Across the chasm: Reimagining the post-COVID-19 organization

Around the world, companies are looking across a deep chasm of uncertainty. The coronavirus outbreak continues to grow globally, destroying lives and livelihoods – with more than 8.8 million confirmed cases and 465,000 deaths so far. While government interventions have slowed the pace of new cases in affected regions, new hotspots continue to emerge. Aggressive stimulus packages have mitigated some of the economic effects on individuals and companies, but with more than 40 million Americans filing for unemployment benefits and stalled growth in other countries, economic stresses continue to threaten communities.

One hundred years ago, the Spanish flu took several unexpected and lethal turns before it subsided two years later. Today, with insufficient testing capacity, a lack of therapies, and no vaccine, the outlook for COVID-19 is also uncertain. For now, one likely global scenario is an effective public health response with some regional virus flare-ups and partially effective interventions, with the economy returning to its pre-crisis level by Q1 2023, though this could change as we learn more.

Some of the news is good. Most large companies have coped remarkably well so far, for example. In just a few weeks, they made leaps that might have otherwise taken five years or more, such as spurring more customers to interact with them in digital channels and transforming management processes to a work-from-home model. In large global capability centers, 70 percent of employees were working at home by the end of March and 95 percent a month later. Many CEOs say their teams are now highly productive– but that may be because they are still in crisis mode.

Large firms are now planning phased return-to-workplace programs, using a long checklist of actions to balance employee health, financial and social priorities. Even with these efforts, however, social distancing requirements could mean that fewer than a third of staff return to their workplaces this year – and the process could be interrupted by sporadic virus flare-ups, including some in the workplace. South Korea, for example, imposed one of the world’s most stringent testing, contact tracing and quarantine programs, but a resurgence of the coronavirus in the capital after a brief reopening triggered another shutdown of schools and public spaces. Smart institutions, realizing that the situation is dynamic and nuanced, are starting to leverage dozens of granular county-level data sources on public healthcommercial sensitivity, mobility and other factors to make decisions to reopen dozens or even hundreds of offices, factories, operations centers, branches and stores in the right sequence – and remain ready to adapt to sudden changes in the environment.

Forward-thinking institutions, while they take short-term steps to protect lives and livelihoods, are now also revaluating their long-term strategies. They are rethinking their operating models to boost efficiency, agility and speed in the “next normal,” in which economic pressures may continue and new constraints, such as a lack of foot traffic and limits on public transportation, could slow recovery for some time.

Most senior teams, having quickly overcome their doubts about the effectiveness of remote working and decision-making speed, now have a chance to redesign how their companies operate. We expect outperformers to boost productivity significantly faster than usual, as they harness new tools and ways of working and learn from past successes and failures.

As they build new models, senior leaders will answer questions in three broad categories: work location and real estate strategy, functional excellence and productivity, and people development & company culture:

  1. Work location and real estate strategy. Today, most global institutions’ employees are co-located in major office hubs in or near major cities, with other hubs for manufacturing or service operations. Across companies, we believe that that few positions will (or should) go back to the “old normal,” and that teams will fall into four archetypes: fully co-located, remote-friendly, remote-first, and all remote. Company headquarters could stabilize at around half their current size, especially in high-cost, high-density locations where commutes are long. At least one Fortune 500 company is expecting to save 20-25 percent on real estate and 10-20 percent on labor expenses as it scales down in major cities and sources talent in lower-cost locations.
  2. The effect of these changes could be significant as physical adjacency is replaced by new collaboration tools, convening in person on designated “office days,” creating remote-local agile teams, scheduling mentoring to replace informal contact, and so on.

  3. Functional excellence and productivity. One size will not fit all. Functions will evolve differently as the recovery takes hold, some more dramatically than others. We expect senior managers and talent in critical functions, such as traders at investment banks, to return to their offices sooner, for example. Many companies that must transform sales will more than offset a decline in field sales by growing inside-sales, or phone-based, agents; customer-service teams now working from home are already managing volume spikes better – one pizza chain staffs its remote workforce to take most orders between 4 and 7 PM – even as they rely more on digital self-service. Some finance functions that operate in cycles may need some full-time staff only closer to the end of each quarter. In product development, some companies are redesigning teams to stay agile while working remotely, reversing the multi-year trend towards co-location. Finally, human resources, IT, and other transactional support teams could remain mostly remote permanently. In aggregate, productivity gains from redesigned processes could be transformational, with dramatically streamlined activities and governance, more productive work-time, and location optimization.

  4. People development and company culture. While the new models could draw in more diverse talent unconstrained by location, and clean-sheet processes raise effectiveness, cultural cohesion, people development and performance management will remain a challenge. Functions with clear metrics, such as service operations and IT development, will migrate more easily. In the last decade, some firms across sectors began allowing work from home, led by research of improved productivity. jetBlue’s 20-year track record of “remote-friendly” home-based reservations and customer service agents led to higher productivity, lower attrition and, according to J.D.Power, helped it achieve the #1 customer satisfaction rating among low-cost carriers for 13 years. Success metrics in some other functions are softer and more difficult to track, of course. In the last few years, some companies have reversed their work-from-home policies. Potential reasons range from the difficulty of collaborating remotely to perceptions of a lack of control or lower productivity.
  5. Rewriting policies is easy; cultural change is hard. Many companies have been managed from large headquarters for generations, and professional success is often linked to personal access to senior management. While all-remote interactions seem to level the playing field, we’re seeing that hybrid meetings, which not everyone attends in person, can make remote attendees feel disadvantaged and isolated. Some small “remote-native” companies are now shifting cultural norms to prevent such problems.

We expect the organizations that emerge from the pandemic in the strongest positions will be those who reimagine their operating models along four imperatives:

  • Address three dimensions – location, function and people – simultaneously, beginning with an honest assessment of how the company runs, questioning every assumption and identifying every bias.
  • Articulate and adopt new working norms for collaboration tools, such as video calls and shared virtual workspaces, that will play major roles in the new model, along with the requisite training on remote collaboration and management.
  • Learn from the successes and failures of other organizations, including those that have tried different approaches in the past and those going through the same discovery process today.
  • Finally, understand that this dynamic environment requires tools to track and monitor not just people’s performance but their physical and mental health, pacing the transition wisely and recognizing and adapting to new challenges before they become crises.

This journey will continue until health threats subside, which could take years. On personal and organization levels, the inability to adapt could result in failure. Research shows that even in the best of times, 70 percent of transformation programs fall short of targets. Today, thousands of companies across industries and continents are already enduring a decline in business momentum. Those who cannot reverse this could also see breakdowns in organizational culture.

But dynamic institutions will seize this moment to overcome barriers to change, learn from others, and stay flexible in an evolving environment. As they climb out of this unprecedented public health and economic chasm, these winners will emerge stronger on the other side.