Home > Risk > Resilience and the speed of decision-making

Resilience and the speed of decision-making

The topic of resilience is an increasingly topical one, given the challenge that responding to the pandemic has been. I think its fair to say that few organizations had identified COVID-19, or even the possibility of a major pandemic, and had to find a way to respond quickly.

While management has been fighting the fire, boards have had to consider not only their role in this crisis, but how they can help their organization be prepared for future ones, both known and unknown (with a timely tribute to Donald Rumsfield).

McKinsey have shared a number of articles very recently on this topic.

In the first, three McKinsey partners shared their views of The role of boards in fostering resilience.

Here are some of their more interesting points, with my highlights:

  • Broadly speaking, resilience refers to a company’s ability to weather a crisis well. That means being prepared to deal with an unforeseen event such as an accident or, more commonly now, a major global health or economic crisis. [Amended later to include foreseen events.]
  • Companies aware of how various types of events would affect their economics are generally better prepared.
  • During this crisis, share price changes of the companies on whose boards I sit have ranged from a 50 percent decline to an increase of 200 percent, and the biggest difference has been the nature of demand. An airline flying out of Hong Kong is now more than a year into demand at 1 percent of historic levels, whereas a manufacturer of PCs has seen the highest demand for its products in years. The resilience challenge at the computer manufacturer has been about ensuring the supply chain works, whereas for the airline it was more about balance-sheet resilience.
  • So it makes sense to differentiate between the actions companies take before a crisis strikes to prepare themselves where the timing is uncertain, and the actions they take once these externalities hit.
  • One important resilience factor we have seen, especially in this pandemic, is how quickly companies shifted their operating model at the top—how they collaborate, how they make decisions and at what pace, and how they support those processes with war rooms or teams providing a synthesized version of external information, structured into scenarios so decisions can be taken confidently. 
  • One of the big insights we had from working with hundreds of corporations during this crisis is that, especially when uncertainty is extremely high, not just focusing on firefighting (although firefighting is important) and not just focus­ing on the long term but focusing on key deci­sions along the entire timeline is crucial.
  • If there is one thing to remember from our conversation, it is the importance of preparation across a broad set of potential risks. Second is to lean in to decision making. Taking them sooner is generally better. And because of geopolitical risk, avoid the small and risky investments: initiatives that could create value but are potentially highly risky, where you could get a disproportionate negative impact on the business in return for relatively small gains.

I will let you read the rest of the piece. I just have two significant disagreements with the authors:

  1. They only talk about the effects of disruption in financial terms, and
  2. They haven’t recognized that disruption can bring great opportunities – even when they refer to a computer company that took great advantage of the pandemic. Ensuring supply lines is one thing; to be smart, that company needed to engage marketing initiatives and be prepared to boost manufacturing as well.

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A second, by four different partners, is Speed and resilience: Five priorities for the next five months, published in March of this year.

It emphasizes many of the same points, again with my highlights:

  • Speed has been a fundamental characteristic of the COVID-19 pandemic—the virus hit fast, sending much of the world into lockdown just months after it was first detected. Businesses reacted rapidly, reorganizing supply chains, adopting remote-work models, and speeding up decision making with surprising velocity. And as with prior crises, the organizations that acted quickly to counter the COVID-19 downturn dealt with the disruption better than the organizations that reacted more slowly.
  • Speed is also likely to be a central feature of what happens next—with one important difference. Over the past year, adrenaline unlocked speed. In the near future, speed will need to arrive by design. For companies to achieve long-term resilience, it is imperative for them to ensure that the speed they successfully unlocked during the pandemic remains sustainable in the future.
  • In some cases, companies are using this moment to strengthen their speed muscles, while also increasing the emphasis on building personal connections and reducing fatigue. Work can and should look different to create competitive advantage in performance and health.
  • In June 2020, McKinsey asserted, “An organization designed for speed will see powerful outcomes, including greater customer responsiveness, enhanced capabilities, and better performance in terms of cost efficiency, revenues, and return on capital. The speedy company might also find it has a higher sense of purpose and improved organizational health. These outcomes are possible, but not inevitable.” Nine months later, we think that this analysis is as sound as ever. Speed matters, but not at the cost of making mistakes or burning out. By asking the right questions, business leaders can improve the odds of negotiating the next normal successfully, and in so doing, help themselves, their employees, and their communities.

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Finally, the partnership shared Ready, set, go: Reinventing the organization for speed in the post-COVID-19 era.

It shares the same message: to be resilient, you need speed in decision-making. (I would add you need those decisions to be informed and made intelligently.) They say, with my emphasis:

  • When the coronavirus pandemic erupted, companies had to change. Many business-as-usual approaches to serving customers, working with suppliers, and collaborating with colleagues—or just getting anything done—would have failed. They had to increase the speed of decision making, while improving productivity, using technology and data in new ways, and accelerating the scope and scale of innovation. And it worked. Organizations in a wide range of sectors and geographies have accomplished difficult tasks and achieved positive results in record time:
    • Redeploying talent. A global telco redeployed 1,000 store employees to inside sales and retrained them in three weeks.
    • Launching new business models. A US-based retailer launched curbside delivery in two days versus the previously-planned 18 months.
    • Improving productivity. An industrial factory ran at 90-percent-plus capacity with 40 percent of the workforce.
    • Developing new products. An engineering company designed and manufactured ventilators within a week.
    • Shifting operations. Coordinating with local officials, a major shipbuilder switched from three shifts to two, with thousands of employees.
  • At the heart of each of these examples is speed—getting things done fast, and well. Organizations have removed boundaries and have broken down silos in ways no one thought was possible. They have streamlined decisions and processes, empowered frontline leaders, and suspended slow-moving hierarchies and bureaucracies. The results, CEOs from a wide range of industries have told us, have often been stunning: “Decision making accelerated when we cut the nonsense. We make decisions in one meeting, limit groups to no more than nine people, and have banned PowerPoint.”
  • Technology and people interacting in new ways is at the heart of the new operating model for business—and of creating an effective postpandemic organization.
  • An organization designed for speed will see powerful outcomes, including greater customer responsiveness, enhanced capabilities, and better performance, in terms of cost efficiency, revenues, and return on capital. The speedy company might also find it has a higher sense of purpose and improved organizational health. These outcomes are possible, but not inevitable. Organizational successes forged during the crisis need to be hardwired into the new operating model; and leaders must ensure their organizations do not revert to old behaviors and processes. That requires making permanent structural changes that can sustain speed in ways that will inspire and engage employees.

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I think this makes a lot of sense!

The question for you is whether your organization has rewired itself for speed. If not, what are you going to do about it?

  1. July 5, 2021 at 1:33 AM

    “Decision making accelerated when we cut the nonsense. We make decisions in one meeting, limit groups to no more than nine people, and have banned PowerPoint.”
    One thing seems missing in this statement, i.e. the hunger for data (real or perceived) by decision makers, which would give them a sense of certainty. However, in crisis situations one should make do with less certainty (50-70%) as basis for decisions, in order to be timely and effective. This seems to be illustrated by the example above of the retailer, which accelerated their curbside delivery project by 18 months; such decision cannot have been taken with 99% certainty.

  2. July 5, 2021 at 2:36 AM

    Not too sure about banning PowerPoint, since the main problem is the person that makes the presentation, not the means of delivery.

    • Norman Marks
      July 5, 2021 at 7:54 AM

      David, I agree with banning PowerPoint as it (a) has people looking at the screen or paper instead of the presenter, and (b) traps the presenter into poor practices.

      • July 5, 2021 at 11:56 AM

        Norman,I would say your reply supports my argument. (a) If people are looking at the screen or paper, then the presenter is failing to make a persuasive point. (b) if the presenter is trapped into poor practices, they aren’t a good presenter. There’s no point in banning a four slide PowerPoint if it results in a ten page report. It would surely be better to say, ‘You have 5 minutes to present your case, using whatever presentation techniques give the best result’.

        • Norman Marks
          July 5, 2021 at 11:58 AM

          I don’t disagree. While I would provide a concise report to the board, I rely on what I say rather than what I can write.

  3. July 5, 2021 at 12:29 PM

    Norman, looking at the first article, I think there is one point made by Martin Hirt which is important and relates to your point about information, ‘The plan-ahead team sits next to the decision maker and its only function is to take information from all sources of intelligence and work it into these scenarios.’. The second article refers to, ‘data science and interpretation take on greater prominence’. I find the third article full of jargon, with no mention of the importance of information. It has the usual swipe at middle management (reduce it) while pushing the idea of a multi-skilled workforce (‘hybrid sailors’). If that’s not a good description of the best middle managers, I don’t know what is.
    If decisions have to be taken quickly, then the more advance warning the better. That means constantly updating risks (and the scenarios surrounding them) and constantly monitoring information to provide as much warning as possible of the risk actually occurring. including the forecasting of financial results.

  1. July 1, 2021 at 5:09 PM

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