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The fuel price rise: a case of adaptive leadership

The fuel price rise: a case of adaptive leadership

Published on: September 2015​ Genre: Economics-Finance​ Category: Op eds​
The fuel price rise: a case of adaptive leadership

This week saw the introduction of a 24% increase in the petrol price, and a drop in the price of diesel by 29%. Frank Kane, writing in this newspaper just last week, described the removal of subsidies on petrol and diesel as one of “the most radical actions taken by any GCC state so far” in response to the plummeting oil price in the region. The move is indeed radical, both in terms of the short term price impacts, and the long-term relaxation of price control. While views on the policy shift have been mixed, it has been broadly accepted and we’re likely to normalize to it pretty quickly – even if, like me, it takes a chunk out of your weekly budget.
So how did they do it? After all, introducing a big policy change successfully takes more than deciding it’d be a good thing. A short review suggests four key dynamics:
A conscious communications strategy. The announcement of fuel price deregulation was reported on 21st July. In the week following the announcement, H.E. Suhail Al Mazroui, the Minister of Energy gave a series of press interviews explaining the rationale of the policy and offering reassurance that the impact would be limited for the average resident. Interestingly the announcement was made in two stages, first the policy change and second the price announcement for August a week later on 28th July.
A space for debate was permitted. The policy announcement triggered wide ranging debate in the local and regional newspapers. Business concerns were raised and debated, such as the impacts on certain sectors such as retailers, taxis and car dealers.  Social impacts for motorists also got a look in, particularly the impact on lower wage workers.
Emphasis on the positives. Stories also appeared promoting a wide array of possible positive impacts of fuel price deregulation. These ranged from savings to the government coffers and knock on impact for the economy, to the possibility of a nudge towards car-pooling, public transport and away from gas-guzzling cars. Anticipation is often worse than reality, and so after the price for August was announced we saw articles breathing a metaphorical sigh of relief.
Sharing responsibility. From the start, H.E. Suhail Al Mazroui emphasized the choices the price rises will prompt residents to take – from decisions on individual journeys, to decisions on car ownership. He also proactively acknowledged the greater impact on lower-earning expatriates. In doing so, H.E. Al Mazroui has recognized that positive outcomes for the environment and road safety require not just a policy change by government, but also behavioural change by citizens and residents.
These dynamics resonate with the concept of adaptive leadership developed by Harvard scholar Ronnie Heifetz. In fact, the image at the heart of Heifetz’s book is that of a leader influencing a community to face its problems. For Heifetz, identifying the adaptive challenge – the changes the community will find tough – and creating a safe space for them to respond to the changes – is the key to successful leadership.   
So, removal of fuel subsidies can be seen as an exercise in successful adaptive leadership so far. The first phase of change has gone well, but it may be too soon to assume the next price changes will too. Does adaptive leadership theory offer any pointers for future action? Well, Heifetz reminds us that adaptive change isn’t quick – it requires disciplined attention. Policies the world over have unintended consequences, and price deregulation may too. Heifetz’s injunctions to pace the change and pay attention to the level of distress being caused may yet be prescient.      
 
For further reading on adaptive leadership, we recommend: Heifetz, R. A., & Linsky, M. (2002). Leadership on the line: Staying alive through the dangers of leading (Vol. 465). Harvard Business Press.

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