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At a Glance
  • Due to uncertainties and rapid changes in business trends, top leaders and executives often fail to adapt to new conditions resulting in unproductivity and failure.
  • There are three main reasons that executives get stuck in their previous practices: fear, denial and learning blocks.
  • Executives, due to fear of losing their reputation, refuse to identify and even to innovate or try new business methods. It is important for CEOs to recognize the emotional impact and to analyze and discuss so that they can work through it.
  • Cognitive errors can also impact executives’ ability to identify clear signs of changing environment. They incorrectly assume that current crisis will be like previous ones and hence same methodology will work. It is fruitful for CEOs to provide extensive and objective raw data to convince the team of embracing new ways.
  • The last problem is that executives ‘ approach to business is based on certain assumptions or truths that are at the heart of their practice. It is essential for CEOs to help them identify the validity of such assumptions and to learn new ways to success.

In the current difficult and fluctuating atmosphere, it is important for CEOs to enable their senior management to cope with distress and renunciation, as well as to adapt to new standards.

In recent times, business settings have evolved quickly and drastically. In such conditions, it is critical for CEOs to depend on their top people to adopt the changing practices swiftly. But the important question here is what course of action to follow when the key leaders in their companies cannot grasp the change? The result is increased cost due to administrative misdirection, lost of profitable prospects and unchartered risks. The increased cost is usually drastic enough to entice organizations to remove executives unable to cope with the changing environment. However, this mindset is incorrect as these leaders have a wide range of valuable and irreplaceable experience – profound market sense, associations and organizational understanding.

Instead of opting to replace these valuable assets immediately, it is desirable for CEOs to attempt to aid them in learning and adopting new practices and knowledge. One side of the equation is to convince the executives that change is essential and inevitable for them to fulfill their responsibilities. The other part is the emotional aspect associated with change. Executives usually experience complicated emotions when they begin to realize that the basis of their business sense and spirit is being dismantled and recognize this phycological aspect can be key to working through fear of change, denial of its necessity and obstacles to adopting it.

It has become a recurring problem to assist executives in dealing with many challenges and the problem has also become severe for most companies in recent years. Global economic crisis not only cause business models to malfunction, they shake the confidence and conventions of senior executives. Dealing with these setbacks is a critical endeavor for CEOs today and in future once business environment starts to improve.

Dealing with Fear

In the array of emotions that impacts a senior manager’s inference and reaction to scenarios, an important and attention worthy one is fear. In volatile conditions, when previously effective and successful delivery actions fail, the strongest of executives may feel overwhelming fears brought about by the coercion of standing, position, distinctiveness, and even survival in the company. Executives who have most successes under their belt are more vulnerable to fear in difficult times as their experience with failure is limited.

Overwhelming fear can turn open-minded, forthright, dynamic and self-analytical managers into narrow minded, self-protective, inflexible and stiff ones. They may start taking commentary on their work personally, feel mistreated, shy away from self-assessment and abandon their capacity to absorb new data and proactively deal with tough situations. Once this happens, other employees will observe and react which further increases fear and install defensiveness in executives.

In spirit of preventing such behavior, CEOs don’t need to become psychologists, but they do need to motivate people around them. Their responsibility is to create a platform where managers can express their anticipations and recognize their cogency so that they can overcome fear and remain productive.

Another aspect of the scenario is for CEOs to accept and acknowledge their fear. The verbalization of fear removes the embarrassment associated with this emotion and enables executives to overcome it. Furthermore, CEOs should also consider their part in reinforcing executives’ fear. It may justify behavior modification on their part such as aggressive outburst about penalties of underperformance to support productivity among the executives. They may require removing concern about executives’ standing and job safety more prominently than traditionally. Ultimately, CEOs require to showcase the correct behavior with open opportunity of dialogue and cooperation, respect and assurance. It is a difficult task especially in volatile times but can serve as essential countermeasure to fear and defensiveness.

Dealing with Denial

Fear affects how leaders understand and infer situations. Additionally, cognitive errors have the potential to cause most skilled and experienced senior managers to reject the obvious signs of changing conditions. For instance, a global semiconductor manufacturer’s CEO received number of reports from executives and managers indicating that the current economic recession is like the previous ones experienced by them during their professional careers. They continued to follow their assumption even after experiencing a decrease of more than fifty percent in revenue in two quarters. Their reports can generate an extensive list of cognitive errors – the major cause of denial. Here are few examples:

  • A second manager stated that the current downturn is same as the last one, so the company will eventually recover – an anchoring error
  • An executive stressed on the fact that the team was all in agreement that the issue will resolve by itself – the bandwagon effect
  • One manager reported they had just received an order, so the situatin is improving – heuristic availability.
  • A leader believed that if they adopted the same course of action as last downturn, eventually it will be fine – optimism bias.
  • A manager noted in his report that he has investigated and discovered three distinct cases which support his hypothesis that the recession is temporary – the confirmation bias,
  • One executive stated that the current scenario requires in depth study before any irrational action is taken – the information bias,

To contest these indicators of denial, CEO of the company chose to provide substantial amount of unbiased data and assessment about the situations that customers and consumers experience across varied economic markets throughout the world. He organized and conducted a series of extensive and exhaustive sessions. He provided the team with raw information enthusiastically and utilized the tool of peer pressure in forcing the executives to be realistic and highlight cognitive biases. When required, he conducted exclusive one-on-one sessions with his key executives to enable them to comprehend logically and process emotionally the complete impacts of market fluctuation.

After committing weeks to the process, the CEO of the company was able to overcome the denial aspect he faced initially. Once executives were able to grasp the new ground reality, their previous performance and attitude actually improved. They commenced in-depth reevaluation of their practices and strategies. A number of managers were able to take the bold but necessary steps such as reassessing product portfolio, modifying sales tactics and marketing models and abolishing activities that were considered to be the backbone of their typical strategical process. By the end, the predispositions and denials were identified and actively eliminated from the team.

Dealing with Learning Blocks

Encouraging leaders to face fears and accept the necessity of change is half of the solution. The other half entails that CEOs enable their executives in learning new business approaches and methods in the rapidly changing environment. Most leaders have high success rates and their encounter with failure is rare. And as failure is infrequent, these executives never acquire the skill to take lessons from failure.

The fact is that when there are uncertain and fluctuation business conditions, even the most successful executives face failure or breakdown of practices that provided success previously. The foundation of their effective business model – defined mandates and timelines, experience-oriented decision making, skill to understand and interpret market data and trends and comprehension of standard practices – can collapse rapidly. Severe turmoil implies that mandates become vague and unpredictable. Timelines can reduce drastically causing leaders to be in continuous panic to restructure and redevise their strategies to incorporate rapidly changing conditions. Change also give rise to unique and new scenarios (that executives have not experienced before) which diminishes the worth of experienced based judgement.

A gaming hotel and casino corporation identified the requirement to assist its top leaders in learning new approaches to success when they encountered their first significant income decline while struggling to fulfill their debt service demands. In the past, the company had amplified its profits and income steadily through customer associative marketing, personalized guest facilities and robust loyalty scheme. However, the effectiveness and productivity of these approaches in increasing sales potential reduced as the recession happened.

In order to deal with the scenario, the CEO of the company recognized his executives’ emotions and provided extensive unbiased and objective data and assessment. Furthermore, he motived them to reevaluate the basic concepts and assumptions that made up the foundation of their successful careers and practices and examine their validity in the current setting. If they appear to be invalid, he pushed them to make drastic changes to their business models rather than simple modification. In fact, in several cases it was discovered that entirely new business frameworks were needed for success.

The organization realized that they had to reduce their expenses drastically which meant decreasing the cost of staffing, facilities, amenities, etc. but not at the expense of upsetting customers. Furthermore, the biggest challenge was to acquire new methods of employing the existing tools to deal with new customer behavior. The Company’s learning progression helped executives develop new standards for managing investments – whether increasing or decreasing, support growth with smaller capital, and provide efficient and satisfying guest service at less cost. The new standards resulted in precise mandates, updated information for management, and appropriate decision-making practices.

The problems associated with fear and denial as well as the need to upgrade learning and knowledge base are not new, however in difficult and volatile business conditions, more leaders and executives are affected by fear and denial. It is now the responsibility of CEOs to aid their people in overcoming these problems especially the associated emotional aspect.