14 Dec 2020
Resilience has been 2020’s must-have attribute
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This is true at a corporate as well as a personal level. Some sectors have seen their order books evaporate, while others have experienced a surge in demand. Staff have been sick, supply chains disrupted and IT systems stressed.
Resilience in the face of this disruption and the adaptability to respond are qualities that will separate winning organisations and transformational leadership teams from the rest.
Such are the themes of a fascinating new study from the McKinsey Global Institute. In ‘The Next Normal,’ Washington DC-based McKinsey partner Susan Lund finds that the pandemic has caused the biggest macro-economic disruption in generations, accelerating existing changes and creating permanent shifts in the shape of our working lives.
Lund says the pandemic has seen the pace of the corporate calendar speed up fourfold – “three months is the new year. We have seen five years’ worth of e-commerce growth in the past five months.”
Alongside rapid change, the pandemic has brought uncertainty. No sooner had the first wave of infections and tragic deaths been overcome than a second wave appeared. “We can get it under control and then see it surge again. This drags down business sentiment because we just don’t know how long this is going to last,” says Lund.
She describes recessions as “like a giant speed bump” that shake up existing sector league tables. Well-established companies that dominate their sector may be complacent and slower to respond than nimbler rivals. She says: “So the resilient companies are those that can be agile, adjust quickly to the disruptions and see opportunities.”
“What we are realising is that we don’t have metrics for resilience. Every line manager and CEO can tell you how much more efficient they are, or by how much earnings per share have increased, but they can’t say whether their resilience has increased. This is a whole new area of risk management that needs to be applied to the operational world. This is a topic that top managers and the board have to become familiar with.”
McKinsey’s study of the last recession, ushered in by the 2007/08 financial crisis, found those companies that moved quickest to cut costs and deleverage were able to re-invest faster ahead of the recovery and strongly outperformed those that were slower out of the blocks.
Driving such change is easier said than done. Lund says: “These steps seem self-evident in retrospect – but it’s not so much what these management teams did as when they did it. This is where a strong executive team and board can make the difference – by making swift decisions and having the courage to go for it.” So to resilience, we can add courage and decisiveness as 2020’s essential qualities for transformational leaders.
The crisis has forced leaders to adjust some established ways of working, with some of these changes likely to be permanent. Lund says: “Many companies say that their decision-making has speeded up, they have managed to accomplish things in a matter of months that they thought would take years, like digital implementation or using advanced analytics.
“Companies are getting flatter, decision-making is happening more directly, and there is more communication between the top and the bottom of the organisation. These are things that companies want to continue. They also tend to be the things that resilient companies in recessions do.”
Laggards, by contrast, hope that the next normal is much the same as the last one. Companies that fail to bounce back from the pandemic will be those “that do what they’ve always done in the past, or are frozen by uncertainty and are just waiting to go back to the way things were.”
But, as Lund says: “The world we are going to re-emerge into is going to be very different than the world we all knew in December 2019.”
Lund posits that the pandemic has not reversed globalisation but it has certainly altered it. She says: “One of the things that is different about the pandemic-induced recession is its impact on supply-chains and globalisation.”
She adds: “Supply chain management has become a strategic issue, coming up to the chief executive and the board in a way it never has before. Companies are trying to insulate themselves from further shocks,” via near shoring suppliers, rationalising product lines or holding greater levels of inventory.
With opportunity, of course, comes risk. Remote working may make it harder for organisations to build culture and social cohesion. Leaders need to recognise the shift in cultural dynamics if they are to retain and motivate their most talented staff.
“A lot of people realise that videoconferencing is great and it is efficient, but it is transactional. What you are missing is a little bit of the collegiality, random discussions, passing people in the hallway. The culture of an organisation may fray if we are all remote.”
Lund’s research suggests that most organisations will move to a hybrid model, where homeworking is combined with time in the office, reconfigured to incorporate more breakout rooms and interaction spaces to facilitate team building and ideas sharing.
She notes: “I think there is a lot of eagerness to get back in person to rebuild those relationships.”
And so say all of us.