Few senior leaders have faced a challenge in their career as severe and potentially consequential as the Coronavirus pandemic and its global impact. Leaders who often rely on pattern recognition and past experience are finding that today’s issues have no historical comparison. This period is a truly novel test of their leadership ability – and no one has any idea how long it will last, or how it will end.
As society has moved forward, day by day, we at Russell Reynolds Associates have seen an evolution of leadership priorities running in parallel with each stage of the virus. An initial phase of crisis management gradually gave way to enabling operations in the ‘new normal,’ with many leaders turning to bold choices that would previously have been dismissed without a second thought. Call centers, for instance, have rejected the assumption implied by their very name that they must be ‘centered’ in a single location, and are instead closing their doors while investing in the tech needed to allow their employees to work from home.
With a modicum of normalcy now in place, we find ourselves at a crucial moment in the leadership curve: as corporate strategy committees begin to meet through the summer, boards and CEOs must now revisit decisions that were taken in the haste of securing business continuation under the Covid-19 boundary conditions in order to determine their medium-term viability. More importantly, organisations will be deciding where to place their strategic bets to make them successful in the long-term, post-Covid paradigm.
The answers will vary from sector to sector, and even from organization to organization, but one common thread will be the continued need for clear leadership from the top. To better understand what will be required of leaders in coming years, Russell Reynolds Associates spoke with 80 Chairs and CEOs across all sectors in Europe. From them, we heard of substantial changes occurring along four key themes: Technology, Organisational Effectiveness, Guidance & Governance, and New Bets.
Many of these new priorities and challenges will require a particular set of leadership skills to manage them effectively. As the board chairs and CEOs we interviewed described their expectations of themselves and their teams, six common qualities emerged as being essential to success in both the near- and long-term. These are not necessarily new traits, but they are the ones which have been amplified and accelerated by the pressures placed on leaders in the Covid-19 world.
EMERGING TREND: TECHNOLOGY
Digital enablement has become non-negotiable in a world where physical movement is limited. The Virtual Organisation has arrived, and with it we see the advent of the dispersed workforce. The surge in virtual-only interactions, communications, and processes has consequences beyond ‘screen fatigue’ – it has also accelerated the move toward a contactless society in which commerce, medicine and other formerly high-touch services will become entirely digital. But protection becomes paramount for any of this to be possible, so cyber security will receive increased investment alongside a renewed focus on data and analytics.
“First and foremost, this is digitalization. Behavioral changes like the one towards online buying will not go back to pre-crisis levels”
LEADERSHIP IMPLICATION: FORCED DIGITAL ACCELERATION
A nearly universal observation among the leaders we spoke to was how quickly and effectively organisations have been able to virtualise their operations. While many of these quick changes may require more substantial investments to shore them up for the long term, it is clear that technology is making the difference between winning and losing.
The rapid pivots have been particularly striking among essential service providers such as telecoms, consumer products, and healthcare. In the case of Bharti Airtel, one of the world’s largest mobile operators, “we’re finding we can run two shifts of 15 people in the network operating center instead of three shifts of 1500, thanks to digitization and automation,” noted CEO and Managing Director Gopal Vittal. “As we come out of this we’re not going back to the old way.”
Looking forward, leaders will need to factor digital into all business considerations, not just technology ones. Connected vehicles, remote quality tests and remote services enabled by augmented reality rather than on-site inspections will become the new norm, along with new digital revenue streams and opportunities. Meanwhile, cybersecurity will only grow in importance as it protects foundational assets.
EMERGING TREND: ORGANISATION EFFECTIVENESS
The crisis has brought into sharp relief the relative importance of certain roles, geographical distinctions, and leaders themselves, as some outperform and others become obsolete.In the next phase, leaders will leverage the massive quantity of data that their virtual organisations generate to inform the right structure and leadership groups for their current operations, using their resources for maximum impact rather than simply tracking with the conventional wisdom of the past. To more fully explore how boards should be thinking about leadership succession in this context, our latest insights are available in RRA’s “Is your CEO Success Plan Crisis-Era ready?
“Effectively harnessing data will become paramount. It will not only change the way companies make decisions, but also the very way they organize themselves - that is to say, data flows will inform company structure, rather than the other way around. We’ll see org design mapping critical roles against new junctures of data-driven decision-making.”
LEADERSHIP IMPLICATION: FINANCIAL AND OPERATING SHARPNESS
The global shutdown has spurred fundamental questions around the optimal shape of business; where previously the aim was to have a lean, cost-effective model, many are now raising questions about the need to build in intentional systematic redundancies to reduce risk – and about how to communicate this shift to shareholders.
“For so long, we’ve been focused on fine tuning and ensuring lean business systems to take advantage of global production opportunities. Now, it’s more about building in redundancies and backups, and considering where we should be reallocating capital to keep us safe in the long run,” said Henrik Poulsen, CEO of Orsted.
As the economic effects linger, success will increasingly depend upon having strong balance sheets, cost management, and effective cash flow to wait out the storm. To remain as sharp as possible when it comes to finance and operations, leaders will need to reconsider the ways in which they formulate their contingency plans and manage risk. In the face of uncertainty, securing financing or revolving loans for worst case scenarios is paramount.
EMERGING TREND: GOVERNANCE AND GUIDANCE
This period of crisis has in many ways been a litmus test for board culture and efficacy; the strongest have shown themselves able to work in increasingly agile ways, putting them ahead of competition. With little visibility into the future, boards and executive teams have focused on being responsive in the near-term, meeting more frequently (and perhaps less formally) than ever before to digest learnings and plan next steps. What’s more, their communications to the public and shareholders have shifted in one crucial way: we see more pressure on CEOs to place social return and welfare above shareholder guidance. As we explore in a forthcoming research paper on sustainability co-written with the United Nations Global Compact, this raises fundamental questions about the way in which organisations prioritize their stakeholders, and the role they ought to be playing in society.
“Until now, I think many companies have not fully understood the social importance of the business sector as a whole, but the interaction is becoming obvious. The business sector has to do more and take an active role, to work with governments to shape a common societal agenda.“
LEADERSHIP IMPLICATION: PURPOSE-DRIVEN LEADERSHIP
Purpose can mean many things. For leaders in this era, it increasingly translates to finding a way to contribute to the larger social good, regardless of the direct benefit or cost to the company. Playing the ostrich and staying narrowly focused on profits and losses is no longer an option.
The need for purpose is partly catalyzed by a growing interplay between the private sector and government. Leaders point out there is more dependence on their governments, as companies look to national healthcare systems and treasuries to help take care of their employees, and in some cases, their own liquidity. Governments are also looking to the private sector in new ways to help manage new needs.
Striking examples have emerged of organizations meeting social needs even in the face of huge losses. Faced with empty hotel rooms and restaurants, hospitality group Whitbread plc used its properties to house and feed NHS workers in critical areas. Similarly, idled car makers began producing ventilators and apparel producers pivoted to making personal protective gear.
EMERGING TREND: MAKING BETS
Among all the leaders we spoke with, there was resounding consensus around one item: we will not be simply going back to the way things were before. Leaders will therefore need to strike a careful balance between remaining vigilant about short-term health and operational concerns and simultaneously making strategic decisions that will allow them to succeed in the longer-term, post-Covid world. Looking ahead, companies will need to constantly refresh and re-assess their strategic scenario plans (economic, geopolitical, and market); those that understand newly-revealed complexities are most likely to manage risk well and win.
“What is borne out of necessity can become an opportunity”
LEADERSHIP IMPLICATION: OFFENSE AND DEFENSIVE AGILITY
For many leaders, the pandemic will be an inflection point to step back and reconsider how they can prioritize agility in order to capitalize on short- and long-term opportunity – and that may mean fundamental changes to the shape of business. “The ‘top down’ approach must change, and will be the differentiator between businesses that can move fast and businesses that fail,” said Andy Green, Commissioner of the National Infrastructure Commission. “To make that change, CEOs will need to recruit leaders who develop the right people beneath them, and have the confidence in their team (and themselves) to push control and decision-making farther down the organisation.”
To be ‘agile,’ the ability to think systematically and develop coherent plans for a multitude of scenarios and timelines is crucial. As F-Secure chair Risto Siilasmaa explained, “the hardest part of scenario planning is identifying what the right scenarios are, but it’s also the most important step. Once you have that, then it’s easy to understand what needs to be done. But if you miss the important vectors that will impact the environment at the outset, then the whole exercise is lost.”
Interestingly, one of the best ways to develop this mental capability of offensive / defensive agility is to prioritize inclusivity in order to leverage disparate perspectives. Rachel Empey, CFO of Fresenius, noted that “what’s been particularly effective from a leadership perspective is those who can be decisive and show leadership, but at the same time take step back, listen to others, and welcome in different perspectives to make sure it’s a balanced set of decisions being made.” Diversity and inclusion therefore become more important than ever.
In conventional terms, bravery classically revolves around leaders who are willing to fight for their organizations in the face of threats and encourage others not to give up. “People need leaders to keep hope alive, they need leaders to help them overcome obstacles and challenge some of their accepted norms,” said Gavin Patterson, Chief Revenue Officer and President of Salesforce, in describing the leaders who have shone in recent months.
We also heard another, less-common dimension of bravery: the courage to take an unpopular action quickly and decisively instead of creating false hope. A number of leaders in heavily-affected industries won kudos for furloughing employees early, as soon as it became clear the pandemic would stifle revenues.
“You have to be bold when it comes to restructuring; having a massive, cumbersome business won’t allow you to stay competitive and agile in the coming years, and there may be some tough realities to face to make that change,” said Richard Meddings, Chairman of TSB Banking Group plc.
In a difficult and uncertain time, leaders are under more scrutiny than ever from their stakeholders, and must play an even more visible and genuine role. To strike the right tone, they must first understand how each group is impacted by current circumstances and then consider the right message. “An important task for the CEO is to provide counterbalance; not to amplify what is already considered mainstream opinion,” said Whirlpool CEO and chair Marc Bitzer. “If the organization is too optimistic, you have to plead caution; if the organization is depressed (like it is right now), I then need to paint the light at the end of tunnel while remaining honest and authentic.”
We’ve seen stunning example of authenticity and empathy in action, such as Airbus CEO Guillaume Faury retroactively donating his 2019 bonus to non-governmental and humanitarian organisations supporting the stressed health systems of many countries, and Unilever borrowing to make more capital to keep suppliers afloat. Actions like these demonstrate a genuine empathy, which the CEO must now display more visibly than ever; as we heard from Sam Allen, Director at Dow Inc and forrmer CEO and chair of John Deere, “The CEO needs to be motivational with the troops no matter what. Getting by with being super-smart as CEO and delegating empathy to others in the team is no longer going to suffice - the CEO needs to demonstrate these leadership qualities in himself or herself.”
While we all hope to leave the acute phase of the Covid-19 crisis behind us and long for a return to where economies and businesses used to be before the virus hit, this scenario has become increasingly unlikely. As a result, demands on senior leadership appear to change more fundamentally than what immediate crisis management required. Our conversations with top European leaders revealed a growing emphasis that boards place on these six leadership traits, which are here to stay: strategic bravery, authenticity and empathy rolemodeled by the CEO, a purpose orientation that redefines the prioritization of company stakeholders, the continuous re-evaluation in an agile “offensive-defensive” play, a renewed financial and operational sharpness linking senior leadership with day-to-day reality of the organizations they oversee, and finally the ability to accelerate digitization and to capture its competitive advantages to the fullest. No doubt an almost daunting accumulation of leadership requirements, this new roster with which boards evaluate their top leaders has already become reality. Those who aspire to enter the highest echelon of business should adapt quickly to a new leadership reality so they can successfully pivot to progress in a new landscape.
Russell Reynolds Associates spoke with 80 CEOs and Chairs representing a wide range of sectors in Europe and would like to thank them all for their wealth of insights they provided for this paper. In particular, we give thanks to our contributors:
Commissioner, The National Infrastructure
NED, Airtel Africa plc
NED, Link Administration Holdings
President and Chief Revenue Officer, Salesforce.com Inc.
CEO and Managing Director, Bharti Airtel Ltd.
CEO, Orsted A/S
Deputy Chair, ISS A/S
Deputy Chair, Kinnevik AB
Chair, TSB Banking Group plc
NED, Credit Suisse Group AG
DR. MARC R. BITZER
Chair, CEO and President, Whirlpool Corporation
NED, Dow Inc.
Presiding Independent Director, Whirlpool Corp.
CFO, Fresenius SE & Co. KGaA
NED, Inchcape plc
Chair, Securitas AB
Vice Chair, Axel Johnson AB
Chair, Sanoma OYJ
Chair, Huhtamaki OYJ
NED, SAP SE
Founder and Chair, F-Secure OYJ
Click here for our leadership scorecard for assessing what matters most.