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A New Era for Global Leadership Development

Published in Harvard Business Review.

The realities of globalization, with increasing emphasis on emerging markets, present corporate leaders with enormous challenges in developing the leaders required to run global organizations. Too many multinational companies — particularly Japanese, Indian, German, and some American ones — still concentrate vital decisions in the hands of a small group of trusted leaders from their home country. They hire technical specialists, local experts, and country managers from emerging markets but rarely promote them to corporate positions. Instead, they groom future global leaders from the headquarters nation by sending them on overseas appointments.

This approach worked relatively well for companies selling standard products in developed markets, but as multinationals transition into truly global organizations relying on emerging markets for growth, it's far from adequate. In order to adapt to local cultures and market needs, companies must shift to decentralized, collaborative decision-making. That requires developing many leaders capable of working anywhere.

To address these needs, new approaches for developing global leaders are required:

  • The diversity of top leadership should reflect the diversity of the firm's customers.
  • Global leaders must be effective in aligning employees around the company's mission and values, empowering people to lead, and collaborating horizontally rather than managing vertically.
  • Rather than concentrating on the on the top 50 leaders, global companies need to develop hundreds, even thousands, of leaders comfortable operating in a variety of cultures.
  • Developing global leaders with cultural sensitivities and collaborative skills requires greater focus on emotional intelligence, self-awareness, and empowerment than on traditional management skills.

To understand these approaches, let's examine what leading global companies are doing:

Create diversity among senior leadership. To make sound decisions, companies need a diverse set of leaders who have deep understanding of their local customers, especially those in emerging markets. Opportunities at the highest levels, including C-suite and CEO, must be open to people of all national origins. Atlanta-based Coca-Cola is a pioneer in geographic diversity. As early as the 1960s, the company was run by South African Paul Austin. Since that time, Coca-Cola has had Cuban, Australian, and Irish CEOs, leading to today's CEO, Turkish-American Muhtar Kent.

Over the past decade two Swiss companies, Nestle and Novartis, have made dramatic shifts from Swiss-dominated boards and executive leadership to a diverse set of nationalities. Both now have non-Swiss majorities on their boards and several business units based outside Switzerland. Nestle's executive board represents ten different nationalities, while 80% of Novartis executives come from outside Switzerland.

Focus on values, not hierarchy. The characteristics of successful global leaders today are quite different than traditional hierarchical managers. They need high levels of emotional intelligence and self-awareness to unite people of different cultures, many who are new to the enterprise, around the organization's mission and its values and empower them to make decisions without waiting for higher-level directions.

Samuel Palmisano, IBM's chairman and former CEO, recognized that IBM's traditional hierarchical structure would not be effective in the 21st century because it was dominated by product and market silos. In 2003 he reorganized the company into an "integrated global enterprise" based on leading by values and collaboration, and uses special bonuses to empower leaders to extend IBM's culture globally. 

Broaden the reach of leadership development. Collaborative organizations like IBM's require far more leaders than the traditional focus on a select group of top leaders. With flatter organizations and decentralization of power, corporations must develop savvy global leaders capable of operating locally and globally simultaneously. IBM's former chief learning officer recently estimated that IBM will need 50,000 leaders in the future.

Unilever has more than half of its business in Asia, and that percentage will continue to increase. The company has undertaken a major initiative to develop 500 global leaders in intensive leadership development programs to prepare them for expanded roles. According to CEO Paul Polman, "Unilever's Leadership Development Programme prepares our future leaders for an increasingly volatile and uncertain world where the only true differentiation is the quality of leadership."

To be effective in global roles, leaders require experience working and living in multiple countries. Extensive travel overseas is no substitute for living there, gaining fluency in local languages, and deeply immersing in the culture. German chemical maker Henkel, whose executives come from a diverse set of countries, insists they live in at least two different countries before being considered for promotion.

New methods for developing global leaders. Developing global leaders necessitates a shift from focusing on management skills to helping leaders be effective in different cultures by increasing their self-awareness, emotional intelligence, and resilience. Dean Nitin Nohria at Harvard Business School recently sent 900 MBA students overseas to work with companies in countries where they have neither lived nor worked.

It's not enough just to work overseas. To process and learn from their experiences, individuals should utilize introspective practices like journaling, meditation or prayer, and develop support networks of peers like True North Groups. There they can consult confidentially with people they trust about important decisions and have honest conversations about their dilemmas, mistakes, and challenges. These experiences enable leaders to develop the self-mastery and appreciation and acceptance of people from diverse backgrounds required to become effective global leaders.

These methods of developing global leaders for the future are still in their nascent phase, but there is little doubt that they will have a profound impact on developing global leaders in the years ahead.

National Academy of Engineering Induction

I was very honored to be elected to the National Academy of Engineering this week. For the full list of new inductees see NAE's Press Release

How IBM's Sam Palmisano Redefined the Global Corporation

In the 20th century, a select group of leaders — General Motor's Alfred Sloan, HP's David Packard and Bill Hewlett, and GE's Jack Welch — set the standard for the way corporations are run. In the 21st century only IBM's Sam Palmisano has done so.

When Palmisano retired this month, the media chronicled his success by focusing on IBM's 21% annual growth in earnings per share and its increase in market capitalization to $218 billion. But IBM hasn't flourished because it kowtows to Wall Street. In fact, five years after Palmisano took over, IBM stock was stuck where it had been when his tenure began.

The real story behind IBM's success is the course Palmisano set for 21st century global enterprises. Recognizing that the company's command-and-control culture wouldn't work in the 21st century, he defined leadership as leading by values and created a unique collaborative organizational structure.

In 2002 Palmisano succeeded a legendary leader in Lou Gerstner, who saved IBM from being broken up and put it on a viable course. Whereas Gerstner famously declared "the last thing IBM needs is a vision," Palmisano had a clear vision for the company. He saw its unique strength as offering complete solutions tailored to customers' needs — something no other company could match. To concentrate on customer solutions, Palmisano spun off personal computers and disk drives and acquired PriceWaterhouseCoopers' consulting business.

Executing this strategy required seamless integration of IBM's product capabilities with its geographic reach. This meant abandoning IBM's existing organization, in which product silos and geographic entities operated independently and frequently were more competitive than collaborative. Palmisano reorganized IBM into a "globally integrated enterprise" focused on worldwide collaboration. He cajoled, pushed, and pulled the company into a client-centric, agile structure able to customize delivery of IBM's software assets, hardware assets, and intellectual property.

With 440,000 employees in 170 countries, Palmisano recognized that IBM couldn't be run solely from the top; rather, it needed thousands of leaders operating collaboratively around the globe to fulfill its customers' diverse needs. His first act was to abolish IBM's corporate executive committee.

Palmisano understood that reorganizing IBM's formal structure wouldn't be sufficient; he had to thoroughly transform the company's culture and do so in a sustainable way. His ingenious first step toward creating a collaborative culture was a massive, global collaboration. In 2003 he launched an online, interactive "values jam" involving all employees for 72 hours to determine what IBM's values should be. The three principles that emerged from that event guided decision-making throughout the organization, giving IBM's huge, globally dispersed workforce the discipline necessary to execute the company's new strategy.

Palmisano could not have succeeded at placing values at the center of IBM's operations without strong principles of his own. These are the qualities I believe made him the best CEO, so far, of the 21st century:

Humility and openness. Palmisano has an engaging manner and keen sense of humor. Colleagues say his humility and humor are disarming. In a speech on IBM's 100th anniversary, he said:

The old model of the heroic superman is increasingly archaic. The most active and successful leaders today see themselves as part of the global community and peer groups. They listen as well as they speak. Never confuse charisma with leadership. The first job of a leader is to enable an organization to survive without him or her. The key to that is to build a sustainable culture.

He practiced this by listening intently to employees throughout the organization. He also talked to customers on a daily basis and circumnavigated the globe six times a year to meet customers in person. These relationships were essential in gaining the confidence of customers who had qualms about outsourcing to IBM.

Patience and a long-term view. Palmisano warned against prioritizing shareholders or other constituents, calling this "a false choice," and explaining that "Long-term management is a serious challenge in a world driven by short-term thinking. Forward-thinking leaders are not just achieving measurable success in the short-term. They are innovating in ways that create virtuous circles for a generation or more." He was comfortable making smart bets to position IBM for decades-long growth, such as creating the Emerging Business Organization to incubate new businesses and shield them from P&L pressures. And his time leading IBM's Asia-Pacific business taught him about the value of building long-term relationships, not just doing transactions.

Directness. Palmisano believes the technology industry requires "a high-performance, in-your-face, speak-your-mind culture." He's personable, but blunt. Known for walking out of long meetings to make sales calls, he shortened IBM's two-month annual budget process to six days. Instead of formal performance reviews, he regularly engaged in short conversations, focusing on key initiatives. Many who know him cite his impatience as a strength; it kept him relentlessly focused on execution.

Pragmatism. When the U.S. government cut back on work permits for foreign nationals, IBM had thousands of Indian employees forced to return to their home country. He turned that problem into competitive advantage by relocating most of IBM's software operations to India as its Indian operations grew from 3,000 to 100,000 employees. He also forced partners and distributors to commit in writing to uphold IBM's strict ethical standards. In 2009 he called off the $7 billion acquisition of Sun Microsystems in part due to Sun's egregious golden parachutes.

As Palmisano built IBM into the world's leading information technology company, its competitors dithered. HP suffered from a progression of strategic missteps and failed leaders. Microsoft's enterprise services stagnated. Cisco now sells mostly commoditized products. In contrast, IBM kept laser-like focus on building the global organization to execute its strategy, and financial results followed.

Palmisano once said, "The CEO is not the brand! It is not about you. You are a temporary steward of a wonderful enterprise, so leave it in better shape than you find it." As he concludes his career, he leaves his successor, Virginia Rometty, with an iconic giant poised to dominate its industry for decades to come.

 


Originially Written for Harvard Business Review on January 18. 2012
This post draws upon several resources, including: the IBM archives; Palmisano's own article, "The Globally Integrated Enterprise" in Foreign Affairst and his speech on the Future of Leadership; aHarvard Business Review interview with Palmisano, "Leading Change When Business is Good;"Rosabeth Moss Kanter's case on IBM and Joseph Bower and Sonja Ellington Hout's case on IBM. The author and Sam Palmisano together serve on the board of directors of the Exxon Mobil Corporation.

 

 

What Minnesota can learn from Germany

MUNICH, GERMANY - The United States seems in awe of China's economic miracle, but rather disdainful of Europe, especially Germany. To the contrary, there is great wisdom in the German economic model from which Minnesotans can learn.

Germany is a jobs machine. Its unemployment is just over 5 percent vs. 8.5 percent in the United States. In Munich unemployment is only 2.2 percent. Germany exports four times as much as the United States with only 30 percent of the population. It has a positive $200 billion trade balance, compared with negative $700 billion for America, and favorable trade balances with China, India and Japan, as well all European countries.

Germans are well-paid, have excellent health care and pension benefits, and save 11 percent of their income. Yet German health care costs only 9 percent of GDP compared with 17 percent in the U.S.

Politically, the country operates like a grand coalition, with narrow differences between moderates on both sides. Politicians put the country's interests ahead of their parties. A decade ago the government went through a restructuring that moderated the cost of wages and benefits to be competitive with Asian countries. Germany is fiscally responsible: inflation is just over 1 percent, and deficits are 3.3 percent of GDP compared with 11 percent for the U.S.

German industrial strategy focuses on sectors where its technology and highly skilled workforce provide competitive advantage: machine tools, automobiles and auto parts, chemicals, electrical equipment and construction. Its financial sector finances German industry at home and around the world. It operates with conservative ratios that enabled most German banks to escape the 2008 financial meltdown.

Leading German companies like Siemens, BMW, Volkswagen, Daimler, BASF, and Thyssen-Krupp are flourishing these days. But there are deeper reasons for Germany's success: relationships between labor and management; its apprentice system, and the Mittelstand -- small and medium-size privately held enterprises.

Labor-management relations. German unions have long practiced "co-determination" with management on corporate boards, but their approach differs dramatically from American counterparts. They are committed to ensuring that their companies do well, produce superior products, and are cost-competitive. Work rules are flexible. Strikes are rare. They focus on collaborative relationships to make their enterprises competitive on a world scale.

Apprentice system: German education utilizes a rigorous system of preparing students for jobs and careers. Students are divided into those who enter gymnasium (high school) to prepare for university education and others who are better suited for careers in skilled positions in 342 recognized trades. They complete their education prepared for a career suited to their talents; dropouts are rare. Those in skilled-labor tracks move into three-year apprenticeships where they learn specific skills, such as computer programming or operating complex computer-controlled machinery. Educators work closely with industrial counterparts to understand skills required for future jobs. Heinrich Heimbold, CEO of Thyssen-Krupp, the world's second-largest steel company, believes labor relationships and apprentices have given his company advantage over U.S. and Asian competitors.

Mittelstand companies. These small and medium-sized firms are export-oriented and focus on high-value manufactured products utilizing skilled apprentices. Typically, they are rural and privately owned and occupy worldwide niche market leadership positions. Mittelstand companies combine long-term approaches with modern management practices like lean manufacturing and total quality management. They work closely with universities and researchers and cluster around large manufacturers. Owner-managers often rub shoulders with workers.

Steven Rosenstone, the new chancellor of Minnesota State Colleges and Universities, believes in the German approach to education and industrial competitiveness. "It's a painful reality that many of the 215,000 Minnesotans without jobs don't have the education needed for the new economy," he said. "By 2018, 78 percent of all Minnesota jobs will require some post-secondary education." Rosenstone is restructuring MnSCU to train people for future needs, and also creating custom retraining programs for existing employees.

Minnesota's CEOs are recognizing the importance of Minnesota's skilled workforce. Cargill CEO Greg Page is leading a task force to address these education issues. Ecolab CEO Doug Baker Jr., who chairs Greater MSP, said: "Ultimately, the education and skills of the workforce is MSP's competitive advantage."

In my view, Minnesota gave up too soon on manufacturing competitiveness to focus on the service sector. It's time to refocus on manufacturing advanced technology products, using skilled labor to enable Minnesota companies to compete globally and restore full employment. It's not too late.

 


Originially Posted in the Minneapolis Star Tribune on January 7, 2012

Read reader's comments and reactions to the article above

 

Readers Respond to My Article on “German Economic Miracle”

My sincere thanks to all of you who responded to my article on "What Minnesota Can Learn from the Germany". You offered some great insights and affirmations. Here are some of your best inputs:

“REALLY EXCELLENT....Please get this into The Times....all the media you can....and especially Obama's office....certainly the Congress needs to see it....many thanks.”

“As a retired teacher and host of 4 exchange students from Germany, I have known that the German method of education and training students to achieve success is working far better than the American model.  I was amazed at the intelligence and skill level of each of the 4 German boys that stayed with me.  I have since visited 2 of them in their native Germany and have seen first hand how Germany has rebuilt from near total devastation just after WW2.  This country should indeed be a model for the US.” 

“Terrific article on the German education model and its effect on business.  As the first American-born in my German family (and dual citizen), I’ve often mentioned to my (American) friends that the United States’ biggest ‘mistake’ was to exclusively emphasize the merits of a proper University education, while dismissing anything else as second rate.  It is always a treat to engage with German companies and discover that everyone on the payroll seems to be pulling in the same direction; it is almost implicit in the culture that everyone has a valuable talent and skill to hone and apply for the benefit of the individual and the common good.”

“I wanted to jump up and down and yell “YES”!!! Bill George, the author, gets it!!! And, admittedly, I bragged a little to myself because – ‘tho only a ND “farm boy” – it’s what I’ve been saying for literally years.”

“Your message needs to be heard “loud and clear” all around the US – not just in MN. Our country either must learn from Germany’s example or risk sliding into second class – or worse – economic status.”

“I work with a number of job shop manufacturers who are frustrated by the lack of skilled labor for job openings that they have.  As a result, I was extremely interested in your article in the Mpls Star Tribune last Sunday.  I have attached a copy of another article from the Tribune on 10/31/2011 about a program called “Right Skills Now” that I thought you might find interesting.  As you can see in the article, there are nine positions for every graduate.  I also have met with a person with Newgate Education Center that provides tuition free automotive technical training.  I also attached some information on them as well.  They indicated that they have a 100% placement rate for their graduates. I might add, I am not affiliated with either of these programs. I just thought you might find them interesting."

“Unfortunately, in my opinion, our education system is far too biased toward a college education even if it does not train a person make a living.  I say this as an individual with a post graduate degree. This is a natural bias of educators having college educations.  Until we dispel the notion that a person is not “successful” without a college education, as opposed to post secondary education or as you have indicated, training in a trade, I see no change forthcoming.  I believe that we need to integrate people with training in the trades (as opposed to just educators)  into our public education system to eliminate the bias.  I have clients who have tried to impress upon high school educators the viability of a career as a machinist, or machine operator with little success.  I hope your article helps move us in that direction.”

“My observations and frequent visits to Germany confirm the solid points which you registered.  They are both pointed and timely.  Interestingly, following a careful five year campaign to attract the “right” distributor for Germany, our key European target, we recently signed a distribution contract with Linde Gas.  My interactions with them and with a very close friend, CEO, and owner via his family of a Mittelstand entity at over 500,000,000 Euros all substantiate your theses. That said, Germany does not carry the socalled “minority characteristic load” that the U.S. does.  Germany has also choked off much of the immigration factor as well.  Preparing their “next generation” is where they seem to excel.  And, that seems to be at the center of your important points.” 

“Moving “College and University Four Year Degree” from its “Only Ticket to the Future” image in the public mind to a right choice for 30-40% of the population will also need to be sought.  Degradation of the quality of the products of many four year college programs is also part of the problem.”

“I salute your choice to continue to be a voice for leadership and wisdom outside “the Company Office” and hope that you are finding much purpose and fulfillment in your work at Harvard.  Reminding students and peers at a campus that keeping at least one foot on the ground as we peer at the stars is important to leadership success and personal growth success.”

“First, I want to say what a great article!  I agree with you completely.  I worked at 2 small manufacturing companies with limited resources over 18 years.  We tried to incorporate some of your ideas on a limited basis under budget constraints. The only candidate that has a clue about how to turn this country around is Jon Huntsman.  The rest of them call Europe a bunch of socialist countries.  If Germany is a socialist country, bring it on; I am all for it.”

“Thank you for your great article in today’s business section! After reading it I feel proud of having been born and raised in Germany for the first 15 years of my life and I have often wondered why I left my homeland. That was 60 years ago and I have been an American citizen for all this time but I will always be torn between the 2 countries. The thing I totally agree with you and what I have mentioned to many people here is the German apprenticeship system. Not everybody is ready for college after leaving high school and learning a trade will keep a person working for a lifetime. My mother owned a beauty shop and always had several apprentices working for her. My grandfather had a plumbing shop and as his sons grew up several became apprentices and ended up with a large company because of all the rebuilding after the war. Your article made my day!"

“That is a good and pretty accurate article about the German education system, That is what I experienced  as I went to Germany in 1961 for an apprenticeship in Munich as an auto mechanic. I stayed there, married and had a child whom I guided through the school system and everything worked great. The skill I learned in the BMW factory allowed me to introduce the autobody repair system called Paintless Dent Removal here in Minneapolis,Mn. I am still practicing this trade and enjoying it.” 

If you'd like to share your thoughts please emailing me at bill [at] bpgeorge [dot] com.

Five Resolutions for Aspiring Leaders

Originially Posted on Harvard Business Review
December 30, 2011


As the New Year approaches, people will be making resolutions to eat better, exercise more, get that promotion at work, or spend more time with their families. While these are worthwhile goals, we have a more important challenge for young people: Think seriously about your development as a leader.

These are tough times. Many leaders of the baby boomer generation have failed in their responsibilities by placing their self-interest ahead of their organizations. In so doing, they have failed to serve society's best interests. As a result, more young leaders from Gen X and the Millennials are being asked to take on major leadership responsibilities. To be prepared for the challenges you will face, we propose the following resolutions this New Year's:

Find a trustworthy mentor: Mentorship is a critical component of your development as a leader. A 2004 study showed that young leaders with mentors were more likely succeed professionally and experience career satisfaction. The essence of effective mentoring is developing a trusting relationship between the mentor and mentee. Identify someone with whom you have a genuine chemistry and who is committed to your development. Although many mentees do not realize it, a sound relationship is a two-way street that benefits both parties — not just the mentee. We suggest looking for mentors whom you admire for their values and character more than their success.

Form a leadership development group: Most of us have little time to reflect on the values and characteristics we want to define us as leaders, the difficulties we're facing, or the long-term impact we hope to have. Forming a leadership development group can give you the space you need to think deeply about these subjects. Leadership development groups are groups of six to eight people who meet to share their personal challenges and discuss the most important questions in their lives. Find people you can trust, and make a commitment to be one another's confidential counselors. Meet regularly, and share openly your life stories, crucibles, passions and fears, while offering each other honest feedback.

Volunteer in a civic or service organization: Have you served your community this year? In the Facebook era it's easy to lose touch with our real-world neighbors. Long hours often cause us to avoid volunteer opportunities. Participating in local organizations — from religious organizations to civic groups — can give you early leadership experiences, provide real connection to your neighbors, and offer opportunities to serve others. It adds a dimension to your life that work can't, and helps you develop and solidify your character while giving back to the community. You will find your time serving a community organization is highly rewarding while broadening your outlook on people and life.

Work in or travel to one new country: "The world is flat," as Tom Friedman puts it, so it has never been more important to get global experience. In the future cultural sensitivity will be a more important characteristic for leaders than pure intellectual ability. John's survey of more than 500 top MBAs found that on average they had worked in four countries prior to entering graduate school and expect to work in five more in the next ten years. Having a global mindset and the ability to collaborate effectively across cultures are essential qualities for aspiring leaders of global organizations.

Finally, ask more questions than you answer: With the high velocity of change in the world, it is impossible to have answers to all the important questions. Much more important is a deep curiosity about the world and the ability to frame the right questions in profound ways. The world's toughest problems cannot be solved by you or any one organization. Your role will be to bring the right people together to address the challenging issues you raise. Our research demonstrates that the biggest mistakes result from decisions made by people without deep consideration of thoughtful questions.

Young leaders will soon be asked to take on major leadership responsibilities in their organizations and their communities. We believe it is essential that they take steps like these in order to be prepared for the difficult leadership challenges they will face. There's no better time to get started than the coming year.

Americans’ Confidence in Its Leaders Hits New Low

The 2011 National Leadership Index indicates that Americans’ confidence in its leaders has hit new low points: the overall index has fallen from 101.4 in 2005 to 89.4 in this month’s survey, even below the 2008 level in the midst of the financial meltdown. (100 is the normative level of confidence.)

The index is highly reliable as it is based on interviews of 1,065 Americans and conducted by the Center for Public Leadership, headed by Professor David Gergen at Harvard Kennedy School. These results are very worrisome to me, as without trust and confidence in our leaders, America cannot recover the energy and optimism required to restore its domestic economy and global leadership.

The survey indicates that 77% of Americans believe the U.S. has a leadership crisis. Without better leaders, America will decline as a nation, according to 77% of those interviewed.  Seventy-six percent disagree with the proposition that our country’s leaders are effective and do a good job.

Among leadership categories, military and medical leaders continue to top the list, scoring at 112 and 105, respectively. At the very bottom are Congressional and Wall Street leaders, with ratings of 73 and 71, both down sharply from the upper 90’s in 2005. Business leaders fare slightly better at 87, with the White House at 84.5 and media at 84.

The survey’s authors’ observe, “Americans have deeper, more abiding confidence in leaders who can still get something done, and do so with a clear commitment to a greater social good, such as security or health. And they are largely withholding confidence from sectors such as Congress, Wall Street, the media, and the Executive Branch, whose leaders convey the impression that they cannot act effectively for the common good.” Painfully, many leaders in these latter sectors consistently put self-interest ahead of their responsibilities to their institutions and to society as a whole, something I believe it is the greatest failing in this generation of leaders.

The survey concludes on an upbeat note, “For leaders in every sector, and especially those who now inspire very little confidence, these findings are a call to prompt action and substantial changes in behavior. The stakes are high; the nation’s challenges are grave, and the consequences of failed leadership today will be felt

for decades to come.” In the survey’s only hint of optimism, 77% believe the nation’s problems can be solved with better leaders, indicating the extreme importance of effective leadership.

I strongly support these conclusions, and the urgent need for the United States to develop and select new leaders who are committed to put the common good ahead of their own interests.  Then, and only then, can the vitality of the United States be restored to its position of global leadership. Kudos to CPL for its vital role in developing this new generation of leaders. 

Hope for the Holidays

Post Co-Written By John Coleman and Bill George.

The recent Occupy Wall Street protests are only the latest of a series of global movements carried out by those who have grown cynical about leadership in business, government, and society.

There is reason for this cynicism. The twenty-first century has been rocked by scandals and failures of leaders in the baby boomer generation. In business, companies like Enron and individuals like Bernard Madoff have broken laws and violated trust. In 2008 financial markets melted down, triggering the Great Recession and costing millions of people their jobs. Governments have failed to demonstrate fiscal responsibility, creating trillions in debt and stifling global growth.

After a decade of problems, it’s not hard to see why people take to the streets or grow distrustful of those who bear responsibility for the troubles we face and who have too often put their self-interest ahead of their institutions.

But while senior leaders have often failed to fulfill their responsibilities, we see many hopeful signs that the Gen X and millennial generations have learned from these failures and are prepared to step up their leadership in these trying times.

According to a recent survey of 500 young MBAs from top business schools:

  • The emerging generation is actively thinking about its responsibilities and taking on leadership roles. Eighty percent believe their generation views leadership entirely different than previous generation.
  • They’re globally minded. On average, MBAs worked in four countries prior to graduate school; and planned to work in five more within ten years of graduation.
  • They want an open workplace that is inclusive of everyone, regardless of gender, race, national origin or sexual preference. Ninety-two percent believe workplace diversity leads to better business outcomes.
  • They are highly effective at navigating an interconnected world where leaders from multiple sectors collaborate to achieve lasting solutions to seemingly intractable problems. Eighty-four percent believe it is essential for business leaders to understand the public and non-profit sectors. Nearly a quarter of them worked in the public sector prior to entering their MBA programs, and thirty percent have already worked in the non-profit sector.

We’ve gotten to know many of these emerging leaders and find their life stories are truly inspiring:

  • Wendy Kopp founded Teach For America shortly after graduating from Princeton, creating the most significant innovation in public education in thirty years. Teach for America has become a prized job for graduating college seniors at leading universities like Harvard, Virginia, and Yale. Though no longer in her 30s, Mrs. Kopp set the stage for other young leaders seeking impact. 
  • While a college student at North Carolina, Rye Barcott founded the non-profit Carolina for Kibera, fostering healthcare and development in the slums of Kibera, Kenya. Then he built his organization even while serving as a Marine captain in Iraq, Bosnia, and the Horn of Africa.
  • Umaimah Mendhro fled Pakistan as a young girl, but returned after rising through the ranks at Microsoft to build schools in the rural areas near her hometown. 
  • Andy Goodman so enjoyed his time as a debater at Oxford that he dedicated himself to building Qatar’s first debate system, working with the leaders of that country to give students an opportunity to engage the country’s most important issues in free and open dialogue.
  • Building on the year she spent working in Brazil following high school, Abigail Falik founded Global Citizen Year – which offers graduating high school seniors a gap year to engage in service learning and leadership development in a foreign country prior to entering college.

Far from unique, these leaders are typical of the many people in their 20s and 30s we have worked with. Many young leaders are consciously building careers that combine both innovation and social good, while working tirelessly to have a positive impact on this critical moment in the world’s history.

The holidays can be a confusing time. With 24/7 media outlets relentlessly pursuing negative stories, it is tempting to be pessimistic about the coming year. But we think there are signs that the next generation of leaders has learned from these crises. No doubt the road ahead will be filled with challenges and pitfalls, but, with help, we believe these emerging leaders will replace cynicism with hope, callousness with compassion, and destructive self-interest with creation of societal gains. 

The time is ripe for the baby boomer leaders to begin providing opportunities to this new generation of young leaders to demonstrate just how effective their kind of authentic, collaborative leadership can be. And perhaps the pessimism of 2011 can turn into a bit of hope for the new year. 

Bill George is professor of management practice at Harvard Business School and the author of five books including True North and True North Groups. John Coleman is an author of Passion and Purpose: Stories from the Best and Brightest Young Business leaders.

Leadership Kudos and Gaffes: European finance leaders concerted leadership has gone a long way to stabilizing the financial crisis

Leadership Kudos go to European financial leaders IMF president Christine Lagarde and EC bank president Mario Draghi for stepping up to resolve the Euro crisis, in part with IMF’s €2.2 billion loan. Their concerted leadership has gone a long way to stabilizing the financial crisis, although much more work well be required to bring the budgets and debts of member countries back to fiscal responsibility and stability.

Leadership Gaffes go to the Olympus board of directors and former CEO Michael Woodford for poor governance that led to the cover-up of $1.7 billion in losses. The details are murky but the failures of leadership are very evident. As a result of the board’s poor governance, a great company is being destroyed and customer and investor confidence is being shattered.

Leadership Kudos and Gaffes: John Hope Bryant's commitment to financial literacy is leadership in action

Leadership Kudos this week go to John Hope Bryant,  founder, chairman and CEO of Operation Hope, the nation's leading non-profit organization committed to financial literacy. Since founding Operation Hope in 1992, Bryant has raised more than $500 million to help the poor achieve financial literacy. He is vice chair of the President's Advisory Council on Financial Literacy, appointed by former President George W. Bush and reappointed by President Barack Obama. Bryant is a Young Global Leader of the World Economic Forum and author of Love Leadership. With HRH Crown Prince Haakon of Norway and Finnish philosopher Pekka Himanen, Bryant founded Global Dignity Day, which has had global impact in restoring dignity for all people of the world. Most recently, Bryant started the Silver Rights Movement to help all people achieve financial literacy and 5MK - or Five Million Kids - to help children become financially literate. He is a remarkable leader: compassionate, passionate, and focused on helping the poor around the world.

Leadership Gaffes go to Corporate Lobbyists for their attempts to water down the Foreign Corrupt Practices Act (FCPA). While some clarifications in definitions may be necessary, we shouldn’t lose sight that FCPA has been an important force for the integrity of U.S. corporations in doing business overseas, setting a higher standard than those practiced by many other nations. The act has given the United States more than the moral high ground, it has also given American companies a competitive advantage.  By taking a higher road of ethical standards and focusing on product and service superiority, rather than paying bribes, U.S. companies outmatch non-U.S. companies in terms of real value creation. Indirectly, FCPA is having the impact of encouraging other nations also to set high standards of business practice. Reducing the U.S. standards for integrity would be a major mistake.