Management: what business learnt in the time of coronavirus
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Approaching the end of the most punishing year of their careers and heading into an uncertain new year, business leaders are united in one belief: the volatility of the past 12 months is far from over.
“I spend a lot of my time looking at all those spinning plates out there,” says Sean Menke, chief executive of Sabre, the flight booking and hotel reservations technology company, whose prospects are tied to the unpredictable fate of the travel industry. “You’re trying to do a forward calculation of what airline capacity is going to be like in the next two years. You think about the impact on travel agencies and the hospitality scene. If you’re dealing with a slow recovery, what are the other options to grow your business?”
Next year promises little respite. It will take time for vaccination programmes to tame coronavirus. Chief executives and their teams will continue to have to contend with health risks to staff, operational disruption, and the unnatural and often novel strains of hybrid working, with some staff located remotely and others in the office or workplace.
What was an urgent crisis in February and March, which drew on executives’ reserves of ingenuity, fortitude and judgment, has turned into a gruelling marathon. The fast-changing mix of threat and opportunity is drawing on different skills, at a time when senior managers’ own strength is depleted by months of pressure.
Ilham Kadri, who runs the Belgian chemicals group Solvay, told a recent Financial Times conference: “This crisis has been a stress test for all of us — for government, for authorities, for families, for companies and industries, and for the leaders we are.”
Jeff Immelt, who, as General Electric’s chief executive from 2001 to 2017, led the conglomerate through the aftermath of the September 11 terror attacks, Sars, and the financial crisis, advises corporate executives to brace themselves for further shocks. GE was still dealing with the implications of the credit crunch three years after its peak, he says: “It just came at you, wave after wave after wave . . . You think you’re in day 180 of Covid, but you’re actually in day one of wave two. You have to continuously adjust and I find people have a hard time with that.”
Veronica Hope Hailey of the University of Bath, who has spent decades studying organisational change, says executives are now entering a “liminal space where there’s quite a lot of uncertainty”. She has talked with scores of managers since the pandemic began and says “the biggest risk is that these people are very, very tired”.
The four horsemen of vuca
Since the 1980s, consultants, pundits and academics have fed executives advice about how to cope with volatility, uncertainty, complexity and ambiguity, or vuca. The acronym was taken by business from the US military, which used it to describe the shifting post-Cold War landscape. Company heads were urged to build resilience, agility, and flexibility.
Yet, most continued to lead businesses as usual, through some version of a top-down hierarchy, until the four horsemen of vuca charged over the horizon in the first quarter of 2020.
“The crisis was so quick to arrive that it was impossible for the leaders who like to do everything to do everything,” says Michael Reyner of headhunter and advisory group MWM Consulting. “Even in a moment of real crisis, the best leaders I saw realised they couldn’t make every decision: it was too fast moving and complex.”
The hallmarks of successful leadership through this acute phase were adaptability, frequent communication — with staff, but also with suppliers, regulators and shareholders — and an acceptance of multiple shifting scenarios. Many bosses, working from home in lockdown like their teams, applied a more human touch, in contrast to the aloof leadership style that tended to suffice in office environments in more orderly times.
The pandemic “galvanised a different type of leadership”, Margaret Heffernan, entrepreneur and author, told the Global Peter Drucker Forum on management in October. The question is how long that is going to last “as we enter the era of crisis: the economic crisis that awaits us, the crisis of inequality, the crisis of employment and the climate crisis that we’re already in. I really wonder how these leaders are going to cope.”
Many chief executives initially took a more direct management role than they were used to.
For instance Jeff Bezos, Amazon’s founder, started joining daily calls on the minutiae of inventory, Covid-19 testing, and day-to-day communications. Organisations, from IAG, owner of British Airways, to Harvard Business School, delayed planned transitions to new leaders to allow seasoned heads to tackle the virus’s immediate consequences.
In India, as soon as Narendra Modi, prime minister, finished his speech in March announcing a lengthy lockdown, Ashish Chauhan, head of the Bombay Stock Exchange, tweeted that the exchange would open on the next trading day. “Exchange CEOs are pretty hands-on usually,” he points out. In the following weeks, though, with colleagues confined to their homes outside Mumbai, he found himself going into the head office “to fill the void” and communicate directly with state and central government and contact banks to ensure the smooth settlement of trades.
In such situations, “leadership at the top becomes more embedded in the organisation. It has to be to get the organisation through it,” says David Gibbs, chief executive of Yum Brands, owner of the global fast-food franchises KFC, Taco Bell and Pizza Hut, whose restaurants worldwide have endured a switchback of on-off lockdowns and shifting safety measures since the pandemic began.
His company, which usually runs franchises in 150 countries on a decentralised model, created a framework based on simple goals such as the need “to deliver safe, affordable food, in a low-contact manner”. “You [often] worry about overshadowing the leadership of your different brands and business units . . . [But] in this case, we wanted to make sure that everyone understood that the Yum! leadership team was focused on this issue.”
Yet, senior executives had to accept that many management decisions were best taken on the front line and not in head office — often reversing a more traditional top-down line of command. “What the branch manager says on hand sanitiser is more important than what Boris Johnson says on hand sanitiser,” in the words of Sara Bennison, chief product and marketing officer of Nationwide, the UK building society, quoted in a report on trust and leadership prepared for the Chartered Institute of Personnel and Development, an association of HR directors.
“Smart leaders realised they had to make the judgment calls and do that without data,” says Prof Hope Hailey, co-author of the report. “This wasn’t the place for lone heroes or heroines: the only way they could make these calls was by operating as a team and getting intelligence from inside and outside the organisation and from the bottom levels of the organisation.”
Companies that were already run on a model of devolved management say their hands-off style worked well — and continues to do so as they face future uncertainty.
Haier, the Chinese appliance-maker, is structured as an umbrella organisation for many “microenterprises” that take responsibility for anticipating and solving customer problems. Haier bought GE Appliances from GE in 2016 and has reformed its more rigid management model.
Kevin Nolan, GE Appliances’ chief executive, says that apart from the initial call to shut down production temporarily, he let most other decisions be taken at plant level. Mistakes — one manager at first rigged up shower curtains as inadequate safety barriers — were quickly corrected.
“I saw other companies come out with big books of ‘here is how you have to behave’. None of that happened here: it happened in real time on the ground, plant managers talking to plant managers, sharing ideas,” he said in an interview for Insight to Impact, a leadership programme.
Similarly, coronavirus exposed the strengths, and some weaknesses, of the system used by WL Gore, the US-based materials science group behind Gore-Tex fabric. The company operates a “lattice organisation”, with few named leaders. Small teams self-organise to meet challenges and exploit market opportunities.
Annemarie Nicholson, a strategic planner for the fabrics division, based in Scotland, says communications and important serendipitous face-to-face contact with colleagues have become harder. But “those who needed to get involved stepped up”.
Everywhere, the pressure has exposed some executives who were not resilient enough to cope — and at the same time uncovered others who were surprisingly adept at handling uncertainty.
“There’s leaders who just freeze and aren’t sure what to do; there are leaders that make the initial move — shore up the balance sheet, extend debt maturity — and then they don’t do anything thereafter,” says Sabre’s Mr Menke. “And there’s a final group that does the financial things but understand that they’re in a world of transformation, and lean into that transformation.”
As the first wave of lockdowns eased, chief executives started to step back from day-to-day operations and revert to a more strategic approach looking for opportunities as confidence recovered.
From July, Mr Menke started “looking into the future about what we need to be doing with the organisation”, pursuing a long-planned restructuring. Even then, he found he needed to pace himself and show awareness of the strains his staff had undergone. When he pressed too hard, he was told by his lieutenants to back off.
The skills some business heads have had to develop over the past nine months have parallels with those that military commanders draw on as they shift from peace to war.
Officers spend peacetime “guessing about the future of war”, retired US general Stanley McChrystal explained at this year’s Drucker Forum. Once a conflict starts, however, “the leader has to be able to gather information with extraordinary speed; [has] got to be able to take doctrine, take habits, take cultures of organisations, and change them almost immediately, which means it has to be changed across the organisation. It can’t be top down.
“The [military] leaders that we have grown for bureaucratic processes, they’re brave, they’re smart, they’re disciplined, but most of them are not ready for that onslaught of data that tells them [something] different from what they expected,” he added.
In future, Ms Heffernan says bosses will have to draw on the skills of three groups: artists, who “keep moving and recognise that they often fail”; activists, “comfortable enough with uncertainty not to promise certainty where there is none”; and doctors, “driven by a passion at least to do no harm and at best to search for cures”.
Chief executives and boards that Prof Hope Hailey advises are already having different conversations about leadership: “Remarkable things happened in this crisis: which ones do [we] want to hang on to?”
“We are at this point where an awful lot of what we were taking for granted [as leadership] has become unfrozen,” she says. There is an opportunity to pursue a more inclusive, purposeful approach and effect a real cultural transformation in how companies are run — an opportunity she believes was squandered in the wake of the financial crisis.
At WL Gore, Ms Nicholson says the “all hands on deck” frenzy of the first wave of the crisis has dissipated, but she adds “the big challenge is we don’t know when and how we’re going to come out of this and normalise. What the future looks like is the big unknown.”
Yum!’s Mr Gibbs offers an answer: simply returning to normal will not be possible. “If there’s going to be no burnout of employees, focus is going to be critical”, as it was at the height of the pandemic when “rolling out the next great product became a secondary consideration to making sure our businesses continued to operate safely for their customers and communities”.
He aims to maintain an open style that does not pretend to know all the answers. “Extreme transparency mattered during the time of crisis,” he says. It was “powerful . . . to share everything, including saying ‘We don’t know’”.