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22 BizEd JANUARY | FEBRUARY 2015 EMOTIONAL INTELLIGENCE Great leaders first must recognize where they are now and understand their long-term goals, says Maury Peiperl, who this February becomes director of the Cranfield School of Management in the United Kingdom. "They need to ask themselves, 'What are the uncertainties? What are we afraid to lose?' They need to see the challenge from a personal level, not just the strategic level." When working on teams, great leaders also must develop a sense of others' perspectives, histories, interests, and goals—one of the bases of "emotional in- telligence," says Peiperl. "When the people in a group trust and know one another, they can find common ground," he says. "If there's no common ground, there's no trust. If there's no trust, there will be no common effort." Peiperl refers to social psychologist Kurt Lewin, who identified three stages of change: "unfreezing," in which people are encouraged to let go of their previous habits and mindsets; implementing the change; and "refreezing," or embedding, new habits and mindsets in place. The success of this process depends on the level of emotional intelligence people possess, he says. "The single most im- portant skill is the ability to understand why you act the way you do; the second, to understand the other person's point of view," he says. "If you haven't tackled the first, it's difficult to tackle the second." That's why, in his previous position as professor of leadership and strategic change at IMD in Lausanne, Switzerland, Peiperl learned the histories and motiva- tions of his executive education students; he asked each of them to write short cases about particular challenges and changes they faced and then share those cases with two or three of their classmates. The bottom line is that any strategy will fail if those responsible for its suc- cess aren't connected to each other—and to the change they're trying to make—on personal and emotional levels. Says Peiperl, "One of my favorite sayings is, 'Culture eats strategy for lunch.'" STABILITY Even the most necessary changes will not happen unless an organization's culture is receptive to them. For that rea- son, change-focused leaders must first establish a stable foundation for them- selves and others, says Rita Gunther Mc- Grath, professor of strategy at Columbia University in New York City, as well as a leading thinker on change management in uncertain times. "It's a fascinating paradox. But when human beings are plunged into change they often freeze in the headlights," she says. "You need to give them something to hang onto." She points to Alan Mulally, former CEO of Ford Motor Company, credited for leading the company successfully through the recession of 2008-2009. In 2007, he established his "One Ford" strategy, in which all the company's workforce, prod- ucts, and activities operate under a single brand. Because Mulally made the One Ford brand a priority, "people knew what the company's 'true north' was," McGrath says. With that reference point, they knew the path their solutions should follow. FORESIGHT Next, successful change makers put systems in place to prepare their organi- zations for change before it comes. For instance, McGrath has studied companies that create new budgets every quarter, change management WHAT HAS THE MOST POTENTIAL TO CHANGE THE BUSINESS SCHOOL MODEL? Rita McGrath: We're already seeing differ- ent revenue models emerge, which shows us that a crisis is not pending—it's already upon us. We're going to see more regional schools, like computer coding camps and community colleges, provide local businesses with people who are perfect for whatever they need. Unfortunately, I think we're going to see a lot of schools in the middle market go out of business, because their courses will no longer be perceived as relevant. We're also seeing the role of finance in our economy changing. Regulators want to shrink the finance industry, because they've seen it behaving badly and they think it contributes too much to our economy. If you look at growth in business schools and compare it to the growth in the portion of the economy represented by financial services, they map onto each other almost one to one. Students' desire to go to business school often is driven by the rich salaries on Wall Street, which long has been a cozy model for business schools. We're starting to see cracks in that model. HOW CAN BUSINESS SCHOOLS BETTER TEACH STUDENTS TO PREPARE FOR CHANGE? Ines Temple: Many MBA programs help students prepare their CVs and practice their interviewing skills, but they also should help stu- dents view themselves as companies that have to understand their competition and the chang- es in their markets. Business schools need to teach future managers to have a sense of urgency about their own career development and to be prepared to market themselves more actively. We need leaders who can take care of themselves. BEYOND THE STATUS QUO