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BirdsEye View

 The Financial Times wrote an article with this same title on Christmas Eve this year.  In addition to interviews with several world-class executives, the article highlighted aspects of the pandemic which have lasting implications for 2021 and beyond.

I have written some on the same subject, and thought sharing some of the FT’s insights will serve our leaders throughout the industry well.

• VUCA.

COVID created an environment characterized with unprecedented VUCA – volatility, uncertainty, complexity and ambiguity.  The term, created in the 1980s and relatively obscure until now, has become the hallmark of the period.  Heading into an uncertain new year, banking leaders are united in one belief: the volatility of the past 12 months is far from over.  The theme has repeated itself time and time again across our monthly executive calls, and the FT found that to be true across industries.  Sean Menke, chief executive of Sabre, the flight booking and hotel reservations technology company, whose prospects are strongly tied to the unpredictable fate of the travel industry, told FT: “You’re trying to do a forward calculation of what airline capacity is going to be like in the next two years. You think about the impact on travel agencies and the hospitality scene. If you’re dealing with a slow recovery, what are the other options to grow your business?” What can Menke do, when his business is inextricably tied to industries that have arguably been most negatively impacted by COVID?  Can he pivot his business to diversify away from that focus? 

Our industry and many others did not react by producing huge books prescribing how to behave.  Decisions took place in real time on the ground, branch managers talking to branch managers and sharing ideas, underwriters talking to each other, etc. 

The SCB calls are a perfect example of the use of such data-gathering from peers across organizations, and the sharing throughout the year has been staggering in quantity, candor and value.  There is no predictive data we can use for COVID, hence reliance on partial data and peer information is essential.

This year promises little respite. As the vaccine is being slowly applied to our population, the banking industry will continue to have to address health risks to staff and customers, operational disruption associated with WFH and other issues, and the strains of hybrid working, with some staff located remotely and others in the office or workplace.”, says FT.  I couldn’t put it better myself. Months of pressure and uncertainty are NOT drawing to and end, and our leaders and their teams are all experiencing battle fatigue to some degree. Plus, we are all bracing for future shocks yet unknown.

We now know that tomorrow will not give us more certainty than yesterday; we are still in the midst of a series of “day One” pandemic-handling days, compounded by a new administration and continuous seismic shifts in health guidelines.  We have learned much about ourselves and our system during the past ten months, but the pressure is still unrelentless, and we are all tired.

• Adjusting our decision-making and information flows.

During wartime, or a fire, or any similar emergency, the leader has to be able to gather information with extraordinary speed.  Malcolm Gladwell wrote extensively about this in his excellent book “Blink”.  An effective leader must upend the organization’s habit, decision-making processes and “the way we’re doing things” and change them on a dime across the board. It’s time to shorten the decision-making cycle, require less information to make decisions and learn on the fly.  The date we get might tell us something totally different from what we expected (the credit behavior of consumers and businesses through the cycle thus far is a perfect example of such dissonance), and we must be able to accept is, process it and make decisions based upon it much faster than ever before.

• Management and employees generally rose to the challenge, but battle fatigue is setting in.

As the crisis hit, very few were caught in it like the deer in the headlights.  Instead, leaders and teams galvanized into action, handled PPP admirably and found ways to continue to function.  

FT says: “The hallmarks of successful leadership through this acute phase were adaptability, frequent communication — with staff, but also with suppliers, regulators and shareholders — and an acceptance of multiple shifting scenarios. Many bosses, working from home in lockdown like their teams, applied a more human touch, in contrast to the aloof leadership style that tended to suffice in office environments in more orderly times.”  

We have certainly experienced this exact process, and those leaders who intensified and humanized their communications have generally been effective in reaching their teams, inspiring them and informing them.  Transparency played an important role here, as leaders sharing with the employee based the uncertainty and concerns they have, while assuring them of Management’s support and care.  It was important to share the conflicting considerations for keeping branches open or closed, for the digitization of processes on the fly, and for the many sea-saw decisions foisted upon us by the pandemic shifting sands.

• CEO reengagement at tactical levels.

Many chief executives handled the initial shock of the pandemic by immediately reengaging with their teams. For instance, Jeff Bezos, Amazon’s founder, started joining daily calls on the minutiae of inventory, Covid-19 testing, and day-to-day communications. Bias for experience and tenure showed across many organizations and delayed planned executive transitions.  Many leaders reengaged more deeply into their banks, participating in tactical decision-making that might seem too trivial, but added comfort to the staff.  

• CEOs set the strategic agenda, local decision makers execute it with tactical decision making.

David Gibbs, chief executive of Yum Brands, owner of the global fast-food franchises KFC, Taco Bell and Pizza Hut, whose restaurants worldwide have endured a switchback of on-off lockdowns and shifting safety measures since the pandemic began. His company, which usually runs franchises in 150 countries on a decentralized model, is quite similar to the banks’ physical distribution challenges.  In response to the COVID challenge, which varied widely across countries and geographies, Yum! created a new framework of simple goals such as the need “to deliver safe, affordable food, in a low-contact manner”. Such a simple battle cry resonates with every employee, is clear and understandable, and is a good guide for decision-making at the ground level. 

Organization-wide mantras are important and helpful, but local decision-making takes over when tactical decisions are involved, such as which branches to keep open, who is going to mow the grass and remove the snow, or even what hand sanitizer is used in one market vs. another. “What the branch manager says on hand sanitizer is more important than what Boris Johnson says on hand sanitizer,” in the words of Sara Bennison, chief product and marketing officer of Nationwide, the UK building society (our Savings and Loan equivalent). 

• Shifting decision-making away from fully data-based and gathering intelligence from various organization levels.

“Smart leaders realized they had to make the judgment calls and do that without data,” says Prof Hope Hailey, of the University of Bath. “This wasn’t the place for lone heroes or heroines: the only way they could make these calls was by operating as a team and getting intelligence from inside and outside the organization and from the bottom levels of the organization.” Companies that were already run on a model of devolved management say their hands-off style worked well — and continues to do so as they face future uncertainty. 

• COVID revealed to us the next layer of leaders.

The incessant and unprecedented pressure of the past year has exposed the lack of resilience and flexibility some executives posses.  They could not cope effectively with this new environment.  More importantly, this period helped reveal others through the ranks who were surprisingly adept at handling uncertainty, rose to the occasion and helped with the heavy lifting day in and day out. “There’s leaders who just freeze and aren’t sure what to do; there are leaders that make the initial move — shore up the balance sheet, extend debt maturity — and then they don’t do anything thereafter,” says Sabre’s Mr Menke. “And there’s a final group that does the financial things but understand that they’re in a world of transformation, and lean into that transformation.” Mark Turner, Previous CEO and currently Director at WSFS, mentioned this as an important benefit of the COVID era, and I quoted him in a previous article on the topic.  COVID helped us discover who our best foxhole soldiers are – at all levels of the organization.

• Thinking forward once the pressure eases off.

As we approached the 2021 planning cycle, chief executives started to step back from day-to-day operations and revert to a more strategic approach looking for opportunities as confidence recovered.  During this period of strategic pivoting and digital transformation, leaders need to pace themselves and show awareness of the strains the staff had undergone, as Rodger Levenson, Mark’s successor, mentioned many times. Our employees have been through a war, and are still in it.  Resources are fully tapped, and most of us are still in a mental survival mode even if our financial picture is stable.  COVID brought mortality to the forefront of our minds, and there is a cost associated with it.

And yet, a new year is about to unfold.  The question before us is, which of the amazing things we discovered about ourselves and our markets do we want to build upon and further develop in 2021 and beyond?  Is our hope to return to who we were or evolve who we are?  Now that the “all-hands-on-deck” approach to PPP and the first few months of the crisis is behind us, and while the future is still more murky than ever, what is planning look like?  How do we stay true to our brand and evolve utilizing the lessons learned from this pandemic thus far?