feel ambivalent about it. Although they want to make progress on hard problems or live up to their renewed and clarified values, people also want to avoid the associated distress. Just as millions of U.S. citizens want to reduce the federal budget deficit, but not by giving up their tax dollars or benefits or jobs, so, too, managers may consider adaptive work a priority but have difficulty sacrificing their familiar ways of doing business. People need leadership to help them maintain their focus on the tough questions. Disciplined attention is the currency of leadership.

Give the Work Back to People

Everyone in the organization has special access to information that comes from his or her particular vantage point. Everyone may see different needs and opportunities. People who sense early changes in the marketplace are often at the periphery, but the organization will thrive if it can bring that information to bear on tactical and strategic decisions. When people do not act on their special knowledge, businesses fail to adapt.

All too often, people look up the chain of command, expecting senior management to meet market challenges for which they themselves are responsible. Indeed, the greater and more persistent distresses that accompany adaptive work make such dependence worse. People tend to become passive, and senior managers who pride themselves on being problem solvers take decisive action. That behavior restores equilibrium in the short term but ultimately leads to complacency and habits of work avoidance that shield people from responsibility, pain, and the need to change.

Getting people to assume greater responsibility is not easy. Not only are many lower-level employees comfortable being told what to do, but many managers are accustomed to treating subordinates like machinery that requires control. Letting people take the initiative in defining and solving problems means that management needs to learn to support rather than control. Workers, for their part, need to learn to take responsibility.

Management needs to learn to support rather than control. Workers, for their part, need to learn to take responsibility.

Jan Carlzon encouraged responsibility taking at SAS by trusting others and decentralizing authority. A leader has to let people bear the weight of responsibility. “The key is to let them discover the problem,” he said. “You won’t be successful if people aren’t carrying the recognition of the problem and the solution within themselves.” To that end, Carlzon sought widespread engagement.

For example, in his first two years at SAS, Carlzon spent up to 50% of his time communicating directly in large meetings and indirectly in a host of innovative ways: through workshops, brainstorming sessions, learning exercises, newsletters, brochures, and exposure in the public media. He demonstrated through a variety of symbolic acts—for example, by eliminating the pretentious executive dining room and burning thousands of pages of manuals and handbooks—the extent to which rules had come to dominate the company. He made himself a pervasive presence, meeting with and listening to people both inside and outside the organization. He even wrote a book, Moments of Truth (HarperCollins, 1989), to explain his values, philosophy, and strategy. As Carlzon noted, “If no one else read it, at least my people would.”

A leader also must develop collective self-confidence. Again, Carlzon said it well: “People aren’t born with self-confidence. Even the most self-confident people can be broken. Self-confidence comes from success, experience, and the organization’s environment. The leader’s most important role is to instill confidence in people. They must dare to take risks and responsibility. You must back them up if they make mistakes.”

Protect Voices of Leadership from Below

Giving a voice to all people is the foundation of an organization that is willing to experiment and learn. But, in fact, whistle-blowers, creative deviants, and other such original voices routinely get smashed and silenced in organizational life. They generate disequilibrium, and the easiest way for an organization to restore equilibrium is to neutralize those voices, sometimes in the name of teamwork and “alignment.”

The voices from below are usually not as articulate as one would wish. People speaking beyond their authority usually feel self-conscious and sometimes have to generate “too much” passion to get themselves geared up for speaking out. Of course, that often makes it harder for them to communicate effectively. They pick the wrong time and place, and often bypass proper channels of communication and lines of authority. But buried inside a poorly packaged interjection may lie an important intuition that needs to be teased out and considered. To toss it out for its bad timing, lack of clarity, or seeming unreasonableness is to lose potentially valuable information and discourage a potential leader in the organization.

That is what happened to David, a manager in a large manufacturing company. He had listened when his superiors encouraged people to look for problems, speak openly, and take responsibility. So he raised an issue about one of the CEO’s pet projects—an issue that was deemed “too hot to handle” and had been swept under the carpet for years. Everyone understood that it was not open to discussion, but David knew that proceeding with the project could damage or derail key elements of the company’s overall strategy. He raised the issue directly in a meeting with his boss and the CEO. He provided a clear description of the problem, a rundown of competing perspectives, and a summary of the consequences of continuing to pursue the project.

The CEO angrily squelched the discussion and reinforced the positive aspects of his pet project. When David and his boss left the room, his boss exploded: “Who do you think you are, with your holier-than-thou attitude?” He insinuated that David had never liked the CEO’s pet project because David hadn’t come up with the idea himself. The subject was closed.

David had greater expertise in the area of the project than either his boss or the CEO. But his two superiors demonstrated no curiosity, no effort to investigate David’s reasoning, no awareness that he was behaving responsibly with the interests of the company at heart. It rapidly became clear to David that it was more important to understand what mattered to the boss than to focus on real issues. The CEO and David’s boss together squashed the viewpoint of a leader from below and thereby killed his potential for leadership in the organization. He would either leave the company or never go against the grain again.

Leaders must rely on others within the business to raise questions that may indicate an impending adaptive challenge. They have to provide cover to people who point to the internal contradictions of the enterprise. Those individuals often have the perspective to provoke rethinking that people in authority do not. Thus, as a rule of thumb, when authority figures feel the reflexive urge to glare at or otherwise silence someone, they should resist. The urge to restore social equilibrium is quite powerful, and it comes on fast. One has to get accustomed to getting on the balcony, delaying the impulse, and asking, What is this guy really talking about? Is there something we’re missing?

Doing Adaptive Work at KPMG Netherlands

The highly successful KPMG Netherlands provides a good example of how a company can engage in adaptive work. In 1994, Ruud Koedijk, the firm’s chairman, recognized a strategic challenge. Although the auditing, consulting, and tax-preparation partnership was the industry leader in the Netherlands and was highly profitable, growth opportunities in the segments it served were limited. Margins in the auditing business were being squeezed as the market became more saturated, and competition in the consulting business was increasing as well. Koedijk knew that the firm needed to move into more profitable growth areas, but he didn’t know what they were or how KPMG might identify them.

Koedijk and his board were confident that they had the tools to do the analytical strategy work: analyze trends and discontinuities, understand core competencies, assess their competitive position, and map potential opportunities. They were considerably less certain that they could commit to implementing the strategy that would emerge from their work. Historically, the partnership had resisted attempts to change, basically because the partners were content with the way things were. They had been successful for a long time, so they saw no reason to learn new ways of doing business, either from their fellow partners or from anyone lower down in the organization. Overturning the partners’ attitude and its deep impact on the organization’s culture posed an enormous adaptive challenge for KPMG.

Koedijk could see from the balcony that the very structure of KPMG inhibited change. In truth, KPMG was less a partnership than a collection of small fiefdoms in which each partner was a lord. The firm’s success was the cumulative accomplishment of each of the individual partners, not the unified result of 300 colleagues pulling together toward a shared ambition. Success was measured solely in terms of the profitability of individual units. As one partner described it, “If the bottom line was correct, you were a ‘good fellow.’” As a result, one partner would not trespass on another’s turf, and learning from others was a rare event. Because independence was so highly valued, confrontations were rare and conflict was camouflaged. If partners wanted to resist firmwide change, they did not kill the issue directly. “Say yes, do no” was the operative phrase.

Koedijk also knew that this sense of autonomy got in the way of developing new talent at KPMG. Directors rewarded their subordinates for two things: not making mistakes and delivering a high number of billable hours per week. The emphasis was not on creativity or innovation. Partners were looking for errors when they reviewed their subordinates’ work, not for new understanding or fresh insight. Although Koedijk could see the broad outlines of the adaptive challenges facing his organization, he knew that he could not mandate behavioral change. What he could do was create the conditions for people to discover for themselves how they needed to change. He set a process in motion to make that happen.

To start, Koedijk held a meeting of all 300 partners and focused their attention on the history of KPMG, the current business reality, and the business issues they could expect to face. He then raised the question of how they would go about changing as a firm and asked for their perspectives on the issues. By launching the strategic initiative through dialogue rather than edict, he built trust within the partner ranks. Based on this emerging trust and his own credibility, Koedijk persuaded the partners to release 100 partners and nonpartners from their day-to-day responsibilities to work on the strategic challenges. They would devote 60% of their time for nearly four months to that work.

Koedijk and his colleagues established a strategic integration team of 12 senior partners to work with the 100 professionals (called “the 100”) from different levels and disciplines. Engaging people below the rank of partner in a major strategic initiative was unheard of and signaled a new approach from the start: Many of these people’s opinions had never before been valued or sought by authority figures in the firm. Divided into 14 task forces, the 100 were to work in three areas: gauging future trends and discontinuities, defining core competencies, and grappling with the adaptive challenges facing the organization. They were housed on a separate floor with their own support staff, and they were unfettered by traditional rules and regulations. Hennie Both, KPMG’s director of marketing and communications, signed on as project manager.

As the strategy work got under way, the task forces had to confront the existing KPMG culture. Why? Because they literally could not do their new work within the old rules. They could not work when strong respect for the individual came at the expense of effective teamwork, when deeply held individual beliefs got in the way of genuine discussion, and when unit loyalties formed a barrier to cross-functional problem solving. Worst of all, task force members found themselves avoiding conflict and unable to discuss those problems. A number of the task forces became dysfunctional and unable to do their strategy work.

To focus their attention on what needed to change, Both helped the task forces map the culture they desired against the current culture. They discovered very little overlap. The top descriptors of the current culture were: develop opposing views, demand perfection, and avoid conflict. The top characteristics of the desired culture were: create the opportunity for self-fulfillment, develop a caring environment, and maintain trusting relations with colleagues. 

Articulating this gap made tangible for the group the adaptive challenge that Koedijk saw facing KPMG. In other words, the people who needed to do the changing had finally framed the adaptive challenge for themselves: How could KPMG succeed at a competence-based strategy that depended on cooperation across multiple units and layers if its people couldn’t succeed in these task forces? Armed with that understanding, the task force members could become emissaries to the rest of the firm.

On a more personal level, each member was asked to identify his or her individual adaptive challenge. What attitudes, behaviors, or habits did each one need to change, and what specific actions would he or she take? Who else needed to be involved for individual change to take root? Acting as coaches and consultants, the task force members gave one another supportive feedback and suggestions. They had learned to confide, to listen, and to advise with genuine care.

Progress on these issues raised the level of trust dramatically, and task force members began to understand what adapting their behavior meant in everyday terms. They understood how to identify an adaptive issue and developed a language with which to discuss what they needed to do to improve their collective ability to solve problems. They talked about dialogue, work avoidance, and using the collective intelligence of the group. They knew how to call one another on dysfunctional behavior. They had begun to develop the culture required to implement the new business strategy.

Despite the critical breakthroughs toward developing a collective understanding of the adaptive challenge, regulating the level of distress was a constant preoccupation for Koedijk, the board, and Both. The nature of the work was distressing. Strategy work means broad assignments with limited instructions; at KPMG, people were accustomed to highly structured assignments. Strategy work also means being creative. At one breakfast meeting, a board member stood on a table to challenge the group to be more creative and toss aside old rules. This radical and unexpected behavior further raised the distress level: No one had ever seen a partner behave this way before. People realized that their work experience had prepared them only for performing routine tasks with people “like them” from their own units.

The process allowed for conflict and focused people’s attention on the hot issues in order to help them learn how to work with conflict in a constructive manner. But the heat was kept within a tolerable range in some of the following ways:

• On one occasion when tensions were unusually high, the 100 were brought together to voice their concerns to the board in an Oprah Winfrey—style meeting. The board sat in the center of an auditorium and took pointed questions from the surrounding group.
• The group devised sanctions to discourage unwanted behavior. In the soccer-crazy Netherlands, all participants in the process were issued the yellow cards that soccer referees use to indicate “foul” to offending players. They used the cards to stop the action when someone started arguing his or her point without listening to or understanding the assumptions and competing perspectives of other participants.
• The group created symbols. They compared the old KPMG to a hippopotamus that was large and cumbersome, liked to sleep a lot, and became aggressive when its normal habits were disturbed. They aspired to be dolphins, which they characterized as playful, eager to learn, and happily willing to go the extra mile for the team. They even paid attention to the statement that clothes make: It surprised some clients to see managers wandering through the KPMG offices that summer in Bermuda shorts and T-shirts.

• The group made a deliberate point of having fun. “Playtime” could mean long bicycle rides or laser-gun games at a local amusement center. In one spontaneous moment at the KPMG offices, a discussion of the power of people mobilized toward a common goal led the group to go outside and use their collective leverage to move a seemingly immovable concrete block.
• The group attended frequent two- and three-day off-site meetings to help bring closure to parts of the work.

These actions, taken as a whole, altered attitudes and behaviors. Curiosity became more valued than obedience to rules. People no longer deferred to the senior authority figure in the room; genuine dialogue neutralized hierarchical power in the battle over ideas. The tendency for each individual to promote his or her pet solution gave way to understanding other perspectives. A confidence in the ability of people in different units to work together and work things out emerged. The people with the most curious minds and interesting questions soon became the most respected.

As a result of confronting strategic and adaptive challenges, KPMG as a whole will move from auditing to assurance, from operations consulting to shaping corporate vision, from business-process reengineering to developing organizational capabilities, and from teaching traditional skills to its own clients to creating learning organizations. The task forces identified $50 million to $60 million worth of new business opportunities.

As a result of confronting strategic and adaptive challenges, KPMG task forces identified $50 million to $60 million worth of new business opportunities.

Many senior partners who had believed that a firm dominated by the auditing mentality could not contain creative people were surprised when the process unlocked creativity, passion, imagination, and a willingness to take risks. Two stories illustrate the fundamental changes that took place in the firm’s mind-set.

We saw one middle manager develop the confidence to create a new business. He spotted the opportunity to provide KPMG services to virtual organizations and strategic alliances. He traveled the world, visiting the leaders of 65 virtual organizations. The results of his innovative research served as a resource to KPMG in entering this growing market. Moreover, he represented the new KPMG by giving a keynote address discussing his findings at a world forum. We also saw a 28-year-old female auditor skillfully guide a group of older, male senior partners through a complex day of looking at opportunities associated with implementing the firm’s new strategies. That could not have occurred the year before. The senior partners never would have listened to such a voice from below.

Leadership as Learning

Many efforts to transform organizations through mergers and acquisitions, restructuring, reengineering, and strategy work falter because managers fail to grasp the requirements of adaptive work. They make the classic error of treating adaptive challenges like technical problems that can be solved by tough-minded senior executives.

The implications of that error go to the heart of the work of leaders in organizations today. Leaders crafting strategy have access to the technical expertise and the tools they need to calculate the benefits of a merger or restructuring, understand future trends and discontinuities, identify opportunities, map existing competencies, and identify the steering mechanisms to support their strategic direction. These tools and techniques are readily available both within organizations and from a variety of consulting firms, and they are very useful. In many cases, however, seemingly good strategies fail to be implemented. And often the failure is misdiagnosed: “We had a good strategy, but we couldn’t execute it effectively.”

In fact, the strategy itself is often deficient because too many perspectives were ignored during its formulation. The failure to do the necessary adaptive work during the strategy development process is a symptom of senior managers’ technical orientation. Managers frequently derive their solution to a problem and then try to sell it to some colleagues and bypass or sandbag others in the commitment-building process. Too often, leaders, their team, and consultants fail to identify and tackle the adaptive dimensions of the challenge and to ask themselves, Who needs to learn what in order to develop, understand, commit to, and implement the strategy?

The same technical orientation entraps business-process-reengineering and restructuring initiatives, in which consultants and managers have the know-how to do the technical work of framing the objectives, designing a new work flow, documenting and communicating results, and identifying the activities to be performed by people in the organization. In many instances, reengineering falls short of the mark because it treats process redesign as a technical problem: Managers neglect to identify the adaptive work and involve the people who have to do the changing. Senior executives fail to invest their time and their souls in understanding these issues and guiding people through the transition. Indeed, engineering is itself the wrong metaphor.

In short, the prevailing notion that leadership consists of having a vision and aligning people with that vision is bankrupt because it continues to treat adaptive situations as if they were technical: The authority figure is supposed to divine where the company is going, and people are supposed t o follow. Leadership is reduced to a combination of grand knowing and salesmanship. Such a perspective reveals a basic misconception about the way businesses succeed in addressing adaptive challenges. Adaptive situations are hard to define and resolve precisely because they demand the work and responsibility of managers and people throughout the organization. They are not amenable to solutions provided by leaders; adaptive solutions require members of the organization to take responsibility for the problematic situations that face them.

Leadership has to take place every day. It cannot be the responsibility of the few, a rare event, or a once-in-a-lifetime opportunity. In our world, in our businesses, we face adaptive challenges all the time. When an executive is asked to square conflicting aspirations, he and his people face an adaptive challenge. When a manager sees a solution to a problem—technical in many respects except that it requires a change in the attitudes and habits of subordinates—he faces an adaptive challenge. When an employee close to the front line sees a gap between the organization’s purpose and the objectives he is asked to achieve, he faces both an adaptive challenge and the risks and opportunity of leading from below.

Leadership, as seen in this light, requires a learning strategy. A leader, from above or below, with or without authority, has to engage people in confronting the challenge, adjusting their values, changing perspectives, and learning new habits. To an authoritative person who prides himself on his ability to tackle hard problems, this shift may come as a rude awakening. But it also should ease the burden of having to know all the answers and bear all the load. To the person who waits to receive either the coach’s call or “the vision” to lead, this change may also seem a mixture of good news and bad news. The adaptive demands of our time require leaders who take responsibility without waiting for revelation or request. One can lead with no more than a question in hand.