Rules for a recession: stick to core business and hold on to great talent
KPMG’s Financial Institutions Performance Survey 2022 (FIPS) offers some concerns and insights that businesses need to be aware of.
Having a sustainably superior business almost certainly depends on having a motivated and high-performing team.
Let me sound my clarion call to all private company board leaders, CEOs, and executives up front, loudly and clearly: the future of work is going to be hybrid, and company culture will be a key determinant of sustainable success.
My view has always been that an organisation’s performance with respect to talent is every bit as vital as its other business drivers, such as strategy, marketing, and what I refer to as the “success six-pack”: safety, quality, on-time delivery, revenue, margin, and cash. Whatever metrics your organisation may track, having a sustainably superior business almost certainly depends on having a motivated and high-performing team—a team you need to retain as you attract new talent to support growth and ongoing business.
Covid-19 has transformed workplaces everywhere, with a large (and growing) block of workers preferring remote or hybrid work—or, at the very least, more flexibility when it comes to when and how they are in the oﬃce.
As a student of military history and former Air Force oﬃcer, I believe there is always real risk in preparing to fight and win “the last war.” Those of us in leadership positions almost certainly developed our skills face to face on the shop floor, in the field, or at the oﬃce. However, these leadership models are not universally applicable today to global teams that primarily interact on PC screens, phones, tablets, or increasingly, wearable computers.
The new normal requires a flexible rule book to deal with what many have dubbed “The Great Resignation,” which Derek Thompson noted recently in The Atlantic is “mostly a dynamic ‘free agency’ period for low-income workers switching jobs to make more money.” While he refers mostly to lower-wage earners, though, the same phenomenon is happening with engineers and other higher-earning professionals. In fact, on the day I wrote this article, a quick web search for “The Great Resignation” returned 1,950,000,000 results. Something very real is happening, and boards need to take notice.
Job considerations have generally included location, salary, benefits, alignment with personal values and mission, flexibility, and opportunities for advancement. None of that seems to have changed. What is diﬀerent is that the pandemic and forced remote work have changed the way we think about employment.
The primary advantage smaller private companies once enjoyed against large public companies was location. Many people liked working in smaller towns or suburbs with better schools, more room, and fewer “big-city issues” such as crime. They may have had the opportunity to work for better compensation at a large company (like Google, Meta, Microsoft, or Amazon), but they did not want to relocate to the Bay Area, Seattle, or some other large city where the cost of living would eat up much of that diﬀerence.
The pandemic and remote work changed that—and took away a big advantage over private companies. Hybrid work means that where you live is now only loosely associated with your company’s location. Big-company opportunities, pay, and benefits are now a real option for these talent resources, and that is contributing to the attrition being seen by many companies.
If you can’t exceed or at least match the salary, benefits, and opportunities for advancement that large public companies provide, how do you compete? The answer lies in creating an engaging, empowering, and elevating culture.
Now more than ever, employees want to feel deep engagement with their work, their fellow employees, and the impact their company is making locally and globally. If people aren’t face to face in the same environment, though, it can be very diﬃcult for them to develop the natural connections that proximity and repetition provide.
Boards should be challenging management on how they are curating an intentional culture of engagement. What technological tools are they using? At what frequency is leadership reaching out and connecting with teams beyond traditional work direction and management? Is there a feedback mechanism for employees, and if so, what is it saying about the company culture?
Compared to larger, more bureaucratic public companies, smaller private companies can be more agile and authentic in connecting meaningfully with employees to foster a sense of community and belonging. These smaller companies should take advantage of this potential strength as they work to build a healthy company culture.
In a decentralized, hybrid work environment, it can be easy for employees to feel some loss of direction. One solution is to ensure management is sincerely committed to empowering them to do their best work with more independence and autonomy. Boards should be asking leadership to elaborate on how they empower their workers to tap into their creativity and initiative in a hybrid environment where “remote supervision” can feel like an oxymoron.
Additionally, private companies and their boards need to consider their culture in terms of employees’ future opportunities. Indeed, the days of presenting a gold watch for 25 years of service are mostly behind us. According to the Bureau of Labor Statistics, wage and salary workers were only with their current employer for a median of 4.1 years in January 2020. When recruiting talent, much eﬀort is spent on identifying people and persuading them to join the organization.
If a company assumes that employees’ tenure will be limited, it must establish a growth path for these workers. If the right opportunity comes along for them and it happens to be outside of the organization, the business is better served by celebrating the employees’ growth and graduating them to “alumni” status so that they remain advocates for the firm in their new company.
If caring about employees comes from an authentic place, it should be demonstrated in recruiting and onboarding. It should be evident in how employees are treated in their current role and how the company prepares them for their next.
Ultimately, it means caring about them professionally even after they leave the company—if they left on good terms. Why wouldn’t you?
The future of work is hybrid, and this environment makes it harder than ever to build and maintain a cohesive culture that supports the organization’s mission and customers. Since remote work has opened up employment opportunities independent of geography, smaller businesses will have to compete on the basis of the culture they curate with their workforce.
Salaries, benefits, and long-term incentives remain satisfiers, but the only sustainable advantage private companies might now hold over larger competitors is a positive, authentic, and human-centric culture.
This article has been republished with permission from the National Association of Corporate Directors (NACD).