Leading Off: A leader's guide to the rules of a new social contract

ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

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There's something happening here. Even as the global battle against the COVID-19 pandemic continues, the application of vaccines and new therapies offers a soothing promise of return to a more familiar and predictable time. Yet it would be a mistake for leaders to lose sight of how much has already changed. Many businesses, newly agile and quick, bear scant resemblance to their former operating selves. No less dramatic has been the change in social attitudes—toward government, toward individual purpose and expression, and toward justice and equality—that took root in the past year and are building a very different business and social landscape. This week, let's look at how those changes, writ large, are forming a new social contract and altering the way you'll lead at work and beyond.

AN IDEA

Has support for workers, consumers, and savers changed for good?

Large-scale policy interventions—G-20 economies have announced fiscal packages exceeding $10 trillion since the COVID-19 pandemic began—have reversed a two-decade-long trend in the social contract (the arrangements and expectations that govern how economic risks and gains are shared among individuals and institutions). On top of public-sector support, some companies in the private sector provided protection to their employees and invested in the well-being of their workforces. While such actions have clearly not tamed economic inequalities, a key question facing leaders in the months and years ahead is whether the pendulum will swing back just as sharply once the pandemic abates or whether at least some of the intervention and innovation will remain.

A SPOTLIGHT INTERVIEW

The twin global crises in healthcare and economics spawned by the COVID-19 pandemic have confronted governments around the world with an extraordinary resilience challenge. While many private-sector players were able to pivot to more agile operating modes, slower-moving government bureaucracies have struggled to sidestep catastrophic health outcomes, rewrite their social contracts with citizens and businesses, and manage an unprecedented cumulative global fiscal deficit that will reach $30 trillion in two years' time. In a recent podcast, McKinsey partners Rima Assi and Tom Isherwood break down the challenges governments face and the opportunities available in applying technology and creative financing to walk that historic tightrope.

A BIG NUMBER

435

That's the number of definitions of “stakeholder,” according to one researcher. Faced with that array, it's no wonder that many executives feel shaky trying to articulate a thoughtful corporate purpose. And the COVID-19 pandemic has only made the task harder. Take employees: McKinsey research found that, as a result of the pandemic, half of them are reconsidering the work they do, thus putting the onus on leaders to help workers find an individual purpose and ward off value-destroying churn. If that weren't enough, a rash of exhausted A-type millennials seem ready to chuck their career paths completely while marching to the “you only live once” anthem. Complicated? Sure. But stakeholder capitalism seems to be here to stay, and some practical thinking about how to narrow your purpose options can help you get a handle on the confusion.

A QUOTE

“There are structural things that have nothing to do with one person's animus that enable some of us to move through the system with ease and cause some of us lots of friction.”

That's from Gregory Fairchild, the Isidore Horween Research Associate Professor of Business Administration at the University of Virginia Darden School. The focus in his book Emerging Domestic Markets: How Financial Entrepreneurs Reach Underserved Communities in the United States (Columbia University Press, January 2021) is the unprecedented rate of growth in some underserved US communities and the opportunity, through innovative financial services, to create new institutions, sound investments, and the next frontier in combating racial inequality. There's another underused lever that leaders can employ to add a racial-equity lens to their postpandemic return-to-work strategies: locating hubs, branches, second headquarters, factories, and other work assets in places where Black people live.

THE ROAD IS LONG

person looking at phone with a child next to them eating

Since 2015, progress toward gender equality in the workplace has been marginal, and now the COVID-19 pandemic has hit women hard. Women are disproportionately represented in industries that have been the hardest hit by the pandemic. While women's jobs face roughly the same level of impact from automation as men's do, long-established barriers to acquiring new skills and making midcareer shifts, as well as other factors, make women's transitions harder than men's. Progress has been made on many fronts: McKinsey research finds that 87 percent of North American companies today report that gender diversity is a top priority, compared with 74 percent in 2015. Still, that reported priority still needs to translate into more decisive action at the policy level and within companies to achieve targets for gender equality, economic growth, and security.

Lead well.

— Edited by Bill Javetski, an executive editor in McKinsey's New Jersey office

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