• Erwan Hernot

To Get Over Covid Disruption, Unlearn, Learn, Repeat…

For years now, we talked about VUCA (for volatility, uncertainty, complexity, and ambiguity). We have been catapulted forward thanks to fast-tracking trends such as automation, digitalization, and innovation. Unfortunately, our VUCA world has now been disrupted by the COVID-19: this pandemic crisis sent shockwaves through industries and economies. The world’s response to COVID-19 has resulted in the most rapid transformation of the workplace. It is unprecedented to have a large cohort of people, all over the world, start working remotely at once. Working from home has become the new normal. But workplace transformation is just one the changes that COVID will bring along. Executives focus for now on short-term strategies in an effort to survive this COVID-19. This is the most difficult environment: it may only allow limited forecasting and requires the agility of quick and coordinated adjustments as events become known. There’s no blueprint for what leaders are facing. All we know is that the events, as they have unfolded, have shown the importance of resilience. Leaders now have a better idea of what can and cannot be done outside their company s’ traditional processes. COVID-19 is forcing both the pace and scale of innovation (beyond workplace to products, strategies, etc.) Many executives will re-balance their priorities in the coming months, so that this resilience becomes just as important to their strategic thinking as costs and efficiency. To get there, we need to unlearn old reflexes, accelerate digitalization and rethink our organisational structures. But it is not enough: we won’t be resilient without a change of culture and leadership.

Enhance digital technologies with social ones

The strategic resilience aka the process of recovery of a company, puts alternative logics (say, a portfolio of strategic options) to work in business continuity plans. How far away from that are we when one takes a look at budget creation for instance? Most companies create budgets based on the legacy principle: if you have been successful, you deserve funds in the future. So much for a quick adaptation! One resilient option regarding budget could be using market-based mechanisms to re-examine resource allocation so that funding of known opportunities is balanced by an appetite to radically innovate aspects of the business model, such as, say, a shift from selling high-margin products to selling services. Further down the road, executives could also have a closer look at their operating model: in the supply chain for instance, resilient companies build a strong network of sourcing inputs and distributing products and/or services to clients. Moreover, a large and fast information-processing capacity enables executives to choose quickly among alternative courses of action. Such a requirement commands an upgrade in technologies: using analytics with live data, AI, and prediction algorithms to see when patterns change. This is where the human factor kicks in. Partly to enable this technological enhancement and partly to deal with COVID consequences, companies must upgrade theirs « social » technologies too: learning, leading, deciding, changing, communicating, engaging and collaborating. First, a quick adoption of new, advanced technology is a central catalyst and is likely to lead to an acceleration in the creation of new roles for people. Reskilling and upskilling can help employees move from one part of the business to another. Second, it goes without saying that to succeed in the business world, you need to know how to smoothly interact with people. Increasingly, the highest value of people is not in their heads but 1) in their capacity to learn : if employees are taught how to build a learning mindset, it will prepare them well for dealing with a constantly, even sometimes abruptly, changing environment, 2) in their ability to lead discussions, engaging others in their interactions and collaboration which means more socialization. For the organizational structure to cope with Covid-19, socialization is the solution.

Situation —> Strategy —> Structure

In the Covid era, we suffer from a persistent use of an outdated organizational model in which leaders conceive strategy, design a corporate structure to support it and install systems to make sure employees toe the line. Accordingly, those with the most relevant expertise in a given situation take the lead in decision making. This is why the majority of firms are still, structured hierarchically, usually in functional form: marketing departments make marketing decisions, sales teams control sales campaigns, and so on. They tend to be difficult to work across, make the development of general management capability a challenge. Nonetheless, cross-functional decision making gets better results when applied in complex situations like the COVID. To transform an organization and move it from hierarchical management to fluid management, investing in AI without restructuring won’t be enough. Alfred Chandler (1) has stated the fundamental relation “structure follows strategy.” Given a strategy, there are some structures which can implement that strategy better than others. We must realize that the most efficient organizations are those that manage to change their structure according to the circumstances. Companies need to be re-configurable (2). Moving from a hierarchical model to a decentralized model, changing again when needed. Is there an ideal structural model to promote resilience? On one hand, the efficiency of a system requires the division of tasks and decentralization (technical and decentralized model). On the other hand, reliability requires excellent coordination, and therefore centralization (hierarchical model). The solution to the dilemma is decentralization and socialization. Socialization, which allows everyone to integrate the culture (values, norms, beliefs) and common procedures of the organization, replaces centralization. Socialization binds together the advantages of the hierarchical model and those of the decentralized model. The COVID context requires indeed to transcend the rigid lines of bureaucracy and divisional boundaries within a corporation and ignore the borders: employees could be grouped by competencies centered around technology, information, and expertise. The emphasis is on fluid and adaptive behavior highlighted in the culture. For people to adopt such a behavior, executives must foster a new common culture whose heart is the project and the person (be it a client and / or an employee). “Treat people as ends in themselves”(3) may result in positive emotions which in turn allows resilience. This kind of emotions prompt us to consider a wider range of thoughts and actions than the typical analytical mind (which we need anyway). They encourage us to create new relationships, expand our support network, explore our environment, and open ourselves to absorbing information.

Changeable culture

Since finding meaning in one’s situation is an important aspect of resilience, it’s no surprise that the most resilient people and companies possess a strong culture hence the mission (purpose) matters. People change for what they care about. So, companies need a changeable culture rooted in trust, transparency and openness. Today, some companies do not share enough relevant information with their members about the challenges they face. It’s time for leaders to re-think their people responsibilities if they want to help strengthen the resilience shield that today’s firms require. It could be exemplified by constant learning, good employees relations, open honest and involving styles of management and empowered and accountable employees at all levels. It means trusting employees to think and act independently in behalf of the organization. Of course, managers can help people design their new roles and behaviors. But employees are expected to exercise this freedom. This requires a great deal of engagement with broad aspects of the business. All companies should push to ensure that everyone across all levels realizes the true value and meaning embedded within their individual jobs and responsibilities, since this can provide the grit they need to keep pressing on during challenging situations. This co-construction must translate into governance and leadership. « Managing change and transforming our organizations can no longer be achieved through the decisions of a great CEO and / or a small group of leaders » (4). Therefore, distributed authority is key. In the face of greater complexity like the COVID situation, the leader’s dependence on others to generate solutions will increase: « new solutions are more likely to be adopted if the members of the organization have been involved in the learning process » (5) So, to sustain resilience capacity in people, companies rely on learning-oriented leadership. Leaders must be willing to learn, take their hands off the reins, and create room for more risk as everyone experiments.

Add right-brain to left-brain thinking

Managers must restrict themselves to setting constraints, and they should allow the performance in their team members to kick in and use their innate problem-solving potential. And let’s be honest here: rules from management usually don’t get the job done anyway. After all, a reliable way to bring an organization to its knees is for people to do exactly what the rules tell them to do and nothing else, even before these pandemic times. Resilient companies continue to learn, despite the circumstances; they experiment and add value iteratively and consistently. Proactive leaders are willing to distribute decision-making and learning, so the company can move faster. They portray confidence that active problem solving leads to learning, thereby setting an appropriate example for other members of the organization. It will be more important to be committed to the learning process than to any particular solution to a problem. Are these learning leaders a reality? Some experts point the fact that, until now, management training has traditionally emphasized left-brain thinking. The emphasis has been on deductive reasoning, analytical problem solving, and solutions engineering. That’s fine but not enough. During the stressful period that executives are in today, soft skills and emotional intelligence are fundamental. These leaders must diversify their cognitive style (that is, the way they think, perceive and remember information) to include after critical thinking, reflective or double-loop learning, systems thinking, creative thinking and design thinking. They must acquire soft skills (including self-awareness, humility, growth mindset, listening and focus, negotiation and conflict). This will give them the capacity to let go of comfortable ideas and become accustomed to ambiguity and contradiction; the capability to rise above conventional mindsets and to reframe the questions they ask; the ability to abandon their ingrained assumptions and open themselves to new paradigms; the propensity to rely on imagination as much as on logic and to generate and integrate a wide variety of ideas; and the willingness to experiment and be tolerant of failure. These learning leaders are set to inspire and lead their people, blending their analytical and « whole human » skills.

Will this combination be enough to get over COVID-19 ? For sure, both these social and digital technologies are the sound basement of a strategic resilience allowing companies to go beyond resisting a one-time crisis, but rather continuously anticipating and adjusting. But having said that « people are ends in themselves » drives us to ask THE question: who is a company for? « For shareholders, to maximize the shares value » answered Milton Friedman almost 50 years ago. This is not relevant. When companies can die due to a pandemic destroying their ecosystem, it doesn’t take long to understand that if businesses are a mix of capital and labor, the needs of capital must be balanced by the needs of employees. Capitalizing on post-COVID opportunities means for companies to strike this balance right.

(1) Alfred Chandler, Strategy And Structures, 1962

(2) Jay Galbraith Designing Organisations, 2014

(3) Immanuel Kant Groundwork Of The Metaphysics Of Morals, 1785

(4) Peter Senge The Fifth Discipline, 2006

(5) Edgar H. Schein, Organizational Culture and Leadership, 2016

Photo: Andrea Piacquadio

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