global Leadership

The Leader’s Toolbox: Dealing with Complexity

A number of core competencies have been identified as essential for global business leaders—the most commonly mentioned being emotional intelligence, self-awareness, resilience, and tolerance of ambiguity.

With leadership challenges becoming more and more complex, leaders also need to be familiar with the full array of sophisticated decision-making tools and processes, including:

1. Using artificial intelligence

“The best person, even if he has a lot of experience, cannot handle more than three or four influencing factors, but a machine can calculate a probability distribution and make the optimal decision mathematically,” says Michael Feindt, a physicist and an expert on algorithms.

But leaders will have to use AI with discrimination. Yes, it can game out thousands of possibilities and predict results, but those results can’t be accepted as the final answer because they aren’t always accurate (even AI-based chess-playing systems sometimes overlook effective move sequences) and the input necessary to develop a specific AI process will always reflect the historical biases of the organization providing the data.

Still the results will often be useful in supporting, questioning, and raising new concerns for consideration, such as potentially counter-intuitive outcomes that might not be apparent to the most talented team of strategists.

2. Recognizing that process is more important than analysis

After noting that 72 percent of senior-executive respondents said they thought bad strategic decisions were either “about as frequent as good ones or were the prevailing norm in their organization”, a 2010 McKinsey study found that process mattered more than analysis, by a factor of six.1 Has there been an explicit exploration of major uncertainties? An inclusion of perspectives that contradict the senior leader’s point of view? Have participants in the discussion been included due to skill and experience rather than by rank?

Depending on the circumstance, leaders can employ iterative models for arriving at strategic decisions, ranging from design thinking and integrative thinking to the principles of adaptive leadership.

3. Filtering out biases

As I’ve noted in an earlier post, leaders need to be aware of

  • Their own personal biases
  • Cognitive biases, such as anchoring, loss aversion, and the confirmation bias (Wikipedia lists 112 cognitive biases in all, of which roughly a third could impact business decisions)
  • Social biases (Wikipedia lists 27)
  • Conflicting incentives among decision-makers

I also find that leaders have to be conscious of their own narratives and company narratives that might be in play (e.g., “This is what has always worked for me”, “This is who we are”, and “This is how we come to a decision”). Are these pointing the way to an effective solution or short-circuiting a fuller consideration?

The best antidote is a robust process. It’s essential to get input from a diverse group of sources and, whenever possible, bounce proposed solutions off completely neutral parties outside the company, including mentors, trusted consultants, and peers in other companies.

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Footnote

1 https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-case-for-behavioral-strategy

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