Founder's Mentality Blog
As more governments reopen their economies, they’re trying to calculate the resulting health costs. This stage of the Covid-19 pandemic will be a long “dance,” to borrow from Tomas Pueyo’s popular metaphor. We will likely take two steps forward with the economy, and one or two steps back with the virus.
Frontline heroes are the main performers in this dance. For decades, the C-suite has signalled that employees should escape from these positions—that there is a higher calling. Even though their firms only existed to deliver promises to customers, they neglected the very people who fulfilled that role. But through the crucible of the coronavirus, companies and communities have finally started to celebrate the “essential” worker.
This is just one of several changes that CEOs want to preserve as they reopen their businesses. But they face a major challenge: How can they avoid a “snapback” to old ways of working and, at the same time, respond to customer and employee desires for a return to normalcy? Leading CEOs will determine the right “power-up sequence,” much like NASA’s Mission Control did with Apollo 13. After an explosion, it had to design the perfect sequence for repowering the damaged command module, in order to get the crew home safely. The stakes were high, as they are now: The pandemic is a dress rehearsal for a more turbulent world ahead.
To meet the challenges of an uncertain landscape, leading CEOs will “retool” their firms. The right power-up sequence will jumpstart this massive change. In addition, winning organizations will design a new social contract to outline future ways of working. It will form a commitment between the firm and its employees. It will not be a new organizational design, but rather will reshape the culture, management processes, decision roles and the like. It will foster purpose-filled career paths with endless opportunities to learn and develop.
Determining a new social contract won’t be easy. CEOs will need to address three questions. First, how can they preserve the best of lockdown—smaller teams, faster and more Agile ways of working, and tight connections between the front line and C-suite—while ensuring the right people are in the room for critical decisions, including middle management? Second, how can they remain free of the worst aspects of “planning,” while strengthening coordination and accountability? And third, how can they start a conversation about the contract with their people, while the future of many jobs, particularly of those essential workers, remains uncertain? Leading CEOs will address the talent issue by defining their firms’ mission-critical roles and discussing the new social contract—while remaining transparent.
Define mission-critical roles
As we enter the post-pandemic world, we’re also entering a new business era—one we call the “era of scale insurgency.” Winning firms will be big and fast, competing with their scale and their speed. They will shed the complex aspects of the professional management system, while retaining its extraordinary ability to deliver the benefits of scale and routine. At the same time, they will build new businesses that redefine or establish new industries.
Leading CEOs will start by dividing the firm’s strategy into two distinct agendas. The delivery agenda will focus on fulfilling existing commitments to customers and stakeholders. Employees will perfectly and routinely execute a known playbook to meet customer needs. The development agenda will focus on discovering the answers and solutions that will define future businesses. Employees will begin to experiment, learn and adapt their way to the best outcome.
The best social contracts commit to creating an organization that executes today’s businesses flawlessly while building tomorrow’s businesses. These clearly defined, separate agendas help CEOs solve their “middle management” issues and redesign their fixed-cycle planning processes. They also help CEOs define their organization’s mission-critical roles, which radically differ for each agenda.
Delivery: The driver, pit crew and system support
Think of delivery teams, the heart and soul of the company, as a Formula One (F1) team on race day. And imagine the customer experience as a lap around the course. The team’s mission is to strive, over time, for the perfect lap. But it’s not enough to achieve one perfect lap—the team has to be faster than its competitors every time. Consistency and speed are imperative.
There are several critical roles on the team. The most important is the driver. Even if designers create a world-class car and the pit crew provides world-class support, the team can’t win unless the driver is fully empowered, with all the right tools and data, to make the right decisions. The driver has to react in split seconds to changing track conditions and competitor moves. There’s a reason why drivers stand on the winners’ podium—we’re celebrating their execution and choices. For companies, the drivers are those in customer-facing roles, from salespeople, to customer care representatives, to customer service specialists.
There’s also the pit crew. F1 pit crews are composed of highly specialized experts in clearly defined roles. Members either change tires or pump fuel, but they don’t do both. For firms, pit crew members are those experts who directly support the front line and follow known playbooks.
The crew’s mission is to keep the car on the track, ideally in its highest gears to get maximum speed with minimum effort. At the same time, the driver and the car need a break, more fuel and new tires. If these interventions take too long, though, it may be better for the driver to stay on the track. An expert pit crew works in well-practiced harmony, so they’re able to make adjustments quickly. There’s no negotiation or deviation during the race, because the driver and crew agreed on a plan well in advance. In addition, there aren’t any committees on the track—the driver and the crew communicate directly.
The same is true for business. Even still, the best playbooks need small adjustments. Supporting teams can intervene in frontline activities, if done at the right time, for the right duration. If they take too long, it hurts the front line and customers. The best supporting teams directly communicate with the front line and deliver quickly. There aren’t spontaneous experiments or negotiations on which playbook to use. This clarity allows winning firms to free up middle management resources for more critical roles.
Finally, there are those who design and run highly adaptable, modular systems with precision. They support drivers and pit crews with timely data on car and track conditions. They’ve also designed their systems for fast adjustments. The car is modular, so that pit crews can review the data and make small changes during the race. For example, to improve speed, F1 teams have designed the car aerodynamics to change with the race conditions, from major factors, like weather, to smaller factors, like track wear and tear. The pit crew can adjust the aerodynamics of the car in seconds.
In leading businesses, there are those who ensure the right data quickly reaches the right people. There are also those who run real-time systems, allowing teams to evaluate data and make fast changes to customer offerings or respond to customer needs. The best systems are like electricity. They are always on and fit for purpose, to provide maximum flexibility for the end user. There is little interference between the power source and power use.
Development: Disruptors, executors and scalers
Because development teams operate in a world of unknowns, their mission-critical roles are radically different. It’s helpful to think of Thomas Edison’s legendary laboratories.
The first, and most important job, is micro-invention. Edison’s inventors wanted to create light from electric current. They had a hypothesis: They needed a filament. And they had a question: Is there a filament that burns for a long time? They prototyped, tested and adapted filament after filament, creating a repeatable model for innovation. Edison’s inventors had the same skills as today’s disruptors. They knew how to make the problem small enough to test and learn. This is the essence of Agile.
As Sarah Elk, coauthor of the bestselling new release, Doing Agile Right, points out, “We have to think about Agile in the right way. It’s not simply about the faster delivery of daily MVPs. It’s about using Agile principles to quickly scale solutions across the organization.” Ultimately, we need to deploy inventions across the company. If the perfect filament costs $10,000 to produce, it’s not a scalable solution. Firms need industrialized solutions with economics that work for them and their customers.
For that reason, scaling requires two other critical roles. First, as part of the development agenda, there need to be executors. Executors help by describing their routines and defining what makes an invention “scalable.” If we’re designing a new F1 car, whose voice would be critically important? The drivers. Leading CEOs rotate executors from delivery teams to development teams—while the agendas are separate, when it comes to talent, the boundaries are porous.
The development agenda also requires scalers—those uniquely skilled and hard-to-find people who can bridge the gap between the firms’ disruptors and executors (for more on finding and nurturing scalers, see “How to Identify Great Scalers”). They take both innovation and routine into account to identify a scalable solution. Scaling problems beget more disruption. Take the history of the razor blade industry: It started with the product itself (the creation of a new shaving experience), but scaling led to more invention (the creation of a manufacturing process for economically producing multitrack blades). The disruptive manufacturing solutions were as important as, if not more than, the product itself.
Scalers don’t just think about a single product—they think about entire industries. Edison’s labs created a grid and infrastructure to electrify an entire city. They scaled from filament to the requirements of an industry. Much like Edison, the best CEOs focus their development agenda not on invention, but on building new businesses. They toggle back and forth between micro- and macro-solutions, keeping scaling at the center of everything they do.
What’s more, Edison’s labs didn’t just design a repeatable process for micro-invention. They also developed one for building new businesses. Similarly, in F1, many of the biggest disruptions are the result of the data systems and modular car designs. While the most visible disruptions are often products, the most valuable disruptions are often around business building ideas and their supporting data and technology systems. As Sarah notes, “Agile thinking is at the heart of business building. When CEOs bring Agile principles to not only product invention, but also to process and business model disruption, we start to see a company’s performance really improve.”
Together, these mission-critical roles provide the building blocks for the new social contract. Leading firms will have teams that deliver a firm’s core promises directly to customers, supported by deep experts, data and technology systems. They will have teams that develop tomorrow’s solutions by connecting the best disruptors, executors and scalers.
And beyond both agendas, leadership teams will play the final set of mission-critical roles. They will set the delivery and development agendas, assembling and disassembling cross-functional teams according to firm priorities. Leaders will design career paths and help individuals rotate through roles in both agendas. They will create communities of experts to help those in mission-critical roles share lessons with their peers. They will track promises to stakeholders and communicate progress. This is not management: Leaders will act as coaches and mobilizers.
Start conversations with those in mission-critical roles, focusing on purpose first
Once they’ve defined the firm’s mission-critical roles, CEOs can engage people in those roles in a conversation about the organization’s new social contract. While the social contract will differ across companies, there are six common design principles.
It starts with purpose. We all know that the best businesses are mission-driven, but truly mission-driven organizations are rare. When you find one, you marvel, especially when that business has demonstrated multiple years of commitment to their mission. However, don’t be fooled by what Unilever CEO Alan Jope calls “woke washing”: misleading advertising that promotes a “purpose,” but isn’t actually backed up by what the firm does every day. Leading CEOs avoid the trap of a mission that lives in marketing, but not in action.
They’re also wary of missions that live at the enterprise level, but not in the activities of teams. “It is great to have an ‘enterprise’ purpose, and it’s important that individuals feel emotionally connected to it, but we need mission-inspired teams. Leaders need to set priorities such that teams are clear on how their objectives and day-to-day actions connect to the enterprise purpose. Leaders can’t solve for all teams, but they must define the mission for teams driving critical work. And that mission will differ hugely between delivery and development teams,” says Sarah.
The best CEOs and HR directors will discuss purpose with those in mission-critical roles: Let’s confirm the firm’s insurgent mission and how it translates into your team’s purpose and daily activities. Purpose isn’t something to review annually, it’s something to live daily. It specifically defines what teams do, but it also influences what they shouldn’t do. It gives them the right to stop any activities that distract from their core purpose.
It’s organic and ever-changing. It’s critical to start the conversation now—however, it’s not critical to rush to signing it, where nothing changes. Sarah notes, “We need to embrace a world of more change, not less. The CEO and HR directors shouldn’t communicate that once we have a new social contract, we’re done. It’s not a contract that is signed and sealed. It’s a commitment to go on a journey, where the organization will constantly change and adapt. That’s a good thing. And it means that the role of HR in the organization has never been more critical.”
The goal of the new social contract is to make the firm more adaptable and Agile. To that end, leaders must become masters of running the business and changing the business simultaneously—the contract can’t be static. The organization will never “arrive,” but rather, embark on a never-ending journey of constant change and improvement.
It’s a two-way conversation. The best social contracts integrate multiple voices from across the business. And it’s the leader’s job to listen. Sarah makes a critical point: “Systematizing how an organization celebrates execution, builds businesses and drives change isn’t something that is designed at the top and delivered, like tablets from the mountain. It’s the result of long conversations with the people in your mission-critical roles. They have to engage in the design and own it. And it’s a good thing if that engagement process takes time.”
And while the firm creates opportunities for employees to succeed, it is the individual who is accountable for creating a career. As John Vincent, the founder of Leon, notes, “While companies do have responsibility for the livelihoods of their teams, we disempower ourselves as employees if we forget the responsibility that we all have for our own lives. I feel that a healthy economy is one in which people do not look to their companies for their own happiness, success and fulfillment.”
Leading CEOs will put an emphasis on the responsibilities of the individual. They will offer various paths, creating a culture that encourages mobility. They will allow people to audition for challenging new roles. But it’s also up to the individual to seize opportunities. They need to determine if the firm’s ambition matches their personal ambitions. They are responsible for determining how the company fits into their life journey—maybe the organization is a good choice every year, and maybe it isn’t.
It clarifies the delivery and development agenda, with a focus on scaling. Delivery and development agendas require different ways of working. But coming up with and testing a new design is relatively easy compared with scaling it and realizing the results. For many organizations, addressing the agendas will take two steps. First, CEOs will find separation and clarity, by determining where the firm must deliver, where it must develop, and who is required for each agenda. But then they will need to execute great integration and coordination. CEOs can determine how to use the voices of the delivery team to shape the scaling of development team ideas. Conversely, they can figure out how development teams should build more modularity into the systems that delivery teams use.
It supports mission-critical roles. CEOs will build the best social contracts on this profound idea: They won’t treat every role with equal importance. Instead, they will scream that the most important jobs in the company are frontline delivery roles. They will ensure that all leadership roles share a mission to improve the day-to-day of critical roles, with a bias to get out of the way. They will reduce complexity and consider the cost of lost time in every intervention. And they will ensure that, above all else, mission-critical jobs are the “best” jobs. Every day, as people in these jobs go to work, they will feel that they share a common purpose with their teams. They should feel as if the entire organization is designed to support them in delivering today’s promises to customers.
While the new social contract will celebrate great jobs, it will also be clear that the best career path is one that rotates through cross-functional teams working on bigger and bigger issues. As opposed to true leadership, management hierarchies will be deemphasized.
It balances ruthless focus and continuous coordination. At first glance, the catch phrases of the new social contract— “focus” and “coordination”— appear to be contradictory. However, these organizational attributes create the best jobs. Be it delivery or development, the best teams focus ruthlessly on their purpose. They have the right cross-functional resources. They are empowered to do whatever it takes to achieve their mission. And they are supported by an organization that provides exactly what they need and then gets out of the way.
But, as part of a team of teams, CEOs know that customers benefit from coordination, learning and trade-off decisions. For example, a delivery team might stop the continued optimization of a specific component of an IT system to introduce a new system with greater modularity. The delivery teams working on optimization and the development teams working on fundamental redesign need to talk, share their resources and, ultimately, help allocate IT resources between optimization and redesign. They are separate teams, but as a team of teams, they constantly coordinate to meet customer needs now and in the future. The social contract should secure the best of team focus and coordination. Leading organizations will make the tough resource allocation decisions across teams quickly and intelligently, bringing the right voices into the room.
Designing new ways of working and an operating model around mission-critical teams is challenging, but the goals and guardrails for the conversation are clear. As they shift their town hall discussions from lockdown to reopening, CEOs can start the conversation, even over Zoom (see our recommended “Zorms,” or Zoom norms).
Be clear and transparent about harsh realities and unvarnished truths
Many CEOs are passionate about beginning these conversations and improving their organizations for a post-Covid-19 world. On the other hand, they share profound concerns about the near future. While politicians and business leaders are hopeful about reopening, it won’t be an instant rebound: The economic toll continues to mount. For instance, the sizeable economic contractions in the first quarter of 2020 reinforce our view that heavy disease-mitigation has temporarily reduced economic activity by 40% to 50%, producing damage on par with (if not slightly greater than) the Great Recession. We are still deep into this crisis.
The degree of uncertainty about these harsh realities will limit the promises that CEOs can make to their people. James Root, chairman of Bain Futures, a global think-tank working on the client implications of coming trends, shared, “I’m an optimist and, for the most part, the Covid-19 crisis has accelerated trends we’ve been watching for a decade now. We will shed a lot of the complexity of the professional management system and we’ll become more Agile. And in this context, I tell CEOs to be bold. Make the hard decisions now to strip out complexity and essentially free those mission-critical roles. On the other hand, there are some big problems CEOs must address around talent.”
These problems will inform the journey to a new social contract. Leading CEOs will let the truth be their guide as they consider four issues:
- Employment. The social contract cannot promise job security. “I’m not sure we understand how fast economies will recover yet. And I’m not sure CEOs know how deeply they may need to cut their organizations. They have many scenarios, but the differences in outcomes are vast,” says James.
- Resilience. Over the years, firms have made bad decisions in the name of efficiency, but didn’t realize the effect on their resilience until Covid-19 hit. Outsourced partners failed to deliver. Supply chains broke. Call centers weren’t prepared for work-from-home mandates. James advises, “Before we move to fast organizational solutions, we have to make sure our companies are not simply adaptable, but also resilient. CEOs realize they need to add buffer capacity, but I don’t think they know where yet. Leading CEOs will solve this first.”
- Culture. “I applaud the confidence of many CEOs who say they will build working from home into the heart of their organizations, because I applaud flexibility. But I don’t think we know how a culture will be created and nurtured in a world with fewer offices. I fear the ‘cultureless firm.’ We need to pause and consider this before we rush to new configurations of how we work and live,” says James.
- Growth. Prior to the pandemic, growth enabled more career paths and offerings. “I live in Hong Kong, and a lot of the CEOs who I work with are leaders in high-growth markets. And we know ‘growth’ smooths a lot of organizational issues, because you almost always guarantee your people bigger and bigger jobs,” shares James. With significantly lower growth rates in the near term, this will change. He notes, “CEOs will have to adjust their talent systems to the new reality. This takes time.”
Starting the conversation on the new social contract is urgent. It ensures that organizations avoid a snapback to old ways of working as they reopen. The CEO will talk of bold ambition and harsh realities, because the best conversations start with honesty.
This is just the beginning of the journey, and it will require ruthless focus. It starts with purpose. CEOs, supported by their CFOs and HR directors, can promise opportunities, but can’t guarantee a job for life. What CEOs can offer is better jobs, particularly for those in mission-critical roles across the delivery and development agenda. They can create an Agile organization with opportunities to work on multiple teams, but can’t guarantee that everyone will pass every audition. They can make resource allocation decisions that consider strategic priorities and create career journeys across diverse teams. Leading CEOs will start with goals and guardrails, not answers, because their people have equal responsibility in designing the contract. It’s up to individuals to seize every opportunity and use it as a springboard for ones that follow. This is their moment.