EFFECT OF LEADERSHIP ABILITIES ON PERFORMANCE DURING VUCA 1

EFFECT OF CERTAIN LEADERSHIP ABILITIES ON BUSINESS PERFORMANCE

DURING TIMES OF VUCA

Stephan Sorger

Golden Gate University

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A dissertation submitted
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in partial fulfillment of the requirements for the degree of

DOCTORATE OF BUSINESS ADMINISTRATION

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Ageno School of Business

Golden Gate University

San Francisco, California

2022
EFFECT OF LEADERSHIP ABILITIES ON PERFORMANCE DURING VUCA 2

Ageno School of Business

Golden Gate University

This is to certify that the Doctoral Dissertation of

Stephan Sorger

has met the dissertation requirements of

Golden Gate University

San Francisco, California

2022

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Approved by:

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Marcia Ruben, Ph.D.
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Dissertation Chair
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Jaime Alonso Gomez, Ph.D.

Committee Member

Alan Roper, Ph.D.

Committee Member
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© Copyright by

Stephan Sorger

2022
EFFECT OF LEADERSHIP ABILITIES ON PERFORMANCE DURING VUCA 4

Abstract

The study explored the effect of five personal leadership abilities, namely adaptability, agility,

critical thinking, learning ability, and emotional intelligence, on business performance, as

evaluated by changes in return on assets (ROA), during times of volatility, uncertainty,

complexity, and ambiguity (VUCA). The research applied the conditions of the COVID-19

pandemic toward demonstrating the challenges of leading in VUCA conditions. Participants in

the study included 100 executives, from directors to chief officers, in technology companies,

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contacted through a commercial research panel. The study applied a mixed methods approach,

with quantitative and qualitative data collected through an electronically distributed research
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survey instrument. Analysis of the quantitative data indicated that learning ability was

statistically significantly correlated with changes in ROA. Tests for reliability and validity
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showed good face validity and content validity, weak reliability, and moderate levels of

convergent and discriminant validity. Analysis of the qualitative data suggested that leaders
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mostly found opportunities in the face of VUCA, that staffing remains a major issue in

organizations, and that stress from VUCA poses a concern for many leaders. Results are

discussed in terms of existing research on learning ability on business performance, perceptions

of opportunities in the face of VUCA, and the stress impacts of the VUCA of COVID-19 on

productivity. Future research is recommended for a dedicated study on the effect of learning

ability on business performance during VUCA conditions.

Key Words: Leadership in VUCA; Corporate training; Learning ability; COVID-19;

ROA; Skill-based leadership theory;

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Table of Contents

CHAPTER 1: INTRODUCTION ................................................................................................9

Background of the Problem .....................................................................................................9

Statement of the Problem ....................................................................................................... 17

Purpose of the Study .............................................................................................................. 17

Significance of the Study ....................................................................................................... 20

Research Question and Hypotheses........................................................................................ 23

Scope of the Study ................................................................................................................. 26

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Definition of Terms ............................................................................................................... 28

CHAPTER 2: REVIEW OF LITERATURE.............................................................................. 33

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Challenges of Leadership during VUCA and Why Changes Are Needed ............................... 33

Systems Thinking, Double-Loop Learning, and Their Relevance to VUCA ........................... 37

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Personal Abilities Recommended for Leadership during VUCA Conditions .......................... 42

Assessment Instruments for Leadership Studies ..................................................................... 51

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Summary of the Review of Literature .................................................................................... 54

CHAPTER 3. RESEARCH METHODOLOGY ........................................................................ 57

General Methodology ............................................................................................................ 57

Operational Definitions.......................................................................................................... 59

Scope of Study ...................................................................................................................... 59

Instrument Development ........................................................................................................ 62

Self-Rating ............................................................................................................................ 65

Expert Review ....................................................................................................................... 67

Pilot Study............................................................................................................................. 68
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Data Collection ...................................................................................................................... 70

Data Analysis ........................................................................................................................ 75

Limitations ............................................................................................................................ 78

CHAPTER 4. PRESENTATION OF RESEARCH RESULTS .................................................. 80

Results: Quantitative Analysis ............................................................................................... 80

Results: Qualitative Analysis ................................................................................................. 89

Results: Segmentation Analysis ........................................................................................... 106

CHAPTER 5. CONCLUSIONS AND DISCUSSION ............................................................. 113

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Summary of Findings .......................................................................................................... 116

Correlations between Learning Ability and Leadership during VUCA Conditions ............... 118
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Identifying Opportunities in the Face of VUCA ................................................................... 121

Learning Ability for Chief Officers ...................................................................................... 122

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Impacts of Stress on Productivity during VUCA .................................................................. 123

Recommendations for Future Research ................................................................................ 131

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REFERENCES ....................................................................................................................... 133

APPENDIX A ......................................................................................................................... 158

Research Instrument Electronic Cover Letter ....................................................................... 158

Research Instrument Questions ............................................................................................ 159

List of Tables

Table 1. Summary of Impact of COVID-19 on Organizations and Leadership Styles ................ 16

Table 2. Example Values for ROA and ROE: Apple ................................................................. 19

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Table 3. Abilities for Effective Leadership during VUCA, and Defining Characteristics ........... 50

Table 4. Research Methodology Summary ................................................................................ 61

Table 5. Model Coefficients and Corresponding P Values for Abilities ..... Error! Bookmark not

defined.

Table 6. SEM Model Convergent Validity Assessment ............................................................. 85

Table 7. SEM Model Discriminant Validity Assessment ........................................................... 86

Table 8. SEM Model Reliability Assessment ............................................................................. 87

Table 9. SEM Model R-Squared Assessment ............................................................................ 89

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Table 10. Segmentation Analysis by Company Size: Participants per Segment ........................ 107

Table 11. Segmentation Analysis by Company Size: SEM Model Results ............................... 108
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Table 12. Segmentation Analysis by Company Title: Participants per Segment ....................... 109

Table 13. Segmentation Analysis by Company Title: SEM Model Results .............................. 110
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Table 14. Segmentation Analysis by Company Function: Participants per Segment ................. 111

Table 15. Segmentation Analysis by Company Function: SEM Model Results ........................ 112
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Table 16. Summary of Findings: Research Question Results ................................................... 117

Table 17. Summary of Findings: Hypotheses Results .............................................................. 118

Table 18. Impacts of Stress on Personal Business Productivity ................................................ 127

Table 19. Impacts of Stress on Organizational Productivity ..................................................... 129

List of Figures

Figure 1. Research Model Diagram ........................................................................................... 58

Figure 2. Scope of Study ........................................................................................................... 60

Figure 3. Research Methodology Process .................................................................................. 61

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Figure 4. Structural Equation Model for Quantitative Analysis .................................................. 82

Figure 5. Principal Leadership Ability Contributing the Most to Business Performance:

Frequency ................................................................................................................................. 92

Figure 6. Principal Leadership Ability Contributing the Most to Business Performance: Reasons

for Selecting Adaptability.......................................................................................................... 94

Figure 7. Principal Leadership Ability Contributing the Most to Business Performance: Reasons

for Selecting Critical Thinking .................................................................................................. 95

Figure 8. Principal Leadership Ability Contributing the Most to Business Performance: Reasons

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for Selecting Learning Ability ................................................................................................... 96

Figure 9. Principal Leadership Ability Contributing the Most to Business Performance: Reasons
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for Selecting Agility .................................................................................................................. 98

Figure 10. Principal Leadership Ability Contributing the Most to Business Performance: Reasons
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for Selecting Emotional Intelligence .......................................................................................... 99

Figure 11. Principal Leadership Ability Contributing the Most to Business Performance:
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Sentiment Analysis Scores ...................................................................................................... 100

Figure 12. Abilities Other Than The Five Principal Abilities: Sentiment Analysis Scores ........ 103

Figure 13. Impacts of Stress on Ability to Lead: Types of Impacts and Frequencies ................ 104

Figure 14. Impacts of Stress on Ability to Lead: Sentiment Analysis Scores ............................ 105
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CHAPTER 1: INTRODUCTION

Background of the Problem

The consequences of the Coronavirus Disease 2019 (COVID-19) have posed significant

challenges for business organizations, such as reduced productivity from employee sickness and

death, business closures, disruptions to supply chain processes and international trade, reduced

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tourism capabilities, not to mention the social and health impacts (Pak, et al., 2020). Worley &

Jules (2020) observed how the consequences of COVID-19 represented conditions associated
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with volatility, uncertainty, complexity, and ambiguity (VUCA).

The term VUCA is attributed to the US Army War College (Barber, 1992; Saleh &
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Watson, 2017), which sought to capture a term that described the frequent changes and dynamic

nature associated with combat conditions. In the past twenty years, the United States and much
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of the world has experienced several major situations that could be described as volatile and

uncertain, such as the year 2000 (Y2K) crisis in 1999 to prepare for the new Millennium, the

9/11 terrorist attacks in 2001, the financial crisis in 2007-2009, the COVID-19 pandemic of 2020

and beyond, and the Ukrainian conflict of 2022, leading some observers to describe conditions as

living in a world of chaos (Cascio, 2020). The term VUCA has entered the vernacular to express

the turbulence of modern business and the leadership challenges that accompany it (Johansen,

2007).
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Cascio (2020) suggested that the term VUCA is inadequate to describe the chaos of the

modern world, proposing instead to describe the current state as brittle, anxious, nonlinear, and

incomprehensible (BANI). In this description, “Brittle” refers to illusory strength, in which

systems appear strong until they are tested, and then they fail spectacularly. In BANI, “Anxious”

describes a state where every choice is perceived as potentially harmful, driving decision

procrastination and passivity. In BANI, relationships between cause and effect of actions do not

follow expectations and can be “Nonlinear”, and sometimes can appear to be disconnected. The I

in BANI stands for “Incomprehensible,” referring to the degree to which proposed explanations

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of unusual events seem illogical. It could also stand for ironic, given that big data, which was

intended to increase understanding, ironically often simply results in an overload of information,

with no clear answer evident.

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COVID-19 has resulted in significant economic impact to many businesses and other
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organizations. Bartik, et al., (2020) surveyed 5,800 small businesses, which revealed mass

layoffs and closures. Many of the businesses struggled with the uncertainty and ambiguity of the
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situation, and businesses held varying beliefs around the expected duration of disruptions related

to COVID-19.

The VUCA/BANI conditions from COVID-19 have affected educational institutions as

well as businesses. Many schools were closed during periods of significant outbreaks. The

Federal Reserve Bank of St. Louis (Gascon, 2020) discussed the general impact of school

closures. The Bank concluded that, in addition to the direct impact to the schools and associated

personnel, other parties were affected, such as workers with children attending school, many of

whom had to stay at home to care for the children. The Bank also contemplated longer-term

effects of school closures, such as increased government spending for unemployment insurance,
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reductions in productivity for parents working from home, and potential impacts to education

quality due to curriculum disruptions.

Some companies have weathered the COVID-19 pandemic storm better than others

(Gakanbham, 2020). Companies in the same industry offering similar goods and services to the

same markets during the same time under the same conditions produced different business

results. For example, Domino’s Pizza and Pizza Hut both deliver pizza and other traditional take-

out foods to neighborhoods across the United States. The two firms use similar ingredients and

often share the same pool of labor in the same consumer markets.

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In the climate of COVID-19 VUCA, Domino’s Pizza made significant changes to the

method in which they deliver pizza to homes and businesses. The changes included the
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innovative development of touchless delivery, a type of delivery process which combines

changes in delivery boxes with changes in the way drivers deliver pizza, with the intent of
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decreasing risk of infection from COVID-19, thus improving safety for customers. Domino’s

Pizza aggressively marketed their touchless delivery to their customers, many of whom were
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working from home. Customers found the innovation highly relevant, and increased their

preference toward Domino’s, increasing revenue for Domino’s from $1.15 billion in 2019 to

$1.36 billion in 2020, and net income from $129 million in 2019 to $151 million in 2020 (Arora,

2021; Lucas, 2021). It is possible that leaders at Domino’s Pizza reflected on the situation and

decided that a new method of doing business was indicated to respond to the pandemic.

Meanwhile, competitor Pizza Hut, whose leaders did not make sweeping changes as Domino’s

did, went bankrupt (Lucas, 2020). Domino’s Pizza can be perceived as an illustrative example of

the value of leaders applying double-loop learning during VUCA conditions to learn about the

changing external environment, critically thinking about how the environment could affect the
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business and the opportunities presented by the new environment, adapting business models as

necessary, and showing agility to respond quickly to changes in the external environment and in

customer preferences. The example thus demonstrates the value of the leadership abilities of

critical thinking, learning ability, adaptability, and agility. The example suggests the need for a

study to examine the degree to which certain leadership abilities can affect business

performance.

Taleb (2012) discussed the concept of organizational anti-fragility in VUCA situations.

Many organizations are fragile, defined as being vulnerable to disruption and uncertainty, and

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deteriorating when faced with VUCA conditions. Some organizations make it to the next level,

robust, defined as being resilient to disruption, where VUCA conditions have little effect. The
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highest level, according to Taleb (2012), is anti-fragility, where organizations benefit from

VUCA conditions. Domino’s Pizza thus represents an example of an anti-fragile organization,

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which took advantage of the opportunity presented by COVID-19 and increased its revenue and

net income as a result.

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Bhattacharyya (2022) examined one method that organizations are using to cope with

innovation and change in their operations during complex, turbulent periods. That method is

through hiring interim chief information officers (CIOs) to help modernize the organization’s

technology, such as digitizing more business processes for increased speed and efficiency.

According to Heidrick & Struggles subsidiary Business Talent Group, demand for interim chief

technology officers and interim CIOs grew by 83% from 2020 to 2021 (as cited in

Bhattacharyya, 2022). Business Talent Group pointed to COVID-19 as an important catalyst for

accelerating technology in general, and for digital transformation in particular.

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Simons (2016) cited a growing need to prepare leaders for uncertain conditions, including

preparing leaders for the disruption caused by new technologies in industries. Examples of such

new technologies include artificial intelligence (AI), machine learning (ML), predictive

analytics, and data mining for large data sets, also known as big data. Simons asserted that

leaders without such understanding will struggle to solve leadership challenges in the future.

Colias, et al. (2021) discussed some of the challenges faced by organizations due to

supply chain issues caused by the consequences of the COVID-19 pandemic. One example cited

was the difficulty in securing the integrated circuit microprocessors, also known as chips, which

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are used in many modern devices. The supply shortages of chips have affected many industries.

In the case of the automotive industry, the Ford Motor Company and other American automotive
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manufacturers have cut production of vehicles by 1.2 million due to the chip shortage. Wilmot

(2020) noted how organizations have changed their supply chain decision making, moving away
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from a strategy of specialization, where companies worked with dozens of specialty suppliers, to

one of vertical integration, to control the entire chain of production more tightly.
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James (2017) broadened the consequences of VUCA events to not just departments

which are supply chain related, but to all departments across the enterprise. For example,

financial structures and strategy could be impacted by the challenges of VUCA, given the

traditional assumption of stable economic conditions for accurate financial forecasting. Leddy

(2018) recommended that organizations move away from the customary annual or quarterly

financial planning cycles and toward more continuous forecasting methods, taking into account

rapidly changing business conditions.

Christopher (2021) discussed some of the challenges associated with organizational

structure and processes during periods of VUCA, citing inventory management as a particular
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concern. Many organizations typically employ procurement specialists, using prescribed

processes, to buy necessary goods and services. Christopher (2021) advocated for the use of

analytical tools to predict pricing, as well as estimate availability, to increase the agility with

which organizations manage their inventory management function. Bennett and Lemoine (2014)

agreed, emphasizing how more sophisticated data gathering and analysis can improve agility

during periods of VUCA. Bennett and Lemone (2014) also recommended restructuring

organizational operations to align operational capabilities with the complexities of the business

environment, to better address the complexities inherent with VUCA conditions.

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Rao, et al. (2017) discussed a general trend of customer expectations, stating that

customers are increasingly expecting rapid response and certainty in queries of delivery time and
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other topics. Supply chain problems from COVID-19 and other causes could cause those

expectations to not be met. Matthews (2015) noted that certain customers, already frustrated by
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VUCA events, could be quick to return items that failed to meet their expectations, even if the

merchant accurately described the goods, and even if the products worked as designed. The
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increase of returned goods contributes to reverse logistics challenges and adds to the high

workloads of operations managers.

Abdelzaher, et al. (2017) noted how VUCA conditions can increase stress in

organizations, especially when those organizations are not effectively prepared for VUCA. The

added stress can result in poor performance and productivity in the organization. Millar, et al.

(2018) acknowledged the extra stress and even mental anguish that employees can experience

during periods of VUCA. To counter the issues, the researcher emphasized the importance of

emotional intelligence in leaders and the role they play in reducing the emotional toll of VUCA

conditions, such as empathizing with their employees and taking action to address their concerns.
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Many companies faced an acute shortage of leaders long before the COVID-19

pandemic, with forward-looking companies needing to identify and groom future leaders as part

of their succession planning efforts (Byham, 1999; Manpower, 2011). The shortage was made

worse by the lack of leaders prepared to lead during VUCA conditions, with researchers stating

that current leadership skills and competencies are outdated for VUCA conditions (Prastacos,

2010), and that a new set of leadership skills are required, including agility, flexibility, and fast

response time (Petrie, 2011). Researchers questioned if leaders are ready to make effective

decisions in the face of VUCA (Johansen, 2007). Certain pre-COVID situations, such as the

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Great Recession of the late 2000s, resulted in VUCA conditions and exposed a talent shortage

for critical leaders who could be effective during those conditions (Parker, et al., 2008).
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Effective leaders are not just important during turbulent events, such as emergency

situations characterized as crises, but also during the transition and transformation to the new
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state after the event. Clark (2022) advised leaders to proactively declare the crisis to be over, to

signal to the organization that the crisis is over, and that the organization can return to business
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as usual, where “usual” could be better described as the “new usual.” In addition, leaders should

follow up with the media and community members to keep them updated, as well as hold a

formal debriefing with members of the organization to analyze what happened and capture the

lessons learned. Insinger, et al. (2015) acknowledged the need to return to normal, but questioned

if the post-crisis normal will be the same as the pre-normal one. Indeed, organizations should

reflect if the crisis or other turbulent conditions offered them opportunities with positive

consequences.

Table 1 presents a summary of the impact of COVID-19 and other VUCA events on

organizations and their leaders. The table summarizes the material presented in this section with
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respect to impacts on organization structures and the models to address them, changes in the use

of technology and innovation leadership, operations and supply chain issues and how to manage

them, financial structure challenges and new ways to deal with them, managing customer

expectations, and improving employee morale during conditions associated with VUCA. The

table thus presents the rather formidable environment with which leaders must work, suggesting

that significant abilities are needed to lead during such conditions.

Table 1

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Summary of Impact of COVID-19 on Organizations and Leadership Styles

COVID-19 and other VUCA impact IE COVID-19 and other VUCA impact
on organizations on leadership styles

Organizational structure and processes Organizational models: mechanistic, etc.

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-Analytical tools for greater agility -Corresponding leadership styles
-Predictive analytics for inventory -Restructure organizations for alignment

Use of technology Innovation leadership

-Disruptions by new technologies -Leaders can add specialty talent to prepare
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Operations and supply chain Supply chain decision-making

-Challenges obtaining critical items -Leaders can change supply chain process

Financial structures Decisions on financial investment

-Need for adaptation during volatility -Leaders can switch planning frequency

Customer strategy Customer leadership

-Increasingly demanding customers -Leaders can focus on order fulfillment

Employee morale Employee leadership

-Suffer from stress during VUCA -Leaders can help employees with stress

Post-crisis operations Post-crisis leadership

-Take action during and after crisis -Leaders can see opportunities in crisis
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Statement of the Problem

Researchers have shown that leadership makes a measurable difference (Madanchian, et

al., 2017) and can affect the financial results of business organizations (Yuki, 2008). Effective

leaders possess a particular set of skills to enable them to be effective during VUCA conditions.

This study builds on the work of researchers to date by identifying the principal leadership

abilities recommended by researchers toward effectiveness during VUCA and calculating the

coefficients indicating the effectiveness of the abilities toward a financial measurement of

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business performance.

Purpose of the Study

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The purpose of the study was to determine if a relationship exists between certain
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abilities that help leaders thrive in VUCA, and business performance as defined by changes of

return on assets (ROA). The study incorporated both the development of a model and a
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correlational study to examine relationship(s), if any. The research applied the conditions of the

COVID-19 pandemic toward demonstrating the challenges of leading organizations in the face of

VUCA. Worley & Jules (2020) observed how the consequences of COVID-19 represented

conditions associated with VUCA.

The research incorporated the concept of double-loop learning, which examines if

underlying mental models, or assumptions, as well as established objectives should be modified

during changing business conditions. Double-loop learning can benefit leaders by providing

them with the opportunity to assess if the means with which previous problems were addressed

are still relevant in new situations (Argyris & Schön, 1996), which is especially important given
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the turbulent environments associated with VUCA. The research studied how the specific set of

abilities identified, such as critical thinking, benefited from double-loop learning, especially

during VUCA conditions.

The study contributes to existing academic research in several important ways. First, it

advanced the literature on how companies can drive business performance despite VUCA

conditions (Saleh and Watson, 2017). It contributed to the literature on how leaders can remain

effective despite the VUCA from changing business models and disruptive technologies

(Balasubramanian, 2018). The research added to the types of capabilities needed by leaders to

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cope with complexity (Uhl-Bien, et al., 2007). It applied the work of Argyris & Schön (1978,

1996) of double-loop learning toward leadership during VUCA.

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The study was motivated by an acute need for leaders skilled in leading in VUCA

conditions (Bennett & Lemoine, 2014), in addition to the need for skilled leaders for succession
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planning (Byham, 1999; Beeson, 2011).The study addressed the need by offering an approach to

identifying the personal leadership abilities that relate to improved business performance during
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times of VUCA. By assessing the degree to which leaders demonstrate certain abilities,

organizations can look for leaders with those abilities, and leaders can develop in the areas

identified.

The financial metric return on assets (ROA) was used to assess business performance.

While no financial metric is perfect, including ROA, ROA is the most broadly available, most

effective metric to capture business performance (Hagel, et al., 2013). ROA measures how

efficiently an organization can generate profits from its portfolio of assets (Brown & Caylor,

2009). ROA is generally expressed as a percentage and can vary by industry. ROA is calculated

as net income divided by average total assets (Macrotrends, 2022). One of the appeals of ROA is
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that it is based on total assets, which tend to remain relatively stable over time. By comparison,

total equity, on which the alternative measurement return on equity (ROE) is based, tends to

fluctuate more than total assets. Table 2 shows an illustrative example, indicating financial

performance of Apple over the period of 2018 – 2021, showing total assets in millions of dollars

(Assets, $M), return of assets expressed as a percentage (ROA, %), total equity in millions of

dollars (Equity, $M), and return on equity in percentage (ROE, %). The values show information

for Apple for years 2018-2019 (Apple, 2019) and for years 2020-2021 (Apple, 2021). The table

shows how total assets varied by 12.9 percent from the highest value to the lowest over the time

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period, whereas total equity varied by 69.8 percent.

Table 2
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Example Values for ROA and ROE: Apple
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Year Assets, $M ROA, % Equity, $M ROE, %

2018 365,725 16.1 107,147 49.4

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2019 338,516 15.7 90,488 55.9

2020 323,888 17.3 65,339 73.7

2021 351,002 28.1 63,090 147.4

The focus of the research study was on moderate disruptions consistent with VUCA

which affect operations at organizations. Examples could include the introduction of new

technological developments, such as artificial intelligence (AI) and machine learning (ML), new

business models, such as ride-sharing to provide transportation services instead of taxicabs,

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worldwide pandemics that affect supply chain operations and create other consequences, and

new legislation that requires new ways of doing business. The study leveraged the COVID-19

pandemic consequences to demonstrate the challenges of business leadership during VUCA

conditions (Worley & Jules, 2020). The research study did not address sudden, severe crisis

situations limited to specific geographical areas and where life and limb are at peril, such as

wars, natural disasters and mass shootings.

Significance of the Study

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The study was motivated by its potential significance. First, the study “stands on the

shoulders of giants,” as stated by Sir Isaac Newton in his letter to follow scientist Robert Hooke
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(Vernon, 2022), in that it acknowledges the important research done by others in the field and

moves their work a bit further. The study contributed to understanding the topic by advancing the
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work of leading researchers in the field, such as Saleh & Watson (2017) and their work on how

companies can drive business performance, Balasubramanian (2018) and his work on how
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leaders can remain effective during VUCA, Uhl-Bien, et al., (2017) and their work on the

capabilities needed by leaders in complexity, and applications of the work of Argyris and Schön

(1978, 1996) on VUCA leadership situations.

The study was also motivated by the potential that several types of stakeholders could

benefit. One stakeholder is the set of companies needing leaders who will be effective in times of

VUCA. Even before the pandemic, researchers questioned the degree of readiness of leaders for

VUCA environments, stating, “Only 18% of leaders were capable of leading in a VUCA world”

(Bennett & Lemoine, 2014; DDI, 2015; Hall & Rowland, 2016; references from Rimita, 2019;

Wolfe, 2015). One recent survey estimated that only seven percent of company chief executive
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officers (CEOs) believe that they were adequately preparing leaders (King & Badham, 2018).

VUCA observers, such as Cascio (2020), could argue that the world will continue to experience

VUCA conditions from various events, thus affirming the value in the development of education

and training that will prepare leaders to be more effective in VUCA situations.

Without the ability to effectively lead during VUCA conditions, leaders could miss

potential opportunities presenting themselves during the most turbulent of times, and not be able

to convert VUCA problems into opportunities (Halamka, 2011). For example, Johansen &

Euchner (2013) noted that graduates of certain United Kingdom (UK) business schools were not

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sufficiently prepared in dilemma flipping, defined as the reframing or reconsideration of

problems as potential opportunities (Johansen & Voto, 2013) during periods of VUCA, and thus
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not able to perceive opportunities in the midst of problems.

Leaders not prepared to lead during VUCA can compromise organizational performance,
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because the instinct of most leaders is to freeze when faced with VUCA (Colvin, 2010). Bushe &

Marshak (2016) agreed, noting how the mental models used for traditional leadership, as well as
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linear thinking, are not effective during VUCA situations. More recent studies, such as Kayes

(2018) stated that the need for leaders prepared for VUCA is perhaps greater than it ever has

been, as the complexity of business continues to increase. Rodriguez & Rodriguez (2013)

suggested that new methods of leadership for VUCA tailored for the Millennial generation,

called cloud leadership, be used. Perhaps the situation will result in a bifurcation in the job

market for leaders; those who are prepared to lead in times of VUCA and those who are not

(Johansen, 2007).

In addition to the need for leaders skilled in VUCA in for-profit organizations, nonprofit

and not for profit organizations could also benefit from leaders skilled in operating during
EFFECT OF LEADERSHIP ABILITIES ON PERFORMANCE DURING VUCA 23

VUCA conditions. Laffey (2022) discussed the challenges that the nonprofit sector faces due to

VUCA. Because so many nonprofit organizations are service-based in nature, the VUCA from

COVID-19 has hit the sector particularly hard, indicating a need for especially skilled leaders

who can navigate the challenges associated with VUCA. The nonprofit sector is significant,

Laffey (2022) indicated, employing 10 percent of the United States workforce, and adding 5.6

percent to the total economic output of the U.S.

Another set of stakeholders which could benefit from the study is the vast network of

companies that develop and train their leaders and other employees. The Association of Talent

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Development (ATD, 2020) indicated that the average organization spent $1,308 per employee on

development and learning in 2019, a slight increase over the $1,299 that organizations spent in
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2018. The top categories for learning included managerial topics, at 14 percent, compliance, at

13 percent, and industry-specific content, at 13 percent. The data for the ATD study came from
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283 organizations in a range of different industries, especially finance, insurance, and real estate.

The study was also motivated by the increasing interest in skills-based leadership
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approaches, which became popular after the reduction of interest in trait-based leadership

models. In trait-based leadership models (Northhouse, 2019), leaders were perceived as

possessing certain exceptional characteristics. Stogdill (1948, as cited in Northhouse, 2019)

showed that leaders distinguish themselves from others through certain traits, including

intelligence, sociability, self-confidence, persistence, initiative, responsibility, insight, and

alertness. The original trait-based leadership models suffered from many flaws, such as ignoring

female leaders like Joan of Arc, Catherine the Great, and others, as well as not being particularly

actionable. The traits were innate, and leaders were born, not made, leaving little chance for

leadership development. The model lost favor over time.

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Similar to the trait-based approach, the skills approach emphasizes certain elements of

the leader, but with a shift from personality traits, which are generally innate and cannot be

changed, to an emphasis on abilities and skills which can be developed (Northhouse, 2019).

Interest in skill-based leadership has a long history, as demonstrated by the work of Katz (1974),

describing the skills needed to become an effective administrator. The skills-based approach has

recently gained more interest through the work of several researchers. Judge (2002) indicated

that certain skills and abilities are beneficial to leadership and can be assessed. Goleman (2020)

found that the ability of emotional intelligence can increase leadership effectiveness. Antonakis,

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(2004) made the argument that emotional intelligence alone is insufficient to predict leadership

effectiveness, and that other methods, such as cognitive ability and the set of personality
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attributes known as the “Big Five,” as introduced by Fiske (1949) and further developed by

Goldberg (1990), including extraversion, conscientiousness, openness, agreeableness, and

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neuroticism, were required as well. Zaccaro (2000) discussed the importance of cognitive ability

toward the problem-solving capabilities of leaders. Jacquart & Antonakis (2015) cited that other
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attributes and abilities, such as the ability to lead through charisma, can assist with leadership

effectiveness in senior leaders. Antonakis (2021) stated that certain abilities, such as the ability to

lead using charisma in particular, can assist with solving problems associated with crisis and

ambiguity, such as addressing challenges during the COVID-19 pandemic.

Research Question and Hypotheses

The purpose of the research was to study the effect of certain personal leadership abilities

on business performance, as evaluated by change of return on assets (ROA), during times of

volatility, uncertainty, complexity, and ambiguity (VUCA). The research applied the conditions

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