It may sound obvious, but facing our collective mortality for the last two years changed us. Of course, many of us had confronted big challenges in our pre-pandemic lives, but this shared experience was uniquely difficult. One area of our lives that was dramatically altered was our collective perspective related to work.

Working under the weight of chronic stress, financial insecurity, and collective grief forced people to work harder and longer to get to the same goals. We became exhausted, self-efficacy decreased, and cynicism grew. It’s no wonder that people eventually hit the wall. But it was still shocking when nearly half of the global workforce said, almost simultaneously, “I quit!”

Why People Leave

The Microsoft 2022 Work Trend Index, a study of more than 31,000 people in 31 countries, discusses this extraordinary workforce disruption. The report found that 43% of the workforce is considering leaving their jobs in the coming year. One of the biggest reasons why people are leaving? It’s not pay, the study claims. It’s unsustainable workloads.

The most compelling data was the increase in time spent “collaborating.” For example, between February 2020 and February 2022:

During the pandemic, and especially during times of quarantine, our priority structures were ruthlessly simplified. Some days, our only focus was to stay alive and keep our loved ones safe. This rise in uncertainty caused an increase in mental illness. Last year, 4 in 10 adults in the U.S. reported symptoms of anxiety or depressive disorder, up from 1 in 10 adults who reported these symptoms from January to June 2019.

Many organizations kept marching ahead. Stretch goals remained, despite employees being unable to meet the demand. According to a recent study by Ernst & Young (EY), 54% of workers left a previous job because their boss wasn’t empathetic to their struggles at work, and 49% said employers were unsympathetic to their personal lives. This “business as usual” mentality caused a ripple effect that some experts believe may have contributed to the Great Resignation.

A Pew Research study found similar trends. Fifty-seven-percent of workers who quit a job in 2021 said feeling disrespected at work was the reason they left, and 45% said lack of flexibility to choose when they put in their hours were reasons why they quit. Nearly half said child care issues were a reason they left a job (48% among those with a child younger than 18 in the household).

Today, employees are renegotiating their social contracts with work. What was once mostly transactional has changed. We’ve gone from demanding that work stay out of our personal lives to quitting if it won’t.

What Employees Want

Too many employees were pushed past their breaking points during the pandemic. Anja Bojić, communication author and researcher at software company COING, shared with me that she left her previous job because “settling for less than the bare minimum just to get paid is anyone’s death sentence, especially when there’s an ocean of opportunities to choose from.”

As more people hit their breaking points, what can leaders do? They can start by listening to what employees really want.

“I expect the psychological safety to have open discussions about mental health,” says Kate Toth, Director of Learning and Development at YMCA Workwell. “I expect empathy and support in recognizing that I am a whole person, and need authentic care as a human being. A manageable workload would be where I would start.”

Nathan Vatcher, employed at Queen’s University, echoes empathy as his number one need, with a four-day workweek being a close second.

David Ehrenthal, certified leadership coach, says that demonstrating change through action and behaviors, not just words, will be fundamental.

Data backs up these perspectives. Gallup recently asked 13,085 U.S. employees what was most important to them when deciding whether to accept a new job offered by a new employer. Sixty-one-percent cited greater work-life balance and better personal well-being, and 58% cited the ability to do what they do best. And with the shifting power dynamic that has resulted from this giant global resignation, employees can demand more.

In a recent HBR article, Don’t Force People to Come Back to the Office Full Time, authors Barrero, Bloom, and Davis found that 40% of U.S. employees would start looking for another job or quit immediately if ordered to return to the office full time. A 2021 McKinsey report of 5,770 employees surveyed also found that 40% of respondents who quit their jobs in the last six months left without having a new job.

This data indicates that what may look like a reshuffling is actually something much bigger. And, perhaps more concerning for businesses, it’s a bottom-line issue that must be addressed.

Fortunately, bright spots are emerging. Firms are signaling that they are (finally) ready to respond in kind.

Here are some areas where positive change is happening.

Mental Health Support

In a recent Oracle AI@Work study, 88% said the meaning of success has changed for them, and that they’re now prioritizing things like work-life balance, mental health, and flexibility.

A 2021 Mercer study of more than 10,000 subjects found that “employees are reporting a high degree of stress, anxiety, burnout, and fear — and employers are listening.” In 2021, 76% of survey respondents with 500 or more employees said that addressing employees’ mental and emotional health would be a top priority over the next three to five years.

In an interview I conducted with Yvette Cameron, SVP of global product strategy, Oracle Cloud HCM, she noted that leaders are aware that workers want more from their employers. “People have had to shoulder immense amounts of stress, juggling work and personal life priorities, struggling to keep burnout at bay, with many not receiving much support,” she explained. “From the business side of things, employers need to recognize that the power has shifted into the hands of workers. Organizations need to work harder to make themselves the kind of place where employees want to work, by building and maintaining a strong culture that nurtures employees instead of burning them out.”

Cameron also suggested that businesses need to infuse support and guidance into every interaction to remove friction. To ensure that this happens, she recommends:

Hybrid and Return to Office

Being a great place to work no longer means that place has to be in an office. More firms continue to make hybrid work arrangements part of their long-term strategy.

Global tech firms like Hewlett Packard Enterprise (HPE) are reimagining what the future of the office should look like. And it makes sense why they would. To address this very real issue of attraction, retention, and attrition, HPE conducted an internal survey and found that almost two thirds of its workforce wanted to spend only 20% or less time working at a shared physical site.

“We know that when team members feel that they have balance, they are more productive and more likely to build a career at HPE,” said Alan May, HPE’s Chief People Officer. “The pandemic caused people to re-evaluate what was important to them.”

The data helped senior executives to decide that their entire 60,000-person company will be hybrid going forward. For HPE, that means people can choose when and if they want to come into the office. The environment at the office will also feel different, with more spaces focused on collaborating and socializing. There will be fewer large conference-style gatherings and more smaller hubs and individual desk areas. Additionally, HPE will offer perks like take-away dinner meals and essential groceries, to allow people to cook and eat at home with their families rather than at their desks.

Mental health awareness, a focus on increasing fairness, hybrid offerings and flexible hours, more active listening, real-time feedback, and personalizing communication are all initiatives that are working to solve issues around burnout in a more upstream manner than we’ve seen before. However, the concept of hybrid work has yet to be fine-tuned. When companies allow employees to come into the office when they want to, it often means that people inside the office are still forced to sit on Zoom while meeting with their coworkers at home. To make hybrid more effective, and to improve relationships at work, I suggest that we find time for colleagues to connect in person when possible. With loneliness and a lack of connection being one of the more negative aspects of the pandemic, it will be important to find the right mix of in-person and remote work.

Paid Leave 

Another major trend we’re seeing in the reimagined workforce is in paid leave policies — a critical area of need for employees during a pandemic and in any future crisis.

The 2020 KFF Employer Health Benefits Survey found that nearly four in 10 workers are employed at a firm that just started offering, or expanded, paid leave benefits since the pandemic began. Some global firms have set themselves apart by increasing their paid leave policies.

For example, Google has expanded parental leave from 18 to 24 weeks. The company will also double its allowance of paid time off to eight weeks for caregivers who are supporting seriously ill loved ones, and is increasing paid vacation days from 15 to 20.

A&T initially rolled out a policy that offered 10 days of 100% paid sick leave, but as the pandemic developed, the company doubled the policy to 20 days. Verizon’s new Covid-19-specific leave of absence policy offers 100% paid time off for 40 days, and those who are medically diagnosed with Covid-19 can qualify for 100% paid sick leave for up to 26 weeks.

This is a necessary step forward, say several physicians that I spoke with during the pandemic. When employees don’t have proper sick leave, they bring illness to work, and it spreads like wildfire, creating overwhelm in the healthcare system.

Notably, Google’s new paid leave provisions also included more robust bereavement leave for those employees who’ve dealt with stillbirth and miscarriages. This is on top of their standard bereavement leave for loss of a loved one. They also have an initiative called Ramp Back Time, which allows employees to work a minimum of 50% of their normal weekly working hours, while still being paid 100% of their normal weekly salary, during the first two weeks back after maternity leave.

Improving Fairness

The Gartner 2021 ReimagineHR Employee Survey analyzed responses from 3,500 employees and found that they are demanding more fairness. “Creating a fairer employee experience will be the most important initiative for HR executives in 2022,” said Brian Kropp, chief of research in the Gartner HR practice. “To do this, organizations need to go beyond policies and develop philosophies.”

To address the disproportionate impact of lack of fairness for women, the Canadian government has stepped up with a new policy to increase female labor force participation. Understanding that women, and even more disproportionately women of color, are most commonly impacted by lack of childcare, the federal and provincial governments are subsidizing the costs. As of April 1, 2022, parents will only pay $10 per day per child for care.

James Nicholas Kinney, Global Chief Diversity Officer at Media.Monks, a global marketing and technology services company, says the firm is adopting inclusive language across all policies to ensure access. “Language matters. We’re a work in progress, which means constantly evolving the language we use to reflect our team of diverse individuals,” says Kinney.

The company rethought their language to be inclusive of same-sex couples and non-binary employees, as well as employees having a child by adoption, surrogacy, or foster placement. Kinney emphasizes that, “In the past, many of these employees didn’t see themselves represented in these policies.” Now the company offers 16 weeks of parental leave for all employees to access.

Advancing policies that support equitable paid leave also reduces the downstream effect of women taking the bulk of unpaid labor hours. This lack of fairness issue had devastating impacts on the female labor force during the pandemic. From February 2020 to January 2022, male workers regained all jobs they had lost due to the public health crisis. And yet, more than 12.2 million jobs, held by women were lost between February and April 2020, reversing an entire decade of job gains since the end of the Great Recession.

Although we are making important steps towards creating a fairer future, leaders need to be relentless in their pursuit of equity. The reimagined workplace must be inclusive.

Looking Forward

The World Bank estimates that more than 120 countries have introduced or expanded worker protection policies in response to the pandemic. However, most of these policies prioritize physical safety guidelines over psychosocial safety guidelines. The good news is that there are some countries like Australia and Canada that are leading the way to change. For example, the Canadian province of Ontario enacted the Working for Workers Act — legislation to help workers disconnect from their employment responsibilities after work hours. The right-to-disconnect provision takes effect June 2, 2022. The law defines disconnecting from work as “not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages.”

These are the kinds of standards, policies and laws that I predict will become more common in the future of work. Although I believe it to be better when leaders protect the well-being of their people without fear of legislation, there is value in laws that safeguard employee safety. It also helps workplaces justify the expense of a more robust mental health strategy. It would also give leaders a clear understanding that these policies are not just “nice to haves,” but a necessity.

It may seem daunting, but I see this new era of work bearing enormous potential for positive change.

For better or for worse, the pandemic forced us to sink or swim. Somehow, we swam. We learned new skills, increased our emotional flexibility, and learned optimism and the capacity to rebound. If we take all that into context, it sounds like we’re learning to build a future rich with possibility.

This content was originally published here.

The post The Pandemic Changed Us. Now Companies Have to Change Too. appeared first on Matt Dallisson Global Executive Search | Leadership Consulting.

Despite the upheaval caused by the COVID-19 pandemic—and partly because of it—innovation and digitization have been happening at a record-breaking pace. A McKinsey survey of top executives around the world found that companies accelerated their digitization of customer, supply chain, and internal operations by an average of three years.

Indeed, over the past two years, countries around the world have set records for new business formation, new patents issued, venture capital invested, and more. The US Census Bureau’s seasonally adjusted business formation statistics data show that through 2021, a record 5.38 million applications had been filed to form new businesses—an increase of more than 50 percent over prepandemic 2019. ¹ 1. “Business Formation Statistics, April 2022,” US Census Bureau, May 11, 2022. The brisk pace meant there were roughly 409,000 more US filings in 2021 than at the same point in prepandemic 2019. The World Intellectual Property Indicators also showed that aggregate global filing activity across 150 authorities grew in 2020, even amid the global health crisis. ² 2. World Intellectual Property Indicators 2021, WIPO, 2021. Venture capital flows have also boomed: in 2021, global venture capital more than doubled from 2020, rising 111 percent. ³ 3. Jordan Major, “Global VC funding hit a record $621 billion in 2021, a 111% increase YoY,” Finbold.com (Finance in Bold), January 13, 2022. 

This article is a collaborative effort by Federico Berruti, Gisele Ho, Phil Kirschner, Alex Morris, Sophie Norman, and Erik Roth, representing views from McKinsey’s Operations, Digital, Growth & Innovation, and Real Estate practices.

What’s striking about these dramatic advances is that they largely entailed people collaborating remotely, leveraging technology in different ways, and being bolder with innovation, automation, and digitization than ever before. For decades, physical proximity has been considered essential to successful innovation. In an influential 1977 book, management professor Thomas Allen described a strong negative correlation between physical distance and frequency of communication, finding that people are four times as likely to regularly talk with someone six feet away from them as with someone 60 feet away, and people almost never communicate with colleagues on separate floors or in separate buildings. ⁴ 4. Thomas J. Allen, Managing the Flow of Technology, Cambridge, MA: MIT Press, 1977. 

This proximity mantra guided everything from office layouts to urban planning. Cities such as Boston (with many counterparts around the world) have tried to fuel innovation by establishing districts where academia, research organizations, start-ups, and investors work side by side in purpose-designed “innovation ecosystems.” ⁵ 5. Carmelina Bevilacqua et al., Place-based innovation ecosystems: Boston-Cambridge innovation districts (USA), Joint Research Centre, 2019. Locating problem solvers together to encourage creative collisions of ideas, experimentation, and informal collaboration is also core to one of McKinsey’s original eight essentials of innovation.

It’s likely that flexible work and workplaces are here to stay, especially for organizations seeking to maintain or accelerate this elevated pace of innovation. More than half of corporate and government employees say they would like to work from home at least three days per week, and the number is even higher for innovation talent, such as programmers. ⁷ 7. “For programmers, remote working is becoming the norm,” Economist, August 11, 2021. Location flexibility has become a de facto expectation for the latter group. Rather than seeing this as an obstacle, organizations seeking to innovate are doubling down on the benefits that new approaches to innovation present.

Diversity and inclusion

Innovators recognize that increased diversity and greater inclusion, both within teams and at the leadership level, produce more and better innovation results. A recent McKinsey study found that more ethnically and racially diverse companies outperform their less-diverse peers by 36 percent when it comes to financial targets. As a result, innovators are tapping virtual work to attract more specialized and diverse talent and are building more inclusive workforces. One recently launched start-up that rapidly achieved unicorn status shifted to a virtual-first model, recognizing that the specific innovation talent its business required wasn’t available in any single major city.

Innovators have also recognized that virtual teams, especially when managed effectively, can avoid unnecessary distractions, experience more effective and uninterrupted workflow, and achieve productivity gains. In a 2021 study, 83 percent of employees working remotely agreed that their homes enabled them to work productively—a higher proportion than the average office (64 percent) and even outstanding workplaces (78 percent). ⁸ 8. “Workplace 2021: Appraising future-readiness,” Leesman, 2021. One innovative technology company recently started “time zone stacking,” the practice of strategically structuring virtual teams to positively leverage time differences and further accelerate innovation efforts.

Perhaps paradoxically, an adjustment made because of the COVID-19 pandemic has enabled many organizations to get physically closer to their customers, as hiring is no longer tethered to geographic location. One global payment platform, for example, launched a remote engineering hub during the pandemic, hiring engineers from a range of locations and cultures. One year into the initiative, the company reports feeling “closer to customers—because we literally are.” Similarly, a government agency now describes being more citizen-centric thanks to hiring employees who live and work across the country, not just in the capital city.

Proximity to the customer, instead of to a physical office, can help organizations’ innovation talent avoid the corporate echo chamber and identify and test new ideas faster. Getting closer to target communities is also easier than ever thanks to the proliferation of coworking sites and other “third places” to work and connect.

Proximity to the customer, instead of to a physical office, can help organizations’ innovation talent avoid the corporate echo chamber and identify and test new ideas faster.

The pandemic has made clear that lack of physical proximity need not hold back innovation—in fact, it can fuel it—but this is not a new phenomenon. Although it may come as a surprise to some, boldly innovating through remote collaboration has been a fixture in the scientific community for decades. In the 1980s, researchers adopted a way of working called the “collaboratory,” a virtual space where scientists interact with colleagues, share data and instruments, and collaborate without regard to physical location. Breakthroughs achieved through virtual collaboration include the Human Genome Project and the ATLAS project at CERN, which involved 1,800 particle physicists across 34 countries.

More recently, innovators outside the science sphere have embraced the approach. Cryptocurrencies and metaverse platforms were largely developed through decentralized collaboration involving people around the globe. Pandemic-related changes simply expanded on the model rapidly, notably in the record-breaking development of the COVID-19 vaccines and a slew of new company and product launches over the past 24 months.

If the age of assuming that innovation requires physical proximity is behind us, with innovative companies’ full embrace of virtual teams and the role of technology, what comes next? One executive who leads a 50-person innovation group as part of a 15,000-employee organization said, “The pandemic made us realize that we never needed a swanky and costly innovation studio to do our work. What we want is community.” His plans are to make virtual work permanent, with monthly or quarterly in-person gatherings to strengthen trust, friendship, and connection.

How many more innovators will adopt this approach? Will bringing together the best of remote practices and the best of in-person experiences accelerate innovation even further? Let’s start experimenting to find out.

This content was originally published here.

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As major companies like Google and Apple have begun mandating a return of all employees to the office for a certain number of days per week, the debate about flexibility and autonomy continues to develop. More organizations are taking a firm stance on where they feel their employees should work, once again casting the spotlight on the question of how much say employees should have in determining their own work arrangement — whether they should be able to decide where and when they work, or whether their organization should make that decision for them.

Even since before the post-pandemic return-to-office discussion, there had been many diverging opinions about the best approach for leaders to take. This has resulted in headlines ranging from  “Let Employees Choose Where, When, and How to Work” to “Don’t Let Employees Pick Their WFH Days.” In this wide-ranging debate, advocates for leadership control over employee work arrangements are often seen as insensitive to the needs of employees. Similarly, advocates for full employee control over their work arrangements are perceived as blind to the needs of the organization. However, in many cases, both of these arguments miss the mark. If executed correctly, allowing employees to choose where and when they work can both boost the employee experience and give leaders the structure and predictability they need to make key strategic decisions for the organization.

Here, we present a roadmap showcasing how leaders can use office spaces and technology to empower employees to create structure in their work arrangements, even when they have full autonomy to choose where and when they work.

Employees want to choose where and when they work

The new Jabra Hybrid Ways of Working 2022 Global Report shows that employees with full autonomy to choose where and when they work unanimously report a better work experience than those with limited or low autonomy. Below, you can see how we’ve defined these various groups:

In the study, we define work experience as an aggregate of eight different metrics: sense of belonging, motivation, productivity, trust in team, trust in leaders, impact, work-life balance, and mental well-being. When asked how their work arrangements impact various aspects of their work experience, high-autonomy employees report the highest levels of belonging, motivation, productivity, trust in team, trust in leaders, work-life balance, and mental well-being. In some cases, these scores are more than 20% higher than their low autonomy counterparts. Interestingly, the sense of impact that employees felt they had in their organization barely varied across any of these groups. In the future, leaders and managers will need to find alternative ways to boost employee sense of impact, such as through increased reward and recognition.

In today’s battle for talent, employee experience has become a key focus for many leaders. Empowering employees to choose where and when they work can be one of the biggest drivers of a better experience at work.

Flexible location choice will continue to grow as a priority 

The shifts of the past two years have given employees good reason to reprioritize their lives to focus more on their health and well-being. So much so, in fact, that our research last year found that the majority of employees had come to value flexibility more than salary and other benefits. This flexibility has given them the opportunity to find newer, better ways of doing their jobs from anywhere and on their own terms.

Employees believe that these new, better ways of working are here to stay. In fact, our latest data shows that 64% of Gen Z and 63% of Millennials consider their office to be their laptop, headset, and wherever they can get a strong internet connection, compared to only 48% of Gen X and 43% of Baby Boomers. It’s clear that the future of work — a future made up primarily of these younger generations — will prioritize having the freedom to work from anywhere.

Leaders are concerned about letting employees choose location 

Despite the major motivation, productivity, trust, and well-being benefits of increasing employee autonomy, many business leaders may find relinquishing all location decision-making power to employees to be a disconcerting thought; after all, it’s leaders who need to make important decisions about what to do with the organization’s physical infrastructure. CBRE, a global leader in commercial real estate, released a report in 2021 indicating that “corporate real estate professionals are being tasked with developing more agile strategies in the face of portfolios that are bound by contractual obligations, depreciation schedules, and cultural norms.”

This same sentiment is leaving many business leaders asking themselves important questions about the future of their organizations in a hybrid working world. Should we sell off some of our real estate? What do we do with our desk arrangements or meeting rooms? How do I service our technology needs if I cannot predict how many employees will be working in the office? If leaders are to make informed decisions on these crucial questions impacting workplace investments and overhead costs, they need to have a predictable and stable overview of how their employees plan to work. They need to understand how buildings, spaces, and technology will be used.

Employees seek habits, structure, and predictability 

We’re creatures of habit. In much of what we do, we strive for balance and structure, not least between work and life. It’s this predictability that offers us more certainty and allows us to get the most out of our lives. And just because employees can choose where and when they work doesn’t mean that they’ll override these inherent human tendencies. They’ll still try to create structures and habits in the day-to-day that allow them to optimize their time.

Take one example from the workplace. In our research, 69% of high-autonomy employees said that if they didn’t have a permanent, regular desk or office at work, they’d still try to sit and work in the same spot every day anyway. This number is the same for low-autonomy employees and only 2% lower for those with limited freedom to choose where they work. Predictability triumphs regardless of the amount of autonomy you’re able to exercise at work. Similarly, knowing what your workday will look like can be a great motivator for coming into the office, and employees will be more likely to do so if they know what to expect.

We found that as the amount of time a given employee spends in meetings goes up, so too does their preference for their home workspace over their in-office workspace. With 80% of all meetings now fully virtual or hybrid, in-office meeting spaces aren’t being utilized to the extent that they were prior to the pandemic. And with the work-from-home shift of the pandemic, 42% of employees have reconfigured their home workspaces for a virtual working world (a number that rises to 68% for those spending more than half their time in meetings). As such, many are better equipped for today’s virtual workstyles at home. The reliability and predictability of their home collaboration experience offers more certainty about the trajectory of their day than the prospect of coming into an office that isn’t optimized for a virtual style of work.

Here, leaders are in a bit of a Catch-22. On the one hand, many are hesitant to reconfigure offices without mandating that employees use them. On the other hand, they can’t expect employees to want to go back into the office when their home setup is better for virtual work and collaboration. If office spaces are brought up to speed with the capabilities of many employees’ remote locations, the predictability of their office use habits will be easier to map out.

Three steps to leading a high-autonomy hybrid organization

With the right strategy, leaders can leverage the trust and well-being benefits of increasing employee location choice — both of which contribute positively to productivity — while still being able to make business-critical decisions about what to do with the organization’s physical infrastructure.

Step #1: Create spaces that actually meet the demands of a virtual-first working world.

Our data shows that employees recognize the value of having access to multiple places to work, both in terms of maximizing productivity and feeling a sense of belonging in the organization. The top two reasons for wanting to come into the office are focus and collaboration — two tasks that are often seen as diametrically opposed to one another. But the current state of offices leaves employees with a subpar environment to effectively complete these types of tasks.

For example, a recent Bloomberg piece reported that “one of [one employee’s] main annoyances is the echo when she’s seated next to a colleague on the same call as her.” “Sometimes,” writes the author, “she can’t even understand what’s happening in the meeting because of it.” Because workspaces aren’t purposefully thought out, employees are forced to blend the physical and virtual worlds in a way that reduces the value of both.

For both individual focus and group collaboration tasks, employees must be able to access spaces that reduce these types of disturbances and maximize the utility of virtual tools. One way to do this is by considering the acoustic and visual privacy offered by any given space. Our data shows that employees prefer spaces with acoustic privacy (61%) over visual privacy (39%). In other words, they’d rather work in spaces where they can’t hear or be heard by those outside of the space than spaces where they can’t see or be seen by those outside. And this makes sense, as acoustic privacy lends itself well to increased concentration as well as to virtual collaboration environments where audio quality oftentimes poses quite an issue for many.

The death of in-office collaboration is being driven in part by a superior remote experience with technology that is better suited to the environment in which it’s being used. Creating office spaces that allow employees to access virtual environments more easily will make their lives easier, consequently allowing them to create predictable work habits and space usage patterns.

Step #2: Supplement the diminished sense of belonging in the office space with an increased sense of belonging in the virtual space.

For a long time, many employees had a personal desk or office at their place of work. And oftentimes, these spaces were points of great pride for employees, spaces where they would keep their favorite coffee cup and proudly display photos of their children. With the rise of hot-desking — a necessary decision for many companies transitioning to a hybrid model — we know that personalized spaces are rapidly disappearing in many offices. Similarly, employees are resistant to the idea of not having a place they can call their own: four in 10 say they would feel less loyalty and commitment to their company if they didn’t have a regular, permanent workspace in the office. And why wouldn’t they feel that way? For many employees, that sense of belonging and ownership they had over a personal space was taken away and they were given nothing with which to replace it.

With our presence in the organization being primarily perceived virtually, that very same sense of belonging that employees once felt in the office space must be replaced with a sense of belonging in the virtual space. This is especially true for organizations proceeding with hot-desking arrangements. The personal artefact that was taken away from them — the desk or office — must be replaced with their own personal technology that offers them a sense of ownership and belonging in the new virtual world of work.

This then raises the question of which technologies best enable that increased sense of belonging and inclusion. Our data found that users of professional audio devices reported feeling more included in virtual meetings than those using either consumer audio devices or the microphones and speakers built into their laptops. In fact, users of professional headsets were 11% less likely to feel left out of the conversation in virtual meetings than consumer device or built-in audio users. Similarly, professional headset users were 14% less likely to report not being able to hear what’s being said in the meeting than built-in users and 12% less likely than consumer device users. If employees are to feel a sense of belonging in these professional virtual environments, they need the professional tools and technologies built exactly with those environments in mind.

Step #3: Let employees find the balance that matches their life’s new rhythm.

Now that the architectural and technological backdrop is all in place, leaders can focus on building a flourishing high-autonomy work culture. With this setup, employees have all the elements they need to build work habits that work for them. Over time, a picture of the organization’s average workplace occupancy rates will begin to emerge. Consequently, leaders can then use this information to identify that balance and make well-informed, strategic decisions about the company’s future real estate and technology needs.

When leaders give employees the freedom to choose where and when they work, it signals that they trust them to do the job they were hired to do. The data shows that that trust is then paid back to leaders and teams at a very high rate, building a tight-knit culture of inclusivity and belonging. With the right spaces and technology in place, employers enable employees to create structure in the way they work, thereby improving the employee experience. And by following these steps, a high-autonomy approach to work will create happier, healthier, and higher-performing employees who will be able to find a balance that benefits both themselves and the wider organization.

This content was originally published here.

The post Balancing Autonomy and Structure for Remote Employees appeared first on Matt Dallisson Global Executive Search | Leadership Consulting.

As we reach the two-year mark of the pandemic, now is the right time for many leaders to rethink how and where their employees work and collaborate. Should businesses call employees back into the office or leave them working remotely? Is it time to try out a new way of working all together? Lost in the ongoing debate, particularly in the popular media, is a simple insight: There is no one right answer because managers need to tailor their working environment to the business needs of their organization. This decision can be tough: recent surveys find that what employees think works best for them may limit the potential of the business as a whole.

To help in this process, we propose a framework to guide managers on identifying the optimal work configuration for maximizing the effectiveness of their knowledge-driven organization. These insights draw upon over a dozen large-sample empirical projects and case studies we’ve conducted both before and during the pandemic, across different industries. Our research suggests that managers need to account for two key organizational features to identify their most effective working model: size and growth orientation. Depending on where an organization falls on those two dimensions, we recommend that managers implement one of four stylized working configurations: a stand-alone office or campus, hybrid with flexible space, coworking environment, or fully remote. Each has benefits when it comes to two difficult trade-offs: collaborative creativity versus individual productivity, and the agility to change and expand versus coordination.

Unfortunately, we see too many managers today wavering on making a decision and falling into half-hearted working configurations. There is no cutting the baby in half here: choosing a working orientation requires making these trade-offs. But decisively implementing one of the four working configurations optimizes on what the organization needs at the expense of what it can thrive without.

Mapping Your Needs to Your Office

Based on our research, we have identified two questions about where your organization is going and where it is today to help you determine which of the four models is right for you. First, what is your strategy for future growth? Second, what is the size of the organization you need right now?

What is your strategy for future growth?

First, you need to decide whether creative innovation or efficient execution is more central to your strategic goals. If fostering creativity is paramount to your business, your workplace needs to bring knowledge together by bringing people together, ideally in person. If execution is your primary objective, your business must make sure that individual contributors are as efficient as possible in their own work; being around others may actually distract from the job that needs to be done and impede efficiency.

What is the size of your organization?

Second, it’s important to recognize that small businesses and large enterprises need to rethink office design differently. On the one hand, large enterprises have access to a rich base of expertise and talent right at home, but the challenges can arise from coordinating that activity at scale. On the other hand, a small business can be nimble and agile, but there is a much smaller pool of knowledge to draw on. With the right workplace that plays on your strengths and addresses your weaknesses, however, a smaller business can position itself to grow into a large enterprise and a large enterprise can stay agile like a smaller startup.

To identify which your business falls into, the U.S. Small Business Administration provides a useful classification for identifying whether your organization is large or small; depending on the industry of your business, the range of what is considered a small organization is wide, but for many services or technology businesses, 100 employees is a good rule of thumb to start with. For really knowledge-intensive work — like development of new technology — our research suggests the cutoff can be much lower: even 10 employees or less in some high-tech sectors.

Identifying the Optimal Workplace for Your Organization

After assessing your organization along these two dimensions, your company can be categorized into one of four stylized working configurations: stand-alone office, hybrid with flexible space, coworking environment, or fully remote. We outline the benefits each below, and offer examples of organizations that have implemented each configuration well.

Stand-alone office or campus: For creativity-oriented large enterprises.

Your top resource is your people: your employees are the fountain of knowledge that drive the creativity you need. Thus, your workplace needs to facilitate what scholars refer to as knowledge recombination among your staff; this is the process by which innovation arises when existing knowledge is combined in novel ways. Our research shows that knowledge recombination works best when you bring people physically together. Why? Because knowledge transfer — especially the type that is not written down or easily codified — is easiest face-to-face and aided by other non-verbal cues. Immediate feedback and updating are crucial for well-functioning discussions and brainstorming.

This means that a Zoom meeting isn’t enough, since not all the knowledge translates well through a webcam and virtual meetings don’t often serendipitously take place in the moment. You need to bring people together both so they can brainstorm in a conference room at the whiteboard, and also to create situations where people can run into each other in the hallway on the walk to the bathroom, elevator, kitchen (or at the proverbial water cooler). Larger organizations have more opportunities to benefit from these happenstance opportunities: a five-person company can have 10 possible interactions at the water cooler, but a 10-person company has as many as 45. You can exploit that size for exponential creative opportunities.

At the same time, a large enterprise faces a coordination challenge. Across functions and products, your people need to communicate regularly and easily to make sure they advance in the right direction as we show in our research in partnership with Google. Thus, you need to bring people together not only to drive innovation, but to engage in active coordination between employees where they can iterate towards common goals going forward, or resolve bottlenecks towards existing goals, like if one team is holding up another.

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Large enterprises can deliver on both knowledge recombination and active coordination by choosing to centrally gather employees in-person in a stand-alone office or campus. Consider Apple: there are plenty of reasons that Apple is Apple, but the company is clearly thoughtful about how they assemble their people. Just a few months before his death, Steve Jobs went to the Cupertino City Council and laid out his vision for a futuristic circular house of glass that would foster creativity and collaboration. Jobs believed that serendipitous moments that lead to innovation are lost when a building’s design doesn’t encourage collaboration

To shape these social interactions, mangers need to pay attention to the architecture of their office: creating spaces for groups to congregate in or for individuals to incidentally see one another as they pass through increases coordination and knowledge recombination. Inaugurated in 2017, Apple Park now offers ample opportunities for employees to run into each other: at the 100,000-square-foot gym, parks, one of seven cafes, or on route to the bathroom. Hosting many Apple employees in one facility enables relationship building across teams, idea sharing with co-workers of different specialties, and opportunities to collaborate. The division of the building into modular sections, known as pods, facilitates teamwork and social activities. Everyone placed into these pods — from the CEO to summer interns — builds connections and can discover mentorship opportunities.

Hybrid with flexible space: For the execution-oriented large enterprise.

Your top resource is still your people, but they need a different kind of “space” to execute efficiently. You need to give them the flexibility to be where they are most productive. As Leslie Perlow, a renowned Organization Behavior scholar at Harvard Business School points out in her research on “time famine,” constant interruptions at work can have dire consequences for productivity, creating a feeling (and a reality) of having too much to do and not enough time to do it. This is why it’s necessary to structure independent work time for your employees to execute. The best place to do this is not always the office; it may be in the place each employee determines is the best environment for themselves, which could be at home, a coffee shop, or even on a tropical island. So, giving employees the space to be remote at least some of the time may be beneficial. As a couple of extra pluses, you can save on real estate costs and your employees can save on commuting time, which research shows can enhance their productivity.

But we also believe full remote work has serious problems. For one, it cannot facilitate the level of coordination — team meetings to divide up projects, manager check-ins to motivate and track individual progress, etc. — necessary to align their employees towards a corporate goal today. Though virtual meetings can host occasional planned interactions, there is still considerable friction in interactions and just plain physical exhaustion. In fact, during the pandemic, we wrote a case study about Zoom Video Communications, the breakout brand in video conferencing. We can assure you that Zoom is well aware of Zoom fatigue, which the technology available today cannot yet eliminate.

If you want to allow your employees to independently execute remotely, but still need coordination, how do you bridge these needs? The key is to take a new view on how you think about the time your employees spend together in-person. Instead of packing their time with meetings in a conference room, your goal is to drive coordination through culture building.

By giving your people the time and space to socialize in person, your organization builds shared language, norms, values, and ultimately culture. This has long-term value and aids in ensuring consistency in the decentralized decisions your employees make when they are working remotely and independently. It also minimizes the need for constant coordination with coworkers and managers.

Large enterprises can allow for both flexible execution and cultural coordination by being hybrid with flexible space. One organization that has been at the forefront of this model is Github, a leading provider of software development tools. Even before the pandemic, GitHub did not require its employees to come to the office: employees were encouraged to work wherever they wanted in the world, and kept formal meetings to a minimum. Despite this unconventional model, GitHub has always maintained an office in San Francisco, where most of its leadership team resides. The headquarters acts as a gathering space for teams across the company to host in-person team summits, for members of the GitHub community to host events or workshops, and for “GitHubbers” to have cultural hub to engage with. Outside of San Francisco, employees can gather in a network of smaller formal offices and co-working spaces all over the world.

Coworking environment: For the creativity-oriented small startup.

The main challenge of being a small business is a more limited pool of knowledge, carried within the minds of employees, to source from within your organization; these pieces of knowledge, when reshuffled and recombined, are required for innovation. But innovation can come from more than your own employees interacting with each other. Creativity-oriented startups need to make sure their workplace facilitates knowledge spillovers from and to peer firms by looking outside their own four walls. But it doesn’t need to be that far outside: perhaps just down the hall or next door (ideally no further than 20 meters).

By locating your office close by other companies (and even competitors) — in the same city, neighborhood, building, floor, or even in the same room — you can benefit from knowledge spillovers. Further, we find that creativity arises from being near other organizations that are very different, not just in technical skills and target markets, but also in demographic background. This allows people from different companies to socialize face-to-face and build trust, comfortably sharing mutually beneficial knowledge over time so both organizations can thrive.

Again, managers need the right office architecture to promote the social interaction where individuals can exchange information. Although our research suggests that very short distances are especially potent, creating common spaces such as kitchenettes can functionally make people closer, even if they sit in more distant places. Remember: your employees still need private space to execute efficiently, so a completely open office design may be counterproductive.

As your business grows, you will also need to adapt. We suggest designing your workplace with fully reconfigurable scope: you need to be able to move your employees around so that the right people are together to coordinate on an innovation you may not have imagined when you picked your workplace. A reshuffling of office assignments may be useful to stimulate exchange among individuals that would otherwise be less likely to interact. Physical location can serve as a tool to enable unplanned information exchange.

One solution is to locate your business in a coworking environment, popularized by companies like WeWork and Social Impact Hub. We work closely with the Atlanta Tech Village, a coworking space where several startups — which have now grown into notable unicorns — exploited the advantages of coworking. Sales engagement platform SalesLoft moved to the Atlanta Tech Village as one of its first members. Shortly after, marketing platform Terminus also started renting space at the coworking hub. Being physically close to other nascent businesses dealing with similar problems helped Terminus, SalesLoft, and the many others in the space learn from each other; for example, about useful web technologies to support their online operations. It also led to the incorporation of technologies produced by neighbors: SalesLoft continues to use Terminus products today.

Full remote: For the execution-oriented small startup.

Some small startups just need to execute: you know what your people need to do, and so do they. In organizations like this, you must make sure you empower your employees to execute with independent efficiency.

At the same time, you know you will need to grow rapidly. Much like the scalability offered by using cloud computing services as opposed to on-premise servers, you want to make sure you have the fully expandable scale to grow your workforce without being limited by four walls of an office.

If it isn’t obvious already, we are not remote work evangelists: our research demonstrates that there are serious downsides. But there is a time and “place” for it, particularly if you’re an execution-oriented small businesses. Consider Toptal, a company that provides a freelancing platform connecting software developers from around the globe with companies for remote work. Both its internal team and its network of contract developers are remote, now spanning over 93 different countries. The company matches developers to one or more companies at the same time where they take on projects with objectives that can be clearly specified and evaluated by the client. Having clear objectives allows works to be completed individually with less back and forth coordination.

Note that there may be limits to the fully remote model. Another organization, online education provider Treehouse, began their journey as a completely remote company. Initially, this was the appropriate model for them. But once they reached around 40 employees, Treehouse managers recognized that with growth, coordination became more difficult. In response, and in order to maintain employee independence as far as possible, they decided to open offices in Orlando and Portland and shift to the hybrid with flexible space model described above. Today, teachers and other roles requiring coordination can collaborate from these offices, while designers and other roles who can execute independently continue to have the option to work remotely.

The opportunity to reimagine your workplace doesn’t come along often. Today, too many managers are letting this opportunity slip by, letting their organizations revert back to where they were before the pandemic. Even worse, some are floundering in an ambiguous workplace mixing the past and the future while suffering from all the tradeoffs between workplace configurations. It is time to design your organization for the future based on your size and goals for growth.

This content was originally published here.

The post What’s the Optimal Workplace for Your Organization? appeared first on Matt Dallisson Global Executive Search | Leadership Consulting.

While current headlines about product shortages and empty shelves have highlighted the importance of the supply chain, that process began in early 2020. Companies that had labored to create a lean global supply chain needed to scramble to adjust to the effects of the pandemic. Beyond that, sustainability has also become a top priority on the CEO agenda, making the supply chain an integral part of managing an organization’s carbon footprint. Consider, finally, the imperative to incorporate digital technologies, and one could argue that managing the supply chain in the current landscape is one of the most complex roles in an organization.

Henkel’s Dirk Holbach has an ideal vantage point to weigh in on all of these issues and more. As the chief supply-chain officer for the Laundry & Home Care business unit at Henkel, a global consumer-goods company based in Germany, he manages an operation that spans 125 countries. In his two decades with Henkel, Holbach has helped to guide the business unit’s supply-chain function through both expansion and disruption. McKinsey senior partner Frank Sänger sat down with Holbach to talk about how the organization responded to the challenges presented by the pandemic, how to build resilience into the supply chain in a shifting environment, and how Holbach has taken the lead on sustainability and diversity.

Question: In your two-decade career at Henkel, how have you seen the company’s operations evolve? What factors have shaped Henkel’s supply chain the most over this period?

Dirk Holbach: During the past 20 years, the supply chain has gone from being regarded as a must-have cost center to a more purpose-led, agile, sustainable function. It has become more intelligent, digital, and resilient. We have invested in setting up the right organization, rebuilt our footprint, implemented digital, and developed sustainability capabilities. We are increasingly becoming a mission-critical growth driver and engine for our business.

Dirk Holbach’s biography 

Education

Graduated with an MS in mechanical and industrial engineering from University of Kaiserslautern and earned a PhD in business information systems from University of Duisburg-Essen 

Continuing education 
Harvard Business School 
Leadership Forum–Executive Education

HEC School of Management/HEC Paris
Leading Strategies for Outstanding Performance

INSEAD
Strategics for Senior Management

IESE Business School 
Advanced Management Practices

Career highlights

CSCO Laundry & Home Care 
Corporate senior vice president, managing director HGSC B.V.
(2014–present)

A key part of this effort was to empower our teams. Over the past several years, we have invested heavily in talent and the tools to support them in their roles. Without the right investment in people development, you can have the greatest system, the greatest footprint, or even the greatest digital technology—but at the end of the day, it will not yield the expected benefits over time.

Question: COVID-19 has led to major reforms in supply chains all over the world but has also brought disruption along the way. What strategies have you implemented in the past two years that helped the company to stay ahead of the competition in such difficult times?

Dirk Holbach: We have taken a systematic approach to managing resilience in the supply chain. During the crisis, it was a steep ramp-up of measures. In many countries, we were fortunate to have not only well-prepared and well-organized teams but also robust processes and systems in place.

Being able to adjust our capabilities and processes is ingrained in the organization, and this was a muscle that helped us a lot during the pandemic. For instance, in April of last year, when the first demand shocks hit our system, we introduced a new element in our S&OP [sales and operations planning] process in just a few days—basically a daily management of capacity and demand by country supported by some digital capabilities using our existing analytics platform.

Certain elements proved more effective in the short term to manage the crisis. Since then, we have assessed our organization and strategy and identified gaps where we had not been prepared well enough. We then embedded these findings into our latest resilience framework, which we are institutionalizing now.

We have now dedicated resources in the central team to look at all the different components of that framework and are making sure the organization is pulling the right levers at the right locations in order to strengthen our supply-chain capability.

Question: How has the pandemic changed the way your organization views supply-chain risk and resilience?

Dirk Holbach: Our framework isn’t super complicated. From the system and process angle, we look at three different enablers: people and visibility, redundancy, and flexibility. And here we really have defined systematically the areas in which we are purposefully investing.

For people, it’s about the mindset and ability of everyone to quickly sense and react, learn and adjust, and encourage and empower the teams to do so despite being a multinational company. Many things are, of course, defined, regulated, and standardized in processes. In certain situations, you need to think beyond. This mental approach is extremely important. We enable that thinking by aiming to have all relevant data available on the spot, ideally—and if relevant—in real time to support effective decision making.

When it comes to redundancy, for instance, one principle is that we manufacture a certain product technology in two locations so that we have a backup. If one location goes down, at least I can manage the supply for a couple of weeks. We cannot replicate capacity ad infinitum, but that is one very simple principle.

The other strategic lever is flexibility. Talking about product platforms, exchangeability and formula flexibility are important. We are continuously working on that lever because materials are pretty short at the moment. We focused on building the ability to react and adjust formulations in a way that we can fulfill our consumer and customer requirements but still continue to manufacture.

At the end of the day, it’s always about trade-offs. Of course, you can build redundancy in your system, but that is not for free. It costs money. This is a kind of insurance premium: you are either willing to pay or not.

Question: We have spoken about the challenges created by the pandemic. Do you also see opportunities that have been created?

Dirk Holbach: I always like to say that in every catastrophe you will find at least one opportunity—and usually more. We learned quite a lot during the past two years. And we leveraged capabilities in a much faster and different way than we ever had expected.

People tend to see the issues and the problems. But I think it’s very important that you turn quickly to a forward-looking mode and ask yourself, “What are we doing now, and how can we do even better afterward?”

For instance, we used digital technologies to run remote installations of new filling lines site tests, even without the OEMs or vendors on site. We used HoloLens and other tools. We took these steps because, due to safety measures and travel restrictions, we had no other choice. That’s why new capabilities and mindsets are so important: what is possible now, compared with two years ago, is very different.

You must be able to keep up with the competition. When you have moving targets and a relevant standard of performance, that makes it difficult to measure and follow. But it continuously gives you new opportunities to perform in a dynamic marketplace.

For the next few years, we have to take a different approach to these just-in-time global supply chains. We have to be smarter. You may run into a cost and benefit discussion on the business side, but I perceive a readiness to invest in resilience.

Question: Do you have any specific advice to other organizations to minimize their exposure to supply-chain disruptions, which have become increasingly frequent and severe?

Dirk Holbach: I would mention several things. First, invest in visibility. Visibility means understanding at any point in time what’s going on in your extended supply chain. That is definitely a must, because without it you won’t know what to do.

The second element is people. Again, continuing to set up the business to be more centrally standardized and organized, adding to strong regional and local teams empowered to make fast decisions within a given framework. We might never get back to a prepandemic level of supply-chain stability, so it’s critical to take everyone along and to help teams to be mentally ready—things we are constantly working on. In my point of view, it is crucial to find ways of operating in such an environment, to learn from mistakes, and to do better the next time.

Last would be to review your product sourcing. This item is a bit linked to the two other buckets. I discussed the redundancy piece and also the flexibility. But let’s say that you then look at the components. Do you have dual, multiple sources and setups at that end?

In general, people, industries, and players tend to forget relatively quickly, especially in the FMCG [fast-moving consumer-goods] context. That, for me, is a big “watch out” so that we don’t fall too quickly back into normal. Even after COVID-19, we will have other things that affect and disrupt our supply chains.

Question: Let’s transition to the topic of digital. Henkel has been at the forefront of digital innovation in the industry, establishing industry-leading lighthouses and covering those at the World Economic Forum. How do you prioritize Industry 4.0 technologies for Henkel?

Dirk Holbach: We started that journey eight years ago. We wanted to do something good for the environment and measure the energy consumption of our factories in a global and standardized way.

Over time, we learned that a couple of elements help us to drive that effort. I elevated the role responsible for digital transformation onto my leadership team and committed the necessary resources. We started to systematically review technology areas that we believe could benefit our organization and settled on four areas: automation, robotics, analytics, and visualization, as well as the connectivity between these areas and the application and use cases.

We defined a dynamic road map, a funnel with a portfolio of application cases, and different maturity stages. It’s important for companies to clearly define focus areas and build a road map. Try not to do everything at the same time. We manage fewer than 25 different application cases in different maturity stages at a time, excluding the ones that are running and implemented.

Usually, we try to learn and try out applications relatively fast and then scale up quickly. If we see that a certain application use case delivers value for us, we use it wherever it makes sense on the global scale. That approach—to avoid focusing on big, complex business and benefit cases—helps to secure the funding for these initiatives because initially you will usually look at a pretty specific and well-defined area of benefits and activities. It’s easier to determine what you need to invest and what you get out of it. Then, you secure funding and build your success stories internally over time to be able to scale up the solutions.

A strong connection between the global and local team is also very important. We use a top-down, bottom-up approach to identify ideas that fit into our framework and strategic focus areas. Last, you cannot undertake this effort without a decent underlying IT infrastructure. You need to have not only a strong central IT department but also focused IT-related capabilities within the supply-chain operations. The ability to define requirements and demands through an operations lens and translate that to IT solutions is critical. Having this deep business understanding paired with Industry 4.0–related knowledge within my team accelerates progress significantly.

Question: You mentioned the digital journey started with the focus on sustainability. Henkel has been included in the list of the world’s 100 most sustainable companies presented at the World Economic Forum. What can industry do to become more sustainable, especially in supply-chain logistics?

Dirk Holbach: Sustainability is part of Henkel’s DNA; it goes back even to the company’s founder. We have been tracking our sustainable performance for more than 30 years and reporting on it. On Scope 1 and Scope 2 emissions, we have decreased our CO₂ footprint in our Laundry & Home Care business by 65 percent over the past 15 years. The rest we will manage over the years to come. It’s well under control and manageable.

COP26 in Glasgow illustrated the size of the challenge: despite all the great things we have done in the past, we must be much faster. In German, we say, “It’s five before noon.” We clearly have to accelerate.

When you take a deep dive in the supply-chain area, looking into the area of logistics, this is the first bigger challenge. Like many others in the industry, we partner with other companies to operate our own logistics fleet. So we have to engage with our partners in the right way, and we need to be clear on our expectations. It starts with how we contract those services and what we specify as relevant performance. It’s not only operational performance but also costs and CO₂ emissions.

On the other hand, if we take the laundry and home-care industry, just 2 percent of the upstream CO₂ footprint comes from our own production facilities. The remaining 98 percent is outside the total life cycle. The majority comes from packaging and raw-material creation, as well as from the use and reuse of the materials. It’s super important that we partner with our suppliers of these raw materials in the right way to drive progress. A few weeks back, we invited all of our key raw-material suppliers to a virtual session and shared our vision for how we want to drive the transformation of our material sourcing over the next years. The conversation covered what we have done, what we expect, and what we can do by working together.

On the downstream side, we have seen a decrease in the amount of materials used for washing. Twenty years ago, we were at 150 grams of laundry detergent per wash load. Now, our most compact version uses 15 to 17 grams—a factor of ten. In our dishwashing detergent, we are using smart chemistry to clean products in a way that doesn’t require heating the water to 50 degrees or 60 degrees Celsius. However, we still need to further educate consumers when it comes to washing, water usage, and temperature. We need to continuously develop and create smarter products, addressing exactly these critical fields.

Question: And how is digitizing the supply chain helping you to achieve your sustainability goals?

Dirk Holbach: In 2013, we started our digital journey precisely to measure energy consumption at our factories on a real-time basis. Creating that transparency along the way helped us to significantly use technology for a purpose—to drive sustainability performance and reduce our footprint. We are going beyond that. We are using machine-learning algorithms to optimize some of our energy-intensive processes, such as laundry-powder production.

Across the upstream and downstream value chain, digital capabilities will further increase the visibility and traceability of products—for instance, raw materials. Our consumers and customers are more and more interested in sustainability—and for good reasons. When I buy a product, I ask myself where it is coming from and where it has been produced. We are building capabilities that will help us answer those questions in a much better way.

Question: Before we close, let’s discuss diversity, which I know is a focus area for both Henkel and you personally. Henkel was recently listed by Forbes as one of the best companies to work for in terms of diversity. Is the level of diversity in the supply-chain function where you want it to be, and what are you doing to improve it?

Dirk Holbach: I’m a great believer in diversity across many dimensions—not just gender but also personal and cultural background. Especially in times of uncertainty, a diverse team will bring you a higher likelihood of different and maybe disruptive ideas and ways to handle a crisis.

At Henkel, diversity and inclusion is a very prominent topic. We have made great progress in our supply chain over the past ten years. Although Henkel is based in Germany, we employ people from more than 125 nations. More than 85 percent of our people work outside of Germany.

I have personally been driving this topic since 2011. For instance, when it comes to gender, we more than doubled our percentage of women in management positions in the supply chain during this period. But we are not where I personally want us to be.

We have been building up the bench, and we have made great progress in the supply chain already, but we need to further drive this transformation.

Question: Any other advice that you have for other supply-chain leaders?

Dirk Holbach: Don’t believe what brought you here today will help you achieve targets in the future. Past experiences and legacy practices are great; don’t throw them away. Build them into your future strategies. But do not expect that they will work as a plug-and-play model in the future, because circumstances will be changing continuously. So be ready and learn. Be open. Try to integrate new findings into your experiences. Be prepared to develop at a different speed than you did in the past.

With the supply chain, you’re talking about big organizations and operations. But supply chain is a people business. Despite all the technology, processes, and standards, it’s super critical that we have the right people at the right spot. We take care of them because they are our most precious resource.

Over the past two years, supply-chain terminology has gained a completely different prominence in mainstream media and companies—really moving from this perception as a cost center to a solution provider and growth engine for many businesses. And hopefully that will attract more talent to supply chain and operations. It’s a cool place to work if you like challenges.

This content was originally published here.

The post Achieving supply-chain resiliency amid disruption appeared first on Matt Dallisson Global Executive Search | Leadership Consulting.

While the world is still deep in the throes of the Covid-19 pandemic, business leaders are busy repairing their operations, looking forward to a post-pandemic world. They frequently find themselves torn between two opposite poles: the urge to act and the need for prudence in the face of uncertainty.

Even as business picks up in many places, the “new normal” is one dogged by uncertainty. Poisoning the mix further is the fact that many businesses now find themselves strapped for cash following nearly two years of crisis management. Many companies slashed costs during the pandemic because it was one of the few tools they had at their disposal. But there’s a limit to how far you can shrink your way to greatness. If they have any spare money at all, most believe that it should be reserved for big-bet transformations, to get the business back on its feet. But a period of sustained uncertainty is hardly the best time for making bets.

How can businesses overcome their understandable reticence and reorient themselves for the future? The question is particularly acute as the old, tried-and-tested management frameworks that served them well in a more predictable world — scale, division of labor, focusing on the best use of internal resources, and so on — are inherently unsuited for a world of unexpected twists and turns. At the end of the day, you can’t forecast the unforecastable. So how can companies grow amid such uncertainty?

From Organizations to Ecosystems

My belief, based on my work supporting businesses through the pandemic, is that companies now need to re-think and re-gear before they can start to re-grow.

The re-think I have in mind is essentially a change of mindset from “economies of scale” to “economies of networking,” a distinction drawn back in 1998 by the economists Carl Shapiro and Hal R. Varian. In brief, this means that rather than fixating on how you manage your internal resources, you turn your attention to how you manage your networks and the full range of transactions that take place within them. Your focus turns outward rather than inward. The idea is that success is determined not by how well you leverage your existing capabilities, but how effectively you shape the surrounding ecosystem.

This re-think should be followed by a process of re-gearing by companies. That will mean taking action in a number of different areas. The five questions below can help business leaders identify where those areas lie and what actions they need to take to prepare themselves for a return to growth.

How can we harness the power of networks?

The networks I’m talking about here are what we might call “dynamic networks” given that they evolve rapidly over time. Dynamic networks operate in a similar way to the types of networks we find in nature, like when ants work together to build “living bridges” or bees swarm to form a new colony. Complexity science seeks to understand how these networks function and what makes their underlying designs distinct. With its help, businesses can learn to apply the lessons of nature to their business practices.

For businesses, harnessing the power of networks means building dynamic partnerships — living bridges, if you will — with players across traditional industry boundaries, and potentially even with former competitors. For instance, one major airline I worked with recently ended up radically re-thinking the way it viewed its B2B partnerships and re-gearing the way it interacted with its ecosystem. Achieving this first required creating transparency within the company into which internal business units and external partners were responsible for each area of value creation at the airline, from scheduling and pricing to data aggregation and payment, across 10 different channels.

My team and I then helped the company develop various market scenarios. We ran a strategy game in which members of the leadership were divided into five teams representing different players in the market, from other airlines to travel distribution companies. The game consisted of three rounds, each exploring different possibilities or market parameters. In each round, the teams had to decide on strategic moves, such as adapting their prices, changing the products and services they offered, or investing in new sales technology. They could then negotiate with other players and potentially form alliances with them.

As a result of this exercise, the airline decided to form a strategic partnership with a previous rival: a pricing forecaster that had been undermining its profits for some time. The new partner took over and improved most of the airline’s yield-management function.

How can we prepare for an uncertain future?

Over the course of the pandemic, our yearning for certainty has grown almost unbearable. Working with companies, I’ve seen time and again how otherwise competent leaders have focused too much on getting the forecasts right, rather than searching out ways to deal with uncertainty. It took almost a year for that focus to start to shift. The fact is, companies need to move away from a forecast–plan–execute approach toward a more systematic exploration of the system and the opportunities it offers, turning uncertainties into possibilities.

What business leaders should be asking themselves is which scenarios, however unlikely, could disrupt today’s system of value creation? What could conceivably happen in the future that will affect their key commercial parameters, like how they operate, how they achieve profits, and how they finance their undertakings? Working with scenarios is a great way to broaden your horizons. Scenarios are a type of thought experiment, a way of anchoring possible futures in your thinking. The company should take these scenarios and identify “no-regret” actions that they’ll initiate if the scenarios arise. They should also define tipping points for each scenario — for example, a specific competitor dropping out of the market. This approach helps business leaders avoid the extremes of doing nothing, waiting for certainty, overreacting, or giving in to despair.

My team and I worked closely with two European airports on precisely this question, developing potential post-pandemic scenarios for air travel and translating them into volume and margin terms. We challenged these scenarios with potential structural developments, including some that until recently would have seemed unlikely, such as on-demand flights. We then developed strategic and commercial options for each scenario, involving different organizational units in the process to ensure engagement on the part of the organization and increase the robustness of the solutions.

How can we put commercial experiments centre stage?

I believe that today’s companies should proceed via trial and error, rather than pursuing a predefined roadmap. After all, what good is a roadmap if the roads have all been washed away?

The key? Don’t guess, test. Predefine your strategic rules and then move forward step by step, interaction by interaction. For example, companies may wish to establish their “rules for experimentation,” such as what their risk appetite is when it comes to conducting commercial experiments before launching into a phase of experimentation.

Over the years, I’ve helped a number of travel agencies and intermediaries introduce this trial and error-based approach. The first step is always to break down the business into various areas: customer payments, product merchandizing, customer service via chat, and so on. Then, starting with one area and gradually moving onto the others, we specify the minimum number of experimental routines that should be run alongside the established procedure, and the minimum and maximum failure rate for these experiments. This represents the risk appetite for experimentation in each area.

The trick here is to make sure you apply the same set of rules for all experiments and business areas. Define up front what success means for that area, such as specific key performance indicators (KPIs) for customer satisfaction. Devise proper experiments, drawing on the expertise of data scientists. And when the experiment is over, act on the results: If the experiment was successful, replace the old routine with the new one. If it wasn’t, leave well enough alone.

How can we anchor our commercial strategy in our operations?

Commercial strategy needs to be hands on: a set of rules that lead to a common goal and are fully consistent with the company’s rules for experimentation. Critically, the commercial strategy also needs to continuously adapt to learnings from operations. This approach to strategy is thus more operations-based than older approaches based on roadmaps and master plans, and it needs to be anchored in operations. Without these rules, any attempt to explore can end up in chaos and action for the sake of action.

For example, instead of putting “Form a partnership with Company A” in a roadmap for your company, define the set of rules for engaging in partnerships — for example, potential partners must have no more than 1,000 employees, or the founders must still own the majority of shares in the company. The rules can also include a description of what a successful partnership should look like — for example, it should save the company at least 10% on the cost of handling accounts receivable by outsourcing this task to the partner. These rules form the basis for exploring the various options for partnerships with Companies A, B, and C — and maybe also Competitors X, Y and Z.

My experience confirms the value of defining commercial strategy both from the top down and the bottom up. The top-down part should involve specifying what success should look like, what the key choices are, and what the rules are, as discussed above. This information is then passed on to cross-functional “commercial squads”: small teams with end-to-end responsibilities, capable of designing and carrying out business exploration. The role of the commercial squads is to determine how to implement the top-down instructions in terms of operations.

This top-down, bottom-up process can be repeated: Guidelines come down from the top, ideas are passed back up from the bottom, more guidance comes down from the top, and detailed actions go up from the bottom. Usually, an external team will need to model this two-way process for the company, but with a little practice, organizations soon become experts in doing it for themselves.

Where can we build commercial squads?

Up to now, most organizations have responded to the challenges of the pandemic by trying to improve their efficiency, optimizing wherever possible. I believe that a better ploy is to become a dynamic, adaptable organization.

Businesses need to spot any barriers to adaptability within their organization and act swiftly to remove them. They should remember that the design of their organization has more impact on their performance than the quality of its individual parts. Of course, having the right skills in the right place still matters, but the interactions between different individual nodes are significantly more important than the nodes themselves.

The dynamic, cross-functional commercial squads I mentioned above can form a key element in what makes an organization adaptable. Using commercial squads is preferable to sticking with traditional, rigidly structured, separate commercial units — sales, pricing, distribution, promotion, and so on — each with its own budget target. The squads should have shared business goals, such as increasing gross profits or the firm’s share of specific segments.

Most organizations are surprised to find that improving performance is more of a design challenge than a challenge with the skills of individual employees. That may even come as something of a relief to companies that feel they’re losing the war for talent (although it should not be an excuse for them to let up on that battlefront, either).

At this point, CEOs may be feeling somewhat overwhelmed. How many fronts do we have to fight on at once? After all the shifts we made in response to Covid-19, are you now seriously asking us to implement yet more changes in order to return to growth?

Again, I believe that the answer lies in the ability to adapt. This needs to be written into the company’s DNA. And that places an even greater focus on the role of leadership, as reshaping an organization’s culture or mindset is the work of its leaders. This is particularly true of network structures, as opposed to hierarchies: Rather than relying on their power and position, leaders in network-based organizations need to propagate the new culture of adaptability by modeling it in their own day-to-day interactions and decisions.

To go back to where we started from: Re-thinking and re-gearing will put you in the best possible position to re-grow. The good news is that in these times of limited resources, the big bets aren’t necessarily the best bets. Having the right mindset anchored in your organization and the right structures and networks to back it up is a surer way to not only survive tomorrow’s challenges, but to prosper. The five questions above can help you identify where you need to take action and ensure that you rise to the challenges of the new normal.

This content was originally published here.

The post 5 Questions to Help Leaders Achieve Growth Amid Uncertainty appeared first on Matt Dallisson Global Executive Search | Leadership Consulting.

The good news is that as the virus has evolved, employers have honed their strategies to keep infections in check. By continuing to be creative, flexible, and adaptive in their approaches, they can contain the threat now and handle other outbreaks if other variants arise — a significant possibility given the low levels of vaccinations in many parts of the world, including some areas of the United States. Here are some broad measures they can apply.

Encourage Vaccination

Vaccination remains the best way to prevent serious illness, hospitalization, or death from Covid-19, and those who are vaccinated are six times less likely to be infected, 12 times less likely to be hospitalized, and 14 times less likely to die of Covid-19.

In a survey of 543 U.S. employers conducted in November, we found that more than half (57%) plan to require Covid-19 vaccines for employees if the Occupational Health and Safety Administration’s (OSHA) Emergency Temporary Standard and the federal contractor executive order are upheld in the courts. Only 25% of employers would have vaccine mandates if these two rules are overturned.

It doesn’t appear that Covid vaccination mandates are having a large impact on recruitment or retention: Only about 13% of respondents said the mandates led to employee resignations, while the same proportion (13%) reported mandates helped with employee recruitment or retention.

Providing easy access to vaccinations is key to increasing their adoption among those who are not highly motivated. Employers should continue to promote vaccination through flexible scheduling and paid time off, and they should consider joining those companies that are now conducting worksite vaccinations.

Consider Local Transmission Rates in Return-to-the-Office Decisions  

Twenty-seven percent of the companies responding to our November survey reported that all employees whose jobs can be performed remotely had already returned to the workplace, and 56% reported that some of these employees had returned.

We expect that many companies will now pause returning remote employees to the workplace until more is known about the transmissibility and severity of the Omicron variant and its ability to evade the immunity provided by vaccines and previous infections.

The risk of workplace Covid-19 transmission is highly correlated with the community infection rate. Businesses can feel comfortable about having their remote workers return to their facilities in communities where the current weekly infection rate is low (less than 10 per 100,000). However, there are many communities with weekly infection rates that exceed 50 per 100,000 where the likelihood that an employee will bring Covid-19 into the workplace is very high. Companies can reduce this risk by delaying employees’ return or by keeping down the number of employees in the workplace through hybrid work and staggered schedules.

The immunocompromised — including those undergoing cancer treatment, taking immunosuppressive drugs, or who have had organ transplants — should consider continuing to work remotely until the rates of infection decline substantially.

Reduce Exposure through Social Distancing

Flexible schedules and remote work have helped create adequate social distancing. Moreover, employers are transitioning remote employees back to the workplace gradually or on a staggered basis to increase safety as they adopt new ways of working. Employers can use behavioral economics techniques to “nudge” employees to maintain social distancing at the workplace. If the capacity of a conference room should be two people, be sure there are only two chairs in it!

Improve Ventilation

Ventilation in a building impacts transmission, and increasing the amount of air that’s exchanged indoors decreases the likelihood of infection in the workplace. Improving ventilation doesn’t always require expensive renovations; many workplaces can add more air exchanges and improve the filtration systems on existing air-handling systems, and some can open windows. However, employers can skip ultraviolet lights, given that there is little evidence that ultraviolet treatment of indoor air prevents Covid-19 transmission.

Decide When to Recommend or Require Masks

Masks provide protection against both being infected with Covid-19 and infecting others. Our November survey found that 90% of employers required indoor masks; most (58%) required masks regardless of vaccination status, and most (70%) reported mask mandates at all locations. The U.S. Centers for Disease Control and Prevention (CDC) recommends  wearing masks when indoors with others, whether vaccinated or not, if community transmission is high or substantial. In the workplace, some employers restrict unvaccinated employees from entering certain areas where mask-wearing is difficult such as cafeterias or gyms.

Some healthy vaccinated employees may choose to wear masks indoors during any local outbreaks. Employers can avoid complaints under the Americans with Disabilities Act about masking requirements by abiding by the U.S. Equal Employment Opportunity Commission’s guidelines.

Encourage Testing

Eighty-four percent of the employer respondents to our survey said they plan to offer regular testing, including some employers that have not implemented a vaccine mandate and do not plan to do so. Of the employers that plan to offer testing, 80% intend to do it at least weekly. Twenty-five percent of employers expected that employees would pay for the cost of testing where state law allows.

The leading choice for Covid-19 surveillance testing is antigen tests, which are modest in cost and provide results available in real time; however, securing a sufficient supply is still a challenge in many parts of the country. Employers can instruct employees to do the test under observation to meet OSHA guidelines and can arrange follow-up confirmatory tests for those who have no symptoms but are positive. All employees should be instructed not to come to the workplace if they feel ill.

Be Cautious about Reinstituting Travel

Most companies curtailed or eliminated business travel earlier in the pandemic, and many were reinstituting travel when we learned of the Omicron variant. The variant could increase risk of travel, and rapidly changing international rules increase the risk of quarantine or travel disruption.

More contagious variants mean that leaders should err on the side of caution in allowing employees to travel to places where risks of Covid-19 infection are high and instead should ask them to conduct business meetings by videoconference. Recognizing the cost and time savings and environmental benefits of reduced travel, leaders are likely to continue to hold down their travel and expense budgets for the foreseeable future.

Communicate Exposures

Many workplaces will experience Covid-19 cases over the coming months. Employers should communicate honestly about exposures in given facilities, while respecting the medical privacy of employees who have reported that they have Covid-19. Vaccinated employees who are exposed to Covid-19 should not be required to quarantine if asymptomatic.

Support Mental Health Care

Attending to employee mental health needs will be even more important in the coming months. Rates of depression and anxiety have surged during the pandemic, and the drug overdose death toll in the United States exceeded 100,000 from April 2020 till April 2021, a record annual level. Many are mourning the deaths of friends and loved ones.

Employers can continue offering access to virtual and digital mental health care, although they should take into account the fact that scientific evidence of the effectiveness of many digital mental health apps is still limited.

Stay Current on the Effectiveness of Interventions 

Last, we recommend that businesses keep up to date on which interventions to limit the spread of Covid-19 are effective and which ones have limited value. For example, we found that most businesses have eliminated temperature screenings, which had proved to be ineffective in decreasing workplace transmission.

We also now know that normal cleaning is adequate to protect against Covid-19 infections in most instances, and disinfection can be reserved for high-touch, high-traffic surfaces and workplaces with a known Covid-19 case. Employers can create more bandwidth for effective pandemic or business initiatives by eliminating those which minimally increase safety.

Clinical recommendations are being updated frequently, too. Changes in booster, mask, travel and quarantine guidelines are posted here by the CDC.

Covid-19 has been a humanitarian tragedy and has upended business plans across the globe. Unfortunately, the pandemic is not going to end imminently. Consequently, employers and their workers must continue to remain nimble. As the local situation dictates, employers must remain vigilant and implement existing and new processes that are proven to keep employees, customers, and communities safe while meeting their organizations’ needs.

Editor’s note: A version of this article was originally published in July 2021, when the Delta variant was sweeping the United States. This piece has been updated to address the Omicron variant and other developments that have occurred since July 2020.

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In 2015, I wrote the book Work Rules!, which laid out a set of guidelines, based on my time building Google’s culture, for how to combine data analysis, academic rigor, and human resources best practices to create a world-class company culture. It included rules like, “Make work meaningful,” “Hire only people who are better than you,” and “Be frugal and generous.”

Based on my time at Google and now at Humu, I revisited what I wrote in 2015 to identify the five new rules of hybrid work. Some I’ve kept from the old guidelines: Meaning and purpose, for instance, matter more than ever in a hybrid model. But others are brand new. Here’s how leaders can apply them to build great teams, even when those teams aren’t together in-person all the time.

1. Make work purpose driven.

Purpose matters more than ever. Our research at Humu shows that people who don’t feel their work contributes to their company’s mission are 630% more likely to quit their jobs than their peers who do.

The way to help employees rediscover the purpose in their work is to make every task and project mission driven. For example, CommonSpirit, the largest nonprofit health system in America, starts important meetings with “reflections,” stories or videos recognizing how hard it is to be a health care worker in a pandemic while also connecting to all the good they do for their patients and communities. Managers can do the same by tying each team member’s work back to the bigger picture of why what they do matters to the world. When assigning tasks, managers should consistently outline answers to: Why is this project important? How will it impact others? How does it fit into the company’s broader mission?

2. Trust your people more than feels comfortable.

Encourage managers to offer direction, not directions. To help hybrid teams succeed, managers should clearly outline the milestones they’d like their reports to hit — and then let them figure out how to get there.

At Humu, in the midst of the pandemic, we decided we wanted to offer a product for mid-sized companies. Our leadership team set a clear timeline and success criteria, and then stepped back to let our product managers and people scientists take over.

It felt uncomfortable at first, but by giving our team the freedom to decide their process and work product, we ended up with a better end product — and were impressed by the innovative approaches that arose. Indeed, research from when I was at Google shows that teams that index the highest on trust and psychological safety are 40% more productive than those who are low on these areas.

3. Learn in the small moments. Send people — and yourself — nudges.

Hybrid work means it’s easier to miss out on the small moments that make teamwork magical and spark innovation. Google News, for example, was the result of a casual conversation between two employees standing next to each other in line for lunch. In an office, these types of interactions happen naturally; in a remote setting, they fall by the wayside and over time this is highly detrimental.

Nudges can offer an opportunity to spark these moments in a hybrid environment. At Humu, we personalize nudges based on a range of signals including individual learning goals, team focus areas, and job level. For example, if team members are eager for opportunities to learn and their manager would like to build mentorship abilities, we might deliver a nudge to the manager ahead of their next 1:1 that offers recommendations for how to have a growth-focused conversation with a report. After six months of receiving these types of personalized nudges, 90% of teams at a Fortune 500 company told us they noticed their managers making clear improvements.

You could send nudges encouraging employees to “Reach out to a team member today” or ones that explicitly communicate unwritten norms, such as “It’s okay to ask a lot of questions.”

4. Provide clarity. Be more decisive than feels comfortable.

While you should offer your people autonomy, you also shouldn’t shy away from putting a stake in the ground. When it comes to company direction, policies, and values, being clear is the kindest thing you can do — even if your decision is unpopular. When people know what’s happening, they can make the best choices for themselves. It’s ambiguity that is more punishing.

For example, rather than leaving it up to managers to determine when people should come into the office, bring everyone together on Wednesdays. Or Tuesdays. Or Thursdays. The important thing is to pick a day when the majority of employees will be together in person — and to not place even more burden on already exhausted managers. Imagine the poor manager who has to justify why her team has to be in the Glendale office each day when another manager allowed an employee to work from Hawaii. Suddenly her fiercest talent competition is from inside her own company.

5. Include everyone. Take a long hard look in the mirror.

Many leaders I speak with ask for ways to maintain their culture in a hybrid model. But most cultures could benefit from some improvement. Part of the reason people don’t want to come back to offices is likely that they weren’t inclusive spaces to begin with, particularly for people from underrepresented backgrounds, introverts, and newly hired employees.

Use the shift to hybrid as an opportunity to identify cultural gaps, and to set new norms to create a better, stronger culture. Encourage managers to take notice of who often dominates the conversation in meetings or receives the most recognition for a project’s success. Make the evaluation criteria for projects as clear as possible: The more explicit the rubric, the less room for bias.

Leaders today are operating against a backdrop of unprecedented uncertainty and amid nearly two years of teams being cooped up at home. Those conditions are not likely to change in the next 12 to 18 months — instead, leaders need to change. By following the five guidelines laid out above, they can support their workforces and create world-class cultures, no matter where their people work.

The post 5 New Rules for Leading a Hybrid Team appeared first on Matt Dallisson Global Executive Search | Leadership Consulting.

But fragmentation isn’t a byproduct of remote work. It results from a lack of intentional bridgebuilding to link discrete groups and regions. Silos were certainly prevalent before the pandemic — hybrid work has simply created new requirements for effectively connecting teams that must work together to achieve shared outcomes.

Working to rebuild bonds is especially important because most people won’t be returning to work as the same people they were before the pandemic; the last 18 months have changed all of us in some way. Our values and priorities have shifted. Our senses of meaning and purpose have broadened. Our anxiety has increased. For some, tolerance increased while for others, it decreased. In short, we have to get reacquainted with who we’ve each become. Otherwise, our natural biases that formed about who each of us were will kick in, creating unhelpful dissonance as we react to each other as we did prior to the pandemic. For example, one executive said of his colleague, “She used to have the best sense of humor, but now quips I make that she would always laugh at get no reaction at all.” He’d failed to consider that she was emotionally exhausted because her family was hit especially hard by Covid-19.

Here are three approaches I’ve seen help leaders and their teams reestablish strong connections across organizational boundaries as they’ve shifted to hybrid work environments.

Create new shared identities

Humans are naturally tribal beings. We bind with and narrowly identify ourselves as one of our immediate group. By default, those outside the group are “other” — and likely not to be trusted. This type of we-they thinking will intensify if cross-functional connections aren’t strengthened. Enabling people to establish new shared identities that bind them to one another more broadly helps reorient their brains to new relationships, seeing colleagues who were once “they” with fresh eyes.

Research from NYU’s Jay Van Bavel found that our brains quickly shift away from previously held biases when we work together in solidarity. In one experiment using brain imaging, a set of people whose amygdalas revealed a variety of implicit biases about certain types of people showed that those biases were dramatically reduced when participants were told those same types of people were now “on your new team.” The closer we affiliate with our “we” tribe, the more outsiders become “they.” The solution requires broadening the definition of we.

In one organization, to break down unhealthy tribalism, we established cross-functional teams to take responsibility for various aspects of the organization’s cultural health. Teams focused on things like learning and education, innovation, community building, and hybrid work health and were composed of members from numerous functions and regions, all resourced and empowered to act. Creating an affinity to a team with broader purpose immediately helped improve cohesion and collaboration across the organization.

Accelerate solidarity

Recent research from McKinsey revealed that the strongest drivers of people quitting was not feeling valued (in other words, like they and their work mattered) and lacking a sense of belonging. They lacked what I refer to as organizational solidarity: creating strong ties to one another and to a shared purpose so people never question either.

Relationships across functions are especially challenging to form with solidarity when you haven’t seen or spoken to one another in a long while. In one client organization where there had been a lot of change in one division during the pandemic (a new organization design, new people, and shifts in people’s roles), we did a comprehensive re-onboarding of everyone in the organization. Leaders realized that if we didn’t level the playing field for everyone, trust would take too long to build. In a two-day session of round-robin conversations, people gathered to “meet for the first time…again.” Each person came prepared to share their responses to five prompts:

It was a heartfelt two days full of emotions and surprises for the group. Most notable were the many comments from tenured employees about seeing their long-standing colleagues in a fresh light while accelerating trust with their new colleagues. One participant said it well: “My default position with other departments has been to assume the worst. But when they showed up with that level of commitment to me, I knew I had to trust them.” These results are further evidence of what my own 15-year longitudinal study revealed: Stronger cross-functional relationships are six times more likely to produce trustworthy behavior.

As you begin bringing people back to work in whatever form that takes, invest the time to reset relationships not only within your team, but also between your team and key organizational partners. Use the opportunity to shed old baggage with rivaling cross-functional partners and start new by strengthening weak ties.

Build leadership learning cohorts

The ultimate determinant of cross-functional health is the quality of leadership over the teams that must cooperate to get things done. Leaders who model empathy, curiosity, proficiency with conflict, and a genuine desire to create widespread shared success build the strongest cross-functional partnerships. But these leadership skills don’t often come naturally, especially to highly results-oriented leaders who’ve been raised in overly hierarchical environments.

I’ve found the fastest way to build strong, consistent cross-functional leaders is to immerse them together in cohorts of leadership development. In nearly a dozen organizations, we’ve built cohorts of 12–16 leaders who journey together in their own learning and formation for 6–12 months. The content is focused on key skills and knowledge they need to drive the shared results their functions must produce. Recently, we’ve oriented content to how the organization needs to rethink leadership in a hybrid workplace. Small sub-teams spend time on real projects aligned to strategic goals that create added value for the organization, and pairs of “peer-coaches” are assigned to meet weekly to exchange feedback and advice on identified development areas. I’ve found that the relationships that form during these cohort journeys remain deep for years beyond their initial time together.

As you bring leaders back to your “new normal,” invest in their development by establishing cohort learning communities that will bind them to one another — and their shared organizational aspirations. They will naturally cascade their newfound broader orientation down to their teams, who in turn will connect more effectively with their cross-functional peers.

The coming year of inventing our way toward whatever our workplaces will look like offers a marvelous opportunity to refresh and reinvent the most important relationships in our organizations: the ones between those who, together, create results and cohesion for the enterprise that no one team could create on its own. Don’t squander it.

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In interviews at major CPG companies around the world, we asked dozens of marketing and growth executives about this new reality. Their answers were clear: fulfilling an ambitious growth mandate requires a marketing agenda that is far more sophisticated, predictive, and customized than ever before. It requires a different playbook with new approaches and tools that few have yet to fully master. While broad reach, powerful, resonant storytelling, and creativity remain critical, marketers now need to utilize data and analytics at scale to crack the code that enables more targeted and engaging interactions to shape consumer behavior.

This article was a collaborative effort by Tiffany Chen, Michele Choi, Brian Henstorf, Jeff Jacobs, and Ed See, all with McKinsey’s Marketing & Sales and Consumer Packaged Goods practices.

As one CPG executive said, “We now live in a world of ‘and,’ where we can have both broad reach and customized relevance, using new, granular, data-driven methods to fuel growth.” In fact, two-thirds of CPG companies say they have put data-driven marketing at the top of their agenda. ² 2. Anne Grimmelt, Norbert Lurz, “CAGNY 2021 virtual conference,” CAGNY Conference, NY, February 16-19, 2021, consumeranalystgroupny.com.

Yet many CPG companies have not yet cracked the code for delivering impact at scale from data-driven marketing. Although they may already leverage data analytics and other technology to personalize marketing for various segments or initiatives, these efforts are not sufficiently pervasive to drive sustainable growth. It isn’t enough to optimize a few demographics or key campaigns. Truly sustainable, marketing-led growth has to be granular, focused, and scaled across the entire marketing organization, delivering “the right message to the right consumer, at the right moment, at the right place—all the time.”

Many CPG companies have yet to fully accomplish this, because it requires a difficult step change in how a marketing organization operates. To thrive in this next era of CPG marketing, companies will have to do several things. First, build a continuously updating, AI-powered consumer-intelligence engine that ingests enough signals and data points to not only identify demand but to predict it. Then, use advanced analytics and marketing technology to recommend high-value actions. From there, learnings from hundreds of tests per week need to feed back into this engine, helping drive rapid decision making and informing adjustments to brand plans, spend allocation, tent-pole campaigns, and always-on activation. All this will require new types of marketing talent, additional data and technology capabilities, an organization-wide embrace of a rapid, agile, test-and-learn mentality, and adjustments to the marketing organization operating model in order to reach at-scale impact.

Creating this kind of modern marketing model is not only possible, it’s now essential for CPG companies that want to successfully capture consumer hearts and minds in a rapidly changing environment. Those that do data-driven marketing at scale well can increase net sales value by 3 to 5 percent and marketing efficiency by 10 to 20 percent. To unlock this impact, we see winning brands using five ingredients (exhibit). Here, we focus on the three that are the most challenging for CPGs.

Macro audiences versus micro-opportunities

CPG companies have traditionally centered their brand strategies around a few broad-based consumer target segments. In today’s fast-moving digital environment, marketers have a staggering amount of highly granular consumer data at their fingertips, although it is not always connected in a way that makes it actionable. Instead of simply targeting as many people as possible in a particular demographic, CPGs now have the capability (and the necessity) to translate a sea of information into more focused and actionable insights. The modern marketer is also able to be more precise than ever about which consumers to target and where to reach them along their life cycle. Scaling this “smart reach” approach widely across marketing initiatives can unlock hidden pockets of growth within thousands of audiences. Instead of suburban moms with two children or young urban professionals, opportunities may lie, for instance, among suburban moms who recently started using delivery platforms like Instacart or who have teenage children, or among urban professionals who live in a certain zip code and buy organic groceries.

Building an AI consumer-intelligence engine

To do granular targeting on a regular basis, companies need to build an advanced analytics engine for generating machine-learning outputs that help them continuously become smarter about the consumer. Building and maintaining this 360-degree view of consumer journeys across channels is now more critical than ever, given Google’s announcement that, by 2023, marketers will no longer be able to use cookies on its Chrome browser—what is being referred to as the “cookie-less future.” Without cookies to easily track consumer activity online, brands will need to find new ways to acquire consumer-facing data.

CPG companies have historically been unable to collect and activate personalized, first-party data at scale because they don’t have direct interactions with consumers the way retailers or digital subscription services like Netflix or Spotify do. For years, they have relied on third-party data to fill this void, but CPG brands must now make clear decisions about their data-acquisition strategy.

Brands that want to reduce their reliance on third-party data will need to decide how much they are going to invest in acquiring “zero-party” data—information that consumers explicitly share with a company—and first-party data, such as purchase information. Much will depend on the types of data already in the company’s ecosystem and the brand’s goals and category dynamics; there is no one-size-fits-all approach. But it will also require offering consumers something of value in return for their data and building trust that this information will be used in secure ways. Sophisticated brands and CPGs have begun to stitch data together from various sources, linking or acquiring not just demographic and psychographic data, but also behavioral identifiers—for example, consumer engagement across media platforms, general consumer sentiment, channel preferences, and sales data.

For brands in more commoditized categories, collecting zero-party data isn’t always a viable option. In those cases, CPG companies will likely work with partners that already have large reservoirs of consumer information and rich audience segments to use for targeting, such as retail media networks like Amazon’s AWS Media services, Target’s Roundel, and Walmart Connect.

Regardless of which data strategy a brand chooses, a consumer-intelligence engine will not be built overnight. What’s important is to get started. The first step is to make a complete inventory of existing data sources, which frequently reside in silos across the marketing organization. Marketers are often surprised at the trove of information and extensive measurement capabilities now available from third parties, especially retail media networks.

One food company, for instance, realized that a number of its existing data sets had never been linked together, including information from its call centers and recipe websites. Marketing teams integrated this data into a “consumer 360” engine and added unique consumer IDs, enabling a deeper understanding of consumers and the targeting of microsegments. In an initial test, the company achieved a 40 percent improvement in its return on ad spend by using first-party data to model and target online audiences that looked like its known best consumers.

Consumer-centric and tech-enabled: An effective strategy for data and the tech stack

Over the past five years, there has been an explosion in the number of software tools available to marketers to help them work more efficiently, create smarter content, solidify consumer relationships, and measure their efforts. More than 8,000 solutions are now available in the market, up 125 percent since 2015. ³ 3. MoffettNathanson US Advertising (2021).

As noted earlier, building the data foundation for the marketing tech stack (martech) requires a clear and robust data strategy that defines the role of each level of data (zero, first, second, and third party). From there, companies that decide there is enough positive ROI from pursuing a direct connection with consumers should work toward building their own customer-data platform (CDP), which will house complex consumer-data sets and send out relevant messages backed by insights from the intelligence engine. For instance, brands in higher-engagement categories, such as baby and beauty, have collected personalized, zero- and first-party demographic and behavioral data through consumer-loyalty sites that feature coupons, tips, and tools for new moms, or virtual try-on features for cosmetics.

Elsewhere along the tech stack, CMOs and chief growth officers told us they encounter two main friction points. First, when executing digital campaigns, their data activation strategy often fails to strike the right balance between reach and personalization. One solution is to disseminate campaigns widely but use a dynamic creative optimization (DCO) ad-tech solution, which leverages machine learning to choose—in real-time for each consumer—the most relevant set of messages and visual and text components to display.

Second, for the design component of the tech stack, many CPG companies say they lack an adequate digital asset management (DAM) platform. This makes it hard for marketers to easily access every version of the media and creative assets that have been created for a brand. It also inhibits streamlined content creation and management, which makes it difficult to standardize design elements across channels and to quickly and efficiently provide retailers and marketplaces with the specific content they need.

The current generation of these data-driven capabilities makes at-scale custom storytelling and closed-loop measurement a reality, letting marketers measure across channels and formats and understand what’s working, what’s not, and what to do about it.

Instead of approaching technology needs piecemeal, CPG companies should do a holistic assessment of their needs based on a strategic, consumer-centric selection of the most valuable and important use cases. One beauty company, for example, identified its ten most impactful marketing use cases, assessed the respective martech solutions it needed to pursue them, and created a road map of needed investments. From this, the company discovered that a DAM and a single-source product-information-management (PIM) system were necessary elements in a majority of its priority use cases. Marketing leaders prioritized near-term investment in these tools and phased in other key martech solutions over the next 12 to 24 months.

Much has already been written on how agile practices enable cross-functional marketing teams to test data-backed consumer insights and initiatives and react quickly to learnings. Although many CPG companies are already using digital pods (often referred to as squads or hubs) to do some testing, these teams typically only influence 10 to 15 percent of the overall marketing spend. With agile now considered table stakes—and new challenges presented by a hybrid, virtual working world—the next horizon is how to ensure a solid foundation for cross-functional collaboration that enables companies to scale impact.

Three priority actions can help build the right capabilities and embed new ways of working into a company’s DNA.

1. Set up the infrastructure to measure and scale successful tests

While many companies initiate small pilots and tests throughout the organization, companies that see impact from this new model create a measurement framework, criteria for scaling, and a process to drive it right from the beginning. They conduct their after-action reviews by always asking, “What did we learn, what is the impact, and should we/how can we scale across channels, audiences, brands, and/or geographies?” They are resolute about what key performance indicators (KPIs) to track and what constitutes a successful test. Additionally, they create a forum to bring together the right cross-functional stakeholders (for example, media, e-commerce experts, measurement leads, finance, and agencies) to align on results, the way a test is scaled, and how it will be funded. Even though CPG companies often hesitate to shift funds that are already allocated, scheduled, and solidified by joint business planning, this resistance can be overcome by starting with a small, predetermined budget for tests with the goal of becoming self-funding. As the business ROI case builds, comfort in reallocating dollars will increase. Further measurement of these bigger or additional tests will continue building the business case.

2. Make test-learn-scale the new business-as-usual

Learnings from agile tests cannot remain within a single pod. They must always be set up in a way that supports the business’s objectives. At one CPG, for instance, agile pods each initially had their own agenda, with pod members trying to convince brand teams to implement new learnings about audiences, messages, et cetera. The company decided to revamp the process so that the pods’ agenda aligned closely with the brands’ objectives and became a “lab” to help accelerate their business goals. By essentially embedding brand managers into the pods, the company was able to drive more tests that the brand teams wanted to scale (both in the current year and for future planning). The shift wasn’t easy—brand teams, finance, and even sales had to evolve their planning, resource allocation, and executional processes. But the benefit was significant: more than 25 percent improvement in return on ad spend.

3. Embrace new ways of working

Success in hiring and grooming digitally savvy talent and creating a data-driven culture will help separate the winning CPGs from the laggards. Too often, when CPGs embark on a data-driven marketing and agile-transformation journey, brand managers and other critical leaders aren’t fully invested or haven’t completely bought into new ways of working. For example, they may consider their work with agile pods to be separate from their “day job.” Top-down communication and support for a digital marketing transformation from marketing leaders—such as sharing wins in public forums or companywide communications—can help increase momentum and help others feel and believe in the progress.

Across every dimension, leadership matters. Beyond advocating for cross-functional collaboration, leaders have to also model it. “One of the most important questions leaders should ask themselves in a new data-driven marketing growth world is, Who are you spending time with?” says one former consumer tech CMO. “If the answer is mostly your brand and creative function, you won’t have the deep knowledge of what your data analytics teams need, how to help solve the challenges they face, and how data and creative need to come together to have the biggest impact.”

Planning ahead also makes a difference. The former CMO says the best advice he ever got was. “Chart out your organization a year from now and work backward—and get your direct reports to do the same.” Such advance thinking and planning for roles needed, the kinds of leadership desired, and the structure to put it all in place, he says, is what allows companies to “learn faster than the competition.”

This won’t be an easy transition. Although CPG companies already do bits and pieces of data-driven marketing, the winners will be those that thoughtfully shift their entire marketing organization and successfully deploy all five “ingredients” of modern marketing. But, as one former CMO told us, CPGs that strike the right balances—between creativity and data, between performance-driven marketing and traditional brand building—will “own the future.”

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