Post-COVID strategy or organisational design - which comes first?
Since the start of the COVID-19 pandemic, we have seen businesses and jobs be adversely affected.
At the end of June, there were 9.4 million people, across 1.2million businesses, on furlough in the UK. But like many things affected by the global virus the picture painted is confusing and contradictory. The lag in the unemployment rate shows 3.9% of the population is unemployed. That’s the lowest in nearly 40 years, yet the Office for Budget Responsibility (OBR) suggests that unemployment will potentially double by the end of this year, rivalling the levels of the 1980s, with aviation, retail, hospitality, and leisure likely to be the hardest hit. There are now nearly 2.6m people claiming unemployment benefits and the number of employees paying tax fell by nearly 650,000 between March and June. Coronavirus is also affecting the available job market. Average earnings have fallen as has the average number of hours people worked, by a record amount. Job vacancies are recording their lowest ever rating since records began in 2001 too.
"I am fearful of a tsunami of job losses"
Whichever way you cut it, it all has to have a major effect on the future of the job market. But as the government furlough scheme begins its scheduled wind-up, we are now starting to see an increasing amount of redundancies being announced. So far, according to official numbers reported by The Guardian at the time of writing, c.170,000 redundancies have been announced, with great British brands like Dyson, WH Smith, JDW Wetherspoon, and British Airways not escaping. The OBR has estimated that 10% of those currently furloughed could become unemployed. At a recent Commons Select Committee, Steve Turner, the Assistant General Secretary to the Unite union stated, “I am fearful of a tsunami of job losses. Firms are now starting to cut their cloth to meet their needs, which will be devastating for jobs, skills, and long-term resistance.”
The over-hanging doom and gloom covering the UK work environment, clouds over some of the more positive performances from some companies amidst the crisis and perhaps the encouraging changes we’re seeing in some workplaces. There’s a chance we are becoming a more compassionate, people-interested, purpose-driven community. During the initial crisis and subsequent mini-recovery, we’ve witnessed many businesses quickly adapt and evolve their usual business interests to assist the wider community and protect jobs and profits. From the pizza-makers who’ve used their ovens to make plastic PPE and redeployed waiters as sales staff, to the money lenders giving payment holidays and businesses who’ve proved that remote working can work and have now given more flexibility to their workers. So, at a time when we are possibly about to face into a stiff headwind of further job cuts and redundancies, what can we do to learn from the positive moves that some businesses have successfully made?
There are two main areas to focus on here and that’s the strategy and organisational design. But what comes first? That may seem like a daft question. “Strategy, obviously!” some of you might say. But is your situation a “needs must” thing and you just have to cut £’s out of the cost base to survive and then you’ll work out how to build from there? In which case you may cry, “Organisational Design!” And even then, do you look at what you want the business to do, be and achieve and shape the organisation accordingly? Are they even different things? Also, does this situation give you cause or the opportunity to take stock of what your organisation has become and make some tweaks to the way you do business and your culture going forwards?
Pre-COVID we’ve seen the growing importance of purpose-driven organisations and the strong financial outperformance of their competitive set. When we talk about ‘purpose’ we mean an organisation's reason for existing beyond just the financial. Where it sets out why the organisation matters, building on its core differentiating capabilities and articulating the value of the organisation to wider societal stakeholders: employees, customers, society, and government. Does COVID-19 present you with the additional opportunity to be the company you’ve always wanted to be? If so, how do you set about doing that, and how does that relate to the strategy and organisational design piece? At this point, I turned to a friend and colleague, Glenda Bray, who deals with this problem, day in, day out, for some help. This is her take on it all.
Glenda. An Organisational Change Agent’s View
Yes, it can feel like a chicken and egg scenario for business leaders. “Do I set my new budgets based on financial needs only and hope that I can achieve the strategy, or do I try and use the strategy and just make cuts where I can?”
In all honesty, there are pros and cons to using each approach.
Using your budgets to guide your decision-making process can have major cash benefits in the immediate term. Reducing your outgoings can help companies survive and provide them with the breathing space necessary for them to reassess their future. Something that is extremely prevalent in these pressing times. The potential pitfall for this approach is that organisations do not grasp the opportunity to review, refresh or rewrite their strategy and plan accordingly and can end up further hampering their ability to trade and begin to re-grow. Leaders who take this approach should be asking the question “by making the cuts, do we now have the structure in place to achieve our goals?” and perhaps more importantly “are our goals still relevant?” Incorrectly configuring resource requirements to meet future needs could negatively affect the organisation's future operating ability and competitive advantage.
Conversely aligning your operating model to your existing strategy has the benefit that you are making reductions based on your strategic intent, and therefore you are ensuring that your structure can support you in achieving business goals. However, the potential pitfall to this is approach is often the opposing pressures of achieving future goals and budgetary constraints. Do you take out a few of the big costs, and potentially leave the business short on thought and people leadership, or do you focus on more, smaller targets which could potentially leave you short of muscle? There are so many things to consider.
Andy also mentions the growing importance of purpose-driven organisations. It’s certainly more in focus today, but it’s not new. Having and using a higher purpose, or that moral compass, has always been an integral part of winning strategies, it’s just perhaps business, in general, hasn’t seen it as so important. Indeed Edward E. Lawler (2006) writes “An effective strategy provides the formula an organisation needs in order to win. It should state the organisation’s purpose, direction, goals, and objectives and in most cases specify the tasks it must accomplish to succeed.” But in today’s society, the reason behind why an organisation does what it does is more of consideration for employees and customers alike, which affects sales and ultimately profitability.
So, is it the chicken or the egg?
Breaking this down further if the strategy is the creative thinking to develop the organisational direction the plan is much more belt and braces. It incorporates your analysis, research, and specific tasks and objectives that will help you achieve your organisational model.
So taking a balanced approach provides you the opportunity to take both financial constraints and strategic intent into consideration. If they can, organisations should grasp the opportunity to pause (even for a very brief moment!) and reflect on their strategy. Even amid extreme financial pressure, this is the perfect time to repurpose, rethink, realign, and adjust your strategic intent for the short, medium, or long term. Challenge your organisational boundaries, clarify your purpose, and create your ideal strategy – the formula you need to sustain your business and grow your competitive advantage.
So, to answer the question is it the chicken or the egg – it's both! They are intrinsically linked. Be flexible in your approach, be prepared to make tweaks to both the strategy and the organisational design to balance out your final plan. Having a more balanced view will ensure that you can build a more sustainable model that is agile enough to deal with the future consequences brought on by new or existing internal or external pressures.
My Summarising Thoughts
Reflecting on Glenda’s views leads me to think that despite my gut and experience telling me to lead with strategy, there really is no clearly definitive answer at this point in time. The individual context will inevitably lead the decision-making. We’re in an extraordinary situation. It’s fine to talk about what “you should” do, but in lots of cases businesses are in pure survival mode. If they don’t cut costs, they won’t be there for next month, let alone the long-term future. But, even at that point, I hope they at least try and think about a short-term plan with a view of a slightly longer-term future, so that whatever they do today, doesn’t block off tomorrow.
For businesses that are in a healthier position, take the opportunity to review where you’re going and how you plan to get there. Consider what the wider purpose of your business is and how that can engage your people, customers, and shareholders, and improve the performance and culture within it and propel you to greater future success as we move towards our next normal. During a crisis, people are less resistant to change and disruption can present a great momentum for change. Hopefully, you will never be presented with such an opportunity to do this again, but it’d be a shame to waste the opportunity, wouldn’t it?
Andy Goram & Glenda Bailye Bray are a pair of energetic, committed partners focused on helping you plot a clear and simple path to successfully delivering the change you seek. They’ll be with you all the way (it will be them too, not some juniors you’ve never met before), or at least as long as you need us. Get in touch here.