There are three modern business leaders I have studied who:

  • Are great examples of being Mind 3.0 (i.e., highly vertically developed) leaders who…
  • Have actualized transformational and sustainable change in the organizations they led.

These leaders are:

All three of these leaders took their organizations from deeply in the dumps to wildly successful.

  • Mulally took Ford from an annual loss of $12.7 billion to being one of the most respected brands in the world.
  • Catmull resuscitated Disney Animation from being stale to breaking box office records.
  • Nadella has led a 10x growth in market cap and stock price in the eight years he has been CEO.

As I have studied these three leaders, I have asked myself two primary questions:

  • What is it about them, as opposed to other leaders, that has allowed them to actualize transformational change in their organizations?
  • What have they done that has been pivotal in the process of actualizing the transformational change?

Two articles ago, I answered the first question (see What Mind 3.0 Leaders Do to Actualize Transformational Change – Part 1).

In my last article, I started answering the second question (see What Mind 3.0 Leaders Do to Actualize Transformational Change – Part 2).

In this article, I will finish answering this second question.

What Do These Leaders Do to Actualize Transformational Change? – Part 2B

Of course, Mulally, Catmull, and Nadella did 1,000s of things that led to successful transformation. But, in my observation, there are four foundational things that they did, upon which all other actions and decisions rested. Stated differently, these four things became filters that they used to pass any decision making through.

Before I identify these four things, I want to make two observations, one that feels more like good news and the other that feels more like a challenge:

  1. These things are all replicable (which is the good news).
  2. The success of the implementation of these three things hinges upon the leader’s vertical altitude (which is the challenge). The higher the leader’s vertical altitude the more they will be able to leverage the power of these three things.

Last week, I covered the first two things:

  1. Mind 3.0 leaders develop an inspirational, clear, and stakeholder-centric purpose
  2. Mind 3.0 leaders develop a clear set of values & lovingly hold their leaders accountable to them

Now, I’ll cover the last two things.

3. Mind 3.0 Leaders Create Psychologically Safe Space for Their Leadership Teams

Something unique about each of these leaders is that they all developed a regular cadence of meetings with the organizations’ leaders. They all saw these meetings as among the most important things that they did.

For these meetings to work, all three leaders understood that in order for them to be productive, there needed to be a sense of psychological safety. They wanted transparent candor to be in the room. It needed to be a space where they could admit failures or problems, so they could get on with resolving them as quickly as possible with as much help as possible. They knew that, prior to their leadership, such dialogue was generally happening at the water cooler, but not in the actual meeting.

Perhaps unsurprisingly, the openness that these leaders wanted did not immediately occur. In each instance, the people in the meetings were quite protective, and it took each leader significant time and effort to earn their team’s trust and develop a psychologically safe space for them to have hard but necessary discussions involved in transformation. But, each leader knew the long-term value of establishing this shared trust.

Mulally had a weekly Business Plan Review meeting where executives provided a signal of “red light” (off plan and still stuck), “yellow light” (off plan, but getting back on plan), or “green light” (on plan) to quickly identify progress being made and where issues were.

green yellow red

For the first couple of months, all of Ford’s executives gave “green lights,” despite the fact that they were set to lose billions that year. It wasn’t until one executive gave a “red light” and retained his job that other executives felt safe to give “red lights.” In fact, Mulally says that the executive giving a “red light” was “One of the most important moments in the turnaround of Ford.”

For more on this, read this article: “Everything was green. Mulally thought that was odd for a company losing billions.”

Catmull instituted a meeting called Braintrust. Catmull writes that “Its premise is simple: Put smart, passionate people in a room together, charge them with identifying and solving problems, and encourage them to be candid with one another.” The key to the Braintrust’s success is candor, or forthrightness and frankness. In order for candor to be present, psychological safety must abound. In fact, to help ensure this psychological safety was present, Catmull did not allow Steve Jobs to attend many Braintrust meetings. Catmull says that these Braintrust meetings are a critical element of fulfilling their purpose of making great films.

For more on this, read this article: https://www.fastcompany.com/3027135/inside-the-pixar-braintrust

Nadella relies upon a weekly SLT (senior leadership team) meeting. He calls it “one of the most important meetings” that he leads.

Just after becoming CEO, he took the SLT to an open-air part of Microsoft’s campus to work with a performance psychologist. The psychologist asked them if they were interested in having an “extraordinary individual experience.” They all nodded yes. But, then he asked for a volunteer to stand up. No one did. It was a quiet and awkward moment. The psychologist asked: “Why wouldn’t everyone jump up? Wasn’t this a high-performing group? Didn’t everyone just say they wanted to do something extraordinary.”

Commenting on this moment, Nadella writes: “The answers were hard to pull out, even though they were just beneath the surface. Fear: of being ridiculed; of failing; of not looking like the smartest person in the room. And arrogance: I am too important for these games. ‘What a stupid question,’ we had grown used to hearing.”

Eventually, the psychologist got them to open up, leading Nadella to write: “As I listened, I realized that in all of my years at Microsoft this was the first time I’d heard my colleagues talk about themselves, not exclusively about business matters. Looking around…, I even saw a few teary eyes.”

4. Lead the Creation of a Comprehensive Strategy and Relentless Implementation Plan to Deliver on the Compelling Purpose

There will never be one strategy that will work with all organizations. Yet, for every organization, there is at least one strategy that puts them on the path of transformational and sustainable change.

But, the only way for a transformational and sustainable change strategy to be developed and successfully implemented is if the leadership first lays the foundation of:

  • An inspirational, clear, and stakeholder-centric purpose and clear values to guide thinking and decision making
  • A psychologically safe environment for effective discussion and strategizing to occur.

As you might expect, Ford’s, Microsoft’s, and Disney Animation Studio’s strategies were all different, but let me provide a high-level overview of key elements of their strategies and then make an important observation.

star team

Mulally’s strategy involved the following:

  • Operate as a global enterprise using a disciplined “Working Together Management System” with clear expected behaviors
  • Invest in the Ford and Lincoln brands and reduce the focus on the other brands (e.g., Jaguar, Land Rover, Mazda, Volvo)
  • Aggressively restructure production to closely match demand
  • Accelerate development of new products that customers want and value
  • Ensure financing for the fulfillment of the strategy

Catmull. After Disney bought out Pixar and put Ed Catmull at the head of Disney Animation Studios, Catmull’s strategy was focused on creating a sustainable creative environment. To do that, Catmull:

  • Prioritized ensuring that “every Disney Animation employee should feel free to talk to any colleague, regardless of position, and not be afraid of repercussions”
  • Sought to remove any sense of alienation and fear
  • Encouraged personality, color, and creativity in the office space
  • Remodeled the office building to enhance collaboration capabilities
  • Improved the feedback system
  • Empowered employees to come up with solutions

Nadella. There are four main areas that Nadella focused on shortly after becoming CEO:

  1. He invested in improving Microsoft’s culture. He said that the “C” in CEO stands for “Curator of Culture.” To improve Microsoft’s culture, he focused on helping employees develop more positive mindsets (e.g., growth).
  2. He opened the doors for collaboration with competitors. This was a 180-degree shift from Ballmer. Nadella recognized that if their program could be integrated with their competitor’s products, they could rapidly expand their customer base.
  3. Under Ballmer, Microsoft focused on creating products that they thought their customers might need or want. They had some hits, but they had a lot of misses. Instead of engaging in this guesswork, Nadella had Microsoft employees simply ask their customers what they wanted and then focused on creating those.
  4. He knew that they needed to be a leader in cloud computing, and saw that as their biggest opportunity to add value to their customers, grow, and be at a competitive advantage.

In instituting these strategies (fueled by purpose, values and psychological safety), Mulally, Catmull, and Nadella did something that is the most difficult part of transforming an organization: they got the existing leaders and employees to let go of old ways of thinking and operating and helped them embrace new ways of thinking and operating.

Summary

In order for leaders to actualize transformational and sustainable change, leaders need to:

Vertically develop themselves, which gives them the cognitive and emotional sophistication to be able to implement the four necessary ingredients of transformational and sustainable change:

  1. Develop an inspirational, clear, and stakeholder-centric purpose
  2. Develop a clear set of values & lovingly hold their leaders accountable to them
  3. Create a psychologically safe space for their leadership team
  4. Create a comprehensive strategy and relentless implementation plan to deliver on the compelling purpose

When I work with executive and leadership teams, I create two tracks of development:

  1. I help leaders individually vertically develop (workshops, self-assessments, coaching, 360s)
  2. I help the leadership team do what vertically developed leaders naturally do: develop a clear purpose and clear values and create a psychologically safe space and comprehensive strategy

If you want to assistance with one or both of these tracks, I would love to help you.