Recast plans based on Revised Risk Assessment
The coronavirus disease (Covid-19) has dealt a terrible blow to all of us. Such trying times require inspirational and innovative leadership. There are three de-risking strategies that can help us prepare for the pandemic’s aftermath.
First, industries need to recast strategic and operational plans based on a revised risk assessment. Every industry will face a churn. In the short-term, the pessimistic environment will increase the power of buyers, while surplus inventory will decrease the power of suppliers. The competition will intensify, as holding the capability of high-ticket items such as real estate and automobiles decreases. Substitutes, such as working from home and digitisation, will emerge, and entry barriers will be altered as governments will fast track many sectors.
Industries such as tourism, aviation, hospitality and travel will be devastated. This will create a domino effect down the value chain. Companies will face several unknowns. These will include the damage caused by Covid-19 in terms of human life, the duration of its impact, an increased focus on the climate crisis, negative market sentiments, deteriorating physical and mental health, and the time taken for the migrant labour to achieve pre-Covid-19 efficiencies. At least one annual cycle of first-time job entrants, both in the public and private sectors, will be thrown out of gear.
This is not about cost-cutting or downsizing of existing plans. All previous plans have lost relevance, with no certainty of events beyond a few months. Organisations will now need to factor in the chilling possibility of losing key leadership personnel, relationships and business partners in the aftermath of the pandemic.
This paradigm shift will require a drastic change in mindset and morale — the two key ingredients needed to sail through a volatile, uncertain, complex and ambiguous (VUCA) environment.
Second, industries must focus on realignment, retraining and re-skilling. The global economy was already tottering before the coronavirus crisis, but the pandemic has upended it. Companies will need new competencies and skills. Digitisation, automation and artificial intelligence will be accelerated in virtually every stream — education, health care, service industry, banking, entertainment, supply chain, transportation, food and government services.
This will require a realignment of business processes, changes in curricula, development of new faculty, and reorientation of existing employees. Many employees will be untrainable, and many subunits will become unsustainable. The cogs in the intricately-connected machine will have to be re-engineered while it is running.
Mindshare and resources devoted to learning and development are currently abysmally low in most organisations. There is no way companies can reorient their workforce with such inadequate capacity. If this supertanker needs to be turned around in time to save it, there has to be a single-minded focus on creating capability, executing unprecedented accelerated learning and realignment across all levels within the organisation.
Third, industries should focus on culture-building and preserving tribal knowledge. Culture works as the rallying call around which organisations coalesce as a team. This is the time for leaders to learn from the history of their companies that helped them overcome adversities. It does not matter how old the company is, because even start-ups have their stories as do their founders. Whether it is a global pandemic or personal trauma, the grit and resilience required to overcome it is the same. This is the time to reiterate those struggles, and lessons learnt from them.
A corollary to the storytelling organisation is the need to preserve tribal knowledge. During hard times, there is a tendency to downsize the “elder” and “redundant” employees.
In the late 1960s, game parks in Africa faced a peculiar challenge of plenty. Their elephant population increased exponentially, affecting the ecosystem adversely. Culling or systematic killing of the excess population was the only practical solution. The rangers resorted to the Darwinian principle of the survival of the fittest and culled the old, infirm and sick elephants.
This, however, wreaked havoc on the tribal memory and social structure of the herds. They could no longer find secret perennial watering holes during droughts or ancient routes across the game parks. When the young bulls noticed a sudden absence of elder elephants, indiscipline within the herd went up, leading to frequent fights, which were fatal for both the winner and the loser.
Younger bulls tried to rut before puberty and turned rogue, threatening other elephants and tourists. The abrupt removal of social milestones and role models turned an otherwise amicable and well-adjusted herd into a squabbling and dangerous mob.
Similarly, organisations will lose tribal knowledge, morale, relationships and social structures if they reduce headcount mindlessly. While some judicious whittling may be required, it is better to distribute frugality across the organisation than amputate large numbers or entire subunits.
Like any economic crisis, Covid-19 will transform the business environment beyond recognition. Several companies will be devastated, many will fold, some will survive, and a few will thrive. The category the companies find themselves in will depend on their leaders leveraging the lull before the storm to think through these risks and implement mitigation strategies.
This article was first published in Hindustan Times on 12th April 2020