Critical decision-making is an essential capability that is required of an excellent leader.
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There are different types of leaders who can do extremely well in different types of situations.
Having leaders in situations that do not fit his or her abilities creates a potential dilemma.
Oftentimes, this leads to pressure situations that may force a leader to act unethically to survive financially or to meet some quota to appease superiors. A good reference for this article is a fascinating case from the Harvard Business Review, entitled "A Leader's Framework for Decision Making." In this particular case study, they discuss and analyze the Cynefin Framework and how leaders are categorized.
The Cynefin Framework can be divided into four contexts: simple, complicated, complex, and chaotic.
The simple context does not require much from a leader when it comes to decision making ability. They usually deal with routine problems where there is a clear cause-and-effect relationship and in which the solution is very evident and undisputed. A leader in this situation is taught to sense, categorize, and then respond to the situation at hand. However, potential problems exist such as an issue might have been too oversimplified or thinking has become too entrenched. Also, in these circumstances sometimes leaders become complacent.
The next context is complicated. Here the cause-and-effect relationship is still present, but it is not obvious to everyone. Thus, experts are needed to identify and respond to this type of problem. Sometimes it is the experts who are guilty of entrained thinking due to the fact they do not take into account opinions and ideas from non-experts—after all, they are experts. Furthermore, "analysis paralysis" is sometimes present in this situation because the experts cannot argue on a solution due to their egos.
The third context is called the complex situation. Complex contexts deal with a lot in the business world, because any major change such as a bad quarter or a merger and acquisition can create an environment with unpredictability and flux. In this situation, leaders should step back a bit and wait for patterns to emerge and then determine what direction to go to. They should probe, sense, and respond.
Examples of leaders in this situation are the founders of YouTube. When the founders started YouTube, probably did not think of all the program applications that are now available for it, but now are able to utilize it on YouTube with ease.
Lastly, the chaotic context is a situation in which action is needed immediately. There is no time to wait for patterns to emerge…a leader must stop the bleeding and develop stability so that the chaotic situation can change into a complex situation.
A key example of this is Rudy Guiliani and his handling of the horrible events of 9/11. A problem emerges, however, if a leader is successful in a chaotic environment. Sometimes the leader develops a narcissistic view of himself. Moreover, the inability to change his managing style when the situations are not in a chaotic context could prove troubling. (Snowden and Moore, 2007)
Understanding these four decision making contexts is definitely key for an entrepreneur taking a leadership role.
Situational leadership is a term that can be applied generically to each of these four hypothetical contexts. Yet, it can also refer to the ability of a leader to adapt to changing working environments.
It is necessary for a good leader to be able to accomplish this in order to garner the continued support of the people they are trying to lead. This is especially important as the world continues to progress technologically and globally.
An example of this type of leader is Sam Zell. Mr. Zell made his fortune in the real estate industry and had just recently purchased the Tribune Company. The Tribune Company was losing revenue, and with Sam Zell coming in as an outsider, this was an example of the aforementioned chaotic context.
I had the opportunity to meet with Sam Zell and wanted to observe what types of characteristic traits were applicable to leaders in that particular situation. I have learned that the leaders involved, such as Sam Zell, must have a strong personality and not be afraid in taking large risks.
The engaging personality of Sam Zell also adds to his leadership ability to turnaround businesses. It is definitely a situation with strong financial pressure and I wondered how he balanced his ethical standards while making sure his business ventures remain financially viable.