getting there eventually: finding equilibrium in uncertain ... · and agility that will engender...

This issue of The Bulletin is the second of our two-part discussion of the challenge in finding equilibrium in these uncertain times In Part 1 we discussed the attributes and actions needed to find equilibrium in the likely phased transition from the coronavirus disease 2019 (COVID-19) lockdown1 Given that a period of ongoing change will follow the lockdown equilibrium means achieving the organisationrsquos full potential during each phase of the transition and leveraging its core strengths to be resilient now soon and next and eventually

Every organisation must be authentic to be truly successful The attributes of inspired leadership and an empowering culture effective employee engagement insightful scenario analysis superior performing ecosystem relationships and a commitment to disruptive innovation can sustain and even accelerate momentum moving forward

There is no road map for what is about to happen soon or next but each iteration requiring a search for equilibrium results

from changes in market and individual behaviour as well as adjustments in business processes to address those changes That is why resiliency is the North Star that will guide the most successful companies forward

Organisations need to recognise and make every effort to anticipate the emerging risks and opportunities even as familiar daily business activities are modified to accommodate the crisis and its aftermath As this crisis subsides (and it will) many of

Getting There Eventually Finding Equilibrium in Uncertain Times

Part 2 ndash Resilience Is the North Star

1 ldquoGetting There Eventually Finding Equilibrium in Uncertain Times mdash Part 1 Build on Your Strengthsrdquo Protiviti Volume 7 Issue 7 of The Bulletin May 2020 available at wwwprotiviticomUS-eninsightsnewsletter-bulletin-v7i7-finding-equilibrium-uncertain-times-part1

the BULLETINProtivitirsquos Review of Corporate Governance

Volume 7 Issue 8

The Bulletin 2protiviticom

these outcomes are the toothpaste that canrsquot be pushed back into the tube and managing them as they evolve will influence the organi-sationrsquos positioning in the market rebound As there is no predictive utopian model for how aspects of market customer and consumer behaviours will shake out organisations must prepare themselves to be agile and adaptive

The organisations most likely to succeed in the aftermath of the COVID-19 pandemic will have leveraged their strengths and acted with intention to find equilibrium amid the seismic changes in several key areas Eight such areas are discussed below along with the related risks and opportunities and illustrative questions and points of focus

Customer and Consumer Engagement

Changes in individual habits have already occurred and will continue to evolve in the post-pandemic world resulting in significant impacts on customer and consumer behaviour Shifts in preferences for online shopping home delivery curbside pickup contactless engagement social distancing and even abandonment of the traditional business handshake are among the various behaviours seeded from the unique circumstances created during the lockdown period that could become mainstays The companies that are most resilient will be the ones that challenge themselves to do everything possible to accommodate these evolving preferences and behavioural shifts Following are questions relevant to this opportunity

bull How will the organisation refine its business model to strike the optimal equilibrium in interacting with customers and consumers during the phased transition to the eventual post-pandemic marketplace

bull Has the company mapped the customer journey to understand the experience that customers are having with its brand from original engagement to the present and how the current environment is altering that journey

bull Does management have the information needed to understand and act on customer and consumer behaviour including analysis of positive and negative feedback from social media and other venues regarding online shopping experiences

bull Is the organisation capable of reacting and pivoting as customer and consumer behaviour and consumption patterns change and evolve To that end

ndash Are there enough channels offering flexibility to customers and consumers interacting with the company

ndash Is management focused on how the companyrsquos offerings can be better positioned for success during the phases leading to the post COVID-19 world including new or modified products and services and flexibility in how they are delivered

As there is no predictive utopian model for how

aspects of market customer and consumer behaviours will shake out organisations must prepare themselves to be agile and adaptive


ndash Are frontline employees trained to interact with customers and consumers safely and effectively communicate how the company can help them through the crisis and convey empathy in understanding their needs Are they empowered to make the necessary adjustments to satisfy those needs

Workplace Redesign

The experience of working from home has by mandate become the norm for those organisations able to adjust and for many has served as an object lesson that people can work from anywhere if they have the right video- and text-based collaboration tools Videoconferencing platforms virtual canvases tablets with stylus pens multiplayer editing virtual whiteboards and voting tools are facilitating our ability to meet share ideas and create Once employees become familiar with these tools and how effective they can be they may not want to return entirely to physical meetings requiring lengthy commutes or extensive travel even if they could Leaders cannot afford to ignore this dynamic

This way of working and collaborating has been in place for some time but is now more widely practiced and honed out of necessity and in some organisations is the preferred method The emphasis on social distancing has changed the way we work individually and as teams Some organisations may embrace this approach going forward to offer flexible options to attract and retain employees and the impact is far-reaching From recruiting to performance evaluations to even developing customer relationships organisations are faced with defining the necessary processes skills and tools for their employees to be effective in a remote workplace For some roles ambidextrous skills to work both

remotely and in person may be required as this model evolves These changes will impact the traditional human resources model and have unintended outcomes

bull Will organisations recruit for ldquoone officerdquo versus geographical locations

bull How can organisations retain a sense of teaming and community in a remote workplace

bull How will the new environment impact employee loyalty and turnover

bull What type of remote work protocols are needed to enhance employee and team performance

bull Can legacy approaches to business devel-opment resume and succeed in the ldquonew normalrdquo If not how will the organisationrsquos model and incentives structure for sales personnel need to evolve

As companies transition from the lockdown their messaging to employees should encourage the kind of flexibility engagement and agility that will engender excitement in the ranks for adapting to new roles hours processes and work locations

From recruiting to performance evaluations to even developing customer relationships organisations are faced with defining the necessary processes skills and tools for their employees to be effective in a remote workplace


Supply Chain Rethink

The COVID-19 pandemic has exposed the risks of concentrated sourcing and over-dependence by jurisdiction and geography like no other incident before it This puts a hyperfocus on the fragility of a supply chain that is not diversified and mandates that organisations reconsider how they safe-guard their ability to produce products and services Organisations should rethink their strategic just-in-time relationships to avoid disruptions going forward and perhaps in cases involving certain critical parts mate-rials and supplies consider vertical integra-tion options They also must be resilient and anticipate the practices and trends that will influence the global supply chain including

bull Marketplace interest in reduced reliance on narrow availability of suppliers andor exposure to geographical and jurisdictional oligopoly

bull Government programs and legislation including tax relief and tariffs intended to incent reshoring and energise domestic production

bull A sharper policy focus on national security emphasising the availability of certain products domestically or regionally as well as product quality and safety and marketplace stability

bull A shift in customer preferences for products made domestically (including raw materials and component parts) accompanied by a willingness to bear a higher cost if necessary to support that preference

bull Concerns for the occurrence of another disruptive event (eg weather political unrest) affecting key suppliers

These issues may also place a companyrsquos existing partnerships under pressure as nationalism can spring up anywhere on the planet Therefore supplier reliability and transparency will likely be closely monitored in the global marketplace It is clear that organisations dependent on the global supply chain will have to prepare for these and other scenarios to remain competitive in the post-pandemic era

Digital Urgency

There is an immediate need to connect with customers sustain a remote workplace and rethink the supply chain to gain the equilib-rium that is possible in each of the successive phases following the COVID-19 lockdown However for many organisations pre-pan-demic technology planning may not have emphasised a sufficiently robust strategy for connecting with customers and suppliers fulfilling orders streamlining and automating processes using data more effectively to im-prove performance and supporting the cur-rent work-from-home models and even much less for whatrsquos to come as the post-pandemic market evolves Upgrades to digital equipment transmission speeds digital offerings and defined workspaces are becoming standard fare But instead of making do with the tools at hand organisations must act with greater

The COVID-19 pandemic has exposed the risks of

concentrated sourcing and overdependence

by jurisdiction and geography like no other

incident before it


2 See Protivitirsquos free digital self-assessment tool available at httpslandingprotiviticomdigital

urgency to advance their digital maturity In fact the COVID-19 experience is making a compelling case that digital maturity is fundamentally about positioning the organisation to compete effectively against digital leaders having hyper-scalable business models featuring a lower fixed-cost base and dependency on people

From a macro perspective countries may move rapidly to a sustained 5G environment mdash across the whole country not just metro centers mdash in anticipation of future stay-at-home orders as well as the realisation of the benefits from and requirements of working from home These are reasons management should resist postponing digital and automation initiatives as part of cost-cutting efforts and recognise that these investments are integral drivers of the companyrsquos resilience as the economy recovers

If digital initiatives including automation and robotics are in fact a lifeline to achieving equilibrium in whatever state the market evolves into next soon and eventually organisations should consider their needs and the needs of customers employees and suppliers to create a future-state digital blueprint This includes governance and oversight to assess the appropriate boundaries for establishing adequate protections of confidential information and intellectual property If not already developed policies should be articulated to define and guide appropriate actions and address key opportunities and issues

bull Where are the company and its suppliers on the digital maturity continuum and in which areas should digital capabilities be advanced to compete effectively in the market segments it targets2

bull Is management thinking boldly enough in digitising the organisationrsquos products and services as preparations continue to position the firmrsquos offerings for a post-pandemic market

bull How is the organisation taking advantage of new emerging and maturing tech-nologies such as robotics and artificial intelligence including computer vision natural language processing translation services and machine learning to improve processes and speed decision-making for the purpose of not only enhancing the customer experience but also making the company more resilient

bull Does the company have the level of data security needed to support digital offerings and secure remote access

bull Is there information that should not be accessed remotely and if so is that information secured

bull Are the new collaboration and other tools deployed to support a remote work environment appropriately secured Are remote workers adequately trained to recognise sophisticated phishing schemes

bull Is management effectively addressing legacy systems and technical debt as well as leveraging the cloud and if not what more can be done

The COVID-19 experience is making a compelling case that digital maturity is fundamentally about positioning the organisation to compete effectively against digital leaders having hyper-scalable business models


Real Estate Configuration

For the providers of commercial real estate this crisis challenges them to meet the changing needs of existing tenants and to attract new tenants It also presents an opportunity for businesses to rethink their real estate requirements based not only on location but also on business operating practices that have changed as a result of the pandemic experience Traditional space configurations may give way to more hoteling common areas with meeting space and significant technology upgrades Space requirements may shrink due to an increase in remote work and new ways of reaching consumers but could also maintain or increase due to required social distancing That means there is a possibility the net effect could be offsetting on space and a boom for reconfiguration-related services such as office design and construction

Since real estate markets are locally influenced the renaissance will depend on the vibrancy of the local marketplace and multiple open issues as well as opportunities

bull Will existing lease terms prevail in this evolving marketplace

bull Can retooling of existing space be a positive disrupter for the real estate industry

bull How will market trends alter traditional real estate demographics (eg migration patterns population growth and occupancy rates) For example

ndash Even if square footage remains intact the geography mix could change mdash particularly as correlations are drawn between population density and COVID-19 transmission rates

ndash How will office design (eg the ldquolook and feelrdquo and key features of work-stations) change for organisations combining virtual working with office-based working (Note Many of the tools being used during the lockdown are working well because everyone is virtual it is harder when some people are remote and others are operating in the same room)

ndash If the workplace goes virtual will lower-cost markets become much more attractive

bull If there is a migration from expensive downtown high-rise office space in high-cost markets in favour of new office parks in near-shore locations or a transition to a remote workplace will there be a significant negative impact to municipalities from a reduction in the tax base due to reduced occupancy rates and business activity

bull Will excess commercial space shift to residential units to energise neighbor-hood development

Space requirements may shrink due to an increase

in remote work and new ways of reaching

consumers but could also maintain or increase

due to required social distancing


Changing and Emerging Business Opportunities and Risks

The market realities of the post-pandemic world will drive a sea change as organisa-tions rebuild or reorganise their respective businesses These changes will spawn both opportunities and risks that will require re-silience to keep pace with emerging issues It is important to recognise that this is not a time for caution In this environment digital leaders are much more likely to embrace risk and even question whether they are under-taking enough risk Old school thinking to freeze technological innovation to cut costs and ldquoreduce riskrdquo at a time when the world is changing rapidly is not a pathway to success

Innovative thinking will generate better ways to do business and create new sources of revenue as well as consider and either accept or mitigate associated risks In seeking equilibrium the lines in the sand for risk appetite and return will be drawn and redrawn to take advantage of windows of opportunity

That is why opportunities as well as risks must be considered as organisations embrace the change they canrsquot control and choose to be resilient in response to market developments To determine the next generation of their business models organisations should consider the evolving trends of recent weeks

bull Distribution and delivery Expanding (if not exploding) demand for delivery and distribution businesses and channels

bull Collaboration and communication Increased use of videoconferencing platforms virtual canvases online white-boards and other virtual interaction and brainstorming tools and social distancing protocols resulting in reduced need and demand for commuting and business travel

bull Retail channels As consumer behaviour continues to reach for contactless fulfillment options ldquobrick and mortarrdquo retail venues double down on experiential retail and multiple channel retailing

bull Service industries Contactless systems dominate the service industries including enhanced delivery services online payment requirements and remote service options

bull Education models Traditional higher education and public education are on the cusp of facing the most radical re-en-gineering in history of their products and processes with higher education expecting reduced enrollment (especially international) more commuting and an emphasis on virtual classrooms smaller class sizes social distancing and evaluating the viability of and continued need for resource-draining programs

bull Healthcare delivery Telehealth visits drive-through testing remote care and touchpoints through patient portals become mainstays in healthcare systems to include traditional processes of patient registration eligibility checks cost estimations claims billing and various additional revenue cycle activities

In this environment digital leaders are much

more likely to embrace risk and even question

whether they are undertaking

enough risk


bull Experiential activities Content expe-riences and entertainment activities are disseminated virtually in creative ways to limit physical interactions due to public health restrictions and inability hesitancy or unwillingness of people to gather and herd

bull Mass transit exodus Reduced mass transit demand dramatically alters the modelrsquos fundamentals as well as its impact on the environment

bull Societal protocols Emphasis on social protocols to transition as appropriate from lockdown status to evolving societal guidelines for reducing risk of viral infections from engaging in business and social interactions

bull Pressure on fossil fuels Price volatility during the pandemic underscores the reality that the oil and gas industry is changing particularly the pressure on companies to reduce their carbon footprints and offer more transparency on their progress

bull Economic and financial impacts The unforeseen impacts of massive fiscal and monetary stimulus on the macroeconomy (eg future growth inflation availability of debt capital cost of borrowing and calls for social reforms)

bull Legislative winners and losers How individual companies fare as governments offer relief and attempt to stimulate product and service creation will significantly influence the market For example

ndash Some businesses will be eligible for government-supported loans and others wonrsquot

ndash Others must balance the possibility of increased demand from government purchases or regulations encouraging reshoring against the risk of scaling or taking action for orders that may never

come (eg investing billions to develop COVID-19 treatments that may not be needed if a vaccine mdash or another more effective treatment mdash is available first)

These illustrative examples suggest that the full implications of COVID-19 across various industries are not susceptible to a reasonable forecast at least at the present time however organisations still need to seek equilibrium even as these trends evolve Such efforts may generate unintended outcomes including the need to reskill and upskill the workforce

Concurrently and for a long time to come the potential for a virus rebound and the contin-uation of shutdowns in specific markets will keep pandemic planning at the top of the list of concerns for government agencies at all levels healthcare institutions and businesses The resulting confluence of challenges should be counterbalanced with focused efforts to embrace disruptive innovation and change to become a more resilient organisation

Climate Change and Sustainability

From issues of carbon footprint size to the impact of climate change on virology to contributing to society to make the world a better place the pandemic has heightened the global focus on sustainability concerns While higher energy demand is certainly expected during the recovery it is doubtful it will approach pre-pandemic levels given likely reductions in commuting mass transit and business travel With increased public awareness of bluer skies and cleaner air due to the COVID-19 lockdowns institutional investors are likely to double down on pre-pandemic calls for a stronger emphasis on environmental social and governance (ESG) issues making them an integral part of the new reality of business planning


3 ldquoGetting There Eventually Finding Equilibrium in Uncertain Times mdash Part 1 Build on Your Strengthsrdquo

While expectations will vary by industry

and stakeholder role there clearly will be more pressure to demonstrate a committed effort to support sustainability

Also pressure on companies is likely to come from other stakeholders including customers through their preferences and consumption choices the public sector through calls for increased transparency and employees through their choices of the types of companies at which they aspire to work As a result it may become increasingly difficult for companies successful in working through the lockdown to rationalise the benefits of business travel and long distance commutes in the post-pandemic marketplace

While expectations will vary by industry and stakeholder role there clearly will be more pressure to demonstrate a committed effort to support sustainability As the pandemic eases there will be choices to be made around the cost of safeguarding the environment versus the return to pre-pandemic norms and behaviours

bull How will marketplace expectations evolve for ESG initiatives and is management proactively considering ESG-related objectives and targets in strategy-setting

bull How can organisations derive value from their ESG efforts

bull Does the organisation have a clear long-term vision regarding sustainability Is that vision responsive to investor and stakeholder expectations regarding socially responsible behaviour for the industry If ESG issues are not presently an integral part of the corporate strategy is it time to rethink that

bull What is the expected tipping point for the return on ESG investment in the industry Is the company prepared to pivot should competitors significantly alter their strategy to emphasise ESG priorities

bull Does the companyrsquos sustainability reporting provide enough insight into its nonfinancial activities related to ESG matters Is it sufficiently focused on the ESG criteria that investors and asset managers following the industry use

A Trust-Based Culture

In Part 1 of this discussion of finding equilib-rium in uncertain times an innovative and agile culture was noted as a critical attribute3 Right now our societal culture as well as every organisationrsquos culture is being tested and stretched in unprecedented ways and the outcomes encountered will reflect what is valued most Many organisations have been forced to innovate during the pandemic The question is how can management sustain the culture that fostered that innovation


Building trust with employees and

customers in uncertain times is an important

currency that cannot be mandated and

must be earned

A trust-based culture requires engagement at all levels to align with evolving customer consumer and employee preferences Therefore as an organisational culture adapts and changes the behaviour that leaders employees and policymakers hope to see in our society and across the organisation should be articulated explicitly and modelled

Building trust with employees and customers in uncertain times is an important currency that cannot be mandated and must be earned Trust comes from remaining loyal to long-term customers even to the point of limiting new customer acceptance to ensure that service levels for existing customers can be sustained at their time and point of need Trust also comes from leadership articulat-ing a compelling vision and demonstrating the discipline to act decisively with intention to do whatever it takes to find equilibrium in the marketplace while providing transpar-ent communication to employees From this resilient approach employees will more likely view the organisation and its leadership as trustworthy versus an organisation that resists the new realities of the post-pan-demic world and hangs on to the status quo Employees want and need to trust their lead-ers to be motivated and engaged and or-ganisations must build and retain employee trust as they refine their business practices to pivot successfully toward equilibrium

While a trust-based culture was a perpetual aspiration before the COVID-19 pandemic it has an especially important role in teaming during and after this crisis

bull How is management engaging employees continuously with empathy and compassion so that everyone is knowledgeable of the situation where the organisation stands and what their respective roles are in the firmrsquos recovery and ultimate success

bull How is the organisation supporting the flow of communications up down and across the company with enough speed to ensure that decision-makers are in direct contact with the unvarnished truth staying in touch with the customer and fostering a resilient organisation that embraces change

bull How are compensation and other incentives aligned with the goal of balancing short- and long-term performance

bull What roles are senior management and the board actively undertaking in shaping the desired culture

bull What trending metrics and early warning capabilities are available to keep the company apprised of changes in the market customer preferences supplier performance and other developments relevant to the strategy so that decision-makers can act timely to respond

bull How and when does the company formu-late resilient options for decision-makers for potential scenarios How are those options considered and converted to timely and actionable refinements to the strategy and business model when the scenarios transpire

copy 2020 Protiviti Inc PRO-0520-IZ-ENG Protiviti is not licenced or registered as a public accounting firm and does not issue opinions on financial statements or offer attestation services

Protiviti is a global consulting firm that delivers deep expertise objective insights a tailored approach and unparalleled collaboration to help leaders

confidently face the future Through its network of more than 85 offices in over 25 countries Protiviti and its independent and locally owned Member

Firms provide clients with consulting solutions in finance technology operations data analytics governance risk and internal audit

Named to the 2020 Fortune 100 Best Companies to Work Forreg list Protiviti has served more than 60 of Fortune 1000reg and 35 of Fortune Global 500reg

companies The firm also works with smaller growing companies including those looking to go public as well as with government agencies Protiviti is a

wholly owned subsidiary of Robert Half (NYSE RHI) Founded in 1948 Robert Half is a member of the SampP 500 index

Summary

Today COVID-19 is most certainly a ldquostrategic inflection pointrdquo for virtually every industry and company While this term was coined almost 25 years ago it remains relevant today as ldquoa time in the life of a business when its fundamentals are about to changerdquo4 In the case of COVID-19 every business recognises what has happened The question is whether management is fully mindful of the various outcomes emanating from the pandemic and is prepared to keep pace with and even anticipate the speed of change to achieve equilibrium for each of those outcomes

In summary leaders and employees have no choice but to recognise that their business and personal lives have been irreversibly impacted and a posture of standing pat and hoping for a return to the pre-pandemic world will not foster the resilience needed

to survive and thrive during and after the crisis Itrsquos time to be comfortable being uncomfortable Organisational resilience and individual resiliency are dependent upon accepting the need to change and finding value in new ways of living and doing business Our very humanity should guide the parameters for decision-making as leaders and companies accept accountability for their actions and mistakes and learn in readiness for the next iteration of change

Itrsquos time to be comfortable being

uncomfortable

4 Only the Paranoid Survive How to Exploit the Crisis Points That Challenge Every Company by Andy Grove New York CurrencyDoubleday 1996


these outcomes are the toothpaste that canrsquot be pushed back into the tube and managing them as they evolve will influence the organi-sationrsquos positioning in the market rebound As there is no predictive utopian model for how aspects of market customer and consumer behaviours will shake out organisations must prepare themselves to be agile and adaptive

The organisations most likely to succeed in the aftermath of the COVID-19 pandemic will have leveraged their strengths and acted with intention to find equilibrium amid the seismic changes in several key areas Eight such areas are discussed below along with the related risks and opportunities and illustrative questions and points of focus

Customer and Consumer Engagement

Changes in individual habits have already occurred and will continue to evolve in the post-pandemic world resulting in significant impacts on customer and consumer behaviour Shifts in preferences for online shopping home delivery curbside pickup contactless engagement social distancing and even abandonment of the traditional business handshake are among the various behaviours seeded from the unique circumstances created during the lockdown period that could become mainstays The companies that are most resilient will be the ones that challenge themselves to do everything possible to accommodate these evolving preferences and behavioural shifts Following are questions relevant to this opportunity

bull How will the organisation refine its business model to strike the optimal equilibrium in interacting with customers and consumers during the phased transition to the eventual post-pandemic marketplace

bull Has the company mapped the customer journey to understand the experience that customers are having with its brand from original engagement to the present and how the current environment is altering that journey

bull Does management have the information needed to understand and act on customer and consumer behaviour including analysis of positive and negative feedback from social media and other venues regarding online shopping experiences

bull Is the organisation capable of reacting and pivoting as customer and consumer behaviour and consumption patterns change and evolve To that end

ndash Are there enough channels offering flexibility to customers and consumers interacting with the company

ndash Is management focused on how the companyrsquos offerings can be better positioned for success during the phases leading to the post COVID-19 world including new or modified products and services and flexibility in how they are delivered

As there is no predictive utopian model for how

aspects of market customer and consumer behaviours will shake out organisations must prepare themselves to be agile and adaptive



Workplace Redesign




















Digital Urgency





incident before it












































enough risk
































must be earned

















Summary





uncomfortable




Workplace Redesign




















Digital Urgency





incident before it












































enough risk
































must be earned

















Summary





uncomfortable











Digital Urgency





incident before it












































enough risk
































must be earned

















Summary





uncomfortable













































enough risk
































must be earned

















Summary





uncomfortable

































must be earned

















Summary





uncomfortable









Summary





uncomfortable


getting there eventually: finding equilibrium in uncertain ... · and agility that will engender...

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