October 7, 2008

Managing Uncertainty

The current plight and panic of global financial markets is unlike any event ever in world history. I have yet to hear from all of the sideline analysis any true explanation and comprehension of the complexity and scale of this current crisis. Needless to say, there are no models from which to extrapolate logical and comprehensive solutions. It is quite possible that we will be faced with a great deal of uncertainty in our economic futures for some time to come.

It is helpful to understand how the brain perceives uncertainty. According to Australian neuroscientist David Rock, author of "The Neuroscience of Leadership," the brain perceives uncertainty as a major threat. Threats are equated by the brain with pain. So, the current financial crisis is causing our brains to experience great pain, which causes the limbic system to become hypervigilant, activating its fight or flight stress reaction. The impact of this stress reaction on the brain, especially if endured for a long term, is quite dangerous. Stress and anxiety severely limit out capacity to engage in effective cognitive activities. In other words, stress and anxiety limit our abilities and capacities to think, eliminate our ability to be creative in finding solutions, and cause our normal ability to manage the complexity of our work and of our daily lives to falter.

In this current crisis, it is imperative as leaders that we increase our abilities to think, communicate, and problem solve. Others are looking to us specifically to make some sense of the uncertainty by placing it in the context of our daily work and our daily lives. They are looking to us as leaders to ease their pain, thereby steadying their ability to think and manage their work and daily lives.

How to do this?
Here are a few suggestions:

1) manage your physical needs diligently - good nutrition, good hydration, physical exertion, and sleep. It is a great mistake to turn to anesthesizng pursuits (drugs, food, alchohol, gambling, etc) to ease psychic pain.

2) limit your intake of information to two limited time periods during the day - once in the morning, once in the evening. Fueling your own sense of pain and panic is counterproductive to your call as leader and chief strategist. Stop spectating and start thinking.

3) start to analyze the scenarios and plan for the worst case. As painful and distasteful as it is to have to rethink current and future plans, it is imperative to take a hard look at not only the plans for the future, but how to survive the current declining situation. Pining over lost opportunity for the future can easily distract you from managing defensively in this current environment.

4) assemble your team and get down and dirty with the hard questions. Key questions would be things like what are current receivables and how can we decrease those? What are our current credit needs and how to manage those? How can we protect our current customer base - both size and volume? What sort of reduction in our current customer base can we comfortably tolerate? How can we maintain and strengthen all of our organizational relationships during this time? Where can we restrain spending without hindering our mission? How can we increase capacity and impact in the system now as to rise to new levels of impact and efficiency?

5) pay attention to innovation. Once the current environment becomes less panicked and somewhat stable, customers will appear again with an awareness of value that we have never seen. Sensitive to the difficulty of amassing capital and the possibility of hard and fast lost, customers will choose to spend only for incredible perceived value. Don't wait until the economy recovers to address your value offerings because it will be too late. Make sure you are incorporating all of the pain of these current markets to make your products and services of great value to your customers - new, different, above and beyond value.

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