Find the Right Balance Between Hope for the Future and the Realities of Today’s Economy
The Coronavirus pandemic is not the sole cause of our economic turmoil. Impulse reactions to the challenges of a global economy and to the pandemic itself are the obstacles of true economic recovery. In other words, do not take your cue from our federal leadership. How do company executives find the right balance between hope for the future and realities of today’s economy?
Executives must discover the right balance between hope for the future and the exploration of reality. They must ignore the politics of the pandemic. Creating value and finding pockets of growth are possible. However, leaders should not conflate aspirations with a prescience about the future.
The unknown portion of the crisis may be beyond anything we’ve seen in our professional lives. Executives are incredibly busy, fighting fires in cash management and other areas. Managers need to do their best to find out what these issues are, and then work with their staff to ensure that the organization can navigate them. The challenge is to create a collaborative culture, identify what is working (and what is not). Be agile and build a decision-making process that is built for speed.
Beware of a gulf between executives and your staff. Top managers are easily adapting to working from home and to flexible, ill-defined processes and ways of working, and they see it as being very effective and the wave of the future. The key is building metrics for performance and building personal relationships with your rank and file.
Mid- to long-term implications and scenarios vary considerably. It’s important to differentiate between industries and regions. Some industries may never come back to pre-COVID-19 levels.
What went wrong? Boards and executives, but also academics, need to debate the question. Where should we have been focusing? Take three examples. Why did companies ignore the issue of inadequate resilience in their supply chain? The risks of single sourcing were well known and transparent. Also, why did we move headlong toward greater specialization in the workforce, when we knew that no single skill was permanently valuable? Finally, why did we refuse to evolve our business models, although we knew that technology and shifts in societal preferences were forcing us down a treadmill of ever decreasing value-creation potential?
Beware of the resistance to a global economy by the jingoism and Trumpism. The tendency toward nationalism was already strong and is growing during the crisis. Global companies, despite their experience, may find it harder to address and engage directly with diverse, volatile, and potentially conflicting stakeholders. In such times, societies may need someone to mediate between the private sector and some of these stakeholders.
Companies need help with government relations. Strong government interventions are occurring on the back of a serious loss of confidence in free-market mechanisms. There is little question that different governments will land on different answers to the debate around how free markets really ought to be structured. The corporate community has been thrust into a new relationship with government, and it is struggling. The government landscape is fragmented, with highly varied approaches and competencies. Companies are looking for a playbook; no one has an infrastructure to manage this complexity.
The balance between profits and cash flow is tricky, and essential to get right. Many companies are caught right now and are sacrificing their bottom line to pay for their financing. It is not sustainable. The question is how to emerge stronger than your competitors?
It may be time for responsible acquisitions, including to help restructure certain industries. There are buyers out there betting on the emergence of new technology, well run companies, and bargains.
The risk of Cyber-attacks is growing. Remote working increases the “attack surface” for criminals and state actors. Both are more active. Chief information officers and chief information security officers are grappling with the overwhelming demand for work-from-home technology and the need for security.
Innovation may never have been so important. Innovation has always been essential to solving big problems. The world is looking not just for new things but also for new ways of doing things (especially on the people side, where we need new behaviors, long-term rather than short-term), capabilities, and work ethics.
The path ahead will surely have ups and downs and will require resilience. As lock downs are relaxed, and segments of the economy reopen, viral resurgences and unforeseen events will keep growth from being a straight line going up. It will likely be a lengthy process of preserving lives
over several months, if not years. The reality is that many or even most business leaders made choices over the past decades that traded resilience for a perceived increase in shareholder value. Now may be the moment to consider that the era of chipping away at organizational resilience in the name of greater efficiency may have reached its limits.
