Let us first understand the meaning of the acronym VUCA. It stands for Volatility, Uncertainty, Complexity and Ambiguity.
Volatility (V) -We live in a world that is constantly changing and becoming more unstable each day, where changes big and small are becoming more unpredictable – and they’re getting increasingly dramatic and happening faster than ever. As events unfold in completely unexpected ways, it is becoming impossible to determine cause and effect.
Uncertainty (U) – It is becoming more difficult to anticipate events or predict how they will unfold; historical forecasts and past experiences are losing their relevance and are rarely applicable as a basis for predicting the shape of things to come. It is nearly impossible to plan for investment, development, and growth as it becomes increasingly uncertain where the route is heading.
Complexity (C) -Our modern world is more complex than ever. What are the reasons? What are the effects? – Problems and their repercussions are more multi-layered, harder to understand. The different layers intermingle, making it impossible to get an overview of how things are related. Decisions are reduced to a tangled mesh of reaction and counter-reaction – and choosing a single correct path is almost impossible.
Ambiguity (A) - “One size fits all” and “best practices” have been relegated to yesterday. In today’s world it is rare for anything to be completely clear or precisely determinable. Not everything is black and white – grey is also an option. The demands on modern organizations and management are more contradictory and paradoxical than ever, challenging our personal value systems to the core. In a world where the “what” takes a back seat to the “why?” and the “how?”; making decisions requires courage, awareness, and a willingness to make mistakes.
You are the CFO
As the CFO, you are responsible for the lion’s share of the decisions about the parameters that define how your organisation can operate.
The increase in volatility, uncertainty, complexity, and ambiguity means that you and your business must seek new orientations and take a fresh approach to management. Only then can you guarantee positive results under changed circumstances. The VUCA world challenges you to find your own way. You will need to understand people’s psychology and develop empathic behaviour – in short, to be more concerned with humans and their needs. Meaning and purpose can take a central role in business activities.
Neither an organisation’s leadership nor its strategies are spared in today’s VUCA world. Experiences, dogmas and paradigms must all come under scrutiny; it is no longer a case of finding the one way or the management tool. Standards are giving way to individuality.
Vision (V) - Paint a picture of the future you want, both as a compass and for orientation. It confers meaning and sparks motivation to forge internal and external identity as well as effectiveness.
Understanding (U) - Understand interconnections; make them transparent. Reflect on the context of these connections. Think and plan meta-strategically. Start from the result and work backwards from there. Harmonise your skills while you embrace and exploit certain behaviours and reactions. Convert your anxiety and resistance into productive energy.
Clarity (C) – Simplicity. Focus on what counts and what it is really all about. Trust in transparent connections and processes in day-to-day businesses and processes. Apply your energy and force exactly where they will be most effective.
Adaptability (A) – Flexibility and agility is essential. Scrutinise hierarchical management techniques, promote a consistent culture to make decisions and account for mistakes. Interact transparently with objections. Facilitate innovation and build up resilience.
Key areas of focus in the traditional era for a CFO
Key areas of focus in the VUCA era for a CFO
“Where the heroic CFO of the past knew all, could do all and solve every problem, the post-heroic CFO asks how every problem can be solved in a way that develops other people´s capacity to handle it.”