This is the fifth in a series of blog posts looking at five cognitive distortions of high achievers. Today, our topic is Schumpeterianism, better understood as the principal of creative destruction. Popularised by the Austrian economist Joseph Schumpeter (1883 – 1950), it states that the old must be destroyed to make way for the new. Of course, this idea itself is as old as the cycle of life. It’s the economic incarnation of Shiva, the Hindu god of destruction and transformation. On the one hand, it is a driving force behind capitalism. On the other, it can exact an immense toll of human suffering. When a business leader indulges in a penchant for creative destruction, he or she can easily create a climate of fear and disharmony within the workplace.
Of course, Schumpeterianism can also benefit us all. Here’s a relatively innocuous example: when the first iMac came out, it lacked a floppy disc drive. Steve Jobs believed that the floppy disc had been superseded as a storage medium. For those of us who had files scattered across a collection of floppy discs, this proved to be inconvenient, so we went out an bought external floppy disc drives to plug in to our iMacs. But Steve Jobs was right. The floppy disc soon became obsolete, and the old floppy disc drives were inevitably dumped in the electronics recycling bin at the local tip.
How does this translate into behaviour in the workplace? Problems arise when business leaders overemphasise destruction, while ignoring the creative side of the equation. Economic rationalists have used Schumpeter’s doctrine to justify radical downsizing and asset stripping. Such changes create enormous amounts of stress within organisations and the broader community, but the CEOs responsible always insulate themselves from those who lose their livelihoods. The responsibility for dealing with the staff fallout is usually delegated to managers who have had no say in the process, but who become the focus for their staff’s anger.
Because they feel besieged, these managers often find it easier to rationalise away the emotional pain their people are experiencing. In organisations where the leaders are prone to personal exceptionalism and dichotomous thinking, the emotional impacts of change may be ignored entirely. But in today’s world, where people connect instantly on social media, callous corporate policies can bring a firestorm of negative publicity down upon the executives involved. This can have devastating effects on the one thing they truly value: the bottom line. It is far better to work with your people through periods of change–even highly destructive change–and engage them in the creation of new enterprises. To do so effectively, however, leaders need to set aside their heightened sense of self, their perfectionism, and their intolerance of difference. Doing so may come at a personal cost. But in the end, the benefits far outweigh the risks.
So let us propose five character traits for effective leaders in the twenty-first century–the qualities we associate with the late Nelson Mendela, rather than Enron’s Ken Lay:
- A balanced assessment of one’s strengths and weaknesses, emphasising humility rather than arrogance
- A high tolerance for ambiguity, and a capacity for systems thinking
- An ability to admit one’s mistakes
- An interest in all aspects of the business, not just the visionary and stimulating elements
- A primary focus on creation, rather than destruction
Finally, let’s add one final characteristic, one which we never associate with dysfunctional leaders: a willingness of forgive. Mandela forgave his enemies. This is the quality that made him great. But forgiveness is most effective when it comes from a position of strength. Which is why it is the most important capability in the modern leader’s skill set.