How to make big, old firms act fast

LIKE other CEOs, Cees ’t Hart instinctively knew that the Covid-19 pandemic required him to manage Denmark’s Carlsberg differently.

“The crisis has raised a lot of questions,” he told Danish business newspaper Børsen in May 2020.

Rather than centralise Carlsberg’s response to those questions, he saw opportunities to explore a more autonomous global management structure and find a new way to develop and implement strategy.

Decisions had to be made on the ground, quickly, so regional leaders were given the power to act fast, a fact noted in Carlsberg’s 2020 annual report. Financial results, despite the drop-off caused by the pandemic last year, are now back to 2019 levels.

Carlsberg is what I define as a legacy company. These are businesses that are more than 50 years old, have well-established brands and market positions, employ more than 5 000 people, and are spread around the world. Their legacy consists of decades of experience and accumulated insight into the markets in which they operate. They have gone through numerous transformations and adapted to multiple reorganizations and changing management principles.

How did such organisations do strategy differently as a result of the pandemic? They flipped their hierarchies and learned to listen in a new way. Prior to the spread of Covid-19, senior executives in large legacy companies would often say that their organizations were far too complex for everyone to be involved in strategic discussions and decisions.

That has changed. The nature of the crisis has shown that what counts is alignment on the same strategic agenda coupled with the autonomy to act. Working with three European multinationals during the pandemic, I saw five significant attitude shifts that showed how deeply the crisis has affected the way these types of companies do strategy.

Shift in mindset: From implementation to

integration

Many large companies have long regarded strategy development and strategy execution as two separate things. Before the pandemic, top management was generally seen as responsible for developing strategies, while middle managers and employees were responsible for executing them. When something didn’t go as planned, senior managers talked about the execution gap and failed implementation, but they never connected the organisation’s difficulties implementing strategies with the way they had been developed.

With the advent of the pandemic, executives realised they had to change tack. Instead of well-designed strategies plotted out in sealed boardrooms, they needed strategies dynamic enough to receive market feedback and flexible enough to evolve. That called for a much shorter distance between decision and action, and vice versa: changes in the market had to be captured immediately in order to make relevant strategic decisions.

For example, before the pandemic, one family entertainment company was exceptionally good at building a consistent brand that is known by people from all walks of life. It also invested heavily in building organisational agility and becoming a digital consumer company. But like other companies, it made a clear distinction between strategy development and strategy implementation, and it didn’t have a systematic and structured approach to aligning people on the same strategic agenda.

During the pandemic, the team that was responsible for building organisational agility in this company went through a fundamental shift in mindset. Instead of asking how to implement strategic decisions made by senior management, they asked how to integrate strategy into every employee’s everyday actions.

They found that employees were overwhelmed with directives that stalled action, so they pared down new initiatives. This led to a significant change in how decisions were made and cut the time to action because it brought clearer focus.

Shift in focus: From communication to

conversation

Isolated in their home offices during the pandemic, most executives turned to one of the oldest and most well-worn assumptions within management: that organisations need as much communication from top management as possible, especially in times of crisis.

They understood that the more complex the company’s situation, the more people must be involved in identifying and solving the most important strategic problems. For example, one large global water technology company realised it would need to upskill its people to adapt to the situation. — Strategy & Business (Online).