Contributor, Korn Ferry Institute
This Week in Leadership (Nov 29 - Dec 5)
Questions—and answers—about the Omicron variant's impact on organizations. Plus, critical year-end moves to boost your career.
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Matthew Breitfelder remembers the feeling. Businesses that produced half of the world’s goods and services were panicking that their costs would skyrocket. Workers feared their jobs would disappear. Some governments even worried the ways of life in their nations would disappear.
Breitfelder, an economist for the US Department of Commerce at the time, would join debates with high-level government officials and corporate chiefs. They all knew their world was in the midst of a major upheaval, and they had very few answers, just educated guesses.
But at least that time, the uncertainty had an end date: January 1, 1999.
That was the day the euro, the single currency used by 11 different countries, was launched. It’s hard to believe now, but there was considerable fear that all those countries giving up their sovereign currencies for one common one would overwhelm finance, labor, trade, even entire societies. But this fear had an expiration date; quickly, it would be pretty clear what problems and opportunities would emerge. Indeed, for all the fretting, Breitfelder says it all looks pretty quaint now. “The euro conversion was a huge issue for businesses to work through,” he says. But, he adds, it was just one thing.
It is definitely more than just one thing now. Millions sick in the COVID-19 pandemic, with no sure end in sight. A worldwide economic crash with no certainty on when and how businesses can recover. Millions out of work; millions more worried. Then came the death of George Floyd under police custody, and social unrest became the order of the day. Bill Conerly, an economist who helps forecast revenues for many companies, says he would always disagree with people who said the Great Recession or any other prior upheaval was the most extreme time ever faced. “Now, I’m tempted to say, ‘Actually, this is it,’” he says.
Nearly six months into the upheaval, most businesses still don’t know where things stand. In Korn Ferry’s May survey of more than 3,500 executives worldwide, 21 percent said they still don’t know how much their annual revenue will be impacted, and 25 percent of firms that have laid off or furloughed employees don’t know when they’ll bring any of them back.
The stakes of 2020 are a little higher for Breitfelder, too. He’s no longer just a modest government analyst, he’s the global head of human resources for Apollo Global Management, the massive private equity firm. The decisions he makes will impact not only Apollo’s 1,400-plus employees—he’s also trying to help the hundreds of thousands of people who work at the companies and real estate Apollo owns. He wants to give his colleagues ways to focus and the ability to make decisions with confidence. “Being a leader has always been a hard job, but now it’s harder than ever,” Breitfelder says. Here are questions many are struggling with—and what a wide range of experts tell us.
1. Will anyone want to go back to the workplace?
There were certainly some early hiccups. Overwhelmed tech networks, a lack of computers for workers, distractions from family members, and countless examples of people not adjusting to video conferencing (“You’re on mute!”). But many corporate executives were surprised at how quickly their employees adapted to doing their jobs remotely. In mid-March, one US insurer had 97 percent of its more than 40,000 employees working remotely within 24 hours.
The pandemic, while awful in so many ways, has shown that some work roles can be handled effectively remotely—and experts say companies must properly identify which ones. But the reality is also that many companies will want—and need—people back at a primary workspace. After all, it’s hard to run a car production line from a kitchen table. Before reopening, organizations should begin the laborious task of identifying which employees (including those currently on furlough) can return quickly—taking into account their roles and personal circumstances.
But it isn’t just a matter of telling people to come back. Organizations need to make workers feel comfortable returning, of course, whether the workplace is a factory, a warehouse, or an open office space. This will not be easy, says Melissa Swift, leader of the Digital Advisory at Korn Ferry. In fact, it’s likely to be the most challenging part as they modify workspaces then make sure to get feedback from employees on trouble spots. “People justifiably will want assurances that their workspace is safe, secure, and sanitary,” she says.
2. When will revenue planning be possible?
The short answer is: when there’s a vaccine.
That sounds flippant, but executives in industries such as travel, food service, retail, and others know that their business will be difficult to forecast until everyone feels comfortable being around other people. And for literally billions of people worldwide, that won’t happen until there’s a vaccine for COVID-19. “This has been my biggest challenge as a forecaster in 40 years,” says Conerly, the economist.
Before opening up any spreadsheets, leaders should start by asking one thing: What has not changed? Yes, the pandemic has disrupted nearly everything, from how things are made and delivered to demand for certain services. But it probably hasn’t dampened long-term demand for athletic shoes, for instance.
From there, figuring out a worst-case scenario is a good place to start. Conerly got one manufacturer to start a 2020 revenue forecast with the depressed sales projection it made for 2009, a figure the firm itself determined in 2008 during the height of the Great Recession. Then the manufacturer modeled out what the figure would be if it were one-third better and two-thirds better. After determining that top-line sales figure, a company can conclude what its costs, both fixed and variable, could be.
That sounds intuitive, but most firms instead focus on how much in sales they need to generate just to make payroll, says Conerly. Forecasting like that could lead leaders to overlook potential demand returning quickly or, worse, never returning.
3. So when will there be a vaccine?
The good news is that an actual working vaccine may be not so far away. There were at least 130 vaccines in development as of June, and large-scale testing of at least a few of them could be underway as early as the summer. Dr. Anthony Fauci, director of the United States’ National Institute of Allergy and Infectious Diseases, said he was cautiously optimistic that there could be a vaccine either by the end of this calendar year or in the first few months of 2021.
But it’s one thing to know a vaccine has a chance of working—it’s another to get it in the bodies of billions of people worldwide. The current global market for vaccines is estimated to be 3.5 billion doses, according to the World Health Organization. The current capacity, even if the world were suddenly to switch en masse from manufacturing existing vaccines to manufacturing one for COVID-19, won’t meet the need to vaccinate everyone. Pharmaceutical companies are cutting deals with governments around the world to provide billions of doses by the end of 2021, but that means nothing if their drugs don’t work. In short, experts say don’t expect a COVID-19 vaccine readily available until at least the middle of 2021 or later.
4. Will there be another COVID wave?
That depends on what you define as a wave. For some, the first wave isn’t over. A good example is the massive outbreak Latin America had after missing out on one in early 2020. Even nations that thought they had stamped out the virus—like South Korea—had hot spots flare up in regions.
But what experts really worry about is more of a tidal wave in the fall as colder weather returns to the northern hemisphere. Here, the pros are torn. Fauci, who was issuing dire warnings about the first wave, said it wasn’t inevitable that a second wave would hit the United States—if social distancing, mask wearing, and other vigilance were followed. Others, however, worry that the virus will come back in earnest no matter what people do.
That dichotomy was captured perfectly in late June, when the Organization for Economic Cooperation and Development released its twice-a-year economic outlook. It unusually presented two cases: one where the virus recedes and one where it resurges in late 2020. Both forecasts are equally probable, said OECD chief economist Laurence Boone.
5. How do you fix your supply chain?
No leader wants a repeat of early 2020, when critical supplies were stuck in other countries, finished products couldn’t get to consumers, or—worse—both. But one lesson that emerged from all this was that in this one area, it may indeed pay to be inefficient.
Most modern supply chains were optimized to maximize efficiency and minimize waste. COVID-19, unfortunately, exposed how fragile most supply chains are, with limited capacity to bounce back. Organizations will need to find a better balance between efficiency, agility, and resilience, says Bernhard Raschke, a Korn Ferry senior client partner and head of the company’s Supply Chain practice in Europe, the Middle East, and Asia. “They will need to accept the additional costs and cash implications involved in ensuring that; the cost of doing nothing will be significantly higher,” he says.
In practice, that means looking at supply chains and considering suppliers that are physically located closer to a company’s factories. Supply chain leaders also have to become better at advance planning and modeling scenarios, while others—most critically—must have a better understanding of the health of their suppliers. Being on open, candid terms with your supply chain colleagues at other firms (if it’s a supplier, it will also be the CEO) will not only help identify efficiencies during normal times but give leaders a heads-up if their supplier is in financial trouble, Raschke says.
6. When will we start rehiring?
To some degree, we already are! In one now-famous example this May, the US reported lower unemployment after gaining 2.5 million jobs. If governments around the world continue to loosen COVID-19 restrictions, companies, particularly in food service, retail, and construction, will bring back millions more employees.
Still, at the moment, experts caution against using the words “recovery” and “jobs” in the same sentence. As quickly as employers shed jobs at the start of the pandemic, there are many reasons why they won’t rehire nearly as fast. And don’t be surprised to still see headlines about layoffs through the summer and fall. Companies will be wary to bring back everyone at once, experts say, when they can’t figure out how much demand there is for their products or services.
Indeed, the spring of zero or severely limited sales has forced companies to continue looking for costs to cut yet again. According to Nathan Blain, a senior client partner at Korn Ferry and global leader of its Organizational Strategy and Digital Transformation practice, one firm that brought back some furloughed employees laid off employees from its corporate headquarters soon afterward. “We aren’t even close to seeing the end of the layoffs,” he says.
7. How do you handle compensation?
Early in the COVID-19 pandemic, stocks around the world were crushed, and experts in corporate pay thought organizations might radically alter their long-term incentive plans for executives. The great volatility since then has only kept that question in play.
More pressing, meanwhile, is whether to restore the pay cuts that companies imposed on multitudes of workers.
As of late May, 17 percent of the roughly 3,500 global companies Korn Ferry surveyed had instituted a pay cut across their organization. Experts advise that, barring some dramatic change in the business landscape, companies should restore those cuts by the end of the year. “As time goes by, the mindset of leaders is that they can ride out the storm,” says Tom McMullen, a senior client partner at Korn Ferry and a leader of the firm’s Total Rewards practice. Companies may have wiggle room on pay and bonuses because many have laid off employees.
A majority of companies also are still planning on paying out year-end bonuses to eligible employees, though at a significantly reduced level, he says. Bonus and incentive plans are largely playing out as designed. In good times, they pay out well. In tougher times, like now, they pay less.
8. How do you improve D&I?
As big as the COVID-19 pandemic has been, the United States was hit by a disruption of comparable size: mass protests about the treatment of Black people.
The killing of George Floyd in Minneapolis was, of course, the primary spark, but the protests soon turned toward how Blacks are treated throughout society. While tackling societal changes may be beyond the corporate world’s scope, change inside organizations is not. “If there will be long-term sustainable change, it has to come from the power source: that’s CEOs and board directors,” says Ayanna Parsons, a Korn Ferry senior client partner who focuses on board and CEO diversity, equity, and inclusiveness.
Acknowledging that systemic racism exists is the first step, and companies large and small have done that with messages of support to their Black customers and employees. There’s also something more basic: White leaders need to be able to get over their fears of people of color, says Andrés Tapia, Korn Ferry’s global diversity and inclusion strategist. After that, they need to make commitments to altering their hiring, training, and promotion practices—and follow through on those commitments.
Experts say that the issues around COVID-19 are no excuse to delay creating a more diverse, inclusive organization. Indeed, the benefits aren’t just altruistic. Data shows that companies with ethnically diverse executive teams are 70 percent more likely to capture new markets than their less-diverse peers and generate 38 percent more in revenue from innovative products and services.
9. How do you become a better leader out of this?
CEOs balance all of the above dilemmas while carrying the burden of dealing with their own uncertainty as well as that of the thousands of workers for whom they bear responsibility. “It has never been tougher to be a leader,” says Kevin Cashman, Korn Ferry’s global leader of CEO and executive development. The crisis, however, could be viewed as a new way to purposefully serve colleagues and customers and, in short, be a forge to creating better leaders.
Experts say leaders must be empathetic and show that they care about their workers’ circumstances and not just the bottom line. Strong leaders also will communicate with realness, clarity, authenticity, and regularity, Cashman says. They won’t be passive, but they will take moments to self-reflect and strategize, especially when circumstances seem to dictate that they must act immediately. The best leaders will show resiliency, be courageous, and be inspiring.