Crisis brings out the best and the worst in organizations. While the entire world is trying to manage the inescapable COVID-19 pandemic, crises are not new. The difference now is magnitude.
Most organizations are facing tremendous challenges, which are more akin to the Great Depression than the 2008 Great Recession. Sadly, many of the lessons learned and practices businesses applied for decades after the Depression have gradually eroded. Balance sheets, cash, cash flow, operating days of cash, and annual and multi-year performance goals used to be priority measures. Debt represented a risk and constant threat. Stock performance was measured over years, not quarters, weeks, or days. Recent news reveals the shortfall of operating cash on hand in many companies, hindering their ability to address today’s financial challenges.
Short-term mentality also diminished focus on the work environment – not the physical, but the experiential. Culture has a profound impact on performance, and culture is inextricably influenced, created, and sustained by the behavior of leadership. Most organizations are good at posting values, yet often these are not consistently reflected in their leaders’ behaviors, dispositions, and decisions. This incongruency creates cultural inhibitors that directly impact performance and diminish opportunity, organizational adaptability, and responsiveness to crises.
Organizations’ displayed values have gradually changed to emphasize performance over conduct. This shift has contributed to the increase in “emotional sterility” of organizations. High-performing, flexible, and innovative teams typically are emotionally connected, not only by ambition and achievement, but by a familial attachment. I contend this is a direct result of leadership and the underlying values they exhibit.
Organizations face the ongoing challenge of satisfying daily operational needs while allocating time and resources to improve and address future opportunities and threats. Managing these competitive priorities becomes even more daunting in crisis. It is imperative that all resources focus on the highest value contributions; this dynamic establishes organizational convergence. Along with capital and culture, convergence creates the synchronicity to make the whole the greater than the sum of its parts. Convergence is the result of integrating values, vision, strategy, and individual responsibility to achieve long- and short-term outcomes. Unlike alignment, which defines the general consistency and adherence to a strategic direction, convergence creates streams of contributions that intertwine efficiently to create unparalleled focus on what is most important to achieve an organization’s goals and effect execution excellence.
Every organization has been impacted dramatically by the pandemic. Those who survive, and especially the ones that fare well, likely will be those who have leveraged the three Cs: capital, culture, and convergence.
During crises, organizations immediately need capital; people’s commitment, loyalty, and trust; and convergence. Unfortunately, it is very difficult, if not impossible, to create these instantaneously. Establishing a values-based culture and gaining people’s trust takes years. Without trust, commitment will diminish, especially when the workforce is working remotely. If a values-based culture hasn’t been established, there is a greater reliance on cash and convergence. It is sad to learn how many “successful” companies have been crippled by high debt and low cash reserves. When cash isn’t available and debt can’t be secured, risk mitigation options diminish, and people suffer the consequences. Enlisting individuals’ support becomes even more important when funds are unavailable, yet their commitment is more difficult to attain without a culture of trust. The spiraling negative consequences are obvious.
I hope the COVID crisis will cause many organizations to reconsider the importance of the three Cs. For our economy to re-establish financial strength and create opportunities, leaders must focus on strong balance sheets, longevity, and sustainability; earning people’s trust through selfless, servant leadership; and driving convergence more than alignment.
Based on conversations with clients and trusted partners, as well as our own efforts throughout the pandemic crisis, IPM assembled a framework to help organizations actively plan for and respond to an uncertain future. Read more: Five Steps to Emerge from the Pandemic with a Dynamic Strategy…