Management in Times of Global Conflict
Introduction
Through the late-nineties and early-noughties, neoliberal-optimists-in-chief bristled with confidence that they could steer the world toward a more enlightened, mutually tolerant and co-dependent global order. Such hopes proved naive; the end of history was just the beginning.
The last ten years have been marred by rising populism, the pandemic, and bloody conflicts, the current wars in Ukraine and the Middle East the most notable examples. Such global turbulence affects businesses – and leaders. As David S. Lee of the Hong Kong University Business School surmises, “Most CEOs came of age during a period of globalisation, when free markets and trade were assumed to be net goods. But the ground has shifted” [1].
Leaders – even experienced leaders – have not had to deal with the level (and variety) of problems currently facing the world. On top of the aforementioned conflicts and political unrest, which impact everything from supply chains to employee morale, there have been shifts in the level of engagement businesses are expected to make regarding social issues. Not engaging, or engaging in the wrong way, can quickly prove damaging, maybe even fatal, as many businesses have found out the hard way.
On top of that, attitudes to work have shifted. Millennial and Gen Z workers have values and expectations that differ drastically from their Gen X and Boomer colleagues. These shifts in working values were only exacerbated by the pandemic, in which the in-office 9-5 ceased to be part and parcel of the working experience. In swathes, employees began asking themselves whether they were truly satisfied with their lot. The answer came in the form of the Great Resignation and quiet quitting; people wanted more.
AI poses greater challenges still. How soon will the technology become sufficiently sophisticated to start displacing human workforces on a large scale? How will that overhaul be handled, by businesses and governments? And how will the human animal, conditioned over millennia to find worth and meaning through work, react to no longer being needed?
It is the job of great leaders to meet these challenges.
McKinsey predicts that by 2027, 75% of the companies listed on the S&P 500 will have disappeared [2]. To be one of the 25%, leaders need to face these issues head on, as well as putting structures in place to ensure they’re as prepared as they can be for future unknowns.
Where do you work?
In the wake of the war in the Middle East, Houthi militants launched attacks on shipping vessels in the Red Sea. The attacks caused enormous disruption, prompting a collective shift in supply chain routes to avoid the area, with the requisite delays in shipping timelines and ramped up costs an inevitable result.
This follows on from the Ever Given fiasco of 2021, in which one of the world’s largest shipping vessels found itself farcically stuck in the Suez Canal, blocking the route off to other suppliers for a matter of six days. Add to that the fallout from Covid and you have a clear reminder that existing supply chains are at the mercy of the world around them. And these problems are coming thick and fast.
As Nitin Nohria, the former dean of Harvard Business School, writes of what he refers to as leadership’s ‘new zeitgeist’, “Leaders can no longer assume that trouble may strike once every three or four years and be managed by outside crisis consultants. Instead, companies must prepare for a steady stream of upheavals—and hone their in-house skills for dealing with them” [3].
A growing subset of firms are looking to capitalise on increasing demand from companies for advice on how to navigate a world in turmoil. In October of 2023, Goldman Sachs set up an institute to analyse geopolitics and technology. Prior to that, Lazard and The McKinsey Global Institute set up similar ventures. Whether it’s done in house or managed by external consultants, the consensus is that these problems aren’t going away. Solutions are needed.
As a result of the barrage of incidents affecting supply chains, a number of companies are looking to pivot their supply bases to less politically challenging countries in what is sometimes known as “friend-shoring”. Others are choosing to move their supply chains to their home nations. Each of these moves comes with its own regulatory challenges and periods of adjustment. For companies choosing to stick to the area of turbulence, Ziad Haider, McKinsey’s global director of geopolitical risk, notes that they “need to use a lot more care and diligence to make sure there isn’t, for example, forced labour involved in that supply chain” [4].
There are no easy options. Do you stay or do you go? Stick or twist? Do you rely on instinct to decide or trust in third-party consultants? Do you set up your own internal consultancy, seeing it a necessary investment in what are proving to be difficult times? All of these considerations and more fall to leaders, who are expected to have clear answers to complex questions.
Reputational risk
In the past, the answer the CEO gave would likely have been based on one consideration only: which option best serves our bottom line? Nowadays, other factors are at play. Namely, reputational ones.
Haider raises the question modern leaders must confront: How do you maintain a global footprint but be ready to answer the question about why you are in that problematic market?
“The bar for explaining where you are and why you’re there has gone up from external stakeholders, be it media or parliament, as well as internally, from colleagues. That’s something companies are having to balance. What you say in one market very quickly shows up in the other market, so you can’t get away with shading your messaging too much, either,” he explains [5].
After Russia’s invasion of Ukraine, companies were quick to distance themselves from the country. Admittedly, that was partly for legal reasons, with heavy sanctions dealt Russia’s way. But the companies also acted with awareness that Russia had become a persona-non-grata; to do business with them would have been reputationally ruinous.
But what about in cases where there’s less consensus as to the villain of the story? Critics are quick to point to double standards in the way businesses who were quick to pull out of Russia are fine to do business with Saudi Arabia, for example, who waged a similarly destructive war in Yemen and brutally executed an American journalist. Finding a clear position amongst nuanced global standings is difficult – also exemplified by the inconsistency of the West’s approach to China over these past decades and the difficulty businesses are having responding to the Israel-Palestine conflict.
The death of the global chief executive
In the Financial Times, fellow at the American Enterprise Institute think-tank Elisabeth Braw writes that “the era of borderless enterprise may be past. Geopolitical tensions are rising, leaving business in the line of fire. Suddenly companies’, and executives’, nationalities matter again” [6].
Braw cites the California-based space transportation start-up Momentus, valued at $1.2bn, that parted ways with its Russian CEO and co-founder Mikhail Kokorich over US national security concerns.
“The fact that some countries aren’t getting along doesn’t mean businesses should discriminate against certain nationalities,” Braw writes. “But it does mean that they should get used to a reality in which they can be attacked as country proxies.”
To be from the “wrong” country can lead to one having their home nation’s ideologies thrust upon them by association. As with supply chains, companies are looking at which countries – and whether consciously or not, which people from those countries – are worth the hassle. It’s unlikely to take the form of outright discrimination. Rather, if deciding between a homegrown hire or someone who might require additional vetting, companies will default to the easy option. It is, of course, horrifically unfair for someone’s career prospects to be potentially hampered by their place of birth. That doesn’t mean it won’t happen.
“We’re seeing that nationality is starting to matter a lot more,” says Andrew Grant, a senior partner at McKinsey. “Leaders must work to hold their organisation together when many of their employees are subject to much more nationalistic forces than they used to be. The leaders we speak and engage with are quite concerned about how to nurture a global culture in a world that is nowhere near as sympathetic as it used to be” [7].
What can leaders do now?
For all the creeping nationalism in enterprise, Grant reminds us that there’s no right answer to complex geopolitical pain points.
“No one has a monopoly on the right perspective. It’s really important for global companies to understand that these are very three-dimensional problems that they should view from a truly global, not just national, lens. The right stance is rarely black and white. And even if it’s black and white today, it may not be black and white tomorrow” [8].
In order to meet the times head on, Lisa Pollina, a global financial services executive and member of the Board of the Atlantic Council of the United States and the Council on Foreign Relations, says leaders must find solutions that (1) protect employees (2) weigh the impact on stakeholders (3) safeguard the bottom line (4) prioritise the organisation’s well-being beyond just the profit model [9].
She suggests boards meet frequently to monitor ongoing events, which move at a pace, and regularly review both past decisions and the evolving political landscape.
Haider says boards should take a granular approach. “Every month, the board needs to look at the top five markets of geopolitical concern and create a clear game plan about what will be done to manage those risks—and that starts with having a common set of facts” [10].
This last point is crucial. Coming up with a productive pandemic strategy would have been impossible for a board whose members couldn’t agree on whether or not the disease was real. Basic facts must be established and agreed upon before any substantive progress can be made.
Leaders must also provide employees with a clear direction of travel. José Luís González Rodriguez, a partner at ActionCOACH in Spain, says that the most effective way to align on facts and ensure everyone is singing from the same hymn sheet is to make use of data.
“In my experience, a significant percentage of business decisions are made without the necessary information, simply because the company data is not structured and up-to-date,” he says. “No one would think of driving a vehicle without looking at the dashboard, and similarly, we should not run companies without one. This is especially relevant in the digital age, where data has become the most relevant asset in every industry” [11].
More than anything, leaders will need to be adaptive. Things change quickly, both in global circumstances and in-vogue attitudes. A good leader will be tuned in to the prevailing winds of the time and have a nose for future trends too. They will adapt to the circumstances around them as well as to the feelings of their staff, with an empathetic approach that brings the best out of their multi-generational teams, whose values likely differ worker-to-worker. Equity, work-life balance and flexible work culture will all need to be factored in amongst the conflicts of the day.
Leaders today face a more diverse set of problems than ever before. Those that can navigate those tricky waters unscathed will be in the minority – and rewarded all the more for it.
More on the Future of Leadership
Leadership in Focus: Foundations and the Path Forward
Mastering Change and Complexity: Strategic Leadership in an Uncertain Business World
Embracing Ambiguity: Leadership in the Liminal Space
Modern Skills for a Modern Boardroom: A New Look at Leadership
Leadership Lessons from Obama and Other US Presidents – Podcast
Sources
[1] https://www.cutter.com/event/leading-era-geopolitical-turmoil
[3] https://hbr.org/2022/07/as-the-world-shifts-so-should-leaders
[6] https://www.ft.com/content/4635c387-1ecf-41ce-82f4-592691dfc894
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