Leading in an Age of Ambiguity

May 18, 2020

By Nicola Amiss

As countries begin to ease their Coronavirus lock-down measures, it is clear organisations will not be returning to a normal landscape.  Stark forecasts from the likes of the Bank of England suggest the brand-new world will be one of deep recession with further challenging times ahead.

The pandemic has prompted a wake-up call amongst many leaders who now recognise that preparing for the uncertain and the unthinkable must be a higher priority on their leadership agenda. In discussion with Merryck’s Margaret Heffernan, author and leadership expert, Margaret discussed the need for preparedness and encourages some new approaches. Released in March, Margaret’s latest book, Uncharted, wasn’t written with the pandemic in mind, but epidemics recur in it because they are persistent experiences of uncertainty. As the COVID-19 pandemic is changing all our lives, the task of imagining different futures together has become even more urgent.

A flawed obsession with forecasting

The popular management obsession with forecasting is essentially flawed in the face of uncertainty. One cornerstone of traditional management is: forecast, plan, execute. But the most expert forecasters say they can see clearly no more than about 400 days out; for the rest of us, that horizon is around 150 days. No amount of better data, people or AI, however, will be able to pinpoint with accuracy the plethora of uncertain possibilities which can impact an organisation.  The world is replete with complex systems and patterns that do not repeat themselves reliably. Small changes can make a huge impact, and expertise may struggle to keep up in a rapidly changing environment.  The precariousness of forecasting then injects significant risk and weak spots in the plan and execute part of the conventional management model.

Questions leaders are considering here:

  • Where is the uncertainty that will impact my business now and in the future?
  • What do I need to do about it?

Efficiency is no longer your friend

Margaret also stresses that in complex systems, efficiency is not your friend.  Efficiency maximises for the predictable and the certain, such as an assembly line – where everything is done in the same conditions, repeatedly.

But efficiency-driven management falls apart when circumstances aren’t predictable. In the recent crisis past efficiency measures relating to staffing, stock control, digital infrastructure and other resources restricted organisations’ capabilities to respond resiliently and cope.

Epidemics are not new and will continue to happen in the future.  What is uncertain is when they will happen, where they will start or what the pathogen will be. Other unpredictable occurrences such as a bank crash, legislation which bans the use of your product, or a disruptor completely changing a market’s dynamics are examples of real possibilities which also present significant uncertainty.

Leaders are increasingly under pressure to consider where uncertainty and threat lies, and what form they could take for their organisation. Margaret argues now is therefore the time when leadership needs to move away from efficiency and forecasting towards preparedness and resilience.

Rethinking margins

In doing so she stresses that, when unexpected things happen, efficiency effectively robs an organisation of its margins – margins for error, margins for surprise, margins for resilience.  The pandemic has sadly highlighted just how little contingency many organisations had in place. Warnings about the risks inherent in squeezing such margins have been building for some time and were specifically raised by Nassim Nicholas Taleb in his books The Black Swan and Antifragile.

Survival in the new complex environment requires robustness and resilience.  This is a challenge for organisations because it impacts on the cost-base and demands setting aside greater cash reserves. Leaders also have to consider other sources of resilience their organisation depend on – such as physical assets, more stock (and a move away from just-in-time stock control), the organisation’s people, the relationships it has forged with suppliers. Managing these well before a crisis gives an organisation greater preparedness and a stronger resilience once it erupts.

A question leaders are considering here:

  • What happens when we move to an environment when we need to manage for robustness and resilience, rather than efficiency?

The payback of investing in relationships

Over recent months, Margaret has observed that organisations who treat their people and supply chains with generosity, reciprocity and trust have found they had a dedicated, responsive and supportive group to depend on when the troubles started. For those with the opposite approach, many are finding there is no such loyalty – no support network. This perhaps reveals a brittleness of the gig economy in the crisis. Investment in relationships brings loyalty – a vital resilience measure in its own right.

A question leaders are considering here:

  • How can we use this time to re-orientate the organisation and build greater generosity, reciprocity and trust?

Creativity and innovation

Much is being discussed about organisational innovation and agility emerging in the crisis.  The leaders the Merryck team spoke with for our white paper, Navigating the leadership landscape out of the crisis and subsequent articles, have shared many positive examples.

To survive in the uncertain future organisations will require even more creativity and innovation. Margaret stresses that those which have already been fostering these skills prior to the crisis will be the organisations that fare better. Since hierarchy and bureaucracy actively suppress innovation and creativity, companies that have worked at reducing these will find themselves with more capacity to adapt and evolve.

Leadership now needs a different business model where a desire for robustness switches the focus away from razor thin margins. Margaret argues in her book that, in a complex environment where you can’t forecast accurately and therefore you can’t plan, what you can do is prepare.

Leadership in the new world is perhaps best served by a preparedness mindset. This draws on creative thinking and levels of imagination which haven’t been prevalent in traditional ‘scientific’ management.  Robust scenario planning is now essential, and this too requires high degrees of imagination, wide and diverse life experience and information.

Questions leaders are considering here:

  • What can we do to create new meaning from the crisis?
  • What can we learn from revisiting our ‘WHY’ in view of past and potentially future events?

 Finally, knowing the bounds of a leader’s control

A degree of preparedness is strengthened by a culture of helpfulness and trust.  Leaders build trust through demonstrating consistency and competence. This is only possible by recognising the bounds of their control, and not promising what is beyond their scope.  No matter what pressure they are under, leaders cannot promise security and sureness in the uncertainty ahead. Psychological safety has its limits in a world that is inherently unsafe.

Instead, now is a time for transparency and empathy, and the creation of environments for dialogue and debate. It is a time for leaders to critically review the traditional metrics and KPIs at the heart of their organisations.   To survive and thrive going forward, it is also a time to consider investment in social capital and the key relationships vital to an organisation’s survival.

If complexity and uncertainty is the new norm, how prepared and resilient can you make your organisation?

About Merryck & Co.

Merryck & Co. has been helping organisations for 20 years accelerate the impact of leadership. Merryck & Co. is a global firm of experienced CEOs and top business leaders who bring an operator’s lens to executive development. Their services focus on succession, senior leadership development, strategic enterprise transformation, and emerging leadership development. The firm’s clients include some of the most successful executives within the highest-performing companies in the world, boards of directors, and select teams of individuals. For more information please visit: http://www.merryck.com

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