4 Ways Great Leaders Can Overcome Company Scarcity Issues

I teach an introductory political science class at a local university. This class utilizes an interdisciplinary approach by exploring basic economic theory, American history, and a bit of political philosophy. When introducing the section on economics, I try to reinforce the premise that economics is really the study of scarcity – what do you do when there is not enough to go around. Stated differently, economics is the social science that examines how we use limited resources to satisfy unlimited human wants.

DecisionWise - Leadership and Scarcity

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I teach my students that there are three options (and only three) when dealing with the problem of scarcity:

1 – Economic growth;
2 – Reduce our wants; and/or
3 – Use existing resources wisely.

It occurred to me a while back that scarcity is the same fundamental issue for leaders as well, and that true leadership is reflected in how effectively a leader deals with scarcity. Even in companies that are flush with cash, there are still never enough resources to cover organizational wants. Everyone is clamoring for more. There may be a need for more talent. There may be a need for increased innovation. There may not be enough time to develop those immediately below you. A leader is constantly bombarded with requests for more. Politicians live and die by how well they manage the issue of scarcity. The same is true for businesses and those that lead them.

Scarcity is a problem we all share, and as humans, we seem to understand it at an evolutionary level. Moreover, we seem to have a built-in urge to solve this problem. This fact can be used by leaders to improve outcomes by framing both the problem and the solution from a scarcity point of view, and then enlisting the help of others. (As an aside, scarcity is also one of the root causes of conflict, which is always an issue in any organization.)

To that end, I would suggest that leaders are best able to handle the scarcity problem by following four steps:

  1. Good leaders recognize the fact that there will never be enough to go around. Thus, they stop wasting valuable energy trying to make everything perfect. We often work with leaders in providing 360-degree feedback. One of the primary derailers called out on their reports is perfectionism. While in many cases, it’s appropriate to expect flawless results, the reality is that, many times, the time effort it takes to get that last five percent right far outweighs the value derived from that effort. The herculean endeavor may have been better spent on other scarce resources. Good leaders accept that: 1) scarcity is a problem that will never be solved, and 2) that, in the words of Voltaire, the “perfect is the enemy of the good.” Instead of ducking the issue, spinning wheels, or wasting precious resources when they could be better spent elsewhere, great leaders acknowledge the scarcity problem head-on.
  2. Savvy leaders try to understand the true human “need” at question. For example, rather than accepting at face value a request to hire more people, they delve deeper. This goes back to root-cause analysis—understanding the cause of the problem, not just addressing the symptoms. Perhaps the real need is to find individuals that possess a different skill-set. Maybe those skills could be obtained by training, as opposed to hiring. Possibly, the needs could be satisfied through outside partners or resources, as the scarcity issue is only temporary. Often, the underlying need is non-monetary in nature and might be solved by focusing on employee engagement (e.g., see our thoughts on Employee ENGAGEMENT MAGIC®).
  3. Attentive leaders do his or her best to respond by exploring one of the three responses to scarcity listed above – or maybe a combination of them— rather than making a knee-jerk reactionary decision that may not address the cause of the problem. For example, instead of layoffs to address immediate payroll woes, the answer might be that everyone takes an unpaid day off every other week. On one occasion, we witnessed a group of employees come forward to an organization which was about to go through a round of layoffs, offering just that—one week of unpaid leave per employee over a period of three months. Because options were explored, and employees felt heard, the organization was able to move forward without losing its most precious resource—people. On the other hand, is the answer always to reduce resource consumption (payroll)? Of course not! Maybe the answer is economic growth (more sales). Perhaps the answer is to focus your entire team on selling one key product that will produce revenue the fastest.
  4. A great leader explains the “why” behind the issue and the decision. More than just acknowledging there is a scarcity problem as described in step one above, a confident leader follows up that message with an explanation as to why the decision was made. Most of us realize that our wants are unlimited and yet our resources are finite. What we have learned, from macroeconomics, however, is that people will accept scarcity and inequality, as long as there is fairness of opportunity and equality in the process. A good leader understands this dynamic.

In summary, when looking through this alternate lens of scarcity, a leader might begin to see his or her role more clearly. And, he or she might start to see different solutions for solving the myriad of requests that filter up during the day. The solution lies not in making those requests go away but, rather, in realizing that the best approach is to take the time to ensure your responses are appropriate. When framed properly, scarcity of resources and its attendant solutions can be turned into teaching moments that solve problems and bring your team together.
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