After the collapse of Lehman Brothers, the global managing director of management consulting firm McKinsey proposed a way to deal with the complexity of the business world after the end of Wall Street’s unrivalled global hegemony. Bottom line: companies should analyse larger quantities of more types of information at higher frequency. Harvesting the Big Data Ocean, corporations will not only survive uncertainty but will flourish by using opportunities their competitors are not even aware of. In other words: in order to reduce complexity, you just need better technology. Leading neuroscientists like António Damásio or Gerald Hüther strongly disagree with the above diagnosis. They have a different understanding of why we struggle with complexity and how we can handle it. The key problem they identify is the way our brain works. The volatility caused by global integration and digitalisation has only increased the data overflow mankind has always had to come to terms with. To cope with unprecedented complexity, companies and societies need to increase their readiness for change. This requires the application of three guiding principles.
The first is flexibility: operating in an environment where change is the only constant, organisations must be able to adapt. More than anything else, this requires a positive attitude towards change. The second principle is awareness: transformational organisations not only embrace changes they cannot avoid, they are actively open for change, constantly on the lookout for signs of change to make use of any opportunities that might be related to it. The third principle is resilience: innovation always bears the risk of failure. It is one thing to take a risk; the greater challenge is to deal with painful failure. This is a matter of leadership culture: what happens to the courageous risk-takers who fail? Who gets promoted: the flawlessly cautious or the innovator who goes for bigger gains and sometimes loses? The way an organisation answers this question determines its ability to regain shape after catastrophic experiences.
Being flexible, aware and resilient cannot be pre-ordained. Driving change is a matter of leadership. In an environment of growing complexity the main task of corporate leaders is managing uncertainty. What does it take to fulfil this task?
First of all: conviction. In a complex environment, leadership requires the skill to convince others to do what seems right, without knowing oneself how the future will look like. Therefore, in times of uncertainty, a leader who wants the organisation to keep moving needs the courage to establish a clear common goal or direction, the second requirement.
The third requirement for leadership in the era of hyper-complexity is empowerment. Here it is worth recalling the famous quote by Saint-Exupéry: “If you want to build a ship, don’t drum up people together to collect wood and don‘t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” This is exactly what empowerment is about. In times when organisations need to cope with unexpected situations every day, decisions need to be taken all the time and quickly. Employees need to be encouraged to take more responsibility. Managers have to provide the target coordinates and a detailed topographical map, not just a sketch of the route they want their staff to take. For example, there is hardly any large company that has given employees more autonomy and responsibility than Google, who have been applying the principles of empowerment throughout their organisation. Just think of the 20 per cent rule or the way project teams are initiated. This has contributed immensely to the success of Google.
Those who don’t believe that empowerment also works in ‘normal’ companies fear the risk of chaos. But Fredmund Malik of the St. Gallen School of Management sees one way to cope with this problem: strategy. According to Malik, “strategy is to do what’s right when we don’t know how the future will be, but nevertheless need to act – having in mind that doing nothing is a kind of action.” Unfortunately, the term strategy is prestigious but not clearly defined. Or as Henry Mintzberg wrote: “The word strategy has been around for a long time. Managers now use it both freely and fondly. It is also considered to be the high point of managerial activity. [...] business schools usually have as their final required capstone a course in strategic management. The word strategy is so influential. But what does it really mean?” Let me introduce a very pragmatic answer, based on three key deliverables:
Strategy is the art of deducing from the future what needs to be done now. First of all, developing a strategy needs a goal that is ambitious enough to require a strategy. Otherwise, a simple operational plan would do. If such a goal is set, developing the strategy means moving backwards until it is clear what needs to be done now. This includes immediate operations as well as creating potentials to enable further action on the way to realising the current vision.
Strategic planning requires thinking in constellations and realising which of them promise greater success than others. As I wrote earlier, strategy is needed to deal with unavoidable lack of knowledge. Strategic decision-making is based on the principle of selection. Because we are unable to consider every possible influencing factor, we have to make assumptions. Which factors seem to be more important than others? Which scenarios are possible? Which of them promises the greatest success? How likely is it to make this happen?
Once the most promising constellation is identified, the difficult part of strategic management begins: creating a joint venture of interests between organisational leadership, employees and relevant stakeholders. All groups whose cooperation is needed have to be engaged in bringing about the desired constellation and make use of it.
It should now be apparent (in case you had not already realised) that communication is a fundamental part of managing complexity. To a large extent, leadership is nothing else but effective communication. The same goes for strategy, the art of directing a group of people towards a common goal. Without proper communication, strategy cannot come to life. Unfortunately, many strategies are designed in a way that makes it very difficult (if not impossible) to pass them on to all stakeholders who need to cooperate in the execution. Time and time again, I come across corporate strategies that remind me of the ruins of ancient Greek temples. Their elements are not related, the roof is missing, and there aren’t any interiors. Let me give an example: imagine an airport operator who is going to build an additional runway; the goal behind it is to increase the number of incoming and outgoing flights. Now imagine a second pillar of the corporate strategy is ‘to be a good neighbour’. In that case, the success of the strategy depends on whether the company will find a way to solve the conflict between its business interests and the interests of the communities that will be affected by the additional air traffic.
As far as I know, communication heads still often only receive the final strategy together with the assignment to communicate it. If he or she was deployed for litmus-testing, a chief communication officer could check and safeguard the coherence of a new strategy.
To be convincing, the elements comprising a strategy must form a consistent story. All stakeholders need to be able to connect the dots. These questions need to be asked: does the strategy present a vision that is attractive for all who need to be involved? Does it consider the hardships specific groups will have to face because of it? Does it provide solutions to how to meet these challenges? And is it in line with the existing identity, culture and values of the organisation?
Separate pillars will not do the trick. You’ll need a complete house with a roof, walls, floors and staircases. And you’ll need apartments that fit the needs of the tenants. The House of Strategy is a useful tool to organise the process of strategic planning and management. It integrates all elements that comprise corporate strategy: the basement comprises identity, culture and values; the roof contains vision, mission and key result indicators; the staircases represent the strategic initiatives. Each floor accommodates a key stakeholder group. The rooms link the stakeholder perspective to the corporate initiatives. All aspects are intertwined, conflicts or inconsistencies become apparent, the strategy is relevant for all constituencies involved and can be told as a story.
Once the House of Corporate Strategy is agreed, it needs to be translated into the House of Communication Strategy. This way, all communication activities are aligned with the corporate strategy. Planning starts with defining the contributions that are essential for achieving the corporate goals. From there it moves backwards along a chain of questions that form a corridor of plausible cause-effect-relations. Which stakeholders co-decide whether the organisation is successful? What do they need to do to make that happen? How do they need to perceive us? How do we engage our stakeholders in purposeful communication? Which communicative offers do we need to make? What do we need in order to produce the necessary content and make it available to the stakeholders?
This assignment to corporate communication is in line with the oldest university textbook on public relations. 60 years ago, Scott Cutlip and Allen H. Center defined public relations as “a management function that seeks to identify, build, and maintain mutually beneficial relationships between an organisation and all of the publics on whom its success or failure depends.” Subsequent to the downgrading of public relations to media relations, Cutlip and Center’s 1952 definition applies to what is today called reputation management: the task of stabilising useful relationships between an organisation and its stakeholders. This presents a challenge to communication managers who are used to reducing their assignment to goals their department can achieve on its own. Accepting this point of view would lead to the conclusion that managing corporate reputation is impossible.
Who would deny that every member of an organisation plays a part in building, maintaining and protecting the reputation? All employees have contact with at least one stakeholder group, every manager is accountable for providing a framework for acting on this responsibility, and corporate leadership provides the quid pro quo. Unfortunately, there is hardly any university teaching future business leaders how to understand the motivations of associates and to align them with a common goal. Most executives focus on avoiding mistakes in decision-making, and winning hearts and minds for the corporate strategy is a task that only a minority of corporate leaders can fulfil themselves. Lacking the necessary skills, they need support from professional communicators. This makes enabling executives to activate employees and stakeholders for shaping the reputation the key assignment of the corporate communication function.
Accepting this assignment would be the first step towards being accepted as a management function; living up to it would significantly expand the scope of corporate communication. Someone has to organise, manage and control the interdisciplinary activities aimed at strengthening and protecting the corporate reputation. If communication executives don’t go for this expansion of their playing field, I am sure that human resources managers and chief strategists will.