Why leaders need confidence in uncertain environments

The latest research at UNSW Business School indicates there are six main ways a leader can improve how they are perceived

PUBLISHED : Saturday, 21 October, 2017, 8:03am
UPDATED : Saturday, 21 October, 2017, 8:02am

It is an ever-changing business environment which organisations are dealing with right now. As such they need to develop more adaptive and responsive leadership skills across the organisation.

Leadership is no longer simply the domain of our senior management teams. Our employees also need to be equipped to relate, connect and respond to challenges and opportunities.

However, leading an organisation in complex and uncertain times implies an ability to understand the patterns of cause and effect and connect the dots to uncover opportunities that are not yet clear. It involves the ability to perceive what is “over the horizon” of our current field of view accessing deep intuition and using imagination to envision the future point. It also frequently involves quickly responding when unpredictable events occur.

The digitisation of the economy, the fast pace of technology introduction, and new competitors with new business models are driving an environment that we define as volatile, uncertain, complex, and ambiguous (VUCA). Environments we think most of us can recognise.

This is not the approach taken in promoting leadership today, where we have grown used to evidence-based strategies based on past experience, rigid planning that does not take account of changing conditions and a drive to find the one right answer.

In an uncertain world where strategic direction is not so clear, experiments and options are common initiatives, and unpredictable events are occurring at a much higher frequency. In this world, strategic directions necessarily change – and this is contrary to the general expectation that top managers provide clear, unwavering direction.

So, what do you do in a VUCA environment, and in that situation, how does a leader exude confidence and competence?

The latest research at UNSW Business School indicates there are six main ways a leader can improve how they are perceived.

There are five important abilities in vertical development, a term used to describe approaches to leadership development that build mindset capacity.

Focusing on a long-term goal that is more stable and allow “tacking on” smaller goals in the near term to match evolving realities is No 1. The near-term goals then drive action initiatives. This stability in the long-term focus creates a perception of legitimacy.

Then, second, communicate that strategy is a journey not a destination. For example, involve larger groups of the organisation in scenario thinking. It is what we used to call “planning” back in the day when management tasks had simple names. This will expand their understanding of uncertainty and agility, as well as the necessity of responsive short-term tactics.

Perhaps we can add a third ability. Separating the decision-making process from the communication process. Any good leader should have a good communications expert on staff, and their advice and expertise is vital in times of change. But, always make the decision and then communicate it – don’t let the outside world know of your deliberations and uncertainty.

Fourthly, focus attention and effort on solid short-term choices to build momentum toward action.

Carefully think about motivating your team, take action, and communicate to stimulate intrinsic motivation. After all, as UNSW’s Amirali Minbashian noted in this column last month, motivating staff is crucial for performance, and carefully constructed communication and feedback can achieve this. We want staff to feel valued, and by telling them what they are doing right, as much as what they are doing wrong, we can achieve performance – even in an uncertain environment.

Fifth, the most important resource you have under your control for navigating this complexity is your leadership mindset – the collection of beliefs, values, assumptions and experiences, often unconscious, that inform how you interpret your world and take action. Stop, and take a moment to think now, as you try and relax this weekend. Take a moment to gaze over Kowloon Bay, and ask yourself this question. Is your leadership mindset prepared for how the very uncertain VUCA world shows up in your organisation?

Research suggests that less than 10 per cent of us have the leadership mindset required to meet the demands of the VUCA world. A mindset that embraces ambiguity and uncertainty, is agile in perspective taking, and values interdependence over dependence or independence.

Sixth, in environments of extremely high VUCA, we suggest building dynamic capabilities. In such worlds, events are less foreseeable so leaders should work on fast sensing, seizing, and transforming capabilities. This means focusing on learning as a desired outcome rather than only a financial metric, promoting experiments as a means to learn and develop even more capability to respond quickly, and removing bureaucracy to focus on fast response systems because not everything can be planned or cost-effectively planned.

So how can this work?

Take one example: prices fluctuate after a natural disaster takes a supplier offline. You can actually plan for this, by building in slack, and stockpiling resources, along with building connections with other suppliers. This form of emergency preparedness can be prudent against foreseeable uncertainties; however, this can be expensive – and you need to balance risk with a known unknown – something that might not happen.

Another example is where you have poured money, time and resources into research and development for a new product. However, a competitor unexpectedly launches a better product, just before you do. A sensible manager would also invest in intelligence, to reduce the probability they get caught out. We call this “monitoring weak signals” in the market. You won’t have a definite idea of what a competitor is doing, but you can get a hint of the way the market is moving, and pick up on that. Using these signals, you can devise a set of strategic options, just in case you need abruptly change your plans to rush out an even better, if more expensive product.

These scenarios involve considerable flexibility of thought to plan for the unexpected. To think of what could go wrong, and plan accordingly, however you can plan alternatives that can be implemented simultaneously.

For example, you can invest in forms of “insurance” to address possible events. Many companies devise a wish list of what they would like to put into a new product, and by having these up your sleeve with the R&D team at the ready, you can quickly react to a changing market.

By doing this continually you can develop a portfolio of strategic options – this allows lower costs, ongoing learning, and speeds response to unexpected change. And in so doing your team can build the capability to quickly respond – they become the agile team we would like them to be.

A leader needs a framework for decision making, and as always in business, flexing your mind, keeping your team motivated, and preparing for the unexpected while keeping your eye on the environment and the big goal, can pay huge dividends.

George Shinkle is an associate professor in the School of Management at UNSW Business School.

Additional words: Julian Lorkin