How Leaders Can Improve Their Decision Making in Uncertain Times

Recently released research provides a framework for leaders to better understand and respond to five types of common knowledge problems

As Black Lives Matter becomes one of the most significant social justice movements in recent history and the COVID-19 pandemic strains the world’s health care systems and economies, one similarity between the two has emerged: the term uncertainty is being used with increasing frequency.

However, the way we talk about uncertainty lacks precision, making it that much harder to parse the range of distinct challenges the term often encapsulates.

“People use the term ‘uncertainty’ generically to mean anything that has to do with lack of knowledge; but by meaning anything, it means nothing,” said Rob Mitchell, associate professor of management at CSU’s College of Business. “Leaders need to be more precise about the different knowledge problems they face, and in doing so, they will be able to make better decisions.”

“We could actually do something to make the challenges we are facing better, to make our actions more ethical, to make sure that everybody feels fairly and ethically treated.”

– Rob Mitchell

Portrait of Rob Mitchell
Rob Mitchell, Associate Professor of Management, CSU's College of Business

In recently released research in The Journal of Business Ethics, Mitchell and his coauthors argue that leaders who fail to appropriately confront knowledge problems by engaging their stakeholders aren’t just closing themselves off from new ideas. They’re potentially being unethical and leaving their organizations worse off.

Mitchell’s research defines stakeholder engagement as the interaction between an organization and its stakeholders that is intended to address knowledge problems in a way that improves understanding between all parties.

As an example, he cited the example of how conversations have unfolded around the COVID-19 pandemic and Black Lives Matter movement, with too few people coming together around a shared understanding of the issues.

“You watch the news and think, ‘Oh, there’s a better way to do this,’” he said.  “We could actually do something to make the challenges we are facing better, to make our actions more ethical, to make sure that everybody feels fairly and ethically treated.”

In pursuit of that goal, this research – over two years in the making, having synthesized insights from over 100 other scholarly papers – is a tool for rethinking how stakeholder engagement can help organizations. It provides a way of breaking down complex topics, offering a practical framework for classifying and solving knowledge problems.

Recognizing and Resolving the Five Types of Knowledge Problems Through Appropriate Stakeholder Engagement

Mitchell and his colleagues’ research highlights five types of knowledge problems:

  1. Risk
  2. Ambiguity
  3. Complexity
  4. Equivocality
  5. Uncertainty

Each knowledge problem requires a different type of stakeholder engagement to solve.

“Organizations aren’t using that degree of granularity in understanding knowledge problems and then targeting their stakeholder engagement to that knowledge problem,” said Mitchell.

This provides an opportunity for organizations that are able to identify the knowledge problems they face to get ahead by better engaging with their stakeholders.

Key Terms

What is stakeholder engagement?

The term “stakeholder” describes any person or group of people who affect or are affected by an organization. This includes employees, customers and investors, as well as communities impacted by the organization’s decisions and so many others.

What is a knowledge problem?

A knowledge problem refers to the challenges a person or organization faces when they do not have a full picture of a situation that requires action. Although such challenges are often called uncertainty, they actually encompass five types of knowledge problems: risk, ambiguity, complexity, equivocality and uncertainty.

“Although our paper is focused on business ethics, the implications are much broader than that. … When you look at the divisiveness in our country … the principles all apply.”

– Rob Mitchell

Risk and Ambiguity

 

Risk

“The knowledge problem of risk has to do with insurability, probability …  You don’t know exactly when an outcome will occur or how likely it is, but you can calculate it.”

– Rob Mitchell

Mitchell’s research encourages stakeholder engagement to help managers better make sense of whether a positive or negative outcome will occur by engaging with stakeholders to “calculate, predict, parse, measure or foresee potential outcomes.”

Ambiguity

“Ambiguity has to do with the interpretation, where how you interpret something, how it is, it’s kind of hazy what’s going on, nobody quite knows exactly what we’re dealing with.”

– Rob Mitchell

To reduce ambiguity, Mitchell’s research suggests pursuing stakeholder engagement that is purposeful and outward looking. This kind of engagement seeks to establish common definitions around key issues and concepts that have multiple meanings in hazily defined decision environments.

Complexity and Equivocality

 

Complexity

“In situations of complexity, leaders face the challenge of identifying and understand everything that’s going on because they don’t have enough information, or information is inadequate,” said Mitchell. “And that has to do with the number of variables and all the interactions between the variables. In such situations, it feels like everything depends on everything.”

One clear example of complexity is businesses’ efforts to address concerns around the upheaval caused by COVID-19, and the little information about how to cope.

Mitchell’s research points to the creation and use of tools that foster outside-in-learning as a key way to simplify complex issues and facilitate stakeholder engagement to make it easier to resolve ethical challenges.

Those tools can take many forms. Even this research, over two years in the making, which synthesizes insights from over 100 other scholarly papers and presents a novel way of thinking about stakeholder engagement, is itself a tool. It provides a way of breaking down complex topics, offering a practical framework for classifying and solving knowledge problems.

Equivocality

“Equivocality is when you have multiple meanings or interpretations that are unambiguous individually, but conflict with one another.”

– Rob Mitchell

Black Lives Matter Protesters Cross the Brooklyn Bridge
Black Lives Matter protesters cross the Brooklyn Bridge

“With equivocality, trying to say that one is right and one is wrong is never going to end well. It’s just not,” Mitchell said, “and the challenge is no amount of more information can solve that impasse.”

His research suggests that people engage in dialogue to discuss their perspectives in order to find common ground and shared purpose

Mitchell cites the phrases “Black lives matter” and “All lives matter” as an example of an equivocal knowledge problem.

“The notion of black lives matter, that’s very unambiguous,” said Mitchell. “But from the other side, some will ask, ‘Do all lives matter?’ Yes, they do. That belief that all lives matter isn’t necessarily a wrong belief, but it is equivocal when it’s positioned in a way that tries to dismiss Black Lives Matter. So, if we’re not actually engaging stakeholders through dialogue and we’re trying to use such equivocal beliefs to silence other stakeholders through whatever other means necessary, that’s not ethical because it’s based on false premises.”

Mitchell argues instead that “equivocality is addressed as individuals engage in dialogue with other stakeholders as a way of seeing where these other stakeholders are coming from and seeing where there is agreement and a shared purpose.”

Uncertainty

“The notion of true uncertainty reflects the idea that there are things that will happen in the future that you can’t predict, you can’t measure, you can’t model, you can’t foresee.”

– Rob Mitchell

Mitchell’s research advocates engaging stakeholders to create a framework that encourages an action-reaction approach, blending anticipatory thinking with taking proactive steps. These steps could include an iterative entrepreneurial process centered around stakeholders’ needs or a corporate social responsibility strategy that looks ahead to future problems.

“To manage uncertainty, leaders have to act and learn and then react,” Mitchell said. “Such action-oriented engagement of stakeholders enables leaders to enhance clarity in the face of uncertainty and better manage an unknown future.”

A Simple Guide to Recognizing and Resolving Knowledge Problems

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