To Build Trust, Cut Down On Surveillance—Even For Employees Working At Home

According to a recent article in The Wall Street Journal, at least one type of business is flourishing in our COVID-19-induced world of remote work: companies selling tools that permit employers to monitor how employees spend their time. The chief executive officer of ActivTrak, a company providing employee monitoring software and user behavior analytics, remarked that inquiries had been “a little insane” lately. Teramind, another vendor in the space, has also experienced a tripling of inbound inquiries since mid-March—along with a sizable uptick in additional licenses requested by existing clients to track more users within their organizations.

It’s not surprising that companies would want to increase their surveillance efforts, given worries about a potential decline in productivity among newly remote workers. But before you turn to ever-expanding technologies that allow managers to see their employees’ screens, keep track of the sites they visit, monitor their email (and potentially their phone calls) or use their computer’s camera to watch them, consider these four important facts.

1) Trust Is Fundamental for Effective Organizational Functioning
In the forward to JetBlue’s executive chairman Joel Peterson’s book, The 10 Laws of Trust, Steven Covey referred to trust as “an economic driver,” noting that “high trust is a dividend; low trust is a tax.” Research backs him up. A longitudinal study of 88 retail stores found that when employees felt trusted by management, they performed better in terms of sales and customer service (in part, because employees accepted more responsibility for their work).

But trust impacts more than external measures of success. It acts like an organizational lubricant—with high trust, there is less friction and people work together more effectively. Moreover, trust affects employees’ willingness to collaborate and share information, since they would be less inclined to divulge valuable and important insights to those whose motives they suspect. For instance, of the 1,202 working-age adults in the U.S surveyed by the Trust Edge Leadership Institute, 23 percent said they would offer more ideas and solutions if they trusted their leaders.

2) Surveillance Diminishes Trust
When a company engages in close surveillance of employees, the action signals that it does not trust staff to get the job done themselves. But this is hardly a new practice. Electronic monitoring of employees long predates COVID-19 and the shift to remote work. Even 14 years ago, a survey found that 78 percent of employers conducted surveillance on employees, with half monitoring phone calls.

That’s because employers believe that their oversight and direction makes things better—something social psychologist Robert Cialdini and I called a “faith in supervision” effect. In essence, observers tend to see work performed under the control of a supervisor as better than identical work done without as much guidance.

But what monitoring actually does is make employers less trusting of their employees. In a classic study conducted by social psychologist Lloyd Strickland more than 60 years ago, participants were randomly assigned to more closely supervise one of two subordinates (actually confederates of the experimenter) in a simulated work environment. When given the choice of who to monitor more closely on a second task, they selected that same person, assuming they were less trustworthy (for no other reason other than they’d already been observing that individual).

The paradox of surveillance is that if a boss is always watching, they can’t possibly know if an employee is trustworthy because that worker has no chance to demonstrate trustworthiness. Until employers take that risk—and allow employees to operate independently—they’ll continue to view the work as a reflection of their oversight rather than the result of an employee’s own motivations and conscientiousness.

3) Companies Should Assess Results Rather Than Micro-Level Behaviors
As long as people comply with the law and applicable regulations to get their work done, why should an employer care how they spend their time? As numerous studies show, hours spent working are often inversely related to productivity. And taking breaks—from school-related study or work—can actually improve concentration.

Presumably, employers hire people to get things done, not necessarily to work certain hours or engage in specific behaviors. This should hold true now more than ever, as more routine tasks become automated, and soft skills, like problem-solving and critical thinking, skyrocket in value.

Yet micromanaging is still a common practice—one that’s a source of deep resentment. Employees are thinking adults and, for the most part, want to be treated as such. They do not want to be viewed as little children who need to be watched all the time.

4) Surveillance Creates Stress and Health Problems
In computer- or software-based monitoring, work and scheduling decisions are ultimately controlled by a machine, a practice some refer to as algorithmic management. As a result, employees do not have, or do not feel they have, the freedom to reach out to peers for advice and social support as they do their work.

The stress that arises from this degradation in job autonomy and job control can actually lead to both short-term illness and long-term changes in health status. A study of more than 700 AT&T employees found that people who had their work electronically monitored perceived their working conditions as more stressful and reported more psychological tension, anxiety, depression, fatigue and health complaints. Meanwhile, an analysis of several field experiments and surveys found that, compared with people at low-trust companies, people at high-trust companies reported 74% less stress, 106% more energy at work, 13% fewer sick days and 40% less burnout.

The Only Way to Build Trust Is by Trusting
In addition to reducing the sense of freedom so fundamental to both employee well-being and engagement, close supervision undermines the trust leaders have in the people they manage (and vice versa). Cultures of trust rely on less surveillance, not more.

Coincidentally, the COVID-19 pandemic gives workplaces the opportunity to do something they should have done a long time ago: provide people with more control over their own work, greater job autonomy and added responsibility—in other words, treat them in a manner consistent with who they are: sentient adults.

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OKRs – It Is More Than Just A Hype

One of my clients, let’s call him John, has been asked to do a presentation on OKRs (Objective and Key Results) during their executive planning session late last year. He was one of the younger team members, but he was nervous and concerned if some of the more senior leaders will be open to this more agile approach.

He phoned me directly after his presentation with the news that it went so well that the CEO has changed the agenda to incorporate time for the EXCO team to start defining their team’s OKR at the session.

This was their first attempt to use OKRs and wanted to ensure they focus on long- and short-term goals which they agreed on:

An annual high-level business OKRs,
Quarterly OKR’s for each team and
Weekly check-ins to track results.
You might wonder what the hype is all about.
OKR’s is an agile way of doing performance management and is an outcome-based approach. Many businesses, for example, Intel, LinkedIn, Airbnb, Dropbox, Twitter, have adopted this approach with success.

OKR is divided into 2 parts:

The Objectives are the inspirational qualitative descriptions of what you want to achieve.
Key Results are outcomes you want to achieve; the qualitative measure of results that will measure the value and impact to your clients or employees.

Here is an example of an OKR for the People (HR) team for a quarter:

Objective: Create an outstanding Employee Experience
Key Result #1: The Employee Nett Promotor Score will increase from X to Y
Key Results #2: Increase the number of mentorships from 30 partnerships to 45 partnerships.
Key Results #3: Design 3 more online workshops (this is an example of a poor key result as this is counting activities instead of measuring impact). Better key results might be ‘Increase the number of virtual workshop attendees from % to %.

I often get the question: “What is the difference between an OKR and KPI?” OKRs are based on tracking data, where KPI is a data point. For example: a KPI for the People (HR) function can be the attrition rate or the time to fill a vacancy.

Here are some ground rules to follow if you are considering implementing OKRs:
Ensure alignment. Ensure that team’s OKRs are transparent and aligned with the overall business objective. It should form part of the organisational culture. It can be informal and fun.
Focus on priorities in your business; don’t create too many OKRs as this can lead to lack of focus.
Objectives are not activities or “to do” lists. This should be short, memorable and inspirational. Ask yourself: ‘Does this motivate, engage and challenge the team?’
Key Results should be ambitious and a stretch. Consider putting the word aspirational in brackets to be clear that it is an ambitious outcome. Define 2-3 key results per objective.

OKRs have a bi-directional cadence – it is not cascaded top-down. OKRs encourage bottom-up and top-down conversation which leads to the alignment between teams. Often teams opt for shared OKRs; this enhances alignment as each team might have different initiatives to achieve the OKR whilst working towards a shared goal.

When OKRs are transparent, it contributes to the alignment. All OKRs should be visible to everyone in the company.

OKRs are decoupled from remuneration. Consider making OKRs one (not the only) aspect of input for employee performance. The difficulty (ambitious outcome) and the impact of the goals itself should not be ignored. This will result in creating a culture of ambitious goal-setting and soon employees will focus on impact and value to clients instead of only the percentage of goal achievement as this relates directly to a bonus payment.
What Will Performance Look Like Post-COVID-19?
The COVID-19 pandemic brings new things to think about at a leadership level. This is a defining leadership moment. It is a balancing act – the short term actions vs compromising the sustainability of the business and the intersection of employee and company wellbeing. Leaders need to exemplify humanity. We have to understand and embrace concepts like empathy, compassion and care and show it. To fake it, won’t serve leaders in this critical time – colleagues are attuned to the realness of their leadership. As a leader, you set the tone at the top.

How one measure the performance of your teams is a definite one to consider – now and beyond “business as usual” will not be the same as what it was pre-COVID-19, and forward-thinking leaders know this.
Make OKRs Work for You
For the companies that are already using OKRs, a recommendation would be to add a step to overcome the uncertainty during the COVID-19 pandemic. Teams can use assumptions as facts and base the OKRs in the short term on these assumptions. Think of assumptions behind the marketplace or changing clients’ needs. Test these assumptions with stakeholders in the business to sense-check it and use this as a basis for setting OKRs.

With big changes come big opportunities. This pandemic provides the opportunity to experiment and learn in uncertain times and to see what is working best. It also heightens our ability to be adaptable and to think differently.
This may be the ideal time to start using OKRs and experiment and see how this is impacting the performance, motivation and engagement of your teams.


Is The War For Talent Over?

For so long there was a “war for talent”, but will it be the opposite post Covid-19, with great talent fighting for fewer positions?
How quickly things change. Although there were signs of easing, the Canadian economy has been running in high gear for the last couple of years. Unemployment at record lows has been the norm and employers competed for talent across industries and skillsets. This war for talent is now a war for survival as Canadian companies make sense of the impact the COVID-19 will have on their organization.

The difficult balance for employers now is ensuring the viability of their business while retaining their top talent. It’s not an easy tradeoff for employers. This balancing act will unfortunately, result in talented workers on the sidelines looking for their next opportunity.

The shifting talent equation will not be one size fits all in Canada. Many industries, such as healthcare, grocery retail, manufacturing (food/essential products) and logistics, are busy now and can take advantage of the available talent from organizations that have had to make difficult layoff decisions. Talent in resource-related industries such as Oil & Gas will flood the market and compete over the coming quarters for limited opportunities.

From a skill set perspective, the war for IT talent will continue. Many organizations now realize how important IT infrastructure and technology tools are as they quickly moved to enable their workforce to work from home. The downstream impact of the pandemic will create more demand on IT and technology skills to support all types of work arrangements, particularly in the areas of infrastructure, cloud architecture, data security and the related support needed to maintain and manage the new processes.

Logistically, the way work gets done is forever changed by the pandemic of 2020. Companies are morphing into more fluid work structures, hyper responsive to economic demands and global trends. The new reality of working from home, virtual teams, remote management means a likely higher demand for contract, multi-skilled, in-demand talent and project-based consulting work. Perennial overhead costs like large office spaces and permanent salaries will be reconsidered against investing in new technology, and contract/consulting arrangements. Agility will be the safe guard against anxious investors and nervous business analysts, and perhaps leaving many well qualified candidates looking for work.

As companies recover and rebound post pandemic, there will be a larger talent pool available and the war for talent will be fought in specific skill sets. The new battle for the Canadian workforce and employers will be fought in learning. How can we support the learning and re-skilling needed to support our new reality in Canada?


How to Manage an Employee Who’s Struggling to Perform Remotely

“You need to make Anil do his job!”

My client, let’s call her Robin, received this text from her sales manager during their virtual leadership meeting. As a food manufacturer, her company is deemed essential during the pandemic. But like many managers today, Robin is feeling the pressure of running a $1.5B division remotely with a team whose nerves are starting to fray.

Anil, her customer operations manager, was a strong performer back in the office. Remote work, however, has not been kind to him. Though he claimed to have his tasks under control, with three children under 10 and a wife who also works, things were falling through the cracks. Salespeople had begun to receive complaints from desperate restaurant customers. Orders were arriving incorrectly and late. Since their businesses depend on every order to survive, these mistakes posed a serious threat.

Despite being an empathetic and skilled leader, Robin was struggling to hold Anil accountable. Difficult conversations are her Achilles heel, and she’s not alone. One study shows that 18% of top executives say holding others accountable is their greatest weakness. The guilt many managers like Robin feel has been made worse by the current crisis and the pressure to remain compassionate of what others may be going through — not to mention the challenge of giving feedback virtually.

At the same time, an employee who isn’t keeping up while working remotely is a problem that cannot be ignored. In fact, poor performance consumes up to 17% of a leader’s job (equivalent to roughly one day a week), and today, given the state of the economy, its financial costs are intensified.

So how can leaders like Robin confront team members who are struggling to successfully work remotely while also remaining sensitive to the times? It requires a broader approach and different skills than many leaders are used to. But there are several ways to learn them:

Expand your diagnostic lens.
With many unfamiliar variables introduced by Covid-19, getting to the bottom of a new performance problem is more complicated. Prior to the pandemic, most leaders might have reflexively zeroed in on the underperformer as the primary unit of analysis and presumed the problem was the result of insufficient skills, lack of initiative, commitment, and/or a poor attitude.

While these often play some role in underperformance, they rarely account for all of it. That’s why focusing on the underperformance vs. the underperformer leads to better problem solving. This is especially true today when a myriad of new factors could be contributing to the issue.

Before confronting your underperformer, use these questions to help you figure out what those factors may be:

What’s different? When you’re dealing with someone who has just recently started to underperform, begin by identifying new variables that could be interfering with their work. Have there been recent organizational shifts? Difficulties in their personal life? For many, working from home has presented several technical and self-management challenges. Isolating which factors may be presenting legitimate obstacles to your employee’s job will require you to have sensitive and persistent conversations with them. In the case of Robin, she assumed that Anil’s demanding home life was a large factor. Feeling bad for him, she restrained from addressing the issue. As it turns out, her hesitance kept the real causes concealed.

What’s worse? Working virtually, as many of us are, will undoubtedly amplify weak areas of your organization: clunky processes may feel more cumbersome; getting information in a culture of secrecy may now feel impossible; work-arounds people have adopted to cope with outmoded technologies will likely break down. But leaders must be able to identify which broader organizational performance issues may be contributing to an employee’s performance issue. Sometimes you may not know until you have the conversation, but it’s important to consider all the factors before a confrontation. You want your employee to trust that you’ve thought through the situation and considered it from their view. They will be less likely to use those broader issues as an excuse.

What’s fact, what’s emotion? In a crisis, anxiety, anger, and fear can lead to blame, defensiveness, and irrationality, which worsen when we’re isolated. As such, it’s even more critical to separate emotion from fact in these situations. Leaders experiencing frustration around an underperformer will need to acknowledge the presence of these emotions, and honor them, before they are able to set them aside. Once you do, you will be more equipped to discuss what is factually true. In Robin’s case, the team’s and customer’s anger amplified her and Anil’s guilt, clouding everyone’s judgment about how to identify and solve the real problem.

What’s mine, what’s theirs? Healthy accountability starts with a leader acknowledging they may play a role in someone’s underperformance. Have you been clear about what you expect from your newly remote team? Have you provided needed resources, coaching, and feedback? Is there a gap in your leadership contributing to the problem? Robin’s misassumption about Anil’s stressful home life became the perfect excuse to justify not addressing him. But this contributed to the problem. Anil’s failure to ask for help, offer creative solutions, and set expectations about how his new normal were his contributions to the problem.

Show empathy without lowering the bar.
“Who do I throw under the bus?” Robin asked me. “My customers, who need my products to survive, or one of my top leaders who is up against tough constraints with a family to care for?” Her unmanaged anxiety and confrontation-avoidance backed her into a false-binary corner, leading her to ask the wrong question. What she needed to ask was, “How do I help my key leader succeed?” Ultimately, she was confusing empathy with lowered expectations. Her fear of making Anil “feel bad” wasn’t compassionate, it was cowardice.

You can demonstrate your care for an employee’s struggles by both acknowledging their hardship and redoubling efforts to help them succeed. The best way to have these conversations right now is through a video call so that you are able to read one another’s tone and expressions. When you start the discussion, remember that this behavior is new for your employee too, and they are likely already feeling badly for struggling. “Check in” before you “check on” as a rule. Ask how they are doing to gauge their well-being. Then, clarify that your goal for the conversation is to help resolve the problem at hand.

To begin, use probing questions like, “Why do you feel this is happening?” Listen carefully to how they describe the situation. If they deny there is a problem, you may have mismatched expectations. If they point fingers, make repeated excuses, or refuse to take responsibility, you may have someone in the wrong role.

When Robin finally confronted Anil, she discovered that the fulfillment process at her company was the real problem. Their data systems were still tied together by laborious manual processes, including spreadsheets, heroics, and hallway handoffs. To avoid catastrophes in the office, Anil and his team routinely ran between buildings with key information. “Running between buildings” had now become endless texts, slacks, and emails. Anil couldn’t keep up.

Through their conversation, Robin learned that a crisis doesn’t let people off the hook from the delivering the same level of results they did before. It means the path to those results might need to shift, and it was her job, as the leader, to help Anil discover that path.

Engage the underperformer in problem solving.
In my experience, performance shortfalls, especially sudden ones, are best resolved by asking the person in question to be responsible for solving the problem. Once you’ve identified what the issue is, ask, “What would you change if you could?” or “What can we all learn from this?” to open their imagination and signal that you trust their ability to improve.

Resist telling them what to do, or being overly proscriptive about how to do it. You don’t want to dilute their ownership and commitment. Remember that working in isolation can make people more anxious about their mistakes, and this is a person who is used to seeing success. Reassuring your employee that you are OK with missteps as long they are corrected and learned from will help empower them to solve the problem on their own. At the same time, you should remain available to provide guidance when needed. This may require instituting more frequent check-ins to compensate for the changing conditions.

To redirect her conversation with Anil, Robin asked, “What can we do right now to help you? How can our whole team help make sure every order is on time and accurate?” This gave Anil permission to ask for help without deepening his shame. It also opened the door to creative, interim solutions. “I know these are tough days, and I know we can do better,” she said. “I need you to come back to me with a plan you are confident will get all orders out the door on time and accurately.”

Anil took less than a day to build a plan and get his peers on board.

Strengthen team accountability.
There a few things you can do to avoid this issue from reoccurring in the future. One of them is making sure that your team members realize their collective success belongs to one another — not just to you, the boss. Otherwise, you’ll end up playing air-traffic control for every result the team delivers, and spend more time managing what falls through the cracks than helping them achieve greater performance.

The toughest question I asked Robin was, “Why do you suppose your sales manager felt it was appropriate to send that text to you, instead of something more generative to Anil like, ‘Anil, we can see you are struggling. How can we help?’” Robin was stumped. I told her this interaction could be exposing another problem: excessive reliance on her for the team’s performance. I suggested that Robin go back to her sales manager and ask what it would have taken for him to reach out directly to Anil.

To avoid the situation Robin found herself in, there is one exercise you can use to strengthen your team’s sense of shared accountability during this crisis. In your next meeting, ask every person to identify how they rely on each of their team members. Then compare answers. There should be explicit commitments they each make to one another, in which you remain uninvolved.

Remember, your biggest contribution to those you lead is helping them be, and contribute, their best. When they fall short, your greatest show of compassion, especially right now, is to help them figure out whatever it takes to get back on track. In some cases, it may be more compassionate to loosen expectations, so long as you make that decision with people and not for them.

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Diversity still matters

COVID-19 is confronting companies around the world with a daunting degree of disruption. In the immediate term, some face devastating losses of revenue, dislocations to operations and supply chains, and challenges to liquidity and solvency. Others are coping with enormous unexpected spikes in demand. In the medium term, we can expect material and lasting shifts in customer markets, regulatory environments, and workforce deployments. Leaders and managers will need a great deal of resolve and resilience as they seek to navigate an economically and socially viable path toward a “next normal.”

The lessons from previous crises tell us there is a very real risk that inclusion and diversity (I&D) may now recede as a strategic priority for organizations.1 This may be quite unintentional: companies will focus on their most pressing basic needs—such as urgent measures to adapt to new ways of working; consolidate workforce capacity; and maintain productivity, a sense of connection, and the physical and mental health of their employees.

Yet we would argue that companies pulling back on I&D now may be placing themselves at a disadvantage: they could not only face a backlash from customers and talent now but also, down the line, fail to better position themselves for growth and renewal. Some of the qualities that characterize diverse and inclusive companies—notably innovation and resilience—will be much in need as companies recover from the crisis.2 Indeed, it could help companies to unlock the power of I&D as an enabler of business performance and organizational health and contribute to the wider effort to revive economies and safeguard social cohesion. In this article, we explore what companies can do to ensure that I&D remains a core part of their agendas during the downturn, and beyond.

The benefits of I&D are clear now—and that doesn’t change in a crisis
Our research has repeatedly shown that gender and ethnic diversity, inclusion, and performance go hand in hand. Our latest report, Diversity wins: How inclusion matters, reinforces the business case.3 Over the past five years, the likelihood that diverse companies will out-earn their industry peers has grown. So have the penalties for companies lacking diversity. Another forthcoming McKinsey report, about Latin America, highlights the strong correlation between gender diversity and positive behavior directly related to better organizational health—which, in turn, is associated with better business performance. Similarly, our previous research found that women tend to demonstrate, more often than men, five of the nine types of leadership behavior that improve organizational performance, including talent development. Women also more frequently apply three of the four types of behavior—intellectual stimulation, inspiration, and participative decision making—that most effectively address the global challenges of the future.

Diversity winners that deploy a systematic approach to inclusion and diversity and don’t fear bold action to foster inclusion and belonging are most likely to reap the rewards. Now is the time to be even bolder.

The bulk of this research on the business case for diversity was carried out during the past five years, when economic conditions have been mostly favorable. Yet the evidence from past crises shows that diversity can also play an important role in recovery. For example, several reports have shown that in the 2008–09 global financial crisis, banks with a higher share of women on their boards were more stable than their peers. This research also suggests that banks run by women might be less vulnerable in a crisis.4 And we are seeing, right now, that cities and countries with women leaders are thought to be facing the COVID-19 pandemic more successfully than those without them.5 It may be, some researchers conclude, that female leadership has a trust advantage giving women the edge in certain crisis situations.6
The challenge: Why I&D may lose momentum during the COVID-19 crisis
Progress on I&D could slow down during and after the crisis unless companies consciously focus on advancing diversity and fostering inclusion. The importance of such continuity is quite intuitive, but it was not the norm during the 2008–09 financial crisis: although gender-diversity programs were not officially deprioritized, they did not benefit from additional effort or interest, and programs targeting all employees became a higher priority among some of the companies in our sample.7 Early signs, this time around, are not encouraging. One pulse survey of I&D leaders, for example, found that 27 percent of them report that their organizations have put all or most I&D initiatives on hold because of the pandemic.8
Representation at risk. As the crisis makes jobs vulnerable, diverse talent may be most at risk. To be sure, we may see an uptick in the number of jobs and, possibly, in pay for some gendered occupations—such as healthcare providers on the front line of public service.9 But these effects are likely to be offset by job losses in the private sector, where low-skill, low-paying jobs in retailing, leisure, and hospitality may be hard hit.

Furthermore, the crisis will probably intensify existing workplace-automation trends that are already expected to take a greater toll on women and minorities. While previous research from the McKinsey Global Institute has shown that automation has a more or less equal net impact on the jobs of women and men, it will vary greatly across sectors and regions. Pervasive barriers to the development of skills and access to technology must be overcome if women and minorities are to get new job opportunities, especially in the tech sector. Avenues for economic advancement will continue to be a challenge for them. And because they typically work in medium- and lower-paid occupations, and demand for such roles is expected to shrink, they are likely to bear the brunt of the transition.

We can see this playing out already in the crisis. McKinsey research has found that 39 percent of all jobs held by black Americans—compared with 34 percent by white ones—are now threatened by reductions in hours or pay, temporary furloughs, or permanent layoffs. That is seven million jobs.

As the COVID-19 crisis makes jobs vulnerable, diverse talent may be most at risk.

Eroding inclusion. A second key risk is that remote-working conditions may erode inclusion. Sending staff home to work, in a bid to stem the spread of COVID-19, risks reinforcing existing exclusive behavior and biases and undermining inclusive workplace cultures. McKinsey research analyzing the lessons of remote working in China—an early mover because it was at the vanguard of efforts to contain the spread of COVID-19—found that teams or whole business units working remotely can quickly become confused and lose clarity. Isolation leads to uncertainty about whom to talk with on specific issues and how and when to approach colleagues, leading to hold-ups and delays. In such a climate, there is a risk of amplifying noninclusive dynamics.

Remote-working norms, particularly videoconferencing, could make it difficult for some personnel, such as LGBTQ+ employees, to avoid publicly sharing aspects of their home lives they might not be comfortable revealing to all of their colleagues. Working from home also may put women and minorities at a disadvantage, given challenges such as broadband access, the availability (or lack) of home-office space, and childcare and home-schooling duties.10
The chance: Leveraging I&D in the crisis
These challenges, if unaddressed, could undermine corporate responses to the COVID-19 crisis. Leaders and organizations will need enhanced problem-solving skills and vision to address dislocations in businesses, industries, and regulatory environments. Strategic agility—the ability to spot and seize game changers—is likely to be a mission-critical trait. It is also likely to be stronger in organizations that can draw on the full spectrum of diverse talent available to them.

Our research and the research of others suggest that when companies invest in diversity and inclusion, they are in a better position to create more adaptive, effective teams and more likely to recognize diversity as a competitive advantage.11 Meanwhile, other companies might struggle. Their responses to I&D during the COVID-19 crisis could mirror the broader stances toward I&D described in our report Diversity wins, where three broad categories of approaches emerged.

Diversity winners and fast movers. One-third of the companies in our data set have made significant I&D gains over the past five years and are increasingly pulling ahead of their industry peers in financial performance. Our experience with companies in this group suggests that many of them will view their existing strengths in I&D as a way to bounce back more quickly from the crisis while they actively seek to boost representation and inclusion.
Moderate movers and resting on laurels. A middle group of companies have made only modest I&D gains in the past five years. It’s easy to imagine their continuing to tread water during the crisis, perhaps seeking to protect their gains but doing little new to build on or increase them.
Laggards. Companies in this broadest group have progressed little, remained static, or regressed in their gender and ethnic representation in the past five years. With no momentum, most could well deprioritize I&D efforts during the COVID-19 crisis.
The crisis, in other words, will interact with existing I&D trends. Further separation between diversity leaders and laggards is possible, and companies in the muddy middle could make huge progress (exhibit). Such organizations, by raising their I&D sights, should be able to upgrade their “license to operate” and realize the goals of recovery, resilience, and reimagination.

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How To Build An Inclusive Virtual Culture With These 4 Effective Strategies

A virtual culture is more than Zoom Happy Hours and random meme sharing. It’s a space where each employee feels comfortable, safe, respected and treated like a valued member of the team; it’s where they feel like they belong.

A recently conducted remote work survey by FinanceBuzz revealed, 46% of workers feel isolated from their team and a reported 30% admitted it’s challenging to collaborate with their colleagues. While no two cultures are identical, healthy ones have a similar foundation: they support the happiness and growth of their employees while fostering a culture of inclusivity, collaboration and engagement.

According to research conducted by EY’s Center for Talent Innovation, “39% of respondents feel the greatest sense of belonging when their colleagues check in with them, both personally and professionally.” Furthermore, “when people feel like they belong at work, they are more productive, motivated, engaged and 3.5 times more likely to contribute to their fullest potential.”

These four effective strategies will help managers build a thriving and inclusive virtual culture.

Repetition in communication is a powerful and effective tool that isn’t used as often as it should. Redundancy or repetition prevents misinterpreted, erroneous or the loss of information when transferring from one person to another. This is why marketing abides by the “Rule of 7” which suggests an individual needs to hear a message seven times before they will consider taking action.

Tsedal Neeley conducted a study with Elizabeth Gerber and Paul Leonardi on the outcome of managers who over-communicate. They discovered managers who over-communicated through different mediums were able to get projects completed in a timely fashion compared to those who only delivered a message once or twice. Examples of different communication mediums consist of email, Slack channels, Zoom video calls or text message.

Despite what many managers believe, there’s no such thing as over-communication. In fact, under-communicating is one of the top reasons employees leave their job. It not only breeds doubt and uncertainty, but it contributes to missed deadlines, uncompleted tasks, decreased productivity and higher turnover. Companies lose millions of dollars annually due to employees not performing at full capacity which results in poor customer experiences.

Champion A Culture Of Collaboration

An inclusive workplace culture values peoples abilities instead of focusing on their limitations. Inclusive managers bring together employees, at all levels, and empower them to contribute their own original thinking and unique skills. Successful teams have a balanced mix of talents, personalities, skills and ideas where they’re able to communicate and collaborate together. A Salesforce survey uncovered 86% of employees and executives cited a lack of collaboration was responsible for failures in the workplace.

Championing a culture of collaboration is essential to growth. For example, instead of presenting a problem to a select few individuals, managers can host a video conference call to solve it together. Likewise, managers can make meetings more interactive where everyone has a chance to share and say what they need. Additionally, they can use the time together to celebrate individual and team milestones.

Kerry Wekelo, COO of Actualize Consulting, a management consulting firm, has found great success in conducting team building activities to keep employees engaged and connected. Wekelo said they do this through friendly group challenges where teams earn points while enjoying theme based team building activities. Recently, they did an elevator pitch challenge that turned out to be successful. Team building helps employees better understand their strengths, interests and weaknesses while getting to know their co-workers better.

Inspire A New Language Of Kudos

Taking the time to recognize employees is fundamental to keeping them motivated, productive and making them feel like a part of the team. While kudos from managers are welcomed, organizations that leverage peer-to-peer recognition experience an increase in customer satisfaction. Praise is more impactful when given in the moment and happens continuously, year round, rather than solely during an annual performance review. Kudos can be given during Zoom meetings, one-on-one’s, through Slack channels, an email and even reinforced through company town hall events.

I recently visited the Zappos headquarters in Las Vegas, where I immersed myself into their culture. It was there I learned that employees thrive on being able to appreciate and celebrate one another. Gallup points out, those who don’t feel recognized are twice as likely to leave their job. A simple thank you goes a long way. In fact, Reward Gateway revealed “70% of workers say that motivation and morale would improve if managers simply said thank you more and noticed good work.”

Encourage Employees To Bring Their Whole Selves

It’s crucial to remember that no two employees are the same. Instead of putting the onus on remote employees to build and maintain relationships, a good leader takes the lead to keep the momentum going. Jeremy Harrison, head of content strategy at Hustle Life Media, Inc., said “an open and judgment-free environment helps motivate employees to speak up and be heard.”

Getting to know employees on a personal level helps foster relationships. Dmytro Okunyev, founder of Chanty, hosts hour-long campfires where employees come together to learn more about each other outside of their job roles. Okunyev shared some of the topics they’ve discussed so far were favorite hobbies, sports, movies and sharing about their background.

These may be unprecedented times, but when offices open back up, the dynamic and thoughts surrounding remote work will be different. Being pushed into remote work has helped remove the corporate formal filter and given glimpses into workers home lives. Since remote work has been proven it can be done, perhaps with a little more improvement, retreating back to the old normal will be impossible.

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Digital Transformation Comes Down to Talent in 4 Key Areas

Over the years we’ve participated in, advised on, or studied hundreds of digital transformations. In doing so, we’ve gained a perspective on just how difficult true digital transformation really is and what it takes to succeed. Digital transformation is not for the faint of heart — the unfortunate reality is that, to date, many such efforts, like transformation programs in general, have failed.

Success requires bringing together and coordinating a far greater range of effort than most leaders appreciate. A poor showing in any one of four inter-related domains — technology, data, process, or organizational change capability — can scuttle an otherwise well-conceived transformation. The really important stuff, from creating and communicating a compelling vision, to crafting a plan and adjusting it on the fly, to slogging through the details, is all about people.

More than anything else, digital transformation requires talent. Indeed, assembling the right team of technology, data, and process people who can work together — with a strong leader who can bring about change — may be the single most important step that a company contemplating digital transformation can take. Of course, even the best talent does not guarantee success. But a lack of it almost guarantees failure.

Let’s explore the talent needed in each of the four domains in turn.

From the Internet of Things, to blockchain, to data lakes, to artificial intelligence, the raw potential of emerging technologies is staggering. And while many of these are becoming easier to use, understanding how any particular technology contributes to transformational opportunity, adapting that technology to the specific needs of the business, and integrating it with existing systems is extremely complex. Complicating matters, most companies have enormous technical debt — embedded legacy technologies that are difficult to change. You can only resolve these issues with people who have technological depth and breadth, and the ability to work hand-in-hand with the business.

Challenging as these difficulties are, an even more critical issue is that many business people have lost faith in their IT department’s ability to drive major change, as many IT functions are primarily focused on “keeping the lights on.” Eventually, however, digital transformation must incorporate institutional IT, so rebuilding trust is essential. This means that technologists must provide, and demonstrate, business value with every technology innovation. Thus, leaders of the technology domain must be great communicators, and they must have the strategic sense to make technological choices that balance innovation and dealing with technical debt.

The unfortunate reality is that at many companies today most data is not up to basic standards, and the rigors of transformation require much better data quality and analytics. Transformation almost certainly involves understanding new types of unstructured data (e.g., a driver-supplied picture of damage to a car), massive quantities of data external to your company, leveraging proprietary data, and integrating everything together, all while shedding enormous quantities of data that have never been (and never will be) used. Data presents an interesting paradox: Most companies know data is important and they know quality is bad, yet they waste enormous resources by failing to put the proper roles and responsibilities in place. They often blame their IT functions for all these failures.

As with technology, you need talent with both great breadth and depth in data. Even more important is the ability to convince large numbers of people at the front lines of organizations to take on new roles as data customers and data creators. This means thinking through and communicating the data they need now and the data they’ll need after transformation. It also means helping front-line workers to improve their own work processes and tasks such that they create data correctly.

Transformation requires an end-to-end mindset, a rethinking of ways to meet customer needs, seamless connection of work activities, and the ability to manage across silos going forward. A process orientation is a natural fit with these needs. But many have found process management — horizontally, across silos, and focused on customers — difficult to reconcile with traditional hierarchical thinking. As a result, this powerful concept has languished. Without it, transformation is reduced to a series of incremental improvements — important and helpful, but not truly transformative.

In building talent in this domain look for the ability to “herd cats” — aligning silos in the direction of the customer to improve existing processes and design new ones, and a strategic sense to know when incremental process improvement is sufficient and when radical process reengineering is necessary.

Organizational Change Capability
In this domain we include leadership, teamwork, courage, emotional intelligence, and other elements of change management. Fortunately, much has been written about this domain for many years, so we won’t review it here, other than to note that anyone responsible for digital transformation must be well-versed in the area. While, we have no firm evidence to support this, it seems that those who gravitate toward technology, data, and process are somewhat less likely to embrace the human side of change. Of course, in our recommendations above, we have urged leaders to seek those with excellent people skills. If you are unable to find them, a good alternative is to put some “purple people,” those able to work on both sides, on the transformation team.

Pulling It All Together
So far, we’ve discussed the technology, data, process, and organizational change capability domains as if they existed in isolation, which of course they don’t. Rather, they are part of a larger whole. Technology is the engine of digital transformation, data is the fuel, process is the guidance system, and organizational change capability is the landing gear. You need them all, and they must function well together.

Consider the “our systems don’t talk” problem, which bedevils most companies and is anathema to digital transformation. But in which domain does it belong? As described above, it is a tech problem — but it also leads to enormous process inefficiencies. Yet it stems from a lack of solid data architecture, and it may involve organizational structure and politics issues that are difficult to change. So one could argue that any domain should take the lead. But the best solution involves the four working together.

Absent a deep understanding of each domain, it is difficult for nearly all business leaders to see the full potential in digital transformation — a contributing factor to many failed digital transformations. But of course, no one individual possesses all the required knowledge and capability. Hence our call to assemble talent in each area.

Finally, work on technology, data, and process must proceed in an appropriate sequence. It is generally accepted that there is no sense automating a process that doesn’t work, so in many cases, process improvement or reengineering must come first. On the other hand, some transformations will feature large doses of artificial intelligence. Since bad data stymies development and deployment of good AI models, in these cases, work on data should come first. Start with your end goals, then develop the sequence of steps best suited to achieving them

Digital transformation can and should be focused on problems of greatest need to the company. Those priorities will also lend a flavor to the talent needed; if the focus is on transforming customer relationships, for example, the data talent on the team may have particular expertise in customer data, the process talent on sales and marketing processes, and so forth. More important, however, is that the talent possesses the four types of expertise we have described and has had previous success at creating and executing on any kind of technology-driven transformation.

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Purpose: Shifting from why to how

Only 7 percent of Fortune 500 CEOs believe their companies should “mainly focus on making profits and not be distracted by social goals.”1 And with good reason. While shareholder capitalism has catalyzed enormous progress, it also has struggled to address deeply vexing issues such as climate change and income inequality—or, looking forward, the employment implications of artificial intelligence.

But where do we go from here? How do we deliver a sense of purpose across a wide range of environmental, social, and governance (ESG) priorities? Doing so means moving from business as usual to a less traveled path that may feel like “painting outside the lines.” Are we going too far beyond our core mandate? Does it mean we’ll lose focus on bottom-line results? Will transparency expose painful tensions better left unexamined? Will our boards, management teams, employees, and stakeholders want to follow us, or will they think we have “lost the plot”? There are no easy answers to these questions; corporate engagement is messy, and pitfalls, including criticism from skeptical stakeholders, abound.

Yet when companies fully leverage their scale to benefit society, the impact can be extraordinary. The power of purpose is evident as the world fights the urgent threat of the COVID-19 pandemic, with a number of companies doubling down on their purpose, at the very time stakeholders need it the most (for more, see “Demonstrating corporate purpose in the time of coronavirus”). Business also has an opportunity, and an obligation, to engage on the urgent needs of our planet, where waiting for governments and nongovernmental organizations to act on their own through traditional means such as regulation and community engagement carries risk.

Fortunately, a “how to” playbook is starting to emerge as a growing number of companies lead. In this article, we try to distill some inspiring steps taken by forward-looking companies. In doing so, we don’t pretend to have all the answers. What we present here is some early thinking about the road ahead from our research and engagement with clients around the world. We hope this will help you wherever you are on your journey.

Confronting the purpose gap
The August 2019 Business Roundtable Statement, which elevated stakeholder interests to the same level as shareholders’ interests, represents both a reappraisal of purpose and a reflection of tensions that have been boiling over. Customers are boycotting the products of companies whose values they view as contrary to their own. Investors are migrating to ESG funds. And the majority of employees in the corporate world feel “disengaged”; they are agitating for decisions and behaviors that they can be proud to stand behind and gravitating toward companies that have a clear, unequivocal, and positive impact on the world.

Organizations turning a blind eye will face inevitable blowback. In just the past year, companies have witnessed hundreds of thousands of employees walking out over climate issues and recurrent high-profile petitions about business practices that have raised the ire of socially conscious interest groups. Digital platforms are powerful amplifiers. As historian Niall Ferguson warns in a recent McKinsey Quarterly interview, “If your company has not been on the receiving end of a Twitter storm, then don’t worry, it soon will be.”

Despite all this, the potential is extraordinary for business to serve as a force for good. Corporate social responsibility (CSR) initiatives remain a powerful lever. We also see burgeoning opportunities for businesses to contribute that extend beyond traditional CSR—such as deploying digital tools and advanced analytics to address global challenges, as well as mobilizing diverse ecosystems of players to pursue goals that no individual business (or government) could realize on its own. To take just one example, apparel giants such as H&M, Kering, Nike, and PVH have joined forces to create Global Fashion Agenda, a not-for-profit organization that promotes sustainable fashion, from the efficient use of resources and secure work environments to closed-loop recycling. Often, though, these opportunities feel tangential. Many executives tell us they feel their own companies do great CSR work but wish those efforts could extend into the core, adding meaning to the day-to-day experience of their employees and themselves.

We’d suggest that the disconnects between public perceptions of business and its potential for good, or between employees’ desire for meaning at work versus what they experience, reflect a purpose gap. In a recent McKinsey survey comprising a representative sample of more than 1,000 participants from US companies, 82 percent affirmed the importance of purpose, but only 42 percent reported that their company’s stated “purpose” had much effect (exhibit). That shouldn’t be surprising. Many companies’ purpose statements are so generic that they do little to challenge business as usual, and others don’t emphasize the concerns of employees. Contributing to society and creating meaningful work, the top two priorities of employees in our survey, are the focus of just 21 percent and 11 percent of purpose statements, respectively.

We’d further suggest that there is a frustratingly simple reason why business leaders have struggled to square all these circles with coherent statements and credible actions: it’s difficult to solve, simultaneously, for the interests of employees, communities, suppliers, the environment, customers, and shareholders. Tensions and trade-offs abound as we strive to align our business and societal goals; to integrate that identity into the heart of our organizations; and to deliver on our purpose, including its measurement, management, and communication.

Placing purpose at the core

What’s needed is relatively clear: it’s deep reflection on your corporate identity—what you really stand for—which may well lead to material changes in your strategy and even your governance (such as your status as a public company, a private company, or a public-benefit corporation).

But how do you pull this off? What are the mechanics of getting it done and making it real? How do you embrace challenging trade-offs and uncomfortable truths that, if unaddressed, are likely to perpetuate the purpose gap and give rise to rhetoric that’s not accompanied by credible action?

We don’t yet have complete answers to these difficult questions. One thing we are convinced of, though, is that the only way to bridge a purpose gap is to embed your reflection, exploration, discussion, and action in the heart of your business and your organization. We describe here a necessary precondition for any of that, and then four steps for moving ahead: sizing up where you are, including your vulnerabilities; clarifying how your purpose connects with your company’s “superpower”; organizing with purpose in mind; and measuring and managing purpose so that it really becomes part of your core DNA.

Employees are agitating for decisions and behaviors that they can be proud to stand behind and gravitating toward companies that have a clear, unequivocal, and positive impact on the world.

Understand that purpose is personal and emotional
The precursor to action is embracing the emotion and complexity associated with hard work on purpose. There is no simple, input/output equation, which makes it hard to address purpose in the context of prevailing shareholder models. Purpose also is deeply intertwined with the people who make up an organization and who, like all of us, are messy at times. Founder-driven companies, such as Starbucks, sometimes find it easier to put purpose at their core, because their leaders connect with and shape purpose emotionally as well as logically. The rest of us need to make this personal, too.

1. Get real: Create a baseline from your stakeholders’ perspectives

Connecting purpose with the heart of your company means reappraising your core: the strategy you pursue, the operations driving you forward, and the organization itself. That’s hard work, and you can’t do it without deep engagement from your top team, employees, and broader stakeholders. But there’s no substitute. Your stakeholders care about the concrete consequences of your lived purpose, not the new phrase at the start of your annual report.

Start by taking a hard look at the relationships among your social and environmental impact, your strategy, and your purpose, which may be misaligned. Such a reappraisal could lead you to reevaluate some of those hard-to-reverse choices about where and how to compete that represent the core of an effective strategy. The resulting friction is uncomfortable, but also extremely valuable. You can encourage it on an ongoing basis by building purpose-linked questions into your key strategy, budgeting, and capital-investment discussions, for example: “Which pillars of our strategy are most and least congruent with our purpose? How would a ranking of our products and services according to purpose compare with one based on profitability?” Questions such as these cause everyone to pause, legitimize healthy introspection, and boost the odds of spotting instances when taking a short-term revenue or margin hit is a small price to pay for being true to who you are or want to be. (For a more complete set of purpose-related questions, see sidebar, “Questioning purpose.”)

Your self-assessment must go well beyond strategy. Measure your social and environmental impact, starting with a review of your supply-chain and supplier risks. Society now holds you responsible for your entire business chain, beyond your corporate walls, including what your suppliers do. If you, as a senior leader, have not been personally involved with supplier issues recently, go and see for yourself. You don’t need another report; you need deep conviction—either that your supply chain is healthy and sound today or that you have a plan to make it so tomorrow. You need to recognize your vulnerabilities in the eyes of society and tackle them.

Dig deep into the makeup of your products. If you make cell phones, how much plastic in the product is recycled versus new, and how easy are your phones to repair versus replace, which carries additional environmental cost? Your impact also extends to the resources, including energy, that are required for the consumption of your products, in their entirety. Starbucks recently estimated that about 20 percent of its total carbon footprint was related to the production of dairy products consumed with its coffee.

Engage a wide range of stakeholders early as a key input into the process. A basic-materials company we know interviewed 150 external stakeholders, including investors who had chosen not to invest in its industry, as well as CEOs in other industries, all with an eye toward understanding their posture and process related to purpose. Such engagement brings out new perspectives, mitigates risk, and avoids surprises later on. What would an activist discover by digging deeply? Where are you most vulnerable? What is the central thing that critical stakeholders believe society expects from you, and are you doing enough about that? Are you focusing on only a couple of the United Nations’ Sustainable Development Goals, while critics would emphasize others at the bottom of your to-do list? Or are you “doing good” in some areas of your business, while hoping this makes up for negatives in others? All these can be calibrated and assessed, to some degree. At times, doing so may demand the courage to let your stakeholders’ perceptions of where you are trump your own views.

The only way to bridge a purpose gap is to embed your reflection, exploration, discussion, and action in the heart of your business and your organization.

2. Connect purpose with your company’s ‘superpower’

As you take stock and tackle your company’s vulnerabilities, you also need to set bold aspirations and push for specificity on the alignment between purpose and value. It’s often present. Research by author and professor Raj Sisodia suggests that purpose-led companies significantly outperformed the S&P 500 between 1996 and 2011.2 More than 2,000 academic studies have examined the impact of environmental, social, and governance propositions on equity returns, and 63 percent of them found positive results (versus only 8 percent that were negative).

Such outcomes don’t arise magically because a company decides to be purpose-driven. They take shape most effectively when purpose connects with a company’s “superpower”—its unique ability to create value and drive progress across ESG themes. For example, the multinational retailer H&M, whose CEO was previously its chief sustainability officer, has embraced the superpower of its supply chain by opening it up to rival brands that can use it to accelerate their own sustainability efforts.

Identifying and building around unique assets, capabilities, or points of leverage with the potential for outsize impact on social challenges can create value in a variety of ways:

Purpose can generate topline growth (or serve as an insurance policy against revenue slippage) by creating more loyal customers, fostering trust, and preserving your customer base at a time when 47 percent of consumers disappointed with a brand’s stance on a social issue stop buying its products—and 17 percent will never return.
Purpose-driven environmental stewardship can reduce costs—for example, by improving energy or water efficiency.
Purpose can unleash employee potential—helping you win the war for talent, retain your best people, and boost employee motivation. Today, about two-thirds of millennials take a company’s social and environmental commitments into account when deciding where to work.
Purpose can make you more aware of shifting external expectations, policy directions, and industry standards—thereby helping you identify risks you might otherwise miss. If a crisis does strike, preexisting alignment on the organization’s core reason for being will enable a coordinated, values-driven response that is authentic to your people and compelling to stakeholders. “Trusted” brands bounce back faster after product mishaps and economic shocks, particularly when they respond effectively. This remains as powerful a truth as it was in 1982, when Johnson & Johnson recalled and repackaged Tylenol following a tampering tragedy.
Purpose can improve your balance sheet. Danone, the French food multinational, has achieved materially lower capital costs by meeting a set of ESG criteria, including the registration of certain brands to B Corps over time. This move is backed by a syndicate of banks that have committed to rewarding purposeful business with cheaper capital.
The role of the leader is first to inspire creative thinking about what makes you unique, how it links to purpose, and why it could be valuable—and then to encourage rigor in embedding it in your company’s core. As you strive to connect the superpower of your business with its impact on society, you’re likely to identify a rich constellation of potential purpose initiatives. Some are near-term win–wins, delivering immediate societal and financial benefits. Others clearly help society now but take longer to yield bottom-line results. There also are bigger, “moon shot” bets, whose potential benefit to society is enormous but, for shareholders, perhaps unclear. If you have already built momentum with initiatives in the first two categories, it’s easier to stretch for moon shots—which are the most meaningful, generate the most internal satisfaction, and also capture external attention (including motivating others to act). For example, Patagonia’s commitment to repairing jackets, to encourage reusing them, has been emulated by other makers of outdoor wear.

The role of the leader is first to inspire creative thinking about what makes you unique, how it links to purpose, and why it could be valuable—and then to encourage rigor in embedding it in your company’s core.

3. Organize to keep purpose at the top of everyone’s mind, every day

Then there’s the organization itself. Do your people routinely reflect on purpose? Do your critical organizational building blocks—whether they are business units, agile squads, or pockets of functional expertise—have the autonomy and incentives to do their work with purpose? Are your purpose-driven functions (such as philanthropy) self-contained silos, or are they connected with the core of your business?

What about your culture? That, too, is part of your social impact. Just because you deliver good service to customers doesn’t legitimize a toxic culture in your organization that excludes people. Dig deep to assess your own culture, the level of engagement of your own people, and the degree to which they feel empowered to bring their best selves to work.

Above all, do you understand what your employees care about—their sources of meaning, aspirations, and anxieties around social issues? Many CEOs are concerned that the majority of their employees are not actively engaged. What would it take for employees to bring enthusiasm, creativity, and collaboration to work, in addition to discipline? Connecting your people’s individual purpose with organizational purpose is the critical link. An Asian insurer provides explicit space in its leadership programs to reflect on this connection. Meanwhile, a US-based healthcare company has prototyped an app with which people can explore their values and purpose and make workplace connections to enable the pursuit of those aims.

Making that link—in other words, achieving a truly purpose-driven culture—requires listening and being very open to what you hear. According to the leader of a recent effort to reexamine purpose at Nordea, a large bank in Scandinavia, it was indispensable to spend time “listening to more than 7,000 people in and around our organization over a period of six months . . . in workshops . . . online with surveys . . . [and] in more than 1,500 coffee-corner discussions. . . . We discussed deeply why people had joined us, why they stayed, and what they see as impact for a financial institution.” That’s what it looks like when organizations move purpose past slogans and buzzwords.

Connecting purpose with the heart of your company means reappraising your core: the strategy you pursue, the operations driving you forward, and the organization itself.

4. Measure what you can, and learn from what you measure

We all know that what gets measured gets done. But when it comes to purpose, what metrics best reflect impact across the ESG playing field? For complex, far-flung organizations, it can be easy to feel overwhelmed by the seemingly endless array of conflicting reporting standards. Different geographies demand different levels of rigor, and keeping up with the range of voluntary reporting initiatives can be taxing. Popular frameworks such as the United Nations’ Sustainable Development Goals or the Global Reporting Initiative framework are useful touchstones, but they cannot serve as the sole basis of measurement efforts.

Instead, you should ask yourself and your peers questions like the following: What data and evidence are critical to understanding your organization’s total social, environmental, and financial impact? How much insight are your current reporting outputs generating about your efforts to deliver on purpose? When was the last time you took action in response to a metric about your purpose? Perhaps even more important: What is not currently being measured or reported that society will hold you accountable for in the future—such as the greenhouse-gas emissions associated with your industry? And what metrics do your performance-management systems take into account? Seventh Generation, a maker of cleaning and personal-care products, recently built sustainability targets into the incentive system for its entire workforce, in service of its goal of being a zero-waste company by 2025.

Changing how you incentivize people, including the integration of societal-impact goals into compensation, is a “proof point” taken seriously by stakeholders. What other proof points can you build in? Measuring and reducing your carbon footprint and making substantial, measurable investments in reskilling are good examples. Ideally, such proof points become mutually reinforcing. Shell, for example, has plans to set short-term carbon-emissions targets and link executive compensation to performance against them.

You may need to create new metrics that more precisely reflect the tensions you are seeking to reconcile for you and your stakeholders. At PayPal, CEO Dan Schulman and his leadership team became concerned when they realized that a significant portion of their nearly 25,000 employees, particularly at the entry level and in hourly positions, were struggling to make ends meet despite the fact that the company was paying wages at or above market rate. To Schulman, this “seemed ridiculous” for a company whose purpose focuses on improving the financial health of its customers. As he put it, the “market wasn’t working” for these employees—or for many others similarly situated.

PayPal surveyed its employees to assess their financial wellness, developed and began tracking metrics such as a new “net disposable income” calculation for its employees, and took immediate action to improve these metrics and provide its employees with financial security. By significantly lowering the cost of medical benefits, making every employee a shareholder, raising wages in certain instances, and delivering financial-wellness training, PayPal set a target to raise the net disposable income of its employees and improve their financial health. In a world where, as McKinsey Global Institute research has shown, a majority of the next generation in advanced economies is “poorer than their parents,” the impact of such initiatives cannot be overstated.

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How Businesses Should Think About Reopening–And Why It Matters

In May 1932, as he campaigned for the presidency during the depths of the Great Depression, Franklin Roosevelt called for “bold, persistent experimentation” to address the crisis.

As the economy re-opens amidst what will likely be the greatest recession since the 1930s, business leaders would do well to keep FDR’s exhortation in mind. The same spirit of boldness and experimentation can help businesses survive the crisis and contribute to the recovery.

Different businesses will, of course, face very different challenges. But I’ve run more than a dozen companies, many following periods of serious upheaval, and there are a few core approaches that are applicable to all firms in the present crisis.

Navigating these volatile conditions will be an exercise in critical thinking. Consider the situation a high-stakes case study in improved reasoning.

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For one, businesses should engage in advanced scenario mapping in order to be prepared for uncertain times. After the 2008 financial crash, then-Obama advisor Rahm Emanuel famously said, “never let a crisis go to waste.” The principle applies just as much to business as to politics. Crises are times when leaders have more opportunity to effect change than usual. But to do so they need to have clear plans to leverage changed conditions.

No doubt, things look rough right now. Revenues are tanking. Employees are struggling to deal with the crisis on both personal and professional levels. And although states are beginning to reopen, stable conditions are still a long way off.

Given this ever-evolving situation, leaders should look to make quick but informed decisions. If the economy opens up faster than expected, businesses need to be in a position to take advantage. At the same time, if things go slowly or — worse, there is a second wave of infections — businesses need to be able to either find new sources of revenue or ramp down without having to shutter completely.

To prepare for this uncertain set of circumstances, smart leaders should map out possible scenarios as well as effective responses to those scenarios. A highly effective strategy for improved reasoning, scenario mapping should be driven by data as well as counterfactuals, while potential responses should be stress-tested by a variety of colleagues both within and outside the field.

While there are a seemingly infinite number of factors in play right now, only a subset are worth paying attention to when considering different ways in which the economic situation plays out. Identifying those factors while scenario mapping are key to a nimble response. Specifically, leaders should keep the Pareto Principle in mind. An important critical thinking tool, the principle states that 20 percent of causes determine 80 percent of results.

It’s crucial, then, that leaders develop plans that hone in on the 20 percent of factors that will have the greatest impact on their business — whether they are the course of the virus, the government’s response or changing consumer desires and demand.

Beyond using scenario mapping, business leaders can be agile in this uncertain time by keeping cash on hand. In these volatile times, liquidity is powerful. It gives leaders the flexibility to experiment, respond to new developments and leverage uncertainty.

As they plan, business leaders will naturally look at China as a model, since it is ahead of the U.S. in terms of reopening. And while there’s some evidence of a recovery in China, consumer demand seems to be returning very slowly. Spending at restaurants was actually lower in March than in February. In other words, even though aspects of the situation are looking better in China, at least from the outside, there remains a profound level of uncertainty.

Firms should also be thinking about new opportunities, even amid the crisis. Some firms have already shown signs of success in responding to the new environment. Sysco, a food-distribution firm, thoughtfully pivoted on the fly, reorganizing itself to serve grocery stores instead of restaurants. Others are trying to take advantage of long-term opportunities that have emerged from the crisis. Lysol, for example, is planning to work with Hilton hotels to develop new cleaning regimens to put customers more at ease.


Personalizing change management in the smartphone era

CEOs know that making organizational change stick requires convincing big groups of geographically dispersed people to think, act, and approach their work differently. And this is devilishly hard, as human beings are motivated by many things, have different fears and aspirations, feel varying levels of empowerment and commitment, and tend to be reluctant to change in the first place. Undifferentiated approaches that don’t carefully consider employees’ mindsets will fall flat and may even breed cynicism that saps morale and undermines progress.

The good news is that when it comes to personalization, senior executives have plenty of inspiration, courtesy of analytical pioneers such as Instagram, Netflix, and Spotify, all adept at tailoring products to meet individualized preferences via apps and other easy-to-use digital platforms. A large global manufacturer’s ongoing experiment in tech-infused mass personalization shows how this thinking can be applied to organizational change. The company’s experience suggests how smart combinations of digital technology, analytics, and behavioral science can make change more inclusive and persuasive—and help employees unleash their enthusiasm in ways not possible otherwise. The key is to use the available tools to better understand people and meet them where they are—a guiding principle that’s equally relevant for implementing long-term change and for leading a remote workforce through the current disruptions caused by the COVID-19 pandemic.

For a few years, the manufacturer had tried with limited success to implement cultural changes across a key region’s 7,000-strong workforce—for example, by promoting behaviors it hoped would break down silos, empower and motivate frontline workers, and bolster performance. Now the CEO wanted a fresh start. An assessment highlighted places where the company’s organizational health was poor or needed strengthening. From these areas, senior leaders focused on three management practices: operational discipline, inspirational forms of leadership, and the use of rewards and recognition to better motivate employees.

Undifferentiated approaches to change that don’t consider employees’ mindsets will fall flat and may even breed cynicism.

The company then formed a team to translate these broad cultural goals into specific mindsets and behaviors that would both generate the desired organizational outcomes and also help employees better understand how they personally contributed to the improvement. For example, the manufacturer wanted employees to think of operational discipline as everyone’s job. One tangible way to promote this would be to encourage shop-floor operators and supervisors to consciously review the company’s “golden rules of safety” before every shift. Likewise, the company sought to instill a mindset of valuing continuous improvement and celebrating small victories. One way of doing this would be to encourage people to speak up immediately when they saw a colleague do something positive (a motivational take on the mantra “if you see something, say something”).

Clear the roadblocks
The team now had a discrete set of behaviors they wanted to encourage. But they knew that to do so effectively, they needed to meet people where they were—they couldn’t simply tell people to change. The team needed to address any mindsets or beliefs that could act as barriers. Lessons from organizational psychology and behavioral science helped identify a range of potential roadblocks, and an assessment survey of employees and subsequent analysis to spot patterns in the data helped the manufacturer isolate the most prevalent roadblocks to tackle. While the roadblocks themselves touched upon several factors (for example, employees’ beliefs about whether a given behavior is part of their job or conflicts with their personal values) the roadblocks broadly fell into three types (exhibit): “I’m not allowed,” “I can’t,” and “I won’t.”


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Company leaders quickly saw how roadblocks could prevent employees from adopting beneficial behaviors. For example, the manufacturer had long encouraged supervisors to take “gemba walks”—visits to the shop floor that help spot production issues and encourage useful conversations with frontline workers. Yet the analysis showed that many supervisors didn’t prioritize the walks or make time for them, in part because they thought the culture didn’t truly support them using their time this way and also because they worried they’d be bombarded during the walks by new problems they couldn’t handle.

Make it personal—at scale
To address the roadblocks most effectively—and advance the transformation’s broader goals—the team ran a pilot project involving 500 employees. The goal: serve up a rich mix of daily content (videos, text-based messages, and short quizzes) all designed to encourage employees to embrace the changes personally. The content was delivered via mobile-phone app in order to make the most of employees’ existing preferences and habits; moreover, the app’s content was tailored for both frontline operators and supervisors, as well as for different shop-floor locations inside the facility. Crucially, the app’s algorithm paired the tips, reminders, and suggestions it delivered to employees with the roadblocks they reported experiencing. Periodic web-based quizzes provided data that showed the degree to which employees experienced the roadblocks, and gauged progress overcoming them. The result was, essentially, a customized development plan that supported a range of personalized interventions and that could be optimized in real time.

A supervisor we’ll call Heloisa,1 for instance, reported having difficulty finding the time to give feedback to her team of operators. When she opened the app, she was prompted to watch a short video of her colleagues discussing how important they felt it was to receive feedback. Then, a few days later, Heloisa received a push notification explaining practical approaches for delivering quick, effective feedback. Meanwhile, a frontline operator we’ll call Juan was resisting giving feedback because he felt that doing so would hurt his relationship with his coworkers. When he accessed the platform, among the content bits he received were messages to help him realize the importance of constructive feedback in establishing a safe and efficient workplace.

Six weeks into the change program, Ana reported a significant shift in how frequently she recognized others—a testament to the skills she developed through coaching.

In addition to clearing roadblocks, the platform helps employees reach the program’s broader cultural goals. A supervisor we’ll call Ana, for instance, wasn’t recognizing the small, daily victories of her colleagues, largely because she didn’t feel she had the skills to do so. When she engaged with the platform, she received bite-size exercises and coaching to help build this capability. Six weeks into the change program, Ana reported a significant shift in how frequently she recognized others—a testament to the skills she developed through the coaching and an improvement directly linked to a management practice (“rewards and recognition”) that the company was prioritizing.

Manage for impact
The team manages the app in conjunction with the same centralized “transformation office” that leads the broader change effort. This gives senior executives an integrated view of where things are progressing or lagging. Dashboards show where participation rates on a module are down, or where employees aren’t retaining certain information, allowing the company to make adjustments in real time.

During the launch of the pilot, for example, the data suggested that some employees weren’t answering questions candidly; they were simply choosing the most optimistic-sounding responses to survey questions. The team updated the algorithm so that if users appeared to be answering questions in a pattern, a pop-up message reminded them that their responses were always anonymous and unlinked to the company’s HR systems (a vital message, and one that was communicated continually and in other forms). Responses to the roadblock assessment quickly became more realistic, which both confirmed the challenge ahead and gave the team confidence that employees increasingly trusted the effort and took it seriously.

Adding communal aspects to the app—the ability to post user-generated images, videos, and messages within the content feed, as well as sharing, tagging, and “like” functionality—encouraged more employees to interact with the platform and helped spur enthusiasm for the pilot. And, as more employees shared their stories, posted photos, and called out good behavior, it also reinforced the program’s goals (after all, people are more likely to follow through on behavior change when they commit to it publicly). Simple gamification, including the addition of “badges” for social posts, helped too. Indeed, as word of the platform spread and people became curious, employees who weren’t part of the pilot wanted in, and what was meant to be a test for 500 employees quickly expanded to allow all 7,000 employees to participate.

As word spread and people became curious, employees who weren’t part of the pilot wanted in.

The results of the three-month pilot have been encouraging, and the company is now rolling out the effort more broadly. Overall attainment scores suggest an average individual improvement of 10 percent against the three management practices the company is prioritizing. Improvements in some areas were rapid—with scores rising about 5 percent every two weeks over the span of the pilot. Meanwhile, the manufacturing unit involved in the effort enjoyed a 6 percent increase in production, an encouraging result that company leaders attribute to a combination of the pilot along with a focused effort to reinforce lean-management principles.

Importantly, employees inside the manufacturing unit report that the work feels different, as momentum for the program grows. Night-shift workers have demonstrated particular enthusiasm. Whereas before, change efforts might have seemed mystifying or incomplete to them—motivational posters appearing in the workspace overnight, companywide mass communications from leaders they rarely saw—now the goals of the program made sense. The platform has also improved their level of recognition in the company and their connectedness to the day shift, which is helping break down the silo mentality that worked against the company’s operational and safety goals

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