Tips to help deal with economic and business uncertainty

The word “uncertainty” is a constant feature of economic headlines in 2023. The debates about the Reserve Bank of Australia’s decisions regarding interest rates (will it raise them or not), the uncertainty about a future recession (if and when it will begin, and how long it could last) all contribute to this.

A 2022 article in the Harvard Business Review further supports this, suggesting that economic uncertainty is growing. With this in mind, responding to it adaptively (learning to “tolerate” uncertainty when it appears) is a pressing challenge for businesses.

The alternative – attempting to evade uncertainty – might ease short-term discomfort, but it can lead to long-term pains.

Uncertainty intolerance can mean more bureaucracy as we attempt to regulate away uncertainty, lengthy decision-making processes (such as prolonged auditing outcomes or delayed loan decisions), and increased supervision needs as workers struggle with decision-making while awaiting the impossible – “complete” information.

We have some control, though, in our responses to uncertainty. Adopting a more uncertainty-aware approach to financial planning can help equip us for the inevitable, shocking or unprecedented economic events.

Here are some tips to move towards uncertainty awareness and away from uncertainty intolerance, based on my book The Uncertainty Effect.

Develop a culture of safety instead of fear

We all have blind spots, so having a diverse set of voices in a company empowered and encouraged to raise the “unknowns ahead” alarm can help us spot uncertainties on the horizon. A culture of fear, where employees risk repercussions for speaking up, leaves most unwilling to speak out.

Such cultures of psychological safety can be built when industry leaders engage candidly with their workforce about the knowns and the unknowns facing the company. This demonstrates the will to see both the uncertainties and certainties as valuable.

When the unexpected does arise, instead of blaming individuals or events, we can ask questions about what led to this unforeseen outcome, and explore process adjustments to prevent similar future events having a detrimental impact.

After all, the unexpected rarely is a result of a single individual, or even a single event.

This problem-solving approach also helps employees feel a sense of purpose, as they’re being asked to be part of the solution. They may be more willing to express concerns in the future.

Sometimes, though, it’s a case of “shit happens”, and leaders willing to acknowledge this can help alleviate the worker burnout that comes with a workplace culture that doesn’t recognise this.

Promote a shared sense of purpose through role clarity

When working in a dynamic, volatile, high-risk sector, having clearly defined roles helps employees weather unexpected crises together.

One of the best examples of this is in the work of air traffic controllers (ATCs) on 9/11. On a typical day, the uncertainty ATCs face is great – from emergencies to weather changes, it’s nearly impossible to predict how the day will develop.

On 9/11, there was no standardised operating procedure for ATCs when planes became weapons. More than 14,000 ATCs coordinated across the US to land about 5000 planes at a rapid pace.

Retrospective evaluations suggest that ATCs’ clarity about what they were meant to do (professional role), and why they did it (purpose), helped them safely land planes in under two hours in unprecedented circumstances.

My team’s research reflects the lessons of 9/11. When employees are confident about what their role is in a company, and the purpose of the work they’re responsible for, their capacity to respond adaptively to unexpected events is enhanced.

On the flip side, when different people’s roles overlap, and/or they struggle to see the purpose in the work they do, employees are more likely to give up when encountering uncertainty.

Focus on curiosity, not just prediction

By asking considered questions, we increase opportunities to be uncertainty-aware.

Relying on predictions can leave us with tunnel vision – the prediction is either true or false. By asking “what if” questions (for example, "What if the market changes or consumer behaviours are modified?"), we can maintain cognitive flexibility to adapt to a changing landscape.

Instead of focusing on end-point predictions, taking the next best step with the information available (adaptive decision-making) helps us move through uncertainty.

Operationally, this means not relying exclusively on past data to predict the future. We saw this in practice during the COVID-19 pandemic. Businesses that were already thinking through the “what ifs” by the time a pandemic was declared more readily adjusted to the consumer markets shifting towards online shopping. Those basing business decisions on only prior consumer spending habits, however, struggled.

There’s a fundamental message in these tips: Oversimplifying challenges, attempting to control uncertainty, doesn’t remove it. Instead, it leaves us vulnerable when the unexpected inevitably arrives.

After all, both uncertainty and certainty can lead to bad outcomes, but it’s the uncertainty in which innovations are seeded, hope is sparked, opportunities are born, and creativity in business flourishes.

The Uncertainty Effect: How to Survive and Thrive through the Unexpected, by Michelle D. Lazarus ,is published by Monash University Publishing.