On this week’s episode of Fortune’s Leadership Next podcast, Alan Murray talks with Erika James, Dean of the Wharton School of the University of Pennsylvania and coauthor of the book The Prepared Leader, about the ways leadership has changed in recent years. Though “leadership is relatively fundamental,” James says, as of recently, “there are so many more stakeholders that one needs to be responsive to,” and … so much more information accessible immediately that one has to attend to.” Murray and James also discuss preparing for crises and what it means to be a prepared leader, the power of vicarious learning, and much more.
Listen to the episode or read the full transcript below.
Transcript
Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations. Welcome to Leadership Next, the podcast about the changing rules of business leadership.
I’m Alan Murray. Ellen McGirt could not be with me today, but I am very excited about my guest. She’s Erika James. She’s dean of the Wharton School, a 130-year-old institution of learning for business. And she has the distinction of being the very first woman and the first person of color to hold that position. Dean James, thank you very much for being with me.
Erika James: Thank you.
Murray: It’s such a distinguished position you’ve ascended to. Tell us a little bit about how you got there.
James: Well, this was relatively an unplanned career. I am an organizational psychologist, and had no intention of being in higher education or business education. But what I learned is that I really liked the application of applying, understanding human behavior and human dynamics in an organizational context. So that’s what led me to my first academic job as a faculty member teaching leadership and organizational behavior. And over the years, I had more and increasing responsibilities, some administrative roles, like department chair and heads of committees and leading job searches to the university. And people started to identify a trait not only leveraging my scholarship and my teaching, but also my administrative prowess. So I had my first administrative real role at the University of Virginia where I lead our non-degree executive education program. And that led to a deanship at Emory University, which then led to the deanship at Wharton.
Murray: In this job you’re charged with educating the next generation of business leaders which is such an interesting challenge and very close to the heart of what we do here at Leadership Next. So this is a big question, but tell us what about leadership is the same as it has always been, and what’s new in recent years? What’s different?
James: So at the end of the day, leadership is relatively fundamental. You have to inspire people, you have to have a message and a vision that is compelling for people to follow your direction or to follow your lead. So that’s been true since the beginning of time. More recently, what we’re seeing is different is there’s so many more stakeholders that one needs to be responsive to, and that there’s so much more information accessible immediately that one has to attend to. And I think that comes with some leadership challenges in that we have to know how to cipher through information in a way to make reasonable decisions. And we have to be mindful that any one decision might work well for one group of stakeholders, but not well for another group of stakeholders. So we have to know how to mitigate some of the issues connected with with those changes.
Murray: Really, that’s phrased really well. It’s the multiplication of stakeholders and the spread of information coming from all directions. Let’s start with the stakeholder piece. I mean, there’s still people out there, I run into them from time to time, they say, Well, I don’t want to pay attention to all these stakeholders. You know, my job is to make money for the shareholders. What’s wrong with that view?
James: Well, it’s I would say it is an important and necessary but insufficient view. I think as the world has become more integrated and much more complex. We don’t stand alone. We certainly work for the shareholders and we work for different stakeholders who also either support what we’re trying to do, purchase what we’re doing, supply things that we need, buy things that we need. So I think it’s irresponsible not to pay attention to a broader swath of stakeholders, while also remembering that shareholders are a very important group of stakeholders.
Murray: And how is it different today than it was 50 years ago?
James: Well, today, you know, I think as we’ve learned more, and as we have access to more information and as more and more people are engaging in commerce and in industry and in business, we have to be responsive to them. So I think 50 years ago, business, while relevant, didn’t have the same notoriety, if you will. When I first got into this field and higher education, it was in the late 90s, early 2000s. And there were a number of business scandals, and this was the time when Enron was happening, WorldCom. And it seemed like every day you’d open a paper or turn on the television and there was some new business-related scandal or problem. And I think that that really influenced how people viewed business and viewed business leaders in a really perverse in negative way. And so one of the things that I’ve been focused on, you talked about my role as a leader in higher education and developing the next generation of leaders, I’m really wanting to leverage this role. This position, the, the Wharton School, in particular, to change the narrative around business and to remind people that societies thrive when commerce is flowing well. And there’s considerable value add to this country and to the world, by the business community. It creates new services and products and allows people to generate wealth that changes people’s trajectory. So I think we can’t, I can’t, we can’t forget that and I think in more recent years, we’ve had more and more reason to remember the important role that business plays.
Murray: Yeah, you’ve written a great book, The Prepared Leader. I enjoyed reading it. Define a prepared leader. What is a prepared leader?
James: So a prepared leader is someone who knows how to identify vulnerabilities in the organization; is someone who is looking at ways to mitigate those vulnerabilities; is someone who a priori builds the kind of high quality trusting relationships that will be necessary when a threat does hit an organization. You want to have your your key counterparts and support system already in place. And a prepared leader is someone who is trusted by his or her workforce.
Murray: And so how can I know if I’m prepared, if I’m a prepared leader?
James: You’ll know if you’re a prepared leader if you have strong relationships within your organization, and people have demonstrated a willingness to follow you even in non-threatening times and in non-crisis times. You’ll know that you’re a prepared leader if you have identified the ways in which your organization is vulnerable to a variety of different threats. If you can’t identify and talk through and share with your colleagues some of the things that you need to be looking out for then you’re not prepared for some of those things that are likely to happen to your organization.
Murray: Yeah, it’s interesting. It’s about building trust and social capital and having all that in place when the unexpected hits. Are there mistakes that you see leaders making on a regular basis that make you want to sort of go and grab them and shake them and say, no, stop doing that, that’s the wrong way to do it?
James: You know, to me, fundamentally, what I see is actually a lack of attention to developing the human potential in people. And I know that’s probably not what you or your listeners were expecting me to say. But increasingly, for organizations to be successful, it requires the support of more than just the leader and even more than just the leadership team. There really has to be an investment in building up the next generation of leadership, and leveraging the skills and the unique experiences and the capabilities that people at all levels in the organization bring. And I don’t think we are yet investing enough in in our people, so that when something does happen when we do when we are confronted with a crisis, for example, we don’t know necessarily where to turn or where the expertise lies. We may assume it because people hold a particular title. But one of the things that we find over and over again is that crises bring out the essence of people either at their best or at their worst. And if we know some of that in advance, we’ll know exactly who to tap when, when we are up against the wall and we’re really confronted with something threatening.
Murray: Yeah, it’s really important of understanding the human capital is the most important capital of your organization and that’s where you need to spend your time and energy.
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I’m here with Joe Ucuzoglu, who is the CEO of Deloitte US and had the good sense to sponsor this podcast. Thanks for being with us. And thanks for your support.
Joe Ucuzoglu: Thanks, Alan. Pleasure to be here.
Murray: So Joe, business leadership used to be about setting strategy in the C-suite and and giving orders to everybody down the line telling them what they need to do to implement the strategy. But today, things are moving too fast for that kind of a top down approach. How do you be an effective leader in that kind of rapidly changing environment?
Ucuzoglu: You hit the nail on the head, Alan. We’ve actually given a lot of thought recently to adjusting our own leadership frameworks in terms of the attributes that are necessary to serve as an effective enterprise leader. In this environment the long standing hierarchical pyramid with orders coming down from the top simply cannot effectively deal with the pace of change. Being a great leader in this environment requires a lot of listening, empowering one’s people, setting the tone for a culture of innovation and strategic risk taking, because at the end of the day, you can’t be involved in every interaction with your customers, with your employees, with your regulators. You have to instill in your professionals a sense of values to drive the way in which they’ll make those on the spot decisions on behalf of the organization.
Murray: Thank you Joe.
Ucuzoglu: Alan it’s a real pleasure.
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Murray: The prepared notion, I mean, I was a boy scout 50 years ago, be prepared was our motto then. Obviously nothing new there. But did something about the pandemic, I mean, we clearly weren’t as prepared as we should have been or could have been for the pandemic, push you to write this book. Explain why you felt it was necessary and why you feel it’s necessary to emphasize the preparedness mandate.
James: So my coauthor, Lynn Wooten, and I actually had done 25 years of research on crisis leadership. And we had written a book previously and after about a decade, we thought it was time to update and provide new examples of the modern day or contemporary crises. And this, we started this book actually in late 2019. So it was before the pandemic actually hit within the United States. And as we started writing, the pandemic became more and more prominent and we realized this is going to be something that everyone in the world is affected by. And if we’re talking, if we’re writing a book on crisis leadership, we have to incorporate what we’re experiencing both as leaders ourselves, but also as scholars in crisis management. We have to embed this crisis, this pandemic in this new book. And the prepared notion is largely because there are people who, in this country and elsewhere, knew that there were there was this strain, this virus that had really deleterious consequences. The layperson, you and I, didn’t have access to this information, so there’s little that we likely would have known to do to prepare, but there were people who had access to information that likely could have handled this in such a way that more and more of us could have taken some precursors and some steps to mitigate the severity and the widespread nature of this of this pandemic. I go back to Bill Gates, who several years ago, warns that, you know, a pandemic of this nature was likely. There were a number of signs we’ve had ebola, we’ve had SARS, we’ve had other kinds of viruses that have spread in some countries or some regions throughout the world that should have informed us on small things we could be doing early on to protect ourselves and to protect our communities.
Murray: So what is it, as a student of psychology, what is it that causes us to be so poorly prepared for crises? I mean, because as you said, we have plenty of warnings but we just didn’t seem to react very much to any of those warnings.
James: Well, this is one of the beautiful things about the brain, it really tries to protect us from negative events and from threatening information or or from threats in general. And so our brain functions in such a way that we have these what we call decision biases that prevents us from necessarily being prepared. So one of the decision biases is that things negative events won’t happen to us. We see them happening to other people, but somehow we we assume that we are protected from falling into that same fate. So we tend to deny those kinds of activities in terms of its impact on us. And that gamble is that we our brain protects us from thinking about the severity of certain things that if something happens, it will only, the extent of it is only what you first experienced initially and that it won’t overtime become more severe. So we don’t plan for things getting worse. We assume that what happens in the moment is the worst it will ever be. We’ve seen obviously through this pandemic that what happened in March of 2020 was just the beginning. And so those biases that protect our brain also prevent us from really being prepared when they need to be.
Murray: So as a leader, how do you override those biases? What do you what do you what’s your formula for getting for for being prepared?
James: So I don’t know that there’s necessarily a formula but one of the reasons why we wrote this book is to remind people that our brain works in this way, and to encourage people to recognize the signs and the signals when we see ourselves discounting information that might be informative. One of the other things that we can do, which if you want to put this in the form of a formula, another variable in that formula would be learning. So although we might not at any one particular time be experiencing a crisis someone else is or some other organization is and the more we watch and observe and reflect and learn from others, we call that vicarious learning, we can we can leverage that vicarious learning for our own purposes, when and if we do encounter something that is seen as a threat.
Murray: Yeah. Interesting. So talk a little bit about how you led through the current crisis. I mean, you took this job shortly before COVID hit. The challenge for educational institutions was as great as any as the challenge anyone faced. During that time. You had to make decisions about when you could and when you couldn’t bring people together. Can you can you talk about how you managed through it?
James: So I started as dean in July of 2020. So the pandemic was maybe three it was three months prior to everything having shut down. I moved to Philadelphia from Atlanta, and the campus at that point was already shut down. So we were in a remote environment and I had not yet had the opportunity to meet any of my colleagues or to even spend any time on campus. And yet I was asked to make decisions about how we were going to handle technology, what we were going to do with classrooms , where we were going to house our students who you know, the few that had come back to Philadelphia. All of these decisions in an environment and in the context that I literally knew nothing about and I had no idea the people who the people were that I was working with to make these decisions. And so I spent easily 12 hours a day on Zoom, trying to get to know my colleagues, trying to understand the motivation for the information that they were providing me, trying to assess and and cultivate information that would be helpful in the decisions that we were needing to make. And all of that was done for a period of easily nine months over zoom. It was almost a year before I met my entire leadership team in person.
Murray: And having been through that difficult experience, what’s your takeaway about the importance, necessity value of in person interaction?
James: It’s incredibly important. We are social beings by nature. And I think what we have seen in recent months is a desire for people to be connected and a desire to people be to be social and to be together. What we’ve learned through this pandemic is that in terms of providing an educational experience, there are a lot of pathways that that can be done. And the University of Pennsylvania and the Wharton School in particular prides itself on our ability to create high quality human interactions in the context of a collegiate experience, whether it’s our undergraduates or MBA students. And so that will always be foundational to what we do. But we’ve also learned that we have an opportunity to expand who we reach in the world by leveraging technology and so I think more and more we’re seeing universities explore technology to reach new audiences and to have new target markets and to provide information to those who wouldn’t have had access to a Wharton experience, for example. And that’s a different kind of educational experience. It’s not any more or less valuable. It’s just different and people need different things. And so I’m pleased to be in a position and an institution that has the breadth and the resources to be able to do both.
Murray: Can I get a degree from Wharton entirely remotely?
James: Actually, we have just launched what we call a global executive MBA program, which is largely remote. So 75% of the classes are remote, but you are online, live with an actual professor. And then we have 25% of the experience where people can come and visit and experience an in-classroom experience. So that is right now our our remote learning experience which we’re finding is tapping into a whole new set of people who would not have been able to consider Wharton previously.
Murray: So Erika, I’ve I’ve been covering business for pretty much four decades. And I don’t think I’ve ever seen a period where there’s so much change going on at the same time. You have this huge technological age that cuts across every business, every industry. On top of that we already talked about sort of expanding stakeholders rethinking the purpose of business in society. You have a massive energy transition going on to get away from fossil fuels and carbon-emitting processes. And then on top of that the pandemic created this complete rethink of how we work together in offices or wherever. So there’s, there’s a lot there. It’s a challenge but it’s also an opportunity. It gives the next generation of business leaders the opportunity to really reshape what business is all about. That’s a charge in your hands as head of the Wharton School. How would you like the next generation of leaders, the people who are graduating today and will assume leadership positions in business over the next decade or two, how would you like them to be different?
James: One of the goals that we have is to help our students navigate all the kinds of changes that you’ve described. And to do that you have to be agile leaders. You have to be able to pivot. You have to be able to learn quickly. You have to be able to experiment and try new things and move on when things don’t work. And as the world is becoming much more complex, the notion of creating and developing agile leaders and therefore also agile organizations is going to become much more critical for one’s individual success but also an organization’s success.
Murray: I would think that also means that the role of the educational institution will change. Because as you point out there, you’re not going to get your education in one two-year chunk. You’re going to have to be a lifelong learner.
James: Yes, absolutely. I’m glad you raised that. One of the wonderful things about being at the Wharton School is we actually touch people in all phases of their life. So everyone knows, of course that we have the world’s best undergraduate MBA undergraduate business program. We also have one of the highest rated and early MBA programs which means we’re targeting a slightly older population of students. We also have an executive MBA Program, which means those who have been out in the workforce for some time and realize that they need to adapt or modify or pivot their skills in order to continue to be successful and advance in their career or to switch industries. But we also offer non-degree education for senior executives who don’t necessarily want or need a degree from the Wharton School but want short pieces of of learning in new topics or new areas. So we have that. We also offer what we call our global youth program. So we’re touching high school students as early as ninth grade, and we’re teaching entrepreneurship skills. We’re teaching personal finance skills, we’re teaching the fundamentals of the economy. We have business case competition for high school students. So to your point about being a lifelong learner, at any point in your life, Wharton is really trying to provide a product that will help you navigate and develop new skills in the business realm.
Murray: Well, we all need it. Erika James, thank you so much for taking time to be with with me on Leadership Next. You have an important mission. Good luck with it.
James: Thank you very much Alan.
Murray: Leadership Next is edited by Nicole Vergalla, written by me, Alan Murray, along with my amazing colleagues, Ellen McGirt and Megan Arnold. Our theme is by Jason Snell. Executive producers are Mason Cohn and Megan Arnold. Leadership Next is a production of Fortune Media. Leadership Next episodes are produced by Fortune‘s editorial team.
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