Three Risks to Address Now

When grappling with Covid-19, or any major disruption, companies must focus on who leads change, what it entails and how to accomplish it.

Courtesy of Bain & Company

By Kevin Murphy, Derek Keswakaroon, and Fai Assakul

There’s a new change in town. We didn’t expect it, and we certainly didn’t want it. Covid-19 may look different from place to place, but it is omnipresent for businesses, with no clear end in sight.

While Covid-19 has highlighted the heightened importance of anticipating, assessing and addressing risk during periods of change, companies have a spotty record in this regard. Today, there’s a greater urgency to contemplate and act on the risks they face. This includes mega-sized disruptions, but also small things that can go wrong and have far-reaching implications.

Companies that anticipate and mitigate risk are 1.8 times more likely to achieve their ambition and 3 times more likely to sustain the change, our research has found. 

Setting aside the external risks actuaries analyze and insurers cover, it’s important for companies to look inside at the risks they can control. Three areas stand out as especially crucial right now: sponsorship, portfolio and capacity.

Sponsorship: Broaden the group leading change

When a company is changing, sponsors keep things moving. They make decisions, remove impediments, support innovation and provide protection. Corporate change and innovation require strong sponsorship, and this group has taken on significant new responsibilities during Covid-19, including leading the response through critical initiatives and projects.

Organizations often turn to the same people to lead change each time a need arises. But the sudden and unexpected nature of Covid-19 meant that, in many organizations, new leaders needed to step up, and they did. Many organizations learned that their pool of this essential talent is deeper than they thought. The challenge now is to more permanently engage them and expand the sponsorship ranks in anticipation of more changes to come.

Sponsorship isn’t a simple title change. It’s strengthened when leaders promote sponsors into important roles in the organization, affirming to all their value and credibility. By endorsing and supporting them, leaders set these sponsors up to guide and inspire others. Then leaders must truly delegate to them and trust them to keep the organization moving forward.

Without broadening and empowering their pool of sponsors, organizations risk burning out a vital group they’re asking to manage the business, keep people safe, find new ways to operate, and simultaneously lead key growth and innovation projects.

Portfolio: Understand what can and must be done

Covid-19 has reordered and reshaped the portfolio of projects companies focus on. Most executives agree that the backlog of work in their sights last February no longer makes sense. Supply chains have shifted. Employees work from home. Customers interact virtually. The entire environment has changed. Every week seems to force a new experiment.

Projects, resources and funding are all up for constant evaluation. Freed to focus on the truly essential, executives are prioritizing and making trade-offs. Which parts of the portfolio stay the same? What changes? What’s added? They’re asking these questions and then publicizing the answers across the organization, telegraphing their willingness to learn and openness to further change.

For large incumbent companies, this kind of flexibility may not come naturally. When a major manufacturer reconceived its operating model and strategic priorities to support future growth, executives spent a significant amount of time improving how decisions and trade-offs were made. This included foundational steps like creating new charters for their operating, management, program management and digital models, as well as specific statements of work and preliminary backlogs for each initiative. This foundation helped teams make decisions faster, and the company continued educational efforts to encourage flexibility and new behaviors within the organization. 

Covid-19 has made clear that ambiguity is the new reality, showing how quickly everything can change. As a more elastic and dynamic portfolio replaces the old backlog, companies become more confident they can adapt to the next surprise that comes their way.

Capacity: Calculate how much change your people can handle

Often capacity refers to resources—the number of bodies available to work. Today, the number of people is often secondary to their capacity to process change.

There is a limit to the stress and disruption that the human brain can take, and executives know they can’t keep asking for more without triggering dysfunction. The capacity people had to process change at the beginning of this year has been swamped by the pace and dimension of the challenges of the past several months. Add to that external stress from running classrooms at the kitchen table, nightly news on death counts, and countries shutting their doors.

With reduced capacity and so much still on everyone’s plate, managers are smart to clearly acknowledge the challenges of Covid-19 and display a high level of empathy and consideration when addressing them. Acknowledging that the world has changed and no one has all the answers primes people to hear more. Once that channel is open, management can engage teams in discussion of what they are currently taking on and what they have the capacity for, now and in the future. With a better understanding of capacity, leaders can balance the portfolio of projects to avoid overloading people. By providing clarity, listening and opening a dialog, managers can give some control back to employees and actually release more capacity.

In any corporate change, listening is fundamental. When a company launches a cost-saving transformation program, for example, it might prioritize speaking with clients and internal leaders to assess and manage the team’s capacity to handle the change. This can begin with one-on-one client interviews to understand the anticipated impact of the change. After validating those findings with the program’s leaders inside the company, management could then upload them into a tracking tool that generates readouts on the impact of the change, helping company leaders monitor the capacity of those affected and anticipate changes to come.

It’s important to manage capacity and invest in it. Understanding this is critical to any transformation’s success.    

Conclusion

By being hypersensitive to risk, and spotting it early, executives buy themselves time to assess how their network of sponsors, portfolio of projects and capacity can best adjust. Anticipating and addressing risk bolsters any company’s ability to achieve and sustain winning results. For today’s companies, discussing and acting on risk is a necessary process of constant vigilance.

Derek Keswakaroon is a partner and founding member of our Bangkok office, Fai Assakul is an associate partner in our Bangkok office, and Kevin Murphy is an expert partner and leader in Bain's Results Delivery® and Digital practices based in Washington DC.