coronavirus: rapid planning for faster business recovery
Watch Rupert Morrison, CEO, orgvue, speak at HRD Summit: A Virtual Experience on how to plan for faster business recovery after Coronavirus.
It may seem a long way off but eventually the Coronavirus crisis will subside. As difficult as it will be, businesses will then have to face the economic damage that’s been done.
In this session, Rupert Morrison explains 3 possible scenarios for how the Coronavirus pandemic will play out and the steps HR leaders can take to navigate the economic uncertainty ahead.
Thinking ahead in the midst of panic and confusion could protect your business from the worst of the fallout. By planning now, your organization will be in a better position to return quickly to full business performance.
Speaker: Rupert Morrison, CEO, orgvue
Recorded on Thursday, June 18th 2020 at HRD: A Virtual Experience.
Hello, everyone. My name is Rupert Morrison. I’m the CEO and founder of orgvue. My background: originally from New Zealand and an economist by education. For my sins, I started life as a management consultant and thoroughly enjoyed that but got frustrated with spending my life creating PowerPoint slides, developing Excel models and trying to help my clients do org design more effectively. I thought there had to be a better way.
So, I did two things. I wrote a book to segment the methodology, which is called Data-Driven Organisation Design. And I founded a company, orgvue, so that we could actually digitize the process of doing org design. But it’s important to stress the thinking and the theory. The practice came first and then the platform followed, so that we could enable proper design. I will elaborate on what I mean by that through this talk, but I’m going to do that in the context of the current crisis we’re in.
And I think there are three messages I would like you to take away. As this is an NHR director conference, clearly everyone listening believes strongly that the organization is absolutely critical. But I think what’s transposed through this COVID crisis is that it’s reached the top of the executive agenda. And people, executives and management have come to recognize just how critical it is to understand the organization, so they can execute your plans. The second takeaway is that in order to plan and replan and be quick at doing that, you have to take a data-driven approach. And being data-driven enables you to be more effective at planning, designing and thinking through different circumstances. And thirdly, you have to become adept at adapting.
So, the world’s always been disrupted; disruption is nothing new. The pace of change is forever accelerating. There are big things like the future of work and the impact of automation and machine learning, globalization, all of these trends. And many other trends are common. But the pace is the thing that’s changing, but also how disruptive events like COVID can be.
I think it’s worthwhile just reflecting that pre-COVID if you’re in the UK, you’ve had the Brexit process and all the uncertainty that has driven. You had the financial crisis of 2008 and we had 9/11 in 2001. So, the world is constantly being hit by exogenous shocks, and so we shouldn’t just think that this is an isolated event.
What a data-driven approach enables is swift and more effective decision making. What we’re fundamentally trying to ensure is that we get the right people with the right skills, the right behaviors and right competencies, doing the right work, having the right levels of accountability for that work in the right locations and the right numbers, so you can execute and achieve your strategic objectives and pre-crisis business strategies.
Back in the day, when I started, we’d do this using Excel and PowerPoint, and it would take months and months to come up with a plan. Now we’re planning, replanning on a quarterly, monthly basis. So, you need to speed up and be more effective at doing that. In terms of COVID specifically, the way that I’ve thought about this is there are three stages. Some people have used much snazzier language, but the first one was really understanding the employees and the health and the wellbeing of our employees. When we hit the crisis, but as we’re going through this, we want to make sure that we understand the physical and psychological wellbeing of our employees and where there are risks or issues that we can help address, that we know that people, if they’re working remotely, are doing that effectively, that we understand if there are dependents, and we understand the impact on productivity and what have you. That is the first step.
The next step is really about maintaining business continuity. So, which roles are mission critical for us to survive through this process? What are the activities that we can’t delay, and we need resilience – this alongside business continuity has probably come to the fore more than people thought would be the case. I’ll give an example here: in my business, credit control is a critical activity, but my organization is not huge in scale, so we don’t have a critical mass of employees doing credit control. Actually, we really had just one person responsible for it. So, when we were doing our planning, we thought, “What happens if that team or that person becomes sick?” And it’s quite likely that at some point they will. So, we identified activities like credit control and cross-trained and upskilled other people in the business and finance function to be able to take on that work, in the event that wouldn’t be the case. So, business continuity is really understanding the activities and the work, as well as things that the finance team always looks at, like cash flows, forecasting cash and all these sorts of issues.
We will come out of this, and when we come out, those that are best prepared, those that have laid the foundations and have used the time – because we do have more time now to plan and to set the foundations – will recover the most effectively and maybe gain market share, will certainly be able to achieve their objectives. The world doesn’t stand still, so how do make the most of this situation?
I’ve only got half an hour, so I’m not going to get into too much depth in any one of these topics, and I’ll focus more on business recovery. But just in terms of employees first, an example of something that we do for ourselves and our clients is understand the entire organization. What you see here is every box is a person within the structure of the organization. You’ve got the chief executive officer and then on the left you’ve got the president of services. And under that, you have the different pieces. So, this is broken into the different functions, subfunctions and roles. And it’s colored by health. So, has the employee displayed any COVID-19 symptoms or have they displayed symptoms and are currently self-isolating, or are they just unwell, or they’ve had a positive diagnosis and have been tested, or have they recovered after displaying symptoms?
So, you can see visually where in the organization you have people that perhaps are unwell and if there are any pockets or teams that are struggling. Then, over time, you can start to see how that changes. You can see those with COVID increase and then decrease – and I should point out that this is sanitized data. What we’re also wanting to look at, and this becomes more and more important, is what can we do about it? What action? How can we help employees?
So, we sent out 15 questions, which we tracked on a regular basis, and one is around childcare. Which employees had children that they were looking after and is there anyone that is solely responsible for those children, are any of them at school age or not. We segment the workforce and that drives a certain action Other questions we asked: were people living alone, did they have the IT infrastructure they needed, were they struggling?
Thinking about these things is scenario planning, which is fairly common now. [For Coronavirus], you have the V shape [model], which is a deep recession but very swift recovery, the U shape, which is deep in but much longer to come out, the L shape, which is deep [recession] and we stay there for a protracted period of time, and the W shape where we’re in and out, in and out of a downturn.
This is all about expectations [because] no one really knows what’s going to happen. The most common view is it’s going to be U shaped, but this is going to be very different in different geographies. As I said, I’m originally from New Zealand, and in New Zealand everything’s opening up again. People are getting together for parties, sports events are being put on, and people have returned to work. However, tourism is down, and other industries are impacted. So, it’s not just relevant to think about how this impact your economy; each economy is impacted differently, but also each industry is impacted differently. Some businesses are growing rapidly, others are really struggling, so you need to understand the macroeconomic impact and then the impact on your organization and, within that context, set plans.
What I did was create multiple scenarios at the beginning of February into March. We had V, U and L shape scenarios. Now, we’re re-planning because we’ve learned so much and we’ll have a July reforecast with an updated work plan. It’s important to work very closely with Finance to understand what the financial drivers are – productivity, EBITDA, cash, all these sorts of financial measures, and then what the workforce is and what you’re trying to achieve. Then, how do you ensure that the workforce and the organization are achieving those objectives, which are moving over time, because the whole world’s shifting?
When we talk about the organization and organization design, David Ulrich said this, I think, fantastically that “people can be champions but organizations win championships. It’s not talented people that provide the competitive edge but organization systems. The key question is how to build an organization as a system to win in the marketplace.” Now, the idea that an org is a system is not new. Galbraith had the star model, the five elements of the system and McKinsey had the 7S model. So, people have said that the organization isn’t just structure and who reports to who, but how do we turn that into something that’s practical? How do we think about, or how can we quantify, each of the different lenses of that organization system and, most importantly, tie them together? I’ll try and answer that.
The first thing to say is that your strategy drives your organizational system, and the system is there to drive your business performance. And so, you can quantify how effective your system is — and a lot of people think ‘organization effectiveness’ – how effective [the organization] is at executing strategy and driving business performance as defined by strategy. We do this by connecting the system with data.
We start off with people. We have data about those people. You have an employee, ID, name, grade, salary, date of birth, demographic. We would typically have 60 to 100 pieces of data about a person. But people do roles and roles have to be designed. It astonishes me how often I see the information that organizations have – some of the most sophisticated organizations there are – and how few of them have a grasp of their ‘role grid’. The role grid is what [defines] the role families and levels. [Incidentally,] you shouldn’t confuse level with grade. Grade has to do with pay and compensation, [while] level has to do with accountability and time discretion – that really ties back to Elliott Jacques’ thinking.
So, we have the level and within that we have all the roles. For each role, there is a purpose. Then we link to the grading pay and bonus and all these other things. ‘Positions’ have a one-to-many relationship with the role. So, for each role, there could be one or many, even hundreds of thousands of positions. An example is the role of ‘sales rep’; the position has a scope, a title and location, so it could be ‘sales rep for in north east of the US – and these positions can have a start and end date. As you’re scaling up your organization, you have more and more positions. Or you might be scaling down parts of the business, so you have end dates and then people fill positions.
What we’re doing is connecting these different data sets, and there’s relationships between them. When we think about roles, we think about three different datasets. [Firstly, what the role is trying to achieve and what outcomes the role is producing. So, for a sales rep, it’s going to be sales but it’s also going to be the number of client satisfaction scores, in my industry, net revenue retention. [Then there’s] the work that the role does, what the activities are and what accountabilities [it has].
A lot of people have heard of RACI mapping. This approach is similar to that, I’m just not a big fan of RACI, because I think it’s too confusing. What’s the difference between responsible and accountable, [for example]? Most people don’t really understand that – I just want to know who’s responsible. I also want to know if it’s a decision, who’s got veto power? Who approves what decision? What RACI doesn’t capture is who actually does the work. [Instead,] I talk about RAD – responsible, approve, do – but whatever acronym you use, you’re setting a target – and the target on activities is accountability.
Equally, you have competencies. What are the skills, the behaviors, the knowledge required to be effective at doing that work so you can achieve those outcomes? And that is role specific. It’s all well and good to set that and produce a job description, but what we’re also interested in knowing is what the actuals are. What are the outcomes that are being produced? What’s the actual work that people do? What are the competencies and what’s the gap? That’s how we connect the system and we’re doing it dynamically over time.
I’m now just going to focus on positions and people and to some extent roles. When we think about positions, we think that’s our demand, that’s a workforce plan, and when we think of our people, that’s our supply. When we do workforce planning, it’s important to recognize that there are different levels of detail.
People they throw out a term like strategic workforce planning, not really defining what that means. I like to break it into three levels: strategic, operational, and tactical. For strategic planning, [the time] horizon is multiyear. So, depending on your industry, 3 to 10 years; if you’re a nuclear plant or something like that, then it might be 15 to 20 years into the future.
Now, with that planning horizon being so far into the future, the level of granularity has to be a lot less. You’re really thinking quarterly or annually. Maybe you have a 10-year plan, you’re thinking in maybe not even annual tracks, maybe, three years out, six years out, nine years out. Then the level of aggregation, you’re really doing it at business line. [With] geographies, in 5 years’ time where do we think we’re going to be – Europe versus North America or APAC? Certain business lines might be growing, others might be declining. Role family is even slightly above that. You’re not thinking at the position level or even at the role level. How many roles do you need of x? How many people in IT do we need? How many developers do we need? How many marketing [people]? That’s the strategic level. And what you’re trying to do is take away that complexity, so you can think in time.
Operational workforce planning is really akin to budgeting. It’s akin to the monthly, quarterly, annual cycle. The planning horizon is at most up to 24 months. Often it will just be 12 months into the future. And the level of granularity, its monthly, and it’s aligned to those reporting cycles, and you’re really doing it at the position level, the role, and position level. Tactical workforce planning is really resourcing, done at the individual level. That’s allocating people to shifts, and the planning horizon, might be four to eight weeks. It’s a daily, weekly level.
When it comes to strategic workforce planning, it’s important also to think about your workforce segment. You want to slice the organization in different ways, and a way to think about it is time to productivity. You’re really doing work for segmentation at the role level. The question is, if someone in that role leaves, how long does it take to source them, so to hire, onboard, train and make productive, so that they’re fully productive? And to quantify that in terms of months. We call that TTP, time to productivity.
So, if a role is done ineffectively, what would the impact be on the key business outcomes? And there are different ways of quantifying this, but a way is just to use a spring scale where you pick the most critical role and you make everything relative to that. But then there’s also growth. So which roles are growing the most and which ones are declining? When you’re doing segmentation, it’s quite helpful to think of a few different dimensions, and you do this at the role level, so actually the amount of data isn’t that great.
And then we move into the planning cycle. Plan, do, review, everyone’s heard this. [But] what does ‘planning’ mean? Where do we want to get it? What are the targets we want to achieve? Then you execute, so you want to understand actuals. Then you review, so you want to understand the gaps. Where are we above, where are you behind. And then you move into replanning.
So, this is a continuous cycle. Practically, the way we [do this by defining] Target-Actual-Forecast. You say, “Well, we want to go from 2.4 million to 3 million. We want to grow the organization cost by x amount and set that at a point in time. Then you say, “Well, how are our actuals doing?” [Maybe they’re] well above target. And the forecast is, “How do we get to where we need to be?”
Obviously, you can always revise your targets and there’s a governance process for managing that. What we’re really talking about here is position management. Operational workforce planning and position management are totally intertwined. Often the CHRO will say, “I’m the chief employee experience officer”, and the entire lens is on the employee lifecycle and the experience, which is absolutely critical. Employees need to have a fantastic experience and need to be well looked after, and you need to work them through their lifecycle. This is not an either-or discussion; this is an and-and discussion.
But position management also has a lifecycle. You plan positions and you do scenario modeling. You say, “What if this, what if that? How could we react here?” So, you’re planning. A plan then turns at a certain point. You say, “This is a budget.” You make a decision, the time for talk is over, you make a decision, and you have your budget, and that then gets turned over to talent acquisition or internal moves, and you’re hiring for those.
Or if you’re demising the position, you’re working out how to reduce the force to meet the lower demand. So then they’re filled, and then there’s a maintenance process, employees moving from position to position, that’s dynamic, and then at a point in time that the positions no longer required, or the position might be changed, then two new positions are created and it’s demised with two new positions in place. If you’re in a growth organization, you’re doing that all the time.
It’s interesting to think how this all impacts the employee lifecycle. You have your operational workforce plan and your budget. Then you move into recruitment and talent acquisition, [then] onboarding and payroll and then maintenance, which impacts succession planning. Then you got demising, which is the exit process and compromise agreements and all those kind of elements.
What’s important to understand is how your actuals versus your targets are evolving and, at a point in time, what does that look like? What is the actual compensation versus the target compensation? What is the headcount data? You want to understand where you’re over, where you’re under, so you can deep dive and do something about it.
What hopefully I’ve demonstrated is just how critical the organization is. You can’t execute your strategy without it. In a time, particularly now, it’s of paramount importance. How many CEOs say our most important asset is our people? Any board report, any annual report will say our people are the golden source of value, but the organization is often the last thing on the agenda. That has shifted because it’s so critical.
But how do you do it? And everything I’ve described is turning a lot of traditional processes and applying that in a data-driven way and using a data-driven approach, so that you can be more effective at planning, more effective at designing in those changing circumstances. To be adept at adapting, being nimble and agile, you need the data at your fingertips. You need to be able to drag and drop, make changes in real-time, so that you can make those decisions with confidence that you’re making the right decision. When things are veering off course, you know that early, so you have early warning signals [and are able to] take action quickly because none of us gets it right all the time.
If there are questions, please let me know, and I will go back to the team and see if I can answer [them]. [Here’s] one question: “What would you recommend as the very first step to creating this kind of system in a very traditional, resistant organization? My exec team are interested in revamping organizational design, but I’m not sure they see the full value. How do I start getting their buy-in on a project like this?”
So, the first thing I would [ask] is what are we trying to achieve? What are the business outcomes we’re trying to achieve and why are we not achieving it? Now, they might say we don’t have enough capital, we have the wrong product or we’re in the wrong market. But for most of those answers will come down to an organizational question: Why are you not executing? [They say,] “We don’t have the right product”. Well, why is that? “Do we not have the right product management function. Do we not have the right marketing? What work are we not doing to understand that?” Sometimes it might be a process question, [which] often comes down to skills and competencies.
So, you don’t have to talk in the organizational model to start off with. Talk about what we’re trying to achieve, what’s getting in our way, and then you start talking about the organizational ways of addressing those questions, and therefore you start moving to organizational design.
It’s fascinating to me when I look at competency data, [for example]. I’ve sat in a room with CEOs of the different brands and they’re more interested in competency data than anyone, because their ability to execute is [based on whether] they have the right skills, behavior and attributes to execute effectively. I mean, that’s what management spends a huge amount of time talking about. I think it’s just elevating the conversation to that business discussion.
By the way, this has a huge financial lens. Your organizational planning is also a financial plan; it’s the people cost over time. Finance always talks about efficiency and productivity. Well, you can do the same thing [by saying,] “What is the cost of delivering, of doing this right?” Do you have the people at the right grade doing the right work, or are they too senior?
Often when we do activity analysis, we see that 30% of the senior management is doing transactional activities. They shouldn’t be doing that work. Is the work being done in the right location? And then business leaders will say, “We need to be able to deal with the future of work.” Well, what work? What activities are you really talking about? What is the cost of doing that? If you’re going to automate that [work], what would the impact be and how could you quantify it? Very quickly, this [becomes] a business conversation.
And [when you say] ‘traditional’, what does traditional even mean? If I go back 100 years and look at the Fortune 100 and [ask] how many of those organizations exist today? Well, the answer is zero. GE was the last one that exited the Fortune 100. [Jeff] Bezos said recently that he fully predicts that Amazon won’t exist in 30, 40 years’ time and his whole job is to hang on for as long as possible. Now, that’s coming from the world’s wealthiest man [from] one of the most valuable organizations on Earth.
So, by definition, no one can be ‘traditional’. A friend of mine works in an organization that has been around for 400 years. It’s a Swedish organization. They’ve evolved from making guns to now creating all sorts of things, leveraging technology and automation and robots and all sorts of amazing stuff. So, is that a traditional organization? Well, what they produce is fairly traditional, chainsaws and garden supplies and all these sorts of things. But is it traditional? No, it’s an incredibly innovative organization.
If you have that mindset, the risks are probably just too great, and I think most leaders would understand that. Hopefully that answers the question. So, again, thank you all so much. Hopefully, this was useful. Shame not to see you all, perhaps sometime in the future.