The 3 Most Common Unforced Errors That CEOs Make
Chris Mailander breaks down how leaders can adapt to change in the year ahead.
By Chris Mailander | 04 Dec 2023
Leaders are set to face choppy waters in 2024. Some CEOs will sense opportunity in the chaos but unfortunately, many will not. Their failings will likely not be due to some factor outside their control. It will come from within. They will make unforced errors which are completely avoidable.
I have counseled corporations and governments through numerous inflection points, including during the passage of NAFTA, the bursting of the dot-com bubble, the post-9/11 environment, the 2008 global financial crisis, Obamacare, and most recently, the COVID pandemic. Each inflection point forced CEOs to make decisions in dramatically altered situational contexts, sometimes remarkably quickly. I saw firsthand how the results, if poorly managed, could be quite subpar.
Heading into 2024, many potential inflection points pose a threat to today’s decision-makers. Interest rates remain high, which is choking down sales of houses, cars, and consumer goods. Unemployment is low, putting pressure on the evolving relationship between employers and employees. Personal debt levels remain high, and many families may face significant financial strains or even financial default in the coming year. Corporate debt is also high, with those highly leveraged companies likely to face diminishing options in the year ahead. Government spending—a critical component of overall economic health—is threatened by a fractured Congress repeatedly voting on possible shutdowns, a tension that could be further amplified in a presidential election year. Two wars of global significance rage on, and a third hotspot continues to flare along the South China Sea. Global supply chains, fuel prices, and the strength of the U.S. dollar will all be under pressure to change, maybe a little, perhaps a lot.
When an inflection point reaches its tipping point, everything changes for decision-makers. Here are three of the most common unforced errors leaders typically make:
THE IMMOVABLE NARRATIVE
When there is large-scale systemic change, uncertainty is high and leaders need to adjust. During these periods of change, share prices grow more volatile, bankers call more frequently, and employees get nervous about the stability of their jobs. A new learning curve must be discovered and climbed quickly. Unfortunately, many CEOs, instead, cling to an immovable narrative from their past. Their logic becomes intransigent. Prior assumptions and rationales are held steadfast, despite everything changing all around.
THE BATTLE FOR SMALL VICTORIES
When there are large-scale economic, security, or political shifts, the entire context for how an industry, market segment, or an individual operates is transformed. When it is difficult to know how the world has changed, many CEOs overly focus on smaller battles they know and believe they can win. In doing so, they fail to see the new strategies, new sets of assumptions, or the new trophies that could be won. For example, in the wake of the pandemic, many CEOs are seeking to re-implement the workplace rules they once knew from before the pandemic. But assumptions for how to achieve strong employee relationships and output have changed markedly since the pandemic. Some CEOs will adjust; others will cling to the past.
EMOTIONAL TINDER
Most CEOs ground their decision-making in rational, dispassionate logic, or so they believe. In reality, all decision-making is strongly influenced by our emotions. When a leaders’ emotions stir, or they’re under the pressure of strained financials, angry employees, or nervous investors, their decision-making will be altered. Quite frankly, pressure, insecurity, and fear will all trigger prior emotional patterns and responses. Emotions are the tinder below the fire of poor decision-making.
The antidote to committing unforced errors in decision-making is prior planning. I recommend that leaders have a playbook built for responding to alternative conditions and prepare their teams to manage through the adversity and change.
The most gifted decision-makers will even go a step further. They will develop forecasts for how to achieve success under the unfolding changing conditions. They will position their companies to then emerge stronger on the other side of the inflection point.