Never in the history of corporate shareholder value creation has it been clearer that human value is more important than economic value. This is the lesson of the COVID-19 pandemic: Without healthy people, economic value creation becomes nearly impossible. The physical heath and psychological well-being of an organization is essential for shareholder value creation and the vitality of national economies. This is the new context as we look ahead to the recovery to come.
It is undeniable that the leaders in all facets of society today are engaged in an epic battle of a physical, fiscal and psychological nature. This multidimensional war came upon us suddenly, viciously and with velocity unimaginable. Within the past 30 days, most leaders have had their entire business plan implode, assumptions about the future and the way they work and lead flipped upside down. Three short months ago at the World Economic Forum, a global pandemic was not even listed in the top 10 business continuity risks.
The actions taken in the C-suite during the coming months will determine survival for most companies.
Ram Charan has experienced many disruptive situations across industries and continents in his 50-plus years of advising many of the world’s leading CEOs. We recently had the opportunity to discuss his observations about what is happening across the globe and the actions leaders should prioritize to respond.
The nature of the fight: this is different
With an invisible enemy wreaking potentially irreparable damage to business models and organizational health, leaders must brace themselves for a long battle ahead. They must possess the energy reserves to sustain the battle on emotional, physical and psychological levels. The battle ahead will have few recognizable patterns for them to follow, nor does previous experience provide many lessons to rely on. This situation is different. Each day will bring new information: both good and bad, often conflicting, and clouding the path forward. Truly, leaders are in the “fog of war.”
In time, we will inevitably have adequate testing capabilities, and a vaccine will emerge. The question for all is: What actions can leadership teams take to minimize damage and optimize recovery? Some companies are well down this action path, others may wish to consider some of the following thoughts.
Action plan for the fight: inside the optimal C-suite war room
Teams that go into this fight weak, depleted or misaligned have a challenge that is exponentially more difficult than those who are strong, tight and highly functional. Most companies that have responded quickly to the challenge leveraged their existing crisis management protocols. While helpful, a more rigorous approach to the battle is being observed within leading companies. If you are doing many of these things already, you are ahead. If not, you may wish to consider some of them.
1. Establish a virtual war room to monitor organizational vital signs
The concept of the war room has been around for decades; however, few have ever managed a 100 percent virtual war room that informs and enables rapid response. Utilizing input from their digital ecosystems, successful teams will wrestle with real-time, unfiltered input from three critical sources: customers, partners and employees.
Successful leadership teams will have the courage to act boldly and the energy to sustain what could be a prolonged effort. The virtual war room led by the CEO includes the CFO, CHRO and communications leader, supported by the entire leadership team and board.
The CEO is the captain and chief prioritizer. The CFO plays the critical role on cash management — the oxygen of the enterprise. The CHRO must provide leadership on all people dimensions, specifically, the safety and health — both physical and mental — of the workforce. The head of communications must assure that everyone at every level of the organization, receives timely, transparent and actionable messages from the CEO. Communication must be two-way and flow between customers and suppliers. Effective communication is a critical ingredient for maintaining trust going forward.
With the top priority being employee safety, this core team should assess fiscal, physical and the mental aspects daily. The crisis is creating a lot of anxiety. Nearly half of Americans worry about contracting the virus themselves, and almost 60 percent worry about how the crisis will affect their finances, according to a recent survey by the American Psychiatric Association (APA). Failure to re-establish a “safe” environment will directly impact employees’ ability to serve customers. CEOs need to be communicating their actions to create a safe workplace on a monthly basis to demonstrate credibility and renew trust. Safety enables trust and trust drives engagement and productivity.
2. CFO-led cash SWAT team
A large percentage of companies will face intense cash challenges. The CEO, CFO and CHRO must be totally aligned on a detailed understanding of the cash availability and priorities. Lack of cash will create enormous stress and speculation within the company and can threaten its existence. The CFO must develop specific cash priorities, on a weekly basis, until normal operations return. Managing a business for cash is a paradigm shift for most organizations. The ability to balance cost-cutting measures with smart investments for the future, while assuring that the organization has the capacity to deliver for customers and create value for shareholders, will separate the winners and losers.
3. CHRO-led cross-functional re-start team
CHROs must be very proactive, and foresight is required. The CHRO, CEO and CFO must work together to develop new KPIs aligned to the new priorities. Continuous pulse surveys (customer, supplier and employee) will be key to assessing organizational health and ensuring the proper workplace modifications exist to assure a safe environment as people return to the office. This must include factors that affect both mental and physical health. Old habits will die hard, and behaviors are unlikely to change without clear “new normal” requirements. This cross-functional information should be fed in real time into the C-suite war room.
Every organization has top talent who will want to strive for heroic actions once people start to return to work. Over-enthusiasm in the short term could be detrimental without the proper “safe at work” conditions. Retooling KPIs, while no small task, must be dealt with promptly because they drive behavior.
4. Communication-led SWAT team focused on listening and delivering authentic, transparent, simple messages
The communications team must arm every employee with the key priorities and specific action plans. Having effective send/receive capability is critical, as is the ability to leverage multimedia tools and platforms to assure everyone receives the priorities and action plan. During this time of crisis, there is no such thing as too much communication. This includes the CEO’s communication with the board.
Ensuring that information about the issues, priorities and progress reach every single person as intended is the mandate. Leaders must communicate not only the current priorities — where the business will be making investments, what cuts will be made and why — but also make clear what is no longer a priority. Effective, consistent and transparent communications will help reduce stress and anxiety. It will also empower quick decision-making throughout the organization.
5. Redefined expectations for investors in the near term
Many company CEOs and CFOs have already begun to abandon earnings guidance. Boards are now most concerned with cash preservation and employee safety. Environmental, social and governance (ESG) efforts now emphasize “S,” with society being largely redefined as mental and physical health requirements. This will likely be the focus for the next 12 months.
Several CEOs have publicly come out and said, “I am managing the company for cash and not for earnings at this time.” Boards and investors realize that, at this moment, the goals have changed and things are different. Again, managing for cash requires a radical mindset change and new KPIs throughout the organization.
6. The creation of agile processes to drive accelerated decision-making and action.
The four key members of the C-suite, along with others, must demonstrate a coordinated approach to enable the organization to function effectively in the new constrained environment — quickly! For example, the HR team must immediately help the organization learn how to work remotely and with new collaboration tools. HR can set an example by redeploying their teams to help support the new priorities.
Process innovation needs to occur everywhere. Now is not the time for hierarchy or functional silos during the intermittent and uncertain recovery. This crisis provides an opportunity to eliminate and streamline processes everywhere. Several beneficial process and customer innovations have likely already occurred. Codifying these into the organizational DNA will assure that the crisis is not wasted.
People deployment processes also are critical. Measuring employee fear and anxiety is a must. Developing a detailed action plan for returning to work will be critical and complex. Communicating this plan well in advance will go a long way toward assuring employees it is indeed safe to return.
During this volatile time, customers will change their minds, maybe without even knowing it. This dissonance cannot overwhelm those in the war room. Suspending assumptions to ensure you are making decisions that are grounded in employee and customer needs will provide the most likely success path.
The enemy will shift, new problems will emerge, and the unintended consequences of decisions will have to be dealt with. Lean, agile, cross-functional teams led by top talent deployed against the critical few priorities will produce action — versus inaction. Speed matters and bold actions are required.
Companies across the world are doing amazing things, in record speed to defeat this pandemic. The time is here: Boards, CEOs and investors all are recognizing it is people before numbers, and that people are the most important source of competitive advantage and value creation. For the next six months, it is all about survival and building the road to recovery.
Keeping the leadership team resilient and maintaining trust with customers and employees are critical to recovery. True leadership is about survival and creating an even better future.
We hope these thoughts may help leaders further mobilize their efforts with the necessary intensity and velocity. In doing so, more lives, jobs, communities and companies will be saved, and the future of a brighter tomorrow will be a reality.
On behalf Spencer Stuart, we would like to thank Ram for spending time with us and sharing his thoughts, perspective and wisdom during this very challenging time.