In a global context marked by chaos and turbulence, technological advancements, health crises, marketplace alterations, shifting demographics and organizational foolishness, the demand for more adaptive and reflective forms of leadership has become a necessity. Given this context, wisdom can provide a meaningful understanding of “good” leadership to navigate such turbulence and seize the opportunities that come along with it. As such, wisdom constitutes a cornerstone of effective leadership and serves as a key driver of organizational excellence.
How do leaders ‘wise up’?
To put wisdom to good use in leadership, in one of our research pieces, we developed a valid “wise leadership scale”, designed to assess the extent to which leaders and managers demonstrate wisdom within organizations by gathering data in France and Morocco. In a recent research output, we validated the new wise leadership scale using data collected from Canada, China and Morocco. How do we define wise leadership?
Wise leadership is oriented toward enabling others to contribute meaningfully to the flourishing of individuals, organizations, and the wider community.
We conceptualised wise leaders as individuals who enact normatively positive behaviours through four mechanisms:
This involves the ability to recognise, comprehend, and make sound decisions in both predictable and unpredictable situations. It entails quickly detecting subtle cues and underlying dynamics, anticipating potential difficulties, and generating actionable insights, even in ambiguous and uncertain contexts.
Wise leaders grasp what needs to be done and are acutely aware of the repercussions of their decisions and actions. To establish facts and provide deductive explanations without rushing to judgement, they rely on reasoned and circumspect observation. Wise leaders also possess the intellectual abilities required to realise their envisioned future by selecting the appropriate course of action at the right moment, while carefully considering the prevailing circumstances.
A lack of intellectual shrewdness along with sound judgement and foresight among high-ranking executives and engineers resulted in Volkswagen’s Dieselgate scandal in 2015.
The latter was about setting up unauthorised software to evade nitrogen oxide emission regulations. The individuals concerned were intelligent leaders with remarkable engineering and financial abilities. Nonetheless, they exhibited poor judgement and unwise behaviour as they did not adequately assess the potential repercussions or anticipate the harmful consequences for both the company and themselves of tampering with emission tests. The scandal resulted in a colossal loss of over €33 billion in penalties and settlements for Volkswagen.
This refers to the capacity to inspire and mobilise others around a compelling vision. Wise leaders help subordinates perceive a positive future vision as both meaningful and attainable.
Spurring action involves directing followers toward actions that yield desired outcomes that followers themselves recognise and appreciate as wise. To this end, wise leaders display specific traits and behaviours that enable them to align individual and organizational goals. Wise leaders additionally, actively develop the potential of their followers, elevating them to new levels of performance and growth. On top of this, wise leaders are also able to bring people with varying interests together, even by resorting to power if necessary. Lastly, by fostering a sense of purpose, nurturing trust, building strong human connections, and creating opportunities for organizational members to work collaboratively, wise leaders entice subordinates to achieve positive work outcomes.
When Tadataka Yamada took over as chairman of R&D at Glaxo SmithKline (GSK) in December 2000, his company was one of 39 pharmaceutical companies suing the South African government for violating price protections and patent infringement for AIDS medicines over access to drug therapies for needy patients.
Given the patients’ powerless position to alter the course of the legal process, Yamada opted to be a part of the solution to global health problems, rather than a party to a lawsuit that prevented such treatments from reaching those in desperate need.
In one-on-one meetings with each GSK board member, Yamada emphasised GSK’s moral obligation to relieve human suffering and associated it with the company’s long-term performance. All 39 corporations withdrew their legal action against South Africa in April 2001. GSK’s business strategy in developing countries, stakeholder relations, and reputation were all positively impacted by this decision.
This refers to how far morals, values, and principles guide wise leaders’ day-to-day interactions with stakeholders in a consistent, truthful, and ethical manner. Wise leaders avoid excess and greed, uphold high ethical standards and prioritise virtuous outcomes. In practice, wise leaders balance their own interests with those of others, carefully evaluate the moral implications of their decisions and actions, and consistently adhere to their ethical principles. To achieve this, wise leaders rely on a strong moral compass that provides clear behavioural guidelines, ensures consistency between words and deeds, and reinforces their moral commitment. As a result, they serve as role models for their followers; their organizations function harmoniously, grounded in a noble purpose aimed at delivering benefits to the greatest number of people.
As an example, Mario Rovirosa, CEO of Ferrer – Spain’s first B corp pharmaceutical company, stresses that the brand’s slogan “Ferrer for good” says it all: it is the company’s purpose to “do good” in society and on the planet, and asserts that Ferrer harnesses its pharmaceutical activity to obtain the required resources to do good.
Rovirosa spearheaded Ferrer to become the first Spanish pharmaceutical laboratory to obtain the B Corp certification that is awarded by B Lab to firms that meet high standards of social and environmental performance, accountability, and transparency.
Ferrer takes into account the effects corporate decisions have on their employees, customers, suppliers, community, and the physical environment. Recently, the company conferred more than half of its profits to social and environmental initiatives.
Cultivating humility involves a balanced sense of self-worth that lies between the vices of deficiency and excess. Wise leaders deeply value their expertise and knowledge yet continually subject them to critical scrutiny. They are committed to lifelong learning as they strongly believe that true wisdom also stems from the vast realms of knowledge that remain unexplored. Wise leaders remain open to learning from all sources, including subordinates, and readily acknowledge that they do not know everything.
Moreover, the humility of wise leaders is evident in their willingness to openly admit mistakes and draw valuable lessons from them. Finally, wise leaders willingly adopt the perspectives of others, rather than exclusively rely on self-focused stances. In so doing, they truly guard against intellectual arrogance and ignorance.
When Anne Mulcahy took the reins of Xerox in 2001, it was recommended that she announce the company’s bankruptcy. Xerox was losing 300 million dollars each year. However, she chose not to take the “easy path”. When confronted with daunting obstacles, Mulcahy favoured dialogue over speeches and exhorted staff to share critical viewpoints and even discordant stances, and hence succeeded in accommodating diverse perspectives and expectations.
Mulcahy did what the vast majority of leaders would not do: she approached junior subordinates to mentor her in product development, engineering, and finance. Mulcahy ended up saving Xerox and improving its profitability by slashing both its capital expenditures and total debt in half, and cutting its general and administrative expenses by one third.
The proposed wise leadership model broadens the scope of existing approaches, such as authentic, ethical and transformational leadership, by incorporating the core components of judgement, action, morality, and humility.
This new wise leadership scale can serve as a practical tool to assess the degree of wise leadership demonstrated by current employees and to identify individuals with (un) wise tendencies during leadership recruitment and selection processes.
It also offers a valuable mechanism to design and deliver targeted leadership training and development programmes aimed at fostering wisdom in leaders, which may lead, in turn, to generating positive organizational outcomes.
The European Academy of Management (EURAM) is a learned society founded in 2001. With over 2,000 members from 60 countries in Europe and beyond, EURAM aims at advancing the academic discipline of management in Europe.
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