Articles

Tolerating Uncertainty in Leadership

14th May 2024 

Uncertainty has emerged as a defining term in contemporary business discourse, with The New York Times naming it the “word of the year”. According to the World Uncertainty Index, created by economists at Stanford and the International Monetary Fund to capture economic and political uncertainty, uncertainty has been rising steadily over recent decades. Definitions of uncertainty vary across different fields, but many resonate with Frank Knight’s distinction between the concepts of risk and uncertainty (“Risk, Uncertainty, and Profit", 1921). Knight's seminal work suggested that while risk involves scenarios with unknown outcomes but known probabilities, allowing for statistical management, uncertainty describes situations where both outcomes and probabilities are unknown, thereby precluding conventional risk strategies. Knight’s theory posited that true entrepreneurship and the quest for profit thrive under conditions of uncertainty rather than risk, emphasising that it is the adept navigation of uncertainty - not merely the calculation of risks - that sets successful entrepreneurs apart and leads to exceptional profits.

This insight lays the groundwork for understanding the pivotal role of navigating uncertainty in leadership. Professor John P. Kotter's argued in “What Leaders Really Do” (Harvard Business Review, 2001), that the role of leadership is to cope with change, contrasting sharply with the role of management which is about coping with complexity. This distinction is echoed in research by Lane and Klenke (2006), who pinpoint coping with ambiguity and managing uncertainty as crucial leadership competencies. Further emphasising this point, Kajs et al. (2009) highlight the capacity to tolerate uncertainty as a distinguishing trait of successful leaders versus their less effective counterparts. Thus, contemporary leadership literature consistently positions the ability to tolerate uncertainty at the core of effective leadership.

The concept of intolerance of uncertainty, a psychological construct initially identified in the context of worry and generalised anxiety disorder by Freeston et al. (1994), can detrimentally affect cognitive functions, particularly due to apprehensions about future events - often referred to as prospective anxiety. Similarly, it can impair behavioural functioning, leading to avoidance behaviours when confronted with uncertainty, a phenomenon known as inhibitory anxiety. Intolerance of uncertainty finds relevance in the leadership domain, where it has been associated with isolation, stress, and burnout. Leadership burnout, has become a critical issue, drawing attention through cases like Jacinda Ardern’s resignation, where she cited depleted personal reserves. This is not an isolated phenomenon; a McKinsey study in 2022 highlighted that 50% of female senior leaders and 40% of male counterparts reported experiencing burnout, with similar numbers for those experiencing chronic stress and exhaustion. The gravity of this situation is further amplified by a Deloitte survey revealing that nearly 70% of executives contemplate leaving their high-pressure roles for environments that better support their well-being - a sentiment more pronounced than among non-management staff. Additionally, the turnover rates among chief executive officers have reached unprecedented levels, with 1,914 CEOs stepping down in 2023, as reported by Challenger, Gray & Christmas, marking the highest rate since the firm began tracking CEO exits in 2002. Notably, the average age of these departing CEOs has decreased to 56 in 2023, from over 63 in 2017, suggesting a trend towards earlier departures from leadership positions.

This insight underscores that the capacity to tolerate uncertainty transcends its role as a mere facilitator of organisational and leadership effectiveness, establishing itself as a crucial element for leader well-being. Despite its significance, the concept of tolerating uncertainty remains underexplored within leadership context and those traditional leadership training and interventions aimed at equipping leaders with the skills to manage uncertainty, have often fallen short (Barsh et al., 2018). We have addressed these gaps through extensive research and provide a strong framework which allows leaders to tolerate uncertainty. Our approach:

1) Avoids a superficial fix aimed at stress reduction and building short-term resilience but approaches the psychological dimensions of uncertainty tolerance (Hong & Lee, 2013) and its impact cognitively and behaviourally.

2) Avoids generalising all forms of uncertainty into a single category, not accounting for the specific challenges posed by different types. Our research has identified three distinct kinds of uncertainty – global macro, business, and workplace relational dynamics - each exerting a unique impact on leaders' sense of control, expectations, reach of influence, self-esteem, and fear of failure, which, in turn, affects their tolerance levels to varying degrees.

In conclusion, our research emphasises a comprehensive approach that considers the psychological dimensions and varied impacts of different types of uncertainty. By recognising and addressing these nuances, leaders can not only navigate uncertainty more effectively but also sustain their resilience and mental health in an increasingly unpredictable world. This refined framework equips leaders to transform uncertainty from a source of stress into an opportunity for growth and innovation, ensuring long-term success and fulfilment.