Operating in the pandemic requires a different approach to the old world. How we respond to the new abnormal is key to customer and employee confidence. So what learning is important as we operate remotely and head into uncertainty? Looking forward, in the snatched time between Zoom and Teams web calls, have we taken the time to consider what are permanent shifts in world markets, and in working practices and employee expectations, that we need to adjust to in order to succeed or survive?
When will it end?
Frankly, none of us knows. One day it will just be history as with the plagues of the Middle Ages, the flu of 1918, and more recently the SARs epidemic. But the world will be different. There will be winners and losers. For now, we will get better at limiting and living with the transmission of COVID-19, accept the erosion of privacy inherent in more testing and tracing, but be more risk averse and we will have glimpsed new ways of living. We all hope for an early vaccine, but miracles take time. Today, no one is clear whether we face a “U”, “V”, “W” or, worst of all, an “L” economic downturn and what the damage will look like.
Some things look certain to change for the foreseeable future: the end of cheap flights and a reduced demand for long distance leisure travel, the acceleration of digital communications and reduced commuting, or the impetus for automation and Artificial Intelligence which has proved robust in a world unsafe for human interaction.
Governments in the west will be driven by the politics of recession and recovery, focusing on employment retention. The complex problem of how to unwind the temporary sticking plasters of furlough and loans that ease, but also defer at an unsustainable cost, the inevitable adjustments in the economy will challenge every nation that offered a rescue package. Furlough retains the workforce but if recovery never comes, its addictive nature drives zombie companies and workforce immobility preventing the painful necessity of reallocation of labour.
Some businesses, notably airlines and oil companies, are biting the bullet and positioning for the new world. Temporary support often proves hard for Governments to unwind, as removing corporate life support may trigger another cascade of job losses and business failures. But neither can they be permanent features of the exchequer armoury. We need to think about how the new world beyond the lockdown will shape our markets, our risks, our business model and our people, and position accordingly.
Geography seems to be important. Today, traffic levels in Beijing are back to pre-Covid-19 levels and Asian economies are back to over 90% capacity. In Europe and the US, the economic devastation looks much worse, with assessments that recovery might take to 2023. If we are only at the end of the beginning it may be too early to judge but the 2020 pandemic looks set to speed the transfer of prosperity, and power, from west to east, something that has been coming for decades. What other trends will it accelerate?
What’s important?
Inevitably, survival. Companies are haemorrhaging cash. For many companies simply remaining in business will dominate their thinking and decision-making. So, what about purpose, culture, and values? How businesses respond in a crisis shapes how they are seen by stakeholders. Or to quote Helen Lewis in The Atlantic, “If your principles can be abandoned under pressure, you never really had them at all.” And yet, it is worth considering what’s changed.
The World Economic Forum, Principles in the COVID era (that can be read at the address http://www3.weforum.org/docs/WEF_Stakeholder_Principles_COVID_Era.pdf) are lofty and paternalistic indicating how we should do right by all our stakeholders. All very Davos. We can all agree these are worthy aims. But, to a manager of a crisis-hit business days or weeks away from bankruptcy it may look very old world. Helping everyone else may have to wait.
That’s not to say Corporate Responsibility doesn’t matter anymore. Walking the talk of your culture and values is important to the people who work for you, the suppliers and customers whose trust is built up over time, and the wider community that judges your actions as real or ‘spin’. You need to convince people you care. But the important long-term plan may have to adjust to the urgency of making it to first base.
What’s important today?
Let’s start with people. How are you supporting your staff; those affected by illness, those under pressure in lockdown, and those coping badly with constraints. How are you supporting safe home-working; operating and communicating remotely will increasingly be expected in the new norm. Maintaining team spirit, supporting mental health, providing advice and welfare support, and keeping in touch are all necessary. And as staff start to contemplate a world with less commuting, or living outside the office, our policies on working need to adapt to retain key skills. There are upsides. We will need less office space, spend less time and expense on travel, and can offer better lifestyle choices; and the thing is we have proved it can work. So, focusing on making us more productive while operating remotely, including encouraging individuals to master new skills, will be money well spent.
Leadership needs to be visible and credible. We cannot offer certainty, but we can paint an honest picture and explain what we are doing. Isolation is disempowering and timely, open, and regular dialogue both in ‘town hall’ meetings and small employee groups addresses that. Freed from the shackles of the office commute, staff retention will hinge on communication, culture and fostering loyalty when times are tough.
What’s important tomorrow?
As we tackle the priorities of balance-sheet protection and retaining key talent, it is important to ponder and position for the existential changes that may have been accelerated by the crisis and those that have altered direction. The context is a world in which economies have shrunk significantly. Is the net zero imperative stronger, or has the economic cost of delivering today’s cleaner atmosphere been too prohibitive? Will globalisation reverse, in nationally defensive strategies and indigenous supply chains that reduce dependence, trade and cross border cooperation? And as Governments’ roles necessarily increase, by virtue of the expansion of the public sector through rescues, and as regimes prove reluctant to repeal temporary powers, how will that impact markets? All that is before you factor in the effects of sectoral shifts that have reshaped adversely the landscape in commercial property, leisure or hospitality, or propelled health and pharmaceuticals up the agenda. Our business environment is changing just as surely as digital and distancing or cashless commerce and post pandemic city planning are reshaping our world.
In the energy sector, long a key target for the route to net zero, coronavirus may prove a catalyst for further disruption. The 6% drop in power demand worldwide in 2020 pales beside the depth of the crash in oil and gas prices. Will green technologies be encouraged in a capital constrained industry? Will social distancing and restrictions on public travel lead to transportation inefficiency, delay energy efficiency and conservation? Demand and price shocks are likely to have a profound effect and impetus, but not all managements, steeped in old world expectations, will be capable of rapid enough adjustment.
What should we be asking now?
Here are some questions you might ask today, the answers to which will help inform decision-making for the future:
Are we neglecting the important for the urgent? Both are important. Both are urgent.
Are we too close to see the big picture? Life will look very different, and much clearer, in a year’s time. All things will pass.
What trends, and accelerations, are inevitable consequences of what we have been through? And what is on the way out?
How are we positioning our people and our businesses for those changes? Are we training them now? And do they believe we care about them?
Are we adjusting fast enough and if not, what is the barrier? Or are we, as old-world management, the biggest part of the problem?
How can we be more robust in the next wave or ready for the next time? And that means doing what?
There will be challenges but there will also be opportunities; how can we position ourselves to realise them?
At Opportuneo , we would be delighted to help you to respond to the challenges of the post-COVID era. Please contact us at info@opportuneo.org if you would like to discuss this .
Robert Armour - May 2020