How Leaders Are Responding to the Most Extreme Test
Angus Dawson, managing partner at McKinsey Australia and New Zealand, shares his expert advice on how leaders are responding to and learning from the most extreme test.
Will leadership change profoundly as a result of the coronavirus crisis?
This is probably one of the more extreme tests of leadership that most of the business and public- sector leaders will have faced so, yes, leadership will change and great leadership will emergeYou work with many CEOs of prominent Australian companies.
What have you witnessed regarding the way they’re leading now?
Leaders stepping up. Australian companies typically have very good CEOs. The initial phase of the crisis was characterised by a rapid realisation that we were facing something profoundly different to anything we could have expected or experienced. Most companies had fairly well- developed crisis-management plans. Some even had crisis-management plans that contemplated a pandemic, albeit most of those plans looked at events rather than the globally synchronised set of consequences that have happened. The leaders quickly got on with making the decisions they needed to in order to keep people safe and, as much as possible, keep business running.
Have you also witnessed some areas for development in terms of leadership?
The best leaders have been authentic with their people and are able to embrace uncertainty. We’ve gone through the initial phase, which was characterised by high-adrenaline, rapid decision-making – classic crisis-management mode. Now we’re moving into having to manage this over multiple time horizons. What’s the path to get back to work? What are the medium-term implications for the health or survival of our business? And longer term, what are some of the bigger changes that could happen, which, frankly, no one knows yet? How do you bring in good old- fashioned scenario planning to understand the range of different futures and what they could mean? The temptation is for most executives to want to pick a future and plan for it because good business leaders are often those who put a stake in the ground and deliver against that, come hell or high water. But we’re in a different context now, where anyone who thinks they know how this is going to play out is going to be wrong. So leaders need to have a combination of clarity about what they want their people to do but at the same time a respect for how uncertain this crisis is across both its health and economic aspects.
I’ve seen modelling with five or six different scenarios of how the pandemic could play out. How do you advise your clients?
At McKinsey, we encourage the use of scenarios; we don’t do forecasts. We’re a “what if?” and a “so what?” firm – what if the following things happen, what would you do differently as a result? We’re encouraging the idea of multiple scenarios – typically, four is a good number because it stops people anchoring on a middle one – and we think there are two
Are most leaders actively looking for new opportunities right now?
There are some companies that are fighting for survival and their leaders will be very much focused on that, as they should be. But there’ll be some companies that have the luxury of a bit more time and space and those organisations are definitely thinking about how effectively they – and Australia – can come through this better than they went into it, if possible.
There’s always been a lot of talk about the fact that startups have an entrepreneurial mindset but big companies often don’t. Do you think this crisis could generate more creativity in corporate Australia?
In terms of what characterises an entrepreneurial mindset, I’d say it’s people who have an unreasonably ambitious view of what can be achieved. They’re well grounded in the reality of the challenges of doing it but they’re able to make stuff happen to get there and are willing to fail along the way. Big Australian companies are much more entrepreneurial than they’re given credit for – there are lots of cool innovations coming out of big companies here. But in terms of this climate, yes, there’s much less attachment to the past and more willingness to put bold ideas on the table and experiment. And having the humility to admit that we don’t know all the answers is also an important hallmark of a more entrepreneurial approach.
We’re seeing a more human side of leaders, aren’t we?
The more leaders can be themselves and be authentic, the better. The other day, I was in a Zoom meeting and a CEO’s five-year-old daughter came in and held up a sign telling him that she’d lost the puppy. So we had to pause while the lost puppy was dealt with and the meeting ended with us all getting to meet the puppy [laughs]. It was a nice moment and it normalises the fact main dimensions to these scenarios people should look at, which is the extent of the potential economic harm in their industry measured by the extent of demand reduction or disruption to the financial health of players in the industry. On the other axis it’s the degree to which more fundamental business-model changes happen as a result, whether that’s customers who are going to borrow much less money over the next decade, if you’re a finance company, or customers who’ll shop online because of their experience during the COVID-19 crisis. We encourage leaders to think about the scenarios then step back and say, “Okay, what are the things we’re doing now that are pretty much no-regret under any scenario? What are the bets we might want to place now, knowing they may or may not come off? And what are some of the things we need to do to protect against the downsides of the more damaging scenarios?” You also need to be humble about the fact that your plan will probably be good for a few weeks and then you’ll have to redo it. It takes real discipline to separate out time to consider that and often requires a different team to do it, which can be protected from the day-to-day.
Are we seeing the rise of the anti-fragile leader, who not only steers his or her company through a crisis but also improves as a leader and comes out stronger at the other end?
In many respects people don’t understand their full leadership potential until they’re tested. The leaders who are going to thrive during this period are those who have a mixture of genuine humility, which is to admit they don’t have all the answers and are clear about where this is going to be challenging, but also the ability to bring together teams of people to chart a course through it. The antidote to fragility is flexibility so if you can be humble and action-orientated that’s a pretty good combination. that Australia’s leaders are ordinary people who happen to be doing extraordinary things.
How are the CEOs you’re talking to coping? They’ve been under enormous pressure.
The first few weeks were incredibly challenging as everyone worked non-stop to make sure people were safe until they understood what the hell was going on. Most leaders didn’t do it themselves – they had the teams around them step up and that brings a lot of strength and energy. It was leadership teams going through this, rather than individual leaders, and lots of camaraderie has come out of that, from the teams all the way to the boards, which were willing to simplify agendas and give execs time to get on with what was urgent. We’re still in the early days of what’s going to be a long road out and the question is how do those leaders look after themselves so they continue to do a great job? There’s the old metaphor of you’ve got to put your oxygen mask on before you put it on your children. Leaders who work themselves into the ground and get sick or can’t operate don’t help anyone.
Some leaders were slow to embrace flexible ways of working but that’s gone out the window now, surely?
We’ve all discovered that remote working can actually work quite well. We’ve identified the potential perils of it and the practical challenges and frustrations, too, but it’ll be a positive legacy of this. In some ways, a decade of gradual change will have happened in the space of only a few months.
What’s your great hope for leadership after the coronavirus crisis?
That our leaders collectively chart a path through this that protects Australia and our lives and livelihoods but also take the opportunity to genuinely reimagine what’s possible for this country. I hope we continue to have leaders who have this wonderful combination of humility and courage. If we do, we’re in great shape.
