“When top managers describe what they perceive as reality with an air of certainty and authority, they create an incredible mantle of ineffectiveness, because everyone then looks up to them to solve the problems, to do the thinking.” — Peter Senge, Massachusetts Institute of Technology, and author of The Fifth Discipline: The Art and Practice of the Learning Organization
Cultivating meaningful business growth may well be the single most challenging activity that executives must master. A critical dimension of that growth, and one that is often overlooked, is the effective management of uncertainty. Even after the computer models have been tweaked, experts consulted, and strategic plans finalized, uncertainty remains. What should executives do? Some suppress the uncertainty while others simply ignore it.
But those who choose either path create “an incredible mantle of ineffectiveness” because the computer models, experts and strategic plans often mask opportunities, thereby hindering growth. In fact, our research has revealed that wise executives learn to create organizations that embrace, rather than suppress, uncertainty. The model discussed in this article provides the conceptual backdrop for cultivating an uncertainty-embracing organization. The last two sections focus on how leaders can foster an uncertainty-embracing mindset and build the competencies organizations need to cultivate this mindset.
A MODEL OF UNCERTAINTY
Figure 1 depicts the tensions that top managers must manage. A wave-like rhythm of crests of uncertainty and troughs of certainty suggests a way to continually progress and meet ever-changing challenges. Wise executives understand how the relationship between the crests and troughs provides the essential tension for meaningful progress; in a dynamic climate, the seas are seldom flat.
Two basic activities govern whether organizations are moving toward certainty or uncertainty, exploring and refining. Exploring increases uncertainty, as the company reaches out for new possibilities. Explorers are masters of discovery and observation, and exploring skills involve a number of important activities:
- Networking: Making useful connections with other people or ideas
- Dreaming: Imagining the possibilities
- Scanning Quickly: Systematically and strategically surveying the situation
- Brainstorming: Developing a lot of ideas to solve problems
- Experimenting: Systematically testing ideas or plans
Refining increases certainty, by further developing an existing idea, endeavour or approach. Refining skills include planning, organizing, delegating, project managing, scheduling, financial forecasting and a host of others.
A platform, as shown in the model, represents a relatively stable bundle of notions, activities or decisions that provide a foundation or springboard for action. It is, in effect, a temporary resting spot for knowledge. Some examples are a first draft of a proposal, a phase of a building project and a computer chip design. Platforms provide order, direct attention and mould responses. Different versions emerge through further refinements, which we represent with a series of trailing circles (1.1, 1.2, 1.3, etc.). Consider a software package (1.1), for example. Subsequent versions (1.2, 1.3, etc.) of the software represent incremental improvements in the platform and a move toward greater certainty.
A new platform (2.1) indicates a radical or quantum leap forward, which almost always means a leap into greater uncertainty.
Progress occurs as the organization moves from left to right, and may occur in either the refining or exploring modes. The diagram doesn’t show it, but it is possible that a new version, or platform, may not result in progress. Yet, as a general rule, movement from one platform to another fosters greater progress than merely refining an existing platform. However, the decision to develop an existing platform further, or build a new one, is not always an easy one to make.
FOSTERING THE RIGHT MINDSET
Managing uncertainty for the organization’s benefit requires the proper mindset. Executives can develop this cognitive and emotional orientation by considering the following guidelines:
- Recognize that there is an optimum point of uncertainty. To continue to explore without a point of consolidation indicates an unwillingness or inability to make critical judgments and arrive at any sense of closure.
When Thomas Edison was conducting experiments to explained, “Our challenge is to continue performing while we transform the plant.” “Performing while transforming” became the plant mantra for several years. It provided a sense of motivation by legitimizing the efforts of those who kept the old equipment “performing” while others installed the new “transforming” machines. It also helped make sense of confusing events, such as using resources to purchase new equipment instead of upgrading existing machines. In fact, despite all the change, production levels continued to rise during this time period.
This frame was effective for a number of reasons. The words rhyme. They are simple. And they are easy to remember. The use of verbs directs attention to action, both in the present and the future. But “transforming while performing” was more than a clever slogan; the frame addressed a deep, underlying organizational issue that resonated with employees and focused attention on the plant’s future.
DISCUSS DIFFERENT MODELS OF THE SITUATION. Such discussions have a way of generating dialogue from different perspectives. Why? Because models use different assumptions. Consequently, they provide various explanations and yield unique predictions. At the very least, debating those differences creates an awareness of viable alternatives.
CREATE A DIALOGUE ABOUT THE CERTAINTY LEVELS ASSOCIATED WITH CRITICAL FACTS. Charting certainty levels associated with underlying facts provides a useful way to promote meaningful dialogue. For instance, many factors could influence an organization’s decision to launch a new venture. No one can be 100 per cent sure that a customer base will continue to expand, since that involves accurately predicting the future. By labelling certainty levels, the organization can clearly see the true risks in any decision. If the decision turns out to be a poor one, executives can always point to the risky nature of the decision-making process. This beats the alternatives, such as becoming mired in self-doubt, avoiding future opportunities, or searching for scapegoats. It also creates a specific opportunity to learn from a mistake. For instance, executives may learn that they put too much faith in the findings of marketing studies. All too often, executives only think about the known without the context of the unknown. Therefore, charting both the certainties and uncertainties can be helpful in providing more realistic views of an organization’s environment.
3. Instigate action
EXPERIMENT. Experiments are a useful alternative when faced with uncertainty because they provide an opportunity for meaningful learning. Consider how a minor-league hockey team, the Utah Grizzlies, managed a decision about whether to purchase a high-speed digital colour copier to print brochures, posters and other promotional items. At first blush, the idea seemed like a pleasant convenience that would allow staff to avoid the hassle of outsourcing arrangements. They decided to try out several of these machines on a trial basis. Not only did the machine make life easier for employees, it also provided a means to increase customer satisfaction and profitability. In short, experiments can allow companies to continually reproduce their success on many levels.
USE INTUITION TO GUIDE COMPLEX DECISIONMAKING. One study of managers found that two-thirds of them felt that using intuition led to better decisions. (L.A. Burke and A.K. Miller, “Taking the Mystery Out of Intuitive Decision Making,” Academy of Management Executive 13, no. 4, 1999: 91-99) Intuition expedites decision-making, promotes the synthesis of information and provides a check on data-driven analyses. Some critics have called the reliance on intuition “irrational.” (But what about irrational numbers? There was a time when the mathematics community did not accept them. Now, rational and irrational numbers are collectively known as real numbers. Perhaps there is a lesson here.) A cautionary note nevertheless: We are not talking about some kind of whimsical hunch that provides a convenient excuse to avoid considering contradictory evidence. Intuition works best when grounded in experience; clearly the intuition of an expert is more reliable than that of a non-expert. That’s why effective leaders hone their intuitions by discerning patterns in their experiences.
FOSTER FOCUSED FLEXIBILITY. In the Book of Proverbs, King Solomon admonishes, “Go to the ant, you lazybones; consider its ways, and be wise.” (Proverbs 6.6) It’s not just the ants’ work ethic; it is the way they work together that proves illuminating. Some scientists call it “swarm smarts” or “swarm intelligence.” It emerges from the ants’ collective behaviour, allowing them to solve complex logistics issues like finding the shortest distance to good food sources. As two scientists observed, “By maintaining pheromone trails and continuously exploring new paths, the ants serendipitously set up a backup plan and thus are prepared to respond to changes in their environment” (E. Bonabeau and G. Theraulaz, “Swarm Smarts,” Scientific American, March 2000).
Ants have a remarkable ability to quickly forget old pathways and switch roles as the needs of the swarm change. In other words, ants practise “focused flexibility”; they focus on present needs while maintaining the flexibility to meet future ones.
Some companies are now beginning to recognize the wisdom of such an approach when responding to environmental uncertainty. Two strategy scholars have observed that:
“Managers of [successful] companies know that the greatest opportunities for competitive advantage lie in market confusion, so they jump into chaotic markets, probe for opportunities, build on successful forays, and shift flexibly among opportunities as circumstances dictate. But they recognize the need for a few key strategic processes and a few simple rules to guide them through the chaos.” (K.M. Eisenhardt and D.N. Sull, “Strategy as Simple Rules,” Harvard Business Review, January 2001: 106-119).
Sounds just like the ants! Focus provides the motivation, resources and direction needed to accomplish ever-changing goals. Flexibility allows companies to respond more quickly to marketplace changes while decreasing development costs.
For example, designers who use flexible strategies, on average, can complete their projects in half the time of those using more conventional design processes. (S. Thomke and D. Reinertsen, “Agile Product Development: Managing Development Flexibility in Uncertain Environments,” California Management Review, no. 1, 1998: 8-30.) “Focused flexibility” may sound like an oxymoron, but it is actually a powerful tool for instigating action during uncertain times.
The critical challenge for leaders is to create an environment in which employees believe that the organization can realistically deal with uncertainty. But that is not an easy task; it means adroitly managing the tension between the opportunities presented by uncertainty and the comforts provided by certainty. Executives need to have a clear vision to achieve this delicate balance. On the one hand, they must alert the organization to the value of uncertainty. On the other hand, they must not overwhelm the organization by mindlessly pursuing too many opportunities. A clear vision instills a sense of boundaries and fairly standard (or certain) procedures for managing uncertainty.
Wise executives cultivate certainty at a more fundamental level in their organizations while fostering uncertainty at other levels. Scientists, for example, use a rigorous and standard methodology in arriving at conclusions. The scientific method provides an appropriate level of certainty at the most fundamental level. Yet scientists can explore countless opportunities using this method, thereby embracing all kinds of new ideas, theories and uncertainties.
We use a similar approach when consulting with various companies. In the communication system, we try to highlight the underlying thought processes of executives. These “thinking routines” are the deeply rooted methods and principles that executives use to work through problems. Issues such as economic conditions, marketing challenges and competitive pressures may change, but the underlying thinking routine endures. In short, the executive thinking routine is the functional equivalent of the scientific method, providing just enough certainty for organizations seeking to embrace the uncertainties implicit in an ever-changing world.
Newspaper headlines more often link uncertainty to fear than to opportunity. Unfortunately, such an association reflects a shallow understanding of the potential benefits of embracing uncertainty. Wise organizational leaders intuitively know this. They creatively manage the exploring and refining tendencies of their organizations by fostering the proper mindset, while developing the appropriate uncertainty-embracing competencies. They do these challenging tasks because they believe uncertainty must be linked to growth rather than anxiety.