THE BOARDROOM BUZZWORDS FOR 2023: "POLYCRISIS" & "PERMACRISIS"

Making predictions is something I usually avoid doing, but I think I can confidently predict the buzzwords in all boardrooms in 2023 will be “polycrisis” and "permacrisis."

Paul Barnett, CEO, Enlightened Enterprise Academy

Back in October Adam Tooze , an FT contributing editor who teaches history at Columbia University, wrote a column, “Welcome to the world of the polycrisis. ” In it he says, “a problem becomes a crisis when it challenges our ability to cope and thus threatens our identity. In the polycrisis the shocks are disparate, but they interact so that the whole is even more overwhelming than the sum of the parts.”

Meanwhile the Collins Dictionary made "permacrisis" the word of the year 2022. They define it as, "“an extended period of instability and insecurity” and say it "perfectly embodies the dizzying sense of lurching from one unprecedented event to another, as we wonder bleakly what new horrors might be around the corner." It does seem fitting for the situation governments and the directors and executives of businesses and other organisations will face in 2023 and beyond.

Tooze answers the question about whether the term polycrisis describes anything new by saying, “what makes the crises of the past 15 years so disorientating is that it no longer seems plausible to point to a single cause and, by implication, a single fix. Whereas in the 1980s you might still have believed that “the market” would efficiently steer the economy, deliver growth, defuse contentious political issues and win the cold war, who would make the same claim today?” And he argues that “the pace of change is staggering.”

Then Tooze considers what the outlook is and notes, “modern history appears as a tale of progress by way of improvisation, innovation, reform and crisis-management. We have dodged several great depressions, devised vaccines to stop disease and avoided nuclear war.”

The views of Tooze echo those of another FT columnist, the economist John Kay , put forward in his book Obliquity (2010). In it he says, “history shows us that oblique approaches are the most successful, especially in difficult terrain.” And that, “paradoxical as it sounds, many goals are more likely to be achieved when pursued indirectly”.

Tooze, concludes by saying, “perhaps innovation will also allow us to master the environmental crises looming ahead.” He then warns, “But it is an unrelenting foot race, because what crisis-fighting and technological fixes all too rarely do is address the underlying trends. The more successful we are at coping, the more the tension builds. If you have found the past few years stressful and disorientating, if your life has already been disrupted, it is time to brace. Our tightrope walk with no end is only going to become more precarious and nerve-racking.”

The leaders of nations will be walking a tightrope, and so will the leaders of all businesses and organisations. No longer will businesses be able to manage risks in the way they have, nor try and tackle crisis with their single fix response, often focused on public relations (PR) driven story spinning which drove the massive growth in the PR industry in the past 15years. It is time for directors and executives to kill the PR approach and get serious about tackling the root causes of their problems.

Whilst "most of those in the reputation management business are focused almost exclusively externally and on marketing communication programmes and events," enlightened governance, management and leadership requires a different approach. “Connect the dots you may not have realised need to be connected to have an organisation that is the most reputable amongst its peers – beginning with values and culture, and including governance, brand, strategy, and risk management," suggests Elliot S. Schreiber, Ph.D. .

Elliot is a former PR industry insider with a unique history and, “one of the world’s most experienced and knowledgeable experts in brand, reputation, and risk.” His views on the PR industry are scathing. For example, he recently commented, “universities pump out millions of graduates with PR degrees, most with little knowledge of business, all anxious to join firms like #Edelman , to tell stories, create creative events, without any concern and knowledge in how to effect change in company policy. They continue to believe that reputation is “image management.”

The Enlightened Enterprise Academy is proud to have collaborated with Elliot to offer a new online programme in 2023, “An Introduction to Strategic Stakeholder Value Creation and Reputational Risk Management ” is an online executive programme starting on April 12th. The programme is based on his book, published by our sister company, Enlightened Enterprise Media in 2020. About the book, Elliot says, “It argues that reputation is NOT based on Public Relations or marketing, but rather is determined by each stakeholder differently according to their own needs and interests. It argues that the goal of reputation is to create and preserve long-term value by meeting or exceeding the expectations of value of the organisation’s different stakeholders, both internal and external. And reputation and risk both begin inside the organisation with its values and culture.”

"How many PR firms understand that “reputation and risk both begin inside the organisation with its values and culture,” as Elliot Schreiber suggests? And are able to offer any meaningful advice on these matters? The answer to this question is important if organisations are to stand any chance of navigating a way forward in the polycrisis world. And the answer is almost none."

Paul Barnett, CEO, Enlightened Enterprise Academy

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The polycrisis also has other governance and management implications, as Martin Wolf, the Financial Times Chief Economics Correspondent explained in, “how to think about policy in a polycrisis .” He added to Tooze’s warnings by saying, “It is indeed convenient to think about the world in intellectual silos, focusing in turn on macroeconomics, finance, politics, social change, politics, disease and the environment, to the exclusion of the others. In a reasonably stable world, this may even work well. The alternative of thinking about the interactions among these aspects of experience is also too hard. But sometimes, as now, it becomes inescapable.”

"It is not just theoretically true that everything depends on everything else. It is a truth we can no longer ignore in practice. We have to think systemically.... Economists have to recognise how the economy is interconnected with other forces. Navigating today’s storms compels us to develop a wider understanding."

Martin Wolf, FT, Chief Economics Correspondent

Wolf referred to the work of his colleague Gillian Tett, who often warns silos are perilous. and he was correct when he said, “this is not an argument against detailed analysis of individual elements in the picture.” And, “economists should still look carefully at the things they know about, because they are both complex and important in themselves.” He describes the need for a “systems-of-systems” approach, and he calls on us to realise, “the world we know now does not divide into neat silos. Our thinking must not remain stuck narrowly within them either.

On the topic of silos, in her book, the Silo Effect, Tett did indeed explain why silos are perilous. I interviewed her about this for a review of her book in Strategy + Business Magazine in 2015, and she joined us for a conference, “MANAGING SILOS: Making the Knowledge Economy Work ” in March 2017.

The Polycrisis world will demand that directors and executives finally get to grips with this issue in ways most have not. Outdated organisational structures, systems and processes will be replaced as organisations recognise the need to become FLAT FLEXIBLE AND FUID. They must if they are to rise to the challenges. This is the focus of another executive programme to be offered by the Enlightened Enterprise Academy in 2023, in partnership with Dr. Frédéric Schneider DETAILS ??????

On the need for a systems-of-systems approach, the big question is whether directors and executives, and the organisations they direct and lead, have the systems thinking capabilities needed for dealing with a polycrisis? The answer is no in the vast majority of cases. Most have “systems thinking capabilities gaps.” That mean they are unable to deal with even a single crisis effectively.

This problem of systems thinking capabilities gaps was a problem we identified as we went into the first COVID lockdown in the UK. And, during the course of the pandemic, we all saw ample evidence of the consequences.

Back then, working with an internationally recognised authority on systems thinking, Dr Mike C Jackson OBE , we developed an executive programme in Critical Systems Thinking and the Management of Complexity , based on Mike's book with that title. The programme was delivered successfully once in 2023 and will run again starting on February 21st, 2022. DETAILS

The Enlightened Enterprise Academy, of which I am the Founder and CEO, believes, “Critical Systems Thinking capabilities are crucial but scarce, because as Mike says....

Today's leaders are "usually brought up on classical management theory that emphasizes the need to forecast, plan, organise, lead, and control. This approach relies on there being a predictable future environment in which it is possible to set goals that remain relevant into the foreseeable future; on enough stability to ensure that tasks arranged in a fixed hierarchy continue to deliver efficiency and effectiveness; on a passive and unified workforce; and on a capacity to take control action based on clear measures of success. These assumptions do not hold in the modern world, and classical management theory provides the wrong prescriptions.”

Dr Mike C Jackson OBE

In short, classical management theory leaves today's leaders massively exposed and unable to deal with the levels of complexity they already face, let alone the even greater complexity they will face dealing with the polycrisis. What must they do?

"Directors and Executives need to prepare themselves, their boards and executive teams, and the organisation they lead. They need to ensure they have the capabilities they need by ensure they understand and can practice Critical Systems Thinking and the Management of Complexity if they are to stand any chance of surviving the polycrisis related challenges they face. And those responsible for director and executive development in learning and development (L&D) or Human Resource functions must recognise these needs of individuals, and of organisation."

Paul Barnett, CEO, Enlightened Enterprise Academy

PROGRAMME ENDORCEMENTS

Following the first run of the Critical Systems Thinking and the Management of Complexity programme we had several very enthusiastic endorsements. The following example illustrates the kind of feedback we got:

“Paul and Mike have built something of incredible value. In an era that seems to promote segregation, simplification, and tribalism this introduction to Critical Systems Thinking (CST) and managing complexity bring together ideas and tools that are a compelling antidote. Each module offers a building block to recognising and solving “wicked problems” but also by juxtaposing established approaches to systems thinking with one another, this course gives a unique view and starting point to shine a light on the “why’s” that traditional, old skool management theories and practices fail to meet the present let alone the future. And if that is not enough, the passion and creativity of the guest speakers as well as the approachability and scope that Paul and Mike bring is a genuine delight in a world otherwise nasty, brutish and … ongoing!”

A Message for Asset Managers: Address Your Systems Thinking Capabilities Gaps. Stop Making Polyexcuses!

And another endorsement from a highly respected long-term investor read....

“If I were granted one wish to be implemented in order to improve the long-term performance of the companies in my stock portfolio, what would it be? Easy--- All board members of these companies must attend this online course.”

These are the words of Bartley J Madden . You can read his biography on the website of the “MADDEN CENTER FOR VALUE CREATION ” at Florida Atlantic University, recently established with the Madden family’s generous $3 million gift to support the Centre’s “promotion of value creation for widespread prosperity.”

Those in Investment Management might wish to take seriously what Madden says. They might then avoid the wrath of Stuart Kirk, a former head of responsible investment at HSBC Asset Management and previous editor of the FT's Lex column. In an article, "Asset managers, please spare us your polyexcuses ", he says, "blaming bad results on world crises displays a woeful reluctance to take responsibility for misjudged investments." And he adds....

"Simply no one knows how to avoid blame like a portfolio manager. I would go as far as to say it is their main job. Given the vast majority underperform their benchmarks, yet retaining assets is paramount, shifting fault is the only game in town."

Stuart Kirk

He notes, "the more money lost, the better the excuses need to be", and after a spectacularly bad 2022 he wondered "how on earth was the industry going to pass the buck this time?" Then......

"Bingo! A polycrisis. You could hear the spasms of joy across the investment world when this idea started to gain currency in the summer. We’re saved! Because you see, dear client, a polycrisis is not like the usual crises you pay us to navigate on your behalf. Oh no. This one has come out of the blue and is bigger than anything any human has ever seen in history — multiple crises igniting each other in a firestorm of risk."

Stuart Kirk

Kirk advises investors to, "dismiss any manager or adviser who mentions the word polycrisis" in order to, "end these free passes for the managers of our money", because we need "no more polyexcuses."

In my opinion we are facing an unprecedented level of polycrisis, and worst effects are yet to come, but Kirk is right to say asset managers should not be using them as excuses. Instead they need to recognise their systems thinking capabilities gaps, and they are many.

Paul Barnett, CEO, Enlightened Enterprise Academy

It is not only economists that are compelled to "to develop a wider understanding," to "think systemically," and to "recognise how the economy is interconnected with other forces." Asset managers must. They always should have done, but they have been too happy to follow the consensus view of analysts, and those analysts have been too content to follow each other in using similar, woefully inadequate, approaches.

Participation in the Critical Systems Thinking and the Management of Complexity programme, starting on February 21st, 2023, is by application only. The application process is now open. DETAILS

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