I must start out by offering my condolences to those who have lost love ones or have a friend or family suffering. It may be that you have seen a deluge of commentary on what we could have done better and what we should be do doing now. I want to focus on the what all those affected by the crisis would want, that is to use the experience to build better businesses and society. The second of the blogs focuses on business.
Business has always known that change is not only inevitable but essential to prosper over the medium and long term. It is well accepted that change that is driven by catastrophe happens quickly. The famous ‘burning platform’ focuses the mind! COVID-19 has been that catalyst for change. It has also exposed businesses who have not rationally assessed catastrophic risk very publicly akin to that saying the ‘Emperor has no clothes on’. Whether cyber-attack,fraud, pandemic or another risk that threatens a business’ very survival they cannot be ignored any longer.
Governance and risk will be looked at through a new lens because of COVID-19. Capital adequacy is a term used in capital market, but its applicable to all business sectors. Some sectors like travel and entertainment have been exposed as inadequately capitalised to withstand a known catastrophic stress event.
All firms review and report on risks in their annual accounts and regulatory submissions as well as at the board. All too often these have been ‘tick box’ exercises or a process of going through the motions. Pandemic is now known to have been on national risk registers for some time and should have been on companies. Those risks that seem remote will move from being dismissed to assessed. While all risks do have a probability factor that needs to be considered, and often is, what seems to have been missed is the binary nature of some risks. If a risk happens,what are the contingency plans and mitigation, and can the firm survive? Enterprise risk is on the front line from now! More on this in my next blog.
One of the biggest impacts has been on the workplace because of having to implement overnight ‘home working’. All firm are assessing what the workplace means today. From a family perspective the transition to home working has been overwhelmingly positive, providing a much better family experience and work life balance. From the business perspective, it demonstrated that most aspects of work can be done remotely supported by good collaborative tools. Productivity appeared to rise with the elimination of commute time and what seems to have become shorter meetings. It also appears meeting start more punctually, saving all attendees time!
Offices have moved in recent years to be more open spaces to create team efficiency and a sense of inclusion but are still very costly. There is still a cache about the location and appearance, but these factors have never been about work productivity. They are much more marketing and image factors. In the future we will see smaller more convenient locations for teams to meet. We have still not yet seen the emergence of the optimum home working, with local team gatherings,to centralised workplace model.
In my view the future will be hybrid with homeworking a significant factor for most, particularly in a service economy. Firms will need to help team members with the home working kits, including desks,chairs, printing and Wi-Fi. There may well be an emergence of more localised business services shops so more sophisticated printing and copying can be done nearer home. Much like what exist with Fedex shops, particularly in the US, but generally only in business districts.
During the crisis, the isolation felt by young workers who are often restricted to small apartments or flat-shares has been highlighted. Home working is often not practical in such places where there is no space. Developers of apartment blocks should look at this as an opportunity to incorporate co-working We-Work style spaces into the design of their new buildings.
Effective leadership and management approaches for the virtual world of work are yet to become clear, but some of the principles are. Team communication has always been important, but now even more so than before. This must be bilateral, and team based. Organisations have always needed clear objectives and KPI’s, but even more so in this virtual world to provide clarity of focus for the organisation. Culture has been acknowledged as a key ingredient of building a sustainably successful company. In this virtual, post COVID-19 world, one is not able to rely on seeing what is going on but needing to rely on the culture.Open, transparent, and self-motivated; not requiring direction and demand to operate. Team induction will have to be transformed and systematically addressed to ensure new recruits get a feel and understanding of the culture,the processes and unfortunately still too often the politics.
Business travel which became the default norm will be dramatically limited to essential,when the opportunity reopens. Understanding why travel was necessary in the past will help identify what may become the new essential. One part of the travel would allow leaders and teams to get to know each other. This process should not stop but be reset with virtual round tables with small groups. Much travel for conferences and exhibitions was to network! There was also an education element to many conferences and a sharing of experiences. The physical opportunity has gone for now and will likely be much smaller in the future. So,businesses must dramatically improve their online profile and engagement to address the awareness factor and establish and participate in online networks.Twitter, LinkedIn and interactive video-based web sites all play their part.Much of the conference education and knowledge sharing can be effectively addressed online.
Businesses that have a physical supply chain will need to rethink the continuity of supply. Robotics and automation destroy the historic labour arbitrage justification for going to low cost manufacturing location. Manufacturing closer to markets with the use of capital and reduced logistics time and cost would appear to be the future.
The ESG movement was rightly on the move in 2019 but with the combination of COVID-19 and the horrific images of racial abuse we have all seen, have been a huge catalytic effect on all aspects of ESG. COVID-19 has provide a ‘free environmental dividend’ during lock down with the significant positive impact on the environment. The reassessment of the, largely unintended, unconscious bias of our collective history has put diversity and pay rationalisation centre stage. Time will tell if it has catapulted us towards a new acceptable norm and there is-much work to do here. All businesses must seize the ESG opportunity it will pay dividends for shareholders.
Governance of both public and private bodies is under review and re definition. It is no longer acceptable to turn a blind eye to malpractice, inappropriate behaviour or excess risk taking.
Many areas COVID-19 pain and suffering have opened our eyes to how we might run businesses in the future. So, let us all use COVID-19 as a positive catalyst for positive change!