The final week of February saw finanical markets reeling in response to concerns over the potential economic impact of COVID-19, a new form of coronavirus. While it remains unclear just how severe of a threat the virus poses, many investors were worried enough about its potential to disrupt global travel and supply chains to set off a flurry of selling that contributed to the worst week for the Dow Jones Industrial Average since the 2008 financial crisis.
When asked to comment on reasons for the 10.4% decline of global stocks, Claudio Borio, the head of the Bank For International Settlements’ Monetary and Economic Department, offered a very simple explanation:
“Now uncertainty rules globally.”
Managing Through Uncertainty
Managing an organization of any size in today’s dynamic economic landscape is a challenging task. As new technologies and consumer demands continue to create disruption, charting a sustainable path forward requires leaders to understand the nature of risk and how it could impact their companies.
In the early 1990s, the US Army War College popularized the acronym VUCA (Volatile, Uncertain, Complex, Ambiguous) to characterize the political and military challenges presented by a post-Cold War world. The term quickly became popular among business leaders scrambling to adapt to the demands of a rapidly globalizing economy.
Among these challenges, uncertainty is uniquely difficult for leaders to navigate. Volatility can be managed with enough forethought, while complexity can be understood and ambiguity clarified through careful and creative thinking. The nature of uncertainty, however, undermines the very critical thinking skills that most leaders rely upon to make decisions. In an uncertain environment where circumstances on the ground could change at any given moment, it can be difficult to assess risk accurately.
Coronavirus: The Perfect Storm of Uncertainty
The ongoing uncertainty regarding the novel coronavirus is a perfect example of this problem. In the first place, the information being shared by public health officials around the world has been mixed at best and downright confusing at worst. There are questions about whether government officials (particularly in the case of China) have been totally forthcoming about what they know, while other organizations are struggling to communicate the appropriate level of concern without causing a panic.
Unlike localized events like wars, natural disasters, or regional market crashes, a truly global health pandemic has the potential to impact both large multinational corporations and small business start-ups around the world. Restrictions on travel could make it difficult to arrange meetings, manufacture goods, and transport products to market. Even if critical supply chains remain unaffected, concerns over contracting coronavirus could keep consumers away from retailers or even from their own jobs, which could quickly cut into an organization’s revenue.
Under these conditions, CEOs may struggle to identify the best course of action. The information they have to work from is both incomplete and imperfect, making it difficult to assess risk accurately. Should the company carry on as usual and hope for the best? Or should it prepare for the worst, potentially placing itself at a disadvantage if it ends up dedicating significant resources to a problem that never actually comes to fruition?
5 Ways a CEO Peer Group Can Help Overcome Uncertainty
Whether a CEO is trying to find the best way to confront the coronavirus threat or is faced with another uncertain situation that could put their business at risk, it’s helpful to have a strong support group that understands the stakes involved. That’s why CEO peer groups are such a valuable resource for both first-time and experienced executive leaders.
Here are just a few ways these groups can benefit CEOs from any industry:
1. They Provide Feedback
When facing uncertainty, CEOs have to make a lot of decisions with imperfect or incomplete information. In some cases, their limited data, instincts, and experience will help them to make the right choice that helps their company avoid negative outcomes. Other times, however, those decisions don’t work out so well, potentially putting the company at further risk. A CEO peer group gives leaders the opportunity to share their decisions and thought process with other experienced and talented executives who can provide constructive feedback. Something that seems very unclear to one person might be totally obvious to another, which helps CEOs to better assess their decision-making process and develop better plans for managing uncertainty in the future.
2. They Give Guidance
Managing through periods of uncertainty can be extremely stressful for first-time executives. In some cases, they’re facing these challenges for the very first time or encountering situations unlike anything they’ve experienced in the past. A CEO peer group puts them in ongoing contact with more seasoned leaders who have been through similar difficulties throughout their careers. These veteran executives can provide the coaching and mentoring that helps their younger peers avoid the mistakes they once made or tap into the management and leadership strategies that put them on a path to success.
3. They Generate Ideas
If uncertainty is defined by a lack of information, putting a group of well-informed, resourceful individuals into the same room together is a good way to begin charting a productive path forward. By sharing both information and potential solutions with the rest of the group, members can brainstorm new ideas and develop strategies that help them to manage the risks posed by uncertainty.
4. They Offer Community Support
Being a CEO can be a lonely experience. As a leader, they’re often expected to be the rock that the rest of the organization relies upon. But even the most accomplished executives are only human, and sometimes they need to share their frustrations and concerns with people who understand the pressures they face on a regular basis. A CEO peer group provides that base of support, allowing leaders to lean on one another and provide the support that allows them to work through their difficulties.
5. They Create Opportunities
As the old adage goes, “It’s not what you know, it’s who you know.” A CEO peer group provides a tremendous networking opportunity for its members. This is especially important for leaders trying to manage through uncertain situations. Each member brings their own network of contacts and relationships to the table, many of which could prove extremely beneficial to a fellow member who is looking for just the right vendor or partner to get through a difficult challenge. CEO peer groups are a good way to expand those networks, providing leaders with the resources they need to overcome uncertainty and risk.
Uncertainty will surely continue to be one of the key challenges facing senior executives and their companies in the years to come. As they develop strategies to effectively mitigate risk, having an experienced CEO peer group to lean on can help them make better and more informed decisions in the face of an uncertain future.
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A lifelong serial entrepreneur and community leader, Mark Stagen, Founder of XLN, started his first company at age 15 and hasn't looked back. Since then, he’s founded, and later sold, several successful companies, including Telecore and Emerald Health Services, which have generated over $1 billion in combined revenues. Mark also founded the Youth Business Alliance, a non-profit organization that works with High Schools in economically challenged areas to educate, motivate and inspire the students on business, entrepreneurship and career development.
Mark has received numerous business and community awards including: EY Entrepreneur of the Year and Inc. 500. He is actively involved in YPO and has served in many leadership roles including Chapter Chair and Regional Chair. Mark received his BA in three years from Yale University, was a member of the Yale Football Team and is an Adjunct Professor of Entrepreneurship at the USC Marshall School of Business.