How to embrace the paradox of control
Many business leaders find they can better manage uncertainty by stepping out of comfort zones and letting go of controlling tendencies
Despite business decision-making being fraught with uncertainty, leaders often operate under an illusion of control. They believe they can predict and assess the exact outcomes of their decisions, underestimating the unpredictability that characterises dynamic markets and segments.
Many individuals fall into this major trap and, in doing so, play down how chance and randomness affect success, such as in emerging Asia’s volatile growth setting – often with serious business consequences.
Many leaders compound this tendency by seeking the perceived security of business models they expect will make sound predictions, forgetting these approaches are often based on the past and not always robust for future planning.
This context – where individuals drive present and future company performance based on supposedly full-proof understanding of how personal decisions will play out – poses a defining question to both companies and their management teams. That is: how can leaders let go of controlling – and inhibiting – tendencies, without completely losing control?
Psychological biases, such as overconfidence and anchoring, and emotional barriers, like greed and hope, are strongly ingrained in our personalities.
This means such biases and barriers often affect business decisions of critical importance. This can impede the broad view by which decisions should be informed.
Leaders must let go of this illusion of control and accept that they are unable to influence all outcomes. They must embrace uncertainty and shift away from the shelter of approaches they know and trust, accepting that these are not applicable or suitable to measure and predict the outcomes they are looking for.
By stepping out of their comfort zone and by letting go of controlling tendencies, many leaders will find that they actually gain more control. Business managers who accept this notion quickly realise that they begin to make better assessments of uncertainty and encounter more beneficial outcomes for both themselves and the business. This paradox of control, that is gaining control by giving up control, does not come naturally, and is therefore one of the most difficult ideas for new and even experienced leaders to embrace.
Of course, embracing uncertainty is not easy – not only for its random nature, but also for the fact that it comes at businesses in different ways. At the same time, it is useful to remember that uncertainty is not necessarily a curse but can often be also an opportunity.
Broadly speaking, there are two types of uncertainty. The first form is “subway” uncertainty, which is somewhat predictable, well behaved and easily modelled. For example, when travelling by train, you have a general idea of what will happen because it is only along this defined path and timing that you will experience chance occurrence.
Alternatively, “coconut” uncertainty cannot be modelled, assessed or quantified easily. These instances are often difficult, if not impossible, to make an assessment of, like when a coconut falling from a tree might kill a person, or when and where an earthquake hits, or when and how Asian financial markets might experience destructive bubbles.
Most real life situations business leaders encounter are made up of both types of uncertainty. The subway part can be assessed well but the coconut component remains unaccounted for in any reliable manner, thus leading to underestimation of total uncertainty, and in the process allowing personal biases to play a significant but a misleading role.
Examples abound of people and institutions embracing uncertainty fruitfully, for example, by building flexibility, or better still, turning it into an opportunity. The economic management of Singapore, betting on uncertainty in the financial markets, corporations creating and maintaining a set of options are only some of the many examples.
To better handle uncertainty, business leaders are turning to executive education to acquire the skills needed to make informed decisions and improve judgment. They are also learning and implementing new strategies that help them make sense of an increasingly ambiguous business world.
Anil Gaba is a professor of decision sciences and the Orpar chaired professor of risk management at INSEAD Business School. He is also the director of Insead Executive Education’s Mastering Decision Making programme.
Three-step plan
The "Triple A" strategy, as outlined in Insead's Mastering Decision Making programme, follows three simple steps that any executive can put to work:
Accept the fact that chance plays a very strong role in everyday situations, and understand what you can and cannot control.
Assess the uncertainty to the greatest extent possible, be it through models, independent opinions or through other methods of analysis.
Realise that, no matter how strong you believe your assessment is, it is still an underestimation of the true uncertainty. With this in mind, continually augment what has already been assessed.
