If you have read the news lately, you may have seen headlines that say things like the Fed has successfully tamed the inflation monster through tightening. Or that the strong labor market and consumer fundamentals point to a mild recession. You may have even noticed that some of your raw materials costs are coming down. But beware. The numbers they are using don’t necessarily tell the full story. As in most things these days, there is a flip side…while things may look relatively rosy on the surface, there is underlying data that says the worst is yet to come. So what can you do to help ensure your company weathers the storm?
Whether you believe the economic conditions are improving now and the Fed has been successful or you think the Fed is still screwing things up, your company will benefit from a plan. The Dallas Fed has a measure called the “trimmed-mean consumption inflation index.” It is considered by many economists to be a very good measure of inflation because it excludes the most volatile prices. In May of 2022, the index was at 4%. For reference, the Fed target is 2%. Today’s Wall Street Journal says consumer inflation surged to 9.1% in June. By any measure, it is fair to say that uncertainty is high!
As a leader, what do we do in times of uncertainty? The Harvard Business Review and many others have lots of great advice for executives. Rebecca Zucker and Darin Rowell published “6 Strategies for Leading through Uncertainty” in HBR on April 26, 2021. They say we need to:
- “Embrace the Discomfort of Not Knowing,”
- “Distinguish between complicated and complex,”
- “Let go of Perfectionism,”
- “Resist Oversimplifications and Quick Conclusions,”
- “Don’t Go It Alone,” and
- “Zoom out.”
Cool…How do we do that? First, says Satya Nadella, CEO of Microsoft, leaders must shift from a “know it all” to a “learn it all” mindset. This is hard to do but it takes a strong person to admit that the team is smarter than any one individual. Once we admit that we don’t (can’t) know everything, then we allow ourselves to learn. Complicated things are typically highly technical and hard to understand (like tax law) . We can typically break down complicated things and create a known solution. Complex things often contain several interdependent elements which may change unpredictably or may even be unknown to us at first. Contrary to a complicated problem, the solution to a complex problem usually comes from trial and error.
Managing through the uncertainty we are facing today creates a complex problem. If we are expecting to perfectly execute our business plan through the current challenge, we will not be successful. We have to know that by its nature, trial and error will result in failure. The challenge is to fail small and learn from it. Most high achievers have a desire to solve problems quickly, but we need to learn to balance our need for action with a disciplined approach to understanding the core problem. We can not “distill” the challenge down and solve the problem quickly because there are too many interdependencies. Disregarding them could lead to a massive failure.
Engaging your peers, especially those whose opinions you value but whose experience is different than yours is a great way to get an “out of the box” perspective on possible actions you can take to navigate the environment. Finally, allow yourself to step back. If you are deeply engaged in the situation, you can easily get lost in the details. It is essential that you take a high-level view at regular intervals to make sure one of those unknown or unpredictable elements hasn’t gone off on a tangent on you. Get a feel for the environment, confirm your objective and then get back to work once you have a good understanding of the environment.