The Resilient Company: 3 Qualities to Succeed in the Post-COVID-19 World
Part 3 of 3: The purpose-driven company
The most important issue for business leaders, now and in the years to come, is to create resilient organizations.
That is, companies capable of not only surviving critical situations like the one brought by COVID-19, but getting out of them better than before.
To be resilient in the 21st century, companies must exhibit three main qualities: continuous learning, ethics, and having a greater purpose beyond profits.
Purpose has become a popular topic in the corporate world after a growing number of thought leaders have recognized its relevance, like BlackRock CEO Larry Fink in 2018, the 181 CEOs of the Business Roundtable in 2019, and, more recently, the Davos Manifesto 2020.
This led to a certain hype on purpose, which became one of those topics that large companies and corporate leaders cannot ignore anymore.
The reality is that many companies are talking about purpose today, but very few have managed to make this issue something concrete and a priority in their daily lives.
The hype does not diminish the relevance of purpose.
When an organization succeeds in inspiring and instilling in its members the perception that they are all united in pursuit of a noble cause, it starts to benefit from a colossal source of energy, motivation and cohesion.
An authentic sense of purpose also makes its other stakeholders such as clients, suppliers and communities feeling part of a just cause aligned with the common good to which it is worth contributing to.
Having a purpose beyond profits is an even greater asset in times of crisis and difficulties. At such periods, it is critical to have the confidence that better days will come. And the existence of a greater cause to pursue is the key that makes employees persevere in building their aspired future.
Crises are also a great opportunity for companies to leave lasting positive memories on its stakeholders through their purposes. A concrete example took place with the Brazilian furniture company Meu Móvel de Madeira (“my wooden furniture”). In June 2014, a flood hit the small city of Rio Negrinho, its hometown. Thousands of people had their homes flooded. Luckily, the company was not directly affected.
This event made its leaders and employees to realize that their purpose of “making your home the best place in the world” was not just about their customers. They joined forces and rolled up their sleeves to clean dozens of houses on the weekends.
The outcome was positive for everyone. Not only did the community benefit, but the unprecedented cohesion among employees led the company’s customer satisfaction index to increase in the following weeks despite the whole period of difficulties. According to its CEO, this episode demonstrated something very powerful: that happy people with a broader perception of their role do things even better.
It is also important to highlight the other side of the coin. When there is no sense of purpose, the organization holds its people together only by the pocket. Consequently, it is more likely to disappear in the first adversity as there is nothing but the money that binds its members.
Peter Drucker had realized this a long time ago when he stated that “Every enterprise requires commitment to common goals and shared values. Without such commitment there is no enterprise; there is only a mob.” That is, an adventure that might work for some time.
Times of hardships, therefore, are the acid test for companies to demonstrate the authenticity of their purpose and values. Their behavior in these situations will be remembered by its stakeholders for a long time.
To create a company that is genuinely purpose-driven, three main initiatives are needed. The first and most fundamental is to review the very concept of success. Instead of maximizing profits, business leaders should evolve to a broader concept of success that seeks to maximize the organization’s purpose.
This does not mean failing to create shareholder value. On the contrary. Achieving a fair return on the investment is an imperative for companies to continue funding their cause and, consequently, make a bigger positive impact on its stakeholders.
The difference, in this case, is that earning an appropriate return for shareholders is seen as a consequence, not an end in itself, in the quest for the creation of shared and sustainable value for all stakeholders.
Leading the company towards a greater purpose is a major paradigm shift. The second structural resolution for this to happen is to change the way senior leaders are used to manage the organization.
Specifically, this means evolving from trying to predict and control the future to focus on the ability to sense and respond to the external environment using the organization’s purpose as the guiding star for decisions.
It is incredible that in a volatile, fast-paced and unpredictable 21st century, most companies still spend an enormous amount of energy, time and resources attempting to predict and control the future. In particular, through detailed strategic planning processes that often seem more like a true collective rainmaking ritual.
Increasingly, companies need to focus on responsiveness and flexibility. This does not mean that it has no direction. The route to follow, and the parameters of what to do or not on a daily basis, are determined by the organization’s purpose, values and strategic vision.
One of the consequences of rigid and overly detailed strategic plans is the widespread practice of cascading goals. Each individual receives his or her goals and then follow them blindly, even when the outside scenario world has already completely changed.
This true dogma is the result of corporate leaders’ obsession in trying to control the uncontrollable.
The solution corresponds to the third initiative to create a purpose-driven company: eliminating the bulk of the dozens of goals and indicators — including the complex models for evaluating individual performance — and focusing instead on cascading meaning and values instead of cascading numbers.
This means getting leaders at all levels to dedicate themselves primarily to instilling a sense of meaning in their team members (the “why we are here”) instead of focusing on monitoring the numerous and unilaterally established goals (the “what to do”).
It may seem radical, but scientific evidence and in-depth business cases show that extremely complex management systems — which aim to control and standardize everything and everyone — end up generating more costs than benefits to organizations.
The resilient company: summary
The figure below summarizes the three qualities of a resilient company: the company that learns, is ethical, and is purpose-driven. The overlap between the circles shows that these concepts are interconnected.
To successfully manage these themes, it is critical to start measuring them. There are metrics for this. It is possible to objectively measure psychological safety, ethical culture, a virtuous leadership style, and the orientation towards a greater purpose, to name a few examples.
Senior executives and board members whose priority is to build culturally resilient companies should start to continuously measure and monitor how their organizations are doing with respect to these qualities.
In addition, I show in the figure below a set of elements that serve as the backdrop for the qualities of a resilient company. They include topics such as autonomy, trust, respect, diversity and inclusion. Without investing in these fundamentals, it is not possible to build organizations of excellence in the 21st century.
At the bottom of the figure, I highlight the basis that supports the whole concept that I described throughout this series: having a positive assumption about human beings.
If senior leaders assume that people are lazy, stupid and malicious, then it will be impossible to build resilient companies with the qualities that I emphasized.
The reason? Leaders create systems and procedures that reflect their own view about others. And, as people tend to respond according to how they are treated, this leads to a self-fulfilling prophecy. If leaders expect the worst from people, then this is probably what they will see and have.
On the other hand, the reverse is also true. There are many positive cases of companies proving that people tend to respond in an extremely positive way when their leaders believe in them and convey confidence, responsibility and humanity.
That is why it is essential to depart from a positive premise in order to bring out the best in people.
A critical implication and conclusion
The corporate resilience model that I developed requires a shift in the mindset of many business leaders. Instead of thinking about their companies as a big machine, they need to start thinking about them as a living system.
The idea of the company as a machine is the result of a mechanical and linear thinking typical of the industrial era. This view is focused on efficiency and short-term performance. It may make some sense when facing simple problems in a stable environment. In a dynamic, complex and unpredictable environment, it doesn’t work.
It is necessary to evolve towards a systemic thinking based on biology. A living system is incomparably more resilient than a machine. In this COVID-19 crisis, for example, nature is giving a great example of resilience.
In a few days, the canals of Venice returned to having fish, algae, and swans, while several metropolises have been invaded by wild animals, including coyotes in San Francisco, cougars in Santiago and even mountain lions in the capital of Colorado.
Nature is extremely adaptable, flexible and always finds a way to regenerate itself, to blossom once under different circumstances.
The same goes for companies that continuously learn, build healthy relationships with their audiences and pursue a greater purpose: they will be able to adapt to new circumstances, reinvent themselves and thrive again.
These will be the companies of excellence in this 21st century of successive shocks and constant changes.
Prof. Dr. Alexandre Di Miceli is a professional speaker, business thinker and founder of Virtuous Company, a top management consultancy that provides cutting edge knowledge on corporate governance, ethical culture, leadership, diversity, and company purpose.
He is the author of “The Virtuous Barrel: How to Transform Corporate Scandals into Good Businesses” as well as of the best-selling books on corporate governance and business ethics in Brazil, including “Corporate Governance in Brazil and in the World”, “Behavioral Business Ethics: Solutions for Management in the 21st Century”, and “Corporate Governance: The Essentials for Leaders”.
I thank Prof. Dr. Angela Donaggio for her valuable comments and suggestions.