The equilibrium of stability & growth
For decades, companies have relied on a balance between stability and growth: As individuals and as company leaders, we cherished and worked towards a feeling of stability where we saw the grand picture, had a pretty good idea of what was coming in the next ten years, and knew that we’d made the right decision. We generally felt in control and safe. We could accommodate that change became a constant, and that the driving force of the extraordinary growth of organisations in recent decades has been innovation: exploring new fields, testing limits, adapting and expanding (e.g., user and customer base, data, company size), and often taking considerable risks. But all of that was couched in a feeling that we were still more or less in control. These two principles, stability & growth, formed a dynamic equilibrium. This has been thrown off-kilter by the developments of the past few years.
Almost 300 years after John Donne wrote “No man is an island’ to describe the connection between all of humankind, UN Secretary-General António Guterres echoed that theme, saying of the climate crisis, “We have a choice. Collective action or collective suicide. It is in our hands.” And climate change is just one of the immense global challenges we are facing. As we head towards the third year of the COVID pandemic, with the largest war since WWII on the border of Europe, a rise in nationalism in countries around the globe, and the threat of recession with food and fuel scarcity, organisations are increasingly struggling to cope. In a relatively stable market, we had tools to manage and encourage growth. These tools are simply no longer able to cope with the massive global and systemic instability and complexity we face. So, what do we do? What does resilience mean in the face of exponential instability?
The human tendency to resist change
Humans usually resist change as long as possible because our brains are wired for efficiency. As we all know, changing things devours large amounts of energy. One of our ways to be efficient is to operate with many automatised “gut” reactions, also known as unconscious biases. These biases and their unconscious nature not only heavily influence how we make decisions but also shape how we perceive the world around us. Well-known biases are, for instance, the “Mere-Exposure Effect” also known as the familiarity principle, which is the human tendency to express undue liking for things merely because of familiarity with them. The effect has been demonstrated with many things, including words, Chinese characters, paintings, pictures of faces, geometric figures, and sounds. In studies of interpersonal attraction, it has been found that the more often a person is seen, the more likeable they are.
Or the “Base Rate Fallacy”, which is the tendency to ignore general information and focus on information only about the specific case, even when the available information is more important. When base rate information (i.e., general information about prevalence) is juxtaposed with specific information (i.e., information that relates only to a particular case), people tend to ignore the base rate in favour of the individual information rather than correctly integrating the two.
There are between 150 and 200 known unconscious biases – we can assume that we all constantly operate with a considerable number of them.
Don’t hide from complexity
You may be tempted to try and reduce the complexity of the challenges your company faces. However, it’s highly likely that a complexity-reduced image is shaped by a multitude of unconscious biases that prevent us from seeing and understanding the tangle of issues we are encountering. Seeing and understanding is the first step to becoming resilient.
We trust too easily in the perception that we are facing something simple that we can analyse and manage with familiar tools. Yet, for example, ESG topics – which range from the effects of climate change to the resulting social unrest, but also wars and economic factors, to systemic and global governance challenges—affect all of us in unpredictable ways. On a more immediate level, we are dealing with a recession, resource scarcity, supply chain issues, recruitment and flexible workforce management, inflation, working from home, and more. There are so many complex interlocking issues and challenges. They need to be addressed with a different mix of actions.
So, the first piece of advice to individuals and to organisations is: Don’t believe in the easy fix.
Take the time to collect and analyse lots of data, including your biases, take on board many different perspectives, reflect – and then form an image of reality that probably looks different and will hold ambiguous, even contradictory elements and lots of interdependencies. That’s what complexity is. Tackling it means being resilient.
Make changes even if it is scary
That’s where it becomes hairy. How do you make an investment or a contractual decision that affects the next 20-30 years in the face of such instability? How do you manage risk you don’t even know of, but that has the potential to ruin your company? Which decision is the right one? These questions are particularly relevant for SMEs, but also for organisations that have staked their future on a few select products/ services and even states, as Germany’s case of self-inflicted dependency on Russian gas shows.
These uncertainties can cause stagnation or overreaction, and a culture of ‘better to do nothing than make the wrong decision’. As I mentioned above, that is a totally normal, human reaction to a crisis. It’s much easier (and it seems safer) to stick with the status quo than to make sweeping changes. And the ‘status quo trap’ is one of the most powerful unconscious decision-making traps that keeps us from making decisions that help us grow. So don’t fall into it as a future-oriented leader but take a step back and reflect. Find ways to break out of the status quo.
The measures you can take to become more resilient as an individual do not scale easily to organisational resilience. Contrary to recent popular opinion, an organisation that focuses on its purpose and “really lives it” won’t be magically transformed or fixed. While it is undoubtedly helpful for leaders and employees in organisations to have a clear general direction, the detail of how a company operates matters—as we can witness on a daily basis.
How can an organisation be resilient if we can’t rely on a re-establishment of stability and a clear sense of direction can’t fix this dilemma? Spread risks across a number of different assets and asset classes—even if it changes your mission and confuses investors. Reducing existing complexity to something investors find easy to digest does not help here. Offsetting different assets against each other does if it comes to the crunch.
Complexity of thinking is good!
If you are reading this in the hope of finding a quick fix, we must disappoint you. We aren’t here to share snappy slogans or provide easy solutions. There’s also no ‘one size fits all’ solution. Every company will have to do the work to figure this out. But we are happy to support you as an independent and knowledgeable sparring partner to shape your organisation’s future.
The Metamorphosis Newsletter will dive deeper into these topics and discuss how you can approach the challenges you face, and help you find solutions that suit your organisation.
In the next newsletter, we will take a closer look at the complex HR issues facing companies in these changeable times, starting with the very nature and value of work.
The Metamorphosis Newsletter is written by Dr Theresa Semler, Managing Partner and Executive Coach, Semler Company. Theresa and her team support businesses on their transformation journey.
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