Recession proofing your organization

Authored by Maya Bodan, Sawan Sethi, Jonathan Pearce and Don Miller

Understanding the implications of the Economic Downturn

The uncertainty brought about by the COVID-19 pandemic continues to linger on, marked by high rates of inflation across the globe, a continued disruption of global supply chains, labor market shortages, and geopolitical uncertainty. In the United States, despite initial signs of picking up in the first few months of this year, hiring rates are down 12.7% compared to the same period in September 2021¹. According to one source, as recently as mid-November this year, more than 67,000 technology workers had been laid off in the United States alone.

Recessions expose existing weaknesses, accelerate emerging trends, and force organizations to make structural changes faster than they had planned. However, despite the shock that an economic downturn can bring to the business environment, we have learned from past downturns that by focusing on what creates value today and in future and basing organizational plans on delivering this value is what enables leading organizations to emerge stronger both during and post-downturn.

In 2008, the auto industry in the United States was on the brink of collapse. How did an automotive manufacturing company manage to achieve record profits only five years later, despite being in financial chaos in 2008? Beyond the auto industry, a subscription streaming and production company weathered the 2008 storm as well–just like how it did during the tech bubble burst in 2001–emerging stronger with unrelenting year-over-year growth post-downturn. In both these examples, leaders focused on making choices anchored in future value creation (such as the future of mobility, electric vehicles and fuel efficiency, trends in content streaming, etc.) and avoided taking an indiscriminate approach to cost-cutting. On the other hand, there are several examples of organizations that rushed toward unconsidered layoffs as a response to economic downturns, thereby failing to align the size and shape of their organization to their long-term success, and consequently losing their competitive edge in the process.

Take the recent example of a global consumer products organization that decided to take a two-pronged approach to design its “Organization of the Future” only six months into the COVID-19 pandemic. They adopted a disciplined approach to align their workforce to activities that focused on creating and enabling their core products, while driving efficiencies in other areas of the business. Simultaneously, they embraced a longer-term view and set up cross-functional teams around critical initiatives (e.g., launching a new category, Environmental, Social, & Governance (ESG) focused capabilities, etc.) that would develop differentiated capabilities required for future success. They took three months to design this future state, creating a comprehensive implementation and change road map to deliver on the future organization through a phased approach, and delivered benefits as early as a few weeks into the initiative. This enabled them to navigate a period of uncertainty efficiently, with stronger than expected financial results while at the same time successfully piloting new categories in target markets and driving innovative solutions in areas like digital, analytics, and ESG, all while taking care of and growing their people.

While it goes without saying that every organization will have its own unique context and challenges, varying levels of organization design maturity and therefore unique starting point, in this article, we present a point of view on how business leaders can use the above-mentioned approach to navigate the current uncertainty in the business environment by using organizational design as a key lever to:

• Run the business more effectively and efficiently today
• Prepare the business to become more adaptable and future ready to deliver on future ambitions

Run the business more effectively and efficiently today

Intentionally restructuring your organization in the short-to-medium term, when done in the right way, will simplify your operations and allow for greater focus on your highest priorities. Start with focusing on these three areas:

1. Bring Transparency to your Organization

Get a clear view of how work is evolving² in the future: what work needs to get done to deliver on your key business outcomes, who should be doing that work, and how do things get done in your organization? Identify where the productivity blockers or pitfalls reside for both teams and individuals alike.

Using organization visualization and modeling tools, as well as conducting an organization network analysis can provide a fairly good view of this productivity landscape, relaying quickly to leaders the current state of their organization–where things are going well, and where there may be issues with people or processes. While we see many organizations struggling to get to this level of transparency, the increasing amount of data that is accessible today–particularly in this present context of hybrid work–presents a huge opportunity for leaders to drive transparency across the business.

2. Increase efficiency in how your people work

Review the size and shape of your organization and see if key organizational metrics point to any areas for improvement. An example of this could be looking at your managerial span of control. This is not to say that there is a single magic number for the right span of control or layers across an organization (which is usually the erroneous approach to employ this useful lever); rather, it’s about thoughtfully analyzing the responsibilities different managers and individual contributors in your organization have and whether their work is delivering the required value to your diverse set of stakeholders.

3. Look across all organizational levers and how they bring in value

As you simplify the organization and design for efficiencies, step back and take a holistic view of the current setup: how cohesive are the various organizational levers in your company? Consider the core elements of your design and how they sync up with the broader organizational culture and workforce strategy. A subscription streaming and production company’s growth for instance, in the post 2008 era, can be attributed to how it cohesively connected its organization’s design with its talent model, and the deliberate steps it took to cultivate an organizational culture that would drive value creation for all its stakeholders.

Prepare the business to become more adaptable and future ready

As you restructure to simplify the business and increase efficiencies in the short term, it’s important to also look to the future and aim to embed flexibility in your organization and build capabilities to maintain growth, both during and beyond downturns. Start with focusing on these three areas:

1. Aspire toward human-centered productivity

As we continue to see disruption in business models, reimagine how work will happen in future and where technology can play a meaningful role³ to make the maximum impact to delivering on your purpose.

Leveraging technology to become more human-centered would look like approaching every question, issue, or decision from a people-first lens. Tools like artificial intelligence, as an example, can really drive productivity in the work processes and provide your workforce the bandwidth required to focus on higher value-add activities for the business.

2. Organize around critical missions to become more responsive and agile

Structuring selected teams around key organizational missions will enable rapid responses to business issues, enabling you to capitalize on opportunities for growth that may arise, mitigate substantial risks, and accelerate value delivered to stakeholders. Our main lesson learnt from various ‘agile transformations’ of the past few years is not to force the ‘scrum’ model across the entire organization–rather, the focus should be to start with prioritized customer and business outcomes, especially in areas characterized by uncertainty, a need for quick responsiveness and requiring deep cross-functional expertise.

3. It’s not just your structure, but all the five layers of adaptability that you need to flex

To build your adaptability muscle, work on not just how you are organized, but all five layers of organizational adaptability⁴. We initially came up with these five layers more than five years ago, and having supported numerous adaptable org. transformations since then, we know these still encapsulate what it takes to become a truly Adaptable Organization.

• The Ecosystem: At the forefront of an Adaptable Organization is the organization as a part of a larger ecosystem, connected by a purpose and constantly sensing external needs
• The Organization: Organize capabilities in such a way that you move away from excessive hierarchy and silos, and toward a network of mission-focused, multidisciplinary units 
• The Team: Adopt connected ways of working and embrace agile principles to nurture high-performing teams 
• The Leader: Develop leaders who are inclusive orchestrators versus technical task masters, and who acknowledge the need for diverse skillsets that will unlock the full potential of your workforce 
• The Individual: Nurture and develop resilience in individuals by designing flexible talent programs that meet your people where they are, and make them captains of their own ship when it comes to how they want to learn, grow, and develop

How to get started

Our advice to leaders who want to be proactive in the face of current uncertainty and emerge stronger on the other side of the downturn will be to start by collectively answering these five questions with their leadership teams to plan the organizational journey ahead:

1. Are our leaders aligned on our north star and can we design our future organization around it?
2. Are we adopting a human centric lens in reimagining the organization of tomorrow?
3. Do we have a full understanding of how our resources are aligned across different value streams of our organization? Do we know which of our resources are too far removed from the delivery of core products and services to our customers?
4. Do we have the right organizational analytics solutions in place that can help inform running the organization today and prepare us to get future ready?
5. Do we have the organizational design capability and maturity to decide on key principles and criteria for our future organization, design around these principles and deliver on the new organization through smooth people transition?

Stay tuned for our next perspective on recession proofing your organization, where we will explore how to safeguard the employee experience during an economic downturn.

Authors:

• Maya Bodan
• Sawan Sethi
• Jonathan Pearce
• Don Miller
• Aparupa Bhattacharya
• Cindy Skirvin
• Danielle Feinblum
• Lee Merovitz
• Daniel Githanga

References: 

¹ LinkedIn, Workforce Report–United States, October 2022: https://economicgraph.linkedin.com/en-us/resources/linkedin-workforce-report-october-2022

²  Deloitte, Future of Work, 2022: https://www2.deloitte.com/us/en/pages/human-capital/topics/future-of-work.html

³ Deloitte, AI for work relationships may be a great untapped opportunity, 2022: https://www2.deloitte.com/us/en/insights/industry/public-sector/how-social-ai-is-transforming-the-workplace.html?id=us:2em:3na:4diGLOB175284:5awa:6di:MMDDYY:author&pkid=1008752

⁴ Deloitte, The Adaptable Organization: Harnessing a networked enterprise of human resilience, 2018: https://www.deloitte.com/content/dam/assets-shared/legacy/docs/perspectives/2022/gx-adaptable-organization.pdf