Knowledge Center: Article

Future of Work

Leading under uncertainty: Three trends to watch

3/28/2018 Heidrick & Struggles

I am leading under uncertainty: Three trends to watch 

Heidrick & Struggles was among the sponsors of the 2018 Stanford Institute for Economic Policy Research (SIEPR) Economic Summit. This year’s event, held in March on the campus of Stanford University, drew more than 400 participants from the public, private, and social sectors. The following commentary distills observations from the conference as well as from our recent conversations with a range of senior executives and board members.


The heat is on, as a combination of geopolitical and technological uncertainty continues to exert pressure on governments and companies around the world. The effects are being felt widely across both business and society. For companies, the rise of artificial intelligence (AI) and machine learning represents a mix of opportunities and threats—all with massive socioeconomic implications. Meanwhile, for Western governments, the rise of protectionist and isolationist tendencies (including the specter of “superpowers behaving badly”) is threatening global economic stability and even the prospects for peace. And in the United States, an opioid crisis is ravaging large swathes of the population, exposing a widening social and economic gap for those left behind.

Against this backdrop, leaders in both government and business are gravitating toward a common solution: purpose-driven leadership coupled with a focus on human-capital development. For countries, this might include retraining programs or investments in education, while for companies it means creating and supporting efforts to build a more capable workforce at all levels of the organization, including the development of high-quality leaders with foresight, agility, and resilience. The stakes are high. Only by escaping the trap of being average may some companies survive what are shaping up to be extraordinary times.

These are among our takeaways from the 2018 SIEPR Economic Summit. The event, sponsored by the Stanford Institute for Economic Policy Research (SIEPR), is held each year in Palo Alto, California, to convene leading academics with leaders in business, government, and technology. This article summarizes observations from the conference as well as from our recent conversations with a range of senior executives and board members. Taken together, they aim to present a snapshot of the challenges faced by organizations and governments today as well as the implications for leaders going forward.

1. The return of geopolitical instability?

Among the distinguished panelists at this year’s summit was Condoleezza Rice, the former US Secretary of State and current Denning Professor at the Stanford Graduate School of Business. Some of the most worrying sources of uncertainty and instability that Rice singled out include the following:

  • The troubling, global rise of what Rice terms “the four horsemen of the apocalypse”: populism, nativism, isolationism, and protectionism.
  • An utterly changed security environment, including cybersecurity, leading to the prospect of countries such as China and Russia asserting themselves in unprecedented and disruptive ways. “When great powers behave badly,” Rice noted, “they bring a lot of force to the table.”
  • The ongoing sociopolitical aftershocks of the 2016 US presidential election, or, as Rice calls it, the “‘Do you hear me now?’ election.”

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2. A new era for automation and robotics

Stanford professor Susan Athey joined LinkedIn cofounder Reid Hoffman and James Manyika of the McKinsey Global Institute (MGI) to discuss the effects of robotics, artificial intelligence, and the future of work. Together, they argued that worries of “AI overlords” not only are exaggerated but risk missing the point that technology can and must be directed actively if it is to achieve its economic and social potential. Nonetheless, the risk of massive, disruptive effects on certain populations remains real.

  • According to MGI, up to 51% of activities in the US economy, representing almost $2.7 trillion in wages, are susceptible to automation.
  • The pace and extent of disruption will depend on several factors, among them technological feasibility, labor market dynamics, and the extent to which changes from automation are deemed socially acceptable.
  • Despite the clear promise of automation, the risk of another “Engels’ pause,”1  or a sustained lag between rising productivity and rising wages, is very real.
  • Companies such as Facebook and Google will continue to deliver the greatest benefits to consumers through continuous, incremental improvements. Yet the long-term economic and social benefits that automation could bring are far greater still. Ensuring that these benefits don’t remain out of reach represents a singular challenge for the tech industry.
  • Government and business must come together to solve thorny socioeconomic problems. Susan Athey, Economics of Technology Professor at the Stanford Graduate School of Business, envisioned how forward-looking transport and housing policy might one day be paired with the development of autonomous vehicles. The right combination would enable workers to travel greater distances to where the next-gen jobs reside, broadening economic opportunity.
  • Similarly, Athey noted great near-term potential in using AI and machine learning to solve intractable problems such as unconscious bias in hiring decisions.

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3. Needed: Human-capital development

Panelists from both the public and private sectors described the many ways in which the socioeconomic challenges faced by the United States and other Western countries are interlinked. In some cases, the challenges are a matter of life and death.

Indeed, Princeton’s Anne Case, the Alexander Stewart 1886 Professor of Economics and Public Affairs, Emeritus, argued that the opioid crisis ravaging much of the United States is part of a larger social challenge—an increase in “deaths of despair” (deaths attributed to drugs, suicide, or alcohol). Case’s research points to a troubling rise in mortality among middle-aged non-Hispanic whites in the United States who lack a high school diploma.

Anna Lembke, an associate professor at Stanford’s School of Medicine, noted that the problem is multigenerational and pervasive. Research from the National Survey on Drug Use and Health finds that more than 11 million people in the United States misused prescription opioids within the past year. A range of interventions are needed, Lembke argues, to begin to stem the tide. These start with changing the prescribing behavior of doctors and building the healthcare infrastructure necessary to treat addiction in a less siloed and more evidence-based way.

From the opioid crisis to the socioeconomic implications of workers displaced by automation, nearly all of the panelists spoke of the need for investments in human development. Some US states are already experimenting with ways to strengthen local communities by better preparing workers for the future. Rhode Island Governor Gina Raimondo, for example, cited the benefits of an expanded education program in her state that makes community college free to students who maintain good grades and who live or work in the state for a time after graduation. The state also invests in workforce training programs in partnership with key local businesses such as General Dynamics Electric Boat. Pragmatism is the order of the day for Raimondo. “This is math,” she tells her critics, “not politics.” Some of the panelists’ observations include the following:

  • Public spending on workforce skills development has fallen in the United States and across most Organisation for Economic Co-operation and Development (OECD) countries in recent years.
  • Skills can no longer be learned once and then expected to sustain a living, argues Reid Hoffman. “Continuous reskilling” is now an imperative.
  • The tech industry must be more cognizant of its economic role in job creation—in particular, how it can help create high-quality, middle-class jobs.
  • The sociopolitical implications of human-capital development are profound. Condoleezza Rice, for example, noted that “if we don’t work on human development at home, [the] gap between elites who love globalization and those people for whom it hasn’t worked is going to keep growing.”

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Essential attributes for leaders

Despite a range of sobering challenges, the panelists nonetheless expressed optimism about the future and in particular about the role of leadership. We couldn’t agree more. Our conversations with senior executives, along with our experience, suggest two areas of conversation (and introspection) for CEOs, corporate directors, and other leaders. Consider these suggestions as food for thought for a wider conversation among your own leadership team.

What’s our purpose? Leaders have a responsibility to use their influence to help foster a sense of purpose in their organizations. Raimondo noted, for example, that while she can’t pay top dollar for talent, she can promise meaningful work. “Give me two years,” she noted, “and when you look back, you will find those to be some of the most fulfilling moments of your career.”

To attract and retain talented people (including millennials), CEOs should be thinking beyond the needs of shareholders to the ways that the company affects a wider base of stakeholders, including the local community. Leaders should also take a long, hard look at their organizational culture to see whether their company lives by its values and their employees feel energized—and empowered—to do the right thing. Companies that pay lip service to concepts such as purpose and authenticity without acting on them will engender cynicism, which damages both their reputation as well as their long-term prospects for attracting and keeping high-potential talent.

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Are we agile enough? Even a purposeful organization must move quickly, particularly given the rapid rate at which technology is evolving. Indeed, it’s no exaggeration to say that the speed of technological change is rendering average performance irrelevant in some industries. Companies that aren’t able to adapt and move at speed will find themselves on the outside looking in.

Our firm’s own research finds that agile leaders are a differentiating factor in high-performing organizations, as such leaders help spot opportunities and threats sooner, thereby helping the company adapt and pivot faster than their rivals. They do so by developing four key skills: foresight, learning, adaptability, and resilience.

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***

The power of AI and machine learning to transform and improve society as we know it is massive. Yet technology in and of itself is not a solution, and companies—and countries—must be mindful of the unintended social, economic, and political consequences that change invariably brings. The difference makers will be a new generation of leaders who are pragmatic, authentic, and empathetic and who can act with the urgency that today’s extraordinary times demand.


About the contributors

Matthew Aiello (maiello@heidrick.com) leads Heidrick & Struggles’ Cybersecurity Practice and is a partner in the Menlo Park office.

Les T. Csorba (lcsorba@heidrick.com) is partner-in-charge of the Houston office and a member of the Industrial and CEO & Board practices.

Lee Hanson (lhanson@heidrick.com) is a vice chairman in the San Francisco and New York offices and a member of the Financial Services and CEO & Board practices.

John T. Thompson (jthompson@heidrick.com) is a vice chairman in the Menlo Park office and a member of the CEO & Board Practice.

References

1 Cardiff Garcia, Jobs, automation, Engels’ pause and the limits of history,” Financial Times, March 9, 2015.

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A series of panel discussions at Stanford suggest that the sources of instability are multiplying for both companies and countries. Success will require a sharper focus on the development of human capital—and the concerted application of technology to solve complex problems.


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