It is important to understand the problem. Even more important to understand the cause of the problem.
Many people confuse the cause of the problem with blame. Blame, no matter how well placed, rarely gets you closer to the solution, even creates distraction that prevents forward steps.
In what way can we fix (mitigate, prevent) the problem is a more useful question.
From the Ask Tom mailbag –
Question:
I gotta tell you that these comments are tone deaf to the situation we are currently in. I am a CEO and focused on survival. I do not know if there will be demand for our services in 1 month or 6 months from now.
Now is the time to lead through the crisis not dream or imagine what life will be like 5 years from now.
If I were to think 5 years down the road it would be like the captain of the ship on the flag pole looking for land while the boat was on fire. It would be best for the captain to get down and lead the team in extinguishing the fire.
Response:
I talk to CEOs every day. I wonder if some will make it, some will not, some are already out of business.
Many states have opened up (with restrictions), but just because regulation has relaxed doesn’t mean the market has returned. I assume most who qualified, applied for PPP and already made work-force decisions. You are likely monitoring sales like a start-up.
If you stand back and look at your competitors, what are the characteristics of those that will be alive in 2021? What did they focus on in the past 60 days? What will they focus on in the next 90 days? What will they focus on, rounding out the year into next?
I don’t know for certain what will happen tomorrow, but I have a pretty good idea. I can even forecast the number of COVID-19 deaths that will occur tomorrow, within a reasonable margin of error. But, tomorrow is not where the game is played.
For the most part, we can anticipate what life will be like in three months time.
“People tend to overestimate what can be done in one year and to underestimate what can be done in five or ten years.” – J. C. R. Licklider, Libraries of the Future, 1965.
It is important to make sure your teams are assembled and safe to do the work tomorrow, but the real chore for the CEO is to imagine life (markets, regulations, labor, technology) in five years time.
In four years, your five year plan will be your one year plan.
By the time an organization reaches S-III maturity, its core system is maturing and provides for eventual profitability. At S-IV, the organization sees the emergence of multiple systems and sub-systems (marketing, sales, account management, operations, quality control, research and development, HR, accounting).
At S-V, with maturing multiple systems and sub-systems, the organization has to look outward, to external systems. No matter how well the company is organized internally, it is external systems that impact success (or failure).
Market (External System)
Markets organically shift related to demographics, trends, economic growth or contraction. These organic shifts are sometimes subtle and relatively slow. The relative slow speed allows companies to respond (market response).
Regulation (External System)
Most companies are financially regulated (taxes), some are subject to stringent environmental regulation. During COVID-19, regulation dramatically clamped market demand, by defining essential vs non-essential companies.
Labor (External System)
The US went from record low unemployment to depression level unemployment in a matter of 60 days. Labor is an external system that impacts the way we internally organize.
Finance (External System)
Finance includes institutional debt, credit lines, owner investment, private equity investment. The company believes it should be able to borrow as much money as it has the ability to repay. Banks, on the other hand have these concepts called covenants which require certain internal ratios. Finance, as an external system has an impact on the way we internally organize. COVID-19 shifted credit in some cases to forgivable debt guaranteed by government.
Most of these external systems stand alone, but COVID-19 has brought together a not-so-subtle interplay. The organizations who survive are those who are mature in their internal systems, but also understand the interplay and impact of external systems. Those companies funded in the first tranche of stimulus were those who kicked in applications immediately. Most smaller companies, with immature systems, without awareness of external systems were brushed to the second tranche or left in the cold.
It is the role of the CEO at S-V to ensure both, maturity of internal systems and skilled experience in external systems.
Let’s get back to work. Unlocking the door and greeting your first customer feels positive, but is it enough to sustain?
As the business leader, more importantly is understanding the viability of your re-opened business operation.
Total Throughput
As operations resume, parts will come humming back, but in the background will be friction. This is not a game of spinning plates. One or two high performing departments won’t cut it, you have to look at total throughput. Restaurant kitchens always have output capacity, but throughput is constrained by the dining room. People only eat so fast, tables turn only so many time during a meal period.
Velocity
And, in the near term, dining room capacity will artificially be constrained by 75 percent. How fast does profit travel through your output system?
It feels good to open the doors, but there will be new constraints imposed that have to be accounted for in your business model. Those that survive will figure this out, now, and make appropriate adjustments.
All the king’s horses and all the king’s men couldn’t put Humpty together again.
Yesterday, someone asked me, as we move from shelter-in-place to a re-open of the economy, what should a CEO think about? Of course, there is work to be done, and we will bring people back to do that work, but what should the CEO think about?
There are two concepts embedded in these questions.
Necessity
Levels of work (levels of decision making, levels of problem solving)
Necessity
If your company considered the purchase of a $100,000 machine, and it was NOT necessary, would you buy it? That same decision has to be made about the roles inside the company. Now, is an opportunity to examine your organizational design and ask, is this necessary?
Levels of Work
Most CEOs do not think about the work necessary to make the product or provide the service. Understanding the level of decision making and the level of problem solving are specific clues to the talent you need. Now, is an opportunity to examine the levels of work and ask, do I have the people on my team who can effectively make those decisions and solve those problems.
The time to re-think is over. The time to adapt is now. Actually, never too late to re-think.
All of these things will impact your business model, the way your customers interact with you, the way team members interact with each other. Intrinsically, we are social animals who want to be together.
These permanent adaptations will seem clumsy at first, but permanent nonetheless. And the clumsiness will become practiced, and those among us who practice will become competent at a new way. And the new way will improve on par with the old way. And, we will wonder what took us so long to get over our resistance.
Things look dire. We are on the precipice of disaster. Twist of fate with permanent consequences.
All these headlines are designed to hijack the primal brain. The primal brain only asks this one question – Is what I am about to hear going to kill me? If it is, then I will pay attention. And, it does.
The leader has to engage beyond the primal brain. But, how? We cannot deny the primal brain was stimulated to cry out an extreme warning. We simply have to thank the primal brain for sharing, “thank you for sharing.” And, move on.
It’s not a matter of what is happening now. The leader has to think, how will things be in three months time? How will things be in six months time? This emergency will be over, and then what?
We created our crisis response. Uneven across the landscape, some more affected than others. By now, we are doing what we thought prudent. For some, that will necessarily be maintained, others may see dramatic shifts in the next four weeks.
Get Ready
While your crisis response is set (one way or the other), it is time to plan for a transition. It is time to blend your crisis response team with your transition team.
Time Frames and Scenarios
Look at the extremes that may happen in your what-if scenarios. Look at the time frames –
This is not something that will just get fixed. This is more likely a chronic condition we have to adapt to. Even if herd immunity kills off COVID-19, you can rest assured there will be a COVID-20.
“They just don’t listen,” Roy complained. “You would think they would have some respect. After all, I have been doing this job for more that 15 years.”
“It’s because they have a dot,” I replied.
“What do you mean they have a dot?”
“A dot. Everybody has a dot. Your team members, each, have a dot. You have a dot. Only your dot doesn’t match their dot.”
Roy was quick. “Okay, but if their dot is wrong, why don’t they listen to me?”
“I don’t know, why do you think?”
Roy was ready for bear. That’s a Texas expression that means Roy wanted to argue. And he was perfectly willing to go first. “Sometimes, I think they are just pig-headed, stubborn. My logic is easy to see, but if I point out they are wrong, it seems they cling to their ideas even harder.”
“Imagine that,” I pondered out loud.