Covid-19 has left organisations operating in an uncertain world. Boards and employees alike have faced a volatile, complex and ambiguous environment, promising only a challenging future and little guidance on how to remain productive. Normal methods and techniques that enable companies to demonstrate innovation and superior performance have been found wanting.
Strategic change during these times is a challenging endeavour that more often than not fails to meet key stakeholder expectations. Reasons for change are varied and new approaches are often perceived as being inconsistent with others’ values and benefits. This in turn triggers negative emotions that can adversely impact the implementation of change.
In addition change processes can result in a sense of inconsistency. For example, a hasty or secretly prepared downsizing strategy in the immediate aftermath of an emotionally draining and compassion-driven event such as the Covid-19 pandemic is likely to result in a significant stakeholder backlash.
Other markers of inconsistency associated unfavourably with change include:
- What is being proposed—disagreement over the initiative’s content, scope or motive
- How the initiative is implemented—disagreement over methods of integration, coordination or a perceived lack of resources
- Values that are at odds with stakeholder expectations—disagreement over the norms being conveyed as crucial to change.
Scenario planning and foresight
Inconsistency between expectation and reality happens when our belief systems are challenged by interfering initiatives. These generate negative emotions that individuals go on to share with others. The scale and spread of negativity will vary from individual to individual and can include feelings that range from puzzlement and confusion, through to indignation, worry, shock, annoyance and apathy.
To counter this some organisations use scenario planning, a process that creates imagined future narratives based on factors arising from a particular set of circumstances. A focus is placed on “critical uncertainties” or forces considered important to stakeholders. Insights from this approach can help decision-makers weigh up various options and courses of action to invest in, although the results can be dubious in terms of identifying detailed resolutions.
Others use foresight—a discipline that provides a structured and systematic approach to gaining awareness of mid-to-long-term future possibilities. This improves preparedness and resilience, while also helping management identify relevant forces that influence future developments, and shows how they interact to shape an operating ecosystem’s transition and future.
Strategic implementation of change during uncertainty
The interplay between multiple initiatives and their subsequent implementation during the pandemic have been complex and often imprecisely conceptualised. Although the organisation’s foresight methods and techniques may promise a desired expectation, this seldom happens.
Achieving the desired results and planned outcomes is contingent on the implementation of strategic initiatives. This requires attention being paid to the people involved in the strategic implementation, and an appreciation of the chosen foresight technique being applied to the problem and the context within this is taking place. Evaluation and feedback throughout the process to correct the strategy as required is also of crucial importance.
For example, once the board approves a strategic change initiative, it is then usually left to management to implement the desired change. However, if the management is focused only on a narrow field of control, or are embedded in autonomous governance structures with insufficient coordination mechanisms in place, inconsistency across the organisation is more likely to surface.
C-suite and various other management levels across the organisation often independently implement changes with a narrow focus on the initiative alone, or with limited attention to the broader social context that may already be under stress from other ongoing change initiatives.
A lack of managerial attention to social context is more likely to result in initiatives being perceived as inconsistent with change activities already in place. Many great strategic change initiatives and foresight plans never get implemented due to ignorance of future-making practices by those who have to implement them.
Those who have to implement strategic change on the ground often feel that management is ignorant about how change is implemented, and the level of harm it can sometimes cause. They believe management doesn’t listen and has lost touch with its employees.
Even middle managers who initially champion change often became disengaged and hesitant about how to move forward and struggled with this duality of position, being expected by managers to deliver results and at the same time having to respond to criticism from below. Middle managers experience their subordinates’ negative emotions first hand, and so it is important to understand activities and practices through which people in the organisation will have to engage with in the future.
Predicting the future and identifying fracture points
We’d all like to be able to predict what will happen to our organisation and understanding future-making practices is the only real way to achieve this. Whether the process is led by strategic or scenario planning, or corporate foresight, it is vital to incorporate the everyday work through which people in the organisation move forward amid uncertainties about the future.
The one constant is maintaining a clarity of competitive advantage that is championed by a committed management. Smart leadership displays an enticing strategic direction that has evidently addressed the organisational weaknesses surfaced by Covid-19.
It is also locating these weaknesses that is of critical concern. There is a necessity to gain a detailed appreciation of how and why strategy is delivered, and at which point fractures in the structure arise.
There are two primary fracture points that deviate strategy from its original course. The first fracture point is the interface between the C-suite and the board. This is where governance often goes wrong, chiefly as a result of management continually resisting the board due to its perceived interference. “Feed the board with information that gets them off our back” is the common refrain. While the board’s attention is distracted from the sensitive concerns requiring consideration, neglect of this governance fracture point can induce ever greater compliance stipulations from the board.
As this happens the board becomes progressively out of touch while the greater focus on compliance results in diminishing attention to stewardship. An out of touch board profoundly impacts levels of attention paid to the challenges that arise at the second fracture point—where competitive advantage is derailed.
The competitive advantage fracture point is the most damaging because it occurs between the C-Suite and general managers—in other words the company heads. The main point of contention is the relevance of the corporate centre designed strategy in meeting the needs of differing contexts. Regardless of the strategy design elegance, not being responsive to local market requirements adversely disturbs competitive advantage delivery.
A common perspective on strategic delivery
Most boards and C-suites recognise that 20% of the effort needs to be devoted to strategy generation. Yet, many have not come to terms with why 80% of attention needs to focus on strategy delivery. It is the appreciation of the finer points of detail concerning the execution of strategy, market by market and country by country that makes all the difference. Complexity increases with the ever-growing number of locations across which the corporation operates.
One of the most frequent laments of country managing directors is “what is the relevance of that corporate centre strategy for me in my market?” It is clear that bottom-up determined quality and granularity of understanding is what differentiates world-class companies from their competition.
To accurately predict the future requires the organisation must positively address the concerns arising from fracture point one. In doing so the board is enabled to become the steward of the enterprise. Distorted strategy delivery at fracture point two now comes under the board’s scrutiny.
A stewardship-minded board sympathetically represents the concerns of disaffected country heads, and the board’s grasp of finer detail and the clear delineation of roles and duties between them and the C-suite encourages a common perspective to surface concerning what is most required to make strategy work. With trust and respect enhanced the board’s intervention is perceived as positive and purposeful.
Despite this, the board being sympathetic to the general managers for sympathy’s sake is of little value. What makes a genuine difference is the board becoming fully acquainted with the details of how strategy is delivered. The capture of relevant and detailed evidence transforms strategy into efficient operational action, which aligns the board with the C-suite and with the general management.
Proof of this sharpness is exemplified by the clarity of expression concerning differentiation, which now has to be clearly defined in through the adoption of digitalisation, namely the evidence platform supporting purpose and mission. Proof of strategic delivery is ultimately in the integration of daily routines along with a direction that makes sense. When supported by a resilient board and management, the future is more sustainable than ever.
Nada Kakabadse is professor of policy, governance and ethics, and Andrew Kakabadse is professor of governance and leadership, at Henley Business School.