Feb
09

Leadership Approach for Crisis and Chaos

By Gary Clayton

[Our need to adopt a leadership approach to chaos is even more relevant today than when I first posted it on my former blog, the Proficient Leader]

Our Economy is Facing Chaos

As our economy sinks further into recession, this sample notice is appearing with greater frequency:

Dear Friend and Customer,
As you may already know it is with regret that we make this announcement, but circumstances beyond our control forced XXX, and ZZZ to file a petition for reorganization under Chapter 11…

Today (October 16, 2008), the US and foreign markets continue to ricochet like racquetballs as very mixed economic news are announced: new corporate losses, rumors about hedge funds, reduced but still bad job reductions, etc.

Leadership Approaches for Handling Chaos Exist

How do we find our way out of this crisis? Luckily, there are protocols for combating chaos, where we don’t even know what the “unknowns” are. There is no guarantee of success, but one can greatly improve one’s chance of surviving chaos, even if one didn’t see the tidal wave coming. David Snowden and Mary Boone outline one such leadership approach in the Harvard Business Review (Referenced below).

Their framework recognizes that one of the most frequent causes of a plunge into chaos is that executives become too complacent during times of stability and/or growth. As the problems arise in simple contexts (“Oh, they are just bad loans”), the executives are fooled into thinking that they’ve seen it before and can use familiar tools to deal with it. Chaos is tricky, in that there are frequently periods where it appears that what we are looking at is no different than what we’ve seen before. Then, things start to take off in unexpected directions. First, by a little bit, then a bit more, and then by enough to alarm us as we realize we don’t have control of the situation at all. We have a crisis on our hands.

We can see that now in this current economic crisis. De-regulation and failure to regulate allowed the proliferation of risky financial contracts to reach a critical mass and explode in our faces. Sinking into chaos frequently happens in businesses where companies are brought to their knees by leaders failing to adequately control the financial or operational risks of growth or contraction – or having no succession plan for a critical position, especially the CEO.

Ideally, a leader never becomes complacent and never takes it on faith that yesterday’s tools will solve today’s problems. But we are all human and complex systems like the economy and our competitive climates will spring surprises upon us. So what should we do when chaos happens and we don’t even know all the “unknowns” that affect the situation?

Snowden and Boone say when faced with in chaos, leaders must first “act to staunch the bleeding” then sense where stability is and where it is lacking. Because of the turbulence, leaders won’t know whether their actions were correct until islands of stability start emerging. Here, existing tools may require some modification, but can address part of the problem - at least temporarily.

There are likely to still be areas of complexity, areas where we can recognize what we don’t know and no existing tool will prove sufficient. With complex situations, leaders “must patiently allow the path forward to reveal itself.” Here is where we need to be careful, for new solutions are required once we understand the situation. We need to go through a deliberate process or probing to better understand the situation, then sensing how any actions we might take could affect the whole system, and finally taking action. The actions will cover the range of quick fixes to stabilize the situation, moderate term actions to move the system back to its intended function and long term changes to ensure the system stays within regulation.

Industry Experts Often Fail in Chaos

We can’t depend on industry experts alone to solve these problems, as they hold the most complete knowledge of the known world and are highly likely to be limited in their ability to bring new thinking to the table. After all, it was the experts that lead our way into chaos, and as Einstein said, ““Problems cannot be solved by the same level of thinking that created them.” Once the chaos is contained and reduced to mere complexity, we need widespread brainstorming and new thinking to come up with viable solutions. Look for an expert in leadership approaches. Let everyone else follow the conventional thinking provided by industry experts.


References

Snowden, D. and Boone, M. A leader’s framework for decision-making. Harvard Business Review, Nov. 2007, 85(11). pp 69-76.

Share and Enjoy:
  • LinkedIn
  • Google Bookmarks
  • Digg
  • TwitThis
  • del.icio.us
  • Facebook
  • Ping.fm
  • StumbleUpon
  • YahooMyWeb
  • Yahoo! Buzz
Categories : Approaches & Styles