Why the Future Belongs to 'Challenge-Driven Leaders'

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Auto industry legend Sergio Marchionne, shown in 2012, embodied a management style that is gaining credence for its focused and uncompromising approach to solving problems.

Auto industry legend Sergio Marchionne, shown in 2012, embodied a management style that is gaining credence for its focused and uncompromising approach to solving problems.


Photo:

Riccardo Antimiani /ZUMA PRESS

The primary purpose of Fiat Chrysler’s investor conference on June 1 was to roll out the auto maker’s latest five-year plan. First, however, Chief Executive

Sergio Marchionne

took the dais. He had some incredible news to share.

The big reveal was this: At long last, the company’s ledgers contained slightly more cash than debt. Audience members were given small, candy-filled tins that said: “Net Cash: How Sweet It Is.”

On the list of milestones most CEOs get lathered up about, record revenues, unit sales and market capitalization rank high. Prudent bookkeeping does not. Mr. Marchionne didn’t care, though—he even decided to mark the occasion with a rare act of flamboyance. For the first time in 11 years, he put on tie.

Nobody knew that this beknotted public appearance would be one of Mr. Marchionne’s last. The following month, after suffering complications from surgery, the man who’d plucked Chrysler from liquidation, merged it with Fiat and guided both weaklings to profitability, died at age 66.

The consensus view of Mr. Marchionne, relayed by hundreds of tributes, is that he possessed an unusual blend of vision, technical expertise, analytical rigor, open-mindedness and candor. The remembrances also agreed on something else: he was a bona fide eccentric.

Throughout his 14-year tenure, Mr. Marchionne had a leadership style that defied labels. There was no precedent for a straight-talking, orthodoxy-rejecting, chain-smoking workaholic who preferred sweaters to suits, carried up to five cellphones, kept a spartan office close to his engineers and obsessed over product details from headlamps to door handles.

“God bless you, Sergio,” Morgan Stanley analyst

Adam Jonas

told Mr. Marchionne during a January conference call. “We’re never going to see anyone like you again.”

This fall, researchers at MIT published a study that might challenge that perception. The study identified a new subspecies of executives called “challenge-driven leaders” whose members share a distinct set of traits. In many respects, Mr. Marchionne fits the profile.

The study began in 2015 when Deborah Ancona and Hal Gregersen of the MIT Leadership Center set out to solve a campus mystery. MIT had produced scores of innovative entrepreneurs whose companies, according to one report, employed more than four million people and produced nearly $2 trillion in annual revenue. For some reason, however, the school wasn’t widely regarded as a leading incubator for CEOs who run major enterprises.

As the researchers studied the school’s leadership ethos, they noticed that most people who came to MIT had deep expertise in their fields. They were relentlessly analytical and experimental, were often bored by the status quo and disdainful of office politics. They showed little interest in the trappings of power (a fancy office, for example) and loathed leaders who took a top-down, order-giving, egotistical approach.

The true finish line is the one always yet to come.

—Sergio Marchionne, in Fiat Chrysler’s June 1 investor conference

That stereotypical breed of leader, Prof. Ancona told me, “is something they don’t want to be.”

People at MIT didn’t really follow leaders—they followed intriguing, inspiring, barely solvable problems. Their motivation came from finding inventive ways to crack them. On these teams, collaboration held sway and command structures were more fluid—leaders stepped forward or back depending on how much their expertise was needed. Leaders were less apt to focus on the social and emotional needs of their followers but more inclined to tolerate their idiosyncrasies.

In these settings, a leader’s job wasn’t to maintain control, the researchers said. It was to use their knowledge and enthusiasm to frame a problem “in a way that draws other smart and skilled people toward it.”

This challenge-oriented approach is most common among startups, although many large companies have recognized its value and sought MIT’s help in figuring out how to harness it. “The very nature of companies is shifting,” Ms. Ancona said. “This kind of leadership may be more appropriate as we move ahead.”

Hubert Joly,

who engineered a miraculous turnaround at Best Buy, is one of a handful of current CEOs who’ve displayed some of these traits. Mr. Joly is widely regarded as a collaborative leader who focuses on tackling complex problems with an inventive, fluid approach.

“The big difference between great leaders and good leaders,” he recently told an audience, “is not the quality of their decisions, it’s the quantity. If you make a lot of decisions, you’re going to make mistakes—but that’s OK. You can correct them because you’ll make more decisions.”

Best Buy CEO Hubert Joly, right, high-fives a customer at one of the electronics retailer’s stores in Minnesota in 2015.

Best Buy CEO Hubert Joly, right, high-fives a customer at one of the electronics retailer’s stores in Minnesota in 2015.


Photo:

Bruce Kluckhohn/Associated Press

At Fiat Chrysler, Mr. Marchionne displayed a similar mindset in 2016 when he abruptly scrapped an expensive long-term plan to produce small cars in the U.S. based on Fiat technology. “We changed midstream,” he told reporters, “because the market had gone completely the other direction.”

There’s no question that Mr. Marchionne’s analytical bent and unorthodox personal style conform to the MIT profile. He was also known for building fluid teams of high-functioning experts, or as he once described them, “courageous individuals with a hunger for challenges.”

The most direct link was his attraction to chasing big ideas that didn’t always make sense to outsiders. His rationales for phasing out sedans in favor of SUVs and pickup trucks, and for spinning off the company’s Ferrari unit, were later widely embraced. His preoccupation with debt wasn’t entirely voluntary—Fiat Chrysler’s balance sheet had long been the weakest among major auto makers—but his dedication to paying it off may prove to be prescient.

These quests didn’t always work out. In 2015, for instance, Mr. Marchionne wrote a manifesto about the pitfalls of the industry’s “addiction to capital” and became a staunch advocate for consolidation. His unorthodox public pursuit of merger partners, including General Motors, led nowhere.

Challenge-driven leadership may be an excellent way for startups to innovate. What’s not clear is whether it can be scaled up. CEOs at big companies are often hard-pressed to step back or be consistently collaborative. Mr. Marchionne was known to crack the whip and show flashes of impatience or ego. He quickly discarded executives who couldn’t keep pace and often managed people, as one Fiat biographer noted, “by stress.”

If Fiat Chrysler had been a stable company on a placid ride, it’s possible that a CEO who likes tilting at windmills would have done more harm than good. In the digital age, however, the increasing levels of complexity, ambiguity and disruption might reward a different brand of leadership.

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Challenge-driven leaders are not always conventional, predictable or polished—but they’re undoubtedly self-reliant. Their satisfaction comes from indulging their own curiosity. No single achievement ever fulfills them. Their leadership is a lifelong process that ends only when they run out of time.

On the afternoon of June 1, as Mr. Marchionne opened the floor for questions about Fiat Chrysler’s future plans, the celebratory tie came off. He’d decided to retire in early 2019, so this was effectively his final act. Given that the company’s stock price had quadrupled over the past four years, nobody would have blamed him for luxuriating in his triumphs that day.

Sergio, God bless him, never quite made it there. “The true finish line,” he said, “is the one always yet to come.”

Write to Sam Walker at sam.walker@wsj.com

Appeared in the August 11, 2018, print edition as ‘Why the Future Belongs to Challenge-Driven Leaders.’