Leading change in a VUCA world

The business world has changed dramatically in the past decade, and even more so given the COVID-19 pandemic. It has become VUCA—volatile, uncertain, complex and ambiguous—and that condition will likely persist, at least for a little while longer. For a business leader, navigating the organization safely and successfully through this rapidly changing world is one of the most important imperatives.

What does it take to get the job done? Must we look differently at how we lead and manage change today?

Marshall Solem, Academic Director of Executive Education at Northwestern University’s Kellogg School of Management, spoke with Chris Morgan, Brian LeFebvre and Torsten Bernewitz, business transformation experts and partners at global management consulting firm ZS, to get their thoughts on managing in a VUCA world.

Chris Morgan: Complexity and ambiguity, which have reached new levels and continue to increase, are the biggest. And they’re requiring leaders to challenge some of the long-held fundamental assumptions behind structuring and running an organization. For instance, companies always have certain business functions and reporting structures. And when companies reorganize, they do so thinking the organization’s “problem” can be solved by more efficiently dividing things into a new configuration of blocks or silos. But the market doesn’t behave like that anymore. Everything overlaps. Everything’s interdependent. The “typical change” today is more multi-variate and interwoven than the change of years ago. Fixing “one bit” of the organization increasingly isn’t an option.

CM: I’m currently talking to the business analytics group at a pharmaceutical company. They’re seeing changes affecting the wider business and want to transform to serve their business stakeholders better. But it’s clear that much of the change they need is related to the way they interface with the rest of the organization—how they set priorities, act as a business partner, route information and triage requests. This is 80% of the group’s problem. But they can’t solve that on their own. Every interface they change has someone on the other end of it, who also needs to change in the same direction. So, despite the fact that it starts with a fairly innocuous question, it ends up as a change for everyone. 

CM: Yes, precisely. Who’s going to move first? Or better, how do we change together and who’s leading it?

Brian LeFebvre: How to shift the mindset of leadership teams from “managing change resistance, resulting from distinct initiatives” to a place where change is not a problem to be solved. In other words, they see the need for the company to thrive in a world in which change is business as usual. That’s very different from seeing change as an implementation problem. Companies need to embrace the notion that “change is our way of working; it’s what we do.” It’s hard to accept, because people, including leaders, want stability and predictability. They want change to be a temporary and short phase of transformation and disruption before the organization lands on a new “future state.” Think of it this way: In their minds, they’re still in the old freeze-unfreeze-freeze model. But how do we handle an environment that is permanently unfrozen, always fluid?

Torsten Bernewitz: The key question is no longer how can we best respond to change, or adapt to change, or make the organization more resilient to change? Now we should ask how can we make the organization stronger through change? How can we derive energy from change rather than spend energy on it? It’s much like our immune system, which gets stronger and more effective with each challenge we experience. In fact, it needs these challenges to “learn” and work at its best. Nassim Taleb, the influential scholar, mathematical statistician and author, coined the term “antifragility” for this. Antifragility means the organization’s performance improves as a result of stressors, shocks, volatility or failures. And that’s different from resiliency or robustness, which is the ability to withstand attacks or recover from setbacks.

CM: The concept of change used to be straightforward: “We’re moving from A to B,” where B was a concrete, well-mapped destination. Today, it’s more directional and vague: “We’re moving from A to ‘something in the region of B’” because everything is always in flux. And that’s really uncomfortable for the leader and the team. It’s the scary risk of a change plus the scary risk of a somewhat unknown destination. 

BL: Absolutely. This is the gist of what I said earlier. Change is not something we “manage.” It’s what we do, it’s part of our identity. We need to be comfortable with ambiguity and get into the habit of constantly asking, “What if?”

CM: Exactly! Change leaders need to shift their mindset and question their assumptions about how to make change happen. Instead of “follow the rules, follow the plan, fill the templates,” the direction needs to be “follow success.” Where are the bright spots where change happens, or happens faster? What are the conditions that enable this? How can we replicate these conditions elsewhere? We need to challenge our belief that we need stability and predictability. We may need to allow instability—maybe even embrace it—as an integral component of change success.

TB: This is even more important these days, as so many organizations want to become more agile. They’re using the Agile approach that initially came from software development to build not just technical solutions, but also the organizational operating model with processes, roles and structures. And they’re using it to make the processes and structures themselves more agile, fluid and local. But, Agile methods themselves are also fraught with ambiguity and scary-sounding notions like “failing fast” instead of the old “get it right first time.” And, we use these methods to create ways of working that are also agile and require a “looseness” and fluidity that can be very unsettling for leaders and teams alike. Managing such a transformation without losing the people is an enormous change task and requires the change management approach to be congruent with the development methodology. In other words, a waterfall-like, sequential change process like Kotter’s 8 Steps or the popular ADKAR model doesn’t work with Agile. One of our clients found that out the hard way, when the change team was always running two to three months behind the agile development teams that were experimenting, learning and adapting constantly. Communications from the change team were always “yesterday’s news,” resulting in perceived flip-flopping, utter confusion and the notion that nobody knew what they were doing. About six months in, the company disbanded the change team and switched the approach completely, embedding the change effort within the agile teams, which worked much better. 

CM: Be super clear on the vision and purpose, the North Star that you follow. Don’t set the expectation of perfection. Embrace and celebrate failure, or rather, the value of learning from failure. Winston Churchill’s adage, “Success is about going from failure to failure without any loss of enthusiasm,” is perhaps more relevant today than ever. Change your language: from Goal to Progress; from Activity to Learning; from Measuring to Reflecting; from Individual to Team.

TB: When change fails, it’s almost always because of emotions. And the emotional impact is even higher in times of volatility, and when beliefs and assumptions are upended. So, what we need now from leaders is a lot of empathy. Slow things down a bit, listen deeply, acknowledge people’s feelings, be human and compassionate. By definition, a volatile environment means people feel a loss of control, which we can compensate for by tapping into other human needs. For instance, take affiliation, our need for social contact, collaboration and group identity. Now may be a good time to refocus people on the purpose of the organization. Why does what we do matter? What are we proud of? Or consider excellence, our intrinsic need for variety, accomplishment and growth. Consider creating opportunities for people to experiment, to try out new things. Lower the perceived risk of failure. Or think about recognition, our need to be acknowledged and appreciated as individuals and for our achievements. It’s important to praise new ideas, creativity and perseverance, and to recognize “heroic” efforts. 

CM: Self-awareness and emotional intelligence. You’re under pressure, you may be stressed, you may feel terrible. If you don’t understand your own state, and what that means for your own behavior, then you won’t be much use to your team. And you need EQ—the same awareness, but for your people. Focus people on their intrinsic motivators; the extrinsic factors will be out of anyone’s control. You can’t control the things that happen to you, but you can control the effect they have on you.

BL: Be visibly hyper-attuned to signs of stress in their organization and rally to provide support where it’s needed, either at the group or individual level.

TB: I already mentioned empathy—genuinely caring for the people. I would add having a growth mindset and the capability to instill a growth mindset culture in the organization. Of course, managers need the skills to connect with people on a personal level and inspire them on an emotional level—even and especially when they’re only a talking head on the Zoom screen. I believe the most successful organizations in and after the lockdown won’t be those with the smartest strategies or the best analytics. They’ll be the organizations with the best people engagement and energy, a strong purpose and alignment and a deep-seated value system.

BL: Invest the time to connect with your people one on one, frequently, stepping beyond business as usual to understand the impacts on them holistically and offering a supportive ear. Reciprocate by revealing your own vulnerabilities.

TB: Examine your assumptions and motivations. Ask yourself: How do I really know what I think I know? What feelings and unconscious biases may influence the decision I’m about to make? What’s the counter-story to what I’m going to say?

CM: Don’t run carrying scissors! It’s meant as a joke, but now that I think about it, people need to get used to running carrying scissors, but making sure to look where they’re going and where everyone else is going.

MS: In other words, be prepared to carry sharp tools because you may need them any time—and move fast. But be aware and vigilant not to hurt yourself or others. That sounds like good advice. Chris, Brian and Torsten, thank you for sharing your perspectives today.

Chris Morgan is a Principal at ZS, based in the London office. He leads ZS’s Transformation Services group.

Torsten Bernewitz is a Principal at ZS and founder of the Princeton Change Institute. He leads ZS’s global Change Management Excellence Center.

Brian LeFebvre is a Principal at ZS and a leader in the Strategy & Transformation practice and Change Management Excellence Center.

Marshall Solem is Academic Director and Adjunct Lecturer of Executive Education at Northwestern University’s Kellogg School of Management, and Principal Emeritus at ZS.