From thinking about the next normal to making it work: What to stop, start, and accelerate

Posted in Aktuellt, Allmänt, Board work / Styrelsearbete, Executive Team / Ledningsgruppsarbete on May 16th, 2020 by admin

What’s next? That is the question everyone is asking. The future is not what we thought it would be only a few short months ago.

In a previous article, we discussed seven broad ideas that we thought would shape the global economy as it struggled to define the next normal. In this one, we set out seven actions that have come up repeatedly in our discussions with business leaders around the world. In each case, we discuss which attitudes or practices businesses should stop, which they should start, and which they should accelerate.

1. From ‘sleeping at the office’ to effective remote working

Stop assuming that the old ways will come back

In fact, this isn’t much of a problem. Most executives we have spoken to have been pleased at how well the sudden increase in remote working has gone. At the same time, there is some nostalgia for the “good old days,” circa January 2020, when it was easy to bump into people at the coffee room. Those days are gone. There is also the risk, however, that companies will rely too much on remote working. In the United States, more than 70 percent of jobs can’t be done offsite. Remote work isn’t a panacea for today’s workplace challenges, such as training, unemployment, and productivity loss.

Start thinking through how to organize work for a distributed workforce

Remote working is about more than giving people a laptop. Some of the rhythms of office life can’t be recreated. But the norms associated with traditional work—for example, that once you left the office, the workday was basically done—are important. As one CEO told us, “It’s not so much working from home; rather, it’s really sleeping at the office.”

For working from home to be sustainable, companies need to help their staff create those boundaries: the kind of interaction that used to take place in the hallway can be taken care of with a quick phone call, not a videoconference. It may also help to set “office hours” for particular groups, share tips on how to track time, and announce that there is no expectation that emails will be answered after a certain hour.

Accelerate best practices around collaboration, flexibility, inclusion, and accountability

Collaboration, flexibility, inclusion, and accountability are things organizations have been thinking about for years, with some progress. But the massive change associated with the coronavirus could and should accelerate changes that foster these values.

Office life is well defined. The conference room is in use, or it isn’t. The boss sits here; the tech people have a burrow down the hall. And there are also useful informal actions. Networks can form spontaneously (albeit these can also comprise closed circuits, keeping people out), and there is on-the-spot accountability when supervisors can keep an eye from across the room. It’s worth trying to build similar informal interactions. TED Conferences, the conference organizer and webcaster, has established virtual spaces so that while people are separate, they aren’t alone. A software company, Zapier, sets up random video pairings so that people who can’t bump into each other in the hallway might nonetheless get to know each other.

There is some evidence that data-based, at-a-distance personnel assessments bear a closer relation to employees’ contributions than do traditional ones, which tend to favor visibility. Transitioning toward such systems could contribute to building a more diverse, more capable, and happier workforce. Remote working, for example, means no commuting, which can make work more accessible for people with disabilities; the flexibility associated with the practice can be particularly helpful for single parents and caregivers. Moreover, remote working means companies can draw on a much wider talent pool.

2. From lines and silos to networks and teamwork

Stop relying on traditional organizational structures

“We used to have all these meetings,” a CEO recently told us. “There would be people from different functions, all defending their territory. We’d spend two hours together, and nothing got decided. Now, all of those have been cancelled—and things didn’t fall apart.” It was a revelation—and a common one. Instead, the company put together teams to deal with COVID-19-related problems. Operating with a defined mission, a sense of urgency, and only the necessary personnel at the table, people set aside the turf battles and moved quickly to solve problems, relying on expertise rather than rank.

Start locking in practices that speed up decision making and execution during the crisis

The all-hands-on-deck ethos of a pandemic can’t last. But there are ways to institutionalize what works—and the benefits can be substantial. During and after the 2008 financial crisis, companies that were in the top fifth in performance were about 20 percentage points ahead of their peers. Eight years later, their lead had grown to 150 percentage points. The lesson: those who move earlier, faster, and more decisively do best.

Accelerate the transition to agility

We define “agility” as the ability to reconfigure strategy, structure, processes, people, and technology quickly toward value-creating and value-protecting opportunities. In a 2017 McKinsey survey, agile units performed significantly better than those who weren’t agile, but only a minority of organizations were actually performing agile transformations. Many more have been forced to do so because of the current crisis—and have seen positive results.

Agile companies are more decentralized and depend less on top-down, command-and-control decision making. They create agile teams, which are allowed to make most day-to-day decisions; senior leaders still make the big-bet ones that can make or break a company. Agile teams aren’t out-of-control teams: accountability, in the form of tracking and measuring precisely stated outcomes, is as much a part of their responsibilities as flexibility is. The overarching idea is for the right people to be in position to make and execute decisions.

One principle is that the flatter decision-making structures many companies have adopted in crisis mode are faster and more flexible than traditional ones. Many routine decisions that used to go up the chain of command are being decided much lower in the hierarchy, to good effect. For example, a financial information company saw that its traditional sources were losing their value as COVID-19 deepened. It formed a small team to define company priorities—on a single sheet of paper—and come up with new kinds of data, which it shared more often with its clients. The story illustrates the new organization paradigm: empowerment and speed, even—or especially—when information is patchy.

Another is to think of ecosystems (that is, how all the parts fit together) rather than separate units. Companies with healthy ecosystems of suppliers, partners, vendors, and committed customers can find ways to work together during and after times of crisis because those are relationships built on trust, not only transactions.

Finally, agility is just a word if it isn’t grounded in the discipline of data. Companies need to create or accelerate their analytics capabilities to provide the basis for answers—and, perhaps as important, allow them to ask the right questions. This also requires reskilling employees to take advantage of those capabilities: an organization that is always learning is always improving.

3. From just-in-time to just-in-time and just-in-case supply chains

Stop optimizing supply chains based on individual component cost and depending on a single supply source for critical materials

The coronavirus crisis has demonstrated the vulnerability of the old supply-chain model, with companies finding their operations abruptly halted because a single factory had to shut down. Companies learned the hard way that individual transaction costs don’t matter nearly as much as end-to-end value optimization—an idea that includes resilience and efficiency, as well as cost. The argument for more flexible and shorter supply chains has been building for years. In 2004, an article in the McKinsey Quarterly noted that it can be better to ship goods “500 feet in 24 hours [rather than] shipping them 5,000 miles across logistical and political boundaries in 25 days … offshoring often isn’t the right strategy for companies whose competitive advantage comes from speed and a track record of reliability.”  

Start redesigning supply chains to optimize resilience and speed

Instead of asking whether to onshore or offshore production, the starting point should be the question, “How can we forge a supply chain that creates the most value?” That will often lead to an answer that involves neither offshoring nor onshoring but rather “multishoring”—and with it, the reduction of risk by avoiding being dependent on any single source of supply.

Speed still matters, particularly in areas in which consumer preferences change quickly. Yet even in fashion, in which that is very much the case, the need for greater resilience is clear. In a survey conducted in cooperation with Sourcing Journal subscribers, McKinsey found that most fashion-sourcing executives reported that their suppliers wouldn’t be able to deliver all their orders for the second quarter of 2020. To get faster means adopting new digital-planning and supplier-risk-management tools to create greater visibility and capacity, capability, inventory, demand, and risk across the value chain. Doing so enables companies to react well to changes in supply or demand conditions.

One area of vulnerability the current crisis has revealed is that many companies didn’t know the suppliers their own suppliers were using and thus were unable to manage critical elements of their value chains. Companies should know where their most critical components come from. On that basis, they can evaluate the level of risk and decide what to do, using rigorous scenario planning and bottom-up estimates of inventory and demand. Contractors should be required to show that they have risk plans (including knowing the performance, financial, and compliance record of all their subcontractors, as well as their capacity and inventories) in place.

Accelerate ‘nextshoring’ and the use of advanced technologies

In some critical areas, governments or customers may be willing to pay for excess capacity and inventories, moving away from just-in-time production. In most cases, however, we expect companies to concentrate on creating more flexible supply chains that can also operate on a just-in-case approach. Think of it as “nextshoring” for the next normal.

For example, the fashion industry expects to shift some sourcing from China to other Asian countries, Central America, and Eastern Europe. Japanese carmakers and Korean electronics companies were considering similar actions before the coronavirus outbreak. The state-owned Development Bank of Japan is planning to subsidize companies’ relocation back to Japan, and some Western countries, including France, are looking to build up domestic industries for critical products, such as pharmaceuticals. Localizing supply chains and creating more collaborative relationships with critical suppliers—for example, by helping them build their digital capabilities or share freight capacity—are other ways to build long-term resilience and flexibility.

Nextshoring in manufacturing is about two things. The first is to define whether production is best placed near customers to meet local needs and accommodate variations in demand. The second is to define what needs to be done near innovative supply bases to keep up with technological change. Nextshoring is about understanding how manufacturing is changing (in the use of digitization and automation, in particular) and building the trained workforce, external partnerships, and management muscle to deliver on that potential. It is about accelerating the use of flexible robotics, additive manufacturing, and other technologies to create capabilities that can shift output levels and product mixes at reasonable cost. It isn’t about optimizing labor costs, which are usually a much smaller factor—and sometimes all but irrelevant.

4. From managing for the short term to capitalism for the long term

Stop quarterly earnings estimates

Because of the unprecedented nature of the pandemic, the percentage of companies providing earnings guidance has fallen sharply—and that’s a good thing. The arguments against quarterly earnings guidance are well known, including that they create the wrong incentives by rewarding companies for doing harmful things, such as deferring capital investment and offering massive discounts that boost sales to make the revenue numbers but hurt a company’s pricing strategy.

Taking such actions may stave off a quick hit to the stock price. But while short-term investors account for the majority of trades—and often seem to dominate earnings calls and internet chatrooms—in fact, seven of ten shares in US companies are owned by long-term investors. By definition, this group, which we call “intrinsic investors”—look well beyond any given quarter, and deeper than such quick fixes. Moreover, they have far greater influence on a company’s share price over time than the short-term investors who place such stock in earnings guidance.

Moreover, the conventional wisdom that missing an estimate means immediate retribution is not always true. A McKinsey analysis found that in 40 percent of the cases, the share prices of companies that missed their consensus earnings estimates actually rose. Finally, an analysis of 615 US public companies from 2001 to 2015 found that those characterized as “long-term oriented” outperformed their peers in earnings, revenue growth, and market capitalization. Even as a way of protecting equity value, then, earnings guidance is a flawed tool. And, of course, there can be no bad headlines about missed estimates if there are no estimates to miss.

Along the same lines, stop assuming that pursuing shareholder value is the only goal. Yes, businesses have fundamental responsibilities to make money and to reward their investors for the risks they take. But executives and workers are also citizens, parents, and neighbors, and those parts of their lives don’t stop when they clock in. In 2009, in the wake of the financial crisis, former McKinsey managing partner Dominic Barton argued that there is no “inherent tension between creating value and serving the interests of employees, suppliers, customers, creditors, communities, and the environment. Indeed, thoughtful advocates of value maximization have always insisted that it is long-term value that has to be maximized.” 2 We agree, and since then, evidence has accumulated that businesses with clear values that work to be good citizens create superior value for shareholders over the long run.

Start focusing on leadership and working with partners to create a better future

McKinsey research defines the “long term” as five to seven years: the period it takes to start and build a sustainable business. That period isn’t that long. As the current crisis proves, huge changes can take place in much shorter time frames.

One implication is that boards, in particular, should start to think about just how fast, and when, to replace their CEOs. The average tenure of a CEO at a large-cap company is now about five years, down from ten years in 1995. A recent Harvard Business Review study of the world’s top CEOs found that their average tenure was 15 years. 3 One critical factor: close and constant communication with their boards allowed them to get through a rough patch and go on to lead long-term success.

Like Adam Smith, we believe in the “invisible hand”—the idea that self-interest plus the network of information (such as the price signal) that helps economies work efficiently are essential to creating prosperity. But Adam Smith also considered the rule of law essential and saw the goal of wealth creation as creating happiness: “What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” 4 A more recent economist, Nobel laureate Amartya Sen, updated the idea for the 21st century, stating that the invisible hand of the market needs to be balanced by the visible hand of good governance.

Given the trillions of dollars and other kinds of support that governments are providing, governments are going to be deeply embedded in the private sector. That isn’t an argument for overregulation, protectionism, or general officiousness—things that both Smith and Sen disdained. It is a statement of fact that business needs to work ever more closely with governments on issues such as training, digitization, and sustainability.

Accelerate the reallocation of resources and infrastructure investment

Business leaders love words like “flexible,” “agile,” and “innovative.” But a look at their budgets shows that “inertia” should probably get more attention. Year to year, companies only reallocate 2 to 3 percent of their budgets. But those that do more—on the order of 8 to 10 percent—create more value. In the coronavirus era, the case for change makes itself. In other areas, companies can use this sense of urgency to change the way they put together their budgets. Sales teams, for example, are used to getting new targets based on the prior year’s results. A better approach is to define the possible, based on metrics such as market size, current market share, sales-force size, and how competitive the market is. On that basis, a company can estimate sales potential and budget accordingly.

In previous economic transitions, infrastructure meant things such as roads and pipelines. In democratic societies, governments generally drew up the plans and established safety and other regulations, and the private sector did the actual building. Something similar needs to happen now, in two areas. One is the irresistible rise of digital technologies. Those without access to reliable broadband are being left out of a sizable and surging segment of the economy; there is a clear case for creating a robust, universal broadband infrastructure.

The second has to do with the workforce. In 2017, the McKinsey Global Institute estimated that as much as a third of workplace activities could be automated by 2030. To avoid social upheaval—more high-wage jobs but fewer middle-class ones—displaced workers need to be retrained so that they can find and succeed in the new jobs that will emerge. The needs, then, are for more midcareer job training and more effective on-the-job training. For workers, as well as businesses, agility is going to be a core skill—one that current systems, mostly designed for a different era, aren’t very good at.

5. From making trade-offs to embedding sustainability

Stop thinking of environmental management as a compliance issue

Environmental management is a core management and financial issue. Lloyds Bank, the British insurer, estimated that sea-level rises in New York increased insured losses from Hurricane Sandy in 2012 by 30 percent; a different study found that the number of British properties at risk of significant flooding could double by 2035. Ignore these and similar warnings—about cyclones or extreme heat, for example—and watch your insurance bills rise, as they did in Canada after wildfires in 2016. Investors are noticing too. In Larry Fink’s most recent letter to CEOS, the BlackRock CEO put it bluntly: “Climate risk is investment risk.” 5 He noted that investors are asking how they should modify their portfolios to incorporate climate risk and are reassessing risk and asset values on that basis.

Start considering environmental strategy as a source of resilience and competitive advantage

The COVID-19 pandemic froze supply chains around the world, including shutting down much of the United States’ meat production. Rising climate hazards could lead to similar shocks to global supply chains and food security. In some parts of Brazil, the usual two-crop growing season may eventually only yield a single crop.

As companies reengineer their supply chains for resilience, they also need to consider environmental factors—for example, is a region already prone to flooding likely to become more so as temperatures rise? One of the insights of a McKinsey climate analysis published in January is that climate risks are unevenly distributed, with some areas already close to physical and biological tipping points. Where that is the case, companies may need to think about how to mitigate the possible harm or perhaps going elsewhere. The principle to remember is that it is less expensive to prepare than to repair or retrofit. In January 2018, the National Institute for Building Sciences estimated spending $1 to build resilient infrastructure saved $6 in future costs. 6 To cope with the COVID-19 pandemic, companies have shortened their supply chains, switched to more videoconferencing, and introduced new production processes. Consider how these and other practices might be continued; they can help make companies more environmentally sustainable, as well as more efficient.

Second, it makes sense to start thinking about the possible similarities between the coronavirus crisis and long-term climate change. The pandemic has created simultaneous shocks to supply chains, consumer demand, and the energy sector; it has hit the poor harder; and it has created serious knock-on effects. The same is likely to be true for climate change. Moreover, rising temperatures could also increase the toll of contagious diseases. It could be argued, then, that mitigating climate change is as much a global public-health issue as dealing with COVID-19 is.

The coronavirus crisis has been a sudden shock that essentially hit the world all at once—what we call “contagion risk.” Climate change is on a different time frame; the dangers are building (“accumulation risk”). In each case, however, resilience and collaboration are essential.

Accelerate investment in innovation, partnerships, and reporting

As usual, information is the foundation for action. A data-driven approach can illuminate the relative costs of maintaining an asset, adapting it—for example, by building perimeter walls or adding a backup power supply—or investing in a new one. It is as true for the environment as any part of the value chain that what gets measured gets managed. This entails creating sound, sophisticated climate-risk assessments; there is no generally accepted standard at the moment, but there are several works in progress, such as the Sustainability Accounting Standards Board.

The principle at work is to make climate management a core corporate capability, using all the management tools, such as analytics and agile teams, that are applied to other critical tasks. The benefits can be substantial. One study found that companies that reduced their climate-change-related emissions delivered better returns on equity—not because their emissions were lower, but because they became generally more efficient. The correlation between going green and high-quality operations is strong, with numerous examples of companies (including Hilton, PepsiCo, and Procter & Gamble), setting targets to reduce use of natural resources and ending up saving significant sums of money.

It’s true that, given the scale of the climate challenge, no single company is going to make the difference. That is a reason for effort, not inaction. Partnerships directed at cracking high-cost-energy alternatives, such as hydrogen and carbon capture, are one example. Voluntary efforts to raise the corporate game as a whole, such as the Task Force on Climate-related Financial Disclosures, are another.

6. From online commerce to a contact-free economy

Stop thinking of the contactless economy as something that will happen down the line

The switch to contactless operations can happen fast. Healthcare is the outstanding example here. For as long as there has been modern healthcare, the norm has been for patients to travel to an office to see a doctor or nurse. We recognize the value of having personal relationships with healthcare professionals. But it is possible to have the best of both worlds—staff with more time to deal with urgent needs and patients getting high-quality care.

In Britain, less than 1 percent of initial medical consultations took place via video link in 2019; under lockdown, 100 percent are occurring remotely. In another example, a leading US retailer in 2019 wanted to launch a curbside-delivery business; its plan envisioned taking 18 months. During the lockdown, it went live in less than a week—allowing it to serve its customers while maintaining the livelihoods of its workforce. Online banking interactions have risen to 90 percent during the crisis, from 10 percent, with no drop-off in quality and an increase in compliance while providing a customer experience that isn’t just about online banking. In our own work, we have replaced on-site ethnographic field study with digital diaries and video walk-throughs. This is also true for B2B applications—and not just in tech. In construction, people can monitor automated earth-moving equipment from miles away.

Start planning how to lock in and scale the crisis-era changes

It is hard to believe that Britain would go back to its previous doctor–patient model. The same is likely true for education. With even the world’s most elite universities turning to remote learning, the previously common disdain for such practices has diminished sharply. There will always be a place for the lecture hall and the tutorial, but there is a huge opportunity here to evaluate what works, identify what doesn’t, and bring more high-quality education to more people more affordably and more easily. Manufacturers also have had to institute new practices to keep their workers at work but apart—for example, by organizing workers into self-contained pods, with shift handovers done virtually; staggering production schedules to ensure that physically close lines run at different times; and by training specialists to do quality-assurance work virtually. These have all been emergency measures. Using digital-twin simulation—a virtual way to test operations—can help define which should be continued, for safety and productivity reasons, as the crisis lessens.

Accelerate the transition of digitization and automation

“Digital transformation” was a buzz phrase prior to the coronavirus crisis. Since then, it has become a reality in many cases—and a necessity for all. The consumer sector has, in many cases, moved fast. When the coronavirus hit China, Starbucks shut down 80 percent of its stores. But it introduced the “Contactless Starbucks Experience” in those that stayed open and is now rolling it out more widely. Car manufacturers in Asia have developed virtual show rooms where consumers can browse the latest models; these are now becoming part of what they see as a new beginning-to-end digital journey. Airlines and car-rental companies are also developing contactless consumer journeys.

The bigger opportunity, however, may be in B2B applications, particularly in regard to manufacturing, where physical distancing can be challenging. In the recent past, there was some skepticism about applying the Internet of Things (IoT) to industry. Now, many industrial companies have embraced IoT to devise safety strategies, improve collaboration with suppliers, manage inventory, optimize procurement, and maintain equipment. Such solutions, all of which can be done remotely, can help industrial companies adjust to the next normal by reducing costs, enabling physical distancing, and creating more flexible operations. The application of advanced analytics can help companies get a sense of their customers’ needs without having to walk the factory floor; it can also enable contactless delivery.

7. From simply returning to returning and reimagining

Stop seeing the return as a destination

The return after the pandemic will be a gradual process rather than one determined by government publicizing a date and declaring “open for business.” The stages will vary, depending on the sector, but only rarely will companies be able to flip a switch and reopen. There are four areas to focus on: recovering revenue, rebuilding operations, rethinking the organization, and accelerating the adoption of digital solutions. In each case, speed will be important. Getting there means creating a step-by-step, deliberate process.

Start imagining the business as it should be in the next normal

For retail and entertainment venues, physical distancing may become a fact of life, requiring the redesign of space and new business models. For offices, the planning will be about retaining the positives associated with remote working. For manufacturing, it will be about reconfiguring production lines and processes. For many services, it will be about reaching consumers unused to online interaction or unable to access it. For transport, it will be about reassuring travelers that they won’t get sick getting from point A to point B. In all cases, the once-routine person-to-person dynamics will change.

Accelerate digitization

Call it “Industry 4.0” or the “Fourth Industrial Revolution.” Whatever the term, the fact is that there is a new and fast-improving set of digital and analytic tools that can reduce the costs of operations while fostering flexibility. Digitization was, of course, already occurring before the COVID-19 crisis but not universally. A survey in October 2018 found that 85 percent of respondents wanted their operations to be mostly or entirely digital but only 18 percent actually were. Companies that accelerate these efforts fast and intelligently, will see benefits in productivity, quality, and end-customer connectivity. And the rewards could be huge—as much as $3.7 trillion in value worldwide by 2025.

McKinsey and the World Economic Forum have identified 44 digital leaders, or “lighthouses,” in advanced manufacturing. These companies created whole new operating systems around their digital capabilities. They developed new use cases for these technologies, and they applied them across business processes and management systems while reskilling their workforce through virtual reality, digital learning, and games. The lighthouse companies are more apt to create partnerships with suppliers, customers, and businesses in related industries. Their emphasis is on learning, connectivity, and problem solving—capabilities that are always in demand and that have far-reaching effects.

Not every company can be a lighthouse. But all companies can create a plan that illuminates what needs to be done (and by whom) to reach a stated goal, guarantee the resources to get there, train employees in digital tools and cybersecurity, and bring leadership to bear. To get out of “pilot purgatory”—the common fate of most digital-transformation efforts prior to the COVID-19 crisis—means not doing the same thing the same way but instead focusing on outcomes (not favored technologies), learning through experience, and building an ecosystem of tech providers.

Businesses around the world have rapidly adapted to the pandemic. There has been little hand-wringing and much more leaning in to the task at hand. For those who think and hope things will basically go back to the way they were: stop. They won’t. It is better to accept the reality that the future isn’t what it used to be and start to think about how to make it work.

Hope and optimism can take a hammering when times are hard. To accelerate the road to recovery, leaders need to instill a spirit both of purpose and of optimism and to make the case that even an uncertain future can, with effort, be a better one.

Source: McKinsey.com, May 15, 2020
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Authors: Kevin Sneader, the global managing partner of McKinsey, is based in McKinsey’s Hong Kong office; Shubham Singhal, the global leader of the Healthcare Systems & Services Practice, is a senior partner in the Detroit office.

Boards in the time of coronavirus

Posted in Aktuellt, Board work / Styrelsearbete on April 21st, 2020 by admin

Boards need to step up their game and guide their organizations toward the next normal.

Never before have CEOs and their teams been more in need of the foresight and seasoned judgment that a well-functioning board of directors can provide. Likewise, never before have boards needed more carefully to balance providing support to management teams operating in highly stressful conditions with challenging them to ensure that they make the best decisions throughout a crisis for which no playbook exists. This may well turn out to be the moment when your board proves its value—or shows its flaws.

In a recent article, our colleagues have called on management to act across five stages—Resolve, Resilience, Return, Reimagination, and Reform—both to address the immediate crisis and to prepare for the next normal after the battle against coronavirus has been won. At the same time, many board chairs and CEOs are looking for guidance on what role boards should play in these challenging times (for highlights, see “Boards of directors in the tunnel of the coronavirus crisis”).

Just as every organization faces different challenges during this crisis—some are reaching new levels of growth, while others are struggling to survive—there is no one-size-fits-all answer for what a board should do. While management teams focus on making rapid decisions to protect employees, address customers’ needs, and communicate with stakeholders, boards need to balance oversight of the crisis response with thinking beyond the immediate challenges. Time is a scarce asset for most board directors, requiring them to make deliberate choices about where they focus their attention.

In hindsight, the early 21st century may be seen as divided into two periods: the time before the coronavirus outbreak and the postpandemic era. That era could be characterized by different consumer behaviors, new ways of working, altered industry structures, and value pools redistributed across existing and new ecosystems. What does that imply for your organization and for your board?

Resolve and Resilience: Support through the crisis

Everyone is looking to an organization’s leaders to serve as role models in protecting people’s health and safety while acting decisively and with purpose amid chaos. The board’s priority should be to support the management team’s crisis response without encroaching on its operating role while also safeguarding longer-term shareholder and stakeholder interests. Management needs board directors to act as both sparring partners and empathetic counselors at a time when many leaders are seeking candid advice and personal support.

Ensure that management adopts a scalable crisis operating model

Your organization likely already has a crisis-response team in place. The team takes care of employee safety, shores up the balance sheet, and interacts with suppliers and customers to ensure business continuity. But that is not enough. The scale of the economic crisis that is unfolding is unprecedented in living memory. Organizations need a crisis operating model that can scale as issues escalate, with a plan-ahead team that develops strategic responses to multiple scenarios across all time horizons. Boards should frequently review and discuss the strategic crisis-action plans that plan-ahead teams develop to stay ahead of the evolving crisis.

 

Augment leadership capacity

A board can ease the pressure on the management team by reviewing communication plans and reputation-management strategies and engaging with select external stakeholders. Importantly, directors should help manage investor expectations in light of financial decisions, such as dividend cuts and changes to share-buyback programs, that may draw negative reactions. And since COVID-19 may affect board directors or managers personally, establishing clear succession and leadership contingency plans is more critical than ever.

Strengthen decision making by sharing crisis-management experience

Board directors with experience in managing external shocks, such as the aftermath of the 9/11 attacks and the 2008–09 financial crisis, will be particularly valuable sounding boards for a management team as it crafts response plans amid high uncertainty. Board directors’ insights from earlier crisis situations can help them constructively challenge business-continuity plans, for example, or supply-chain strategies. That said, the current crisis is uncharted terrain for all executives, making intuition and experience unreliable guides and cognitive biases particularly dangerous. As such, boards should urge management to use techniques such as red and blue teams or premortems to ensure that their decisions weigh all relevant factors.

Balance short-term and long-term priorities

While a board needs to protect all shareholders’ and stakeholders’ interests by weighing key operational risks and ensuring effective cash management and financial stability, it cannot lose sight of the organization’s long-term priorities, even as it focuses on short-term crisis response. Preserving the foundation of the organization’s competitive advantage, such as maintaining investments in a digital transformation or customer-experience improvements, should be a key point of board attention.

Return: Lead into the reconstruction phase

As business conditions start to stabilize, a board should strive to lift management’s ambitions and position the organization to ride the waves of uncertainty rather than be overpowered by them. The severity of the disruption of this crisis suggests that the path out will feel more like a reconstruction than a recovery. Boards can add value by pushing early for scenarios and robust plans to be prepared for the reconstruction phase.

Engage on major decisions

As employees start coming back to work, a board should confirm that effective health and safety protocols are in place and continue to oversee management’s integrated action plans. Some decisions are more complicated than they at first seem—for example, a government stimulus package may seem like a boon, but it can dilute shareholders’ equity and come with unexpected strings attached. The board should also closely monitor the management team’s evolving plans (such as slowing down new-product introductions and capacity expansions or accelerating resource reallocation) to ensure, for example, that these decisions do not overly weaken the balance sheet amid challenging capital-market conditions.

Catalyze a strategy review

Many organizations will have to rethink their product-market focus, customer engagement, or pace of technological innovation. During this period, a board should encourage management to undertake a broad strategic reevaluation that could entail embracing some bold moves. It can foster this process by requesting regular, joint strategy sessions with management to discuss various alternatives and scenarios.

Review the operating model

A new strategy may require a broad review of an organization’s operations. The board should trigger the discussion, share external perspectives on the operating models of comparable organizations, and provide constructive challenges. It should also encourage management to match critical talent to key strategic initiatives, especially new leadership talent that may emerge during the current crisis.

Help manage shareholder and broader stakeholder commitments

Maintaining an ongoing, open dialogue with key shareholders and other stakeholders should be a key board responsibility as business conditions change. Managing interactions with governments and regulators may be particularly vital at this time, especially if an organization receives a stimulus package or other public assistance that entails commitments. Major investors, including activists, may also offer ideas for repositioning the organization for the postpandemic era that the board and management should consider.

Reimagination and Reform: Stay ahead of the next normal

As businesses will shift focus on preparing themselves for the next normal, some changes adopted during the current crisis may become permanent. This might well have implications for the purpose and overall positioning of the organization that a board should closely monitor.

Reassess the organization’s purpose and value proposition

Our world will almost certainly look different after the coronavirus crisis. Industries and supply chains will be reshaped, value pools will have shifted (some irreversibly), and new behaviors may become the norm. Getting ahead of such trends by developing privileged insights can make the difference between leading or lagging in an industry for the subsequent decade. These changes may be profound enough to require a reassessment of an organization’s value proposition—and even its fundamental purpose. The board should also closely monitor how competitors are evolving and where they are investing (for example, in vertically integrated supply chains to fill gaps left by bankrupt suppliers) and make sure these realignments are factored into management’s long-term plans. By connecting management teams with the larger ecosystem of innovative players (including ones outside the organization’s traditional business), the board can widen leaders’ understanding of shifting business conditions.

Plan for the next crisis

It is never too early to plan a response to future shocks. A board’s role makes it well positioned to ensure that key lessons from the current crisis are captured and synthesized. The importance of remote-working technology and enterprise-wide action plans, for example, can guide new governance measures that make organizations more resilient during future disruptions (including potential later waves of the COVID-19 outbreak). Importantly, a board should challenge the management team to address a critical question: Is the risk-management approach sufficiently robust to respond to another “black swan” event?

Operating the board during the crisis

The current crisis sheds light on the vital importance of a diverse board. A group with a breadth of experience, relevant industry and functional expertise, and a range of ages, genders, and backgrounds enables an organization to assess challenges from a variety of perspectives. Here is how a board can effectively play its role (see sidebar, “Long-term implications for a board’s operating model”).

Reconfirm the board’s role and accountabilities

clear division of roles and mandates between a board and management is paramount to make collaboration seamless and avoid the distraction of unnecessary conflicts. While the level of stress and pressure every individual is facing during the current crisis can be draining, a board needs to remain calm and focused. Some decisions that take years of alignment in normal times may have to be passed in a matter of hours. All this will be difficult unless boards and management teams embrace seamless teamwork, trust, and mutual support. During this time, boards should make explicit that they are fully behind the management teams as they make some of the most difficult decisions of their careers.

Adapt the board’s operating model to the crisis

During a crisis, a board has no choice but to adapt its working mode to the speed of events, requiring directors to invest significantly more time than normal and relax the annual agenda. Ongoing communication between boards and management teams is necessary for quick action on contingency planning, public announcements, strategy development, and other urgent matters. An ad hoc board-level crisis committee can help directors engage regularly with the crisis leader who reports to the CEO. While some of the board’s heightened responsibilities—such as more frequent risk or policy reviews, financial-stability assessments, and governance-structure changes—can be absorbed by standing committees (including those for audit, risk, nomination and governance, and compensation), assessing the crisis’s strategic implications and the organization’s future direction needs to be handled jointly by the entire board, with collective accountability and frequent interaction.


The coronavirus pandemic is, first and foremost, an urgent health crisis affecting countless people around the globe. The scale of change—social, political, economic, and cultural—it may bring is immense. To manage a crisis of this magnitude successfully, boards need to help management balance short-term priorities with long-term goals, actively engage with shareholders and other stakeholders, and support a fundamental rethinking of long-term strategies. Management teams may need boards to extend them a greater-than-normal level of trust so that leaders can rapidly respond to unprecedented conditions.

While oversight and control remain vital, board directors’ wisdom, insights, and experience have never been more important. Boards should seize this moment to step up their game and provide critically needed guidance to their organizations.

Source: McKinsey.com, April 2020
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Authors: Martin Hirt is a senior partner in McKinsey’s Greater China office, Celia Huber is a senior partner in the Silicon Valley office, Frithjof Lund is a senior partner in the Oslo office, and Nina Spielmann is a senior expert in the Zurich office.

Boards of directors in the tunnel of the coronavirus crisis

Posted in Aktuellt, Board work / Styrelsearbete on April 19th, 2020 by admin
There are areas that boards and their chairs should prioritize when guiding their organizations through unprecedented uncertainty.
Few boards of directors had a playbook for managing the crisis we face today. Now, even fewer have a clear perspective on when and how their organizations will emerge from the tunnel the coronavirus pandemic has forced them to enter. The light at its end is very dim. Uncertainty is high for most sectors and businesses, with boards and management teams struggling to find solid ground, which makes it all the more vital that boards are deliberate about where they focus their attention.Based on conversations with leading chairs around the world, we recently outlined reflections on how boards can add the most value to their organizations in a major crisis, such as the current coronavirus crisis. These conversations have inspired this summary of practical highlights and, perhaps somewhat provocatively, three recommendations for chairs and their boards to consider.

1. Don’t increase management’s burden

Your CEO and the management team are under huge pressure to handle the rapidly evolving and potentially escalating issues the crisis is throwing at them. What management needs most from the board right now is a strong mandate to handle short-term actions and directors’ support as it makes difficult decisions. But we see many boards heading in the opposite direction, requesting weekly updates—even though some chairs find these meetings of limited value. Such meetings may, of course, be required for some organizations that face a clear and present danger (such as a liquidity shortage) or an urgent, institution-altering decision (such as accepting a government’s support package). For most, though, these interactions divert precious management time that should be spent on handling the crisis and planning ahead.

Instead, a board should urge management to develop a strategic crisis-action plan that would guide the organization’s response across all relevant time horizons and simply request the same standard reports on the up-to-date scenarios and actions that management reviews. These reports will keep the board abreast of the major issues the management team is working on, what scenarios it is considering, and what actions it is planning to take. If needed, the board can intervene and request more information to stress-test the plans, but even these interactions will then, by definition, be more focused and deliberate.

2. Augment management capacity

During the heat of a crisis, time is precious, and management teams are forced into trade-offs between handling the immediate action plans and communicating with stakeholders. This is one area in which a board can provide valuable assistance. Specifically, boards could take on the task of interacting with shareholders, governments, regulators, debt holders, employees, or major customers.

For example, many boards have directors with experience in serving in government or regulatory agencies. Those directors could pair up with senior managers to meet regulators for discussions of the organization’s pandemic response, giving the CEO much needed flexibility. Likewise, those with deep finance experience, such as chairs of audit committees, could support the CFO in meeting with rating agencies or debt holders. Naturally, it is critical that the board and management team explicitly agree on who engages with which stakeholders for what purpose.

3. Frame the postcrisis strategy

Every crisis has an end. The light at the end of this tunnel will eventually appear—sooner for some than others. The big questions for many organizations will then be, “How will my industry and my ecosystem be reshaped by this crisis, and what strategies should our organization pursue to emerge as a leader?”

While management teams focus on immediate survival or planning for the reconstruction phase, board directors should leverage their experience, professional networks, and industry understanding to outline how their organizations’ future vision, strategy, and corresponding operating model may need to change in the postpandemic era. Developing such a perspective now will enable a board to challenge short-term management actions constructively while providing a foundation for the strategic review that most organizations are bound to undertake in the wake of the crisis.

This big-picture work will help management develop an organization’s posture and broad direction of travel—the vision of the future and the big thematic ideas that will guide its strategic response. Management can then start to pursue that direction when it emerges from the tunnel of the crisis, once uncertainty diminishes and the next normal becomes clearer. This is probably the area where boards can add the most value in guiding their organizations through the crisis. Strategy definition is the job of the management team, but the board can provide a clear and compelling frame to help accelerate the process.


Boards have a special responsibility to guide their organizations safely through this period of unprecedented uncertainty. When you look back at this crisis in a few years’ time, what will you wish you had done as a board member? The decisions you make in the next few days on how you work with, support, and stretch your management team will likely make a big difference to your answer.

Ask yourself these questions:

  • How can we stay current on the management team’s crisis response without taxing executives’ already-packed agendas?
  • What specific activities can board directors take on to augment management capacity?
  • What should be the organization’s strategic posture for the postcrisis world, and how can we encourage the management team to align all decisions with that broad direction of travel.
Source: McKinsey.com, April 2020
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By:  Martin Hirt is a senior partner in McKinsey’s Greater China office, Celia Huber is a senior partner in the Silicon Valley office, Frithjof Lund is a senior partner in the Oslo office, and Nina Spielmann is a senior expert in the Zurich office.

EXTRA, Ledarskap i Coronatider: Styrelseproffsen: Så tar ni er genom krisen

Posted in Aktuellt, Allmänt, Board work / Styrelsearbete, Leadership / Ledarskap on March 29th, 2020 by admin

Skilj på känslor och fakta, håll borta egot som rädsla för att misslyckas och fokusera på att det är företaget som ska klara sig.
Var synlig, rak och ärlig. Sov, ät och pausa.
Det är några vd-råd som hjälpt näringslivsprofilerna och styrelseproffsen Mats Jansson, Sarah McPhee och Lottie Knutson genom tidigare kriser.

”Ingen kris är den andra lik”, betonar Mats Jansson efter årtionden som vd, däribland Axfood och SAS, och senare styrelseledamot i Telia Sonera, Candyking och Delhaize.

”Men principerna för krishantering är desamma.”

Kriser kräver extrem prioritering i arbetet som vd, faktabaserade, aldrig känslomässiga, beslut och kritisk granskning av all information, enligt forne SAS-chefen. Vad är sant, vad är känslor och framför allt: vad är relevant för företaget?

”En vd måste bära krisen – informationen och besluten, men också hålla liv i entusiasm och kraft internt. Aldrig gömma sig, aldrig skicka fram andra. Vid materiella skador kan du delegera framträdandet, men aldrig när det gäller drabbade människor. Var ärlig, sakligt driven och rak”, fortsätter Mats Jansson, som gjort sig känd för sin rakhet och utvecklade sin syn på ärlighet i Di Weekend 2013:

”Ärlighet är inte att säga allt man tänker, utan att i stället stå för det man har sagt.”

Även Sarah McPhee, tidigare vd och koncernchef för pensions- och försäkringsjätten SPP, i dag ordförande för bland annat Fjärde AP-fonden och styrelseledamot i Klarna, Bure Equity och Axel Johnson Inc, betonar vikten av transparens och vd:ns fokus framåt.

”Tänk ut vart verksamheten ska och bryt ner det i koncisa steg. Först detta, sedan nästa, sedan nästa…”, säger hon.

”Det är för kriser en vd verkligen behövs. När allt går bra, får andra leda och briljera.”

Båda lyfter fram att avdela en person som hanterar krisen.

”Se till att krisen inte knäcker hela ledningsgruppen genom att alla gräver ned sig i den. Dela upp ledningsarbetet i krishantering och vanliga verksamheten”, säger Mats Jansson.

Hur mycket bör man som vd följa med i informationsflödet?
”Inte alls. Det ska den personen som är satt att hantera krisen göra. Det gagnar inte vd att veta senaste nytt”, svarar Sarah McPhee.

Hon började på SPP 2008, mindre än tre månader efter Lehman Brothers konkurs i den skenande finanskrisen.

”Jag var ingen expert på det som kom. Men när jag hade kommit fram till att så här ska det bli kände jag ett lugn inför uppgiften. När en kris bryter ut vill man vara snabb och visa kraft, man bryr sig ju. Men det som känns jättebra först kan visa sig bli både dyrt och verkningslöst, och då blir det ingenting. Snabbt är bra men genomtänkt vinner i längden.”

Företagsledare behöver även hålla reda på sina känslor och sitt ego, däribland den egna rädslan för att misslyckas, menar hon.

”Självklart kan det gå åt h-e. Men krisen handlar inte om dig, utom om bolaget du leder.”

Att inte ta saker och ting så personligt är viktigt, enligt Mats Jansson.

Vara känslokall menar du?
”Absolut inte! Inte kall, men kylig. Stor skillnad.”

Enligt honom är det i kriser som agnarna sållas från vetet:

”En vd kan vara oerhört emotionell, men måste kunna hålla avstånd till känslor och fakta för företagets bästa. Det där måste sitta i ditt dna. Det är det karaktärsdraget, inte krisen, som avgör om du är skickad i att hantera kriser eller inte. Resten – hur man sorterar och prioriterar rätt – lär man sig med erfarenheten.”

Men om du inte är extern vd utan familjeföretagare?
”Svårare, men ändrar inget i sak”, svarar Ica-handlarsonen från Kolsva i Västmanland med ett förflutet i den generationsdrivna Axel Johnson-sfären.

Under Mats Janssons nära fyra vd-år i SAS gick bolaget från runt 30.000 anställda till 15.000. Han hanterade flygkrascher med många dödsoffer, strejker, oljepris på nästan 150 dollar fatet, det vill säga flygbränslet kostade lika mycket som personalen, akuta likviditetskriser och emissioner för att undvika konkurs. Miljardförlusterna under finanskrisen 2008-2009 hann knappt klinga av förrän askmolnet från Island ställde samtliga SAS-plan på marken.

”Branschanalytikerna i London kallade mig för Mr Bad Luck. För att orka behöver man en stöttande familj och rutiner. Jag tog inga samtal före klockan 08, gick eller sprang på Djurgården kl 05.30 varje morgon och åt sedan frukost med familjen.”

Även Lottie Knutson, Fritidsresors och hela Sveriges informationsbärare efter tsunamin 2004, framhåller team med rak dialog och prestigelöshet.

”Trots Gottrörakraschen, tsunamin, hårda sparpaket och it-haverier under mina år på SAS och sedan Fritidsresegruppen är coronaviruset det hittills värsta jag upplevt. I princip all verksamhet jag är i närheten av varslar och tvingas permittera merparten av personalen”, säger hon.

Idag arbetar hon som styrelseledamot i bland annat Cloetta, Stena Line och STS Alpresor, föreläsare och skribent.

”Hur långa och svåra arbetssituationer jag än har haft försöker jag gilla läget, ta en sak i taget och ha fokus på de drabbade. Det gäller att ta korta pauser, säkra mat och sömn och införa skift så fort som möjligt.”

Din viktigaste lärdom?
”Att det blir värre innan det blir bättre, och att vi i ledarrollen måste kunna fatta snabba beslut samtidigt som vi hjälper medarbetarna att skymta ett hopp bortom det akuta.”

”Det är inte en slump att utsatta yrkesgrupper bär uniform, skyddsdräkt eller vit rock, som tas av vid arbetsdagens slut. Även kontorsfolk bör göra en liknande symbolhandling; byta kläder, duscha, ta en promenad för att försöka släppa jobbet. När vårt privata jag är detsamma som jobbrollen blir vi sårbara vid uppsägningar och turbulens.”

Men allt är inte mörker. Att ta sig genom kriser ger också starkt positiva erfarenheter, betonar trion.

”Man jobbar nära medarbetare och lär känna varandra på ett annat sätt. Det ger energi. Mina mest positiva minnen och erfarenheter är från just kriser, ibland får man även vänner för livet”, säger Sarah McPhee.

 

 

Källa: DI.se, 29 mars 2020
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Anställda saknar förtroende för ledningens förändringsarbete

Posted in Aktuellt, Board work / Styrelsearbete, Executive Coaching, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on February 27th, 2020 by admin

Få anställda i stora nordiska finansbolag känner tillit och förtroende till sin ledning i förändringsfrågorna – det visar en ny undersökning från konsultjätten Accenture.

Konsultjätten Accenture har i undersökningen “Nordic Transformation Readiness Study” undersökt hur anställda och chefer på företag inom bank, finans och försäkring arbetar med förändring. Det är första gången undersökningen genomförs i Norden med företag inom bank, finans och försäkring.

Resultatet visar att de nordiska företagen inom bank, finans och försäkring har relativt få anställda som är frustrerade eller otrygga över sin roll i förändringsarbetet, i en internationell jämförelse. De anställda upplever även att organisationerna har tillräckligt med personal för att driva förändringsarbetet framåt.

– Först och främst vill jag säga att alla de nordiska företagen vi analyserat är “on track” med sin förändringsresa. Däremot har de inte kommit lika långt i processen som önskvärt och har ännu inte riktigt fått utväxling för sitt arbete. Vi konstaterar att de har en del kvar att göra för att uppnå de bästa resultaten, säger Linda Håkansson, ansvarig för finansiella tjänster på Accenture.

De nordiska svagheterna identifieras till att få anställda känner tillit och förtroende till sin ledning i förändringsfrågorna. De anställda finner även att cheferna på avdelningarna inte gör tillräckligt för att stödja förändringsarbetet.

– Vårt resultat visar att medarbetare i Norden är redo för att skapa förändring och har alla förutsättningar som behövs. Däremot är det ledningen som här behöver ta kommando över processen vilket inte upplevs av de anställda i nuläget.

På internationell nivå är resultaten de omvända. Där känner fler medarbetare oro och frustration över sin roll i företagets förändringsresa. De upplever också i större utsträckning att företagen är underbemannade för processen.

– Internationellt är resultaten de motsatta. Där är det istället ledningen som driver på för förändring och de anställda som känner sig dåligt utrustade för processen. När vi jämför de nordiska resultaten med de globala konstaterar vi att internationella bolag har kommit längre i förändringsresan än deras nordiska konkurrenter.

Linda Håkansson tror att skillnaden dels beror på kulturella skillnader inom ledarskap. Andra faktorer som spelar in är företagens storlek och benägenhet till förändring.

– I Norden har vi en ledningskultur som önskar konsensus vilket stärker medarbetarnas roll i arbetet men i viss mån försvagar ledarskapet. Internationellt är det vanliga med toppstyrda organisationer och där behöver de istället arbeta med att förankra medarbetare i processerna.

Ser ni några skillnader mellan olika roller på samma företag?
– Det vi ser är de som arbetar på utvecklingssidan bättre förstår företagets hela förändringsprocess och känner sig delaktiga. Rådgivare, eller de som arbetar med slutkunden, är de som ser lägst resultat kring förändringsresan.

Vilken är er rekommendation till ledningar som vill driva förändring?– Det handlar om att förstå sina anställda, sitt företag och tydligt kommunicera vägen framåt. När du som ledare tror att kommunicerat tillräckligt behöver du ofta upprepa budskapen och målsättningen så att det verkligen går in. Det handlar om att skapa en delaktig “vi-känsla” som får dina anställda att nå sin fulla potential.

– Det är väldigt farligt att tro att du som ledning är färdig med förändring. Oavsett vilka andra problem eller utmaningar du som ledning har måste din närvaro vara tydlig och framåtdrivande. En öppen organisation som tillåter personalen att jobba mot tydliga mål.

—————————————————

Undersökningen gjordes under våren 2019 och innefattar anonyma svar från sex nordiska storbolag inom bank, finans och försäkring. 

– Syftet är att du som företag ska ha rätt information när du fattar strategiska beslut. Genom att kartlägga företagens förmåga och beteende inom förändring så att företagen bättre kan förstå hur de ska leda sin utveckling framåt, säger Linda Håkansson, ansvarig för finansiella tjänster på Accenture. 

Undersökningen görs via det Accenture-utvecklade analysverktyget Transformation GPS och kompletteras med djupintervjuer med personer i ledande roller. Sammantaget har Accenture fått svar från över 1 miljon anställda som enligt Accenture tydligt visar var företagen befinner sig i sin förändringsresa. 

 

Källa: Realtid.se, 27 februari 2020
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How to beat the transformation odds

Posted in Aktuellt, Board work / Styrelsearbete, Executive Coaching, Executive Team / Ledningsgruppsarbete, Fact Based Management, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on February 26th, 2020 by admin

Three out of four transformations fall short!

Transformational change is still hard, according to a new survey. But a focus on communicating, leading by example, engaging employees, and continuously improving can triple the odds of success.

After years of McKinsey research on organizational transformations,  the results from our latest McKinsey Global Survey on the topic confirm a long-standing trend: few executives say their companies’ transformations succeed.  Today, just 26 percent of respondents say the transformations they’re most familiar with have been very or completely successful at both improving performance and equipping the organization to sustain improvements over time. In our 2012 survey, 20 percent of executives said the same.

But some companies have beaten the odds. We asked respondents whether their organizations follow 24 specific actions that support five stages of a transformation.  At organizations that took a rigorous, action-oriented approach and completed their transformations (that is, all of their initiatives have been fully implemented), executives report a 79 percent success rate—three times the average for all transformations. According to the results, no single action explains the difference; in fact, the more actions an organization takes, the more likely its transformation is to succeed. Still, the results suggest that some transformation practices correlate much more closely than others with success. These practices include communicating effectively, leading actively, empowering employees, and creating an environment of continuous improvement so organizations can keep their performance from stagnating (or even regressing) once a transformation’s goals are met.  By implementing continuous-improvement activities that enable the organization to look regularly for new and better ways to work, respondents’ organizations double their chance of successfully sustaining improvements after the transformation.

The power of action—and communication
To test which transformation practices correlate most with success, we asked executives about 24 specific actions that support a transformation’s five stages (see sidebar, “The 24 actions of transformation”). Indeed, the results indicate that when organizations follow a rigorous approach and pursue all of these actions during a transformation, the overall success rate more than doubles from the average (26 percent), to 58 percent. Among only completed transformations, respondents report a success rate of 79 percent—about triple the average success rate for all transformations.

While the results show that success links closely to a greater overall number of actions, they also indicate that not all 24 actions are created equal. Communication, specifically, contributes the most to a transformation’s success. At companies where senior managers communicate openly and across the organization about the transformation’s progress, respondents are 8.0 times as likely to report a successful transformation as those who say this communication doesn’t happen. Good communication has an even greater effect at enterprise-wide transformations, where company-wide change efforts are 12.4 times more likely to be successful when senior managers communicate continually.

It also helps when leaders develop a clear change story that they share across the organization. This type of communication is not common practice, though. When asked what they would do differently if the transformation happened again, nearly half of respondents (and the largest share) wish their organizations had spent more time communicating a change story.

Lead, don´t manage
According to respondents, leadership matters as much during a transformation as it does in the company’s day-to-day work. It can’t be delegated to a project-management office or central team—the presence (or not) of which has no clear bearing on a transformation’s success—while executives carry on with business as usual. Indeed, when senior leaders role model the behavior changes they’re asking employees to make (by spending time on the factory floor or in the call center, where work is done), transformations are 5.3 times more likely to be successful. Success is twice as likely when senior leaders and the leaders of initiatives spend more than half of their time on the transformation. In practice, though, only 43 percent of these leaders say they invested that much working time in the transformation’s initiatives.

But even if they’re involved, senior leaders face some potential pitfalls. First is the perception gap between them and everyone else in the organization. Eighty-six percent of leaders say they role modeled the desired behavior changes when transformation initiatives were being implemented, yet only half of all employees who were part of the transformation (but didn’t play an active role) say the same. Overall, senior leaders are also 2.5 times as likely as other employees to rate their companies’ transformations a success.

A second pitfall, in addition to outsize optimism, is overplanning. Few initiative leaders—only 22 percent—say they would spend more time planning the transformation if they could do it over again. Instead, these respondents most often say they would spend more time communicating a change story (49 percent) and aligning their top team (47 percent).

Choose the right people and empower them

An involved team of senior leaders is only half the battle. Executives report that for transformations to truly succeed, companies must think about the role that employees play as well as their people needs across the organization. If the transformation happened again, the largest share of executives say they would move faster to keep people resistant to changes out of leadership or influencer roles.

According to respondents, it’s important to define clear roles so employees at all levels are prepared to meet the post-transformation goals—a factor that makes companies 3.8 times more likely to succeed . Also key to an effective people strategy is allocating enough employees and the right ones—that is, the high performers and active supporters—to work on the transformation. One effective way to hold these people accountable, according to the results, is using transformation-related metrics. Executives who say their initiatives’ leaders were held accountable for their transformation work in annual evaluations are 3.9 times more likely than others to report a successful transformation.

Prepare for continuous improvement

Once initiatives are fully implemented, the change effort does not end; almost 40 percent of respondents say they wish they had spent more time thinking about how their organizations would continue to improve. Several specific practices that help companies connect strategy to daily work, deliver value more efficiently to customers, enable people to contribute to their best ability, and discover new ways of working all link to an organization’s long-term health—and can keep companies from backsliding on performance gains and support continuous improvements after transformation.

For example, in organizations where people understand how their individual work supports the company’s broader vision, executives are 5.5 times likelier than others to say the transformation has been successful . To achieve long-term success, that link must also be reinforced with a company-wide commitment to identifying opportunities for improvement—a practice that more than quadruples the likelihood of success. Likewise, executives report a much higher rate of success when their companies have a systematic process for developing people’s capabilities and for identifying, sharing, and improving upon best practices.

Of the eight continuous-improvement actions we asked about, one was an outlier: only one-third of executives say teams of employees begin their days discussing the previous day’s results and the current day’s work, compared with strong majorities of executives who agree that their organizations take each of the other actions. But respondents whose organizations had implemented daily discussions were twice as likely as others to report success.

Looking ahead

Focus on people, not the project. Transformations are about the people in the organization as much as they’re about the initiatives. The long-term sustainability of a transformation requires companies to engage enthusiastic high-potential employees, equip them with skills, and hold them accountable for—as well as celebrate—their contributions to the effort. Companies should, in our experience, take the same steps toward developing people throughout the organization. To build broad ownership, leaders should encourage all employees to experiment with new ideas: starting small, taking risks, and adapting quickly in their work. Doing so can create far-reaching and positive support for change, which is essential to a transformation’s success.

Communicate continually. When embarking on a transformation, executives should not underestimate the power of communication and role modeling. The results suggest that continually telling an engaging, tailored story about the changes that are under way—and being transparent about the transformation’s implications—has substantially more impact on an effort’s outcome than more programmatic elements, such as performance management or capability building. But the communication doesn’t end once the change story has been told. Leaders must continually highlight progress and success to make sure the transformation is top of mind across the organization—and to reduce the gap between what employees believe is happening and what they see.

Take more action. Transformation is hard work, and the changes made during the transformation process must be sustained for the organization to keep improving. There is no silver bullet—and while some factors have more impact than others on a transformation’s outcome, the real magic happens when these actions are pursued together. Overall, the survey indicates that the more actions an organization took to support each of the five stages of transformation, the more successful it was at improving performance and sustaining long-term health.

 

Source: McKinsey.com
About the authors: The contributors to the development and analysis of this survey include David Jacquemont, a principal in McKinsey’s Paris office; Dana Maor, a principal in the Tel Aviv office; and Angelika Reich, an associate principal in the Zurich office.

Link

Läs mer om förtroendet för ledningen avseende förändringsarbete inom nordiska finansbolag (27 februari 2020):

 

Organizations do not change. People change!

Posted in Aktuellt, Board work / Styrelsearbete, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap on October 28th, 2019 by admin

Addressing an organization’s mindset has a tangible business impact and is the key that opens the door to successfully transforming an organization.

Albert Einstein once famously remarked, “Today’s problems cannot be solved with the same level of thinking that created them.”
Consider the example of a Latin American consumer goods manufacturer under pressure to change its performance after not having performed well for several quarters. Due to urgency, the chief transformation officer went off to set more stretched targets and created a weekly governance to review performance initiatives with more rigor.

Yes, people worked hard. Yes, at first some KPIs improved, but all of this drained more energy than the results it was delivering. It soon became clear that the people would not last a marathon at the speed of a sprint; they had started to become disengaged.
Like in this organization, most enterprise transformations focus on changing business metrics and, at best, employee behaviors—and not the thinking what created the need for a transformation in the first place. And, not surprisingly, 70% of them fail. Companies with failed transformation programs identify employee resistance or management behavior as the major barrier (72%) to success.

To avoid that statistic, this manufacturer for the first time shifted the focus on the people. What was driving their behavior? What made their eyes shine? What would truly engage them in a transformation? Looking for these answers, the top team discovered that up until then, people were gaining praise for doing new things even if they were not delivering their promised results. They thought that short-term results were more important than satisfying the consumer. And when the time came to choose, they felt that their individual goals were bigger than the company’s. All this was limiting them from participating wholeheartedly in the transformation underway.

In fact, these mindsets, as we call them, needed to be flipped to make things work. Through a set of targeted initiatives, these mindsets were shaken. The people came to realize that satisfying the consumer is what will bring the short-term results. There is no success for the individual if the company is not doing well. And they started to be recognized for executing with discipline focusing on our full potential to deliver challenging goals. Sharing the story of why the transformation was necessary and addressing these mindsets engaged the employees with a whole new level of energy, and only few months later the organization was able to deliver its first quarter back on track and continue the trend.

Companies that take the time to identify and shift deep-seated mindsets were 4x more likely to rate their change programs as “successful,” according to the McKinsey Quarterly Transformational Change Survey, 2010. In fact, mindset shifts are linked to the highest impact behaviors a person wants to change.

Unless you first identify the mindsets, both limiting and enabling your people, your transformation initiatives may be wasting resources, time and energy. Another company, a telco, found that managers spent the majority of performance reviews explaining the complex rating process vs giving feedback. So, the telco simplified the process and rating system, increased frequency of conversations, and provided training on delivering feedback. However, it’s important to keep in mind that “from” mindsets aren’t necessarily bad; many rational, competent and well-meaning people could and do operate in this way.

In the case of the telco, leaders cancelled reviews and/or spent most time on small talk. Why? Leaders actually avoided difficult conversations and focused the feedback on process because they were afraid that criticism and difficult conversations would damage their relationships. Once this mindset transformed into “honesty (with respect) is the essence of building strong relationships,” leaders started to engage in regular, honest and courageous feedback conversations, and focus their feedback on performance.
Addressing the organization’s mindset has a tangible business impact and is the key that opens the door to successfully transforming an organization. In our next articles, we explore how to uncover those mindsets and how to turn them around.
The authors wish to thank Natasha Bergeron for the practical insights she provided for this post.

Source: McKinsey.com, October 2019
Authors: Anita Baggio, Eleftheria Digentiki and Rahul Varma
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Vila rätt – så maxar du semestern för din hjärna

Posted in Aktuellt, Allmänt, Board work / Styrelsearbete on July 16th, 2019 by admin

Sommarsemestern är ett bra tillfälle för återhämtning, och inte minst hjärnan behöver ett avbrott och vila.

”Att bli trött efter att ha stressat mycket på jobbet, och ha låtit ‘hjärnan gå på högvarv’, ska inte tas för lätt på”, säger neuropsykologen Åke Pålshammar.

Så här råder experterna till att ta vara på semesterdagarna.

”Under ledigheten ska man lämna så mycket som möjligt som har med jobbet att göra. Man får gärna tagga ned lite innan ledigheten också. När man är så mycket uppe i varv som många av oss är kan det ta upp till en hel vecka av semestern att få ned varvet”, säger Åke Pålshammar, neuropsykolog och senioruniversitetslektor vid Uppsala universitet.

I och med att människor är så olika går de inte att generalisera vad som krävs för att hjärnan ska kunna återhämta sig. Grundregeln är att lägga tankar på jobbet åt sidan om det är möjligt, men det är inte ovanligt att vissa blir ”näst intill tokiga” om de inte har en hög stimulansnivå.

”Hjärnan behöver inte så ohyggligt mycket lugn, om man inte är väldigt uppe i varv och känner att det sliter”, fortsätter Åke Pålshammar.

”Då kan man behöva ordentlig avkoppling. Även då kan man ha någon form av kontakt med vardagen genom att kolla mobilen, säg en gång om dagen, så att man slipper oroa sig för att något ska hända om man inte har en ersättare”, säger han.

Har man mycket stimulans på jobbet så är det kanske inte ännu mer stimulans som får en att koppla av att, utan man kan behöva dra ned på tempot. Samtidigt ska man inte kasta sig in i att gå ned i för lågt varv och känna att ”hjärnan stannar”.

De som har mer enformiga jobb kan behöva en annan form av stimulans under ledigheten för att hjärnan ska må bra. Det blir en slags vila av att få göra något roligt och annorlunda från det man brukar göra.

Att blir trött efter att ha stressat mycket på jobbet och låtit ”hjärnan gå på högvarv” ska inte tas för lätt på, enligt Åke Pålshammar.

”Om hjärnan går på högvarv för länge så får vi problem med bland annat att orka göra viktiga saker eller koncentrera oss. Man har nött ned alla system och då kommer det ibland en förfärande trötthet som kan göra att man nästan inte orka engagera sig för någonting. Då kan man bli näst intill handlingsförlamad”, säger Åke Pålshammar.

Om man inte heller fått en ordentlig sammanhållen sömn skriker hjärnan efter att få sova och varva ned. Till slut tycks hjärncellerna bestämma sig för att gå i strejk, fortsätter han.

Det är rekommenderat att ta minst två veckor sammanhållen semester, menar Åke Pålshammar. Risken är dock att två veckor av ledighet kan bestå av en veckas nedtrappning, följt av några dagars upptrappning för att återgå till vardagen, vilket gör att det inte blir mycket av riktig semester kvar.

”En månads sammanhållen semester, det är nog vad man absolut skulle önska. Då får man en chans att under två av veckorna varva ned ordentligt och ger hjärnan en chans till återhämtning”, säger Åke Pålshammar.

Enligt Dan Hasson, docent i folkhälsovetenskap och anknuten forskare vid Mayo Clinic och Karolinska institutet, får man ett ökat välbefinnande som på sin höjd håller i sig i ett par veckor efter semestern, oavsett om det är en kortare eller längre ledighet.

”Man behöver vara pragmatisk och fråga sig själv vad man vill ha ut av sin ledighet. För alla är inte semestern vilsam utan den kan vara fylld med krav och måsten. Då kan det vara en lättnad att komma tillbaka till jobbet efter semestern”, säger Dan Hansson.

Det behöver inte vara negativt att tänka mycket på jobbet under semestern, menar han.

”Är man passionerad i sitt jobb är det bara roligt om man fortsätter tänka på det under ledigheten.  Men om det blir ett problem att tänka för mycket på jobbet kan man gärna innan semestern tänka på vad som kan få en att slappna av. Återhämtning är något man även ska ha i vardagen så klart, men under semestern kan man verkligen maxa det och se till att man får lite mer djupgående återhämtning”, säger Dan Hasson.

Källa: DI.se, juli 2019
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Five moves to make during a digital transformation

Posted in Aktuellt, Board work / Styrelsearbete, Digitalisering / Internet, Executive Team / Ledningsgruppsarbete on May 20th, 2019 by admin

Surveyed executives confirm that digital transformations rarely achieve success. But in those that do lie the structural elements that may help organizations overcome the odds.

Despite the abundance of digital and analytics transformations underway across the business landscape, few companies are achieving the results envisioned. Our latest McKinsey Global Survey on the topic confirms that the rate of success is alarmingly low.1 About eight in ten respondents say their organizations have begun digital transformations in recent years, but just 14 percent say their efforts have made and sustained performance improvements.2 What’s more, only 3 percent report complete success at sustaining their change. (Explore the survey results in our data visualization, “An interactive look at digital transformations.”)

That companies find difficulty turning in successful digital transformations is not surprising, since we know from previous research that digital transformations are harder than more traditional ones to get right. But a look at the structure of digital and analytics transformations points to five key moves at particular stages of a transformation that set successful change efforts apart. These actions suggest ways that other organizations can plan and execute digital transformations successfully.

For starters, respondents who report the greatest levels of success in pursuing digital transformations say their organizations ruthlessly focus on a handful of digital themes tied to performance outcomes. In defining their transformations’ scope, these successful organizations boldly establish enterprise-wide efforts and build new businesses. They also create an adaptive design that allows the transformation strategy and resource allocation to adjust over time. In addition, they adopt agile execution practices and mind-sets by encouraging risk taking and collaboration across parts of the organization. Moreover, in successful efforts, leadership and accountability are crystal clear for each portion of the transformation.

Ruthlessly focus on a clear set of objectives

When considering a response to digital disruptions, organizations face many critical choices. Should they transform their existing business model or build a new one? Should they drive down costs or focus on customer engagement? Which areas of the business will require more investment in digital initiatives, and which will need to defund their own initiatives to free up resources for the ones that perform well or reflect higher-priority objectives? Getting leaders to agree upon the best way forward can be challenging, but the survey results suggest a need for consensus.Would you like to learn more about McKinsey Digital?Visit our Digital Organization page

With successful digital transformations, respondents say their organizations keep efforts focused on a few digital themes—that is, the high-level objectives for the transformation, such as driving innovation, improving productivity, or reshaping an end-to-end customer journey—that are tied to business outcomes, rather than pursuing many different agendas (Exhibit 1). At successful organizations, accountability for those objectives also spans the organization. These respondents are 3.7 times more likely than others to report a shared sense of accountability for meeting their transformations’ objectives. They also say their organizations have been clear about the financial effects of their initiatives; for example, they estimate impact based on the company’s current business momentum and models of near- and long-term scenarios.

Exhibit 1

Be bold when setting the scope

We know from previous research that digital strategies should be bold in magnitude and scope,3and the survey results show that this also holds true for digital transformations. The successful digital and analytics transformations are about 1.5 times more likely than others to be enterprise-wide in scale (Exhibit 2). This result aligns with earlier research, which found that companies making digital moves often use new digital technologies at scale to capture the full benefits from their technology investments.4 Respondents at successful organizations are also 1.4 times more likely than others to report the creation of new digital businesses during their transformations.

Exhibit 2

Create an adaptive design

The fast pace at which digital drives change explains why so many companies are launching digital transformations and why the transformations themselves must be flexible. Defining a multiyear transformation’s investment requirements and performance targets up front—and not revisiting them as the transformation progresses—has perhaps never been a sound approach. But digital transformations require monthly, if not weekly, adjustments. We see this adaptability ingrained in the design of successful transformations: respondents reporting success are almost three times more likely than others to say their efforts involve at least monthly adjustments to their strategic plans, based on business leaders’ input on the state of the transformation (Exhibit 3).

Exhibit 3

Along with the need for adaptable transformation targets, flexible talent allocation is a differentiator in a transformation’s success. Respondents at successful organizations are more than twice as likely as others to strongly agree that their allocation of talent to digital initiatives has been dynamic during their transformations. Finally, a larger share of respondents reporting success say their organizations have reallocated their operating expenditures to fund the transformation. Earmarking resources for initiatives that span organizational silos can help ensure that a transformation is properly funded and that initiatives aren’t partially funded by one part of the organization only to be deprioritized by another.

Adopt agile execution approaches and mind-sets

Just as the transformation’s design must be adaptable, so must the execution of its initiatives. Successful digital and analytics transformations are likelier than others to employ more agile ways of working, such as encouraging risk taking, innovation, and collaboration across parts of the business, during a transformation.5 Agility’s importance to transformation success is clear when we look at the agile characteristics of companies’ organizational culture. Respondents at successful organizations are more than twice as likely as their peers elsewhere to strongly agree that employees are rewarded for taking risks of an appropriate level and 2.6 times likelier to say their organizations reward employees for generating new ideas (Exhibit 4). Additionally, these respondents are three times likelier to say employees collaborate effectively across business units, functions, and reporting lines. These findings align with previous research on successful digital cultures, which found that being risk averse and too siloed often prevents incumbents from realizing business impact from their digital activities.

Exhibit 4

Of course, organizations can rely on employees to be innovative, take appropriate risks, and work collaboratively only if they have the right digital talent. Talent is another aspect in which successful digital and analytics transformations differ notably from the rest. A larger share of success-group respondents than their peers strongly agree that their organizations are focused on attracting and developing highly talented individuals. They are 1.8 times likelier than others to say their organizations have hired new employees with strong digital and analytics capabilities during their transformations. What’s more, these respondents report that an average of 53 percent of employees have been trained in new digital and analytics capabilities since their transformations began—1.7 times greater than the share of employees reported at other organizations.

Make leadership and accountability crystal clear

Who owns the digital and analytics transformation is often a hotly contested question, since the initiatives that organizations pursue will affect how company resources are prioritized and might even change the entire direction of the organization. A look at responses describing leadership roles shows significant differences between the success group and others in how certain roles lead the transformation’s strategy and its execution. Respondents reporting successful transformations are likelier than others to say their leaders—from the board and CEO down to the leaders of specific initiatives—engage materially in the efforts (Exhibit 5). For example, leaders at these organizations are more likely to communicate their transformations’ progress regularly to the markets. There also is greater clarity at successful organizations about who is responsible for which portion of the transformation, whether it’s the ownership of a specific initiative or a particular stage in the process.

Exhibit 5

Clarity about ownership is critical, since responsibility often shifts among different groups as the digital transformation progresses, and the handoffs must be well-defined. The survey results show how successful companies manage ownership over time during their digital and analytics transformations (Exhibit 6). For setting strategy and measuring impact, the largest shares of respondents from successful organizations say responsibility lies with the corporate strategy function, which has visibility across the entire business and broader ecosystem. By contrast, respondents at all other organizations are more likely than the success-group respondents to say individual business units or functions are responsible for these steps. Meanwhile, respondents from successful organizations say business units most often oversee the actual execution of initiatives—that is, building and refining them.

Exhibit 6

Looking ahead

While most respondents say their organizations have not fully sustained the improvements made during transformations, lessons can be learned from the approaches of the organizations that did succeed. The results from those efforts point to moves companies can make to keep their transformations on a path toward success:

  • Raise the bar on leadership alignment and commitment. The broader scope of successful transformations further underscores the importance of having buy-in and alignment across the full organization to keep efforts coordinated and prioritized. Lack of leadership alignment around objectives often leads to many subscale and misaligned initiatives. One way to encourage commitment to a transformation’s initiatives is to show leaders, using pilots and proof-of-concept exercises, that the strategy will work, followed by investment in a single cross-cutting initiative. Building these proof points can galvanize support for the change effort. The same is true of increasing leaders’ digital fluency. These steps help make leaders comfortable with dedicating operating and capital expenditures at an enterprise level, which shows executive commitment and reduces the risk of wasting resources on incomplete initiatives.
  • Build in flexibility with clearly defined handoffs. Not only are successful transformations more likely than others to span large parts of the organization, but the ownership of each transformation will evolve over time as it moves from ideation through execution. The results suggest that there must be a clear plan for how these shifts in accountability will occur. Handoffs and overlap are notorious friction points that are critical to manage and define. Leaders should gather the pertinent groups across the business and provide a clear plan for each transition, to avoid duplication, misalignment, and dropped balls.
  • Enforce survival of the fittest among digital initiatives. Like ownership, funding for initiatives requires clarity: there should be clear criteria for reallocation of resources, whether operating or capital expenditures, based on performance. All digital initiatives should be expected to meet their targets to continue to receive funding. When initiatives fail to do so, organizations should defund them without delay to free up capital for new ones and quickly move on to the next approach. Seeking out M&A and partnership opportunities to quickly build out missing capabilities for new initiatives has been shown to be an important differentiator for success,6  and this seems likely to continue to hold true as the pace of digital transformations continues to increase.

About the author(s)

The survey content and analysis were developed by Jonathan Deakin, a partner in McKinsey’s London office; Laura LaBerge, a senior expert in the Stamford office; and Barbara O’Beirne, an associate partner in the Dublin office.

They wish to thank Jacques Bughin, Tanguy Catlin, Oisin O’Sullivan, and Soyoko Umeno for their contributions to this work.

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Three keys to faster, better decisions

Posted in Aktuellt, Board work / Styrelsearbete, Executive Coaching, Leadership / Ledarskap on May 3rd, 2019 by admin

Decision makers fed up with slow or subpar results take heart. Three practices can help improve decision making and convince skeptical business leaders that there is life after death by committee.

Two years ago, we wrote about how it was simultaneously the best and worst of times for decision makers in senior management. Best because of more data, better analytics, and clearer understanding of how to mitigate the cognitive biases that often undermine corporate decision processes. Worst because organizational dynamics and digital decision-making dysfunctions were causing growing levels of frustration among senior leaders we knew.

Since then, we’ve conducted research to more clearly understand this balance, and the results have been disquieting. A survey we conducted recently with more than 1,200 managers across a range of global companies gave strong signs of growing levels of frustration with broken decision-making processes, with the slow pace of decision-making deliberations, and with the uneven quality of decision-making outcomes. Fewer than half of the survey respondents say that decisions are timely, and 61 percent say that at least half the time spent making them is ineffective. The opportunity costs of this are staggering: about 530,000 days of managers’ time potentially squandered each year for a typical Fortune 500 company, equivalent to some $250 million in wages annually.1

Managers at a typical Fortune 500 company may waste more than 500,000 days a year on ineffective decision making.

The reasons for the dissatisfaction are manifold: decision makers complain about everything from lack of real debate, convoluted processes, and an overreliance on consensus and death by committee, to unclear organizational roles, information overload (and the resulting inability to separate signal from noise), and company cultures that lack empowerment. One healthcare executive told us he sat through the same 90-minute proposal three times on separate committees because no one knew who was authorized to approve the decision. A pharma company hesitated so long over whether to pounce on an acquisition target that it lost the deal to a competitor. And a chemicals company CEO we know found himself devoting precious time to making hiring decisions four levels down the organization.

In our previous article, we proposed solutions that centered around categorizing decision types and organizing quite different processes against them. Our latest research confirms the importance of this approach, and it also highlights for each major decision category a noteworthy practice—sometimes stimulating debate, for example, while in other cases empowering employees—that can yield outsize improvements in effectiveness. When improvements in these areas are coupled with an organizational commitment to implement decisions—embracing not undercutting them—companies can achieve lasting improvements in both decision quality and speed. Indeed, faster decisions are often a happy outcome of these efforts. Our survey showed a strong correlation between quick decisions and good ones, suggesting that a commonly held assumption among executives—namely, “We can have good decisions or fast ones, but not both”—is flawed.

Three fixes that make a difference

Avoiding life on the bubble

Of the four decision categories we identified two years ago, three matter most to senior leaders. Big-bet decisions (such as a possible acquisition) are infrequent but high risk and have the potential to shape the future of the company; these are generally the domain of the top team and the board. Cross-cutting decisions (such as a pricing decision), which can be high risk, happen frequently and are made in cross-functional forums as part of a collaborative, end-to-end process. Delegated decisions are frequent but low risk and are effectively handled by an individual or working team, with limited input from others. (The fourth category, ad hoc decisions, which are infrequent and low stakes, is not addressed in this article.) Clearly, it is important that these types of decisions happen at the appropriate level of the company (CEOs, for example, shouldn’t make decisions that are best delegated). And yet, just as clearly, many decisions rise up much higher in the company than they should (see sidebar, “Avoiding life on the bubble”).

Even those businesses that do make decisions at the right level, however, complain about slow and bad outcomes. The evidence of our survey—and our experience watching executives grapple with this—suggests that while the best practices for making better decisions are interrelated, there’s nonetheless one standout practice that makes the biggest difference for each type of decision.

Big bets—facilitate productive debate

Big-bet decisions can be future-shapers for a company, the most important decisions leaders make. And they often receive much less scrutiny than they should.

The dynamic inside many decision meetings doesn’t help. It’s as if there is an unspoken understanding that the meeting should proceed like a short, three-act play. In the first act, the proposal is delivered in a snappy PowerPoint presentation that summarizes the relevant information; in the second, a few tough yet perfunctory questions are asked of the presenter and answered well; in the final act, resolution arrives in the form of an undramatic “yes” that may seem preordained. Little substantive discussion takes place.

In a global agricultural company, for example, the members of the executive committee tended to speak up only if their particular area of the business was being discussed. The tacit assumption was that people wouldn’t intrude on colleagues’ area of responsibility. Consequently, when the top team moved to decide on a proposed new initiative in Europe, the leaders from the US business stayed silent, even though they had years of hard-won experience in marketing and cross-selling similar agricultural products to those new ones under discussion. Nonetheless, the decision was made, the products launched—and sales lagged expectations. Later, the European sales force was frustrated to learn their US counterparts had relevant experience that would have helped.

Whether the cause of such dynamics is siloed thinking or a consensus-driven culture (of which, more later), the effect on decision making is decidedly negative. Bet-the-company decisions require productive interactions and healthy debate that balance inquiry and advocacy. In fact, the presence of high-quality interactions and debate was the factor most predictive of whether a respondent in our survey also said their company made good, fast big-bet decisions?

Leaders can encourage debate by helping overcome the “conspiracy of approval” approach to group discussion. Simple behavior changes can help. For example, consider starting the decision meeting by reminding participants of the overall organizational goals the meeting supports, in order to reframe the subsequent discussions. Then assign someone to argue the case for, and against, a potential decision or the various options under consideration. Similarly, ask the leaders of business units, regions, or functions to examine the decision from outside their own point of view. A rotating devil’s advocate role can bolster critical thinking, while premortem exercises (in which you start by assuming the initiative in question turned out to be a failure, and then work back for likely explanations) can pressure test for weak spots in an argument or plan.

The objective should be to explore assumptions and alternatives beyond what’s been presented and actively seek information that might disconfirm the group’s initial hypotheses. Creating a safe space for this is vital; at first it can be helpful for the most senior participants to ask questions instead of expressing opinions and to actively encourage dissenting views. Productive debate is essentially a form of conflict—a healthy form—so senior executives will need to devote time to building trust and giving permission to dissent, irrespective of the organizational hierarchy in the room.

A final note of caution: minimizing the number of debate participants to speed up decision making could harm decision quality. As many studies show, greater diversity brings greater collective wisdom and expertise, along with better performance. This is also true in decision making. To ensure a faster process, companies should manage the expectations of debate participants by limiting their voting rights and sticking to other agreed-upon processes, as we explore next.

Cross-cutting decisions—understand the power of process

An executive we know joked during a meeting that “a committee is born every day in this organization.” Just then, another executive nearby looked up from his computer to announce he had just been invited to join a new committee. The comedic timing of the line was perfect, but it wasn’t a joke.

Or perhaps the joke is on the rest of us? We often find companies maintaining a dozen or more senior-executive-level committees and related support committees, all of which recycle the same members in different configurations. The impetus for this is understandable—cross-cutting decisions, in particular, are the culmination of smaller decisions taking place elsewhere in the company. And cross-cutting decisions were the ones that executives in our survey had the most exposure to, regardless of their seniority.

Yet when it comes to cross-cutting decisions (involving, for example, pricing, sales, and operations planning processes or new-product launches), only 34 percent of respondents said that their organization made decisions that were both good and timely.

There are many reasons cross-cutting decisions go crosswise. Leaders may not have visibility on who is—or should be—involved; silos make it fiendishly hard to see how smaller decisions aggregate into bigger ones; there may be no process at all, or one that’s poorly understood.

Solving for cross-cutting decisions, therefore, starts with commitment to a well-coordinated process that helps clarify objectives, measures, targets, and roles. In practical terms, this might mean drawing a bright line between the portion of a meeting dedicated to decisions from the parts of a meeting meant to inform or discuss. Any recurring meetings (particularly topic-focused ones) where the nature of the decision isn’t clear are ripe for a rethink—and quite possibly for elimination.

Good meeting discipline is also a must. For example, a mining company realized that its poor decision making was related to the lack of rigor with which executives ran important meetings. As a result, the top team developed a “meeting manifesto” that spelled out required behaviors, starting with punctuality. The new rules also required leaders to clarify their decision rights in advance, and to be more deliberate about managing the number of participants so that meetings wouldn’t become bloated, on the one hand, or lack diverse views, on the other.

The manifesto was printed on laminated posters that were put in all meeting rooms, and when the CEO was seen personally reinforcing the new rules, the news spread quickly that there was a new game afoot. As the new practices took hold, the benefits became apparent. In pulse-check surveys conducted over the course of the following year, the company’s measures of meeting effectiveness and efficiency went up by almost 50 percent.

A social-network analysis, meanwhile, allowed a global consumer company to identify time wasting around decision making on a heroic scale—as many as 45 percent of interactions were found to be potentially inefficient, and 23 percent of the individuals involved in an average interaction added no value. In response, the company broke down complex processes into key decisions, clarified roles and responsibilities for each one, defined inputs and outputs for each process, and made one person accountable for each outcome. After conducting pilots in several countries, executives used two-day workshops to roll out the process redesign. The resulting benefits included a significant financial boost (as employees used the freed-up time in higher-value ways), as well as an arguably more important boost in employees’ morale and sense of work–life balance, which in turn has helped the company attract and retain talent.

Delegated decisions—make empowerment real

Delegated decisions are generally far narrower in scope than big-bet decisions or cross-cutting ones. They are frequent and relatively routine elements of day-to-day management. But given the multiplier effect, there is a lot of value at stake here, and when the organization’s approach is flawed it’s costly.

In our experience, ensuring that responsibility for delegated decisions is firmly in the hands of those closest to the work typically delivers faster, better, and more efficiently executed outcomes, while also enhancing engagement and accountability.

Our research supports this view. Survey respondents who report that employees at their company are empowered to make decisions and receive sufficient coaching from leaders were 3.2 times more likely than other respondents to also say their company’s delegated decisions were both high quality and speedy.

A vital aspect of empowerment, we find, involves creating an environment where employees can “fail safely.” For example, a European financial-services company we know started a series of monthly, after-work gatherings where leaders could meet over drinks to discuss failure stories and the lessons they’d learned from them. The meetings were purposely kept informal, but top management nonetheless established ground rules to ensure that the stories would be meaningful (not trivial) and that employees telling the stories would be protected. The meetings started small but became popular quickly. Today, a typical session includes 40 to 50 of the company’s top 150 leaders. The climate of trust and openness the sessions encourage has translated into better ideas, including practical lessons that have helped the company speed up its release of new products.

As this example suggests, empowerment means not only giving employees a strong sense of ownership and accountability but also fostering a bias for action, especially in situations where time is of the essence. That’s easier said than done if there’s no penalty for avoiding a decision or sanction for escalating issues unnecessarily.

Executives who get delegated decisions right are clear about the boundaries of delegation (including what’s off-limits and how and where to escalate what’s beyond an individual’s competence), ensure that those they entrust with decision-making authority have the relevant skills and knowledge to act (and if not, provide them with the opportunity to acquire those capabilities), and explicitly make people accountable for their areas of decision-making responsibility (including spelling out the consequences for those who fail to respond to the challenge). This often means senior leaders engaging in conversations and dialogue, encouraging those newly empowered to seek help, and in the early days subtly and invisibly monitoring the performance of those participating in “delegated” forums so as not to appear to be taking over. Leaders might want to start mentoring their reports with a small “box” of accountability, slowly expanding it as more junior executives grow in confidence.

For leaders looking to become better delegators, it’s not a question of choosing between a style that is “hands-on” or “hands-off,” or between one that is “controlling” or “empowering.” There’s a balance to be struck. Root out micromanagers who are both hands-on and controlling, as well as “helicopter autocrats” who are hands-off and controlling, occasionally swooping in, barking orders, and disappearing again. But the laissez-faire executive—generally too hands-off, delegating but leaving those with the responsibility too much to their own devices (sometimes with disastrous results)—is also a danger. The ideal in our experience are hands-on and delegating leaders who coach, challenge, and inspire their reports, are there to help those who need help, and stay well clear of actually making the decision.

After the decision: Seek commitment, not unanimous agreement

In his April 2017 letter to Amazon shareholders, CEO Jeff Bezos introduced the concept of “disagree and commit” with respect to decision making. It’s good advice that often goes overlooked. Too frequently, executives charged with making decisions at the three levels discussed earlier leave the meeting assuming that once there’s been a show of hands—or nods of agreement—the job is done. Far from it.

Indeed, any agreement voiced in the absence of a strong sense of collective responsibility can prove ephemeral. This was true at a US-based global financial-services company, where a business-unit leader initially agreed during a committee meeting not to change the fee structure for a key product but later reversed course. The temptation was too great: the fee changes helped the leader’s own business unit—albeit ultimately at the expense of other units whose revenues were cannibalized.

One of the most important characteristics of a good decision is that it’s made in such a way that it will be fully and effectively implemented. That requires commitment, something that is not always straightforward in companies where consensus is a strong part of the culture (and key players acquiesce reluctantly) or after big-bet situations where the vigorous debate we recommended earlier has taken place. At a mining company, real commitment proved difficult because the culture valued “firefighting” behavior. In staff meetings, company executives would quickly agree to take on new tasks because it made them look good in front of the CEO, but they weren’t truly committed to following through. It was only when the leadership team changed this dynamic by focusing on follow-up, execution risks, and bandwidth constraints that execution improved.

While it’s important to devote enough resources to help propel follow-through, and it’s also important to assign accountability for getting things done to an individual or at most a small group of individuals, the biggest challenge is to foster an “all-in” culture that encourages everyone to pull together. That often means involving as many people as possible in the outcome—something that, paradoxically, in the end will enable the decision to be implemented more speedily.

While it’s important to assign accountability for getting things done to an individual, the biggest challenge is to foster an “all-in” culture that encourages everyone to pull together.

Follow the value

There are many keys to better decision making, but in our experience focusing on the three practices discussed here—and on the commitment to implement decisions once taken—can reap early and substantial dividends. This presupposes, of course, that the decisions leaders make at all levels of the organization reflect the company’s strategy and its value-creation agenda. That may seem obvious, but it bears repeating because all too often it simply doesn’t happen. Take the manufacturing company whose operations managers, faced with calls from the sales team to raise production in response to anticipated customer demand, had to consider whether they should spend unbudgeted money on overtime and hiring extra staff. With their bonuses linked exclusively to cost targets, they faced a dilemma. If they took the decision to increase costs and new orders failed to materialize, their remuneration would suffer; if the sales team managed to win new business, the sales representatives would get the kudos, but the operations team would receive no additional credit and no additional reward. Not surprisingly, the operations managers, in their weekly planning meeting, opted not to take the risk, rejected a proposal to set up a new production line, and thereby hindered (albeit inadvertently) the group’s higher growth ambitions. This poor-quality—and in our view avoidable—outcome was the direct result of siloed thinking and a set of narrow incentives in conflict with the group’s broader strategy and value-creation agenda. The underlying management challenge is part of a dynamic we see repeated again and again: when senior executives fail to explore—and then explain—the context and underlying strategic intentions associated with various targets and directives they set, they make unintended consequences inevitable. Worse, the lack of clarity makes it very difficult for colleagues further down in the organization to use their judgment to see past the silos and remedy the situation.

Designing an organization to deliver its strategic objectives—setting a clear mission, aligning incentives—is a big topic and outside the scope of this article. But if different functions and teams do not feel a connection to the bigger picture, the likelihood of executives making good decisions, whether or not they adopt the ideas discussed earlier, is significantly diminished.

Source: McKinsey.com, April 2019
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About the authors: Aaron De Smet is a senior partner in McKinsey’s Houston office, Gregor Jost is a partner in the Vienna office, and Leigh Weiss is a senior expert in the Boston office.

The authors wish to thank Iskandar Aminov, Alison Boyd, Elizabeth Foote, and Kanika Kakkar for their contributions to this article.