In times of crises, holding steadfastly to the long-term purpose, enhances the agility and resilience of the organisation, says Stephen Wyatt
Turbulence in business and markets is increasing. The impact of the Covid-19 pandemic is particularly disruptive currently. Yet at mid-year 2020, Unilever reported results that were above analysts’ expectations sales were down 0.1%, but the sector focused analysts had predicted a drop of 4.3%; meanwhile profit had actually increased year on year by just under 4% and through timely actions, free cash flow had more than doubled to €2.9bn from €1.3bn. As a result of this Unilever is able to seize opportunities and strengthen its ecosystem in ways that will help to ensure the company emerges from this period of turbulence stronger than it entered.
- Unilever has pledged $540 million in cash to support companies across its extended value chain in order to help these small-to-medium sized businesses survive pandemic-triggered economic downturn.
- They will also donate $108 million toward efforts to help fight the coronavirus outbreak. This includes donating about $54 million toward soaps and hand sanitisers to the Covid Action Platform of the World Economic Forum as well as donations of sanitising products to hospitals and schools.
- These initiatives will help the company strengthen its eco-system and may enhance loyalty among partners as well as customers. A recent study found 75% of people want to see brands taking action to fight the pandemic.
Whilst companies and individuals globally are seriously impacted by the Covid pandemic, Unilever, like other corporations has learned lessons from past crises and is putting them into action; perhaps with the words of Winston Churchill ringing in their ears ‘to never waste a crisis’. Time will tell if it the Covid pandemic is an outlier event, in the same way that many thought the Global Financial Crisis (2008), the Tech Crash & Recession of 2000-2001, the Asian Financial Crisis (1997), or Black Monday (1987), were also exceptions.
What each of these crises, and those that undoubtedly lie before us, present is an opportunity to clearly see differences between leaders. As US academic and economist Michael Porter often said: ‘Strategy is about making choices, what to do and what not to do.’
At times of crisis leaders are called upon to make choices and the consequences of those choices quickly becomes apparent. Being aligned on the purpose and having clarity on the strategic priorities of the corporation equips the leadership to make clear decisions especially in fluid, turbulent times of crisis. Plenty of research has been conducted on what differentiates the winners and losers, at a firm level, during a time of crisis; particularly with reference to the Global Financial Crisis, such that there is, for those who have paid attention, almost a ‘play-book’. For sure there are stark sectorial differences in fortunes; online retailing and software providers doing particularly well during this period of turbulence whilst aviation and hospitality particularly suffering – however to only look at the sector differences would fail to see the differences between companies, as a result of their leaders, their choices and their actions.
What is the playbook to managing through a crisis and emerge stronger?
1Rule 1: The CEO, CFO and Chair of the board need to work in close harmony and alignment with each other
They need to be seeing the same picture, able to be decisive and to follow-through on the decisions taken in a timely manner.
- Together they need to establish an accurate view of the current environment and the firm’s position in it. Moving from business as usual to having a perspective on the potential scenarios and conducting stress-test assessments. The leaders need to align on one planning scenario that becomes the basis for definitive action.
2Rule 2: Focus on the purpose of the company
All the stakeholders should already know and be aligned with the pursuit of the purpose. The choices that the leadership team takes and the messaging of ‘why’ actions are to be taken, how flexibility is being enhanced and operations adapted should always be consistent with the pursuit if not acceleration towards the purpose.
- Maintain active communication to all stakeholders – keeping the messaging on ‘why’, linked to the pursuit of the purpose, whilst responding to and adapting to the present changing context.
3Rule 3: Free up cashflow and strengthen the balance sheet to be ready and able to seize emergent opportunities
costs through a focus on operational efficiency, while maintaining investment
in the future of the company (e.g. R&D, marketing).
- Divest underperforming assets to increase financial flexibility and strengthen the balance sheet to be ready to move quickly on investments such as M&A targets as the downturn slows.
4Rule 4: Follow through on key strategic priorities that had been defined prior to the crisis These initiatives may need some adaptation, but the turbulence of the crisis provides an opportunity to accelerate their implementation.
- Prioritise the actions most pragmatic for the business at this time, within the broader plan. Push through planned changes in business scope and operations. Emerging from the period of turbulence having completed the key strategic initiatives will further extend the anticipated advantages.
5Rule 5: Seize on initiatives that shore up trust; with employees, corporate partners and as an actor in the wider society
the ‘duty-of-care’ to employees and workers. Amplifying initiatives that
support the well-being and resilience of staff, where-ever they are located,
even if far from the HQ. Ensure that exit schemes are handled humanely, and
that fair process is adhered to.
- Look beyond your own operations to provide also insight on eco-system partners; react quickly and confidently when required; for example, as demonstrated by Unilever, adjusting payment terms or on-boarding alternative suppliers or channel partners.
6Rule 6: Accelerate switching over to new working practices and digital enablement. Use the urgency of the situation to switch over into the mainstream, behaviours and reliance on applications and systems that may have previously been regarded as experiments, pilots or only suitable as exceptions. Scale-up the new practices and abandon the old.
- In the Covid pandemic we have witnessed rapid scale up in flexible working and working from home. Triggering many firms to reconsider the longer-term value of office space.
Turbulence is normal in the Fourth Industrial Revolution (4IR); to thrive, leaders need to ambidextrous and adaptive. This dynamic context exposes the limitations of prior ways of planning that were based on assumed relative stability in industry structure and the assumed relevance of forecasting forward based on prior performances.
In 4IR, ambidextrous leaders, those who remain resolutely focused on the pursuit of the purpose of the corporation whilst simultaneously being flexible and adaptable at the speed of disruption, will ensure their organisations thrive whilst others only survive or worse.
Stephen Wyatt is Professor of Strategy and Leadership at the University of Bath. For more than 25 years he has been a business consultant focused on developing leaders and enabling organisations to thrive in highly dynamic environments. He is also Affiliate Faculty at Singapore Management University and Industrial Associate at the University of Cambridge, and serves on the boards of the Global Innovation Management Institute and the Management Consulting Institute. Stephen is the author of Management and Leadership in the 4th Industrial Revolution (Kogan Page, 2020).