Diving deeper into agility and innovation mindsets, MERIT spoke with Margarita Mayo, award-winning author and professor of leadership and organisational behaviour at IE Business School.

Margarita’s research shows that 70% of all corporate change initiatives fail, mostly because they do not involve top management. She proposes a model for starting change from the top down and ultimately creating an innovation mindset for the whole company.

Margarita’s book Yours Truly: Staying Authentic in Leadership and Life, which won a 2019 Business Book Award in the UK, argues that an outdated model of domineering, charismatic leadership is holding organisations back. On the contrary, authentic leaders who show humility, have storytelling abilities, and can learn new habits are the ones that can create agile, innovative companies.

But Margarita’s research confirms the known paradox that the more senior someone’s position, the less open they are to feedback and change. For executives in HR or L&D who want to promote a mindset of innovation, this poses a conundrum: the very people who need to lead change are often the ones most reluctant to do so.

What can companies do in order to transition to an authentic leadership model and become more innovative? What can HR executives do? Margarita’s method, developed after 20+ years of research at the State University of New York, Harvard University, and now IE University (Spain), offers some suggestions.

Why is authentic leadership necessary?

Margarita maintains that company mindset cannot change unless leaders themselves undergo a personal transformation. “Real change happens from the top,” she said. “Then that trickles down.”

The CEO and key decision-makers set the tone, motivate everyone else, and inspire trust that culture programmes are sincere. If leaders ask for advice, accept feedback, and practise humility – key behaviours in a culture of innovation – the rest of the organisation will follow suit. Otherwise, people are likely to dismiss innovation programmes as window-dressing.

It may seem like culture initiatives would have more impact if they targeted middle management. But it is likely that this would be a wasted effort, according to Margarita’s research. Targeting leaders, on the other hand, can bring about what she calls a “revolution”. “That’s the way that we can make a difference,” she said.

If leaders have such a big impact on company culture, change should be straightforward, right? Unfortunately, no. The problem is the widespread crisis of trust in leadership. The 2019 Edelman Trust Barometer finds a “high lack of faith in the system”, with only one in five people feeling that it is working for them.

Further, only 58% of employees say that their employer is a “trustworthy source of information about contentious societal issues”. While this number is far from abysmal, it still means that 42% of employees do not trust their employer to tell the truth about challenging topics. People are acutely aware we are living in difficult times and expect their leaders to take responsibility, Margarita emphasised.

Many leaders have lost a connection with their people at a time when this is essential. HR executives need to tackle this issue: “The first task is selling top management the need for a new type of leadership. … I think we have to give them this sense of urgency, that we have to do something different,” Margarita said. If leaders understand how strongly their own mindset is linked to innovation and the company’s performance, they are more likely to get on board.

Using leadership development to seed innovation

Leadership transformation begins with self-awareness: it is important to “know what you don’t know”, Margarita said. Preliminary data from a survey she is conducting provides a benchmark against which leaders can compare themselves. So far, the three traits on which people perform the most poorly are storytelling, openness to feedback, and legacy.

Leaders’ reluctance to take feedback is not a surprise as, traditionally, they have been selected for their charisma and confidence. But the extremely low score on storytelling is unexpected. Margarita thinks leaders are so focused on data that they neglect the power of moving, human stories. The other common weakness, legacy, is also surprising, as it is ostensibly a priority for many companies. “Legacy means having a purpose greater than yourself and understanding why we’re doing what we’re doing. It’s the vision of the company,” she explained.

When she asks executives about their purpose, Margarita said, many cannot answer the question – “and this is not just middle managers, but people with certain responsibility in their company.” Without a sense of purpose, it is not possible to move ahead with an innovative vision. To develop both storytelling and legacy, Margarita conducts workshops in which executives tell stories about when they perform best, and what kind of impact they have outside of the organisation.

Key features of agile companies are openness, flat hierarchies, and collaboration. That is why leadership development should also include an interpersonal component. Margarita’s approach combines a self-driven development plan with peer coaching. This way, in addition to gaining insight into their own traits and tendencies, leaders “appreciate that other people are different, so they can start developing a team orientation.”

A public commitment by top management is the first step in creating an innovation mindset. Then, leaders need to model the changes they wish to see across the organisation. Employee response is one way to hold leaders accountable: if the commitment is genuine, engagement will increase.

How a mindset of innovation “trickles down”

Once members of the C-suite have committed to adopting an innovation mindset, the time has come for company-wide initiatives. At this stage, each person needs to practise the attitudes and behaviours that foster a culture of innovation.

Accepting failure is a crucial aspect of an innovation mindset, Margarita said. As an example, she cited PERI, a highly innovative construction technology company where only one out of five new products is successful. But she was careful to differentiate between merely tolerating mistakes and actually using them to achieve personal and organisational growth.

“One of the things that is important when we learn from failure is that these lessons are not just for one person, but these lessons actually are transferred to the system. Organisations have to have memory systems,” Margarita said. “If there is only one manager who learned that lesson, and that manager leaves the company,” then the potential for innovation is lost. To combat organisational forgetting, everyone should be empowered to contribute to a shared knowledge bank.

In addition to organisational memory, there should also be “transactive memory”. In innovative companies, each employee sees their own role within a larger context: “I know what others know.” That way, people understand who they can collaborate with on a certain task. To make this a reality, managers should reward employees for sharing their knowledge.

Engaged, authentic leaders can create organisations in which people trust each other and adopt a mindset of innovation. Once leaders demonstrate that they can ask for advice, implement feedback, and reflect on their own legacy, employees will follow suit.

That is the way to build a culture in which mistakes become assets as part of the organisational memory, people with different skillsets collaborate, and innovation is dramatically accelerated.

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By Ani Kodjabasheva