Leading in a Crisis: The VUCA Environment

High stakes leadership is about leading in times of crisis – when the interests of many are threatened; when the potential for significant loss is great; when there is no clear path to resolution; when the need for leadership is greatest.There are few more challenging environments for a leader than navigating the turbulent and dangerous waters of an organizational crisis.

How can we be so certain that you will be called to face some sort of team, unit, or organizational crisis? Because we live and operate businesses in a world where the pace of change is accelerating; where advances in technology are happening faster than ever before; where customer expectations are changing faster than businesses can respond; where a nearly infinite supply of information is available at the click of a button; and where competitive pressures force businesses to launch new products and services before they are 100% complete. This is the new normal.

The business environment of today can be difficult to describe. Perhaps the best way to do so is with a term that was introduced by leaders of the United States Army back in the early 1990s to describe the battlefield of the 21st century – a battlefield where decision-making was immensely challenging due to the nature of the environment in which those decisions had to be made and then executed. The term used was VUCA. It is an acronym for the four unique but related characteristics of all future combat environments that military leaders should expect to encounter: Volatile, Uncertain, Complex, and Ambiguous. As a business leader in the 21st century, you will be faced with these same characteristics on the battlefield of competition.

Why is this important? Because the VUCA environment in which you live and work has become the perfect breeding ground for organizational crisis. So much so, in fact, that business leaders can no longer afford to think about a crisis as a rare, once-in-a-lifetime event. Now, and going forward, a crisis at some scale is no longer an “if”, but a “when”. The combination of the new business environment and the evolving intensity of competition for smarter, savvier, better informed, and more demanding customers requires leaders to be ready for the inevitable day when an aspect of the business goes sideways in a major way. When it does, high stakes leadership will be required.

What is it about the VUCA environment that is creating such challenges for combat decision-making and, similarly, is increasing the likelihood of crises for business leaders?  Consider each characteristic of the VUCA environment and the challenges it creates for you and your business.

Our business environment is Volatile (vol·uh·til or ·tahyl / characterized by or subject to rapid or unexpected change)

Things are changing continuously. As we see on a daily basis in the news, there seems to be no limit to the possible impact of seemingly minor events or decisions or actions. When a public figure makes a statement or does something unique, social media erupts with charged responses both in support of and opposed to the act. In a business context, our markets seem to fluctuate wildly, sometimes on changes in fundamentals and other times purely on emotion. Commodities markets are demonstrating volatility unlike any seen in recent history, impacting our ability to predict and manage the cost of our materials and their availability. Supply chains, whose effectiveness and efficiency have become such vital elements of our business processes, can implode in an instant, effectively bringing production, distribution, or delivery to an immediate halt. Severe weather systems, international tension, and now, global pandemics, headline the inventory of factors that create volatility for business leaders around the world. This volatility has become a primary cause of many business crises.

Our business environment is Uncertain (uhn·sur·tn / not able to be relied on; not known or definite)

More than ever, we live in an environment that offers a great deal of uncertainty. It has become much more difficult to accurately make predictions about the future. What we knew for sure yesterday may not be true today and has a better chance of not being true tomorrow. Goods and services that our customers loved yesterday – offerings that have served as the cornerstones of our brand – are being copied, improved, produced at lower cost, and delivered more quickly by competitors. Add to this that now, more than ever before, our competition can come from anywhere in the world. As our ability to make accurate predictions about the future declines, we will find ourselves making decisions that are less reliable and, therefore, less likely to produce the outcomes that we expect. As our decisions become less reliable, both the likelihood and the scale of our miscalculations will increase. Unfortunately, with greater levels of miscalculation comes a greater likelihood of crisis.

Our business environment is Complex (kom·pleks / characterized by a very complicated or involved arrangement of parts, units, etc.)

In all aspects of our businesses, we see increasing levels of complexity. Where we were once able to clearly identify how and why individual components of a system functioned and contributed to the greater whole, increasing levels of complexity have made these connections almost impossible to see, much less understand. An entire field of study – systems engineering – has evolved to help us better understand component interactions within a system, because in many of our increasingly complex business processes, the system itself has as much of an impact on the contribution of a component as the component does on the system. These increases in complexity have made it very difficult for high stakes leaders to truly understand a situation or to be able to predict the impact of the decisions they are asked to make within it. Because of this, even seemingly obvious decisions can produce unintended consequences that can rapidly deteriorate and manifest a crisis.

Our business environment is Ambiguous (am·big·yoo·uhs / of doubtful or uncertain nature; difficult to comprehend, distinguish, or classify)

Are vitamins good or bad for you? Is it worth investing in solar power for your home? Has social media been a benefit or a liability for society as a whole? For each of these questions, you can easily find convincing but contradictory information and opinion. In May of 2020, the COVID-19 pandemic raised many questions about the appropriate steps to take in support of human lives, on the one hand, and the health of local and national economies on the other. Is one or the other more important? On the surface, there should probably be a simple answer to this question, but the practical reality is that leaning too much toward one side or the other of this tension could have catastrophic long-term results.  The broad availability of unfiltered information has created a situation where, some would argue, it has become increasingly difficult to identify clear solutions to our planet’s most challenging problems.

What we do know about conducting business in a VUCA environment is that things can go wrong and, in doing so, can create significant risks and challenges for high stakes leaders. We have seen situations where things go wrong in an instant:

and where situations have gone wrong over time:

A common lesson from every crisis, irrespective of its timeline, is that the requirement for exceptional leadership will be clear. In response to our increasingly VUCA world, there has never been a more important time for a vast supply of competent, capable, and well-prepared high stakes leaders.