The credit crunch and the leadership challenge

Sarah Lewis

Appreciating Change

Sarah Lewis explains the problem of leader paralysis when facing big and unpredictable events, arguing that trying to predict the future and agonising over the consequences might be part of the problem.

With the benefit of hindsight there may have been signs of possible economic meltdown but few people saw it coming, and even fewer prepared for it. Leaders, who expect to be able to shape the world to their purpose, can become paralysed when suddenly dealing with a big unpredicted event. Fortunately there are things leaders can do to reduce their vulnerability to unexpected events and to increase their ability to respond when they happen.

The basic problem of predictability:

• There are things we do know and things we don’t know
• There are things we can know and things we can’t know
• The balance of predictability in the world is shifting (argues Taleb, 2007) from a preponderance of things we can know (there is some possibility of prediction, e.g. the housing bubble will eventually burst) to preponderance of things we can’t know (there is no possibility of prediction e.g. the whole financial system will unravel in days)
• In other words the problem of being caught by surprise is only going to get worse

The basic challenge with unpredictable events is:

• The past is not a reliable predictor of the future
• We don’t know what we don’t know
• What we don’t know is likely to be more important, and impactful, than what we do know
• Studying what we do know more, won’t tell us what we don’t know
• We think we know more than we do, and we don’t know how much we don’t know

The problem for leaders and the essential forecasting conundrum

Organisations rely on the tools - planning, forecasting and experts - that can only predict the predictable. Our focus on the predictable prevents us seeing the infinite unpredictable possibilities. It is the unpredictable that will have impact and that should be important to us.

"Our world is dominated by the extreme, the unknown, and the very improbable while we spend our time focusing on the known and repeatable." (Taleb, 2007)

What can Leaders do?

1. Embrace the power of the Not Knowing and the wisdom of Un-Knowledge

• Accept that you can’t know the future
• Appreciate that you can’t assess ‘total risk’
• Recognise that what you don’t know is more important than what you do know
• Reduce stress by letting go of the illusion of knowledge and control

2. Invest in preparedness rather than prediction

• You can’t plan for the improbable, unthinkable, highly impactful event. You can only be ready to respond to it
• There will always be unpredicted consequences to actions - they may even be an opportunity
• Beware of precise plans
• Don’t ford a river ‘on average’ four feet deep (you may drown in the deep bits!)

3. Dance with the unknown

• Use imagination as a resource. Imagined things become possible things
• The rational brain only knows what it knows, to get to what you don’t know, you need to work with image, metaphor and music
• Aggregating knowledge dilutes it (thinking of our river as ‘on average only’ four feet deep we lose the information about the range of depth, which is actually more important). So work with the whole system in its messiness
• Explore consequences - ‘what if?’ - rather than probabilities - ‘how likely?’

4. Get lucky

• Tinker about with your organisation – it creates opportunity and learning
• Invest in trial and error, recognising that it means trying a lot and tolerating a series of small failures
• Learn to recognise opportunities and seize them - they come disguised as mistakes, interruptions, distractions and failures
• Look out for positive accidents

5. Do change differently

• Appreciative Inquiry, future search, open space technology, world cafe and other new approaches to change all work with an awareness of the power of the system, imagination, emotion, not knowingness and ‘doing things’. These can be used to help with preparedness or as a rapid response to the unexpected.

www.appreciatingchange.co.uk

Sarah can be reached via email here, and via Skype on sarahlewis10.