Dealing with change is nothing new for successful leaders. But over the past decade, the speed and severity of change has increased, culminating in what the Harvard Business Review called “a new normal of change,” marked by three dimensions:
Today, leaders are dealing with the lingering effects of the pandemic, a protracted war in Ukraine, and global political and economic instability. Any one of these variables would introduce an intolerable level of chaos into the market. How these variables will interact and what effects they will have has proven impossible to predict, eroding the already precarious ground upon which leaders stand and creating a sense of profound uncertainty.
Layered on top of these macroeconomic challenges are the challenges businesses face all the time. Nearly two-thirds of leaders surveyed in a recent McKinsey survey said their organization had undergone significant change within the last three years — whether that be reorganization, culture change, reductions in force, mergers and acquisitions, or an IPO. The result? 68% of business leaders feel overwhelmed.
If the last few months are any indicator, the level of uncertainty leaders face is unlikely to change. What skills will leaders need to navigate this uncertainty and steer their organizations forward?
According to the executive coaches and consultants we surveyed, the answer to this question has three parts: build self-awareness, master simplification, and balance the bears and bulls in the market.
As a species, we are not designed for these kinds of unpredictable conditions. Millions of years of human evolution created a stress response that kicks into high gear when we encounter ambiguity. To succeed in what seems to be a new normal, leaders will need to pay careful attention to how they respond to uncertainty.
Studies show that, when faced with overwhelming challenges, some people adopt a persona resembling the gritty heroes of old Hollywood westerns or war movies — charging up the hill as though they were invincible. While many leaders would prefer to think of themselves this way, this type of leadership has a significant dark side.
Most people already overestimate their strengths and underestimate their shortcomings, a tendency that increases under stress and pressure. Overcoming this tendency requires leaders to have tremendous self-awareness, and adjusting their natural leadership style to meet the needs of a particular moment requires tremendous self-determination and self-control.
While counterintuitive, leaders need to set aside time for self-development and introspection. Many leaders doing this well put recurring blocks in their calendar to ensure it is integrated into their weekly work-life.
In the coming year, leaders and their organizations will face a barrage of distractions — daily emergencies that require their immediate attention. But staying in reactive mode hinders a leader’s ability to see the forest for the trees, which can leave them vulnerable to disruption.
Leaders need to adopt a flexible mindset that allows them to zoom in and assess problems and situations with nuanced, detail-oriented thinking, then zoom out to see that problem in the context of broader patterns and trends. Leaders should use this flexible mindset to step back and evaluate what is essential to the organization. Then, they can zoom in and focus on the initiatives that will make the greatest impact on the organization’s success.
This is not the first era of economic uncertainty that organizational leaders have encountered. Historically, leaders face two primary risks during times of economic hardship: not doing enough to protect the business and not doing enough to invest in the future.
Harvard researchers posit that the key to outperforming competitors during and after an economic downturn is balancing bearish and bullish attitudes. A study of 4,700 public companies during three global recessions showed that the companies that made the first and deepest cuts were the least likely to succeed post-recession. Many failed to ever recover their pre-recession value. Companies that invested too aggressively fared similarly badly.
The nine percent of companies that came out of each slowdown stronger than they went in were those that mastered “the delicate balance between cutting costs to survive today and investing to grow tomorrow.” At the end of each recession, these companies not only outperformed their own pre-recession financial metrics but bested their rivals by at least 10% in terms of sales and profit growth.
As challenging as it is to cut expenses and reduce the workforce, the harsh reality is that, for many businesses, making strategic reductions now might allow the rest of the company to adapt and thrive. At the same time, leaders need to look ahead and consider the areas they need to push forward. Where does the company need to invest so that it comes out of the recessionary headwinds with momentum and competitive advantage? The answer to this question will help organizational leaders make plans for the future, even if it is not wholly predictable.