The Power of Positive Paranoia: A Key Trait for Every CEO and General Counsel in 2024
December 15, 2023
Winter is setting in across the Northern hemisphere and the new year beckons. If there is one certainty about the outlook for 2024, it is that business leaders will face numerous challenges — some that can be predicted, others that will come as a surprise and even some that are beyond imagination.
Recent years have taught leaders that they need to be prepared for an ever-changing and uncertain landscape.
Black swan events occur with high frequency, and for many senior leaders the ability to manage major events and shocks are now more important than developing strategy and optimising operations.
So-called black swan events require immediate attention and often divert focus away from business-as-usual operations. Looking at past crises, we know mishaps, slow reactions and flawed decisions can be costly and put organisations on the back foot.
The results of an FTI Consulting study of 100 black swan events over a 20-year period are staggering: 32% of senior executives lost their job, US$200 billion in market capitalisation was lost and 14% of the companies studied went out of business. And given the variety of modern-day crises — from cyber attacks and competitive misconduct to government investigations and financial sanctions — the probability that a major company will face zero crises over the next five years is almost zero.
So, how should business leaders prepare for new challenges in the year ahead?
Leading today requires a new approach — “positive paranoia.” Through proactive risk management, investment in areas of vulnerability, and a heightened sense of curiosity, senior leaders can use this mindset to ensure that their business is resilient to future shocks and has the ability to innovate.
As Albert Einstein wisely stated, we cannot solve problems using the same thinking that created them.
Here are three essential actions that leaders can take to connect with a positive paranoia mindset.
Stress Test Your Assumptions
Despite knowing that change is inevitable, C-suite leaders frequently miss opportunities to capitalise on circumstances that will position their business for future success. An FTI Consulting survey conducted in 2021 revealed that 50% of G20 businesses did not think they were being proactive enough in driving change.1
To guard against this, leaders must seek out diverse viewpoints that challenge their assumptions. Establish information or “sensor” systems that identify the sometimes-subtle changes that occur on the edges of the business, as this is often where you are likely to see the early indicators of inflection points. Staying vigilant also applies to the ever-evolving policy and regulatory landscape. Stress test the preparedness of the business for proposed regulation and requirements. How will you get ahead of these changes? Do they present any challenges or opportunities?
Sharpen Decision Speed
Pilots make sound, time-sensitive decisions under pressure, whether that is due to weather or another emergency. Successful business leaders are also defined and judged by their ability to think under pressure, and act when a decision has been reached. According to a recent survey conducted by FTI Consulting,2 the trait that investors most want to see in CEOs after financial acumen is decisiveness.
Whatever the crisis event, it is imperative that leaders prioritise the acquisition and analysis of reliable data to ensure that their decision-making is sound, swift and effective.
Scenario-based planning has a role to play here, as it enables leaders to assess the organisation’s crisis response and exposes weaknesses that would impede the speed of gathering critical information. These weak spots could be due to organisational bureaucracy, distortions from multi-layers or internal politics, the complexity of the situation, skills gaps, communication challenges or a host of other reasons. It is essential that leaders address these obstacles when confronted with them.
The opposite of a positive paranoia doctrine is sitting on information. Taking an objective view and reacting to facts before they play out is what sets management teams apart.
Build Your Ecosystem
Within the business you will have a clear idea who in the executive team will “own” a particular crisis — for example, the chief people officer in the case of an employee misconduct incident. However, there will be situations where the natural owner is not so clear cut due to the wide-ranging consequences of the event on the business, its fast-moving nature or insufficient expertise or experience on how to respond.
Spend some time considering who is best placed to lead these situations and how those leaders will gain access to the critical information that they require to arrive at a clear and systematic conclusion, and fast. Ask who should complement the skills of these leaders and what talent can be redeployed to provide assistance?
In the early stages of a crisis, designated first responders face immense pressure. They must analyse the situation, identify causes, gather data and implement solutions. Do they have tools to deliver? Can they maintain business-as-usual activities? Are there short-term changes that the business can make to divert skills or demand? It is also a good idea to have a vetted and approved list of external industry experts and contractors that you can call on for advice and counsel to help alleviate some of this pressure.
In a constantly shifting economic and geopolitical environment where the list of potential black swans is large, multifaceted and growing, effective leadership is a competitive advantage. It is an asset that has the power to build the future success of a business. Given that no winning position is permanent, how a company handles a black swan event can be the largest single determinant of its future market value and reputation. The senior leaders who create value in a crisis are the ones who use their positive paranoia as a defence and reframe these events as stepping stones towards their goals.
December 15, 2023
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