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What should be the purpose of a company when the objective of so many, at this moment, is to survive? For years, more sophisticated executives have sought to find a middle ground between the need to maximize profits on behalf of their shareholders and their desire to find a purpose focused on the issues of environment, social responsibility and governance (ESG) in the name a wide range of segments involved in your business, including customers, employees and communities. But suddenly, COVID-19 appeared. With companies large and small closing their doors and millions of people retiring for forced isolation, the magnitude of the coronavirus crisis confronts corporate leaders with the most important economic challenge of their lives. And, as if that were not enough, he also demands from them a moment of existential introspection: what defines the purpose of your company – what is your main reason for existing and its impact on the world?
In real and virtual meeting rooms, fundamental and urgent issues are on the table. How long will this all last? How are we going to pay employees on leave? What are our peers doing? What should we do first? Global companies have never had as much power as they do today to leverage their scale and benefit society at a time of global crisis. And, equally, the actions and behaviors of executives have never been so intensely the focus of attention. In times of crisis, the standard expectation is that companies should withdraw and focus on financial fundamentals. In fact, many CEOs are forced to make defensive moves to protect their businesses. But in this crisis, the needs of those involved are so severe that the opportunity for companies to leave an indelible mark in terms of purpose, empathy and human support is greater than ever.
Lessons from the past draw attention and serve as a warning. During a situation that looks more like a battlefield, the words and images of past war leaders echo in our consciences as icons of resilience and concern for people. In previous periods when there was an economic shock, the actions of executives – both good and bad – became part of the companies’ histories and forged perceptions that persisted for many, many years. Likewise, the decisions made during this crisis will define the identity of companies and will tell a story that will leave traces, lasting over time even after COVID-19 is no longer a threat.
In this crisis, executives will choose to stay out or engage – and those who do should choose to lead or follow others. Those who have carefully created and nurtured a sense of purpose in their companies will find a foundation and a set of values capable of guiding fundamental and decisive actions. For others, this moment may represent the first steps towards deliberately defining their corporate purpose. Is this the time when purposeful companies demonstrate how to use their profits for good or show how everything a company can do for good?
When meeting rooms become war command centers, some principles can help guide executives to define a fundamental course of action and build a sense of identity and powerful purpose, which will last long after this immediate crisis has ended. defeated.
Analyze exactly what is at stake for your employees, their communities, your customers, your partners and your business owners. All of these groups will have urgent, growing and ongoing needs. Some of these needs will be new and will require creative solutions. Listen carefully to the stakeholders best placed to be informants. Among food retailers, for example, the needs of employees and customers, as well as serving society more broadly, are usually ahead and at the center of everything. Even so, as the crisis intensified, reports emerged from retailers in this segment that raised the prices of their products. Others, like the Canadian food retailer Loblaws, acted quickly: with the expansion of physical distance measures, the company started to open its stores earlier for elderly customers, increased the remuneration of frontline employees and committed to maintaining prices at the same pre-pandemic level.
It is also important to be prepared for tensions as more and more trade-offs arise between the groups of stakeholders, each with their specific needs. For example, increasing the salaries of frontline employees can create the need to reduce payments to suppliers. For retailers and delivery services, temporarily closing distribution centers to keep employees safe can mean longer lead times for deliveries to customers.
What are the strengths that your company has and that can be used to make a bigger difference at this moment for the segments involved in your business? A robust financial situation can be the way to support employees during the crisis. A unique logistical network can be employed to bring aid to people in need. A plant can change its production format to produce and deliver urgent medical supplies. Resist the temptation to do everything yourself. Collaborate closely with your ecosystem of suppliers and customers – they may be able to identify strengths you didn’t even know you had.
Both large organizations and small businesses are adapting and restructuring their skills to respond to the crisis: a wedding dress boutique in New York responded to the postponement of their orders by producing protective masks for healthcare personnel, while French perfume manufacturers restructured to produce gel alcohol for hands. Automotive parts manufacturers and automakers have adapted their production lines to assemble lung ventilators. Lessons learned in the past can help to think of creative solutions: in 2010, when rural Tanzania needed urgent medical supplies, Coca-Cola used its vast capillary delivery system, able to reach the most distant areas, to reduce deadlines delivery time from 30 to five days. Participating in the public sphere in the heat of a crisis can bring about impressive synergies and creative solutions that will remain valid for a long time.
In times of great uncertainty, use your intuition to question your decisions when compared to your values as a leader and as an organization. Are your choices aligned with your identity? Everything you do now will be analyzed when the dust settles. Will your actions and identity be perceived as consistent?
Communicate clearly not only your decisions, but also your rationale – as well as the trade-offs you have considered. Are you able to explain your decisions to the most skeptical? Will the decisions you made be proud of? In the financial services sector, many bank executives report credit loss, as well as liquidity and financing, as their biggest concern. But banks also have a long-standing social commitment: supporting businesses and families in the form of lending. Those banks that stop providing financing during a crisis will be defining themselves in the context of future interactions with the communities in which they operate.
Finally, if you have embraced initiatives in the areas of environment, social responsibility and governance, do not take resources from one to give to the other – do not run the risk of appearing to “steal from Pedro to give to Paulo”. In this crisis, there may be a temptation to reduce environmental programs to better support the pressing needs of the social area. But be careful not to give the impression that you are abandoning causes strongly supported by the segments involved in your sphere of activity – supporters of these causes usually have a good memory.
Every crisis brings opportunities to build common sense of purpose with your company’s employees – they are likely to be looking for strong leadership and ways to engage. This moment can lead to the emergence of a new generation of leaders. It can be tempting to collect and create small task forces with lean decision-making processes so that decisions are made as quickly as possible. But leaders with a sense of purpose should seek to share execution plans with their employees more broadly, in order to solicit input and engage them in the challenges faced by the organization, including the complex trade-offs that will need to be considered.
Many employees and their families are suffering from isolation and loss of income, which leads them to reflect on what really matters. The actions of crisis leaders at this time can stimulate collective unity and a sense of belonging. When these decisions come from the principles and purpose on which the organization is based, it will be easier to convey confidence in positive results, even when decisions are painful.
There are also advantages to bringing employees together to deal with problems in new ways. The creation of multidisciplinary teams with people from different areas of the organization to seek solutions to problems, for example, can help to end the long custom of acting in fiefdoms. When Hurricane Katrina hit the United States in 2005, Walmart stepped up its support for disaster mitigation initiatives and asked its employees to deliver supplies to hard-to-reach areas. At the same time, the company ensured that all employees of stores and facilities located in the disaster areas would keep their jobs in other locations during, and even after, the event. When Hurricane Harvey hit Houston in 2017, Texas Mutual Insurance immediately took action to ensure the safety of its employees, closing its offices and providing company supplies and cars to personnel affected by the disaster. The insurer also supported the community in which it operated, providing $ 10 million in donations to help policyholders rebuild their lives.
Leading during a crisis is never easy, but tough times leave much longer lasting marks on a company’s identity. Effective leadership has both an essential and fragile element in credibility. In a recent McKinsey survey of employees of organizations in the United States, 82% of the more than 1,000 respondents confirmed the importance of a company’s purpose, but only 42% reported that the stated purpose of the companies they worked for had real practical effect. This serves as a wake-up call regarding the generic nature of most organizations’ identity statements, but it also identifies an opportunity to surprise and disprove the most skeptical segments. Authentic actions will demonstrate to employees the company’s genuine commitment to its social purpose.
Communicate quickly and often, even if the information is incomplete. Remember that, at this time, people who are suffering seek empathy, but they also want leaders who are able to face the facts in a naked and raw way, without condescension. Stay nimble for when situations change – and they will certainly change. Adapt to evolving conditions and new information, instead of returning to a more static way of doing things. Bring perspectives on the details of the crisis at that moment, with a micro vision to ensure the segments involved that the actions are being carried out with competence. However, also take a more macro view of what the recovery will look like in the future. At some point, the COVID-19 crisis will pass. Families and businesses will take an inventory of their losses and begin to rebuild. Acting in line with the principles of your organization’s purpose will help to balance these perspectives and demonstrate confidence in your company’s ability to come up with a positive solution.
At such a crucial time, executives are in a unique position to use corporate power – guided by a social purpose – to help millions of displaced people and vulnerable lives. If done correctly, your actions in this crisis can serve to build a bridge never seen before between shareholders and the parties involved in the communities in which they operate, leaving a positive and lasting legacy for your corporate identity.
About the author (s) Bill Schaninger is a senior partner at McKinsey’s Philadelphia office, and Bruce Simpson is a senior partner at the Toronto office, where Han Zhang and Chris Zhu serve as consultants. The authors would like to thank Arne Gast, Sufanah Hamza, Pablo Illanes, Abi Kulshreshtha, Sebastian Leape, Robin Nuttall, Richard Steele, Matt Stone and Lynn Taliento for their contributions to this article.
Author: Por Bill Schaninger, Bruce Simpson, Han Zhang, e Chris Zhu Source McKinsey