New rules of business in the post-covid age

Babita Baruah’s daily work routine has not changed much since the national lockdown. Except, of course, the fact that she isn’t going to office.

Every morning, the India head of global communication agency GTB changes into office attire, and is at her home workstation at 9.30am. The remote interactions begin and stretch through the day, involving her various teams, GTB’s clients, colleagues around the world in different time zones. The day ends usually around 7.30pm, when she returns “home” for family time, playing with her three English bulldogs, one kitten, reading and watching something on Netflix.

“Perhaps the most critical job that I have right now is to keep the team spirit high, keep people engaged and positive,” she said. Thus, she makes sure that every day, some time is spent in some stress-free fun activity that breaks the sense of isolation.

Covid-19 is on its way to create what will perhaps be the most serious global economic crisis in a century, since the Great Depression that began in 1929 and lasted a decade. While numbers for India are not available, data from some other countries paint a dark picture.

In the past four weeks, 17 million Americans have applied for unemployment benefits. Almost one million Britons applied for welfare payments in the space of two weeks, 10 times the normal amount. A record 470,000 companies applied for German state wage support in March. More than 23 million, or a third of Thailand’s population, have registered for the government’s cash handout since it was made available on 28 March. The grants are intended to cover only nine million people.

Covid-19 will profoundly change the way businesses are run, and fundamentally alter management practices. In fact, if history is any guide, the Great Depression did just that. Post the depression, the work of experts like Fritz Roethlisberger and Elton Mayo placed the “softer” human element at the centre of business efficiency, irrevocably transforming management theory, which had till then focused only on mechanical—and “dehumanized”—input-output measurements, as immortalized in Charlie Chaplin’s 1936 film Modern Times.

Then, the global financial crisis of 2008-10 led companies to shift from permanent employment towards more contractual workers, and led to the rise of the gig economy. How will the covid-19 effect play out?

Though these are early days, some strong winds of change are visible that could reshape the way businesses are managed. The most obvious will be firms allowing, even encouraging staffers to work from home (WFH). But covid-19 may also go on to impact leadership style in a new anxious era, how supply chains are organized, and even the way companies are structured—they will become more fluid, more flexible and more agile. Here’s how current ways of doing business could change.

The art of leadership

All CEOs spoken to for this story agree that covid-19 will have a lasting impact on the very nature of leadership. The pandemic has led to some basic behavioural changes. We are unforgiving if we believe that some people are not taking the necessary precautions. Neighbours keep watch on one another, and are willing to call the police about wayward behaviour of old friends.

Quite simply, people don’t know who to trust any more. Post-lockdown, we could well emerge into a society marked by much higher distrust, fear and insecurity. It may force business leaders onto a path of greater transparency, and to make extra efforts to generate and maintain trust.

T.V. Narendran, global CEO of Tata Steel, said: “As we become more connected in some way (digitally) and more disconnected in some way (physically), trust becomes more important and more fragile in some sense. So leaders have to step up to the challenge.”

Deepak Jain, partner, Bain and Company, who leads the consultancy firm’s manufacturing and B2B digital practices for the Asia-Pacific region, agrees. “These issues were relevant even before covid-19, but their importance may increase going forward. The work from home (WFH) model requires leaders to engage with the employees more regularly and transparently to provide them visibility into the state of business.”

Of course, several businesses will get hugely impacted by the crisis, forcing leaders to make tough decisions. “Leaders will have no choice but to have candid discussions with the employees to navigate through the tough times,” added Jain.

The inevitable salary cuts and downsizing will need to be handled with far greater sensitivity than before. With so much uncertainty and pain all around, leaders can no longer afford to be seen as having blood on their hands. “Transparency and honesty will be paramount,” said Baruah. “Leaders will need to develop a high trust quotient. Otherwise, they will not command respect.”

The CEO of a consumer durables firm who wishes to remain anonymous adds that companies will have to evoke concepts like “for the greater good” and “sacrifice”. “These are positive cues and leaders will need to use these with intelligence and empathy to cut through all the fear and negativity that are bound to be there. Leaders will have to be seen to be bearing the cross,” he said.

Clearly, authentic and truthful communication will be key, and this will not only be vital for running motivated organizations in the short-term post- covid-19 scenario; it will become a core management mantra. Leaders will have to listen to their people more attentively, even if it sometimes tries their patience.

The flexible corporation

Covid-19 could significantly speed up the trend of moving from traditional static organizational structures towards dynamic team forms, with people working in flexible groups with shifting membership, often from different locations, to address particular challenges.

“The crisis has forced even traditional industries to adopt technology in a big way, like video conferencing, online approvals and so on,” said Jain. “The use of technology creates more freedom in an organization in terms of choice and location of talent for various projects. This should lead to more fluidity in terms of team structures in some industries, especially the ones which adopt technology use in a bigger way.”

Above all, the seismic shifts that covid-19 has caused, have happened in a matter of days, not even months, instantly rendering traditional metrics and assumptions irrelevant. Dealing with it means that leaders have to take decisions while facing an unprecedented level of uncertainty and the realization that facts may not become clear within the necessary decision-making time frame.

In practice, the act-pause-assess-anticipate-act cycle will become ongoing, and perhaps the next normal. The final result will be a stronger sense of what makes business more resilient to shocks, more productive, and better able to deliver to customers.

Relooking supply chains

Supply chain management will move centre stage. The pandemic has thrown into sharp focus how dependent the world’s manufacturing industries are on China. At the corporate level, firms are waking up to the fact that they were either too reliant on a few vendors, or they do not even know the links in their supply chain, beyond the vendors they directly interact with.

Companies will now drill deeper to assess risk of disruption, to vendors who supply the companies’ vendors, and even further down. Managers will have two options before them: diversifying their vendor base to reduce dependence on a few, or building a tight ecosystem of suppliers they can have more control over, perhaps even located geographically close.

Tata Steel’s Narendran thinks the latter option is more likely to be adopted. “Over the last couple of years, we saw companies reducing their dependence on China,” he said. “After this pandemic, you will see more and more localization of supply chains. They will be ideally in the same country, and it’ll be even better if they are in the same neighbourhood.”

Jain expects both trends playing out, depending on the nature and location of business. In some industries, where companies relied on a few vendors, he sees diversification by addition of new vendors. In other industries, which depend on Chinese vendors, companies will find or create local suppliers. But will not these moves impact quality? “In general, we don’t expect customers to dilute their quality requirements, so expectations from new vendors will remain similar to existing ones,” he said. “However, there could be cost implications, especially if the new vendors are geographically away from customers.”

The WFH debate

WFH will certainly become much more common,” said Narendran. “This crisis has demonstrated to many who did not have the experience of working remotely how easily it can be done. It will drive greater productivity of people, space and time. It will also allow us to tap talent from among the differently abled better than we did in the past.”

“Many organizations already have a geographically dispersed leadership team,” said Shyam Srinivasan, managing director and CEO, Federal Bank. “I sit in Kochi, but I have business and functional heads working out of Mumbai and Chennai. This sort of virtual working will certainly become a way of life, and virtual conferencing services today can mimic the physical experience pretty well.”

However, he feels that right now, WFH is working well because you already know the people you’re interacting with. Once covid-19 is over, some challenges may arise. “In the absence of physicality, how do you build new teams, how do you get members to bond?” he asked. “New modules will need to emerge to tackle these issues.” He also pointed out that WFH will require much more personal honesty and commitment from the employee. After all, at home, there will be distractions. And, in India, many executives may not have the space to create an insulated work area.

“The WFH model may have some impact on the level of cohesion or engagement in any organization as a certain percentage of staff starts to work from home on a regular basis,” said Jain. The answer could lie in creative virtual engagement programmes, and WFH for fixed periods of time. “For instance,” said Jain, “if only a small minority works from home at any given time, and for a shorter period every month—say a week or less—then they will still find ways to bond with the rest of the staff in the remaining three weeks of the month.”

Baruah of GTB, however, points out that the higher-efficiency claims that are being made about WFH are based on current circumstances, which are far from normal. “What we have now is not planned WFH, but forced WFH,” she said. “No one has worked out the efficiency metrics. And in a physical office space, someone often just walks across to a cubicle with a thought, there’s a quick huddle, ideas are exchanged and decisions made. We don’t count these as formal meetings. So, WFH during a pandemic is not proof of concept for WFH in general.”

But she agrees that more companies adopting WFH may have a great positive impact. “For example, so many women couldn’t return to full-time work after they had a baby,” she said. “WFH will be a boon to them and for firms which will be now able to tap all that talent.”

In conclusion

The virus may have also given leaders the rare opportunity to reflect and introspect, which could have been difficult in the usual hurly-burly of business. Narendran said that these days of the lockdown have been one of the busiest periods of his life, so “sitting at home should not be correlated to time to step back and reflect and think”.

Yet it has been life-changing in some ways. “The crisis has forced us to think about how easily in this highly interconnected world a problem in one city can become a global problem and how vulnerable we all are, irrespective of how important many of us think we are,” he added. “I think it has forced all of us to reflect on what is really important in our lives and be more philosophical than we traditionally are. Hopefully it will help all of us recalibrate so that we can create a better world and a better tomorrow.”

The world will not be the same again.

Sandipan Deb is former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines