A consistent finding in psychology is that people don’t like uncertainty or risk. It’s called Risk Aversion, and we all have it to some degree.
To be fair, we are not risk averse all the time. We also enjoy risky behavior, like gambling, smoking, or playing fast and loose with food expiration dates. However, as a general rule, we don’t like risk. Managing our risk aversion and the risk aversion of our customers is a significant part of providing an excellent Customer Experience.
People don’t like risk in part because of the uncertainty. We want to make a good decision but worry about how terrible the consequences will be if we make a bad one. We discussed uncertainty in business and Customer Experience and how to cope with it in a recent podcast. Luckily, there are a few ways to manage uncertainty—and its related risk.
Coping with Uncertainty in Business
Many years ago, I attended the Confederation of British Industries (CBI) conference in London. I remember the speaker said that businesses want certainty, to be able to predict how much inventory they should produce and how many people they need and so on. It crystallized for me how vital certainty is in business.
In the next ten years, is business going to get easier or harder? The answer is harder. In other words, certainty is critical for business, but also elusive.
I support a team called the Luton Town Football Club. The manager has a phrase I quite like that applies here. He says you have to control the “controllable.” (Now, he didn’t come up with it; I just Googled it, and 33,300 results appeared in .38 seconds. However, most of them are coaching sites, so I can see why he says it.)
Controlling the controllable means that even if the world’s going mad, there are some things you can keep in check (aka, the “controllable”). You can’t rule the world or change human nature, but you can deal with it and use models of thinking that manage uncertainty.
How People Cope with Risk
It starts with your attitude, how you look at things. Most of my career I spent in corporate life. Whenever we went through organizational “restructuring,” there was loads of uncertainty. However, where there is change, there is opportunity. I always thought that the chances of moving up are higher in an organization that is changing than one that is static.
Since uncertainty is a fact of life, like death and taxes, one of the ways people cope with risk is demanding higher payoffs or higher expected returns from risk. For example, if you are going to leave a stable job (read: boring but steady) into a riskier one at a startup (read: exciting because it could flourish or fold any minute), many people would ask for a higher salary and greater immediate benefits. They demand compensation for the riskier situation.
Customers are the same way. If you have people who are risk averse, you have to put a lot of effort into front-loading those benefits to encourage them to engage in that risky behavior of moving over to you instead of sticking with what they have.
Another way that we cope with uncertainty is wanting to feel as if we made the best decision. In other words, we talk about everything even when we don’t know anything. We try to figure out, project, and model what we think is going to happen with the full understanding we only have some of the information significant to that decision.
In my global Customer Experience consultancy, I have dealt with some companies who spend hours talking about the .001 percent chance of something negative happening if they implement a new customer experience strategy design. They make it a huge issue.
We encourage our clients to learn by doing, to test a few things in a less risky environment and then deal with the issue if it comes up. I mean, yes, it could be an issue for one person on a random Tuesday, but let’s get the product out there for everyone else!
It reminds me of one of my favorite phrases: Ready, Fire, Aim! We just engaged in some of that thinking at Beyond Philosophy with training we launched. We are getting a new product out there and seeing what happens. I even told my training manager to put on his researcher hat. I want to know if our customers want this training, and if not, what do they want instead.
The “Ready, Fire, Aim!” approach works well for small decisions. While training is vital to what we do at Beyond Philosophy, it’s also not going to break the bank if we are wrong about it. So, we opted to skip the months of market research that might improve our decision by eight percent. Instead, we are trying to be efficient in doing business while gaining intelligence at the same time.
Unhealthy Ways to Deal with Uncertainty
One of the unhealthy ways that people cope with uncertainty is to throw up their hands and give up. They decide if the world is uncertain, then everything’s uncertain. So, they risk it all on this next big move for the company or the next marketing campaign. It’s the “Go big or go home” mentality. Behavior like that is driven by trying to cope with uncertainty in an unhealthy way.
Over the past decade, one of the positive changes in business has been experimentation in embracing uncertainty. In Silicon Valley, they talk about failing faster, meaning taking lots of smaller risks instead of one big one and getting feedback quickly. This approach allows the company to adjust what isn’t working or build upon their success with what is. Instead of “Go big or go home,” they “Go diverse and go on.”
Some corporate people react to uncertainty by not wanting to make a decision at all. Again, it is because of risk aversion. They feel if they put their neck out on a choice and fail, it will sully (or end) their career.
Failure is valuable in business. Now before you click away to read someone’s post who doesn’t sound a bit cracked, hear me out.
There is a famous story about Tom Watson, Jr., the CEO of IBM from the mid-50s to the early 70s, the IBM heyday. A young executive made some mistakes that cost the company millions. When the executive was called up to Watson’s office, he expected Watson was going to sack him. However, legend states that Watson said, “Not at all, young man, we have just spent a couple of million dollars educating you.”
Unfortunately, most corporations are not built that way now. Business today requires everybody to be right all the time. However, everyone isn’t right all the time. Sometimes you blow it.
I don’t remember who said it, but I once heard that a successful business is making more good decisions than bad ones. In other words, if you make a couple of mistakes but outweigh those blunders with successes, you are okay. It’s when you make too many mistakes that there is a problem.
Changing How We Evaluate Success with Decisions is Critical in Uncertainty
How we evaluate whether a decision is good or bad often makes no distinction between process and outcome. When there is uncertainty, and we don’t have full information, we have a method to help make decisions efficiently and rapidly.
We too often judge people by the outcomes of the decisions instead of on the process that was used to reach them. However, isn’t it better if people had a unfortunate result and a great process than someone who had a successful outcome but flipped a coin to get there?
We should focus on the process instead of on outcomes in our evaluation. That approach can help manage uncertainty in decision-making.
So, What Do You Do with This?
A couple of things here are critical to remember when coping with uncertainty:
- You must be able to deal with risk. Uncertainty and ambiguity are part of life and business, and it’s not going to get more comfortable moving forward.
- You have to control the “controllable.” You can’t control politics or the economy or what your friend posts on Facebook. You can control how you react to them.
- You need to recognize that human nature will not change. People are people, no matter what, so understanding people’s psychology and emotional state is critical. These concepts of behavioral economics are vital to your Customer Experience because it helps you understand human behavior at a deeper level.
- You should make your team’s world as certain as possible as a leader. Your employees want certainty, particularly about their job security. Share your decision-making process so your employees know what to expect and how you will evaluate their performance.
- You cannot value the outcome over the decision-making process. We can’t guarantee results because we can’t control everything. However, we can make people feel more comfortable when we are transparent about the process. For example, when a customer is upset in a Customer Experience, explain how you are going to resolve this issue for them and what is going to happen next in the process. It provides a general sense of comfort that will help cope with their feelings of uncertainty.
I don’t know whether it’s true that we’re living in more uncertain times than we have in the past, but it feels like it. Moreover, it doesn’t matter. When you’re managing Customer Experiences or employees, what it feels like is more important than how it is.
The concept of uncertainty is fundamental in the study of decision making. After all, if we knew how everything would turn out, then decision making would be easy. We would know exactly how to manage our Customer Experiences and employees. Uncertainty is what makes choices interesting.
Business is as easy today as it will ever be moving forward. Uncertainty is a fundamental part of making decisions in business now and it will be in the future. The question is are you prepared to deal with it?
To hear more about managing uncertainty in business in more detail, listen to the complete podcast here.
If you want to benchmark your organization’s performance in the new world of behavioral economics against other companies, take our short questionnaire. Once you submit, we compare your answers against what we know about the market and send you a free personalized report about where your organization is today.
Hear the rest of the conversation on “How to Manage Uncertainty” on The Intuitive Customer Podcast. These informative podcasts are designed to expand on the psychological ideas behind understanding customer behavior. To listen in, please click here.
If you enjoyed this post, you might be interested in the following blogs and podcasts:
Customers Are Irrational! Why? What Can We Do About It? [Podcast]
The Four Things You Must Do To Keep Customers Talking About Your CX
Colin Shaw is the founder and CEO of Beyond Philosophy, one of the world’s leading Customer experience consultancy & training organizations. Colin is an international author of six bestselling books and an engaging keynote speaker.
Follow Colin Shaw on Twitter @ColinShaw_CX
Source:
“Characteristic of Leadership.” The-happy-manager.com. Web. 12 March 2019. < https://the-happy-manager.com/articles/characteristic-of-leadership/>.