The heart of resilient leadership: Responding to COVID-19

A guide for senior executives

Five fundamental qualities of resilient leadership distinguish successful CEOs as they guide their enterprises through the COVID-19 crisis. Learn specific steps that can help blunt the crisis’s impact—and enable your organization to emerge stronger.

Source: Deloitte Insights

Authur: By 

Leadership in the crucible of crisis

THE rapid global spread of COVID-19 has quickly eclipsed other recent epidemics in both size and scope.1 In addition to the deadly human toll and the disruption to millions of people’s lives, the economic damage is already significant and far-reaching.

In the face of certain challenges and a still-uncertain set of risks, business leaders are rightly concerned about how their companies will be affected and what they have to do next. In the heat of the moment, there are a number of lessons from history that can be applied now. We have pooled the insights of Deloitte leaders in affected areas around the world to provide practical insights for chief executives and their leadership teams in taking appropriate action.

We recognize that companies are in different phases of dealing with the outbreak, and therefore the impacts vary by geography and sector. But regardless of the extent of the virus’s impact on an organization, we believe there are five fundamental qualities of resilient leadership that distinguish successful CEOs as they guide their enterprises through the COVID-19 crisis:

  1. Design from the heart … and the head. In crisis, the hardest things can be the softest things. Resilient leaders are genuinely, sincerely empathetic, walking compassionately in the shoes of employees, customers, and their broader ecosystems. Yet resilient leaders must simultaneously take a hard, rational line to protect financial performance from the invariable softness that accompanies such disruptions.
  2. Put the mission first. Resilient leaders are skilled at triage, able to stabilize their organizations to meet the crisis at hand while finding opportunities amid difficult constraints.
  3. Aim for speed over elegance. Resilient leaders take decisive action—with courage—based on imperfect information, knowing that expediency is essential.
  4. Own the narrative. Resilient leaders seize the narrative at the outset, being transparent about current realities—including what they don’t know—while also painting a compelling picture of the future that inspires others to persevere.
  5. Embrace the long view. Resilient leaders stay focused on the horizon, anticipating the new business models that are likely to emerge and sparking the innovations that will define tomorrow.

We believe that a typical crisis plays out over three time frames: respond, in which a company deals with the present situation and manages continuity; recover, during which a company learns and emerges stronger; and thrive, where the company prepares for and shapes the “next normal.” CEOs have the substantial and added responsibility to nimbly consider all three time frames concurrently and allocate resources accordingly.

Within the framework of these broad imperatives, resilient leaders can take specific tactical steps to elevate these qualities during the current crisis, blunting its impact and helping their organizations emerge stronger. With the right approach, this crisis can become an opportunity to move forward and create even more value and positive societal impact, rather than just bounce back to the status quo.

potting the “black swan”

Black swan events are unforeseen or unpredictable crises that often have extreme consequences. The outbreak of COVID-19 and its westward march across the globe has introduced a new kind of uncertainty:

  • Recessions since World War II have usually been caused by either economic policy mistakes, oil shocks, or financial bubbles. The rapid economic deterioration of economies and stock markets amid the COVID-19 threat represents a new category: a global societal shock. We surveyed more than 4,200 US executives on February 26, 2020, asking them which of the three typical categories—or a fourth “something else” category—would trigger the next economic downturn, and 35 percent presciently selected “something else.”
  • Whereas the 2008 global financial crisis was stoked by the shutoff of the supply of capital, disruptions on both the supply side and the demand side are the cause this time around. In China, for example, mass shutdowns of factories evaporated the supply of products such as auto parts, electronic components and apparel. Meanwhile, the mass quarantining of the population cut off consumption, most acutely in the travel, hospitality, restaurant, and retail sectors.2

Design from the heart … and the head

An essential focus in a crisis is to recognize the impact the uncertainty is having on the people that drive the organization. At such times, emotional intelligence is critical. In everything they do during a crisis, resilient leaders express empathy and compassion for the human side of the upheaval—for example, acknowledging how radically their employees’ personal priorities have shifted away from work to being concerned about family health, accommodating extended school closures, and absorbing the human angst of life-threatening uncertainty. Resilient leaders also encourage their people to adopt a calm and methodical approach to whatever happens next.

In everything they do during a crisis, resilient leaders express empathy and compassion for the human side of the upheaval.

The first priority should be safeguarding workers, ensuring their immediate health and safety, followed by their economic well-being. A survey of human capital policies and practices in China at the onset of the COVID-19 outbreak, conducted by Deloitte China in January 2020, revealed the following steps companies and not-for-profit organizations were considering in response:

  • Ninety percent said that it was an urgent requirement to provide their employees with remote and flexible work options.
  • Companies in industries facing the biggest constraints on providing flexible and remote working options—such as energy, resources, and industrials—were focusing on providing stronger physical protection in the form of cleaner and safer work environments and personal protective equipment.
  • More than half of government and public service entities were focusing on addressing employees’ psychological stress.3

Designing for the customer’s heart starts with understanding how that heart may have changed dramatically from what you perceived before. Consider that in crisis, customers often revert down Maslow’s Hierarchy of Needs to basic desires such as safety, security, and health. How does the nature and tone of your customer communications and the sensitivity of your customer experience need to shift in the midst of the COVID-19 crisis? Customers relish the same kindness and grace toward them that you show your workers—they are struggling through the crisis, too, and expect empathy. Simple things can be big things. UberEats is asking customers if they want food left at the door rather than passed by hand. Many airlines have emailed customers to describe their enhanced plane decontamination efforts. Some restaurants have encouraged their wait staff to visibly use hand sanitizer to assuage patron concerns.4

Yet for the sake of those same employees and customers—as well as creditors and investors—resilient leaders must stay vigilantly focused on protecting financial performance during and through the crisis … and making hard, fact-based decisions. The adage “cash is king” is most real in the midst of an existential event. There are several critical steps in protecting performance:

  1. Centralizing decision-making in fewer nodes for consistency, speed, and especially decisiveness—especially since uncertainty can paralyze some decision-makers.
  2. Cataloging the sources of cash the company has available, including unused credit lines (committed and uncommitted), revolving credit facilities, and related borrowing restrictions; new sources of credit, such as fixed credit facilities to refinance existing revolvers; excess working capital (e.g., via inventory reductions, extended payment terms); equity infusions; etc.
  3. Rapidly articulating economic scenarios across all served markets, generally scaling scenarios from mild to moderate to severe.
  4. Modeling the projected financial impact of the scenarios on profitability and especially liquidity. This includes assessing the probability of violating debt covenants and terms, and determining when available cash sources should be drawn.
  5. Defining the non-negotiables: Which products, services, customer segments, business lines, employee segments, and so on are the most critical to ongoing and future cash flow and should be preserved, although even those non-negotiables may be impacted if scenarios tend to the more severe.
  6. Identifying the levers leadership has available (within the boundaries of the non-negotiables) to impact financial performance, such as discretionary expense reduction, hiring freezes, or temporary plant closures.
  7. Determining the actions to take now, and agreeing in advance on the hierarchy of levers to be pulled as the severity of scenarios unfolds.

Companies that have developed a downturn planning playbook have a head start, since many of the scenarios, projections, non-negotiables, and levers already have been articulated and may just need to be adjusted for present circumstances.

Yet amid the crisis, a company’s purpose should remain steadfast: It’s never negotiable. Purpose is where the head and the heart unite. While many organizations today have articulated a purpose beyond profit,5 purpose risks getting ignored in day-to-day decisions. In a recent survey, 79 percent of business leaders believe that an organization’s purpose is central to business success, yet 68 percent said that purpose is not used as a guidepost in leadership decision-making processes within their organization.6

Making decisions that tie back to the organization’s purpose is particularly important during a crisis, when companies are under increased pressure and stakeholders are paying close attention to every move. We know from research on purpose-driven organizations that they tend to thrive during challenging environments:

  • Purpose cultivates engaged employees. When companies are centered on an authentic purpose, employees feel that their work has meaning. Research shows that employees who feel a greater sense of connection are far more likely to ride out volatility and be there to help companies recover and grow when stability returns.7
  • Purpose attracts loyal customers who will stick with you in a downturn. Eight in 10 consumers say they are more loyal to purpose-driven brands, which can help sustain customer relationships in a downturn and beyond.8
  • Purpose helps companies transform in the right way. Companies that are guided by their purpose when they face hard decisions have a sharper sense for how they should evolve, and their transformation is more cohesive as a result.9 When purpose is put first, profits generally follow; when profits are first, the results can be more elusive.

Amid the crisis, a company’s purpose should remain steadfast: It’s never negotiable.

Put the mission first

Organizations in the middle of a crisis are faced with a flurry of urgent issues across what seems like innumerable fronts. Resilient leaders zero in on the most pressing of these, establishing priority areas that can quickly cascade.

Based on our analysis of the leading practices of multinational companies in business continuity planning, especially related to major emergency management of infectious atypical pneumonia, H1N1 influenza, Ebola hemorrhagic fever, and other major infectious diseases,10 we have identified a number of key actions resilient leaders can take that can be grouped into the following categories:

  • Launch and sustain a crisis command center
  • Support talent and strategy
  • Maintain business continuity and financing
  • Shore up the supply chain
  • Stay engaged with customers
  • Strengthen digital capabilities
  • Engage with your business ecosystem

See the appendix, Action guide—putting the mission first, at the end of this article for detailed activities and priorities for each.

The recommendations in the action guide are further informed by Deloitte’s on-the-ground experience serving clients and supporting Deloitte professionals in the China market (see sidebar, “Key learnings from leading companies in the Chinese market”).

Key learnings from leading companies in the Chinese market

Command center. Leading companies in China established emergency response teams right away in order to assess the risks and formulate response strategies after conducting robust scenario planning, which significantly improved epidemic response mechanism and toolkits.

Talent and strategy. After the initial outbreak, companies began implementing flexible work arrangements for middle- and back-office staff in order to minimize onsite work while meeting basic operational requirements. With remote work capabilities being stress-tested, overall opportunities for improvement were identified and addressed. A digital employee health declaration system was also launched by some companies in order to track employee well-being and to comply with administrative reporting requirements.

Business continuity and financing. Companies immediately began to update/develop business continuity plans to understand contractual obligations, evaluate financial impacts and liquidity requirements, formulate debt restructuring plans, and optimize assets to help restore financial viability. Another core focus was to understand financial impacts across the entire value chain.

Supply chain. Companies in China accelerated investment in digital trading solutions to combat supply chain interruptions, overcome logistics and labor shortages, and get better visibility into local access limitations in order to ensure product supply for the domestic market. Operational agility and data quality were critical in supply chain scenario planning.

Customer engagement. Companies quickly moved to maintain open and ongoing lines of communication with their customers on the impacts of COVID-19 to the business and the emergency actions implemented. This approach of working in partnership has built confidence amid the uncertainty.

Digital capabilities. Companies are revisiting the current e-commerce landscape and developing digital road maps for the short, medium, and long term. Companies realized that digital capabilities needed to be implemented across the entire organization in order to embed resilience. Some leading companies in the service industry promoted “no touch” experiences in order to shift away from brick-and-mortar presence.

Stay engaged with customers

This is a critical moment that matters in the relationship with your customers, and it is a time for your company’s brand to lead. Customer needs can shift dramatically during crises such as this one, often from the rational to the emotional, and it is important for companies to intercept that shift. A study of consumer behavior found that a business’s traditional customer segments are at risk during a downturn, as their purchasing behavior is driven more by their emotional response to the economic volatility than by the characteristics businesses typically consider when defining their customer segments.27

Particularly important is to take care to consider how your own sales efforts will appear. If you’re going to offer price cuts or marketing promotions, some might see that as an attempt to capitalize on a crisis—or worse, undermine public health efforts to encourage people to stay out of stores and other public places. Look at other benefits you can offer customers that help to sustain the customer relationship. For example, some hospitality companies are deferring the expiration of loyalty points.28

Strengthen digital capabilities

Recommendations for “social distancing” have led organizations to expand their operations in the virtual, digital sphere. For many, this means asking their workforce to work from home. If you are preparing for increased remote work, ensure that the organization has the technology capacity to support it. Bandwidth, VPN infrastructure, authentication and access control mechanisms, and security tools all must be able to support peak traffic demands. Provide VPN/remote access to contractors and third parties who are supporting critical services, and purchase additional licenses for collaboration tools.

The sudden increase in online activity can have big implications on system stability, network robustness, and data security, especially in parts of the world where telecom and systems infrastructure are not as well developed. Companies will need to act quickly to ensure they have the systems, and support staff, in place to ensure smooth operation as the workplace and workforce evolves.29 Also consider the often-overlooked impact of such arrangements on employees who may feel socially isolated—or the potential loss of innovation when you limit in-person interaction.

If you’re going to disperse your workforce remotely, make sure you have the protections in place to safeguard your networks and data.

A particular concern is that cyber risk multiplies when the workforce is suddenly distributed. Although many companies may be set up for remote work, far fewer have the proper cybersecurity protocols in place. Since the crisis began, phishing scams and other attacks have been on the rise, targeting employees working from home … from the coffee shop … from any open network.30 If you’re going to disperse your workforce remotely, make sure you have the protections in place to safeguard your networks and data.

Maintaining customer connections virtually amid shifting behaviors also has challenges. As COVID-19 fears rose in the United States in early March, online sales increased 52 percent year over year, and the number of online shoppers increased 8.8 percent.31 While retailers may want to move more sales online to offset declining store traffic, they should ensure that their team has tested a scaled capability before making such a shift. Providing substandard service could do more damage to your brand long-term than the lost sales in the short term.

Engage with your business ecosystem

Finally, as new business models emerge from the crisis, can you become the nexus of a new, emerging ecosystem that’s built for the “next normal”?

Most companies’ networks—suppliers, vendors, customers, investors, employees, and other stakeholders—have grown exponentially since the last economic downturn. In a crisis, these massive global ecosystems add another layer of complexity and potential vulnerabilities—but they can also offer opportunities. Questions to consider include:

  • How can we lean on the ecosystem to improve the resilience of individual organizations during periods of disruption?
  • How am I extending my stakeholder communication to embrace ecosystem partners that have become critical components of the business model?
  • What additional data might my partners have to improve my own operations? For example, one B2B technology supplier is seeking to augment its short-term inventory planning by increasing transparency with its manufacturers.32
  • For the investor community—the more traditional “econosystem”—what level of communication is appropriate? Some companies have stopped offering financial guidance to investors in light of the crisis,33 but organizations should not stop all communication. Keep your investors updated with as much information as possible.

Finally, as new business models emerge from the crisis, can you become the nexus of a new, emerging ecosystem that’s built for the “next normal”?