Korn Ferry

Mission Impossible: The New Age of Ambiguity Starring The CEO

Jonathan Dahl

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You’re the CEO of a UK-based international retailer that sells products for expectant mothers, with more than 1,300 stores and $650 million in revenue. Two years ago, the board brought you in to turn the retailer around—which is exactly what you have done, leading the firm to its first profit in years.

Then you wake up one June morning and the world has shifted. And it’s no small shift. Headlines are announcing the shocking Brexit vote, and nobody can say what that means exactly. How will trade be affected? Will EU workers have flexibility in the UK? How much will the pound weaken? Quickly, the questions—and the concerns—funnel down to your company. All that seems certain now is that nothing is certain.

But if you are Mark Newton-Jones, the CEO of Mothercare, who is at the helm of this ubiquitous retailer, you begin to make some new calculations as you strategize. Soon, the next step becomes clear: Book a trip to Asia.

Is the core mission of a CEO still possible?

As the proverbial captains of industry, CEOs have always been a special breed, tasked with a host of roles unique to the corner office. They must be great strategists, suave liaisons for the boardroom, builders of top C-suite talent and the master of all budgets. Naturally, they must be comfortable with change—change in markets, change in competition and change in governments.

 

But what happens when the world goes crazy—when surprise becomes the norm in business and politics and when predicting key strategy can seem like guesswork? We’re talking, of course, about trying to set firm business plans during popular uprisings that have produced a new party in France, a bitter divorce inside the European Union and a different breed of presidency in the United States. Or trying to determine budgets and hiring when taxes, immigration and healthcare policies are up in the air. And that’s just the political side of things. Tech disruptions are so common now—and start-ups so well-funded—that businesses can turn on a dime.

Of course, CEOs have always had to deal with ambiguity—government leaders change all the time, and the financial crisis of 2008 was no walk in the park. But to many, today feels much more explosive and unpredictable. What’s more, in this age of activist investors and ever-demanding boards, CEOs are under a lot more pressure to produce great quarterly results than year-long plans.

All of which raises the obvious question: Is the core mission of a CEO still possible? How do you keep your company’s head above water while running blind in some areas? Korn Ferry decided to go straight to CEOs and chairpersons themselves, interviewing a dozen across sectors and the globe. We talked to the head of a banking firm big in Asia, the CEO of a Latin American airline and even the head of a big cleaning solutions company in Minneapolis. One, Cathy Jacobson, the CEO of Froedtert Health, a large regional healthcare system in Wisconsin, says corporate leaders today are in a “helter skelter” environment. “Absolutely, the pace and the mix of change has gone up significantly,” she says.

In response, some leaders say they are knee-deep in scenario planning. Others are taking a more Zen-like view, ignoring the blaring headlines and staying the course. For his part, Stuart Rose, chairman of the Ocado Group and one of the United Kingdom’s most distinguished business leaders (he’s been knighted) thinks CEOs have to have their “fingers on the pulse of everything” and be ready for any paths the government may take. “It’s like trying to rub your tummy and pat your head at the same time,” he says. “It’s quite tricky.”

 

The biggest concern for many: letting all the distractions get in the way. “It’s better to think about what you can do, than to want what you can’t,” says Debbie Hewitt, chair of The Restaurant Group, White Stuff and Moss Bros. Group in the UK. “Rather than descend into doom, work on what you can influence, and be nimble and focus on what matters.”

Which is precisely how Newton-Jones reacted. Last summer, as the pound weakened, he and his team realized they needed to fly to Asia to talk down the price increases from suppliers for all those baby strollers and toddler clothes. Brexit was a “shock to the system,” he says. “But there’s no better way to negotiate than at someone’s doorstep.”

 

Below, a look at how some CEOs have been managing a few of today’s challenges, and what some leadership pros are advising them to do.

Brexit and the EU

We begin with the big one—as in the world’s biggest divorce. Like so many leaders, Wilf Walsh, the CEO of Carpetright, says he was astonished by the news, but pragmatic. “Once you wake up from the smelling salts, you have to have a plan,” he says. He says product prices are up a little, but believes Carpetright’s size will help it outlast its competitors. “We’ll be able to suck air longer,” he says. Indeed, he thinks the retailer’s market share may ultimately grow.

 

And yet no CEO can discuss the topic without some jitters about the future. The pound fell more than 15 percent against the dollar after the vote, and consumer confidence has wavered. “I’m not sure anything in my life has affected me as much as Brexit,” says Walsh. “It affects so many areas—trade, consumer confidence, labor. It’s seismic.”

The answer? For some, patience seems to be the only play here. The actual separation won’t happen until 2019, and the negotiations on the details between the UK and EU leaders are expected to be open. What’s more, although it gets lost in the hype of tabloid coverage, there are historical parallels to learn from. Back when the EU was forming, countries like Norway, Lichtenstein and Switzerland skipped full membership but stayed friendly with the EU—a possible scenario for the UK. “If you are a smart CEO,” advises Nick Psyhogeos, an author and the head of the consultancy Global Negotiations, in Bellevue, Washington, “you become a good student of the past to make the best decisions for the future.”

Healthcare Reform

Americans have known pretty much since the night Donald Trump pulled off the election upset of the century that the nation’s healthcare system was going to change—they just didn’t know how. For months now (as of press time), Congress has been keeping the nation on edge with proposals. Healthcare providers, of course, have a ton at stake—just look at stocks, which have shifted with each passing development.

Based in Cincinnati, John Starcher is the CEO of one of those providers, Mercy Health, a large regional operator. He’s the first to concede that he can’t anticipate the end result—but also insists he isn’t focused on all the back and forth. “I may be different, but I tend not to get wrapped up in all the hand-wringing,” he says. “For my money, as long as we drive lower costs and offer better care, we will be in the best possible position under any system.” His focus? Changing the paradigm of healthcare— for example, opening more clinics with more convenient hours, giving people greater access to preventive care and creating a work culture that encourages innovation and drive. “We are not here to keep the trains running on time,” he says.

 

It may be a wise approach—especially since Starcher also says he avoids making any large capital bets and instead is focused on “non-regrettable” actions. What’s more, as with Brexit, he and other providers do have time and past experience on their side. “We’ve had rehearsals for all this,” says Jacobson at Froedtert Health, referring to Obamacare. “What surprised us was that change didn’t come as fast we thought. We had time.”

Taxes

Considering how much it could ease their balance sheets, talk of US tax reform is always of keen interest to CEOs. President Trump has been floating both the idea of cutting corporate tax rates in half and offering a “tax holiday” to encourage companies with foreign tax havens. And yet, as with healthcare, few can predict what Congress will do.

So for many leaders, including Chris Killingstad, CEO of Tennant Co., a major cleaning products and solutions firm, this is all viewed as free money. “We manage as if the status quo will remain the same until it gets better,” he says. On the heels of recently making a major acquisition, he says, the company would just use any tax break to help pay off the purchase debts. “We’d welcome any change but don’t expect it.”

Immigration

Security fears. The great “wall.” Travel bans taken all the way to the Supreme Court. The US has dominated the immigration issue, but it’s a big deal across the globe, too, as national anxieties over welcoming immigrants grow. Down under, Australia has proposed new restrictions on some working visas, while in Europe even a country as open as Switzerland is rethinking its policies. Rarely, experts say, are such moves taken up smoothly or universally welcomed.

But talk to our CEO group and you’ll discover that whether immigrants should be welcomed or shunned overshadows a more pragmatic problem. In many industries, foreign nationals make up a significant portion of the workforce. This isn’t just undocumented field hands, either. Nearly 5 percent of military-specific jobs in the US are filled by immigrants, and there are up to half a million foreigners holding H-1B visas, meaning a company sponsored them to enter the country to work. Meanwhile, there are more than 3 million EU nationals who live in the UK, and they haven’t been given any post-Brexit-vote guarantees that they can stay. “People are feeling quite uncertain about their future status here,” says Hewitt, from The Restaurant Group and Moss Bros.

 

There are options out there. CEOs can increase compensation and benefits to help entice new citizens into the job market, or improve training and development to create an agile workforce that can handle multiple responsibilities. Companies worried about a shortage of higher-skilled immigrants can also increase their college recruitment efforts, Psyhogeos says. Agile organizations have another option: Diversify across national borders. To counter changes in US policies toward immigrants, legal or otherwise, some firms are considering expanding their footprints in places such as Canada, Mexico and New Zealand, where there are considerably looser restrictions on hiring foreign-born personnel.

Technology

It was a tough step but one many analysts thought was long overdue. In 2015, not long after taking over as CEO of Standard Chartered Bank, the London-based banking giant with primary operations in Africa, Asia and the Middle East, Bill Winters launched a massive cost-cutting campaign to shore up the firm’s balance sheet. In all, he would cut 30 percent of the bank’s $10 billion cost base. But the former J.P. Morgan investment banker will tell you the money wasn’t put away for a rainy day. One word: fintech. “We took the savings and put most of it straight back into technology,” he says.

In a way, he had to. As much as government elections and policy changes are disruptive, it’s really tech that hits home at many companies but is hard to predict. Who could have imagined the pace at which, say, artificial intelligence or the Internet of Things would unravel one business model after another? And whose crystal ball can identify the next really big step?

In the case of banking, fintech allows average customers to make split-second transactions on smartphones. To stay ahead of this curve, Winters says he is not only shifting funds but making sure he has lined up team leaders who are agile and bold enough to face change. “There can be a tendency to hesitate, but it’s important to be bold,” he says. “Fintech poses risks, but there are also huge opportunities.”

And as Killingstad, the CEO of Tennant, reminds us, technology even creates opportunities in the cleaning solutions business; his firm was an early developer of electrically converted water, which reduces chemical and water use in the cleaning process. “You have to be comfortable with ambiguity,” he says, placing small bets at the tinkering stage, then ratcheting up. “We invest at the speed of our confidence.”

 

Brazil

In some ways, Brazil may be the capital of uncertainty. Since 2015, one president has been impeached and evicted from office, while the next was investigated for corruption. Both unemployment and inflation have run into double digits, and the economy has shrunk. Large street protests are a common occurrence.

But every month or so, Rodrigo Kede Lima, president of IBM Latin America, says he makes a trip to New York to inform corporate that it’s business as usual for his staff. “I tell the board, ‘Don’t worry about this, we are used to it.’ ” he says. He points out IBM has been in the country for more than 100 years, and that he plans for scenarios for each government or economic change. “Through all the unpredictability, we have been very predictable,” he says. “I think that is key.”

Indeed, business leaders say outsiders often underestimate the Brazilian tolerance for ambiguity. After all, since military rule ended in 1985, the country has dealt with corruption, rampant inflation, intractable crime in urban areas and wholesale privatization of industries. Yet the nation’s economy grew dramatically, and the country hosted both a World Cup and a Summer Olympics. Even last year, at the height of uncertainty, Brazil attracted nearly $79 billion in foreign direct investment, equal to a record 4.4 percent of the country’s GDP.

Perhaps there is a lesson, experts say, for all company leaders here. At Avianca Holdings, CEO Hernán Rincón says his bigger concern in running his well-known airline is not the next president, but actually the next weather report. With storms, currency fluctuations and shifts in oil prices, every day ushers in a new wave of uncertainty. But after spending years in the technology business before coming to the airline, Rincón can only shrug. “I came from an industry that is only about change,” he says. “If you don’t like change, perhaps this isn’t the industry for you.”

 

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Authors

  • Jonathan Dahl

    Vice President, Chief Content Officer

 

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