Founder's Mentality Blog
Around the world, economies are reopening from the pandemic shutdown—and people are finding creative ways to demonstrate social distancing. In New York City, park-goers are relying on circles drawn in the grass. In Japan, designers are using the Abbey Road cover and the average length of a bluefin tuna to illustrate safe space. As CEOs and citizens navigate the trade-offs between the economy and health, Google searches for “back to work” are ramping up, while “work from home” is declining (see Figure 1). In a recent Bain survey, we found that among US workers, financial concerns are starting to outstrip health concerns (see "Back to Work" for a closer look).
Google searches suggest a recent surge in interest in getting back to work
As CEOs figure out the right sequence to “power up” their firms during reopening, they’re determined to avoid a snapback, or a return to old ways of working. According to a recent Bain survey, 97% of executives say they anticipate changing their operating model because of the pandemic—and of those, 42% expect to make significant and systematic changes. They want to carry forward the best of lockdown, including smaller teams, more experimentation and less “rules, tools and fools,” or needless friction and complexity.
However, CEOs also want to address the organizational costs of these new routines and behaviors. While they worked faster in a time of crisis, they didn’t always work smarter. For many decisions, critical people weren’t part of the “Zoom where it happened.” Sometimes ad hoc decision making can become “bad hoc,” as Andrew Hill, management editor of the Financial Times, noted.
Avoiding snapback is tricky, but vital: The Covid-19 crisis is a dress rehearsal for a more turbulent world ahead. Through a new social contract, CEOs can determine how the organization will work together in the future. They can alert the organization that they’re using lessons from lockdown to shape the firm’s future. The best social contracts will hit the hardest issues head on, starting with the role of middle management (spoiler alert: solving the problem requires a new lens). They will also address issues around “planning”: How can firms reinstall clear commitments and accountabilities, without returning to the soul-destroying aspects of planning that they jettisoned during lockdown?
The problem with planning
Planning is a means, not an end. It’s a boring word that describes the extraordinary universe of how organizations systematically identify issues and solutions, allocate resources and track actions to get things done. Good planning not only entails good processes, but also the right mindset, behaviors and capabilities. It’s a series of dialogues among leaders. It’s an organic system that constantly evolves and improves. By contrast, bad planning is a static process. It’s full of templates and meetings delegated to staff. They share PowerPoint enemas in long, box-ticking sessions, while leaders get on with real life.
What do we mean by “planning”? The term refers to three separate systems. There’s strategic planning, or the process of developing strategies that inform goals and the allocation of resources (finances and people). There’s financial planning, which converts a subset of strategic goals and resource-allocation decisions into financial commitments to stakeholders and time-based objectives. There’s also the performance review and reward system, which assesses individuals on achievements and personal development. It relies on several factors, including performance against strategic or financial objectives.
This sounds clear-cut, but it isn’t. Because it feels like we’re constantly in planning or budgeting meetings for various cycles, everyone is slightly confused about what is an output of one plan vs. an input for another. Here are the three main concerns relating to planning systems:
They don’t link up
Imagine a CEO who has led an extraordinary strategy planning process. Taking industry scenarios, competitor moves and customer behaviors into consideration, she develops a strategy for 2030. She sets strategic goals: Gain market share against key competitors, gain ownership of specific consumer segments, move from offline to online channels and build new capabilities and businesses in response to a more turbulent world. The leadership team determines where to play and how to win, recognizing the need for huge resource shifts among different parts of the business.
Then the CEO leads the financial planning process, where the organization translates the strategy into financial measures. They retain the strategic goals “elsewhere,” but those goals lack the teeth of financial targets. And during budget meetings, the organization makes a series of resource allocation decisions that have profound strategic implications. For example, the head of China might argue that he can’t meet the strategic goal of “winning in China” based on current investments. During the financial review, the organization cuts the commitment to make the budget work. But there’s no reconciliation with the strategy planning process. No one revises it to acknowledge that the firm has decided not to win in China, at least not this year.
Later, during the strategy reviews, most of the discussion focuses on near-term financial performance against obligations. The strategic goals are subordinate to the financial metrics. The same goes for individual performance reviews. The conversation revolves around how well a leader has met financial targets. The review glosses over strategic goals, which also have no effect on bonus levels. Managers in high-growth markets may lose share, yet earn rewards for above-average revenue performance. Meanwhile, managers that gained share in a turbulent market, building vital capabilities for the future, might be penalized for below-average revenue performance.
Herman Spruit, a London-based partner who has spent the past 25 years focusing on what makes good strategy, notes, “Each component of the plan may or may not make sense from meeting to meeting. As a whole, the system lacks cohesion, coherence and integrity. CEOs see this. But more importantly, managers see this every day, which is why so many detest planning systems.”
By the end of the process, the customer loyalty, channel and e-commerce goals haven’t survived. Only near-term financial obligations remain.
They rely on fixed cycles
All corporations set “time” by the Earth’s rotation around the sun, rather than customer behaviors, technology trends and competitor responses. Senior leaders could be in the middle of a massive debate over the firm’s digital strategy, with major unresolved issues that affect millions in investment. They’re still debating in October, but they need to decide something, because there’s a board meeting on October 15. They can’t leave the issue unresolved, because the system demands decisions. And they have to go to the board on October 15, because they need to submit the final three-year plan by November 15, to lock it in before the end of the year.
Leaders often make bad decisions simply because they run out of time. Weekly, monthly, quarterly and annual deadlines don’t take the complexity of an issue into account.
Fixed-cycle planning also doesn’t allow for responsiveness or adaptability. If leadership makes a set of decisions and, in Mike Tyson’s words, they get “punched in the mouth,” they find it hard to change material decisions in material ways. Planning processes never anticipate a boxing match so the firm can never roll with off-cycle punches.
Herman explains why firms need a continuously evolving approach to strategy: “Humans are living. They act and react. As humans, customers and competitors will react and adapt to events. Planning is meant to guide the actions and reactions of fallible, living humans. But it fails, because planning processes are static, set to cycles that have nothing to do with actions or reactions. We need living strategies, not static ones.”
They don’t reflect real human behavior
A CEO might want to use a review meeting to pound the table and argue that the organization has to get back to basics. He wants to emphasize that the teams know the routines, yet they’re failing to execute flawlessly and hit critical financial targets. He intends for the messages to be tough: The leadership team needs to leave the meeting with a renewed commitment to avoiding distractions and getting the job done.
Meanwhile, in a strategic discussion, the CEO wants the leadership team to remove themselves from the daily agenda to consider possibilities, look around corners and debate various options. The best CEOs are skilled at leading both types of discussions.
And good senior leaders might very well be able to participate in both discussions. However, it’s difficult for humans to handle both discussions in the same meeting. Yet it happens all the time, and we’ve all been there. At one moment, the CEO is castigating a leader over a decline in receivables due to the careless execution of a payments system. In the next, he’s asking the leader to suggest partnerships for the digital strategy. The situation requires the leader to dramatically shift from a defensive mindset (“I’m sorry, but let me explain”) to a growth mindset (“Here are innovative new possibilities”) in the span of five minutes. That’s impossible. Yet every day, planning processes tangle discussions of current business delivery and future development.
In the crisis mode of responding to Covid-19, most CEOs temporarily paused planning. The consensus? Their leadership teams felt liberated. The spirit of the times evoked late Southwest Airlines founder Herb Kelleher’s famous quote: “We have a strategic plan—it’s called doing things.”
Leadership teams stopped negotiating and put their heads down. They just delivered. And for a few issues, where they needed to find new ways of working, they formed small teams to experiment and learn. They didn’t feel constrained by old ways of working or sacred cows, which previously prevented them from challenging innovation. They just developed new things.
“When CEOs describe what they liked during lockdown, they basically say, ‘Without our planning systems, it all became so simple. Some meetings were about doing stuff. We just sorted out jobs to do, agreed on a playbook and just did it. And in other meetings, we understood the need to invent. We formed the right teams and started experimenting. It was all so clear.’ These CEOs realized that all leaders need separate meetings for delivery and development discussions. We’re humans after all,” noted Herman.
As they face reopening, CEOs know they need to bring back planning. At the same time, they don’t want to endorse the old systems and their problems. They know their old planning will be ill-suited to the post-Covid-19 world.
Four software changes for better planning
As CEOs grapple with the challenges of avoiding snapback, they're certain on one front: They are not calling for a complete revamp of all planning processes.
Leslie Carroll, a Toronto-based partner, helps executive teams shape their organizational “software” (culture, management processes, decision roles, ways of working and the like) and their structural “hardware” (boxes, lines, etc.) to transform businesses and improve performance. She notes, “The extraordinary results companies are achieving under lockdown come from the ‘triumph of software.’ They haven’t reorganized in a traditional sense, but rather, they’ve created a more adaptable organization by organically adjusting behaviors, streamlining decisions, breaking traditional processes and leaning into purpose. CEOs are obsessed with bottling up the best software changes, including what’s been happening with planning.” CEOs currently changing the software to prepare their planning systems for the new world are taking four actions.
Clarify the delivery and development agendas
The early stage of the crisis taught us that there are times when we need to get on with things, and there are times when we need to experiment and learn. CEOs can maintain this approach by clearly separating the firm’s strategy into two distinct agendas:
- Delivery. This covers the majority of firm activities. It’s when leaders focus on the outcomes they want and create the clear playbooks needed to achieve those outcomes repeatedly. Performance depends on flawless execution of the basics, not reinvention. Managers can stop over-managing this part of this business and instead empower teams to execute with limited oversight. For leaders, variance will matter: Who’s offtrack and how can we intervene? Who has the opportunity to accelerate ahead of plan and how can we help?
- Development. This is a collection of the unknowns, where the organization needs more time to explore key issues or solutions. Leading CEOs will avoid “chapter headings” such as “win in China.” Instead, teams can innovate and test to create products capable of competing with local Chinese brands. With each iteration, teams can solve the “failure point,” or the next big potential problem threatening to derail them. And they will fail—but they’ll have the time and space to reach a winning solution. This is about building the new businesses that customers need. Skilled business builders have approaches to prototyping and scaling. They can adeptly navigate turbulence and respond to external triggers. To cultivate business building, leading CEOs will shift resources from the over-managed delivery agenda to the under-resourced development agenda.
According to Herman, clearly defined agendas are a hallmark of successful strategy: “Over the last two decades, I worked extensively with five CEOs to track ‘results from strategy.’ I find the ‘it's all about execution’ notion too glib. Strategies go wrong for two reasons. First, high-level decisions don’t result in different resource allocations. There’s obviously money and people to consider, but there’s also shelf space for new products, priority in sales calls, even time allocated in meetings. Second, leaders don’t distinguish between the delivery agenda, or the stuff that ensures we keep our jobs, and the development agenda, or the stuff we need to resolve and build from, in order to thrive and create our legacy.”
Clear agendas can also help the organization create the “stop” list. For resources to move from delivery to development, the firm will need to “stop” many pre-pandemic activities. It simply can’t afford them.
Address delivery and development differently
For CEOs, the time spent defining the two agendas will pay off when they set up each discussion. Leading CEOs will get the right people in the room for the delivery and development dialogues—but they will have different meetings, different information and different mindsets. There will be no comingling. As part of the new social contract, CEOs can work with their leadership teams to create the right “Zorms” (or Zoom norms, to borrow a term coined by Stanford graduate student Janelle Terry) and eventually, norms, for each type of meeting.
One CEO unlocked the difference by comparing his delivery meetings with a Formula One race, saying, "Our job is to help all of our teams, in all those cars, shift to higher gears. The engine works less the higher you go. Every time we change a routine, we bring that team back to first gear—and it takes a lot of work to get them back up to fifth again. Our people work smarter, not harder, in higher gears, with routines and playbooks."
"If we do need changes, we have a pit-stop mindset—we tackle as a team and solve the issue fast with known interventions, such as fuel or tires. We simplify the dashboards and information so we can act fast. We’re not redesigning an engine for goodness sake, just changing tire treads because the weather changed. We want that team back on the road, shifting back to higher gears. You don’t win a race by building new engines between laps. And you can’t build the next great business through pit stops," he said.
And he brings development discussions to life through Thomas Edison’s laboratory: "We’re testing new filaments, on one hand, but also thinking about how to create a new industry built on electricity. Little failures, big dreams. Multiple projects, loose-tight integration. I need to assemble the right fact base. And here, insight can come from breadth, not depth. We’re looking beyond our industry boundaries."
Identify defining actions and trigger points for current scenarios
The pandemic revealed that static planning isn’t built for turbulence, adaptability or humans, especially as firms still face unprecedented uncertainty. “Right now, CEOs need to be in daily conversations about what’s happening to each market, the pace of recovery, the key opportunity, the key risks, and the changes that demand action. Static systems don’t help with that. The best CEOs try to steer the conversation from ‘turbulence and uncertainty’ to defining actions and trigger points. They agree on the actions to take as certain scenarios unfold and the triggers that will bring those scenarios to life,” says Herman.
Some CEOs use a “war room” to manage the Covid-19 crisis, conjuring images of leaders moving wooden blocks across a map to track allied and enemy forces, and generals deliberating, deciding and rushing to call captains in the field. Like military leaders, they are monitoring market movement and getting ahead of events before they unfold, using actions and triggers.
Herman makes a critical distinction: “This isn’t an ‘event-reaction’ mode. The whole idea is to plan the actions in advance. If you understand an event could be highly negative, you anticipate it and build in the right buffer capacity for fast adaptability. If you’re building a bridge in an earthquake zone, build a bridge that can survive most earthquakes and keep materials on hand to repair it quickly if needed.”
In this scenario, CEOs can also ask: “Do we need to build in an earthquake zone? Is there a way to avoid this outcome altogether?” The purpose of scenario planning isn’t to accept scenarios “as is,” but rather to identify the worst possible outcomes and actively lower the probability that they will occur.
Create a “sight model”
CEOs have multiple stakeholders, including boards, investors and employees, who want updates on the state of the business. This isn’t a time to signal false certainty: Rerunning pre-pandemic financial models is risky. The best CEOs aren’t returning to old systems, but they’re not flying blind either. They’re using quick and dirty financial models that give a sense of the current shape of the business, what creates value, and what’s at risk, based on various scenarios.
Herman calls these “sight models”: “The best CEOs are getting their top finance and strategy teams to put together a rigorous sight model. It’s 10% of the old planning systems but 100 times better than flying blind. And creating these sight models forces teams to remind themselves of the real value drivers of their business. It aligns the top team on what really matters.
“This model also helps CEOs talk to stakeholders. If you have the right owners and leadership team, they all recognize that they must tolerate ambiguity. But they need signposts. Are they looking at a flat year, down 20%, down 40%? Under each scenario, what actions will you take and when will you know to take them?” says Herman. It’s a balance, as is much of navigating the pandemic.
New Zorms for the new world
Steering the firm through the Covid-19 crisis without traditional planning systems places a huge burden on the CEO. Most meetings demand decisions. Most decisions involve reallocating some resources. CEOs are making these tough decisions daily. It’s exhausting and it takes courage.
Collectively, the organization needs these decisions—there’s freedom in stopping debate, forcing realignment and eliminating uncertainty. But such decisions also create winners and losers. As one CEO shared, “Sacred cows never roam through organizations without many cowboys leading the herd. You can’t kill sacred cows without upsetting their herders.”
As Leslie notes, the pandemic put the CEO at the center of these high-stake decisions: “Business crises are increasingly common and most CEOs have experienced several events such as data breaches, terrorist attacks, activist investors and more. However, Covid-19 has caused extraordinary levels of disruption requiring daily high-stakes decisions, including life or death. And, by the way, all of this is happening with a workforce that has become distributed by necessity and reached primarily by Zoom.”
But the best CEOs will improve the Zorms of how they make these decisions. After more than 20 interviews with CEOs over the past eight weeks, Herman and Leslie developed a list, including these seven:
Speak least and last. CEOs use Zoom meetings to facilitate debates that lead to the best decisions. A good rule for CEOs is to talk the least, and last, on these calls. State the issue, open the discussion and listen. Ask someone to chair the call, collect views, enforce Zorms, and clarify points of agreement and conflict. At the end, CEOs can summarize what they’ve heard and set the agenda for the next discussion on the decision.
Reinforce the importance of delivery. The pandemic has illustrated a massive issue: Business cultures don’t celebrate the “essential worker” nearly enough. They don’t celebrate the front lines or flawless delivery to customers. Customers only want companies to keep their promises. And companies can only fulfill these promises when the execution team and their commitments to established playbooks are perfect. Firms don’t have the right to disrupt or develop unless they can deliver what already exists.
Yet every hour, we somehow signal that the execution role is one to escape from—that there is a higher calling. There is not. As they work to distinguish delivery from development, leading CEOs will repeat that delivery is the most important and valued job in the company, at every moment—and they must do so until they are breathless (for more, see "A New Social Contract: Talent in a Post-Covid-19 World").
Deploy the discover, debate and commit cycle. Living planning systems need time, because people process big issues for hours and days after the initial discussion. Leading CEOs make high-stake decisions through a three-part cycle.
Herman describes it: “The first discussion is about discovery—let’s learn about the issues from each other. Teams confront, rather than avoid, conflicts now, before the commit meeting. The second discussion is a rigorous, fact-based debate about the issues. And the third discussion is about commitment. The team agrees to stop the debate, commit to the decision and move forward. There’s zero tolerance for backsliding or renegotiation. The firm needs the resources that it often wastes on a lack of commitment to fund new businesses. For a development issue, commitment might only be an agreement to the next round of experimentation. But teams need to be clear on development commitments—whether they come back with success or failure on a particular issue, they will live by the next steps they agreed to. They aren’t finding more hurdles to say ‘no,’ or another excuse to say ‘yes.’”
What does this look like in Zoom meetings? “I’ve found the best CEOs divide this into at least three different Zoom sessions and use the space in between for individuals to process. From time to time, they come to the CEO with deeply personal views that need a separate hearing,” says Herman.
Cascade the commitment. CEOs continually face the risk that people who could be critical to project success aren’t included in the “Zoom where it happens.” To address this issue while keeping meetings manageable, CEOs can set rules for attendees. For discover and debate discussions, they can require that in advance, each attendee seeks out views from those with expertise or something at stake on the issue. The commit meeting assumes that attendees close the loop with others not on the call, particularly those who would disagree with the decision made.
This is also a great trick for unmasking “false commitments.” The test isn’t “Yes, I commit” but “Yes, I commit to getting others to commit.” If the CEO gets this right, it reassures her that every meeting attendee is actively cascading the discussions and getting the right people on board. The CEO enforces the Zorm, but doesn’t chase down everyone who isn’t on the call—that is a shared responsibility.
Use breakout rooms for pulse checks. We’ve all learned that typical Zoom meetings aren’t good for pulse checks. But many CEOs are now using the “breakout room” feature to take a 10-minute pause mid-meeting, separate team members into private chats, and ask them to discuss what is and isn’t going well about the discussion. When everyone regroups, attendees report issues and actions to correct.
Leslie notes, “It’s important to recognize that we’re all learning during these times. A ‘retrospective’ is an Agile technique where a team has the opportunity to reflect on what’s going well and actions for improvement. It’s particularly powerful, even if used informally, as teams figure out new ways of working. It takes a couple of cycles, but individuals get very good at this.”
Co-create the design principles of the new social contract. During these turbulent times, CEOs are starting conversations about the new social contract. They are also navigating inner loops, or improvements within the rules of the system, and outer loops, or concerns with the system itself. During some tough debates around resource allocation, it’s hard to tell whether people are concerned with the decision itself or the way the decision was made (such as the people in the room or the facts provided). CEOs can ask the group, “What are we learning about the way we made this decision? How should it inform the way we design the new social contract?” Of course, this will lead to better discussions of the new social contract. But it will also help CEOs turn their teams’ observations or complaints about the process into positive actions.
Use “town Zooms” to reinforce new ways of working and share Zorms. In a recent survey, we found that more than 30% of global workers have become more satisfied with their employer during the crisis, compared with less than 10% who have become less satisfied. Employees attributed their satisfaction to their company’s support of the community, their leadership’s efficient decision making and their teams’ increased agility. The best CEOs are also liberally using town halls, or “town Zooms” for frequent, broad communications. More recently, town Zooms have celebrated and reinforced positive changes. They’ve also highlighted a commitment to preserve the best practices post-lockdown. CEOs can also use town Zooms to share new Zorms. Imagine the power of these seven Zorms cascading through a company.
The problems with planning systems have always been there. Yet, by applying what’s worked during lockdown, CEOs have found new ways to address those problems. By tinkering with the organizational software in four ways, they can lock in best practices and avoid the dreaded snapback. And with seven Zorms, they can shape a new social contract for a post-Covid-19 world.
Remember the 80s mockumentary, This is Spinal Tap? While most amplifier volume knobs are marked from 0 to 10, guitarist Nigel Tufnel’s amps go up to 11: “It’s 1 louder, isn’t it?... These go to 11.” At its worst, planning can feel as useless as changing the numbers on a volume dial: No one wants to talk about the music your teams are making, they just want to fiddle with the dials and measurements. At its best, planning connects the musicians and songwriters, through an amplifier to the audience. The knobs don’t matter nearly as much as the quality of the music and the integrity of the connections. The best CEOs spend their time getting the right people to write and perform the right songs, at the right time for the right audience. You can sort out the knobs later. This is your moment.