Key people choices business leaders face due to COVID-19
18 June 2020
- The future way of working is set to accelerate - but needs to be carefully planned
- Businesses are looking at rightsizing or alternatives - but still want to invest in people
- Successful leadership depends on the ability to cope with paradox
Brussels, 18 June, 2020 - In the midst of this humanitarian and economic crisis, business leaders are being tested as never before. The current complexity and turbulence means they’re being confronted with very difficult choices in three key areas of people management: the way of working, the size of the workforce and the leadership skills required.
Future way of working: accelerate or not?
The crisis has forced thousands of employees to work from home, whereas in the past they were not able to do so. This has enabled many companies to continue to operate and mitigate the impact of the crisis on the company's results, making it difficult afterwards to justify that teleworking should not be further promoted and improved within the organisation. So, why not use this opportunity to take a giant step forwards into the future way of working?
Shifting to a virtual workforce can have an extremely positive impact, especially for certain categories of experienced employees. It can improve work-life balance, while at the same time avoiding unnecessary commuting - particularly advantageous when workers live far from their workplace. According to Statbel, the number of employees sometimes or usually working from home rose to 19% in 2019, from only 7% in 1999. However, implementing new ways of working requires preparation. “The crisis may have curtailed physical proximity of people, but many systems and processes have remained the same,” explains Bart Van den Bussche, Director, People & Organisation Consulting, PwC Belgium. “It’s important to consider on a case-by-case basis which groups of employees can work remotely, how frequently, which ‘rules of the game’ are applicable (e.g. about being reachable) and what the impact is on the rest of the organisation - in some sectors the options are much more limited.” Recent data from the PwC COVID-19 Navigator (an assessment of crisis preparedness that had roughly 3,000 global responses as of April 30) show that 82% of health sector respondents note that human interaction is required to deliver products and services, and 49% will not be able to effectively work remotely.
Although increased remote working can be a way for companies to cut costs during the economic slowdown, e.g. by reducing their real estate footprint, or reduced contributions to transport costs, there may be new costs: equipment, contributions to expenses such as internet access, electricity, heating, water, printing, etc. These aspects also require planning, to ensure the proper tax treatment (and social security contributions) of the allowance granted as costs proper to the employer that are not part of the taxable remuneration of the employees. Businesses need to obtain a tax ruling for these aspects. To cater to the above situation, the Rulings Office has already taken the initiative of establishing a “fast track” application procedure which enables rapid approval of the payment of a lump sum expense allowance.
Workforce: rightsizing or alternatives?
In PwC’s latest CFO Pulse survey 70% of finance chiefs said they are considering cost containment measures, and over the past few weeks it has become clear that many companies of different sizes and from various sectors will be forced to consider layoffs to survive (expected by 39% of CFOs in industrial manufacturing). The current crisis is also expected to evolve in waves rather than in a linear fashion, so boards need to review their organisational structure to cope with volatility, and prepare for the long term on the basis of scenario planning in the post-governmental support period. Finding the right size organisation for boards’ amended business objectives will not be simple.
What are the cost-cutting alternatives without significant workforce reduction? Various options are open to boards in this respect: freezing salary and benefit increases, freezing hiring for all non-essential positions, postponing start dates for new hires, reducing working hours, using the existing temporary unemployment regime, and aligning reward policies and procedures to the new business reality (for both staff and top management). Companies can also provide incentives to certain employees to leave, for example employees eligible for early retirement or end-of-career time credit leave.
Existing upskilling and/or retraining programmes should not be overlooked: in PwC’s 2019 Hopes and Fears survey of 22,000 people around the world, 77% said they would be willing to upskill in order to become more employable. In PwC’s 23rd CEO Survey, 74% of CEOs said they were concerned about a lack of key skills, and in the latest CFO Pulse survey, 94% of CFOs said they are confident in their company’s ability to build skills for the future. Taking one or more measures might enable companies to continue to hire in areas where skills are difficult to find and in positions that will immediately generate revenue for the business, and to maintain investment in upskilling.
Fortunately business leaders remain firmly focused on the wellbeing of their people in the crisis. “Employees are still the ones that perform internal processes, connect with customers, and design, sell, make and ship products - they’re the critical component of any business,” states Sandrine Schaumont, Partner, People & Organisation Consulting at PwC Belgium. “Our research shows that three quarters of CFOs intend to change workplace safety measures to protect employees as they transition back to on-site work. And according to our Global Mobility Pulse survey, when asked about how COVID-19 will affect international mobility, 56% of Belgian respondents expect business will return to normal with the same number of international moves.” While expecting global mobility of workers to return to business as usual, there is a growing awareness of the need for groundwork on how this can best be dealt with in future. For employee safety and welfare, policies for insurance, healthcare coverage and medical evacuation support for globally mobile employees are being reviewed. In addition, organisations need to keep up-to-date on new (temporary) initiatives or restrictions on tax, immigration and travel restrictions.
Leadership skills: reconciling opposites?
As businesses change dramatically due to the current economic turbulence, defining which skills are crucial now and in future for top management is also very difficult. Some leadership skills become increasingly relevant, such as dealing with ambiguity, strategic thinking, effective communication, etc. Perhaps most important is a mindset able to cope with paradox. Confronted with all kinds of dilemmas, boards and their management teams must continuously balance seemingly irreconcilable opposites: cost cutting vs. investing, or safety and business continuity vs. innovation. Even when communicating with employees and stakeholders, boards have to walk a tightrope between demands for greater transparency and confidentiality required to protect competitive advantage. “One-sided strategic choices can have a negative impact,” explains Tom Verboven, Director, Management Consulting at PwC Belgium. “Part of being in the driver’s seat of the decision-making process today is ‘balance’. Leaders need to embrace both sides of the paradoxes they face to be effective, and to enable their organisations to emerge stronger from the crisis.”
Contact
Erik Oosthuizen
0474 56 42 76