“Sailors navigating tricky winds, shifting tides, and mercurial weather systems prepare their vessels so they can sail on safely and purposefully, and companies can do the same. Rather than simply reacting instinctively and responding to the informational noise detected by their instruments, leaders can move swiftly and proactively to alter their course and chart a new one — and capitalize on dislocations in the market.” – Will Jackson-Moore, Heather Swanston, and Mohamed Kande

This week, we’re finishing our two-part series on leading your business during uncertain times.

Adjusting to Tax and Regulation Reform

One of the biggest drivers of the current uncertainty is the truly complex landscape of tax and regulation reform. In a range of large industries, the regulatory situation is volatile and prone to significant change. Many organizations have found that these shifts impact their industry, the specific markets in which they operate, and the general environment for business. Unfortunately, hiding under a rock is not a suitable option. In order to be resilient to shifts in the tax and regulatory environment, companies must get ahead of the changes and, where appropriate, work with industry peers and government to improve outcomes.

For example, embracing technological solutions can help companies manage compliance issues while they assess the longer-term impact of other changes. Above all, being in a position to respond effectively will enable a business to continue focusing on its trading environment and not be further disrupted by legal or regulatory challenges at an already difficult time.

Capital Strength

Companies can implement capabilities-driven strategies, invest in human capital, and execute deals effectively only if they rest on a strong financial foundation. But finance has its own heuristics in a time of uncertainty. Commercial organizations are often slow to react to changes to their forecasts. Working capital often increases, consuming more cash and effectively restricting liquidity. Companies often become motivated sellers at a time when asset prices are low. To ensure effective action, it is vital not just for finance to act as an operationally involved partner and conscience of the business, but for all key operational functions, including commercial, procurement, and supply chain, to be actively engaged.

By harnessing data and information technologies to run scenarios involving their business, companies can review and challenge economic, business, and sales projections — and continually feed the results into updated forecasts.

Act Now

No one action, by itself, can dispel a heavy cloud of uncertainty or significantly mitigate its impact. But if organizations can get out of their defensive crouch and assume a more aggressive stance, they have a better chance of maintaining their balance and shaping their future. Building and harnessing the mutually reinforcing attributes of optionality, agility, and resilience will enable leaders to adopt the strategies and mind-sets that allow them to succeed in the full spectrum of uncertain outcomes. Pursuing this path takes a lot of courage. Companies must consciously lean into changes and counterintuitive activities in the precise moments when it is most uncomfortable to do so, or when the forces of inertia and gravity are pushing them toward a predictable outcome.

Rather than being an excuse to detach or check out, uncertainty should be a spur to engage and build sustainable advantage.

Uncertainty is found everywhere in life—the weather, the economy, the actions of others, etc. That uncertainty can rise and fall, just like the weather. Currently, business owners and employees are facing a series of uncertain alerts.

If you are a leader of a company, or a team, and need some guidance to leading during this time, we’ve got some approaches to help your company adapt.

“Sailors navigating tricky winds, shifting tides, and mercurial weather systems prepare their vessels so they can sail on safely and purposefully, and companies can do the same. Rather than simply reacting instinctively and responding to the informational noise detected by their instruments, leaders can move swiftly and proactively to alter their course and chart a new one — and capitalize on dislocations in the market.” – Will Jackson-Moore, Heather Swanston, and Mohamed Kande

Dynamic Strategy 

During uncertain times, the greatest challenge of managing is that the potential outcomes are much more numerous than is typically expected—for the economy at large, and for the behavior of competitors and consumers. In order to be more resilient, leaders will need to be as clear about what they will not do as they are about the initiatives they will pursue.

Sundar Subramanian and Anand Rao have written, strategic decision making has to become more dynamic and probabilistic. In order to build competitive advantage, company leaders will need to define strategy, then test and tweak it to adjust to internal and external changes.

Investing in the Workforce

During uncertain times, companies will reduce head count, put hiring freezes in place, and leave positions open. Yet, simply freezing activity means companies can miss out on filling critical needs and areas. Instead, companies should recognize the potential of longtime employees. By investing in efforts to make the existing workforce more agile and resilient to changes in the environment can boost an organization’s capacity to thrive in uncertain times.

Create Values with Deals

Uncertainty tends to paralyze deal making or to push companies into transactions that are defensive and reactive. But companies that are sufficiently agile to execute transactions when they can, rather than when they have to, will find that deals present occasions to boost growth and pull ahead of rivals. Because more motivated sellers appear in uncertain times, companies can potentially take advantage of deal flow from organizations that are divesting assets. It is no surprise that private equity firms tend to do their best deals and create the most value by buying at the trough of a cycle, when both multiples and profits are depressed.