Today’s business environment often elicits many unforgiving characterizations from executives. Thanks to the availability and speed of information, driven in large part by advances in technology and the expansion of globalization, business leaders are quick to describe the environment they operate in as complex, fast, volatile and uncertain.
This environment, executives will say, makes it incredibly difficult to manage large organizations — as if the task wasn’t already a handful. On top of having to deal with already complex domestic markets for goods and services, with consumers and businesses increasingly picky about where to spend their finite dollars, new emerging markets present even more confusion for leaders.
What's more, each has its share of talent management implications, such as how to recruit top talent and create the kind of work environment that motivates and engages workers.
In the 1990s, the military came todescribe this sort of environment as volatile, uncertain, complex and ambiguous, or VUCA. The volume and pace of change in modern organizations, uncertainty about the future, information overload and lack of clarity mean that the acronym is nearly as relevant in today’s boardrooms as it is on the battlefield.
Writing for Harvard Business Review, professor Nathan Bennett at Georgia State University’s Robinson College of Business argues that leaders use VUCA as a “crutch” to throw off “the hard work of strategy and planning.” But amid the chaos, employees need a strong sense of direction more than ever. Succeeding in a VUCA world requires exceptionally strong leaders who can guide their teams into the unknown.
There are considerable bottom-line rewards for those who get it right. According to research by consulting firm McKinsey & Co., three factors drive superior business performance: clear direction, accountability through roles and a culture of trust. These three factors stem from strong leadership.
To this end, courageous leaders all share specific traits that allow them to not just survive but also thrive in a VUCA environment. When it comes to formal leadership development, these five are worth extraattention.
Strong working relationships allow leaders to deliver results through their teams. The ability of managers to “relate” to their team has a multiplicative effect on everything they do. Try to lead in a VUCA environment without strong relationships, and even the best efforts will be undermined.
Indeed, strong bonds are vital in turbulent times. A 2008 study published in Journal of Applied Psychology found that the quality of relationships affects leaders’ ability to influence during change. When relationships are poor, team members attribute negative motives: “They’re just trying to butter me up,” or “they’re abusing their authority.” But when they’re good, employees interpret leaders’ behavior positively.
In the workplace, as is often the case at home, relationships are based on trust. Analysis of 40 years of research featured in a separate Journal of Applied Psychology study found that trust in organizations has a direct positive effect on job satisfaction, retention and performance. Moreover, relationships with direct managers influence employee trust in the organization most.
Unfortunately, leaders’ natural desire to be liked often gets in the way. Difficult messages and decisions are inevitable in a VUCA environment. Therefore, to forge strong relationships despite organizational turbulence, leaders must relate to their employees’ motivations and emotions while maintaining enough distance to provide clarity around tasks and accountability.
The ability to relate doesn’t end there. To thrive, leaders must forge strong relationships upward, downward and sideways, building a support network that allows them to respond to fast-changing, uncertain situations.
At Danish shipping conglomerate Maersk Line, lateral relationships are fostered through regular face-to-face events. “We invest in bringing people together,” said Pete Baker, the company’s global head of learning and organizational development. “Our directors meet regularly to maintain that personal connection.”
Relationships, of course, are a means to an end; they enable leaders to leverage team performance to improve broader organizational well-being. Leading through uncertainty also requires clear direction — people need to know where they’re going and why, even if the route is likely to change. “People need to understand whether they’re building a wall or a cathedral,” said Dawn Sullivan, deputy director of Civil Service Learning, a U.K.-based learning resource provider.
Direction, therefore, is about creating clarity, rather than issuing instructions. Baker said clarity has been fundamental to Maersk Line’s success in one of the most volatile and ambiguous operating environments around.
“The reason we have thrived over the last few years is down to a strong alignment on strategy, direction and performance management principles,” Baker said. “Senior management’s approach is to drive clarity so that we’re all steering in the same direction.”
Specifically, achieving a clear direction meant pinpointing two strategic principles — cost leadership and commercial excellence — and communicating these priorities throughout the business. “We’ve spent a lot of time ensuring that everyone understands what cost leadership and commercial excellence look like,” Baker said.
Clarity also enables people to respond appropriately to volatility and uncertainty. In turbulent times, there’s a temptation for leaders to slip into command-and-control mode. But in global organizations, where different functions face regional challenges on a daily basis, each function must be autonomous and agile enough to steer the course.
A clear direction provides the buffer that allows for this autonomy. When a team is united behind a shared objective, the route can be flexible. Plus, employees who work in an autonomous environment, free from micro-management, feel more engaged and motivated too.
With the clearest direction in the world, chasing those goals when the course keeps changing, conditions are unclear and thefuture is uncertain can be a draining task. So a courageous leader also energizes others, providing a sense of hope amid VUCA demands.
As research has shown, people who experience positive emotions perform better, are more engaged, are more creative and make better decisions. Leaders who harness the power of emotional contagion reap these benefits. Still, there are nuances to this approach that warrant deeper attention.
Positive emotion is about creating and communicating purpose. People perform better and are more engaged when they know that their work has meaning and can see the difference they make.
Positivity is built by communicating all the reasons to be hopeful. Most of all, leaders energize their teams by noticing, communicating and celebrating progress.
In a longitudinal study of more than 64,000 data points, Harvard Business School researcher Teresa Amabile discovered that the feeling of “making progress” had the biggest effect on what is referred to as “inner work life,” or how people feel about their work. Interestingly, when the same researchers asked managers to rank potential employee motivators, “showing progress” came last on the list.
The nature of the VUCA environment means that a feeling of “one step forward and two steps back” is common, or that progress is meaningless when the goalposts shift. But celebrating progress, no matter how small, is a simple tool leaders can use to fire up their teams when they need it most.
In complex and dynamic environments, leaders must be incredibly agile. In a survey of 350 global executives by The Economist Intelligence Unit, a research and advisory arm of The Economist Group, 88 percent of respondents considered agility to be critical for business success in a volatile and complex world. Yet 34 percent of initiatives failed because of internal barriers such as conflicting priorities, silo-based information and risk aversion.
Agility applies at organizational and individual levels. Internal processes should enable the organization to respond to change in a nimble manner — quickly and with minimal disruption. Harvard Business School professor and author Joseph Bower describes this as a “Velcro organization,” in which infrastructure can be easily rearranged when strategy calls for it.
A flexible infrastructure achieves the ideal balance betweenlocal-level responsiveness and the large-scale cooperationneeded to achieve goals. Too often organizational silos and competition between functions hinders progress. To build a Velcro organization, Bower argues, leaders need clarity on strategic direction as well as knowledge of the strengths that exist across the business and the ability to combine complementary skills when required. Robust interpersonal relationships make this process easier.
At an individual level, leaders require so-called “learning agility,” or the ability to quickly learn and adapt to the demands of new, changing and ambiguous situations. These leaders quickly recognize how prior experience can be applied to new situations, through behaviors such as seeking feedback, experimenting and reflection. Learning agility also requires leaders to let go of habits, beliefs and behaviors that are no longer relevant.
Scott DeRue, professor of management at the University of Michigan Ross School of Business, argued in a 2012 article published in Industrial and Organizational Psychology that certain internal characteristics foster learning agility in leaders, including a general cognitive ability, having a “goal orientation” and being high in openness to experience.
Likewise, leaders can engender learning agility in others by modeling a desire to learn throughout their careers and lives and rewarding those who are adept at adapting to the demands of new situations, rather than promoting on the basis of prior performance.
The fifth essential leadership skill in a VUCA environment is the ability to thrive, also known as resilience.
Leaders must deal with more pressure, fewer resources, greater competition, increased uncertainty and, thanks to the global workforce and all-pervading technology, are doing so around the clock. No wonder stress and burnout is estimated to cost organizations more than $300 billion each year, according to the American Institute of Stress.
These demands on leaders are unlikely to change. Those who succeed instead of succumbing to the pressure recognize that they have a choice about how they respond.
With high levels of self-awareness, resilient leaders recognize the warning signs that they’re feeling overburdened and take action. They build mental resilience by choosing how they think, replacing toxic internal commentary with more productive and compassionate thoughts. They choose to spend their time on activities and with people who energize them. Additionally, these “protective habits” act as a buffer against stress — leaders find ways to switch off, connect with people, look after their physical well-being and continuously learn and grow.
Another facet of resilience is “confident uncertainty.” That is, knowing that leaders won’t always have the answers. This is OK. Leadership in a VUCA world is by its very nature going to challenge leaders. The trick for talent managers is preparing leaders with the mindset ready to tackle what’s unknown.