Managing in Uncertain Times, Part 1

L. Douglas Mault

February 2009

A few months ago I presented a seminar on the topic of "Managing in Uncertain Times.” This is the first in a series of six articles dealing with this topic.

Let’s start with these four questions:
• What certainties were destroyed on September 11?
• What certainties were destroyed in the financial collapse late last year?
• Are things any less certain today than before these terrible events?
• Why is the topic "Managing in Uncertain Times” on our minds?

Certainly, our feelings of being an impregnable nation are shattered, our sense of security is less, and our sense that the economy will never undergo a tremendous downturn has proven to be in error. Such a tragedy and such an economic downturn leave us feeling a great deal of uncertainty.

For most of us, when we think about uncertainty we tend to think in terms of when things seem to have taken a turn for the worse. But, were this 2000 or 2007, how certain then was the future? Continued economic growth, continued increase in equity markets and continued growth in the construction industry were the forecasts or expectations for many of us. The future seemed pretty certain.

But if we think about those expectations, we know that the honest answer has to be, "yesterday was no more certain than today.” As a result, when the downturn comes and when we feel much less certain, we often find it difficult to look into the future.

In 1994 Professors Gary Hamel and C.K. Prahalad wrote an article, Competing for the Future. In this article they outlined the results of their detailed study of how companies look into, plan and compete for the future.

They asked senior executives the following three questions.
1. What percentage of your time is spent on external rather than internal issues—on understanding the implications of a particular new technology instead of debating corporate overhead allocations?

2. Of this time spent looking outward, how much do you spend considering how the world may change in the next three to five years, rather than worrying about winning the next big contract or responding to a competitor’s pricing move?

3. Of the time devoted to looking outward and forward, how much time do you spend working with colleagues to build a deeply shared, well-tested perspective on the future as opposed to a personal and idiosyncratic view?

The answers fall into what Hamel and Prahalad call their "40/30/20 rule.” This says that executives spend about 40 percent of their time looking outward. Of that time, about 30 percent is spent looking three or more years into the future. Of that time, about 20 percent is spent building a collective view of the future.

The math, then, is 40 percent x 30 percent x 20 percent = 2.4 percent. But let’s say it’s 3 percent. If the average executive works a 50 hour week (2,500 hours per year), then 3 percent of 2,500 is only 1.5 weeks per year dealing with the uncertain future—a rather frightening statistic.

To succeed in the uncertain future, one must devote substantial time to looking outward and forward and, in current days, this is absolutely critical.

L. Douglas Mault is president of Executive Advisory Institute, Portland, Ore. The Web site is www.consulteai.com; he can be reached at (888) 428.3331.