Mike DePrisco is Chief Operating Officer (COO) of Project Management Institute (PMI), a global association for project professionals.
What can we make of the current economic environment? While some indicators, such as contracting GDP and inflation, signal a possible recession (paywall) on the horizon, the U.S. economy continues to add jobs, and consumer sentiment seems to be on the mend.
Faced with so many mixed signals, is it any wonder that business leaders today are proceeding cautiously? Having endured a global pandemic, unprecedented supply chain issues and the tightest labor market in decades, business leaders now face an uncertain future with no clear view of what comes next.
Indeed, eight in 10 global CEOs in a KPMG survey expect a recession to hit within the next year, and three-quarters have already taken precautions in anticipation. However, the majority of these executives said they believe the recession will be “mild and short,” and 71% are confident about the global economy’s future growth prospects in the coming three years.
How business executives respond to these challenges in the coming months will be critical. While there are few hard-and-fast rules in times like these, there are useful principles that can be helpful in guiding our actions. Knowing how important guiding principles are becoming, here are three principles that I think are particularly relevant for business leaders considering the current situation.
Uncertain times call for uncommon leadership. The best-performing companies lean into uncertainty, looking not just to avoid risks but to capture opportunities. McKinsey research, for example, shows that high-performing companies during the pandemic invested more time than others in clarifying their goals and setting strategies. Lower-level decision making improved because workers understood the big picture and could better align their actions with the company’s overall strategic direction.
Creating such clarity is all the more important in times of great uncertainty. To do so, leaders need to invest in sensing mechanisms so they can identify and track the most relevant economic and marketplace signals and assess their implications for the business. They then need to be decisive in setting and communicating a course of action and in modeling the leadership behaviors that will move the enterprise forward.
Optimize risk responses.
Understanding the risks, challenges and, yes, the opportunities that arise in the normal course of business is even more essential during uncertain times. Risk management, however, isn’t a one-and-done exercise. It needs to be an ongoing effort and a core organizational capability.
Once identified and prioritized, risks should be assigned to teams with the knowledge, skills and tools needed to actively manage the risk in accordance with the organization’s risk appetite. Wherever possible, this means taking action to mitigate risks before they mushroom into full-blown issues or crises. It also means tracking and taking advantage of opportunities that surface over time and periodically reviewing both risks and opportunities to identify longer-term strategic pivots that may be required.
Embrace adaptability and resiliency.
I’ve written before about the importance of resiliency and the need for organizations to remain agile and adaptable in the face of continuous change. Indeed, this need is reflected in the growing adoption of agile methodologies in the project management field, as organizations seek to enhance their speed and retain greater flexibility in implementing critical projects, all while prioritizing their customers’ needs.
In uncertain times, resiliency and agility are essential and can often spell the difference between success and failure. But they are not easily instilled. Organizations need to build a culture where change and disruption are accepted as the norm rather than an exception and where speed and flexibility are consistently valued. And they need to view the world through the widest possible lens, anticipating not just close-in business risks but broader economic, social and geopolitical risks as well.
Truly resilient organizations have the ability to absorb significant shocks, recover their equilibrium, and continue operating effectively in an altered business environment. Given the mixed signals our economy is sending, it’s unclear what the next shock will be. What is certain, however, is that the shocks will keep coming and that we would be well served to strengthen those resiliency muscles while we can.
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