Outlook for 2022: VUCA Time Continues

Moving from Pandemic to Endemic

VUCA – which stands for Volatility, Uncertainty, Complexity and Ambiguity – has been a defining way to describe the time in which we are living.  It captures not only the effects of the pandemic, but also the economic shock, supply chain issues, climate change acceleration, inflation, and social justice issues that we are experiencing in the last two years.  Lots of volatility, uncertainty, complexity, and ambiguity!  It is a difficult time to predict what might happen tomorrow, let alone in the coming year, but we have been gathering ideas and want to shed light where we can on what to expect in 2022.  Key takeaway:  Keep your seatbelts fastened, it’s going to be another bumpy year.

Foremost is looking ahead to what is predicted for the pandemic.  Many scientists see us moving from a pandemic to an endemic, as variants arise, and we continue to learn how to live with the virus among us.  The New York Times’ Covid deaths surpass 800,000 (Link)  provides a stark picture of where we are at the end of 2021 and what 2022 may bring.  “Coronavirus deaths in the United States surpassed 800,000 on December 15th, according to a New York Times database, as the pandemic neared the end of a second year and as known virus cases in this country rose above 50 million.”

“The new death toll — the highest known number of any country — comes a year after vaccines against the coronavirus began rolling out in the United States. It also comes at a tenuous moment in the pandemic: Cases are rising once again, hospitals in some parts of the country are stretched to their limits with Covid patients and the threat and uncertainties of a new variant loom. More than 1,200 people in the United States are dying from Covid-19 each day.”

“The last 100,000 deaths occurred in less than 11 weeks as the pace of death has picked up, moving faster than at any time other than last winter’s surge. The current uptick is being driven by the Delta variant. It is not yet known how the Omicron variant, which continues to emerge in more states, might affect those trends in the coming weeks and months.”

“Some 75 percent of the 800,000 Covid-19 deaths have involved people 65 or older. One in 100 older Americans has died. Countless others have found themselves isolated.  By now, Covid-19 has become the third leading cause of death among Americans 65 and older, after heart disease and cancer. It is responsible for about 13 percent of all deaths in that age group since the beginning of 2020, more than diabetes, accidents, Alzheimer’s disease or dementia.”

Dr. Peter Hotez makes a grim prediction: “Looking at our twin epidemic of delta/omicron as we head into the new year, we have a real prospect of reaching one million American deaths by the end of Q1 in 2022. FYI all preventable.”

Supply Chain Issues Continue

In The year of the endemic phase? 7 predictions for 2022, (Link), experts from Northwestern University make their predictions that “After a year filled with unprecedented challenges and uncertainty, experts hope lessons learned from 2021 can prepare us for a stabler 2022.  One of their predictions is that supply chains will continue to suffer.  Tarek Abdallah, assistant professor of operations, Kellogg School of Management, Northwestern University, said “We are experiencing shortages and delays in supply chains since every entity is highly utilized. The global shipping industry is not able to keep up with the surge in the demand, the ports are congested, companies are struggling with labor shortages, and some are shutting down due to workers protesting work conditions. In normal conditions supply chains can possibly absorb these shocks if they occur sporadically, but when these disruptions happen simultaneously even the best-in-class supply chains will suffer. With highly utilized supply chains or processes, even the smallest shock to the system can lead to disproportionate consequences that ripple throughout the chain. Add to that the uncertainty due to the emerging COVID-19 variants, and it is easy to see that we are in for a rough ride.”

Democracy v autocracy

In 10 Trends to watch in the coming year, by Tom Standage, The World Ahead 2022, (Link), he predicts “If 2021 was the year the world turned the tide against the pandemic, 2022 will be dominated by the need to adjust to new realities, both in areas reshaped by the crisis (the new world of work, the future of travel) and as deeper trends reassert themselves (the rise of China, accelerating climate change). Here are some themes and trends to watch in the year ahead, for the full list go to the link.

Standage’s first prediction is: “Democracy v autocracy. America’s mid-term elections and China’s Communist Party congress will vividly contrast their rival political systems. Which is better at delivering stability, growth and innovation? This rivalry will play out in everything from trade to tech regulation, vaccinations to space stations. As President Joe Biden tries to rally the free world under the flag of democracy, his dysfunctional, divided country is a poor advertisement for its merits.”

And this prediction: “Political footballs. The Winter Olympics in Beijing and the football World Cup in Qatar will be reminders of how sport can bring the world together—but also of how big sporting events often end up being political footballs. Expect protests directed at both host countries, though boycotts by national teams seem unlikely.”

Climate Change Gets Real

In 2021, the fact that climate change was occurring now and not in the distant future was inescapable. Polling shows that it has risen as a concern for most people.  There are lots of predictions on climate adaption actions and the urgent need to address climate change.  One action getting more traction is the need to decarbonize.  NBLC has joined many other organizations in supporting the Energy Innovation and Carbon Dividend Act, legislation to put a price on carbon and return 100% of the net revenue as a rebate to American families.

In Grist’s Fix, 22 Predictions for 2022, (Link) one compelling one is by Bob Inglis, ED at republicEn.org, who predicts the U.S. will follow the E.U. on carbon policy.  He says, “The biggest advance in carbon pricing is the expectation that the European Union will impose a carbon border adjustment. The E.U. plans to collect a tax on the entry of goods into its market from countries that don’t have a price on carbon dioxide. This won’t occur until 2023, but the fact that it is moving and seems undeterred — though it had some pushback — is going to have an impact on the rest of the world. Even Russia is contemplating a carbon tax because of what the E.U. is doing. It’s going to affect the U.S. as well, because we do an awful lot of trade with the E.U. It is in trading partners’ interests to follow the lead of a country that’s imposing a carbon border adjustment. Why pay the tax to them when you could’ve collected it yourself?”

Inglis wants “to show conservatives how the power of their free-market idea of accountability is the solution to climate change. We’re all about showing conservatives the strength of their own ideas, that this is a natural for them. Once we build that constituency on the right, then politicians on the right will be able to support smart, market-based policies like a price on carbon dioxide.”

Another climate prediction is from Catrina Rorke, vice president for policy at the Climate Leadership Council, who predicts climate goals and trade goals will intersect. Rorke says, “We’ve been doing research at the Council [on what we call] the U.S. carbon advantage. What we have found is that the U.S. economy on average is much cleaner than the vast majority of our trading partners. It takes 80 percent more carbon emissions to create the same dollar value anywhere else in the world — in China, India, and Russia, we’re talking three to four times the amount of emissions to create the same kinds of goods. So our starting point is that the U.S. economy is very clean compared to our competitors. If we price those emissions, if we price the emissions associated with trade, we give a leg up to a U.S. industry that is clean. That’s a competitive advantage. And we decarbonize our supply chains — that’s a climate advantage.”

Rorke says, “We are going to see a proliferation of policies that connect climate goals with trade goals, because this relationship is absolutely necessary to support decarbonization. Addressing climate change is going to require a whole lot of policy efforts in a whole lot of places. We should never take our most effective tools off the table. So I want to manifest reinvigorated support for the most effective tools to fight climate change, which always come back to a price on carbon.”

And Tom Standage also weighs in on what he calls the “Climate crunch. Even as wildfires, heatwaves and floods increase in frequency, a striking lack of urgency prevails among policymakers when it comes to tackling climate change. Moreover, decarbonisation requires the West and China to co-operate, just as their geopolitical rivalry is deepening. Keep an eye on the solar-geoengineering research team at Harvard. In 2022, they want to test the use of a high-altitude balloon to release dust to dim sunlight—a technique that may, at this rate, be needed to buy the world more time to decarbonise.”

Daniel E. Horton, Northwestern University’s assistant professor, Earth and Planetary Sciences, Weinberg College of Arts and Sciences and principal investigator, Climate Change Research Group, wraps it up with his prediction that we are on the precipice of transitions in energy. Horton said, “It’s been several decades since climate scientists first identified the fingerprints of human influence on global climate. And it’s been about a decade since we’ve been able to quantify the human contribution to the occurrence and severity of individual extreme meteorological events. At this stage, human-influenced changes to our climate system are inevitable. Human-caused climate change is here, and society must choose a path forward – mitigate, adapt or suffer. In 2022, I’m most excited to see what paths of action are adopted by the U.S. federal government. The Biden administration is poised to revolutionize our country’s fight against climate change via their two-tiered infrastructure package. We sit on the precipice of federally-backed transitions in energy and transportation infrastructure – actions that are critical for transitioning our society away from fossil fuels, reducing our carbon emissions and reducing the impacts of climate change.”

Year of the Worker

Josh Bersin makes some interesting predictions in his Predictions for 2022: Everything Is About to Change (Link). Bersin summarizes where we are well: “It’s time to talk about predictions for 2022, and the number one theme is change.  And in a sense, everything is about to change.”

“If you think back about where we are, it has been 14 years since the 2008 financial crisis, and we’ve been through digital transformation, economic hyper-growth, a stock market boom, extremely low interest rates, and an enormous availability of capital. We’ve witnessed huge investments in the tech industry, the emergence of cryptocurrency and blockchain, the birth of 5G telecommunications, widespread use of electric vehicles and charging stations, and mobile devices more powerful than supercomputers.”

“Personally, we have video cameras on every device and our homes have become movie studios. On the downside, we’ve lived through disruptions to our political system, threats to our sense of inclusion and belonging, a growing problem of homelessness, and a sense that income inequality may be worse than ever (three billionaires flew into space for fun this year.)”

“On the positive side, we’re seeing an increase in the standard of living as flexible work and new employment models go mainstream, and wages are definitely rising. Companies are discovering that paying people more does not reduce profits. Even penny-pinching companies like Amazon.com are raising wages.”

Bersin makes some predictions from an HR focus. “First, it’s clear to me that we’re going to be in a very tight labor market.  Today there are close to 14 million jobs open in the United States and there could be 20 million open in 2022. It’s going to be very hard to hire and you will be focusing your recruiting efforts on internal hiring, redeployment of people inside the company, upskilling, and what I call ‘human-centered recruiting.’ You’ll be hiring people based on skills and fit, not just experience.”

“The labor market will change. The massive number of opportunities will draw people into the labor market, driving the labor participation rate up. And that means you’ll have a more diverse range of candidates to source from. That doesn’t mean hiring will be easy because people feel very empowered.”

“Remember also that training is more important than ever. New EMSI research shows that even for essential workers, over the last two years there was a 40% increase in the share of postings offering on-the-job training. You will need to hire for fit and capability, then train people as they arrive. (A 330% increase in supply chain jobs that require no experience at all.)”  As Craig Nelson, Nelson Family of Companies says, “Now people are hiring for what employees will do, not just what they can do.”

Bersin predicts “We are about to witness the unleashing of the most incredible technology I’ve ever seen. Not only do we have AI under the covers of every HR too, but Talent Intelligence systems are also getting incredibly good at matching, predicting, and selecting people. We have virtual reality and augmented reality tools, avatars, microlearning, and an entire industry of online AI-powered coaching.”

“The third big change is a new conversation about culture. I believe we’re going to have a stock market correction, a series of interest rate rises, and a lot of angst about inflation,” said Bersin. “For me, we’ve been in an inflationary period for a long time. I’ve always felt that the Bureau of Labor Statistics data about inflation is incorrect. Where I live in California, we’ve been an inflationary economy for a decade. Housing prices are at a ridiculously high level and so is everything else.”

Bersin says, “And thanks to the media, inflation is becoming something people are talking about a lot. What inflation does is reduce people’s sense of security. It gives you this feeling that everything you base your decisions on is suddenly changing under your feet. It’s like living on shifting sand … something you wanted to buy yesterday became more expensive today, and maybe you can’t buy it tomorrow. And that creates a sense of uncertainty added to the continuing lagging problem of the pandemic.”

“So we’re going to see a work and business environment where employees look for predictability,” says Bersin. “They’re looking for safety. They’re looking for security. They’re looking for a company they can trust.”

Bersin sums up, “And there’s even more. Employees want to work for a company that cares about global climate change, environmental issues, and sustainability. They’re looking for a company that cares about its people. So the issues of culture, trust, and employment brand are going to be huge in 2022. And the stress of the pandemic is not over: new research by Mercer points out that almost 40% of workers are using mental health or coaching benefits. (The Global Wellness Institute believes workplace mental health will grow at 9.8% annually over the next five years.) So I think 2022 will be a big year of talking about culture, trust, human-centered leadership, and your employment brand.”

Need for Equity in All Things

The recognition of the need for equity in all things will continue in 2022.  Nina Vaca, Chairman and CEO, Pinnacle Group (Link), says “At Pinnacle Group, we have been deeply committed to DE&I since the beginning, but it has taken center stage more recently as an absolute must-have value. We have seen talent increasingly seeking companies that not only declare their support for DE&I initiatives, but act upon it and can show a track record of success. As leaders are growing their companies and redefining their brands, it is important to ensure that DE&I is part of the conversion by investing in authentic initiatives that include and engage internal and external stakeholders.”

Forrester reports in 2022 Predictions on Employee Experience (Link), “Sure, executives have been comfortable talking about Employee Experience (EX) for a few years now. Even the Securities and Exchange Commission in the US has mandated that quarterly and annual reports include details of how a company plans to approach human capital.

“But none of this rising focus has prepared them for the commensurate rise of employee power. The very turbulence that your employees just survived has now placed them in a different state of mind. They want different things, they expect improved resources to enable their success at work, and they may even want different outcomes for their careers. And, looking around, they see evidence suggesting that they can ask for and receive the reasonable things that they want.”

In their annual annual EX Predictions report, they predict “things large and small for 2022, from the bold claim that 100% of companies will fail at adjusting compensation during the post-pandemic surge to the smaller but meaningful prediction that employee recognition programs will get a boost from 1% of total compensation to as much as 2%. The predictions all arise from the same tension: Companies have a lot of decisions to make — about where people can work, what tools they should have available for work, and how managers can shift to becoming more like coaches than supervisors. Today, just 48% of large organizations in the US have a dedicated program for EX. That number will rise to 65% as more executives watching their monthly quit rates go as high as 2% will suddenly become EX advocates of the highest order.”

Knowledge @ Wharton’s Beyond Business: Humanizing ESG (Link) talks about the need to humanize and prioritize the “S” in ESG – an acronym that stands for environmental, social, and corporate governance. “The S or the social factor is really about people,” Wharton management professor Witold Henisz said. Employees, supply chain partners, customers, and the larger community are all affected by the operations of a firm, so prioritizing them depends on which group is most important. “It’s really the salience of these different groups that’s going to drive the allocation of resources at the corporate level,” he said.

Andrew D. Plepler, global head of ESG for Bank of America, said the events of 2020, especially the pandemic and social justice movement resulting from the murder of George Floyd, “touched off conversations inside the company from employees who wanted BOA to do better. They demanded the bank close its pay gap and improve its track record on diversity, equity, and inclusion (DEI). As a result, BOA raised its minimum wage to $21 an hour, kept health insurance premiums flat for the lowest-paid associates, and increased its diversity hires.”

Creating a more equitable workplace isn’t just the right thing to do, Plepler said, it’s the practical thing to do.  “When you talk about attracting and retaining the best people, you are not going to do it today if you don’t have a good answer to the question” about how the company treats its workers, he said. “Employee satisfaction is a real driver of the success of companies these days.”

In 3 Predictions that will instantly highlight who has good leadership skills by Marshall Schwantes,(Link), it reinforces the integration of how organizations treat employees carries over to customers.  Schwantes says, “They predict that the employee and customer experiences will align more.  Traditionally, employee and customer experiences have been managed separately, with businesses establishing different frameworks and requirements for each. However, the pandemic and the Great Resignation have made it increasingly clear that these two business priorities are intrinsically intertwined.”

Faisal Pandit, president of Panasonic System Solutions Company of North America, says, “The shift in customer expectations and workforce demands has challenged today’s leaders to rethink how work is done and offer solutions that break down organizational silos. It’s more important than ever for leaders to make a conscious effort to build a positive culture within their own organization so the workforce feels empowered to bring the best experience to customers.”

Schwantes says, “That means businesses that invest in their employees to achieve great employee experience are investing in their own future. To achieve this, strong communication, inclusion across the organization, opportunities for professional development, empathy, and autonomy at all levels are needed so employees can feel ownership of the function or business for which they are responsible.”

Pandit adds, “It’s also important for leaders to build a collaborative culture where customer-centricity feeds into every aspect of the business. This gives employees the skills and tools they need to meet customers where they are and in a way that best resonates with them with conversations focused on outcomes and solving their challenges over individual products. In turn, employees become trusted advisers to help solve customer pain points and bring more value to every touch point.” Schwantes says, “The end result? When employees feel valued, it fosters great customer experiences and business outcomes.”

Stop Waiting for the Return to Normal

Of the many lessons learned in 2021, one of the foremost is that there will be no return to normal.  For those who hope to see normal again, it is akin to plot of Waiting for Godot. Normal isn’t coming back.

CEOs across the market, economy agree on one 2022 prediction: More volatility, no end to Covid by Eric Rosenbaum (Link), who said, “Damola Adamolekun, CEO at restaurant company P.F. Chang’s. “There’s basically two camps of thought in the restaurant business, some folks who saw this as a temporary issue that they needed to get through so they can get back to the way things were … let’s figure out delivery for this period of time, so we can go back to not having to deal with it. And there’s folks who I think saw it as more of an acceleration of the way things were already going. And we just arrived at the future sooner.”

Rosenbaum says, “Adamolekun said in the next year, the companies in the latter camp are going to outperform because the changes are permanent. The use of QR codes in its restaurants has proven successful even in areas where the consumer demographic is much older. And the companies ‘still hoping to go back to the way things were,’ will find themselves in a losing position.”

Simplification is a Key VUCA Strategy

Another great lesson is the need to simplify.  Or as Adamolekun said, “Do more with less,” he said. “We have a saying here now: do less better.” With so much volatility, the simpler your operations are, the easier it is to manage them and be flexible.  Simplification is a great VUCA strategy.

Decision Fatigue

Perhaps, one of the most significant lessons learned is the need to cope with Decision Fatigue. Making decisions in a time of VUCA is difficult and challenging.  Even if you’ve never heard of decision fatigue, you have probably experienced it, especially during the pandemic, which has added a new layer of complexity to the everyday choices we face. In Decision fatigue: Why it’s so hard to make up your mind these days, and how to make it easier by Stacey Colino, (Link), “There’s no aspect of the pandemic that has not thrown decisions at us that we haven’t had to make before,” says psychologist Barry Schwartz, a visiting professor at the Haas School of Business at the University of California at Berkeley and author of “The Paradox of Choice.” “Things that used to require no thought or effort now require a lot of planning. In the covid world so much is uncertain — we haven’t had practice making decisions under these circumstances.”

“The more complicated a decision is, the more it wears you out,” Schwartz says. Colino explains, “When decision fatigue kicks in, you may feel like you just don’t have the mental bandwidth to deal with more decisions. This can lead to decisional paralysis or depleted self-control, causing you to avoid making certain choices entirely, to go with the default option or to make ones that aren’t in line with your goals or values, experts say.”

To ease decision fatigue, Colino advises getting more sleep, pacing yourself, limiting the decisions that need to be made, and giving your expectations a reality check.  Tuning in to your mental state is a good thing to do.

Driving home the need for good decision-making is found In Forbes’  Predictions 2022: The Ideas That Will Drive Decisive Leaders (Link), who shares that Doug Merritt, CEO, Splunk, says “I think we’re at a point where decisiveness is going to be at a premium It’s perhaps the essential quality of leadership. Every other virtue, from empathy and integrity to courage and problem-solving skills, is in service of the leader’s ultimate job: to make the right decision.”

CEOs’ Confidence for 2022

And last prediction is from the Conference Board’s survey of US CEOs, CEO Confidence Slipped Further in Q4, but CEOs Remain Optimistic Entering 2022. (Link)

Employment, Recruiting, Wages, and Capital Spending
The survey gauged CEOs’ expectations about four key actions their companies plan on taking over the next 12 months.

  • Employment: 69% of CEOs expect to expand their workforce, up from 60% in Q3.
  • Hiring Qualified People:79% of CEOs report some problems attracting qualified workers, up from 74% in Q3. Notably, 64% report difficulties that cut across the organization, rather than concentrated in a few key areas—up from 55% in Q3.
  • Wages: 79% of CEOs expect to increase wages by 3% or more over the next year, up from 66% in Q3.
  • Capital Spending: 57% of CEOs expect to increase their capital budgets in the year ahead, up from 49% in Q3.

As we started, fasten your seat belts, it’s going to be another bumpy year.  But not as bumpy as the last two years!

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