How Can Organizations Align Leadership with Work Levels to Harness Transformative Potential?

By Bill Baue & Ralph Thurm

We at Reporting 3.0 talk a lot about the “micro-macro gap” and the “micro-macro link” between organization-level impacts that aggregate to systems-level breakdowns or, ideally, positive breakthroughs. And we talk about the meso level of corporate industries, investment portfolios, and bioregional habitats that intermediate. But all of this is built on the foundation of individual leadership at the “nano” level, ideally through ‘Positive Maverick’ consciousness.

This thinking grew out of our work (with Robin Lincoln Wood and Paul van Schaik) at the ThriveAbility Foundation where we identified what we called the Three Gap Problem:

  • The Sustainability Gap (Macro level threshold-crossing in biosphere & sociosphere)
  • The Organizational Gap (Micro level transformation pace & meso level scale lagging)
  • The Leadership Culture Gap (Nano level sociocultural development disconnects)

We proposed a Three Axis Solution to stress the need for holistic, interrelated responses. Upshifts on one axis can pull up the other axes, but best to upshift all three in sync.

Figure 1: Three Axis Solution (ThriveAbility Foundation)

What’s the issue?

A rich vein of research (dating back to Clare Graves’ landmark 1970 “Levels of Existence” paper) proposes a kind of double-helix relationship between human development at the individual level, and cultural development at the collective level. Management theorists subsequently applied this lens to corporate leadership, perhaps most famously Rooke & Torbert in their 2005 Harvard Business Review“ Seven Transformations of Leadership” article and Laloux in his 2014 book, Reinventing Organizations.

Reporting 3.0 embraces such approaches that tie leadership at the individual level to paradigm shifts at the collective level. For example, Mark Van Clieaf of Organizational Capital Partners draws on Elliot Jacques’ Work Levels concept to propose the need for alignment between leaders’ “strategic horizon” and levels of transformation. “Only 5% of the world’s adults have the cognitive hard wiring and systems thinking to conceptualize, plan out, resource and implement business model and industry ecosystem transformations,” says Van Clieaf.

Figure 2: Work Levels, Innovation, Strategic Horizon, and Enterprise Valuation (Organizational Capital Partners)

Misalignment between professional role and Work Level obstructs goal achievement. Given the emergence of super wicked problems such as climate change, the need for Work Level cognitive capacity commensurate with the challenges is paramount — but the actual alignment is, shall we say, not quite “fit-to-task.” How many companies — or investors — can you name that have aligned their long-term strategy, business model innovation, influence on industry ecosystem shifts, and advocacy for economic system transformation to achievement of the IEA net zero GHG emissions by 2050 scenario? Your answer to this question defines the need for aligning Work Level 5 and above leaders with the key leadership roles in business and finance (among other sectors).

Why it’s important?

The purpose of business and finance is to serve the “ultimate end” of well-being. This is the lesson we at Reporting 3.0 extrapolate from Limits to Growth Co-Author Donella Meadows, in her interpretation of the Daly Triangle (named after World Bank Economist and Ecological Economics Co-Founder Herman Daly).

Figure 3: Daly Triangle (Adapted by Reporting 3.0 from Donella Meadows, Indicators and Information Systems for Sustainable Development, Sustainability Institute, 1998)

To understand this truism, you need only consider it’s opposite: the purpose of business and finance is to serve ill-being. While this may accurately reflect reality (think: opioid crisis, coal business model, weapons industry, tobacco industry, etc.), it certainly sounds insidious when framed this way. And we can take a hard-nosed perspective on it as well: enterprise wellbeing requires feedstock wellbeing, supply chain wellbeing, employee wellbeing, customer wellbeing, etc.. So, the role of business and finance leadership is to serve (and enhance) holistic wellbeing. How many business and finance leaders do you know who serve this goal?

How can you tackle it?

Our Reporting Blueprint offers some clear guidance: 21st Century leaders identify a clear purpose and “worldview” for their organization (aligned with the ultimate end of wellbeing), project a legacy they wish to create, and backcast from there to determine the building blocks.

The Reporting Blueprintalso points to King IV, the fourth generation of the King Codes of Corporate Governance in South Africa (named after Mervyn King), which now calls for “ethical leadership,” which is

exemplified by integrity, competence, responsibility, accountability, fairness and transparency. It involves the anticipation and prevention, or otherwise amelioration, of the negative consequences of the organization’s activities, and outputs on the economy, society and the environment and the capitals that it uses or affects.

King IV also posits that organizations are “an integral part of society,” dependent on society for “a conducive operating environment, a viable customer base, and the skills the organization requires,” while society is dependent on organizations as “creators of wealth; providers of goods, services, and employment; contributors to the fiscus; and developers of human capital.”

This idea of interdependency betweeen organisations and society is supported by the African concept of Ubuntu or Botho, captured by the expression uMuntu ngumuntu ngabuntu and Motho ke motho ka batho– I am because you are; you are because we are. Ubuntu and Botho imply that there should be common purpose to all human endeavors (including corporate endeavors) which is based in service to humanity.

What will you have achieved?

Leadership at the Work Levels aligned with scope and scale of challenges needing to be navigated in the emerging Anthropocene clearly result from a significant mindset shift from the status quo. At the same time, such mindset shifts amongst leaders, rising to the challenge of intergenerational transformation of our economic system, seeds mindset shifts amongst other leaders, adding up to a critical mass needed to trigger tipping points.

To conclude, we return to Dana Meadows, whose list of “leverage points” (or “places to intervene in a system”) placed in the second-most-important slot “the mindset or paradigm out of which the system — its goals, structure, rules, delays, parameters — arises.”

You could say paradigms are harder to change than anything else about a system, and therefore this item should be lowest on the list, not second-to-highest. But there’s nothing physical or expensive or even slow in the process of paradigm change. In a single individual it can happen in a millisecond. All it takes is a click in the mind, a falling of scales from eyes, a new way of seeing.

So how do you change paradigms? Thomas Kuhn, who wrote the seminal book about the great paradigm shifts of science, has a lot to say about that. In a nutshell, you keep pointing at the anomalies and failures in the old paradigm, you keep coming yourself, and loudly and with assurance from the new one, you insert people with the new paradigm in places of public visibility and power. You don’t waste time with reactionaries; rather you work with active change agents and with the vast middle ground of people who are open-minded.

What questions will be discussed next time?

How Do We Innovate New Business Models that Trigger New Industry Ecosystems and New Integral Economies? Please read part 12 here.

[Context of this series: This is part 11 of the Reporting 3.0 series that forms the basis of an Implementation Guide that summarizes the total value of Reporting 3.0 in implementing a future-ready sustainability strategy and disclosure approach, in line with the idea of a Green, Inclusive and Open Economy. By posting these articles here Reporting 3.0 seeks feedback in the writing process of the final document, to be released as Blueprint 5 at the 5th International Reporting 3.0 Conference in Amsterdam, The Netherlands, on June 12/13, hosted by KPMG, see www.2018.reporting.org]