HOW TO BE A RESILIENT LEADER
Five fundamental leadership qualities can lessen the impact of the global pandemic — and enable your organization to emerge stronger.
of pandemic-related challenges and risks, business IN THE FACE leaders are rightly concerned about how their companies will be affected and what to do next. We have pooled the insights of Deloitte thought leaders around the world to provide practical insights for leadership teams in taking appropriate action.
We believe that five fundamental qualities define resilient leadership — and that they will distinguish successful leaders as they guide their enterprises through the COVID-19 crisis and its aftermath.
1. Design From the Head and the Heart
In times of crisis, it is essential to recognize the impact that uncertainty is having on the people that drive an organization. At such times, emotional intelligence is critical. In everything they do during a crisis, resilient leaders express empathy and compassion for the human side of the upheaval — for example, acknowledging how radically their employees’ personal priorities have shifted away from work to being concerned about family health, accommodating school closures and absorbing the human angst of life-threatening uncertainty. Resilient leaders also encourage their people to adopt a calm and methodical approach to whatever happens next.
The first priority should be safeguarding workers, ensuring their immediate health and safety, followed by their economic well-being. A survey of human capital policies and practices in China at the onset of the COVID-19 outbreak, conducted by
Deloitte China in January 2020, revealed the following steps companies and not-for-profit organizations were considering in response:
• Ninety per cent said that it was an urgent requirement to provide their employees with remote and flexible work options.
• Companies in industries facing the biggest constraints on providing flexible and remote working options — such as energy, resources and industrials — were focusing on providing stronger physical protection in the form of cleaner and safer work environments and personal protective equipment.
• More than half of government and public service entities were focusing on addressing employees’ psychological stress.
Designing for the customer’s heart starts with understanding how that heart may have changed dramatically from what you perceived before. Consider that in a crisis, customers often revert down Abraham Maslow’s Hierarchy of Needs to basic desires such as safety, security and health. How does the nature and tone of your customer communications and the sensitivity of your customer experience need to shift in the midst of the COVID-19 crisis?
Customers relish the same kindness and grace towards them that you show your workers. They are struggling through the crisis, too, and expect empathy. Simple things can be big things.
Ubereats is asking customers if they want food left at the door rather than passed by hand. Many airlines have emailed customers to describe their enhanced plane decontamination efforts. Some restaurants have encouraged their wait staff to visibly use hand sanitizer to assuage patron concerns.
Yet for the sake of those same employees and customers — as well as creditors and investors — resilient leaders must stay vigilantly focused on protecting financial performance during and through the crisis, making hard, fact-based decisions. There are several critical steps in protecting performance:
• Centralizing decision-making in fewer nodes for consistency, speed and especially decisiveness — especially since uncertainty can paralyze some decision-makers.
• Cataloguing the sources of cash the company has available, including unused credit lines (committed and uncommitted), revolving credit facilities and related borrowing restrictions; new sources of credit, such as fixed credit facilities to refinance existing revolvers; excess working capital (e.g. via inventory reductions, extended payment terms); equity infusions; etc.
• Rapidly articulating economic scenarios across all served markets, generally scaling scenarios from mild to moderate to severe.
• Modelling the projected financial impact of the scenarios on profitability and especially liquidity. This includes assessing the probability of violating debt covenants and terms, and determining when available cash sources should be drawn.
• Defining non-negotiables: Which products, services, customer segments, business lines, employee segments and so on are the most critical to ongoing and future cash flow and should be preserved (although even those non-negotiables may be impacted if scenarios tend to the more severe).
• Identifying the levers leadership has available (within the boundaries of the non-negotiables) to impact financial performance, such as discretionary expense reduction, hiring freezes or temporary plant closures.
• Determining the actions to take now, and agreeing in advance on the hierarchy of levers to be pulled as the severity of scenarios unfolds.
Companies that have developed a ‘downturn-planning playbook’ have a head start, since many of the scenarios, projections, nonnegotiables and levers will have already been articulated and may just need to be adjusted for present circumstances.
2. Put Your Mission First
Amid a crisis, a company’s purpose should remain steadfast: It is never negotiable. Purpose is where the head and the heart unite. While many organizations today have articulated a purpose
Leading companies adopt a policy of shorter, more frequent communications based on what they do know.
beyond profit, purpose risks getting ignored in day-to-day decisions. In a recent survey, 79 per cent of business leaders believe that an organization’s purpose is central to business success — yet 68 per cent said that purpose is not used as a guidepost in leadership decision-making processes within their organization.
Making decisions that tie back to your organization’s purpose is particularly important during a crisis, when companies are under increased pressure and stakeholders are paying close attention to every move. We know from research on purposedriven organizations that they tend to thrive during challenging environments for the following reasons:
• When companies PURPOSE CULTIVATES ENGAGED EMPLOYEES. are centred on an authentic purpose, employees feel that their work has meaning. Research shows that employees who feel a greater sense of connection are far more likely to ride out volatility and be there to help companies recover and grow when stability returns.
•
PURPOSE ATTRACTS LOYAL CUSTOMERS WHO WILL STICK WITH YOU
Eight in 10 consumers say they are more loyal IN A DOWNTURN. to purpose-driven brands, which can help sustain customer relationships in a downturn and beyond.
Com• PURPOSE HELPS COMPANIES TRANSFORM IN THE RIGHT WAY. panies that are guided by their purpose when they face hard decisions have a sharper sense for how they should evolve, and their transformation is more cohesive as a result. When purpose is put first, profits generally follow; when profits are first, results can be more elusive.
3. Aim for Speed Over Elegance
Perfect is the enemy of good, especially during crises, when prompt action is required. Most companies do not have the infrastructure to deliver perfect information or data, in real time, on operations that could be affected during an epidemic. There will be many ‘known unknowns’ in the days and weeks ahead. Are you ready to accept that you’ll need to act with imperfect information? Collect as much proxy data as you can to inform your decisions so you’re not flying blind. When the crisis is over, you will have the opportunity to conduct a thorough review to see how to improve information quality in future crises — but during this one, you will likely have to set aside that kind of analysis.
As leaders confront situations that were never anticipated, this is also a time to encourage more initiative and decision rights at all levels of the organization, trusting that the teams and individuals who are deeply embedded in a specific context may be in the best position to come up with creative approaches to addressing unanticipated needs. Make the objective clear, but allow more flexible local autonomy.
To achieve the overall objective of reducing disease trans
mission risk in its stores, for instance, one coffee shop chain gave store leadership the flexibility to reconfigure tables to maintain social distancing. The key, of course, is to ensure that all workers are clear on the objectives that matter and the guardrails that cannot be crossed. This approach may have value beyond the current crisis as organizations learn to conduct business in more and more uncertain times.
4. Own the Narrative
As we have seen, there is a fine balance between communicating in advance of having all of the facts and being late to comment. We have seen leading companies adopt a policy of shorter, more frequent communications based on what they do know — with details filled in later. In the absence of a narrative from you, your stakeholders may start to fill the void with misinformation and assumptions. Setting a regular cadence with a clear voice is critical. Incomplete or conflicting communications can slow the organization’s response rather than providing better guidance.
In a time of crisis, trust is paramount. The following formula emphasizes the key elements of trust for both individuals and organizations:
Trust = Transparency + Relationship + Experience
Trust begins with transparency: Sharing what you know and admitting what you don’t. It is also a function of relationships: Some level of ‘knowing’ each other among you and your employees, your customers, and your ecosystem. And lastly, it also depends on experience: Do you reliably do what you say?
In times of growing uncertainty, trust is increasingly built by demonstrating an ability to address unanticipated situations and a steady commitment to address the needs of all stakeholders in the best way possible.
It’s also important to recognize and address the emotions of all stakeholders. This is not just about charts and numbers. Narratives can be powerful ways to acknowledge the fears that naturally surface in times of crisis, while at the same time framing the opportunity that can be achieved if stakeholders come together and commit to overcoming the challenges that stand in the way.
In the midst of crisis, Marshall Mcluhan’s famous observation that “the medium is the message” rings even more true. Many psychologists assert that the majority of communication is nonverbal. E-mails, texts and tweets miss the voice intonation, eye contact, and body language essential to trust-building communications. Encourage the use of video — especially to connect emotionally with your teams — instead of e-mails and other forms of communication. Just as you may feel overwhelmed by your inbox, so do your employees.
5. Embrace the Long View
Resilient leaders stay focused on the horizon, anticipating the new business models that are likely to emerge and sparking the innovations that will define tomorrow. Any period of volatility can create opportunities that businesses can leverage if they are prepared. In the case of COVID-19, organizations that take a more assertive and longer-term approach can spark innovations that will define the ‘next normal’.
A Harvard Business Review assessment of corporate performance during the past three recessions found that, of the 4,700 firms studied, those that cut costs fastest and deepest had the lowest probability of outperforming competitors after the economy recovered. In other words, the group most likely to emerge from the recession as winners were those that struck the right balance between short- and long-term strategies by investing comprehensively in the future while selectively reducing costs to survive the recession. While the importance of this balance may appear obvious when the economy is strong, amid the pressures of a downturn, companies are particularly susceptible to a shortterm mindset. Here are three principles to embrace:
COANTICIPATE STRUCTURAL CHANGES AND THEIR LASTING EFFECTS. VID-19 is likely to accelerate fundamental and structural changes that were inevitable in any case — but are now likely to occur far faster than they would otherwise. Consider that the ‘virtualization’ of work — undertaken from home or elsewhere, with remote collaboration and reduced travel for physical colocation — has been evolving steadily. Today, all around the world, businesses — and their talent — are learning to communicate, collaborate and coordinate on virtual platforms, and understanding the increased efficacy and efficiency such modalities of work can provide. Virtual work and collaboration tools are likely to create a booming new market space.
These structural changes also may require you to alter your strategy and planning. For instance, if you shift your staffing model to allow more telecommuting or remote work, how could that affect your real estate portfolio? Are there cost savings you can achieve by shrinking your organization’s physical footprint? What sort of new liabilities or challenges might develop if
Market shapers — those who shape the future of their industry rather than adapt to it — will emerge stronger.
you adopt a decentralized work model? Will you need stronger cybersecurity protocols? What changes will you need to make to management training and communication policies to run a more distributed workforce? What upgrades are required for video conferencing and network availability?
The necessity of operating differently gives businesses the opportunity to understand what they can do. One company, for example, tested the ability of its finance staff to perform their monthly close while working from home to determine if the company could meet its quarterly financial reporting requirements if conditions persisted. Once you discover that you can do things differently, you may want to consider whether you should continue doing so.
Shaping strategies can become a sigBECOME A MARKET SHAPER. nificant source of new value creation emerging from unanticipated crises. The market shapers — those that shape the future of their industry rather than adapt to it — will emerge stronger. Companies emerging from this crisis and shifting into the ‘thrive’ time frame will take part in this reinvention, either by identifying and solving for new opportunities, aligning themselves with the future-shapers of their industry or actually becoming the nexus of the next ecosystem while their competitors focus on the crisis.
Consider the promise of additive manufacturing. Although 3D printing has been growing, existing global supply chains and the wage arbitrage opportunities they provide have provided powerful economic advantages. The status quo has already been tested by growing geopolitical tensions and protectionism, and growing concern about carbon footprints. Now add the impacts of COVID-19, and it is easy to anticipate huge investments in new additive manufacturing technologies that bring production back much closer to consumption — creating entirely new markets to be shaped.
Likewise, structural market BUILD FUTURE BUSINESS MODELS. changes and newly shaped markets prompt new business models. Imagine the creation of public-private partnerships to provide redundant infrastructure in a particular geography — an initiative at least one government agency already has sponsored in anticipation of circumstances such as these. How will emerging trends, structural changes and new markets redefine how your company and industry will be organized tomorrow?
For example, consider the growth in adoption of AI and robotics, which already are playing a key role in detecting and treating COVID-19. Ai-equipped tools are scanning social media to analyze virus progression in real time, recognizing viral pneumonia in chest CT scans 45 times faster than humans with 96 per cent accuracy, and conducting molecular synthesis and validation in days rather than months or years.
Meanwhile, robots are disinfecting quarantined patient rooms to reduce possible transmission. AI also could accelerate drug discovery, preclinical drug development, and phase 1 clinical trials in which safety and toxicity could be tested with Dna-on-a-chip. Imagine how future healthcare models might change if the typical decade-long pharmaceutical research and development cycle could be slashed by over half. What’s more, POST-COVID-19 shifts in popular opinion could suddenly enable changes in the regulatory framework concerning fast-track approvals.
In closing
COVID-19 is a crucible within which resilient leadership is being refined. Acting without perfect information, often with only a few hours or days to spare, leaders will have to guide their organizations through myriad decisions and challenges, with significant implications for their stakeholder system.
Clarity of thinking, communication, and effective decision-making will be at a premium. Leaders who can best exhibit this clarity will inspire their organizations to persevere through this crisis, positioning their brand to emerge in a better place, prepared for whatever may come. The good news is, crises like these lead to opportunities for learning and deepening trust with all stakeholders, while equipping organizations for a step change that creates more value not just for shareholders, but for society as a whole.