CEOs and corporate leaders on the lessons they have already learnt — and what happens next
by Andrew Hill
and Emma Jacobs
ArcelorMittal won plaudits for ensuring people’s safety during the 2014-15 Ebola outbreak in Liberia — and keeping the steelmaker’s iron ore production going. It has called on veterans of that west African crisis to inform its reaction to coronavirus, from Luxembourg to the US. Yet the path ahead is still largely uncharted. Sometimes the group just had “to make a leap of faith and say ‘we’re moving forward’,” Bart Wille, ArcelorMittal’s head of human resources, says of the early response to the pandemic.
Now, managers are entering a new phase as some Asian and European economies emerge cautiously from lockdown. Consequences of decisions already taken, both at corporate and government level, should become clearer but the dilemmas faced by executives are arguably more complex. They need to consider how far to relax the tight hold some have exerted over decision-making; which of many ad hoc solutions to the crisis to preserve; how to take advantage of the potential opportunities ahead; and, in a few cases, whether the business has a future at all.
Some common themes unite the way in which leaders and managers have responded to the crisis so far.
One is the speed with which companies had to react. Some with operations in China had a foretaste of what was to come. Even so, they were obliged to accelerate and simplify decision-making on the hoof.
Glen Walter, president, North America, for Mondelez, the snack-maker, said the group started by allowing existing teams to take on the extra responsibility of tackling the crisis. “It was clear within 48 hours that this was different,” he says now. “If we were going to ask our supply chain leaders to deal with people’s safety, government protocols etc, they would be overwhelmed.”
Mondelez created a “framework that allowed a smaller central group to identify strategically a much smaller set of priorities . . . so leaders down in the organisation could move with speed and agility”.
Mr Walter also split the US leadership group. One part of his team handled people safety and related issues; another explored how to handle increased demand for Mondelez products, including hiring more than 1,000 people as temporary labour and pivoting branding and advertising to fit the new situation. “No matter what we do here, there’s going to be criticism,” he told colleagues, “but I’m going to err on the side of completely repositioning ourselves.”
Serco, the outsourcing group, faced a similar challenge. Some areas of its business — running leisure centres in the UK, or handling driver licensing in Canada — closed down completely. Others, notably supplying cleaners to overburdened hospitals, faced extraordinary new pressures.
The company has reduced the time it takes to employ people from five weeks to less than three. It has also redeployed staff between areas of its business: some 500-600 people were moved from the leisure businesses to support the contract to provide Covid-19 testing facilities.
Rupert Soames, Serco’s chief executive, says the most stressful moment came when staff, ill or obliged to self-isolate, stopped turning up for work. “When the rate of no-shows started to increase and go through the 25 per cent mark in health businesses, [I was] wondering where that was going to stop, because if it had gone north of 30 per cent, we would not have been able to cope,” he says.
Serco has also come under attack for alleged failures in operation of the testing system. “The pinch-point changes every day,” says Mr Soames.
Fighting to stay open
Other businesses fought to stay open as government mandated lockdowns took effect. John Roberts, founder and chief executive of AO.com, the UK online retailer of white goods, says: “The early government messaging was mixed: that created concern for people. It was working our way through that, while trying to keep the operational wheels on.”
At one point, he found himself arguing with a UK government official who was unconvinced that AO.com was providing an essential service. “Could you imagine turning off the national [electricity] grid?” Mr Roberts asked the civil servant, who responded, “That would be ridiculous!” “Well, what the f*** do you think that electricity powers?” he retorted. AO.com’s delivery vans were allowed to stay on the road.
Executives have also had to think about the pace at which they shutter their businesses, or whether to shutter them at all.
“What’s different is we’re having whole swaths of industry just close,” says Miles Roberts, chief executive of packaging manufacturer DS Smith. “It isn’t just a recession. It’s outside of people’s control: [we see] the helplessness of government and society to deal with this.”
Standard Industries, which owns a large US residential roofing business, bet on a “hot” shutdown, furloughing staff for only two weeks and keeping its US facilities ready to reopen. It has since decided to restore 80 per cent of the furloughed workforce and restart production. “Demand held up more than folks would have expected,” says David Winter, co-chief executive. “Others overshot and then struggled to get [workers and production] back up.”
Even so, Mr Winter says he found it hugely challenging making decisions that juggled the future of the business and the wellbeing of workers. There comes a point, however, “where you have to make tough choices. Everyone wants to be compassionate . . . but you have got to have a healthy company come out the other side.”
Understanding workers’ requirements — and the pressures on them — has become even more difficult for managers because of the imperative for almost all to work away from the office. Even in good times, senior teams are not in touch with the reality of their workforce’s conditions, says David D’Souza, membership director at the CIPD, the UK human resources association.
“If you are the CEO of a large organisation you are probably not managing work from a laptop perched on your knees,” he points out. Those with stay-at-home partners and nannies may not understand the challenge of those who have to combine work with childcare. So, the narrative peddled by senior executives that everyone has made the transition to homeworking smoothly is not matched by reality, he says. “There is a high level of stress and some people are really struggling, while concerned about jobs.”
Serco’s Mr Soames says: “What we’re having to get used to is having a situation where everybody has some form of conflict in their private life, at the same time as running a business at 90 miles an hour.”
Strong culture matters
Leaders lay stress on the importance of a strong culture. Jill Ader, chair of Egon Zehnder, the executive search group, says: “If leaders weren’t grounded in their firm values before, they won’t be now.”
Egon Zehnder’s board and executives revisited the company’s principles as the crisis hit and asked themselves “what would hold us strong and grounded and centred over the coming months and how can we come out of this with our heads held high, knowing we made the right decision however bad it gets?”
One clear conclusion — helped by the fact that the group has no external shareholders and came into the crisis in good financial health — was that Egon Zehnder would make no one redundant. “Ethically we feel it’s right,” says Ms Ader “If you lay anybody off, they won’t get [another] job.”
Providing “psychological safety” for staff is an investment in the future, she says. “If we lose the trust . . . that we’ve got, it will take years to win it back.”
Existing management teams have vastly increased the frequency of interactions, with the help of online tools. ArcelorMittal’s global management team, headed by chief executive Lakshmi Mittal, used to meet four times a year and now convenes three times a week. Its Covid-19 taskforce, including the Liberia executives, was talking every day until the end of April.
The crisis has put pressure on leaders to take the reins, in a top-down style that is unfashionable during calmer times. AO.com’s Mr Roberts says, “People look to leaders [and ask] ‘What’s the plan, Stan?’” He adds that he is “very hands-on, but only from an insight and guidance point of view, not a ‘doing’ point of view”.
The balance is hard to strike. If leaders try and retain too much control, or avoid decision-making, they cause bottlenecks and delay response, says McKenzie Lloyd-Smith of Cass Business School. He has written a forthcoming paper in BMJ Leader, the British Medical Journal’s outlet for clinical leadership, that looks at healthcare’s redeployment of expertise in the pandemic. “Leaders benefit from loosening control during crises, enabling staff to creatively and intuitively respond to an uncertain and unknown situation,” he says.
Serco’s Mr Soames has always operated a “loose-tight” system, delegating local decisions to the 150 to 200 managers of Serco’s 500 contracts. Mr Soames, a grandson of Winston Churchill, set a bulldog tone early on in video messages to staff, emphasising their role in sustaining vital public services. He says he told managers, that getting this crisis right was “the most important thing that you will do in your working life . . . you need to rise to the level of events and all these things you think you are good at: now you have a chance to prove it”.
At Mondelez in the US, Mr Walter says he tries to elicit feedback from his direct reports about whether his style is becoming heavy-handed by flagging his intentions clearly. He tells them: “This is what this [new framework] is designed to do and this is what it’s not designed to do. [If] my definition of a framework is feeling oppressive and very top down, you need to check us on it.”
As lockdown starts to ease, chief executives and managers are also beginning to think about how to handle the aftermath of the acute phase of the pandemic. One difficulty is assessing the relative contributions of managers and staff.
While it is fairly easy for managers to understand where the gaps in staffing are in retail or manufacturing, this is much harder in knowledge work. With so many job losses and furloughs, the CIPD’s Mr D’Souza says the tendency for “people to bluster [about] what they are doing” is high.
Joe Cainey, director of data science at Peakon, which measures engagement, says that anonymous surveys during the crisis, show that employees are anxious about how productive they are. “Companies are not very clear about the targets or their performance management framework,” he says.
“Part of the reason that CEOs think plans are going well is because no one wants to tell them they are not,” says Mr D’Souza. At a time of job insecurity, few people will dare raise their hand and admit to being underemployed.
One woman who did raise her hand was Brittany Becker, talent acquisition specialist at XOJET Aviation, a Florida-based private jet company. She admits she felt “vulnerable”, adding “the fear of the unknown is obviously scary”. Now she is working in maintenance administration. It’s “completely different. I was used to being the first impression of the company . . . a lot of my job previously was making judgment calls and now it’s really working by the book, since there really is no grey area in maintenance.” She also had to learn new software and terminology quickly, though believes it has given her greater understanding of a different department.
Cass’s Mr Lloyd-Smith says prior research suggests that following an urgent crisis there is a post-crisis lull of energy and motivation as workers suddenly lack critical purpose. “There can also be a sense of envy from those who have played important roles, but are not celebrated.” For example, those who continued to work hard in their normal roles, keeping the organisation afloat, felt disheartened that they had received little praise, compared with those in frontline jobs.
Business leaders certainly believe some of the changes pushed through at speed during the crisis will endure. The need to work remotely and use virtual collaboration tools has made them and some of their teams more productive.
Egon Zehnder’s Ms Ader believes innovation departments will have to redefine themselves as it becomes clearer how ingenious solutions to crisis problems were spawned throughout organisations. Mr Winter at Standard Industries has been able to accelerate a move to more digital selling of roofing materials: “We’ve increased adoption with folks who would otherwise have been more reluctant. We’re hopeful this is one of the kinds of things that will stick when we come out of this.”
After the crisis
Mr Soames says he hopes that after the crisis, “people will value public services more. They will value people who deliver them more. They’ll be nicer to the people who clear their dustbins, to cleaners”. Whether they will be paid more, however, is still “a case of supply and demand”, he says, with cash-strapped public-sector clients likely to be under huge budgetary pressure.
On the horizon is the looming prospect of global recession, which will thrust even managers of the companies that survive into a new round of difficult decisions.
Serco has given a couple of its executives responsibility to think through the implications of larger government deficits and the need to catch up with work that healthcare clients delayed to deal with coronavirus. But Mr Soames says his managers are spending more time “rushing around” dealing with immediate priorities: “On the whole, we don’t want the majority of the organisation sitting about thinking: most are up to their ears ‘doing’”.
Similarly, Mr Roberts of DS Smith says that he has to concentrate on “the here and now”. “We’re trying to untangle, when this lockdown relents, what this means . . . it’s going to be a future of consumption [but] what is that going to look like? . . . We have moved out of the phoney war to ‘this is real’ and we’re right in it now and we have to focus on really keeping the company together.”
Above all, he is aware that DS Smith, so far, is one of the lucky ones. He spoke to one customer, a successful family-owned German industrial company, which employed 4,000 people but had had to furlough 3,800. “We talked to them about starting up [again]. They said: ‘We don’t know whether we have a business’.”