The world is becoming increasingly volatile and uncertain. In India in the last 10 years, the daily volatility of the sensex has increased one and half times; our exchange rate is now about four times more likely to fluctuate and the volatility in repo rate has more than tripled. This rise in uncertainty is also reflected in the performance of Indian companies – both in terms of operating margins and market positions. Less than half of the top 35 companies in India in 2000 retained their position in the list in 2010.

Is this bout of volatility a one-time blip or are we in a "new normal"? We at The Boston Consulting Group have looked at market data over the last 50 odd years to specifically probe this question. The data overwhelming indicates that the world we live in has changed and we are in-fact in a new normal. Here is one data point as an illustration. Volatility in market leadership – be it measured on sales, profits or market capitalization – has clearly shown a relentless steady increase over the last 60 years.

So how do Indian companies succeed in this "new normal"? As part of a recent study we at The Boston Consulting Group had extensively spoken to leading CEOs in India to get a hands-on view of what it takes to "Thrive in a Volatile World". One theme stood-out above all else - the need for a new model of leadership for this kind of environment. In our conversations with business leaders here in India and elsewhere we heard a growing realization that our past models of leadership will need realignment to the realities of this new, uncertain and volatile world.

Two clear themes on leadership are emerging, both of which have implications for Indian business leaders.

Firstly, unlike in the past, leadership at the frontlines is as important as leadership at the top of the pyramid. In a stable environment, command and control leadership was sufficient for success. However, in an uncertain environment where data is insufficient, risks are ubiquitous and speed to respond is critical, operational decision-making has to move to the front-lines. No one leader, however good he or she may be, can process and act on the amount of information and uncertainty that exists. As one CEO puts it, “I want empowered and capable profit owners across the organization”.

Secondly, the new normal requires a different type of leader. In a recent study, BCG interviews with nearly 30 senior HR executives around the world revealed that four capabilities—the four points of the compass—will differentiate the most successful leaders in the coming years:

· Navigate. Leaders need to navigate the tricky balance of conveying purpose and direction with the willingness to course-correct midway. They need the ability to discern and translate signals and make decisions on the basis of experience and imperfect information.

Empathize. Leaders must empathize with people at all levels, respect and understand diverse perspectives and build networks of people outside their organization. Especially as Indian companies globalize, this will become absolutely necessary.

Self-correct. Leaders need to have the openness and courage to continuously question the status quo, be willing to re-examine long-held assumptions and adjust leadership styles when required.

Win and win. Leaders should broaden their view of what constitutes success, as success increasingly depends on cooperation with competitors, nongovernmental organizations, and regulators.

The bottom-line is simple – we need leaders, many more of them than was required in the past, that too of a different ilk. Many Indian organizations have recognized this leadership challenge and are focusing significantly more efforts on their talent management processes. And rightfully so!

But traditional leadership/talent management programs are not geared to deliver leaders of the 21st century. More effort is not always better!

From experience we see four specific gaps. The first challenge is compression. Leadership programs need to be reoriented to deliver more leaders in much shorter time scales. No longer can companies plan for 20 years to develop leaders. Their competitors, their strategy and their employees won't wait that long. Secondly we need early acceleration. We see too many companies still being conservative when it comes to fast-tracking careers or giving a diverse set of experiences to their younger managers. If you want front-line leaders, you have to start with front line people. Thirdly, talent management approaches have to factor in the skill expectations of leaders – the four points of the leadership compass. These are not just extensions of traditional leadership skills, but require a new focus. And finally, leadership development requires bringing into play a much more diverse set of development levers – advanced tools, longer term career planning, focus on life experiences, secondments and rotations, complex postings, etc. On-the-job and classroom sessions need to be completely rethought!

The talent management challenge in front of us is complex. We must recognize that change has to start from the very top. Top management must become role-models for the entire organization. Best practices indicate that 20% of your time, should at the minimum be invested in developing your talent. The twenty first century is still young, but it is getting late to address the leadership gap.

(Vikram Bhalla is Senior Partner & Director & Xavier Sebastian is Principal, BCG. Their views are personal.)

(This article was published on June 22, 2012)
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