The Role of Institutions in State Development
The Importance of Institutions and their Role in State Development The previous articles in this module have briefly discussed the importance of institutions in state building and state formation. The key themes that were introduced were how well functioning and stable institutions contribute to state development and state formation. When we talk about institutions, we […]
Advantages and Disadvantages of Reinsurance Brokers
In the previous article, we have already seen what reinsurance brokers are and why they are so important to the reinsurance market. There are a large number of reinsurer companies that only deal with reinsurance brokers. These companies do not provide any direct service to their clients. The number of reinsurance brokers is increasing day […]
How to Spot Signs of Sexual Harassment and Act on Them
Ever since the allegations against the famous (now infamous) Hollywood celebrity, Harvey Weinstein, about sexual harassment broke out, there has been a flurry of women across the political, economic, social, and entertainment world who have come forward detailing their own experiences with sexual harassment. Also, with noted Silicon Valley firms being accused of covering up […]
Writing a Leadership Development Plan
Preparing a leadership development plan is not an easy task. The entire process involves a comprehensive effort and careful planning at every stage. Various steps go into the development of a leadership development plan. The process starts with an initial phase of self-assessment and the data collected from self-assessments is then used for defining the […]
Transactional Leadership Theory – Meaning, its Assumptions and Implications
The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981. This style is most often used by the managers. It focuses on the basic management process of controlling, organizing, and short-term planning. The famous examples of leaders who have used transactional technique include McCarthy and […]
Managers in contemporary organizations are confronted with uncertainty and ambiguity in their everyday lives. Not only do they have to contend with rapidly changing trends and fluid situations, the data they get from the ground or from market research becomes redundant with no time. This has given rise to confusion and chaos in the way organizations approach the future. This situation can be remedied by the use of scenario based decision-making where the managers draw up possible scenarios that the company might have to contend with in the short term, medium term, and longer term.
By drawing up scenarios that consist of simulations of the best-case situation and the worst-case situation, the managers would be better able to take the right decision when the situation manifests itself.
The point here is that looking into the future is impossible except for oracles and clairvoyants. Hence, some sort of grip on the future must be firmed up by planning for all possibilities.
Over the last couple of years, global businesses had to contend with multiple economic shocks starting with the bankruptcy of the investment bank, Lehmann Brothers that nearly brought down the global financial system. Next, the Eurozone crisis erupted that threatened to bring entire governments to their knees. Now, we have the specter of diminishing resources and runaway inflation. In this context, it becomes important for managers to draw up scenarios that would happen with a certain degree of probability. For instance, it would be better for managers to think of the eventuality of Greece leaving the Eurozone and then planning for it accordingly. For managers in sectors that do not have exposure to financial instruments in a major way (after all, which sector is immune from financial shocks?), they can simulate models and scenarios where a war in the Middle East is predicted and then base their strategies accordingly.
The point here is that when there is so much uncertainty, it becomes tough to anticipate events. Hence, by drawing up scenarios that simulate the worst and the best as well, decisions can be taken that would derive advantage to the organizations. When one adds complexity to the uncertainty and ambiguity that pervades the current world, one is even more muddied and muddled to take decisions. For this, managing the present, it is a challenge and hence many organizations leave future forecasts to consultants and management experts. However, this need not be the case and in-house expertise can be developed to deal with emerging scenarios.
A case in point is NASSCOM (the Apex body of IT and ITES companies in India) that has been advising IT companies in India to plan for the downturn and the possible aftershocks from the Eurozone crisis and the upcoming “fiscal cliff” in the United States. NASSCOM has also been asking IT companies to draw up scenarios for these events that if not planned for have the potential to blow up on everyone’s face. Unfortunately, many organizations are rushing into the future without any thought or idea on how they would deal with “Black Swan” events. A Black Swan event is a low probability but high impact event that can surprise people with its occurrence.
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