Leadership in uncertain times

Jun 01, 2018
What are the determinants of leader success in a volatile, uncertain, complex and ambiguous world?

Recent times have been commonly described as volatile, uncertain, complex and ambiguous (VUCA). The VUCA world has been propelled by three fundamental shifts. First, the convergence of a couple of great disruptors – technology and globalisation – has made the pace and scope of change far greater than it has been since the industrial revolution.

The emergence of new disruptive technologies and business models is becoming more commonplace and is reshaping the nature of competition across industries. As a result, executives may need to master additional skills to redirect their organisations in the face of attacks from a wider array of competitors than ever before, who create value for customers in fundamentally new ways.

Second, and on a related note, executives are faced with a constant stream of information and trends that have become more readily available. It is therefore difficult to distinguish noise from actionable intelligence. As a result, executives may need to make decisions and advocate for them with little clarity on environmental trends.

Finally, a fundamental shift is under way in the psychological contract between employers and employees. Unlike the past, when individuals often remained with a given employer for most or all of their working lives, individuals are now more likely to change jobs multiple times over the course of their career and employers are less likely to offer stable employment than prior generations. As workplaces come to be characterised by frequent turnover of staff and an increase in contractual and temporary staffing arrangements, leaders face increasing challenges in hiring, motivating and retaining employees and in preventing the loss of valuable skills and
knowledge.

When one considers the fundamental changes ushered in by these developments, it is not surprising that there is much interest among executives, consultants and academics alike in understanding the key leadership skills that can drive organisational success in a VUCA world. Questions have also been asked about how these leadership skills compare to those that drove success in prior decades.

A key determinant of leader success in a VUCA world will continue to be the ability to effectively manage talent in one’s organisation. In particular, managing talent is becoming the foremost strategic priority and requires even greater executive attention. We are conscious that there isn’t any one boiler-plate or leadership template for managing talent. Rather, our aim is to discuss a few challenges leaders may encounter in a VUCA world and share examples of some practices that can enhance the probability of leader success.

The hiring process

The first and foremost talent management challenge facing leaders in a VUCA world is getting the hiring process right and treating it at par with other significant resource allocation decisions – but getting this right is easier said than done. Research has found that executives often staff their organisations with individuals with homogeneous skillsets and work experiences, often mirroring those of executives themselves. In doing so, they may create a ‘tunnel vision’ of sorts in the organisation when instead, greater diversity of thought and skills is likely to be needed for organisations to navigate the current VUCA times. There is also the temptation to make recruiting choices based on the immediate operational needs of the organisation or by prospective candidates’ fit with current activities instead of acquiring talent that will support the organisation in the medium- and long-term. One example is the need for technology-savvy individuals who are able to help the organisation capitalise on the digital and analytics disruptions that are reshaping the business world. As the famous hockey player Wayne Gretzky once said: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

Nurturing talent

A second, not-so-obvious challenge facing executives in a VUCA world is avoiding the extremes of either neglecting their top talent or singularly focusing on top talent while ignoring other employees. On the one hand, top talent disproportionately contributes to organisational performance despite being in the minority. Top talent is also generally highly mobile. Thus, leaders cannot afford to take these individuals for granted and must make efforts to motivate and retain them. On the other hand, the features of a VUCA world also imply that organisational performance is increasingly dependent on team effort as much as solo efforts by key employees. Important contributions to team effort are often made by employees who may not be the top-most performers, but are nevertheless good organisational citizens who provide valuable stability. Organisations should therefore be mindful of the unintended emergence of a vicious cycle whereby the nurturing of top talent comes at the cost of denying growth opportunities to others. The balancing act that leaders need to perform in order to retain and reward their top talent without alienating others often proves difficult. Good inductions, coaching, and emphasising and encouraging collaborative behaviour are a some actions leaders can take.

Incentive and reward systems

A third challenge facing executives in a VUCA world is preventing potential distortions triggered by the design of organisational incentive and reward systems. One such distortion can result from adopting incentive systems that are at odds with organisational objectives. This possibility was extensively discussed in the seminal article, On the Folly of Rewarding A while Hoping for B. For example, organisations commonly provide incentives for the achievement of individual targets while stating a desire for a collaborative organisational culture. Another distortion that can occur as a result of organisations’ incentive and reward systems is employees being promoted based on their performance in their current roles as opposed to their potential and suitability for future roles. Google’s ‘Project Oxygen’, for instance, revealed that individuals who were promoted to managerial roles largely on the basis of their current technical skills and performance were often not effective in these roles, as good managers also needed softer skills such as listening, coaching, developing others, and the ability to delegate. More generally, organisations’ incentives and reward systems could also generate distortions when they focus on a narrow set of behaviours and outcomes, thus inadvertently discouraging other value-creating behaviours and outcomes. For example, it is quite possible that a great salesperson may neither want to be a sales manager nor would make a good sales manager. Creating incentive and recognition systems that seek to recognise the different ways in which employees contribute to organisational success could be one way to avoid this.

Conclusion

A VUCA world has created immense opportunities for companies to tip the balance of competition in their favour and create the preconditions for lasting success. In doing so, leaders must approach the selection, motivation and retention of talent as a strategic priority.

Karan Sonpar and Federica Pazzaglia are both Professors in the management subject area of UCD Smurfit School of Business.

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