The intersection of COVID-19, calls for racial justice, and economic volatility have many asking whether the level of change and uncertainty in today’s environment is temporary or a signal of permanent change to our way of life and the way we do business.
During the KPMG Board Leadership Center (BLC) September 10 webcast, participants were surveyed about the extent to which their companies were reconsidering strategy. To Edie Weiner, CEO and founder of the futurist consulting firm The Future Hunters, the answer is simple: “Change was already happening in almost every discipline and industry, from sports to education to medicine to physics. Adapting, even more rapidly, is not sustainable in a time of fundamental change. This is a time for reimagining, and the board needs access to thinking and management strategy for a new world. We have to think seriously about starting over.”
Weiner and BLC Senior Advisor Susan Angele discussed the forces reshaping the business landscape and how boards and executives should be reimagining the future and rethinking strategy in light of these forces.
Takeaways from this webcast conversation include:
To inform directors’ oversight of strategy, Weiner identified 10 trends she sees shaping business and society at large:
In light of these trends, Weiner offered insight on how directors may want to reconsider the following aspects of their corporation’s strategy:
Setting strategic planning horizons
As management rethinks the company’s strategic direction, the board should ask them to prepare short-term, medium-term, and long-term strategic plans. Weiner suggested using three unique planning horizons with a different team working on each: 1–2 years out, 5–7 years out, and 15–25 years out.
“Oftentimes the people working on strategic planning work on all the planning horizons. That’s a big mistake,” said Weiner. “Those working on the 1–2 year horizon should be financially and administratively focused, analyzing the current market and conducting a competitive analysis. For the 5–7 year horizon, the team should be composed of forward-thinkers who can look at emerging technologies, competitive forces, regulatory shifts, social pressures, and geopolitical and economic trends. The 15–25 year horizon needs visionaries that can foresee mega changes and create a future for the organization that will change significantly while still keeping the vision alive.”
“The hallmark of reimagining is not about what the competition is doing,” said Weiner. “It’s about what you are doing to make your company more effective and efficient going forward.”
Weiner suggested a multi-faceted approach to evaluating new initiatives as public capitalism gains traction. Each of the following questions should be evaluated on a scale of 1 to 10, with management providing a justification behind the score for each question. “No new initiative will score a 10, or even close to it,” said Weiner, “but the goal of public capitalism will be to strive to drive up the scores all around.”
A KPMG BLC survey on the impact of COVID-19 indicates that one-third of directors would like to improve their board’s willingness and ability to challenge management on fundamental assumptions around risk and strategy in light of COVID-19.1 Weiner proposed inverting the board’s view of enterprise risk management and scenario planning: “Significant risk outcomes may have many causes, and the company should prepare to deal with these outcomes regardless of the cause.”
Weiner suggested that the board should consider a list of approximately 20 outcomes each year, ask how the list should be updated from the previous year, how the risks can or will be mitigated, and how the company will respond should the risks occur.
For example, how would the company handle the following outcomes?
“In order to effectively mitigate risk, the company must identify the outcomes that are of highest concern,” said Weiner.
Attracting and retaining diverse talent
Of the directors and C-level executives surveyed during the webcast, 41 percent of the 370 respondents ranked finding and growing diverse talent as the greatest challenge to building a future-ready workforce. Findings by global communications firm Edelman also indicate that most Americans consider an inclusive work culture with a strong diversity program as critically important to attracting and retaining someone like them as an employee.2
Weiner cautioned that diversity and inclusion initiatives will backfire if implemented for the wrong reasons, for example, if done purely for public relations. “If diverse employees aren’t hired and retained for their points of view, but instead for their appearance, they will burn out,” said Weiner. When diverse employees are valued for their thinking, and are supported by the business case for diversity, more and more diverse and talented people will be attracted to the organization.
Defining corporate culture
In a recent KPMG poll of more than 300 business executives, culture was identified by more than half of respondents as one of the most important factors impacting their organization’s ability to successfully reemerge or restart post-COVID-19.3 For boards to truly understand and shape the organization’s culture, Weiner recommended looking at the “carrots and sticks,” or what behaviors the organization rewards and punishes.
“Culture is a term that’s thrown around loosely,” she said. “It’s not what is said and written, it’s what is really being rewarded and really being punished.” All executives, managers, and independent workers—in addition to the board—are responsible for “walking the talk” and should be rewarded or penalized through compensation metrics that are transparent to employees and the company’s broader group of stakeholders.
In light of COVID-19 and related events, to what extent has your company reconsidered its strategy, including its approach to the market, employees, and society?
A significant or permanent shift in strategy
No significant or acceleration in strategy after consideration
Acceleration of a direction the company was already considering
The company has not reconsidered its strategy
As a director, what do you view as most critical in how your company builds trust with stakeholders?
Executive leadership on accountability and culture
An inclusive and compassionate workplace
Transparency and clearly defined metrics
A well-considered and communicated corporate purpose
As a director, what do you see as the greatest challenge in building a future-ready workforce?
Finding and growing diverse talent
Uncertainty regarding the shape of technological innovation
The effective use of artificial intelligence and automation
Managing generational differences
To what extent does the company consider the impact of the business on climate/climate change in its discussion of strategy?
It has not been discussed
* Of 370 corporate directors, C-level executives, and governance professionals surveyed during the September 10, 2020, KPMG BLC webcast. Does not total 100 percent due to rounding.