This article first appeared in MIT Sloan Management Review, February 5, 2020.
By: Antonios Christidis and Bill Heath
Employee development may be a complex, long-term priority, but it's more effective than short-term responses to disruption.
Faster product development cycles and rapidly evolving technologies are accelerating business disruptions. Companies facing recurring transitions typically respond by cutting costs, exiting a geographic area, streamlining supply chains, or revamping their brand. But which of these strategies is the most effective response to disruption?
We surveyed 954 managers in North America and Europe to better understand the keys to surviving disruption and found that a majority of respondents felt they had successfully managed through upheavals. Surprisingly, most deemed the above strategies as less important to their success than investment in their work cultures to develop workforces capable of reacting nimbly to the blistering pace of disruption.
To become more resilient in the face of sudden change, most respondents felt it was just as important to improve the way their people work and to update their skills as it was to introduce new technologies. Specifically, they thought it was important that employees help to deliver their corporate strategies — and that leaders act as positive role models and promote a work environment based on trust.
Integrate People and Strategy
Many survey participants felt they were effective at managing disruption. Of these, 77% reported that their business and people strategies were closely linked. In contrast, only 35% who said that their business and people strategies were minimally integrated reported high success.
One bank we worked with, for example, executed a successful digital transformation by linking its business and people strategies through crowdsourced ideas from their employees. When the management team held an innovation competition that allowed employees to voice their aspirations, it sparked hundreds of suggestions (many of which were implemented) and boosted employees’ investment in realizing the bank’s goals. By putting people first, the bank came up with a system that benefited its customers.
Clearly, business leaders who persistently demonstrate their commitment to employees through words and actions are more likely to earn trust and loyalty. And those qualities help companies survive disruptions and thrive thereafter
Show Employees They Are Valued
Empowered and engaged employees are more likely to go the extra mile to help their company succeed in times of adversity. Indeed, 80% of respondents to our survey who felt they successfully managed disruption believed that employee communication and engagement were highly important to their success.
Clearly, business leaders who persistently demonstrate their commitment to employees through words and actions are more likely to earn trust and loyalty. And those qualities help companies survive disruptions and thrive thereafter. For example, one bank recovered from a scandal after, among other things, its new CEO started openly communicating with employees, investors, and other stakeholders through daily LinkedIn posts that expressed his excitement about the future while also acknowledging the challenges of the past. At first, the posts went unanswered. But eventually, they resulted in a broad, two-way dialogue with employees.
In a similar vein, leaders of energy firms can help keep accident numbers low — despite downsizing due to low oil prices — by repeatedly visiting employees, prioritizing their safety, and following up with concrete actions such as reengineering equipment and amending procedures.
Invest In Workforce Development
Another way managers successfully persuade employees to stay on and help their companies survive disruption is by investing to improve their skills. Some organizations fill skills gaps by hiring new people with needed capabilities while removing employees or automating tasks to limit redundant skills, but companies that invest in their people often fare better. In fact, an overwhelming two-thirds of respondents felt that updating working practices and skills — along with adding new technologies — was key to managing disruption. In contrast, only 44% of managers felt that downsizing worked.
Although companies may hope to address skills gaps by simply hiring new talent wholesale, this approach isn’t always feasible, because they aren’t alone in their need for new skills. Companies may not be able to find (or afford) the talent required. That’s why even tech giants at the leading edge of creative disruption invest heavily in strategic workforce planning and learning and development as a means to increase internal mobility. They allow their employees to experiment with new projects beyond the barriers of their departments. Lumbering legacy giants are also finding that investing in their people is the fastest way to reinvent their organizations. Companies facing obsolescence with people trained in a different era are discovering that it is possible to rapidly retrain current employees while engendering a culture of perpetual learning.
A Disruption-Ready Culture
Many leaders view investing in their employees as a complex problem and long-term priority. They focus more immediately on pressing, short-term issues such as cost reduction and regulatory reporting. But our findings suggest that leaders will be most effective if they prioritize developing their workforces during ordinary or even prosperous times, rather than waiting for a skills gap to explode. For example, by consistently communicating fresh ideas about future pathways, management teams at some technology companies have been able to persuade employees to stay on even when their main product line suddenly became obsolete.
Before businesses are disrupted, leaders should double down and focus on their existing employees by communicating and engaging with them, investing in their development, and ensuring an appealing post-disruption environment. The very factors that build resilience and bolster a company through potentially jarring transitions are the same as those that will create an employee-friendly environment that may prevent it from being blindsided by change. In an age of technical wizardry and virtual solutions, an age-old solution may still hold sway: It’s an engaged and committed workforce that makes a company great.