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Conditional Leadership™ in a VUCA World

Business leaders are most effective when they know how to respond with efficacy to stable conditions. However, our era is defined by high volatility, uncertainty, complexity, and ambiguity (VUCA). Consequently, the lack of stability and predictability calls for an agile leadership framework. We call this Conditional Leadership™.

Let’s take the recent pandemic. Suppose your style of leadership was democratic. It probably wasn’t very effective when your business had to face a sudden drop of 25-50% in revenue, forcing you to make quick decisions to keep a positive cash flow. After all, there wasn’t time for soliciting group opinions or debating the business out of harm’s way. Most leaders may have switched instinctively to an autocratic leadership style, as the conditions demanded someone to take the lead and make tough decisions quickly and decisively. While the switch of styles makes sense, given the dire conditions and the common belief that the leader is often the most qualified to make these tough decisions, we will see that leaving things up to one Great Man or Woman may not lead to the best fit for the situation.

P.s. Conditional Leadership™ isn’t about improving an individual’s readiness to perform. Preparing people for a task is certainly one of leadership’s roles (image below, coach potential) but to that end, we would recommend Hersey’s Situational Leadership® method.

Definition

Conditional Leadership™ is about improving overall performance readiness by anticipating potential changes in conditions, internally and externally, that could affect the bottom line. It is not a leadership style but a modeled approach to build high performing systems while acknowledging that change is constant and that all systems are inherently self-organizing.

For instance, Conditional Leadership™ demands to have your strategic playbook ready to mitigate specific adverse effects or to benefit quickly from positive influences while keeping a record of the system’s gaps, constraints, and interdependencies. In accordance, the They can switch instantly to the most effective leadership style as the conditions change.

It is essential to realize that we can’t make sense of the circumstances or consequences (of our decisions) if we don’t understand their impact or context. Knowing what to look for and how to interpret a change in conditions is critical to steering the company in the right direction.

Conditional Leadership™ addresses all four roles of leadership: it is about creating a compelling vision of the future, brought about by an agile strategy, while inspiring trust (so we don’t need to panic when conditions change), knowing that we hired the right talents for the future.

Fallacies

Both Peter Vaill as well as Owen Harrison (creator of Open Space Technology) challenge the conventional “Great Man” theory of leadership.

Instead, they believe that any complex system, in particular in a VUCA world, are inherently self-organizing.

In science, the idea to test an assumption in a closed system makes sense. However, in the real world no system should be perceived in isolation.

If we refuse to acknowledge this fallacy, we’re bound to get the wrong idea of reality and any decision taken from it will be shaky at best.

While we are an advocate of Systems Thinking and the need to perceive the whole system, we also realize this is a fallacy. Because, are we really seeing the whole system?

American psychologist and philosopher, Ken Wilder, argued that ‘Every inside has an outside and vice versa.’ We can describe a person by his/her appearance, but does this allow us to understand his/her motivation?

Furthermore, what about the context of the system we’re investigating? Any imaginary border or boundary will prevent us from getting the whole picture.

But, let’s assume we are able to map the whole system. By the time we’re ready, the system will have change so much that our efforts will be pretty much useless.

Chaos, confusion, and conflict

If all there is left to say is “Brace for impact!”, then we’re too late. People are uninformed and come unprepared because critical changes in conditions have been ignored for too long. The following scene, taken from the movie Flight (2012), paints the picture.

Leadership Styles in the Business Cycle

Next to somewhat unforeseen events like the recent pandemic, some forces bring predictable conditions. Such a force is the business cycle and, in particular, the Kondratieff cycle or K-wave. It is a recurring economic cycle of about 53 years driven by technological advancements. Renowned economists like Nikolai Kondratieff, Joseph Schumpeter, and Carlota Perez (London School of Economics) support the K-wave theory, while scientists validated the hypothesis using a Bayesian statistical paradigm.

The K-wave theory suggests that we are reaching the end of the current (5th) K-wave. A period marked by economic depression, caused by the fact that most products and business models that are based on inventions in the sixties and seventies, are now maturing almost simultaneously. Although is 

We’re suggesting applying a different leadership style to each of the four stages in the business cycle to meet the known challenges. However, you may prefer a different leadership style to direct your business with, and that’s fine as long as you recognize the long-wave conditions during a specific timeframe and change to a leadership style that is most effective to execute a response.

Business Cycles and Disruption

Today’s products and business models simultaneously decline because they all come from inventions in the sixties and seventies. It is, therefore, no surprise that many boards are looking for a CEO that can steer the company away from the path toward demise even though they are often unaware of the dynamics of business cycles.

Another way of dealing with a steep decline in revenue is to appoint an outsider to help turn around the business, as IBM encountered when the company reported the biggest corporate loss in history. Kodak, on the other hand, was convinced that their strong competitive advantages (making the highest-quality film) would protect their revenue streams (film and print), despite the rise of digital photography. But they failed to appreciate the change in external conditions: due to the exponential rise of mobile networks, the adoption of camera-equipped smartphones, and the popularity of social networks, customer behavior had shifted rapidly from printing photos offline to sharing pictures online. In a few years, Kodak lost 75% of its revenue, mostly in favor of Instagram.

Other market leaders like Blockbuster and Blackberry completely underestimated the industry’s capacity to increase the bandwidth and the speed of online connections, thereby creating the perfect conditions for Netflix and Apple to thrive. Nokia, Blackberry, and Microsoft had long ignored signals that users strongly preferred touchscreens on smartphones, allowing Google and Apple to take over the lead. If only leadership had known about these conditions, things would have developed very much in their favor. Alas.

A different Type of Leader for every Stage

It is pretty common for startups, as they mature, to appoint a CEO that best suits the stage of its development: often beginning with an inventive type (Irruption), followed by a marketing or salesperson (Frenzy), next, an accountant (Synergy), and finally a M&A type or change agent (Maturity). Each period may have a different leadership style: highly inspirational, highly performance-driven, highly cost-effective, or keeping the lights on while preparing to make a leap (or foreclosing or selling the business).

In 1983, Neil C. Churchill and Virginia L. Lewis published an article on HBR of business growth, particulary for small businesses. The authors identified five stages of growth, from birth to maturity, with five general types of management styles (see image below).

Change Management and Leadership

Contrary to what we discussed before, change management is about the response to the external conditions while creating the internal conditions for change. The practice of change management is a relatively young discipline, starting with a paper by Julien R. Phillips of McKinsey, first published in Human Resource Management (1983). Phillips’ work inspired several similar approaches, such as Kotter’s 8-step model and the Prosci ADKAR model.

Phillips wrote in 1983:

“Until recently, most companies operated in reasonably stable environments. Their major challenges were to deploy their resources and exploit their capabilities as effectively as possible within these stable environments.”

Although this was 1983, and since we’ve almost progressed a complete cycle, leaders are now facing similar challenges. Phillips continued with,

“But today a great many companies are facing unstable competitive environments that are often changing profoundly. The dramatic reduction in economic growth ─ both domestic and international ─ has shifted the primary competitive battle from shares of new or expanding markets to survival shares of slow-growing markets.”

Again, history tends to repeat itself. Phillips concluded by stating:

“Thus, many companies are finding it necessary today to change drastically what they are trying to do and how they are doing it, in order to continue to be successful. Bringing about such organizational change by devising different kinds of strategies and patterns of operation creates a much greater managerial challenge than simply continuing to perform well within established strategies and operations, and it is a challenge for which few senior managers have much relevant experience.”

Finally,

“It requires greater environmental sensitivity, imagination, and a different kind of leadership than continuing to operate well in as stable environment.”

There you have it. In 1983, McKinsey knew that change leadership hinged on understanding and interpreting the internal and external conditions (‘environmental sensitivity’, which today is sometimes described as ‘market intimacy’).

Phillips believed this new style of leadership could be learned:

“The challenge of managing such fundamental organizational change can be met successfully, but first it must be understood.”

It is no coincidence that Peters and Waterman of McKinsey published their bestseller In Search of Excellence in the same year. The authors described how some companies outperformed others in innovation and creativity because leadership allowed small groups to launch new ideas despite the formal structure and the linear way of thinking.

Styles of Leadership

Just to give you an idea of the various types of leadership, this is a shortlist.

Visionary leadership is the ideal management style to use when a business leader needs to introduce a new concept or new direction to current staff. With this technique, business leaders can inspire employees by presenting them with a powerful and progressive future outlook. To be successful with this method, leaders must make a strong connection with their team to earn their commitment. This can be achieved by creating unity and focusing on how important their team is to helping the organization achieve the new agenda or direction.

Coaching leadership involves honing a staff member’s individual talent so that they can develop their experience and expertise within their industry or field. With this approach, the leader’s goal is to identify the key skills of its employees and instill knowledge to help further develop the candidate’s career. To be successful with this approach, leaders will need to possess a strong understanding of each team member’s strengths and weaknesses, as well as their inspirations and motivations. This can be achieved by taking the time to get to know their staff and asking strategic questions surrounding their perceived strengths and what they feel they need to be successful.

Affiliative leadership is used to nurture workplace morale, helping staff members reconnect with their organization and their peers. This leadership style focuses on the group as a unit; however, it is important to hold each employee accountable for their role in the team re-building process. When morale is low, some workers need more motivation than others to encourage them to invest their hearts into rebuilding workplace relationships.

The democratic leadership style involves soliciting group opinion to help find the solution to a difficult problem. The democratic leadership style tallies the staffs’ opinions for a possible solution, which is then presented to the organization’s leadership who makes the final decision. When business leaders include staff in the decision-making process, staff members are more likely to offer genuine support for the agenda, because they helped to devise the plan. The democratic leadership style is not appropriate for dealing with business emergencies.

The pacesetting approach requires setting performance standards and holding team members accountable for meeting those goals. Although performance can be measured based on quantifiable metrics, it is especially important for leaders using the pacesetting approach to understand and consider all possible factors that can influence performance. Additionally, the pacesetting method should not be overused, as it can lower staff morale when they do not achieve the goals.

The autocratic leadership style is primarily the traditional boss-worker structure, where management makes a majority of decisions and workers do what is asked of them. An advantage of this method is that companies and organizations are able to execute their vision in an efficient and effective manner. A great example of when this leadership style is appropriate is for extremely complex projects – such as construction – where conformity is necessary for worker safety and project completion. However, if an autocratic leadership style is used inappropriately, workers may become extremely dissatisfied and can feel as though they provide little to no value.

Modeled after the military, the commanding leadership style is similar to the autocratic leadership style but involves no input from subordinates. The commanding method of leadership has long been known as the style used in a time of crises when there is no time for leadership to explain what is happening but immediate action is necessary. In the daily workplace, this is the most ineffective leadership style, as there are rarely daily crises and workers enjoy understanding what they are doing, as well as having a say in work-related projects and situations.

The laissez-faire leadership style involves leadership empowering staff with minimal directives. With this style, leaders often provide their staff with the tools needed to complete their work, and as appropriate, let staff resolve issues on their own. Although this method results in the highest job satisfaction rating, the success of the style can be largely dependent on the composition of the team and specific to highly skilled and motivated staff members.

The bureaucratic leadership style relies on the positions individuals hold within their organizations and businesses to definitively outline their responsibilities, rules and regulations within the organization. An advantage of this leadership style is that it is highly efficient and controllable. This is due to the fact that bureaucratic leadership can be thought of as a system with several levels of management, each reporting to the level above it. The cons of this style are that it is quite hierarchical, and workers or managers on the lower level have a difficult time expressing good ideas or input to those in charge, as they often have to travel through a vast chain of management.

With servant leadership, people are the most important business component and their needs are key priorities. This leadership style focuses on the concept that a satisfied team will produce good work, and it works best when coupled with other, more authoritative, leadership styles. When using servant leadership, it is important to consider whether this style is appropriate for the organization’s corporate culture.

Depending on the circumstances a business leader is dealing with, they may need to incorporate different leadership styles to move their organization forward, especially as organizations face growing complexity and ongoing change. Whatever styles business leaders use, it is important to remember to apply the right style to the right situation to help enhance employee performance and morale.

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Edwin Korver

Edwin Korver

Architect of ROUNDMAP™ - Advancing Grandmastership of Business™ ✪ Business Model Matrix™ ✪ Polymath ✪ Generalist ✪ Systems Thinker ✪ Board Member, CEO CROSS-SILO BV

2 Responses

  1. Excellent article.
    Certainly Leaders can’t do something they don’t know.

    1. Thank you, Eduardo!

      Correct, leaders can’t respond to what they don’t know. So it is critical to understand the circumstances, both internally and externally, of the entire business environment. War in Ukraine may not just influence our supply chains but that of our competitors too. There are opportunities and threats in every change in conditions while we also need to understand our strengths and weaknesses (gaps, constraints, interdependencies, traps, etc.).

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