Kellogg School of Management at Northwestern University
Insight Blog

Jan 27, 2015

You Won’t Be a Successful Business Leader Unless You Understand Government

Image: Dean Sally Blount with Jim McNerney, Chairman and CEO of Boeing.

Many people ask me: What’s the biggest change required in preparing business leaders for this century? While some may argue it’s understanding big data, social media, millennials, diversity, or how to grow businesses in the BRIC and beyond, in my mind, the more fundamental shift is the importance of partnering with government, both domestically and abroad, no matter what industry you’re in.

Jim McNerney, Chairman and CEO of Boeing, made this point quite succinctly when he spoke at Kellogg as part of our Brave Leaders Series. “In the 70s and 80s, businesses practically ignored government. But not anymore. You simply can’t succeed today without dealing with government.”

And you “don’t have to work in a company that sells to government customers” to be affected. “Whether it’s expanding regulatory costs, trade and tax policies, commercial diplomacy, or any number of other intersections, government decisions can have a major impact on your business. So you can choose: be at the table … or on the menu. It’s important enough that I’m telling our emerging leaders that they should be looking for a Washington or global–capital market experience before they hit mid-career.”

While other recent business trends are meaningful, they are largely extensions of concepts we’ve been studying in business and business schools since the 1980s and 90s—big data is statistics on steroids; social media has its roots in the study of communications, social networks, and crowd behavior; millennials represent a new customer segment; and we began studying cross-cultural differences in consumer preferences and business practices years ago.

But government policy making and regulatory issues at the local, state, and federal levels—that’s something business schools largely left to others. A small group of business schools, like Yale, tried to address it in the 1980s, but found that they had to convert to more traditional curricula in the 1990s in the face of meager demand.

So what does this new era of public–private interdependence mean for business? It means learning to understand and respect the different priorities and structures that guide government hierarchies and policy making; the different motivations, incentives, and power bases that characterize political actors, their administrators and staff; the different ways of communicating and making decisions—ways that frequently operate on a very different time scale. Finally it means understanding different views of a “successful outcome” (e.g., profits for businesses versus a rising tide that lifts many boats for government).

As McNerney emphasized, managing through these issues requires moving beyond the traditional business functions and operating norms. “You must be able to manage through the grey. You have to deal with folks who have very different objectives. And it’s tough because you can’t control all the discussions or the outcomes.” And this growing recognition isn't just happening at Boeing. Others have mentioned it in recent talks at Kellogg. When Jeff Immelt of GE visits a foreign market, he meets with the government first. Muhtar Kent, CEO of Coca Cola, talks about leading within the golden triangle—combining business, government, and civil society. 

So this century has indeed created a brave new world for business leaders, one that requires constantly crossing new borders of many types. But most notably, success in the 21st century global marketplace demands understanding the interdependencies that bind the public and private sectors and cultivating leaders who can manage and partner across these sectors.

Sally Blount is the Dean of the Kellogg School of Management.

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