CEOs are confronting double the number of critical issues today compared with ten years ago. On this episode of The McKinsey Podcast, McKinsey Senior Partners Daniel Pacthod and Kurt Strovink, along with McKinsey Senior Advisor Wyman Howard, join McKinsey Editorial Director Roberta Fusaro to discuss the characteristics today’s business leaders need to handle greater and more frequent waves of disruption and how organizations can create the infrastructure and conditions to build team-oriented leaders.
In our second segment, we examine three types of resiliencies that CEOs can develop within their companies with McKinsey Senior Partner Ida Kristensen.
But first . . .
What’s getting in the way of AI adoption?
Lucia Rahilly: There’s a lot of talk about the transformative long-term impact of AI on business. But in the short term, McKinsey’s recent research says only 1 percent of companies believe they have achieved AI maturity. And what’s standing in the way of adoption? It’s not the employees. It’s the leaders. They aren’t deploying enough capital or steering their companies closer to AI maturity—fast enough. If you’re curious, have a look at our report Superagency in the workplace: Empowering people to unlock AI’s full potential. And now, let’s hear from Daniel, Kurt, and Wyman.
The McKinsey Podcast is cohosted by Lucia Rahilly and Roberta Fusaro.
This transcript has been edited for clarity and length.
Building leadership capabilities
Roberta Fusaro: It’s right there in the title of the McKinsey article that all three of you just published around the 21st-century leadership factory. Tell me, Daniel, what is a leadership factory?
Daniel Pacthod: When we put this article together, we realized that it is perhaps more difficult to be a leader today than ever before. Lots of new threats, new challenges, new headwinds. Some of them are arriving very fast. And then there’s a compounding effect among them.
We coined the term “leadership factory” because, to some extent, the best leadership teams are creating almost industrial-grade, five-nine reliability processes to build tomorrow’s leaders. We embraced the concept of leadership factory for the work we’re doing for our clients as well as the work we’re doing internally.
Kurt Strovink: The only other thing I would add is that, oftentimes, CEOs will think actively about the pipeline of folks who could be succession candidates for their own role; they’re encouraged to do so by their boards, and they’re thoughtful about that. But we think the leadership factory concept is actually much broader than that. It encompasses succession, but it’s actually about developing a much broader leadership team that’s needed in modern organizations to execute at scale.
What matters most in leaders
Roberta Fusaro: McKinsey’s research, similarly broad and deep over decades, has uncovered six traits associated with strong leadership for today’s organizations. These include optimism, selfless leadership, continuous learning, resilience, levity, and stewardship. I was wondering if maybe each of you might take a turn talking about one of these attributes. Daniel, what’s your favorite?
Daniel Pacthod: I choose positive energy and personal balance. I’ve been seeing CEOs and leadership teams saying, “It’s time to play offense but also [it’s critical] to do so in a way where you inspire leaders on your team and are a role model for personal balance.”
Kurt Strovink: I think continuous learning is particularly important. Management teams and the broader leadership core need to be current and assimilate all the new things that are happening in our world.
We’re observing a number of different strategies that top teams are using that allow for transparency, keep score, develop an even standard of work, and lock down how we do things with excellence at this place. But I also see examples of leadership skills or strategies that involve reaching deeper into the networks that go beyond their typical networks, beyond their industries, across industries, learning from other places, and making sure more people in the organization maintain networks that are outside of their companies.
Roberta Fusaro: Wyman, stewardship is one of the key traits you’ve encountered in your experiences with the US Navy SEALs. So tell me, why is this trait so important for leadership success?
Wyman Howard: It’s the idea that you’re always standing on the shoulders of others. We think of stewardship as your opportunity to leave the boat faster because you were on the team, starting with family, community, what you do, what you contribute professionally, to your country, and to the planet. Leave it in a better position because you were on the team.
Roberta Fusaro: Kurt, is there any one of these attributes that you’d particularly like to talk about?
It’s OK to be uncomfortable
Roberta Fusaro: A component of continuous learning is trying different things and being put in uncomfortable types of situations. Kurt, can you talk a bit about this dynamic?
Kurt Strovink: We’re seeing more leading organizations offer their employees stretch roles and hard assignments. We’re also seeing employees skip a level and giving that opportunity to someone who reports to somebody who could otherwise do it.
We often think we know who the high performers are before we begin building systems for people’s development, continuous learning, and the like. But one of the interesting things about leadership cultures is sometimes people rise who you didn’t think were your high-potential folks. They succeed within the system you establish and become the high-potential folks of the next generation. That’s another benefit for organizations to harvest out of this leadership approach.
Roberta Fusaro: Daniel and Kurt, were you ever put into an uncomfortable situation yourself early in your career, and how did that help you?
Daniel Pacthod: Yes, it might be a reflection on me, but multiple times. I think when you look back, these are perhaps the moments when you actually learn and develop the most. I had a mentor whom I worked with a long time ago, and he was obsessed with taking a play-to-win approach. But it was more the process and the mindset that you took.
You need to quickly realize what you don’t know and then humbly reach out to people to teach you. Then you’ve got to be unbelievably aggressive and do everything you can to play the role and then mobilize people and teams around you.
I think the best CEOs today give people field promotions. I’ve got a lot of these [experiences] where I was perhaps not ready to play the role, but then people grow into the role and rise to the occasion. I think that’s a mindset you want to create in a high-performing, 21st-century leadership team.
Kurt Strovink: Sometimes a mark of a truly leading organization is that just when you become comfortable in the role, you’re usually moving on to something else that you’re slightly uncomfortable with. So you have to lean into discomfort because that’s part of growing and evidence of stretch, and that’s a beautiful thing.
Roberta Fusaro: Wyman, what uncomfortable situation did you face when you were starting out, and what did you learn from it?
Wyman Howard: There was a mission we were tasked with. My senior enlisted adviser came to me with some concern about the viability of the ways we were going to infiltrate the objective. And I listened. He moved my thinking about risk and a different approach, and we ultimately reversed the decision to his point of view, and it was a decisive and successful outcome. I was reminded in that moment of something my father taught me: Have your hand on the gearshift at all times and have the position of reverse well oiled. This means being in position to slam the machine into reverse and being courageous enough to show vulnerability by acknowledging that your earlier decision wasn’t the right one.
Finding balance
Roberta Fusaro: Managers these days are being buffeted on all sides by disruption, new agenda items, and new responsibilities. How can CEOs find balance in this kind of environment?
Kurt Strovink: Managing energy is what’s really important to building resilience and accomplishing what you’ve set out to do.
We find that those who manage energy explicitly and strategically are actually able to do quite a bit at once, and they’re thrilled to be doing it. But those who miss opportunities to recharge on their own terms, whatever those are, sometimes get ground down and are less effective than they’d like to be.
Daniel Pacthod: I was working with a CEO a few years ago, and he had this great quote: “I treat my personal balance, energy, and health like one key stakeholder, like the board, for example.” I think it’d be great to get Wyman’s perspective on this, because of what he’s done with the Navy SEALs, where there was this real focus on mind, body, and spirit.
Wyman Howard: We came to a practice of mind, body, and spirit out of necessity. We saw our combat employment go vertical after 9/11. And in the mid-2000s, we started to see the strains of that pace. We had creative leadership of the enterprise at the time, and we addressed the stresses we were seeing with a practice across those three pillars.
We saw stressors on family and from the pace of combat employment and behaviors that could be detrimental to the mission. The investment was made in practitioners across the pillars. So think about the importance of destigmatizing mental health. That’s got to come from the top.
Psychiatrists, psychologists, sports psychologists, marriage and family life coaches, social workers, nutritionists, physical therapists, strength coaches, and nondenominational spiritual advisers—those practitioners cross-functionally organized based on the resources that we had for a 10,000-person Naval Special Warfare enterprise. I’ll give you one example of the innovation that we delivered. Inside of our physical gyms, we began to invest in a mind gym, M-I-N-D.
Roberta Fusaro: What did that look like?
Wyman Howard: That’s where the float tanks are for sensory deprivation. Being able to work on the elasticity from a heightened state to a relaxed state. When you’re pushing the edge of complexity and risk, the downside is you can get stuck in the red, so to speak, in a heightened state. So from floating in sensory deprivation to mindfulness training, teaching breathing techniques for emotional regulation, cutting-edge neurocognitive testing, yoga, this is where we train the mind for the missions that are asked of us.
Inside McKinsey’s leadership factory
Roberta Fusaro: The article also talks about how CEOs can support high-potential leaders by leading immersion sessions. What do these immersion sessions look like in practice?
Daniel Pacthod: Leadership factories are core to what the CEO and the senior team do. Best practices involve taking new people into the roles and creating a very focused intervention. This includes them learning the art of the possible from what others in similar roles have done, but also starting to open up a lot about, perhaps, their fears, the hurdles they have, and then have a much more peer-based learning, which is almost an on-the-job learning, on what they’re going to do, and how they set and raise the ambition of what they want to do.
I think it’s also an intervention where people in smaller cohorts learn from each other. And in some cases, we’ve seen this both with our clients and internally, these groups stay together. Sometimes we do these sessions with CEOs from different industries. And that learning cohort stays together in the spirit of continuous learning.
Roberta Fusaro: It also speaks to some recent research McKinsey has on teams and change. So, Kurt, if you don’t have a leadership factory currently, how can you start to build one? What are the questions or considerations that you need to think about?
Kurt Strovink: Some of the markers for whether or not there’s an opportunity in your organization for a leadership factory is when you have a certain number of leaders who you consistently go to for major missions, challenges, and opportunities.
Those folks are both extremely prized and overtaxed. They might be shouldering 120 percent of the missions of the company because you have such confidence in them.
If you feel like you have those 30, 40, 50 people but need 250, and you ask, “Can I actually build that?” The experience we’re gaining from all the clients and CEOs we’re working with is, “Yes, you can.”
There is a way to systematically develop and increase by a factor of three to five the number of leaders a company has. This is about infusing the way you work with a leadership program and development. Usually it anchors in a new set of leadership capabilities that the organization believes are critical for its next phase. It involves a CEO being an active partner with a CHRO [chief human resources officer] to build this out and a deep belief that human capital is a differentiator.
Leadership lessons learned
Roberta Fusaro: Daniel, what’s the best piece of advice you got as you were developing as a leader?
Daniel Pacthod: Everything is possible. Play to win. And then get into this learning mindset and be willing to take risks, make mistakes, learn, and then constantly develop and build teams around you.
Roberta Fusaro: Kurt, do you have some sage wisdom that someone passed along to you as you were coming up as a leader?
Kurt Strovink: A piano teacher of mine when I was younger had this beautiful expression that always stuck with me: “Hurry up and relax.”
It’s an interesting idea for a leader, because I think they’re often in situations where they have to quickly recalibrate and get their bearings. They need to not say something they’ll regret and show up in ways that solve problems and don’t create fear or reactivity.
I think the idea of these yogic properties in leadership, where you have to be both decisive and a good listener, relaxed but keyed in and present, [illustrates that] we’re often balancing these dualities. Another more tactical piece of information or advice from a mentor of mine suggested that in the next couple of meetings I was having, what would it mean to ask nothing but questions and make no assertions? How would you do that? How would you lead through that? What if that were your dominant mode? It’s amazing how much you can do through questions. And it’s amazing how much you alight other people’s opportunities, development, and leadership by doing that.
Roberta Fusaro: Wyman, what’s the best piece of advice that you got?
Wyman Howard: My father had the biggest impact on me as a leader. He commanded two warships. And when I was very young, it might have been ten years old, he said, “You’ll get to a point in what you choose to do where you may think you’re an expert.” And he said, “In that moment, if you think you’re an expert, reframe immediately to increasingly senior amateur.”
Roberta Fusaro: I love that.
Wyman Howard: Experts die, metaphorically. So, to Kurt’s point on continuous learning, I’ve talked about vulnerability and being very open and humble, and it’s carried me far.
How to build a resilient company
Lucia Rahilly: What also carries leaders and companies far is resilience. McKinsey Senior Partner Ida Kristensen talks with our managing producer and editor, Laurel Moglen, about what companies need to do to bounce back from difficulty.
Laurel Moglen: How should a CEO organize their thoughts around building a resilient company?
Ida Kristensen: I like to think about this as three types of resilience. I like to talk about financial, operational, and organizational resilience. Financial resilience is fundamentally about having both enough capital and liquidity to withstand and take advantage of things that might change and to invest in new opportunities. Operational resilience is about the agility to move and operate in different ways when circumstances change. And then last, organizational resilience is about your individual resilience. So individuals and teams not freaking out but taking change as it happens and not being overwhelmed by it, and using that energy to drive progress and to make really interesting changes.
Laurel Moglen: Do you have an example of resiliency that comes to mind?
Ida Kristensen: Corie Barry came in as the CEO of Best Buy right before the pandemic. There was a lot of innovation about in-store solutions. She invested in empowering individual store managers, which allowed the individual stores to make decisions fast. There was a lot of digital growth, and it allowed Best Buy to pivot really fast at a time when the old business model and in-store model clearly weren’t meeting the demands of the consumer.
Laurel Moglen: Would you say resilience is not always a pretty process?
Ida Kristensen: Indeed. I think sometimes when we talk to CEOs or executive leaders in general, there can be a bit of a preoccupation with how it is going to look. The companies we see as the most resilient are the ones that are comfortable taking some risks, making decisions without full information, because you will never have that in a crisis situation. Some CEOs talk about if they have 70 percent of the information, it’s time to move. And that means, by definition, it’s not always going to be pretty. Some of your decisions are not going to be the right ones. But a culture of learning from imperfection and moving ahead is where we see the ability to learn and grow. Also, growth comes to those who have the ability to take the greatest advantage of the upside in spite of disruptions.
Laurel Moglen: How resilient do organizations and companies feel these days?
Ida Kristensen: Not very resilient. We’ve done research that shows that about 16 percent of companies believe their organization is prepared to anticipate different types of external shocks and disruptions.
Laurel Moglen: How important is it for a CEO to role model resilience? And what does that look like exactly.
Ida Kristensen: On one hand, you want to make sure the CEO shows composure when going through disruptions. It’s about absorbing, not amplifying. But at the same time, the CEO should not confuse that with being stoic. They have to show that individual vulnerability, that there’s aspects of the situation that are hard. Great CEOs role model things like “It’s OK not to be OK.”
In our research, we see many examples of how CEO vulnerability can truly be a superpower.
One of the examples I really like is Brad Smith, the former CEO of Intuit, who made a habit of publishing his performance reviews. He would literally plaster them on the glass window of his office. And what happened over time at Intuit is that this type of role modeling had a trickle-down effect within the organization and allowed others to show their vulnerability, making it more normal to have open conversations about people’s strengths, development opportunities, and goals. That’s a big shift.
So since CEOs can’t be everywhere all the time, how do they pick and choose carefully where they weigh in? When it comes to resilience, we see that there are a number of decisions that have disproportional weight in building resilience in a company.
I know right now, there are a lot of CEOs having conversations about tariffs going up and coming in. And in an environment with higher tariffs, how do we think about hedging what happens right now? How do we think about potentially filling up inventories?
Anticipating disruptions that can happen in the cost structure and the supply chains, we see CEOs leaning in on topics like talent rotation—the habit of rotating people across the different parts of the company. That gives individuals more experience, it challenges them more, it creates some battle scars, and it builds that resilience.
I was in a conversation with the CEO of a financial institution who basically put his thumb on the scale in exactly that way. He was meeting with an executive. The executive was building up a new area of the company. And the CEO asked a simple question. He said, “What message will it send to our organization if you build up this area solely with external hires?”
What I think is interesting about that example is the CEO taking that longer-term view, but also stopping short of saying, “I’m going to tell you what to do,” and asking a well-timed question.
Laurel Moglen: Is there anything organizations commonly do that stands in the way of developing a resilient company?
Ida Kristensen: I talked about financial, organizational, and operational resilience, and I think of these as muscles that work together and partially compensate for each other.
One kind of error I sometimes see is that companies, particularly companies with a very high level of talent, can sometimes over rely on organizational resilience, and it’s a bit what I like to call a hero culture. So something disruptive happens, something the organization was unprepared for, and there might not be a lot of resilience protocols or other things built up over time. But you have a group of very intelligent and very hardworking people who get the job done.
In my experience, that can be very effective. But the issue is it’s not sustainable. It is absolutely exhausting for people to be in that role for more than a short amount of time.
On the other hand, if you equally or more evenly invest in the different types of resilience, you will see that these different elements will support each other. If you are intentionally investing a little less in one area, at least make sure you know how the other areas are compensating.
Your employees will still do heroic things at times, but they will do so feeling more supported and feeling more accomplished.
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