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Leadership in the new normal
THE Covid-19 pandemic has made obvious the complexity of our world. Almost overnight, our forecasts and budgets for 2020 became obsolete and we realised that we had no way to produce accurate predictions. Governments and businesses had to play catch up having failed to recognise the early signals.
The consequences are there for all to witness and suffer - billions told to stay home, businesses closed, supply chains disrupted, airplanes grounded, and essential products such as face masks or hand sanitisers unavailable. The business world needs a new leadership approach that fully appreciates the complexity of our environment while approaching it with humility, an open mind and discipline.
Most leadership teams have a deterministic view of the world. We simplify problems and reduce them into manageable parts. We make assumptions, leverage our experience, bring expertise when needed, and generate one view of the future: forecasts, budgets and performance metrics. At this point, we feel good because our craving for certainty is satisfied.
Unfortunately, many situations in today's world do not lend themselves to a deterministic approach. They are simply of a different nature: No matter how much analysis, experience or expertise we throw at them, we are no closer to understanding the dynamics at work.
In the face of complexity, our predictions are worthless, just like our 2020 budgets were. And after responding competently but tactically to the crisis by conserving cash, reducing expenses, seeking new sources of revenue and protecting employees, many leaders are now re-enacting the movie Groundhog Day, desperately revising budgets and forecast week after week in a desperate attempt to predict the unpredictable.
Four simple practices can help leaders make sense of the world and navigate this complexity.
The first practice consists of recognising complexity when we face it.
This is more difficult than it sounds. Indeed, leaders are paid to solve problems and produce answers - and they would often rather make one up than admit ignorance. We make predictions with the greatest confidence, even without much evidence to support them.
We also fall victim to many cognitive biases, such as overconfidence (for example, all players in a given industry simultaneously believe they can grow their market share), focusing on positive outcomes (such as believing that a vaccine will be found), or ignoring "fat tails" - extreme outcomes with higher-than-expected probability - such as social unrest or geopolitical shifts.
Simple questions, such as "Are we sure?" or "Do we really know this to be true?" should become the mantras of leadership teams to fight overconfidence and groupthink.
We should hence be constantly reminded of these human biases. In the face of any uncertainty, let us ask ourselves whether more information, experience or expertise will help us find the answer, or we are simply facing irreducible complexity. Arguably, the drivers of tomorrow's business depend on sanitary, economic, social and political conditions that no one can foresee today.
The second practice simply consists of acknowledging that we do not know. It demands courage but is surprisingly liberating. Practicing "Not Knowing" is a central tenet of several Eastern spiritual traditions and is the precondition to remove ignorance.
This practice is challenging for leaders because we are so conditioned to solve problems. We believe that we should know, and not knowing is akin to being deficient. When we coach executives, we have them look us in the eye and repeat "I don't know" until they finally release the tension that comes with having to be omniscient. In the face of complexity, we are stronger when we recognise that we do not have to know.
With this humble posture, we become more open to new perspectives and we adopt a learning mindset. At this point, we are ready to embark on the third practice.
Imagining possible futures
Predicting the future is futile; imagining it is fertile. This is fundamentally different from the simplistic best case - worst case scenarios which lure us into complacency and a false sense of certainty.
It is going beyond the stale, deterministic groupthink and imagining a fresh and wide range of possible futures, some plausible, others more dramatic.
Possible futures should include benign linear extrapolation of the present as well as significant shifts such as economic depression, social unrest, geopolitical tensions, regulatory changes, or technological disruptions. Some scenarios will be optimistic, others dark. They all force us to consider our response under many different alternatives.
We use three approaches to imagine possible futures:
1. With our teams: To expand the range of ideas, leaders can enrich their thinking by inviting new points of view: front-line employees, suppliers, or customers, for example. Often, we will benefit from a dialogue outside our comfort zone - with an artist, an elite athlete, a group of students, a poet or even a spiritual guide.
2. Away from our teams: We encourage leaders to spend time offline in solitude and silence. Drawing from the spiritual traditions, a retreat is time we spend looking inward and connecting the dots. By breaking up the routine and spending time reflecting on the "why" rather than "how", we see new patterns. We do not need a monastery for this. We can simply go for a quiet walk in nature, move away for a couple of days, or even spend a couple of hours in a coffee shop where anonymity works as a powerful substitute for solitude.
3. With horizontal communities: Vertical organisations are too slow for today's world. Instead, we can engage with horizontal networks such as communities of practitioners, industry associations, predictive markets, or we can conduct instant employee surveys to tap into the collective sense-making to supplement our own.
With an expansive sense of possible futures, we can move to our last practice.
In an unpredictable, complex world, we cannot know the future, but we can prepare for it. To do so, we must act with two simultaneous horizons in mind: the very short-term (less than one to two months) and the medium term (12-18 months).
Very short term, the world may still behave linearly in a predictable manner. We relentlessly plan and execute at full speed. Any decision - marketing campaign, product launch, expense reduction - must be measured by its impact over the next few weeks, not months. We navigate by sight, from one milestone to the next.
Medium term, we prepare for the possible futures imagined earlier and launch small bets or safe-to-fail experiments that have a small cost and high option value.
Most leadership teams are confident that they will know what to do when whatever situation arises. The recent months have showed the limits of this approach - communication is inconsistent or incoherent, actions are not coordinated, and under stress, breakdowns occur everywhere.
To improve short- and medium-term planning, teams can adapt methods pioneered by elite military operatives:
Red Team - Blue Team: A debating approach in which one team defends one course of action and the other finds all the possible arguments to prove that it cannot work. This helps prevent groupthink.
Pre-mortem: With a chosen course of action in mind, the team now imagines that 12 months have passed, and we have failed spectacularly. The team debates all the possible reasons why we failed.
Debriefing: Upon completing each project, the team reviews what was and was not done well. This approach is conducted with an intention to learn and not to blame. Making mistakes is part of learning and the antidote to paralysis when there is a crisis.
Small controlled experiments: Like pilots, they are frequently mentioned but rarely executed well. The experiments must be cheap enough to allow gaining information at low cost, and failure is inconsequential. The experiments should have a control group to sense what inputs may lead to what outputs.
Simplification: Over time, organisations become more convoluted, and entropy increases inexorably. Bureaucracy crops out of nowhere. This creates rigidity, lack of reactivity and the inability to perceive weak signals. Crises are a wonderful time to simplify processes.
TOWARDS A GREATER SENSE OF PURPOSE
These four practices of recognising and embracing complexity, developing new perspectives, and emphasising preparedness, will allow leaders to be more serene in the face of complexity. By engaging their teams in this way, we also discover who is critical yet constructive, open-minded and ready for the future.
In complex times, there is no need to waste time on precise goals. They are bound to change with circumstances. Instead, we can find a sense of purpose in practices and daily routines. Achieving excellence, relentlessly questioning our assumptions, cultivating resilience, diversifying our points of views, training, challenging each other, and serving clients, is more purposeful and meaningful than a grandiose vision.
The new leadership that we advocate is a journey, not a destination. Please enjoy the ride!
- Fabrice Desmarescaux heads the global leadership advisory practice at Eric Salmon & Partners, a leadership and executive search firm. Jean Drouffe is CEO of AXA in Singapore and has held senior leadership positions in Europe and Asia for the last 15 years.