Work

Pop-up leaders and flexible staff are ready for a new crisis

The entire workforce has just taken a global stress-test and senior managers are far more prepared than executives appreciate

Companies can rely on the resilience developed by workers during the Covid crisis to manage the challenges imposed by the current surge in inflation and the war in Ukraine. Photograph: Przemyslaw Koch/iStock

Andrew Hill
Fri Jul 8 2022 - 04:50

Wanted: managers with hands-on experience of double-digit inflation and economic recession. Fluency in 1970s industrial relations an advantage. Knowledge of the business impact of war in Europe desirable.

Financial executives have raised the alarm about a lack of senior employees with exposure to the sort of economic gloom not seen for 40 years. City grandee Sir Win Bischoff has warned that recessionary know-how is lodged “in the minds of by-now-retired managers and mistakes are bound to be made by their successors”.

He is not alone. When I talked to former US general Stanley McChrystal recently, he drew a parallel between executives unused to the fight against inflation and peacetime officers and policymakers unprepared for a return to big-power geopolitical upheaval.

But inflation-hardened pensioners can stop pressing their pinstripes in readiness for a call-up. Bosses can also calm down. The entire workforce has just taken a global stress-test that ought to have left them better prepared for the next crisis.

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Murad Mithani of Rutgers School of Business-Camden has looked at how crises improve organisational resilience. He points out the links to “hygiene theory” – which suggests exposure to infection protects children from autoimmune diseases – and the “steeling effect”, by which stressful childhood experiences help people cope with later challenges.

If nothing else, more than two years of dealing with the consequences of coronavirus have made corporate leaders realise the danger of pulling an old plan off the shelf. “It’s a big paradigm shift to learn to live with ambiguity. Rigid frameworks and seeking certainty have not actually served people that well,” one chief executive told Veronica Hope Hailey of University of Bath when she interviewed leaders about their response to the crisis in 2020 and 2021.

The stark choices that the pandemic forced on them in early 2020 have given way to knottier questions involving difficult trade-offs

Managers developed “new forms of resilience”, she says. They learned to build trust with staff and to use values as a guide to how to act when hard data were lacking. “Pop-up leaders” – staff who rose to the challenges of dealing with the consequences of the pandemic – helped cover gaps.

High-stress moments

Chief executives told me during the pandemic that they drew on their response to the 9/11 terror attacks, or the financial crisis of 2008, or even their preparations for Brexit, when coronavirus hit. They did not need to find managers who had lived through a global pandemic. They looked to other high-stress moments for clues about how to handle this one.

“Close partnership and effective communication” between customers, suppliers, staff, unions and investors kept BAE Systems agile, says Brad Greve, the defence company’s chief financial officer. Now, “it’s really important that we build on that trust and apply and retain the many lessons from the past couple of years”.

Speaking at an FT board director event, McChrystal told me companies facing uncertainty needed to keep moving. “The best leaders understand that there is a risk in everything you do [whether you are] moving or not. If you are moving, often you energise the organisation better, the sensors are up, there’s a bit of energy... that comes from constantly adapting, [which] puts you in a better position” to deal with different risks.

Constant adaptation may also help companies “build back better”. In a paper for Academy of Management Perspectives, written before the pandemic, Mithani described how organisations that suffered repeated shocks were forced to change, rather than simply returning to how they were before the crisis. Doubtless the most successful managers of the 1970s forged something new out of their inflation stress-test.

There are caveats. The obvious one is that repeated crises are bound to wear down managers who, even six months ago, might have expected the clouds to have cleared by now.

Another is the danger, highlighted by Hope Hailey, that the way leaders handled the pandemic and lockdown may have raised expectations to a level that will be hard to meet as more complex problems assail businesses.

At a corporate workshop I attended last week, managers implied the black-and-white decisions taken during the first months of coronavirus were now fading to grey. The stark choices forced on them in early 2020 have given way to knottier questions involving difficult trade-offs. To what extent does hybrid work hide poor performers? Is corporate purpose a luxury in hard times? How do we meet the aspirations of new generations of workers? All this against that stagflationary backdrop.

One thing, however, is clear. To answer such questions, you would no more go back to the managers of the 1970s than you would jam today’s flexible staff into that era’s rigid organisational structure. – Copyright The Financial Times Limited 2022