VUCA – Its Meaning and Implications for Hospitality

As published in HotelExecutive, Summer 2019

The US Army War College introduced the term VUCA during the Cold War ― a time when the world was facing especially high levels of volatility, uncertainty, complexity and ambiguity. Since being introduced, this framework has become a trendy acronym that strategic business leaders regularly use to assess the suitability of their environment or market for launching new products, entering new markets, and embarking on other key initiatives. It allows them to pinpoint where the four challenges in their respective business are situated or skewed, as well as how to create appropriate responses.

Many today would assert that, given the current geopolitical climate, the world’s VUCA level has again spiked to higher than normal levels. People and corporations must increasingly adjust to unpredictable events. In fact, the one thing we can almost certainly predict these days is that something unpredictable is just around the corner. The hospitality sector is no exception and has in the very recent past witnessed numerous events that have exacerbated the VUCA state in which its players operate.

VUCA in hospitality manifests on many different levels and can affect individual hotel properties, tourism demand within certain areas, an entire company, or even impact the industry on a global basis. Examples of symptoms of VUCA in the hotel world include impending Brexit in the UK, US-China trade war, les gilets jaunes in Paris, and Hong Kong’s weekly protests. On a broader scale, the launch of the disruptor Airbnb in 2008 shocked the industry at large. Companies and their business models that had been unchallenged over centuries suddenly faced fierce competition. More recently we learned about the massive data breach at Marriott, exposing private and sensitive information of some 500 million guests.

Katharine Le Quesne, Managing Director at HoCoSo attests, “Disruptors so often come from outside the traditional confines of the hospitality industry – look at Airbnb (students renting out beds to pay rent), OYO, ACE (Alex Calderwood went from party promoter, to vintage clothing, to reinventing barber shops before hotels), even Ian Schrager … they all possessed the ability to look at the industry with fresh eyes. The sector is not very good at being self-critical. The story of the emperor’s new clothes may seem to some as an outdated parable, but we ignore it at our peril. Anticipating and expecting the rules of engagement to change is the new normal.”

Businesses therefore must possess an awareness of the unstable environment in which they operate and be prepared to react and respond quickly. As Bruce Harkness, author of “Performance Matters: The Ultimate Career Survival Guide,” put it, “To survive and excel in today’s global economy companies must be highly adaptable, light in structure and fast in terms of decision-making. Technology and the application of supporting processes is mission critical but above all is the need to be adaptable.”

All the above scenarios are part of fast-changing technological, social, and business environments. Looking back, flux and dynamism have always been present; however, it should be emphasized that the pace of change, the immediacy, and the impact and complexity of problems have increased substantially.

No longer is “change” the exception but instead the rule. And, it requires a certain skill set to think and act in adaptive, nimble, and flexible ways when confronting VUCA conditions. This is particularly true in terms of business strategy and goal setting. Harkness states, “Bureaucracy and hierarchy have no place in high performing companies. Leaders need to be highly adaptable and have the ability to embrace change. This is in addition to being innovative, visionary, people focused, resilient and authentic in terms of how they lead their business. Slow and steady will not make the grade! Those organizations that adapt will survive and those that don’t will quite simply become extinct.”

Fortunately, social scientists have long studied productive attitudes and behaviours for VUCA scenarios. To date, there seem to be four variables that work individually and collectively to define the psychological profile of individuals and teams who are best equipped to succeed in this context:

• Ambiguity Tolerance: a state and trait variable that is a well-known, established psychological construct. First described in the late 1940s, intolerance of ambiguity can be described simplistically as “black-and-white” thinking and solutions characterized by premature closure, often at the neglect of reality. Basically, intolerance of ambiguity results in rapid and overconfident judgment of ambiguous information or events. It is also a motivating factor for individuals in social situations — intolerance of ambiguity results is the tendency to perceive ambiguous situations as threatening, whereas tolerance of ambiguity is the tendency to perceive ambiguous situations as desirable. It can be learned or improved to a good extent.
• Self-Efficacy: a state and trait variable that represents self-awareness, drive, motivation, focus, and accountability. These factors translate to what HR and business leaders recognize as “steadiness, resilience, and grit.” This variable speaks to an individual’s ability to take initiative, push for action, and manage stress and maintain perspective in the face of adversity. It can be learned or improved to a good extent and is frequently a standard component in leadership coaching.
• Servant Leadership: a state variable that represents one’s capacity to embrace a vision, formulate actions and goals to further it, and an ability to communicate this vision so that others are inspired to follow. Business leaders and team members alike know this simply as adopting the working mentality of “the first priority is to make others successful.” While uncertainty controls the environment, a “leader’s aptitude to break the pattern by taking a thoughtful position and articulating an agile strategy is crucial.” It is almost entirely a learned skill — whether via unstructured or structured formats. Thus, leadership development programs must groom this mentality from the start so that next-gen leaders develop the “muscle memory” of servant leadership.
• Strategic Thinking: a state and trait variable that is often misunderstood and discussed in cliché ways. It boils down to brain function, i.e., the capacity for big-picture and forward (proactive and solution-focused) thinking. It is not about trying to foretell the future, but rather that nuanced balance between drawing on empirical data and business intuition to “see around corners” and act accordingly. Although DNA-wired, raw intelligence plays a major role; this is an ability that can be learned or improved to a good extent.

In the current environment, hospitality businesses are being exposed to VUCA on a more frequent basis. No matter how much planning and preparation is put in place, the reality is that something unexpected can arise at any time and organizations need to be able to flex and adapt quickly to cope and survive. When it comes to the people leading those companies, as Harkness attests, “we (need to) recruit and develop leadership that is solutions-focused, that has the desire to keep learning and evolving, being open to change, and having the courage to explore new opportunities, take risks and maintain an open mind.”

When recruiting or developing talent into their business, hospitality organizations need to measure “Execution Skills” to assess ambiguity tolerance and self-efficacy, “People Skills” for servant leadership, and “Cognitive Skills” for strategic thinking capability. To help screen for ‘VUCA-resistant’ candidates, hiring managers may wish to consider using interview questions that probe stress management, creativity and adaptability, such as the following:

• What has been the most stressful situation you have ever found yourself in at work? How did you handle it?
• What have you done in the past to prevent a situation from becoming too stressful for you or your colleagues to handle?
• Tell me about a situation in which you have had to adjust to changes over which you had no control. How did you handle it?
• How was your transition from high school to university? Did you face any particular problems? How did you handle them?
• Tell me about a problem that you’ve solved in a unique or unusual way. What was the outcome? Were you happy or satisfied with it?
• Give me an example of when someone brought you a new idea that was odd or unusual. What did you do?
• Give me an example of a time when you had to be quick in coming to a decision. What obstacles did you face?
• Describe a situation in which you recognized a potential problem as an opportunity. What did you do? What was the result? What, if anything, do you wish you had done differently?

This VUCA-response recipe needs to be baked in a corporate culture in which speed and agility are hard-wired into the firm’s DNA. Those hospitality groups that manage to weather VUCA situations the best will be those whose leaders demonstrate the above skills and possess an acute awareness of the state of volatility, uncertainty, complexity, and ambiguity in which they operate.