Michael Distefano is Korn Ferry’s president, Asia Pacific, and a member of the firm’s Global Operating Committee; Nathan Blain is Korn Ferry’s global solutions leader of organizational strategy.
A sacred corporate ritual may be coming to an end: the demise of the annual planning process.
Each year, CEOs set targets, build teams, allocate resources, apportion budgets, and assign accountabilities. In turn, their direct reports replicate the process and cascade the exercise all the way through to the front lines of the organization.
Leaders like how annual planning drives visibility, predictability, and alignment up and down the organization. And they appreciate the comfort of being surrounded by teams that are dedicated to achieving their objectives.
This long-tenured approach to planning has survived wars, transformational technologies, and nimble competition. It seems hard to imagine that it could change. But should it?
Sometimes it takes a crisis to help us rethink our assumptions. With the coronavirus forcing change upon us, we should consider whether our existing operating models are appropriate for today’s increasingly tumultuous and unpredictable world.
Perhaps our response to the coronavirus will debunk the myth that employees need to be watched to be managed effectively, and persuade organizations, once and for all, to fully embrace flexible work arrangements.
Perhaps our response to the coronavirus will finally convince corporate leaders that annual goal-setting activities are an anachronism in an environment where change is swift and profound.
Perhaps our response to the coronavirus is the final piece of evidence that leaders need to see that a top-down management model can’t keep pace with the current speed of play in their industry.
Organizations need to be able to make dramatic adjustments in the face of all kinds of change, challenging environments, and sudden opportunities. Among them, we see:
From titans to teams. The traditional corporate hierarchy allowed industrial organizations to scale into multibillion-dollar enterprises, delivering consistent customer experiences around the globe. Captains of industry called the shots and invested capital that created the world’s biggest companies. Today, that model is the biggest obstacle to growth that most companies face.
Few institutions made better use of the hierarchical operating model than the US military. Eventually, their enemies turned that strength into a liability. A grassroots group of Al Qaeda warriors fought the United States to a draw in Iraq, forcing General Stanley McChrystal to rethink his approach
“I went from being the micromanager, the centralized director, to being a commander who creates this ecosystem in which this group of really talented people figure it out,” McChrystal told an audience in 2018. “And my goal was to keep the ecosystem going, grow it with new participants and keep everyone supported and inspired.”
One needs to look no further than the IT department to see this approach already being deployed in the corporate environment today, as software engineers have been operating like this for years. Maybe this crisis provides a moment for other functional leaders to make it work for them.
Managing the unexpected. Most organizations work hard to fund and manage “the plan,” but they do little to manage the unexpected. The coronavirus is one of those unexpected developments. Who is on point? Who leads the response? How do you fund those initiatives? While the coronavirus is a unique event, business disruptions occur on a regular basis.
Aligned to a nimble, more agile approach, many high-growth business-services companies are now reserving 5% of their budget unallocated. Potential deployment of the funds are discussed at a quarterly forum regarding disruptive developments, and there is a named executive to manage the strategic initiatives that emerge.
Handling Disruptive Change: Five Changes to Your Operating Model
- Use agile teams that are empowered to act to manage the most dynamic parts of your business.
- Bring rigor to the management of the unexpected. Create the right leadership, resourcing, and governance mechanisms to chase opportunities and defend against threats.
- Use contingent labor to fill your needs for short-term expertise, unpredictable demand, or seasonal work.
- Focus your time and treasure on what matters most to your success. Minimize the cost and distraction of everything else through outsourcing or service-center models.
- Equip leaders to direct, engage, and inspire virtual teams. Equip employees to commit, collaborate, and connect with their peers.
The CEO of one of the world’s largest chemical companies was dismayed to learn that the critical initiatives he launched to address threats and opportunities in their markets had not been staffed. Then—several months after people were appointed to the initiatives—he discovered the appointees couldn’t do the job. He hired a chief disruption officer to make sure that never happens again.
Other companies are making similar changes to their governance models. Korn Ferry’s search partners have seen little evolution in the role of the chief operating officer at most companies. But the role of the corporate development head or the strategy lead has changed dramatically. Those aren’t planning roles anymore. They are operating roles, managing a portfolio of diverse and critical initiatives designed to ensure the continued growth of their companies.
Segmenting work, segmenting the workforce. Given the challenges his organization faced, one chemical company CEO knew that he needed top people. Some of that talent lived in the company. Much of it didn’t. This is a familiar stumbling block for anyone responsible for driving innovation in a large, well-run organization. How do I know when to hire internally or when to go outside the organization to fill a need? It’s also a challenge on the operating side of the business. What criteria should I use to determine if a role should be filled by contractors or by a full-time employee?
Oftentimes, hiring a full-time person is not necessary. Consider these two examples:
A young and growing business needed high-level coaching for its salespeople. Rather than hire a top professional at a high salary, the organization contracted with a group of former sales leaders of Fortune 50 companies to provide training and mentorship to its employees on a part-time basis. By structuring the work arrangements around the lifestyle needs of the former sales leaders, the organization obtained superb sales coaching at a relatively low cost.
In a similar vein, a leading aerospace company needed to stay abreast of research in a wide range of technology, manufacturing, and energy areas. Rather than hiring an individual or a group of individuals, the company contracted with experts in 12 research disciplines to convene four times a year and provide thought leadership presentations to key employees.
A sharper focus on the core. Companies must distinguish between activities that drive value and competitiveness and activities that don’t deliver any kind of market differentiation. While both types of activities are necessary, companies should focus more attention and resources on core activities and reduce the expense and management attention required for noncore activities.
With the advent of content digitization, a document storage company realized it no longer had to maintain print storage facilities near major urban areas. It evaluated a variety of sites to store and organize digital records, from the perspective of labor availability and cost. By relocating some operations to lower-cost areas, it significantly reduced its noncore expenditures and was able to devote more resources to core activities.
In another example, a major telecommunications company determined that outsourcing the recruitment of some positions would save money and improve hiring efficiency. While that held true for some time, the company monitored a variety of hiring-related metrics and discovered that the positions had reversed: it now could hire at less cost than the recruitment firm. As a result, it pulled the recruitment back in-house.
A sharper focus on performance. There seems little question that the coronavirus will lead to more employees working from home. Many companies will need to rethink how they manage, develop, and evaluate the performance of remote workers.
Organizations need to set clear expectations about availability, communication, and performance metrics for employees who work primarily from home. And managers should be coached on how to work with off-site employees or how to function as off-site managers themselves.
The downside of remote work is the lack of face-to-face interaction. Many companies with remote staffs are creating so-called digital “watercoolers” where people share everything from pictures of children and pets, books they’re reading, recipes, and vacation photos.
By building a digital community, these companies are fostering positive work relationships, increased workplace satisfaction, and a deeper commitment to the organization.
As we know, the coronavirus outbreak is a devastating event that is killing people, causing massive strains on the world’s healthcare system, and disrupting the global economy on a scale not seen since the 2008 financial crisis. But while it may be one of the worst global crises many of us will experience in our lifetimes, the undeniable truth is that there will be many more disruptive and cataclysmic events in the years ahead.
Organizations that use the outbreak as a catalyst for self-examination and change will likely find themselves better prepared when the next crisis hits or the next great opportunity arises.