May/June 2020 Chief Executive Magazine by Chief Executive Group

OUR ANNUAL SURVEY: THE BEST AND WORST STATES FOR BUSINESS 2020

THE VOICE OF AMERICA’S CEO COMMUNITY | MAY/JUNE 2020

INTO THE UNKNOWN A CANDID ASSESSMENT OF WHAT’S TO COME

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C ONTENT S

M AY/J U N E 2020 No. 306

FEATURES COVER STORY 20 INTO THE UNKNOWN To get a read on what comes next in the Covid-19 crisis, we reached out to dozens of CEOs and experts across nearly every industry. While no one has conclusive answers, we did unearth

28 V, U, W OR L? Six top economists on the shape of things to come with Covid-19.

RESEARCH 34 THE BEST & WORST STATES

FOR BUSINESS 2020 Once again, we asked CEOs where you like—and dislike—doing business. Here’s what you said.

BEST IDEAS 2020 42 DRIVING DIGITAL 34

TRANSFORMATION The mission? Change before change takes you under. Some tips.

TECHNOLOGY GUIDE 50 UPDATING YOUR

PEOPLE OS New software and new employee expectations unleash new ways of working.

C O NTE NT S EDITOR

Dan Bigman EDITORS-AT-LARGE

Jennifer Pellet Jeffrey Sonnenfeld DIGITAL EDITOR

C.J. Prince PRODUCTION DIRECTOR

Rose Sullivan CHIEF COPYEDITOR

Rebecca M. Cooper ART DIRECTORS

Carole Erger-Fass Gayle Erickson Alli Lankford RESEARCH EDITOR

Melanie Nolen

DEPARTMENTS 6

EDITOR’S NOTE Summer School

CONTRIBUTING EDITORS

Russ Banham Dale Buss Ram Charan Daniel Fisher Patrick Lencioni EDITOR EMERITUS

J.P. Donlon

8 LEADERS 8 The New Abnormal How will the way we’ve worked change the way we work?

PUBLISHER

Christopher J. Chalk 847-730-3662 | cchalk@chiefexecutive.net VICE PRESIDENT

12 Law Brief / Daniel Fisher A Litigation Pandemic

Phillip Wren 203-930-2708 | pwren@chiefexecutive.net DIRECTOR, BUSINESS DEVELOPMENT

14 Transformation / Patrick Lencioni A New and Better Normal

Lisa Cooper 203-889-4983 | lcooper@chiefexecutive.net DIRECTOR, BUSINESS DEVELOPMENT

16 On Leadership / Jeffrey Sonnenfeld Viral Messaging

Liz Irving 203-889-4976 | lirving@chiefexecutive.net DIRECTOR, BUSINESS DEVELOPMENT

Gabriella Kallay 203-930-2918 | gkallay@chiefexecutive.net

60 PLANE ADVANTAGE Crisis Control A global pandemic isn’t the only time it’s great to have a private plane at your disposal—but it certainly is one of them.

DIRECTOR, BUSINESS DEVELOPMENT

Marc Richards 203-930-2705 | mrichards@chiefexecutive.net MANAGER, STRATEGIC PARTNERSHIPS

Rachel O’Rourke 615-592-1198 | rorourke@chiefexecutive.net

64 LAST WORD The Digitization Imperative Every CEO who has not truly started on this path must do so now, even in the midst of the Covid crisis, even if it seems impossible. Here’s how. By Ram Charan

CLIENT SUCCESS ASSOCIATE

Jake Holmon 203-889-4974 | jholmon@chiefexecutive.net

CHIEF EXECUTIVE GROUP EXECUTIVE CHAIRMAN

Wayne Cooper CHIEF EXECUTIVE OFFICER

Marshall Cooper Chief Executive (ISSN 0160-4724 & USPS # 431-710), Number 306 May/June 2020. Established in 1977, Chief Executive is published bimonthly by Chief Executive Group LLC at 9 West Broad Street, Suite 430, Stamford, CT 06902, USA, 203.930.2700. Wayne Cooper, Executive Chairman, Marshall Cooper, CEO. © Copyright 2019 by Chief Executive Group LLC. All rights reserved. Published and printed in the United States. Reproduction in whole or in part without permission is strictly prohibited. Basic annual subscription rate is $99. U.S. single-copy price is $33. Back issues are $33 each. Periodicals postage paid at Stamford, CT, and additional mailing offices. POSTMASTER: Send all UAA to CFS. NON-POSTAL AND MILITARY FACILITIES: send address corrections to Chief Executive Group, PO Box 47574, Plymouth, MN 55447.

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CH I EF E XECUT IV E RE SE A RCH AD INDEX

RESILIENCE IN ADVERSITY

ASSOCIATED AIRCRAFT GROUP flyaag.com 63 ABBOTT LABS abbott.com OUTSIDE BACK COVER

Insights from Chief Executive Group’s CEO Confidence Index, a widely followed monthly poll of CEOs, and the Chief Executive Network (CEN), our nationwide membership organization that helps C-Suite executives improve their effectiveness and gain competitive advantages. For more information, visit ChiefExecutiveNetwork.com. WE ARE ALL NAVIGATING UNCHARTED TERRITORY, and how to get the economy restarted safely, yet promptly, is now the topic du jour. Moving forward will be about trial and error. Acknowledging that there will be setbacks, challenges, curveballs and outright disasters, CEOs polled by Chief Executive in May were loud, clear and aligned behind one central point: we will make it through. While everyone waits on healthcare experts and White House task forces to find the answers, your outlook for the business landscape 12 months from now is now far higher than it was last summer amid President Trump’s trade showdown with China. It declined by 9 percent since the crisis was declared a global pandemic, and you now understandably assess current conditions as “weak.” But while the proportion of CEOs expecting next year’s revenues to be lower than they were the year prior remains at multi-year high, the numbers are starting to moderate, with 63 percent in May versus 69 percent in April. The proportion of those anticipating profits to go up is starting to bounce back even more sharply, 32 percent in May versus 21 percent the month prior. The trends are similar for Capex and number of employees. Most of the 300-plus CEOs we surveyed say they believe that once people are back to work and socializing, business conditions will recover. The question is, when? And how quickly? You’ve shared with us a series of factors that can impact what lies ahead—the risks, the wins, the challenges and the opportunities. There’s a lot still unknown. What is certain is that this crisis will continue to force U.S. businesses into new ways of operating, new ways of thinking and new ways of growing. The winners will be those organizations that adapt wisely to this new reality.

CEO CONFIDENCE LEVEL IN BUSINESS CONDITIONS ONE YEAR FROM NOW TRAILING 12 MONTHS

7.0

6.8 6.6

6.6

6.2 JULY

AUG.

6.7

OCT.

NOV.

DEC.

JAN. '20

Chief Executive’s CEO Confidence Index is measured on a scale of 1-10.

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FEB.

MAR.

APR.

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6.4

TRUE OFFICE LEARNING trueoffice.com 55

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CEO AND SENIOR EXECUTIVE COMPENSATION REPORT FOR PRIVATE COMPANIES chiefexecutive.net/compreport 40, 41

ORLANDO ECONOMIC PARTNERSHIP orlando.org 25

6.7

6.4

6.5

MAY '19 JUNE

6.6

CHIEF EXECUTIVE NETWORK chiefexecutivenetwork.com 59

WORKBOARD.COM workboard.com 47

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ED I TOR ’ S NOTE CHIEF EXECUTIVE OF THE YEAR

SUMMER SCHOOL T.S. ELIOT WASN’T KIDDING. April really is—at least in 2020—the cruelest month. Tens of thousands of Americans—many of them the weakest and most vulnerable among us—died. Unemployment skyrocketed. The virus continued to grind away. Life in the U.S. took on the feel of old newsreel footage. No surprise, there’s increasing—and understandable—impatience for all of this to be over, to get back to something like normal. When will that be? Who knows. The hard part lies ahead, so we may as well make productive use of the time. Not just leading digital transformation or increasing workforce flexibility (we dive into all of that on pages 20, 42 and 50)—but growing ourselves as people, as leaders. “This very moment is the perfect teacher,” the Buddhist nun Pema Chodron writes in When Things Fall Apart, her classic manual for learning to roll with life’s punches. “And lucky for us, it is with us wherever we are.” LESSON PLAN

So what are we studying? A few things, for sure: • How to be resilient (or not). I remember talking with Patrick Lencioni for the last issue of Chief Executive before all this happened, and something he said stuck out. He said that compared with the generation that went through the Depression and WWII, many Americans had grown soft. It made me grumpy, but it also rang true. We’ll get plenty of chances to work on taking a punch over the next year or more. • How to be empathetic (or not). Weeks of bad news and constant worry will erode our patience and our ability to put ourselves in the place of our fellows. Whether they be family, neighbors, employees, co-workers, customers—we’re all spending a lot of time with the foibles of others. Can we continue to love them, or at least not strangle them? This coming election cycle will ramp up the degree of difficulty. What fun. • How to be courageous (or not). At my summer camp in the 1970s (and yeah, it was a pretty old-school summer camp), they made us memorize “If” by Kipling. You remember: “If you can keep your head when all about you/ Are losing theirs and blaming it on you…” etc. We had no idea why we had to read a dead Victorian’s ode to stoicism instead of swimming. Now I get it. Thanks to coronavirus, we’ll get ample opportunity to face our fears and press on—or fold. • How to accept reality (or not). Maybe we’ll find a vaccine for this by fall. Maybe not. Maybe it won’t spread as fast as predicted or kill as many people as we worry it could, or force the economy to close again. Maybe not. No matter what, we’ll get the chance to face what’s actually happening. First we’ll do it with undue optimism or overwrought pessimism or reflexive poltical partisanship or impatience or anger. And the virus won’t care. So we’ll arrive at some acceptance of reality, instead of our hopes for reality. Or not. We’ll change and grow stronger as a result. Or not. What will we learn from coronavirus? That’s up to each of us. Class begins now. —Dan Bigman, Editor, Chief Executive

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2020 SELECTION COMMITTEE ADAM ARON President and Chief Executive, AMC

DAN GLASER President and Chief Executive, Marsh & McLennan

FRED HASSAN Former Chairman, Bausch & Lomb; Partner, Warburg Pincus

NEAL KEATING President and Chief Executive, Kaman

TAMARA LUNDGREN President and Chief Executive, Schnitzer Steel Industries

MAX H. MITCHELL President and Chief Executive, Crane Co.

ROBERT NARDELLI Chief Executive, XLR-8

THOMAS J. QUINLAN III Chairman, President and Chief Executive, LSC Communications

JEFFREY SONNENFELD President and Chief Executive, The Chief Executive Leadership Institute, Yale School of Management

ARNE SORENSON President and Chief Executive, Marriott International 2019 CEO of the Year

CARMINE DI SIBIO Global Chairman & CEO, EY Exclusive Adviser to the Selection Committee

TED BILILIES, PH.D. Chief Talent Officer, Managing Director, AlixPartners

CONTACT US CORPORATE OFFICE Chief Executive Group LLC 9 West Broad Street, Suite 430 Stamford, CT 06902 Phone: 203.930.2700 Fax: 203.930.2701 ChiefExecutive.net LETTERS TO THE EDITOR letters@ChiefExecutive.net Advertising, Custom Publishing, Events, Roundtables & Conferences Phone: 847.730.3662 Fax: 847.730.3666 advertising@ChiefExecutive.net REPRINTS Phone: 203.889.4974

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LE AD E R S

Cornered Office: Limeade CEO Henry Albrecht with his workfrom-home team.

THE NEW ABNORMAL How will the way we’ve worked change the way we work? BY DALE BUSS

THE OFFICE WAS ALREADY ONE OF THE MOST popular shows on Netflix. Then, viewings multiplied during Covid-19 as millions of Americans wistfully remembered the personal interactions with co-workers that previously filled their days. Joe Fuca isn’t surprised at all. “Employees crave the kind of live interaction that only an office can provide,” says Fuca, CEO of Reputation.com, customer-experience consultants based in Redwood City, California. “They miss the routine, sense of community and opportunities for intersection

8 / CHIEFEXECUTIVE.NET / MAY/JUNE 2020

outside their core group that come from working in an office. The spontaneous conversation, the informal transference of knowledge, the collegiality—much of that just can’t be replicated virtually.” A craving for cubicles? He’s hardly alone in thinking so. For all the talk of transformed virtual workplaces and a “new normal,” with employees permanently Zoom-meeting from orbit like astronauts on the International Space Station, many CEOs we talked to say they’re not convinced that telework is the future—just the opposite. When it comes to getting things done, and

LE A DE RS

creating the kind of innovative, fast-moving organization they need to compete, there’s no substitute for face-to-face interaction, they say. Giving up their seats on the living room couch couldn’t come soon enough— and they think their employees feel the same way, too. “I don’t see telecommuting becoming the norm or the culture for our company, says Arnav Dalmia, CEO of Cubii, an exercise-equipment maker with about two dozen people working in its headquarters office in Chicago. “Our culture has very much been focused on hanging out and little side conversations that you have at work. People draw energy from that physical team environment.” Jim Hallett, CEO of used-car auctioning company KAR Global, invested $80 million in a new headquarters building in Carmel, Indiana, last year, outfitting it with a health clinic, gym and a cafe that serves Starbucks. “I don’t believe anyone has the same productivity working from home that they have working in the office,” says Hallett. “We can have our culture in the building and still continue to respect social distancing.” Not every employee has a choice, either. Some 63 percent of U.S. jobs can’t plausibly be done from home, according to a new study by the University of Chicago. Many CEOs must prioritize making their factories, stores and warehouses Covid-19 safe while still functioning essentially as they did. That may be far more important than ensuring their white-collar staffs can stay out of the office. “You’ve got to be very intentional about the cultural messages you send,” says Henry Albrecht, CEO of Limeade, a Bellevue, Washington-based provider of human-resources software. “Not everyone has the privilege of working remotely.” Mahe Bayireddi prefers to view his company’s remote-working episode during the pandemic more as a testament to the importance of its employees than as a prelude to how things will be now. “Once it’s time to come back together in the office, employees will have a renewed dedication to the employer who worked tirelessly to maintain consistency during uncertainty,” says the

co-founder and CEO of Phenom People, an HR technology company in Ambler, Pennsylvania. “The world is telecommuting but only to remain resilient during this period.” Remote Control

But while some of the more painful business conventions of the coronavirus crisis— think virtual “happy hours”—may thankfully run their course, the truth is that social distance mandates will require many companies to find new ways of operating out of position—for a while, at least. “These kinds of interruptions in business continuity are probably going to become more frequent for a variety of reasons, so we’re thinking even more about how to do things remotely,” says Sean George, CEO of Invitae, a genetic-testing company based in San Francisco. Allowing remote work has plenty of other benefits, too. Access to a national or global talent pool, increased work-life balance for employees, recaptured commute times and potentially wiping millions of dollars of office leases off your P&L. James Goodnow, CEO of the Fennemore Craig law firm based in Phoenix, says well-run businesses will integrate remote working and its associated benefits into the workplace fabric in more meaningful ways. Doing so, he says, “will force leaders to think about whether the large brick-andmortar footprints are as necessary as many once believed.” Even before the crisis, more work—at least white-collar work—was shifting to “virtual,” propelled by advances in technology. For most CEOs, particularly those with operations disposed to allowing work-fromhome options, the best strategy will likely follow a model that blends the two styles, taking advantage of the resiliency and flexibility of telework, while not losing the productivity gains and culture investments they’ve made building their offices over the past decade. Besides, thanks to Covid-19, you may not have a choice for a while. “Workforce interactions and the definition of ‘together’ have changed forever,” says John Mullen, head of

“I don’t see telecommuting becoming the norm or the culture for our company.”

CHIEFEXECUTIVE.NET / MAY/JUNE 2020

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Capgemini consultants for North American markets. “And you can look at the pandemic as the kick in the pants that CEOs needed.” Some ideas for creating and leading this new hybrid workforce: Take a clean-sheet approach:

“Zoom is great and everyone is getting along well, but that’s working because everyone is in crisis mode.”

Rather than accept workarounds forced by the crisis, don’t look at makeshift arrangements made during the teleworking imperative as a beginning point for the future of your workplace. Start from scratch. CEOs must decide whether to promote vast telework as a “new normal” or an interim arrangement—or a mix of inside and outside work. This will help dictate whether they actually reconfigure existing workspaces or just “X-off” some desks, chairs and vending machines with black tape for a while. “What is the problem you’re trying to solve?” says Stan Vlasimsky, vice president at consultancy Pariveda Solutions. “Work backwards from there to figure out the remote-work parameters that will help your organization be the most effective over the long term.” Rework your capacity: Existing band-

width, work-sharing software and other capabilities pressed into service during the pandemic proved inadequate for many companies to support a dramatic expansion of teleworking. “Everyone being home worldwide stressed our telecom infrastructure,” says Behrooz Abdi, CEO of a San Jose, California-based maker of tracking sensors that struggled to conduct all-hands webcasts for 600 employees around the world. “So we’ve got to improve that.” Prioritize the culture: Entire industries

have been shaken by vaporization of demand, idling of operations and atomization of workforces. But while Covid-19 has disrupted it, retaining their culture will remain important for companies in the long term. Virtual connectedness based on videoconferencing and online

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communication tools, such as Slack and Microsoft’s Teams, will probably not prove adequate—at least not without some extra effort. That’s the experience of Eugenio Pace, CEO of Bellevue, Washington-based Auth0, a security-software company that built its culture on remote work performed by about 60 percent of its 650 employees around the world. “You’ve got to supplement that as a company by using that platform for notification of employees about important events,” he says. “We’ve closed a deal, we have a new feature, or a new employee has joined.” Beware of creating haves and have-nots:

Allowing or establishing work from home post-pandemic can create yet another divide in white-collar workforces that already may be cleft by factors such as compensation and functions. You’ll need to be careful about how it is perceived in the company. Don’t allow telecommuting options to be seen as perks. Add incentives for in-facility work to compensate and avoid problems. “Zoom is great, and everyone is getting along well, but that’s working because everyone is in crisis mode,” says Tom Gimbel, CEO of LaSalle Network consultants, based in Chicago. “But if we were in non-crisis mode and some people were at home and others in the corporate office, there would be resentment.” Figure out your ideal mix: Americans’

desire for communal experiences will combine with corporate requirements for physical co-location to ensure that many workplace environments swing back toward normalcy. “Forcibly working from home was a great experiment for companies,” says Jordan Buckner, the CEO and founder of Chicago-based TeaSquares, which was building out distribution of its caffeinated energy bars when Covid-19 hit. “But the nature of a lot of work and jobs encourage people to be there in person. So, I’m expecting a more flexible model rather than a big jump in people working from home permanently.” CE

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LE AD ERS LAW BRIEF \ DANIEL FISHER

A LITIGATION PANDEMIC

Never let it be said American trial lawyers let a crisis go to waste.

Daniel Fisher, a former senior editor at Forbes, has covered legal affairs for two decades.

WEEKS BEFORE THE WORLD HEALTH Organization declared Covid-19 a global pandemic, long before state governors ordered their citizens to shelter in place, U.S. class action lawyers swung into action. They sued soap and hand sanitizer manufacturers for claiming their products protected against the novel coronavirus. They sued a pharmaceutical manufacturer after its CEO, perhaps prematurely, said the company had developed a Covid-19 vaccine. Insurance disputes erupted in New Orleans and elsewhere as companies sought to tap business-interruption policies that insurers argued were intended to pay for property damage from storms, not loss of customers due to stay-at-home mandates. It’s a peculiarity of our legal system that even something that most people would consider the very definition of an act of God— the unforeseen and unstoppable emergence of a global pandemic—would nevertheless provide raw material for litigation. Some of the lawsuits in situations like this are predictable contract disputes, such as when parties to a business deal fight over whether clauses that were written with one type of disaster in mind apply to a completely different one. Many contracts contain “force majeure” clauses that kick in when unforeseen events prevent one side from fulfilling the terms, despite best efforts to do so. Usually, that’s a natural occurrence like a storm, flood or earthquake. Careful lawyers often write in a war clause to make sure man-made events are included too. Does a government-ordered shutdown meet the definition? Courts will be asked to decide, but many businesses will choose to take a pass on calling their lawyers, predicts Charles E. Harris II, a partner with Mayer Brown in Chicago. “While we will certainly see some Covid-19 related contract disputes in court or arbitration, I think many compa-

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nies in the commercial world will resolve their contract disputes without resorting to litigation,” Harris says. Plaintiff lawyers are likely to file more tort lawsuits accusing businesses of failing to anticipate the coronavirus or failing to protect their customers and employees once it erupted into a pandemic. In those cases, “the critical question will be whether the company breached its duty of care,” Harris says. The answer to that may be driven by how the government or other companies in the same industry responded to the coronavirus threat. Before the lawyers get too excited, however, they need to contend with a force majeure of their own: Congress. Legislators have repeatedly stepped in to take the ball away from trial lawyers before the game starts to get fun, by passing statutes that limit or prohibit lawsuits over natural and man-made disasters. In the runup to the Y2K changeover that threatened widespread chaos from faulty computer code, Congress passed the Y2K Act, which banned lawsuits over most economic losses associated with misdated computer software. The late Sen. John McCain justified this extraordinary meddling with the civil court system by saying “there was a realization on both sides of the issue that this legislation is critical to the future of American business, and if it wasn’t passed and signed into law in a timely fashion… lawsuits could cripple the economy.” Congress also intervened after the 9/11 terrorist attacks and has protected peripheral defendants against Superfund liability. Early in the coronavirus crisis, Congress extended liability protection to manufacturers of N95 facemasks, and New York Gov. Andrew Cuomo protected medical professionals treating Covid-19 patients. Litigation may seem like a fixed element in the American landscape, but there are times when it must retreat into the background as the public wrestles with more important issues. CE

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LE AD ERS TRANSFORMATION \ PATRICK LENCIONI

A NEW AND BETTER NORMAL AS WE NEAR THE LIGHT AT THE end of this strange tunnel we’ve been in, most of us are in the process of trying to get back to normal at work. I’d encourage CEOs to leave behind some aspects of the old normal for a new and better one. Here are a few things that may be worth abandoning. Over-engineering. I have

Let’s make the most of the changes wrought by the pandemic.

always been a big fan—and I mean a BIG fan—of the quick and dirty, 80/20 approach to project management, and I’m going to double down on it here. During these past few months, many of us have seen more good ideas than ever go from conception to implementation in record time with minimal over-engineering. We seem to be getting more done with less polishing, tweaking and fretting—and it’s actually a lot more gratifying. This happened because our goals become clearer and the stakes become higher during a crisis, allowing us to ignore silos and find ways to create and implement solutions without overthinking, nitpicking and fear of failure. We’re not insisting on perfection but focusing on the essential elements of a product or program and moving quickly. When this crisis passes, CEOs cannot allow things to slide back but should instead make sure that their newfound “essentialism” continues. Professionalism. It’s time that we put

Patrick Lencioni, president of The Table Group, is the author of 10 business books, including The Five Dysfunctions of a Team.

more emphasis on personalism and less on professionalism. During this crisis, most good CEOs took a more active interest in the personal lives of their direct reports than ever before. They’ve seen their team members in pajamas during Zoom calls as they negotiated the demands of bored kids, noisy pets and disheveled homes, all while trying to work from the chaos of their living rooms. As the crisis recedes, many leaders will presume a return to the old boundaries, but they should reject that presumption. After

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all, the challenges in the lives of our people will not recede even when the virus does. CEOs need to understand that when people grow closer during a challenging time, the prospect of backtracking is particularly painful and awkward. Leaders should leave behind the professional boundaries of the past and embrace more personal relationships with their people, even if their lawyers suggest otherwise. Work-Family Compartmentalization.

Along these same lines, many leaders I’ve worked with over the years, allowed a wall to build between work and family life. Too often, we keep work at work, assuming that our family members are too busy with their own priorities to care about a project we’re working on or a challenge we face. One blessing of this time of homebound work is that many family members have a bit more appreciation for what mom or dad does at work. We should not let that fade. As we go back to the office and the physical separation of our professional and home lives, we should work hard to keep our families connected with what we’re doing, both for them and for ourselves. It will make us happier people, which will inevitably serve our organizations. Handshaking. This one may seem relatively

insignificant—even to fly in the face of being more personal. But there is something about shaking hands that seems more about protocol than genuine relationship-building. In the spirit of discarding non-essential formalities— and the spread of germs—perhaps the end of the handshake will mark a time when leaders embraced a new essentialism and abandoned unnecessary activities that prevented us from being more human and more effective. The point of all this is much bigger than making seemingly small cultural changes. It’s about taking this unwanted and painful experience and having the wisdom and courage to make the world of work better for having endured it. So, here’s to a new and better normal.

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LE AD ERS ON LEADERSHIP \ JEFFREY SONNENFELD

VIRAL MESSAGING

What you can learn from CEO communication blunders during the Covid-19 crisis.

Jeffrey Sonnenfeld is senior associate dean, leadership studies, Lester Crown professor in management practice at Yale School of Management, president of the Yale Chief Executive Leadership Institute and author of The Hero’s Farewell. Follow him on Twitter @JeffSonnenfeld.

THROUGH THIS SPRING’S COVID-19 pandemic, I have celebrated models of great CEOs who filled a trust void with meaningful external messages—and I’ve also seen some blunders. Here’s a look at what’s working, what isn’t and what to do going forward. Avoid handwringing. A Greek chorus of sobbing is not helpful to anyone. Taking action is more meaningful than issuing bulletins claiming, “I feel your pain” or “our hearts and prayers go out to the victims.” Exemplary leaders like the CEOs of IBM, Apple, PepsiCo, UPS, AT&T, Johnson & Johnson, Morgan Stanley, Comcast and Waste Management moved quickly to provide compelling examples of how they were alleviating suffering in various communities, such as by providing personal protective equipment and needed supplies to healthcare workers or extending job security and continuity of benefits to employees. Drop cheerleading in favor of straight talk and truth. Resist the urge to attempt to reassure people by proclaiming “this too shall pass,” “tomorrow’s another day” or “this is no worse than x, y, or z unrelated catastrophe….” While well-intentioned, such efforts are misguided, says McKinsey CEO Kevin Sneader. “Business leaders are optimists. We want to believe it is going to be okay,” he told me. But “this is not a time where point predictions can be made.” Joe Ucuzoglu, CEO of Deloitte US, agrees. “Some people were advocating for saying, ‘We’ll be back to business as usual,’ when we had no idea what was coming. If you go out in advance of actually having the facts to substantiate those calls and the facts go against you, you will never get your credibility back.” Instead, pull your team together and give them facts: “Here’s what we know and what we don’t know.” Invite in experts and pledge to work toward getting and transmitting the latest information in a transparent way. Keep the lines of communications open. Jim McCann, founder and chairman of

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1-800-Flowers, reports the company has been writing weekly to their customers and employees since mid-March. “Our letters force us to confess what we know and don’t know and, more importantly, focus on the questions where we would like their input.” McKinsey’s Sneader broadcasts a weekly town hall every Thursday, fireside chats with colleagues every Friday and conversations with client company CEOs twice a week. “I feel like I’m running a TV station,” he says. “All this keeps us together. The amazing thing is the viewership; on average, the content is reaching 70 percent of our people [worldwide].” Joe Ucuzoglu at Deloitte is also communicative. “I made an unconditional statement that I will answer any question any time. We’ve been leveraging a technology platform where anyone can ask any questions that everyone can see and vote on to prioritize.” Expect a new normal. Forget the old expression “the more things change, the more they stay the same.” Former Hudson Bay CEO Helena Foulkes predicts a reevaluation of values. “This whole thing is making us think about safety, not just about being in malls but about what we really need in life.” For McCann, signs point to a fast-tracking of trends already under way. “Everything we thought would happen over the next five years evolutionarily is happening over the past few months, and we can be better for it,” he says. Others see potential for a bigger role for both remote work and government in business. Ucuzoglu reports that the ability of Deloitte consultants to seamlessly leverage distributed technology and pivot to an entirely virtual model overnight exceeded his expectations. Meanwhile, Sneader suggests, “This isn’t the end of globalization, but things will change… government will have a much bigger role in the economy.” Be forgiving. In operating through this crisis, missteps will invariably be made. Unless there is a pattern of intentional misconduct, encourage a culture of support and learning. CE

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The International Innovation Imperativeâ&#x20AC;&#x201C;

Modern Opportunities and Challenges in R&D Footprint Optimization By Neale Rath, Specialist Leader, Deloitte Consulting LLP | nrath@deloitte.com

WHILE BUSINESSES LARGE AND SMALL ACROSS A BROAD swath of the global economy are focusing resources on stabilizing from economic shocks being felt around the world, many companies will resolve to emerge stronger and more competitive than before. Many organizations will likely see the spike in remote collaboration and distributed innovation as a strength upon which to build, especially in the area of international research, design, and product development. Internationalization of the enterprise R&D footprint is not a new phenomenon. From automotive to consumer goods to pharmaceuticals, companies that blazed the trail of globalization in the 20th century often deployed R&D activities outside of their home countries to augment innovation capabilities, crack the code of new markets, and increase the efficiency of commercialization. But as the competitive landscape in many sectors becomes increasingly diverse and globalized, and as technology enables the pace of innovation to accelerate exponentially across sectors, as well as geographies, business leaders face a modern set of opportunities and challenges in determining how to optimize their R&D footprint.

The case for geographic dispersion of R&D capabilities Decades of research on R&D footprint diversification and internationalization consistently illustrates that companies who invest commensurately in strategic R&D dispersion generally reap the rewards of enhanced innovation capacity and accelerated speed-to-market. While this approach introduces unique challenges for every individual business (it is certainly not one-size-fits-all), and substantial risks must be mitigated and constantly monitored, the benefits an enterprise stands to derive from gaining access to additional creative ecosystems tend to be transformative and highly advantageous.

As an enterprise builds new innovative competencies by tapping into fresh talent pools, absorbing and internalizing knowledge spillover, as well as effectively leveraging academic institutions, government research initiatives, and private sector service providers, leadership can establish and nurture channels for drawing new innovation and advances back into the global organization. This is in addition to the company potentially enhancing its ability to serve the host market more effectively and efficiently. Over the past decade, many industries have seen a more diverse and expansive range of innovation hotspots emerge around the world than ever before. In the life sciences sector, rapidly emerging clusters of innovation in countries such as Ireland, Israel, and China have attracted significant R&D investments from global leaders in biotechnology, medical devices, and pharmaceuticals. Industry clusters in cities like Cork, Haifa, and Chengdu now compete with long-established innovation hotbeds for new cutting-edge R&D establishments. Multinationals across the automotive value chain have deployed new large-scale and sophisticated R&D operations in Mexico, where cities like Queretaro have vaulted from being seen as a low-cost manufacturing location a decade ago to being recognized as a world-class innovation hub today. Perhaps the proliferation of recognized innovation hotspots around the world is no more pronounced in any sector than it is in software and IT services, where R&D is the primary value creation driver for a broad array of enterprises. In long-established markets such as the UK, US, and India, the emergence of up-and-coming cities as alternatives to the usual suspects for R&D has accelerated dramatically over recent years. Take for example, Belfast, Northern Ireland; San Antonio, Texas; and Visakhapatnam (Vizag), Andhra Pradesh, which has emerged over recent years as a stronghold of Indiaâ&#x20AC;&#x2122;s fintech R&D landscape.

Emerging regions of the world have also caught the attention of software and IT services multinationals. Numerous countries in Central and Eastern Europe have gained recognition as offering a sustainable pipeline of well-educated talent that is trainable, collaborative, productive, and capable of undertaking sophisticated product development activities, such as Hungary, Lithuania, and Romania. With such diversity of potential resources accessible, and in an age of seamless connectivity and enhanced remote collaboration, what could stop an enterprise from pursuing such an innovation advantage?

21st century challenges and considerations

Enterprises that face the challenging balancing act of seeking to enhance their innovation footprint under very strict investment constraints can consider deploying a hybrid model of in-house and outsourced R&D capabilities; however, when evaluating the business case presented by outsourcing scenarios, it is critical to account for the often overlooked facilitation costs of managing the outsourced service provider(s) on an ongoing basis. Partnership or co-investment with a value-added collaborator in a favorable market is another way to potentially reduce investment costs. However, outsourcing, partnership, and co-investment can increase the risk of IP loss, which is perhaps the most threatening risk associated with R&D footprint expansion.

As current affairs demonstrate quite clearly, macroeconomic Intellectual property protection has continued to become an turbulence that could result in disruption of business increasingly challenging hurdle as multinationals operations can surface at any time without pursue sustained growth in ever more glowarning. As a counterbalance to unforebalized industries. R&D operations often seeable business disruption triggers, contain or handle the most precious Geographically geographically diversifying the R&D elements of a company’s intellectual footprint helps enable business property; thus, comprehensive and diversifying the R&D leaders to build resiliency into the constantly evolving IP protection footprint helps enable enterprise’s R&D portfolio and to measures and an internal approach conduct detailed business continuto operationalize IP protection are business leaders to build ity planning for critical innovation necessities. resiliency into the competencies. However, expandFurther complicating the IP risk ing the geographic footprint of an enterprise’s landscape for enterprises that leverenterprise into one or more new loage an international R&D footprint R&D portfolio. cations tends to add capital costs that is the cybersecurity threat, which has could be avoided if existing locations (or escalated dramatically over recent years. even facilities) were leveraged instead. Companies should approach cybersecurity While operating costs like labor, real estate, utilities, with intense vigilance. When considering potenand taxes can potentially be lower in a new emerging location tial partners to support the enterprise on the front lines of than in an enterprise’s home location, the extension of an cybersecurity (particularly across international geographies), organization into a new geography can often require some it may be worth considering a cybersecurity provider’s own duplication of operating costs like managerial, administrative, R&D footprint and whether or not the provider has sought to and engineering/technical talent; technology systems and inbenefit themselves from geographically dispersed innovafrastructure; and localized services like legal and engineering. tion capabilities. Over the last several years, we have witnessed corporate boards more intensely scrutinizing ROI on potential R&D investments in an effort to control capital expenditure. At the same time, corporate executives and board members generally tend to understand the international innovation imperative amidst intense competition and growing international markets.

Overall, the path to reaping the benefits of geographically diversified R&D can be complex and flanked with risks that should be fully understood and consistently managed; however, the rewards that can be achieved through such an R&D strategy can mean the difference between a company’s ability to set international trends or race to adapt to them.

ABOUT DELOITTE: Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms. Copyright © 2020 Deloitte Development LLC. All rights reserved.

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INTO THE UNKNOWN To get a read on what comes next in the Covid crisis, we reached out to dozens of CEOs and other experts across nearly every industry. While no one has conclusive answers, we did unearth some clues. BY DALE BUSS AND DAN BIGMAN

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THROUGH 90-PLUS DAYS OF SUDDEN and catastrophic economic collapse, America’s CEOs have heroically focused on the most important, immediate questions forced upon them: “How can I keep my workers safe?” “What will be the impact of this on our sales and operations?” And maybe, “Will we survive?” Now, CEOs crawling over the great Covid-19 chasm are turning to the bigger question: “What’s next?” The good news, of course, is that we will get through this. We may not know where the other side is, but we do know there will be another side. “Nothing can stop America when you get right down to it,” Warren Buffett told shareholders in April. “I will bet on America the rest of my life.”

CHIEFEXECUTIVE.NET / MAY/JUNE 2020 / 21

AGILE WINS Marc Lautenbach, CEO of Pitney Bowes “In these moments of dislocation, share tends to change hands. It goes to those who are agile. We are operating at very high volumes as an industry, but some competitors can’t respond to that increase in demand.”

PRODUCTIVITY BLOSSOMS Kate Duchene, CEO of consulting company Resources Global Professionals “When you don’t have the commutes and lost hours from the old normal… this will open up talent pools we didn’t know we had, as it opens up virtual re-sourcing strategies. We’re already seeing guys who say they want to work out of their RVs now and not be tied down to real estate.”

WORKSPACE REDUX Mitch Hoefer, CEO of commercial architects Hoefer Wysocki “Carpet is antimicrobial in many types; you could see more commercial purchasers of that…You’ll see more autonomous hands-free environments, like those door-opening systems that already exist for handicapped people. You may have new six-foot-centerline spacing in office environments, though maybe not going back to individual offices.”

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We agree—and so did every one of the more than 50 CEOs and other experts we talked to about how they’re coping with Covid—and what they think comes next. How we get there remains the open question, though. Based on our conversations, CEOs have learned a lot about surviving a lockdown of the entire economy—not so much about what life looks like on the other side (though we goaded a few to take a stab at predictions—see boxes, at left). “Where things are fundamentally going to change is that, historically, we haven’t felt that casual interaction with strangers was dangerous,” says Marc Jones, chairman and CEO of IoT provider Aeris. “Now it is. So behaviors and mindsets are going to change dramatically until or if we get back to where that no longer is dangerous.” We found near-universal acknowledgement that there is no precedent for anything that’s happened so far and no playbook for what to do to promote a recovery. But there is a fair amount of faith that the most extreme views about the future will not come to pass. “Historically, when people say there will be a ‘new normal,’ changes have tended to be on the margins, and they’ve tended to accelerate trends as opposed to creating whole new norms,” says Marc Lautenbach, CEO of Pitney Bowes. “This could be different. But for the most part, the hit rate of prognosticators on how they think the world will profoundly change is wrong.” Still, few CEOs profess to having any specific strategies for leading their companies through the intervening months if cases and deaths flare, as projected. What happens to companies if business continuity is repeatedly interrupted over the next several months or year? Good question. Many CEOs say they’re simply remaining flexible, talking to customers, taking things a day or a week at a time, trying to hang on to good people and making the most of technology to react quickly to endless curveballs. “Recovery in the short term is going to be uneven, unsettling and unpredictable,” says Jim Turner, CEO of Intelligent Fiber Network. “The only thing that is certain is that the fundamental change we already have experienced will continue to exist and likely become more erratic.” Changing Workplaces, Changing Work

In the face of this, many CEOs talked enthusiastically about the success their companies have had in switching to remote work on an emergency basis and the long-term positive impact that will have on their companies. They see accelerating digital interactions and digital processing of work, as well as a move to a more flexible, adaptable workplace. “That was in our gameplan on January 1, before we even knew what Covid-19 was,” says John Schlifske, CEO of financial-services giant Northwestern Mutual. “This basically forced us to do it overnight. It’s kind of a catalyst—an unfortunate one because of the mayhem and mortality—for something that was bound to happen anyway.”

A CHANGED WORLD BY 2030 Covid will accelerate a slew of mega-trends already reshaping our world, predicts Wharton professor Mauro Guillen, author of the forthcoming 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything (August 2020, St. Martin’s Press). Here’s what you should be watching. SOME CRISES ARE CLEAR TURNING POINTS IN history, disruptions like the Black Death of the 1300s or the Great Depression of the 1930s, where everything before is swept aside and a new order emerges. The coronavirus pandemic is not one of those times, argues Guillen. It will just intensify and accelerate— rather than create—a series of interrelated trends. His advice for CEOs: “If you weren’t doing enough before the crisis to catch up with some of these, you’re going to have to run faster.”

Large-scale automation happens. Covid-19 is providing the manufacturing, service and transportation sectors more incentives to automate than ever. The risk of disrupted operations and supply chains due to illness will tip the scales on the costs of conversion. “Inevitably, some people will lose their jobs, and you know who they are,” says Guillen. “They tend to be people in their 50s with skills that are not really employable. They can’t find jobs. That contributes to economic inequality.”

Emerging economies truly emerge. According to the IMF, emerging economies this year are projected to grow by about 2 percent. That’s paltry, yet the U.S. should have -5 percent GDP, Europe, -7 percent. “Asia is worse off than it was before the pandemic, but they’re going to keep growing, whereas we’ll just be shrinking in economic size,” Guillen says. “So, that’s only going to accelerate their rebalancing of geopolitics in the world based on the size of economies.”

Generational divides expand. With Europe and East Asia composed of an older age cohort and Africa and South Asia experiencing a baby boom, the share of the world’s population moving to the latter will only accelerate if the Covid mortality rate among the old continues at the pace we are witnessing, with financial and other impacts.

Smaller families reshape markets—and nations. People usually postpone major decisions when faced with uncertainty. Having a baby is a huge financial commitment, and a recession will force many to reconsider whether the timing is right. In addition, the virus will reduce immigration, especially to the U.S. and Europe, further slowing birth rates in these regions, impacting everything from consumer spending to stressing social safety nets, like Social Security and Medicare. “On both counts, we’re going to see an intensification of that trend,” says Guillen.

Income inequality and health. The working poor and the homeless are unlikely to have access to good healthcare, and their immune systems may already be compromised due to poor diets or insalubrious living conditions. While the virus won’t discriminate by income or healthcare coverage, people at the bottom of the socioeconomic pyramid are far more exposed to the consequences of infection. This will have longterm, perhaps multigenerational, consequences.

Online wins the customer. Social distancing and “sheltering in place” are already intensifying shifts toward online shopping, virtual communication and digital entertainment. That will increase, and it will not be reversed. Banks, for example, are already seeing an unprecedented acceleration away from physical branches, with knock-on impacts for finance, real estate and the labor market. “This is a big experiment, and people have been forced to use the online channel given this crisis. And the learning, the experience, that is going to stay with them forever.”

CHIEFEXECUTIVE.NET / MAY/JUNE 2020 / 23

SUBURBAN BOOM Riaz Taplin, CEO and founder, Riaz Capital “There will be an outflow of families with children from cities,” says Taplin, who develops multi-unit housing in Silicon Valley. “If you’re above a certain income and you have children and you have been living in a high-density city that was highly affected by Covid-19, you’re probably going to move. Suburban America will be a big winner here, and a city like New York will be a big loser.”

BACKING AWAY FROM CHINA Stanley Chao, longtime consultant on business in Asia “The average American is sitting at home and is mad as hell and wants to blame someone,” says Chao, “So, more American companies at least will set up small pilot production in the U.S., so that when the public asks what they’re doing about this, they can say we’re looking not at decoupling from China but at diversifying.”

AUTOMATION NOW Ravin Jesuthasan, managing director at consultant Willis Towers Watson “Automation will increase exponentially, but we need to make sure we understand the new human work that is created by automation,” says Jesuthasan, “such as the people needed to maintain and calibrate robots and the labor to manage and fix new distribution centers.”

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For white-collar workforces, the virus may permanently free up huge amounts of cash by reducing companies’ physical footprints. Companies spending millions of dollars expanding their digital infrastructure will need to earn a return on that by having less real estate and less travel, says Ravin Jesuthasan, managing director at the consulting company Willis Towers Watson. He predicts requiring a premium for people to meet in person. “The purpose of the workplace will only be for you to come and collaborate and innovate,” he says. For manufacturing CEOs, like Emerson Electric’s David Farr, Covid-19 has already reshaped how production lines are set up at his industrial giant, perhaps for good. He expects “more automation, which means fewer people” employed in manufacturing overall. Given the worker shortages faced by most factories just a few months ago, this is only accelerating the inevitable. Greater spacing of employees, running three shifts instead of two and having different types of shifts all will be part of Emerson’s new normal. “That will run our costs higher,” he says. Despite the changes, few CEOs we talked with say they’ve imagined a fully remote workforce—even in industries where that’s not an impossibility—as they figure out how to address the inevitable strains on corporate culture and start to wrestle with the legal implications of returning their workforces. “Humans crave the need to interact,” says Bob Sibik, co-founder of Fusion Risk Management, and “prefer to experience things physically rather than virtually.” CEOs will have to figure out the balance, he says. Brave New World

Meanwhile, most CEOs have remained largely quiet while government actions—at both the state and federal level— created winners and losers, with disorganized efforts at backstopping business, haphazard designations of essential and non-essential companies and tight controls on when certain types of companies and industries can “reopen.” Even chiefs of industries fortunate enough to be favored by government handling of the economy or who are conducting affairs largely unaffected by the damage of Covid-19 don’t know exactly how their relative prosperity could be endangered by a “fat U-” or L-shaped recovery. “A lot of this will be driven by health,” says board consultant Harry Broadman. “If in six months we find out that the coronavirus is going to mutate every year and we’re going to have to worry about this every year, then it’s a very different scenario than a once-in-a-lifetime change.” Globally, some CEOs appear to be betting on a return to the status quo. Heads of multinational corporations, with complex supply chains consisting of highly integrated nodes around the world, insist that globalism is just too ensconced to be reversed, so they don’t see that happening.

T H O U G H T LE AD ER SH I P PR OV I D ED BY O R L AN D O ECO N O M I C PAR T N ER SH I P

FILLING THE PIPELINE With quality of talent the deciding factor in success, CEOs spend much of their time on strategies for recruiting and retaining the best—and that won’t change.

BY 2023, MORE THAN half of all investment in information and communications technology will be spent on digital transformation, up from 36 percent today, according to the most recent forecast from IDC. That’s a growth rate of 17.5 percent (CAGR), with total investment worldwide reaching $7.4 trillion over the next three years as companies seek to modernize operations, boost efficiency, head off disruption and create the kind of compelling user experiences that win loyalty. "Organizations with new digital business models at their core are well positioned to successfully compete in the digital platform economy," says IDC analyst Shawn Fitzgerald. But as CEOs know well, technology investment is just one factor determining success in the digital age. The key ingredient? “You really need great people,” says Michael Brown, CEO of Wyndham Destinations, the world’s largest publicly traded timeshare provider, headquartered in Orlando. That has always been true in Brown’s industry, but increasingly across industries, the data show quality of talent making the difference between getting by and surging ahead. McKinsey estimates, for example, that top engineering talent can be "anywhere from three to ten times more productive than average engineers" and that "acquiring top talent can yield double-digit investment savings by accelerating the transformation process by even 20 to 30 percent.” The challenge, of course, has been finding and keeping that top talent—and it will continue to be, even now. In the next several issues of Chief Executive, this series will explore unique strategies and share tips that CEOs, working closely with HR chiefs, are employing to reach new candidates earlier, attract and retain the best, and build their reputation as an outstanding employer. Here’s some of what we’ve heard already: • Plug into local education sources. To keep the pipeline full, companies are utilizing increasingly close partnerships with area universities. “Attracting STEM talent is competitive no matter where you are,” says Frank A. St. John, executive vice president of Lockheed Martin’s Rotary and Mission Systems business and incoming Chief Operating Officer for Lockheed Martin Corporation starting June 2020. The division’s Orlando location allows it to tap a pool of 500,000 college students within a 100-mile radius,

and its College Work Experience Program with University of Central Florida gives both undergraduate and graduate students a chance to work in various departments across Lockheed Martin and gets them on the company’s radar screen early on. Photo courtesy of Lockheed Martin Another partnership with Valencia College’s Advanced Manufacturing Training Center allows Lockheed Martin to provide classroom speakers and to be directly involved with curriculum development. “The schools we recruit from in Florida have robust and diverse populations in majors that are of interest to us,” says St. John. “We also lead outreach efforts for K-12 students to help inspire them to pursue STEM careers, reaching tens of thousands of students annually.” Mitsubishi Hitachi Power Systems, whose signature product is, in the words of CEO Paul Browning, “basically a jet engine that, instead of flying on a wing of an airplane, is on the ground being used to produce electricity,” also recruits heavily from UCF’s engineering pool. “Even [for] our sales team, we tend to hire engineers or people with an engineering degree just because even the sales process is very, very technical, so one of our highest priorities is having access to great technical talent,” he says. MHPS runs a large internship program that allows students, while still in school, to “work with us and get to know us, and vice versa,” says Browning. • Hire right—and smart. A recent Gartner study found that companies are successful with new hires just 68 percent of the time. Given that turnover costs range anywhere from 20 percent of annual salary to upwards of 200 percent for senior-level employees, retention is critical. At AdventHealth, a faith-based, not-for-profit healthcare system in Orlando, turnover for first-year nurses can be as high as 40-50 percent. To improve its odds of success, the hospital invested in sophisticated AI technology that runs in the background during video interviews, analyzing facial features and responses and calculating the percentage chance of an individual nurse staying with the hospital for two years vs. less, explains Daryl Tol, president and CEO of AdventHealth’s Central Florida Division. “Anything you can do to find that person who is different from the rest of the college class, who is ready and who has a level of commitment, whose heart is in the work—it makes all the difference in the world.”

PUSHING BACK ON LEAN Ken Harris, managing director of Cadent consultants He predicts lean and just-in-time management systems may fall out of favor. “They’re inadequate for a crisis situation,” he says, “so the natural outcome of this is going to be more automation, particularly in warehouses. There will be densification of warehouse footprints to make them hyper-productive.”

FINDING PURPOSE IN ‘PURPOSE’ Tim Koller, senior partner for McKinsey “This helps crystallize what ‘corporate purpose’ could mean,” says Koller. In ESG, “the ‘E’ part was pretty clear to everyone because it was top of mind before the crisis. The ‘S’ part was a little vague. But now companies see that they want to have a good reputation as an employer. Having employees who are excited about working with you is important.”

DIGITAL RECKONING Jim Kaskade, CEO of cloudtechnology outfit Conversica “If you’re barely surviving, you’ll lick your wounds and not drag your feet on this anymore. Many companies have increased their digitization through this by force. And there will be muscle memory from that.”

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“The genie is out of the bottle,” Pitney Bowes’ Lautenbach says. “Those trends are unstoppable. But China in particular is a very open question. They’ll continue to be a major player, but people will think about China in a different way when they’re making supply-chain decisions.” Will American public opinion on China shift to the sort of Cold War loathing once reserved for the Soviet Union? Or will the need for cheap goods win out in an era of painfully high unemployment and diminished economic prospects? Already, some CEOs we talked with are trying to figure out how to decouple from Chinese sources. Big, Big Government

Perhaps the only thing CEOs do know for sure is that the U.S. and other nations will be coping with debt loads that may change many of the most important parameters of the global economy, with implications for everything from borrowing costs to taxes. At the same time, no matter who wins the election, they’re staring at a new status quo that involves government involvement in the U.S. private sector at levels unseen since the 1940s, a painful whiplash from President Trump’s laissez-faire approach. “Civil society and political processes and businesses have to think about pushing back against the centralization we’ve seen from this and begin to decentralize and distribute economic power again,” says Carly Fiorina, former CEO of Hewlett-Packard and a 2016 Republican presidential candidate. “That’s the entrepreneurial secret sauce of this country.” Yet, CEOs acknowledge there is no mechanism other than the U.S. government for backstopping the economy at the scale needed now. It will remain that way until the world’s true economic superpower—the American consumer—is feeling safe and ready to spend again. Through it all, CEOs we interviewed find themselves in the tough position of having the same doubts, fears, frustrations and anxieties as their employees but not being able to express them because they’re leaders; there were a lot of stiff upper lips on the CEOs we talked to. And yet, in their most candid moments, when they talked about the future, they acknowledged they are doing so from the same unsettling positions of ignorance as everyone else. For each reassurance that the nation, and their companies, have been through difficulties before, we heard quieter recognition that there is, perhaps, something new here, and it will take a new way of doing business—one that’s more agile, more digital, more adaptive and resilent— to succeed. Or even survive. “CEOs will have to two-step think a lot more,” says Jack Zahran, CEO of Pinkerton. “There won’t be linear progression anymore. Your sandbox will keep moving.” Or, as Yogi Berra might have put it: doing business will be like it was before. Only more so. CE

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C OVI D -19

V, U, W or L?

Six top economists make their best cases for the shape of things to come. BY RUSS BANHAM PREDICTING THE FUTURE IS DICEY BUSINESS, ESPECIALLY when it involves the future of business. Drawn-out uncertainty, as we’re experiencing with the impact of states retracting their shelter-in-place mandates, only makes it more so. Covid-19 startled the world with its ferocity, spreading viral contagion and economic chaos at an accelerating pace. The federal stimulus packages, in addition to actions by the Federal Reserve to decrease short-term interest rates to zero and buy bonds, increased the money supply and injected liquidity into the financial system, but consumer sentiment is about as low as it can go. Everyone is anxious about their health, jobs and finances. The silver lining? The economy will recover… at some point. To get a sense of when, we asked six leading economists to go out on a limb and describe what recovery will look like. We requested they use an alphabet letter to describe this shape, such as a V, W, L or U, although one economist selected a reverse checkmark. Lastly, we asked for the “monkey wrench” that would change their analysis and their advice to CEOs on how best to ride out the storm. Here’s what they had to say.

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“All that pent-up consumer demand will explode.” STOPPING THE CHAIN REACTION William Dickens, Ph.D., University Distinguished Professor and former Chair of the Department of Economics, Northeastern University; served as a non-resident Senior Fellow with The Brookings Institution and a visiting scholar at the Federal Reserve Bank of Boston DICKENS, WHOSE MAIN RESEARCH FOCUS IS examining the cause of long-term unemployment and its consequences for monetary policy, posits a V-shaped recovery. “My hope, but not necessarily my expectation, is that the government will do an adequate job of preventing the thing I fear the most—cascading bankruptcies,” says Dickens. “There are enough smart people in various institutions in Washington who should persuade whoever else is there that people and businesses must be given help so they don’t default and start a chain reaction.” If these “smart people” prevail, the rebound will be sharp and quick. “Unlike a typical recession where there’s a reason for the shortfall in demand, such as the Federal Reserve raising interest rates and killing the housing sector, this one is hinged to a health crisis that will inevitably moderate,” Dickens says. “When it does, all that pent-up consumer demand will explode. People will run out to shop at stores, and the economy will come roaring back.” On the other hand, if “smart people” do not prevail,

hordes of people and small businesses will seek bankruptcy protection. This will cause a downgrading of corporate debt and the impairment of bank balance sheets, spiraling downward to adversely affect employment, consumer demand and business growth. In short, a domino effect. Dickens is hopeful this won’t be the case. While stimulus bills are easing the impact of unemployment on people affected by layoffs and job furloughs, more federal largesse may be in order to reduce the possibility of bankruptcies causing trouble for banks. “It may turn into a U-shape after all, but I still see a rapid recovery,” says Dickens. Monkey Wrench: Bad decisions in an election year. “I’m

leaning toward optimism that the government will do what is necessary to reduce the risks of people and businesses defaulting on their debts. When we start doing a better job of suppressing the virus, the economy will shoot upwards and reach the top of the V-shape in 18 months.” Message to CEOs: Prepare for good times; they’re com-

ing. “Depending on the line of business, expect to receive a bunch of orders as soon as things get better. Industry sectors that revive first include hospitality and restaurants, followed by capital goods. If the financial system holds up well, be ready to seize the moment.”

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DRAGGING ON Stephen Fuller, Ph.D., Professor of Public Policy and Regional Development [retired] at George Mason University and director of the Stephen S. Fuller Institute, which monitors Greater Washington’s regional economy

“Consumers will have changed.”

FULLER, WHOSE RESEARCH FOCUSES on the evolution of metropolitan economies, posits what he calls a “lazy” W-shaped recovery. “With the Fed shooting all of its ammunition early in this ‘war’ and with three federal stimulus packages now signed by the president, unless there is additional stimulus in the months ahead, we will experience a slow recovery,” says Fuller. The reason: Many small businesses will not reopen, putting unskilled and semiskilled workers out of jobs for the foreseeable future. Furloughed employees also will not go back to work as fast as they were laid off, sustaining high unemployment levels. These factors suggest consumers will continue to hoard cash. “The economy that emerges from this disruption will be different; consumers will have changed,” says Fuller. “The shock of going from full speed to full stop—savings depleted, income reduced and uncertainty about the future occurring so rapidly—will make younger and older consumers more conservative about spending. People will think twice before buying goods and services.” Fuller also is concerned about the possibility of a second cycle of the coronavirus gearing up before a vaccine and medical treatments are approved and available. With the southern hemisphere lagging the northern hemisphere in Covid-19 cases, the cases rising in the southern hemisphere could generate a return of the coronavirus in the northern hemisphere by late fall—a pattern similar to the seasonal flu. Hence his depiction of a lazy W-shaped rebound. The laziness references the width of the letter, which accordions from first quarter 2020 into 2022. Fuller posits that the economic cycle bottomed out in second quarter 2020 and will recover over the second half of 2020 before turning negative for a second time in early 2021 with the resurgence of the pandem-

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ic, then gradually return to relative normalcy by first quarter 2022. He bases his estimate on the abrupt cessation in demand, continuing unemployment and disruptions in supply. “This is not a traditional recession driven by flaws in the economy,” he says. “It’s driven instead by distortions in the economy that must be mitigated—and that will take time.” A restaurant that closes will find it harder to reopen the longer this goes on, he explains. Even if the business reopens, it will need to regroup the workforce, which won’t be easy as previous employees may have jobs elsewhere. New people will need training. “Many businesses will confront more conservative consumers who have learned to live without certain things they thought were essential, like eating out,” he says. “Sales of homes, cars and other ‘big ticket’ items will suffer as consumers pull back their expenses.” The stock market will bounce along with these repercussions, but Fuller does not see the Dow falling a “couple thousand points at a throw,” he says, adding that the real estate market will slow down, disrupted by sidelined construction workers, difficulties getting raw materials from foreign suppliers and sluggish demand. “Real estate developers will rethink the development of more office buildings if it’s proven that a big chunk of the workforce can work productively from home,” he explains. Monkey Wrench: The availability of a

vaccine sooner than later. “It would put the U.S. and world economies back on their long-term trajectory, moderating the lazy-W recovery. Once widely available, the economy can go back to work, but it will still suffer the drag of unemployment, business failures and curtailed consumer spending.” Message to CEOs: “The short-term chal-

lenges are to preserve capital and cash and retain talent so workforces can be reassembled quickly after the ‘all-clear’ sign is flashed. The long-term challenge is to identify how this recession has changed the trajectory of the business, altering consumer behavior and shopping patterns, where and how and we work, and how we socialize.”

LINGERING IMPACT Ernie Goss, Ph.D., Professor of Economics and Jack MacAllister Chair in Regional Economics, Creighton University’s Heider College of Business GOSS, WHOSE RESEARCH FOCUS IS labor economics, econometrics and macroeconomics, initially predicted a V-shaped recovery, changing his forecast in early May to a U-shaped one with a longer horizontal. “I’m still hopeful for a V-shaped rebound,” he says. “People are hunkered down now in their homes, and when many of them receive the check from the stimulus legislation, they’ll eventually spend the money, kicking the economy back into gear. I just think this will take longer than I previously considered. I now see us bumping along at the bottom more like a U-shape.” The reason, he says, is the continuing spread of Covid-19 around the rest of the world. In December, the economy of only one country, China, coped with the coronavirus. Thailand, South Korea, Japan, Italy, Spain and the United States soon followed. Other countries are headed the same way, not all of them on lockdown with social distancing and stay-at-home orders in place. “We’re part of a global economy, in which each country’s fortunes is dependent in part on other countries. Our most recent regional manufacturing survey indicates dismal export and import numbers, with two-thirds of supply managers reporting shipping problems to and from vendors. Things are expected to get worse in the weeks ahead.” Like other economists, Goss has mixed feelings about the government’s $3 trillion stimulus legislation, which he refers to “rescue” bills. “It isn’t stimulus in the sense of what we economists refer to as the ‘velocity of money,’” he says. Goss is referring to the rate at which money is exchanged in an economy—the number of times (the velocity) at which money moves from one entity to another. In simple terms, it’s the rate at which businesses and consumers spend money on goods and services, measured as a ratio

of GDP to a country’s money supply. Goss says the stimulus bill and actions by the Federal Reserve do little to fuel velocity. “They pump money into the financial system to increase the cash balances of businesses and people temporarily,” he explains. “Recipients are not likely to spend the money until signs are clearer that things are better. And that isn’t going to happen until the rest of the world catches up to the U.S. and stops the virus. We’ll see meager spending until then. Hence my choice of a U-shaped recovery.” On the bright side, if medical solutions like vaccines and drugs are available and Covid-19 “goes into remission” across the world, he says he’s willing to go back to his initial V-shaped rebound, with the upswing occurring in fourth quarter 2020. Otherwise, the downturn is likely to persist through 2021, hence his choice of a U-shape with a wide horizontal. “The good news is that there will be a big bump up at some point,” he says, “and everyone will go back to eating out, going to movies and concerts and spending their money freely.”

“Recipients are not likely to spend the money until signs are clearer.”

Monkey Wrench: Scant investment in

plants and equipment. “Our world is GDP. If company capital and operating expenditures go down, it will elongate the U -shaped recovery. Similarly, if the government erects trade barriers that keep people and products from coming in and going out, we’re in trouble. Our population is not growing. Immigration is vital to future economic growth.” Message to CEOs: Shore up the balance

sheet. “CEOs are always focused on the income statement and growth, but in the current recession they need to give attention to the balance sheet. Now is the time to clean it up since income impairments are more likely to be accepted by investors. Review and reevaluate your investments, accounts receivables, goodwill impairments and accounts payables terms and write off what you can to strengthen the balance sheet.”

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SHARPLY DOWN AND SHARPLY UP Robert Hartwig, Ph.D., Clinical Associate Professor of Finance and Co-Director of the Center for Risk and Uncertainty Management, University of South Carolina’s Darla Moore School of Business

“The sentiment that the ‘cure will be worse than the disease’ is mounting.”

HARTWIG WAS AMONG THE MORE optimistic economists we interviewed about the current freefall and eventual recovery, selecting a V-shaped recovery, a sharp upturn once the economy hits the bottom of the current precipitous decline. He predicted the bottom would occur in midsummer, assuming state-mandated stay-at-home and social distancing initiatives successfully contain the spread. Federal stimulus will provide the steam for the rapid economic uptick. “Three trillion dollars represents roughly 13 percent of GDP, which is sizable, even though it will blow a hole through the federal budget,” Hartwig says. “But I also think the American tolerance for a second shutdown of the economy will have reached its limit in the next 30 days. With unemployment claims rising each week to levels not seen since the depths of the Great Recession, the sentiment that the ‘cure will be worse than the disease’ is mounting.” Buoying his prediction is November’s election. “I cannot possibly see the president shutting down the economy a second time and throwing millions of people out of work again,” Hartwig explains. “The political dynamic will not tolerate it. As we get closer to the election, the administration will do

everything in its power to keep the lights on. A range of heroic measures will come out of Washington, and the accommodative measures from the Federal Reserve could well continue for years.” He projects that after the economy goes through a “freefall stage,” it will ignite slowly and then fire up in the fall as pent-up consumer demand is unleashed. “I can see hints of positive economic growth occurring in Q3 2020, with Q4 being particularly strong, continuing into 2021,” he says. Monkey Wrench: A tragic policy mistake.

“Everything plus the kitchen sink will be thrown at this, but the president could bend to political will and not reopen the economy until the very last molecule of the coronavirus has been extinguished. But I don’t think that’s realistic, as it could cause markets to seize. Society has to realize we make tradeoffs between risks and rewards every day... Thirty thousand people die in auto accidents every year, but we don’t stop driving. And as many as 60,000 people die each year from influenza, but we don’t shut down business.” Message to CEOs: Cash is king, as is

courage. “Over the next few months, your liquidity is everything. Dividends, capital spending and compensation should all be on the table. But don’t go too deeply into the recession bunker, or you could be left behind once the economy reignites.”

MAKING A BAD SITUATION WORSE David Levy, Chairman of The Jerome Levy Forecasting Center, a world-recognized economic forecaster whose analyses have led to substantial growth gains in financial markets for investors in the Levy Forecast Fund LEVY’S SHAPE FOR THE RECOVERY is a reversed checkmark, a sharp diagonal headed down on the left, followed by a short and flatter diagonal at right (basically an L tilted backwards). For the past 18 months, Levy has warned that worldwide financial conditions were dangerously

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fragile and a recession risk. “On February 21, we wrote that avoiding global recession would require containing the coronavirus in China and that if it spread broadly, it would cause a recession,” he says. “In March, we wrote that a severe recession had begun.” This analysis is based partly on private sector balance sheets that grew faster than income for several decades. As interest rates got lower, more people and businesses took on risk, particularly in emerging markets that borrowed excessively and lack the ability to

contain Covid-19’s health consequences. Levy says that “emerging markets risk” is the “U.S. subprime mortgage housing crisis” in the current economic debacle. “The bigger that balances sheets are relative to income in a country, the more severe the breakdown will be,” he says. “Conditions in the rest of the world will range from awful to not quite as good as in the U.S.” Assuming social distancing restrictions are largely relaxed by summer in the U.S., Levy anticipates business profits to perk up in the third quarter, due primarily to federal stimulus spending, but profits still “very depressed” in both Q2 and “I’d be very Q3, averaging roughly 40 concerned percent of year-ago levels. about foreign “If that happens, it will take more stimulus,” exposures.” he adds. “But the bigger question is how successful Europe will be in stabilizing its situation. Most major central banks have little or nothing left to cut interest rates. I’m also concerned if international financial efforts will be provided to emerging markets to help stabilize their condition.” Monkey Wrench: Testing fails to get people

back to work, as the coronavirus makes a return visit. “My hope is that won’t happen, and we’ll manage to restore work for much of the population. The outlook abroad is even worse. Without more developed nation fiscal stimulus and financial support for emerging markets, a bad situation will become worse. Given strong nationalism and gaping political divisions at home and globally, I’m concerned.” Message to CEOs: Do not expect a quick re-

covery. “There will be lingering problems. While the U.S. will continue to be relatively healthy compared to the rest of the world, I’d be very concerned about foreign exposures, particularly emerging markets exposures.” There you have it—the good, the bad and the really scary—the outcomes uncertain and altering by the day. Our own message to CEOs is this: You can’t control how this will pan out, but you can put forward smart mitigations. And lead with empathy. CE Russ Banham is a Pulitzer-nominated journalist and author who writes frequently for Chief Executive.

TESTING IS EVERYTHING Laurence Kotlikoff, professor of economics at Boston University, has made news globally for the innovative group coronavirus testing process he developed with his brother Michael, a professor of molecular biology and provost of Cornell University. His V-shaped prediction for recovery hinges on how federal and state governments respond to the pandemic. “We have the potential to end this thing in two weeks and get everyone out of their homes and back at work,” says Kotlikoff. “The key is to mandate that every single American is tested in large groups at once, and then to isolate infected people from those who aren’t.” Group testing is a vastly more efficient process than individual testing, explains Kotlikoff, who outlines an aggressive testing and response program aimed at combatting infection. By swabbing the mouths of a thousand people at once, the tests can be pooled for a single aggregate view of the findings. Each group would be tested twice. If the entire group isn’t infected, they’re good to go. If one person in the group is infected, the second swab of each person would be tested to identify who is infected. “We could test the entire U.S. population in a single day and then quarantine all the infected individuals immediately at hospitals, homes, hotels, community centers and the like to stop the spread,” Kotlikoff says. “Obviously, for it to work, we need strict compliance, oversight and medical monitoring.” People found to be free of infection would be given a green ID badge or bracelet to wear at all times, allowing them to return to work, he suggests. “My hope is for daily testing, preferably by the military, on a household-by-household basis at election polling places and other local venues. Will this be costly? Yes, but nowhere near the costs of a business shutdown lasting months and months.” The Kotlikoff brothers have written articles on the subject in The Hill and other publications. “If the government takes our advice—and we’re receiving lots of positive comments—I predict a V-shaped recovery, with the diagonals coming so close together it looks like an I,” he says. Kotlikoff is calling on CEOs to help get the message out and press for aggressive action. “If the government dithers and doesn’t set this up, or people think the idea of requiring green bracelets is ridiculous, then we’ll just keep plodding along,” he says, adding that the private sector has the power to make a difference on a global scale. “If we do things right here, then companies across the world will follow our lead, including those in emerging economies suffering the most. We can get the entire world back to business in two months, six at the most if we have a really bad depression.”

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R E SE ARC H

THE BEST & WORST STATES FOR BUSINESS Once again, we asked CEOs where you like—and dislike—doing business. Here’s what you said. BY DALE BUSS

THE PANDEMIC CRATERED ECONOMIC DEVELOPMENT FOR NOW, but it hasn’t changed CEOs’ opinions about three important things: Texas remains the best place in America to do business, in their eyes; having a capable workforce is still their top concern, despite now-record unemployment; and states’ “blue” political leanings concern them—except when they don’t. Welcome to Chief Executive’s annual “Best & Worst States for Business” survey, Covid edition. Once again, for the 16th year out of the 16 years we have conducted our poll, Texas ranks No. 1 (see p. 39). Despite the shutdown of much of its oil industry by the coronavirus recession, the state retains extremely business-friendly characteristics and policies. The rest of the top 10 states also remained essentially unchanged from the 2019 rankings. Similarly, the bottom 10 in the rankings were relatively frozen, with California once again in last place (see p. 36). Michigan’s jump of 19 spots, to No. 13, was one of the biggest single-year moves in the Best & Worst States for Business ranking history and reflected a broad surge of confidence by CEOs even as the auto industry has leveled off. “We’re seeing a diversification in the economy including more tech firms,” says Alan Barr, CEO of Creative Change, a consulting firm in Manistique, Michigan. Still, about 52 percent of site-selection projects nationwide were paused by the pandemic, according to an April survey of members of the Site Selection Guild, though none said clients were outright canceling projects. “Like the stock market, a lot of site-selection projects are built on speculation, on confidence in how things will look one or two years down the road,” says Brian Corde, co-founder of Atlas Insight. “If confidence isn’t high, it slows the pace.” Because the food industry largely gained during the Covid-19 crisis, many of those

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RANKING 2020 BEST & WORST STATES FOR BUSINESS <<LOSS FROM 2019

Tennessee With the oil patch under assault by Covid-19, Texas is facing the worst economic crisis in decades. But don’t expect it to fall in our ranking anytime soon (see p. 39).

MUSK: REUTERS / STEPHEN LAM; NORTHAM: REUTERS / JONATHAN ERNST; WHITMER: REUTERS / REBECCA COOK; NEWSOM: REUTERS / STEPHEN LAM - STOCK.ADOBE.COM

The election in November that turned Virginia’s legislature blue drew the attention of CEOs (p. 38).

North Carolina

Georgia

Virginia Colorado

Iowa Arkansas

South Dakota

Kentucky Nebraska North Dakota New Hampshire Kansas

Maryland No surprise, California Governor Gavin Newsom says he isn’t a fan of our list (p. 36).

Pennsylvania New Mexico Rhode Island Alaska

Washington

-10

-5

RANK

GAIN FROM 2019>>

1 Texas 2 Florida Nevada 3 4 5 Indiana 6 7 Arizona 8 South Carolina 9 Ohio 10 Utah 11 Wyoming 12 13 Idaho 14 Wisconsin 15 16 17 18 Oklahoma Delaware 19 Missouri 20 21 22 Louisiana 23 24 25 Alabama 26 Montana 27 28 29 30 31 Maine 32 Minnesota 33 Vermont 34 35 Mississippi 36 West Virginia 37 38 39 40 41 42 Hawaii 43 Oregon 44 45 Massachusetts 46 Connecticut 47 New Jersey 48 Illinois 49 New York 50 California 0

The Tesla factory near Reno attracted other tech companies to a nearby industrial park (pgs 37 & 38).

Michigan

Michigan had a huge leap in the standings under Democrat Gretchen Whitmer.

Covid-19 will rock states like Illinois, already suffering from a vicious cycle of growing liabilities and falling population (p. 37).

WHAT PRICE FAME?

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THOMAS WOLF, WWW.FOTO-TW.DE / WIKIMEDIA COMMONS

LAST YEAR, CALIFORNIA GOVERNOR GAVIN NEWSOM rapped Chief Executive by name because the state once again finished last in the magazine’s annual survey of CEOs. No word from him so far on how he feels about his state finishing No. 50 in this year’s survey, too. “Our GDP growth outperforms every damn one of those other states they highlight,” he said at a conference in San Francisco in late June, bashing Texas and Tennessee along the way. “I get it. We’re not going to be the cheapest place to do business. But you knew that 50 years ago. Come on. Stop.” The problem is, owners of businesses in California aren’t stopping. Many are still running away as fast as they can, especially those who make things. Newsom’s comment summed up why, implicitly saying this to CEOs: As long as California can count on spectacular growth from tech companies in Silicon Valley and movie studios in Hollywood, don’t expect the state to reverse any of its attitudes and policies that chase many companies away. John Kearney is one CEO who’s actually been trying to hang onto his company’s California factory. Advanced Training Systems, which makes driving simulators for truckers and other specialty drivers there, has been eyeing a move. “California is so tough to work in and getting worse,” Kearney says. “It’s a good assumption that our manufacturing will be leaving there” for Florida. Economic-development consultant Larry Gigerich believes that California “can’t rely anymore on the idea, ‘We’ve got really smart people here, so you should be here too.’” In fact, the managing director of Ginovus, based in Fishers, Indiana, believes the current recession will exacerbate the hollowing out of California’s middle class. “You could have only the super-rich and super-poor left in California.” Others are more sanguine about California being able to hang on to its status as a very prosperous and huge economy despite disdain by so many business chiefs. “Everyone’s leaving California, people have been saying,” says Rick Weddle, head of the Site Selectors Guild. “But California has continued to grow for 40 years. And there aren’t a lot of people moving there either. It’s been sheer organic growth.” Nevertheless, some CEOs will be heartened by the fact that in early March, California voters soundly rejected the largest borrowing proposal in the history of the state’s schools, a $15 billion bond for repairs. They also rejected more than half of the 237 local tax and bond measures on the same ballot. Did concern over Covid-19, a teetering stock market and a likely recession make California voters nervous? Or was it a way to register pent-up frustrations over soaring housing costs, an expensive boondoggle in the high-speed rail system and the state’s booming homeless population? Many CEOs will be waiting to find out.

companies remain on the hunt for sites. By contrast, office-construction plans have pulled back severely as all players consider the future of telecommuting. Clearly, states will be hungrier to chase whatever projects go forward. “But with declining tax revenues, states have fewer resources to offer dollars up front that can help companies offset project costs,” says Larry Gigerich, head of Ginovus consultants. Georgia is among states that will “dig into existing sites and get those readier for development” during the Covid-19 pause, says Bert Brantley, chief operating officer of the Georgia Department of Economic Development. Pre-pandemic, the availability of qualified workers and government incentives tied to workforce preparation had risen to the top of many CEOs’ wish lists. A slowdown is unlikely to blunt that need unless it becomes a depression. Meantime, more places are pursuing tech jobs by “trying to make their communities an environment that will attract talent,” says Jay Garner, chairman of the Site Selectors Guild. That’s a big reason Austin, Texas, and Nashville, Tennessee, have been shining. CEOs traditionally prefer “red” states such as Texas, Georgia and Tennessee, and their business-friendly policies. So some take a dimming view, for example, of Nevada (see p. 37), where the governorship and legislature flipped into Democrat hands in 2018 and then overrode a 1965 ban on collective bargaining for state employees. “Nevada’s biggest risk is a quick shift to blue” politics, says Dennis Cuneo, who heads an economic-development consulting firm headquartered in Reno. “It’s a bit scary.” Yet, the 2020 survey results belie these concerns. Nevada rose three places, to No. 3, the biggest advance among the top ten. And Michigan’s huge leap occurred while Democrat Gretchen Whitmer was governor, after former Gateway Computer CEO and Republican Rick Snyder completed his eight-year tenure.

ILLINOIS: A BUSINESS DRAIN

NEVADA RISING

SOME ILLINOIS BUSINESS LEADERS WORRY THAT their state is resembling two things these days: California and a coronavirus patient in critical condition. Concerns include an attempt to get voters to approve a graduated-income-tax constitutional amendment and that a Covid-19-induced recession could exacerbate Illinois deficiencies, such as the Chicago public school system. “The governor has sold this vote as a tax cut for 97 percent of the population, but the reality is that in every state that has tried to do this, including California, people who can afford to leave have left and relocated their businesses elsewhere,” says Orphe Divounguy, chief economist for the Illinois Policy Institute, a conservative think tank. The state has already lost 850,000 people during the past decade, seen 21 percent lower personal-income growth over the last 20 years than the national average and may become the first state to go into default due to unfunded public pension liabilities of at least $137 billion. “Hundreds of thousands of residents moving elsewhere for more economic opportunity is a symptom of the Illinois disease of bad public-policy decisions,” says Jonathan Williams, chief economist for the American Legislative Exchange Council. “Illinois is surrounded by states that are generally going in the right direction, with flat or falling corporate taxes. Plus, they are right-to-work states.” Yet, plenty of CEOs stay for reasons like having invested heavily there or because of the highly educated millennial workforce in the Chicago area. The latter has helped Fusion Risk Management, for example, become one of Deloitte’s 500 fastest-growing tech companies in America. “Fifteen years ago, a company like mine would have started on the coasts,” says David Nolan, founder and former CEO of the software and consulting company. “The problem is that the level of churn in those markets is really high and hard to manage. But in Illinois, we have access to a very talented base of resources in excellent” colleges and universities. Some experts scoff at the depiction of Illinois as the “California of the Midwest.” “You see states fishing for companies in places like California,” says Jay Garner, an economic development consultant. “I don’t see many states setting up shop to try to acquire Illinois-based companies.” Sid Diamond wouldn’t listen to offers anyway. The CEO of Flix Candy and a couple of other licensed-products manufacturers in Barrington, Illinois, concedes he’s “very concerned” about the rising costs of doing business in his home state. “But it would be very difficult to move to Wisconsin. All of our talent is right here; all of our employees are in our central office” in northwestern suburban Chicago,” he says. “We’ve had employees with us for 30 years. So you go on and hope for the best.”

NEVADA KEEPS ROLLING 7s and 11s as it climbs in the perception of CEOs and consolidates recent gains made by diversifying its economy, landing a couple of prosports teams for Las Vegas, luring more companies from California and winning Tesla’s battery-making “gigafactory” near Reno a few years ago. India Hynes, for instance, fled the hostile business climate in southern California last year and relocated Vinotemp, her wine-refrigerator manufacturing outfit, to an abandoned Kmart in Henderson, Nevada, in suburban Las Vegas. To get core staffers to leave with her “I incentivized those who never wanted to leave California by helping them with down payments on homes,” she says. The welcoming attitude of Nevada continued. “Here I was in a retail zone and [local regulators] gave us permission to do manufacturing and distribution both,” says Hynes, who employs about 30 people in her 118,000-square-foot facility. “That’s something California never would have done. That flexibility made all the difference in the world to us.” One of Hynes’ Henderson neighbors will be Haas Automation, a $1.2 billion maker of CAD machinery for factories. Based in Oxnard, California, the company disclosed plans to build a 2.3-million-sq, $327-million factory. Meanwhile, the Tesla factory near Reno attracted other tech companies to a nearby industrial park, and “diversified the economy significantly,” says Stephen Miller, director of the Center for Business and Economic Research at the University of Nevada-Las Vegas. A decade ago, the Great Recession left the state’s tourism-dependent economy in tatters, including a nation’s-worst 14.5 percent unemployment rate. Then-Governor Brian Sandoval, a Republican, reworked the state’s economic development strategy and aggressively recruited businesses with incentive deals. There were some missteps, most notably Sandoval’s deal laden with $335 million in tax incentives for the construction of an intended $1 billion electric-car plant in the Nevada desert. It fizzled in 2017, when Faraday Future, a startup owned by a Chinese tech entrepreneur, couldn’t get its act together. Challenges continue. “It’s still always a tale of two cities here—Las Vegas and Reno,” Professor Miller says. “And we’re not very high in the number of college graduates relative to most states, which means we could stand to improve our skill mix.”

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THE ELON DERBY

AMAZON STARTED CONSTRUCTION PREPARATIONS for its $1.2 billion development in the Pentagon City sector of Arlington, where the e-commerce giant promised to raise twin 22-story towers and bring 25,000 new jobs. But that may not be the most important development for the state’s business climate in the past several months, after Virginia dropped by three spots, to No. 16, in this year’s rankings. The election in November that turned the legislature blue also could have a profound long-term effect. Both the senate and the general assembly flipped to Democratic control. Further entrenchment of Democrats is considered likely as Virginia’s populations of knowledge workers and non-whites continue to expand. Democrats were quick to exercise their new majority power, including committee deliberation of eliminating the state’s right-to-work status. Union members accounted for only 4 percent of wage and salary workers in Virginia in 2018 compared with the national rate of 10.3 percent. Reversing right-to-work would cause Virginia to “drop down the list” of desirable states, predicts development consultant Dennis Cuneo. “Many CEOs have told me over the years, ‘If a state isn’t right-to-work, don’t even look there.’” Rick Weddle, former chief of the Hampton Roads Economic Development Alliance in Virginia, and now executive director of the Site Selectors Guild, agrees: “Virginia would be the only state south of the Mason-Dixon line that would be non-rightto-work. That kind of a stuff is a concern.” The legislature did approve a bill that would extend the right to collective bargaining to teachers and other government workers in any locality that authorizes negotiations. Business leaders fear that Virginia will lift altogether its previous statewide ban on such bargaining, a prohibition shared by only North and South Carolina. Meanwhile, Virginia’s snagging of Amazon’s “HQ2” attests to the success of its primary strategy of promoting higher education and a growing talent pool, including community and technical colleges. It was a centerpiece of the winning effort by economic development head Stephen Moret. Amazon’s choice of suburban Washington, D.C., for its massive new operation—and to create 5,000 jobs in Nashville for a “customer operations center”—is also recognition that today’s companies don’t necessarily need to locate in urban cores to attract knowledge workers. “It’s the way we do business now, so it’s more advantageous to locate in a place” like Arlington, says Max Gulker, senior research fellow at the American Institute for Economic Research. “For that reason, prospects for Virginia are better than for the average state because it’s never had that kind of big urban center anyway.”

TESLA’S PLAN to build a plant to assemble its all-electric pickup truck and Model Y compact sport-utility vehicle was the hottest topic in the economic-development community before the pandemic and recession chilled talk of business expansion. When the U.S. economy recovers, states are sure to jockey furiously for consideration. The stakes may have gotten higher since a frustrated Elon Musk, Tesla’s founder and CEO, railed against authorities unwilling to let the company re-start its existing assembly plant in Fremont, California, in mid-May due to pandemic concerns. “Frankly, this is the final straw,” Musk tweeted in the midst of filing suit to re-open. “Tesla will now move its HQ and future programs to Texas/Nevada immediately.” Many handicappers were already betting that Musk likes the idea of putting the pickup plant in Texas, America’s biggest truck market and where GM and Toyota already build trucks and large SUVs. “San Antonio was the runner-up for the gigafactory” for batteries that Musk built in Nevada, says consultant Dennis Cuneo. Now the two states may be able to battle it out to steal a much bigger prize, from California. But there are other contenders for both the plant and—if the Musk really ditches California—to become the new site for production of existing Teslas as well. Georgia sits in the middle of an “auto alley” of suppliers, some of which supply batteries, and a Kia assembly plant. Josh Hunt, vice president of business development for the Michigan Economic Development Commission, argues that his state is best “because of the strong workforce we have and the level of engineering talent.” Meanwhile, Michigan-based startup Rivian, with a $500 million investment from Ford, plans to make all-electric delivery vans for Amazon in Normal, Illinois. Musk’s mercurial management style and single-minded pursuit of his technology vision are among reasons that states might hesitate to enter the new-plant derby. Few companies that dangle such huge prizes are so personally controlled by their founding CEOs as Tesla. Amazon, where Jeff Bezos reportedly was deeply involved in its “HQ2” search in 2018, is an oft-cited comparison. EV manufacture also requires 30 percent less labor than conventional automobiles. And it’s also possible Tesla’s electric pickup won’t gain traction with traditional truck buyers. Plus, how Covid-19 fallout will affect Musk’s plans is unclear. But making a play for any piece of Tesla likely will still prove worth the effort for states that may witness slowdowns in the months ahead. Along with Tesla’s growth and maturation as a company, there are thousands of reasons as measured in jobs, and millions of reasons as measured in tax revenues, for governors and state economic development officials to pursue the new Tesla plant with everything they’ve got.

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REUTERS / HANNIBAL HANSCHKE - stock.adobe.com

VIRGINIA GOES BLUE

TEXAS: STILL NO. 1 SOME DAY ANOTHER STATE MAY TOPPLE TEXAS FROM NO. 1 in the Chief Executive Best & Worst States for Business rankings. But don’t count on that anytime soon. The stunning plunge in oil prices during the pandemic idled thousands of oil and gas wells and froze energy-development activity across the Lone Star State. Its millions of white-collar and service-sector jobs also were endangered. But Texas just keeps shedding potential threats to its position atop the perceptual pinnacle for business leaders. They continue to be attracted by the state’s lack of an individual income tax, low business taxes, friendly regulators, reasonable cost of living, and diverse and growing labor force. Add to that a mid-country location and robust recreational options. Existing employers keep expanding, and new ones keep coming to the Lone Star State, especially from California. The latest big example: Discount brokerage firm Charles Schwab merged with TD Ameritrade and then announced plans to move its headquarters from San Francisco to Texas. Rejected in Amazon’s HQ2 search, Houston is plowing right through the disappointment, already having more Fortune 500 headquarters than any city but New York, a diversified industrial economy, strong healthcare and academic institutions, and under-appreciated ethnic diversity. Amazon cited a lack of an “urban core” of tech workers in Houston. Part of the city’s response was to establish The Ion, a downtown tech incubator that will bring together all Houston’s strands of innovation when it opens next year. “More and more, talent wants to live close to where they work and not have to get in the car, and they want restaurants and theaters and the rest of their lives close to them,” says Gabriella Rowe, The Ion’s executive director. “And in a sprawling city like Houston with limited public transportation, that very much means being in the urban core.” Its historic relationship with the oil and gas sector might have been problematic for Texas’s growth by now, especially amid 2020’s historic swoon in oil prices. But despite the fracking boom, Texas had cut its dependence on the rollercoaster exploration and production part of the business over time. Downstream aspects that are less cyclical now comprise the biggest part of the oil industry in Texas, such as refining, which is centered on the Gulf Coast. “While we’re still connected to oil and gas, the relationship isn’t what it used to be, says Karr Ingham, petroleum economist for the Texas Alliance of Energy Producers. Meanwhile, the Texas economy continues to diversify. For example, Waco—known as the site of the mass deaths of Branch Davidian cult members in 1993—has become a central-Texas tourism mecca due to the success of reality-TV entrepreneurs Chip and Joanna Gaines, who built a thriving retail and entertainment district there. Diversification is a big reason business leaders find Texas favorable for M&A activity too. More than 80 percent of a group of 200 enterprise leaders said that they’re planning such moves in the next three years in a pre-Covid-19 survey by West Monroe Partners. “The strong talent and employee base is leading to private equity clients moving and expanding in all the big cities in the state,” says Adam Gersting, a senior director. CE

Houston has more Fortune 500 headquarters than any city but New York.

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BEST IDEAS 2020

DRIVING DIGITAL TRANSFORMATION

The mission? Change before change takes you under. Some tips.

EVEN BEFORE THE COVID CRISIS, CEOs were being hounded and haunted by the imperative of digital transformation. But heeding the call still leaves many chiefs asking at least two big questions: What is it—really? And how do I go about leading the digital remaking of my company? Digital approaches are in the DNA of most companies started in the last few years. But knowing how to embark upon and execute digital transformation can be more difficult for operators in legacy industries. The distraction of the current crisis makes it even more so. “What we are trying to achieve is a fundamental change in our thinking,” says Dan Knotts, CEO of RRD, a Chicago-based integrated-communications giant that began business 164 years ago as the commercial printer RR Donnelley & Sons. Today’s transformation requires RRD “to fundamentally rethink our business model. Our digital revolution is a key enabler of our path forward.” While for some CEOs a digital path becomes obvious and simply must be embraced, for other companies a promising approach to transformation isn’t apparent, is too far a reach or just isn’t possible. “It’s a matter of getting Uber-ed before you get Kodak-ed,” says Jim Ryan, CEO and president of Flexera, an IT-management software company based in Itasca, Illinois. “Every single company in the market-

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place is a tech company that is now being powered by software and the cloud. That represents great opportunities to go and disrupt markets—and to be disrupted.” One big reason so many CEOs can get gobsmacked boils down to the new speed of innovation. “The scale and pace of change across almost any industry is almost exponential now,” says Peter Dahlstrom, a senior partner at McKinsey and co-author of the new book, Fast Times: How Digital Winners Set Direction, Learn and Adapt. “It isn’t just five to 10 percent a year—it’s 10X, 100X, maybe even 10,000X over the course of a couple of years.” To avoid being victimized by this tsunami of change, Dahlstrom recommends focusing on three things. Accelerate digital transformation, but only after “taking a bit of time to think through what you want to do.” Scale the process by moving it to the center of the company instead of keeping it in “a handful of agile tribes for testing.” And, finally, sustain change by attracting and keeping talent, insourcing IT functions that have been sent overseas and “reskilling” legacy employees. Some CEOs figure they’ll slide in behind the industry leaders in digital transformation in a “fast-follower” strategy. “But that doesn’t work anymore,” Dahlstrom warns. “You have to be first; moving slow isn’t really an option. If you’re not fast and first, you’ll really struggle. You can’t miss the beat and fall behind in the innovation cycle.”

HR OUTSOURCING

SET UP SKUNK WORKS CHRIS MICHALAK, FORMER CEO Alight Solutions, Lincolnshire, IL

INSURANCE

DON’T SETTLE FOR MERE ‘DIGITIZATION’ ROGER CRANDALL, CEO Mass Mutual, Springfield, MA You have to tear up the playbook and build a real, end-to-end digital company. And that’s different than just digitizing what you do today. For us, if you take an application on paper and just put it in a digital format, so an advisor can sit with you with an iPad, it’s not really transforming anything. It ultimately kicks back to the same stack you had; it’s just easier. So we have to imagine applications that are built as digital apps so now, when you’re filling them out, they feed back into our underwriting algorithms and directly into our administrative platforms and tie all the way back to claims. That’s different than taking pieces and digitizing them or even optimizing an existing process. And that’s the approach that you’re ultimately going to compete against: someone who said, “I’m going to go after this problem or this opportunity and build a modern technology platform to do it.”

Our carve-out in 2017 from Aon Hewitt gave us the potential to evolve to maintain our leadership position in the industry, particularly as it related to digital transformation. We needed to create a vision for the company around being more tech-driven and consumer-centric. We knew innovation would be important. So we took some really practical steps such as taking our top 100 leaders to a two-day offsite focused on innovation. Then we went much further by joining the 1871 innovation lab and creating an internal innovation lab called Spark Tank. At 1871, we’ve joined more than 100 other companies and other entities in the Chicago area to tap into the knowledge, energy and experience of some of the area’s most forward-thinking entrepreneurs to create new solutions. Our people can interact with others working on consumer-facing applications. I also felt having a presence there sent a message about where we were going and what was crucial to us. We wanted to put cultural stakes in the ground that would communicate a message about who we want to be and what’s important about making our digital transition. Spark Tank is an effort to make sure we’re listening to our 15,000 employees and creating opportunities for them to contribute to our digital transformation. We have done it twice so far, running it as a competition that has involved more than 80 teams from around the world so that the best ideas bubble up throughout the company. We actually funded an initiative of the winning team and sent them to 1871 so they could take that idea to the next step. Now it has the potential to produce an actual result that could come to Alight while engaging people in innovation and digital transformation in ways that affect the company.

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CHOCOLATE MANUFACTURER

DEFINE AND CONQUER DOUG STRATON, Chief Digital Officer The Hershey Company, Hershey, PA The biggest component of digital transformation is the cultural change that goes along with it. It’s good to have a strategy and technology that will enable it, but the hardest work is around culture, re-education and the upscaling of the organization. So, you need to define what digital transformation is, and what it isn’t. Because the mere talk about digital transformation conjures up feelings in [employees] that this is going to be something they don’t understand. Build a narrative that people do understand because they’re already in the middle of digital transformation in their personal and professional lives. You can boil it down to, “10 years ago you had an address book, a calendar and a cell phone, and now you’ve got them all on one device—and you can watch TV with it too.” That’s a major transition that people understand that can make it a little less scary. The second thing is don’t bite off more than you can chew. Everything being affected by technology right now leads people to believe they have to focus on everything—which is an impossible task. The prioritization of what you’re trying to get out of transformation—growth, efficiency or a balance of both—needs to be clear. Otherwise you’ll fail. The third thing is to have strong communications plans internally. That’s probably where we’ve struggled. It’s hard to get a narrative that resonates with everyone without dumbing down the topic too much. You strategize and come up with bold plans, and as an organization work on those things for months and years. And you think everyone knows what they’re working on. But if there isn’t a good communications plan to go with your overall plan, then you’re doing yourself a disservice. People have to understand what they’re doing as part of digital transformation, why they’re doing it and the expected outcomes. It has to be clear. You can convey to folks that they’re already participating in a digital transformation—it just might not be as strategic or well-coordinated as it should be. Then you can explain that we’re already doing these big initiatives in other areas; with Hershey, much of that is how we’re improving our approach to nutrition and the supply chain. And you can say it’s possible to do another big initiative. And you may already be doing [digital transformation] in various teams and functions. You just have to step back and proactively unify and align all those activities in one broader effort, and we’ll end up finding lower costs and less complexity and less work to do because we’re better unified. It becomes more of a, “Let’s do what we’re already doing—just a little more smartly.”

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HARDWARE MANUFACTURER

EMBED IT IN EVERYTHING JAMES LOREE, CEO Stanley Black & Decker, New Britain, CT In 2014, we created a digital accelerator in Atlanta and a “digital center of excellence” in the company where we could have subject-matter experts who could fan out to our portfolio of businesses and demonstrate to people what our capabilities were in areas such as digital marketing or the Internet of Things. But soon it occurred to me that the pace of change was accelerating and things were coming at us faster than we’d expected even two years earlier. The light bulb went off that we needed to do something dramatically different. And we did a lot of things, including embracing ESG, diversity and inclusion, which has made us a magnet for digital talent. We’ve also embraced lifetime learning and what we call “extreme innovation.” All of that has helped us ensure that digital transformation now is embedded in everything. We knew it would become pervasive, but we didn’t know how. What we’ve been able to do over the last couple of years is figure out how.

RESTAURANT HOLDING COMPANY

FINANCIAL SERVICES

DIFFERENTIATE WITH DIGITAL TECH

MAKE A CONTENT PLAY

NICK MARSH, CEO Founders Table Restaurant Group, New York City We just established a new company that brings together two major brands, with the promise of adding others, around the success of technological transformation and identifying opportunities to build on it. I was CEO of Chopt, which I founded 19 years ago with the simple goal of making the best salads on the block. Our customers come to us because of the quality and creativity of our products, but now they want them as fast and conveniently as possible. Where tech starts to play a massive role in our space is that what was fast back then doesn’t cut it anymore. They were noticing the same thing at our other brand, Dos Toros Taqueria. We’ve made significant investments in tech to be not just the best but the fastest and most convenient salad, including introducing payments without credit cards and without cash seven or eight years ago with mobile payments and QSR codes. Based on the success of that, we moved forward and developed online ordering. Now digital represents about 40 percent of all our consumer touches. But we have also learned that each person ordering in a different scenario actually has different needs from their technology. If you’re ordering for yourself, you might be most focused on loyalty points. But if you’re in an office and your administrator is ordering for a meeting, they need to be able to pay centrally and have a single point of contact for getting all that product arriving at one time. If you’re at home, you want to be able to save and preview previous orders based on what different people in the family have ordered. So, we’ve formed Founders Table to get ahead of customers’ digital needs for our existing brands and use the platform for multiple brands going forward. We want to create a seamless ordering experience with all of a customer’s information, where they’re earning loyalty rewards among a best-in-class group of brands. We think success with digital transformation, and identifying opportunities to build on it, could be a meaningful differentiator.

BARRY MCCARTHY, CEO Deluxe, Minneapolis, MN We invented the checkbook, but only 38 percent of payments in America today are checks, so we have created digital payment types and digitized distribution of new digital products as well as our analog and physical products. Just as important, we start with what kind of business problem we’re trying to solve— not just, “Here’s a product and why you should buy it.” To that end, we have made a major effort to provide great digital content that is organized around how our customer thinks. For each major business issue, we provide a link to an online white paper with use cases and examples of how other businesses in your situation have solved their problem. We also created a TV program called “Small Business Revolution” with segments that answer some of the same questions. We produce the program, and we distribute it on Prime, Hulu and YouTube—and soon it will be in-flight entertainment on Delta. We film it entirely, and it’s one of our employees who co-hosts along with Ty Pennington [of “Extreme Makeover” fame]. We have a national competition where thousands of small towns compete and we choose one as the winner. Then we put $500,000 into the community to help renovate Main Street, and we select eight businesses to help them grow. It’s not an infomercial; it’s truly helping small companies succeed and advising them on how to grow their business. So we don’t just give people a product answer and a sales pitch but educate them and give them value.

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REAL ESTATE

SCHOOL SPIRIT COMPANY

ADAPT TO THE INEVITABLE

FOCUS ON THE CUSTOMER EXPERIENCE

MIKE PAPPAS, CEO Keyes Co., Miami No business has been changed more dramatically by digital transformation than ours. Once Zillow and Trulia came into the market in 2005 and 2006 with the multilist online, it changed the dynamics of the business, and Realtors followed suit. We, in a sense, cooked our own goose. So what we’ve done over time is become the “last mile” for home buyers. With our hyper-local knowledge and local expertise, we’re very difficult to beat. Also, we have forced the evolution of our industry by adding on ancillary businesses—such as everything from mortgage insurance to cable hookups for a new home. If we hadn’t done that, we wouldn’t be here. If we were still running the brokerage business our father ran, we’d be out of business.

PRINT SERVICES

STAY TRUE TO YOUR CORE DAN KNOTTS, President and CEO RRD, Chicago We prioritize remaining true to our core while embracing change. Maintaining a focus on your core values and objectives doesn’t mean ignoring new technologies, processes or ideas. What it does mean is that if you have a well-defined strategy, you should utilize new technologies to enhance strategic execution rather than believing that new technologies, by themselves, are your strategy. As we head into the new decade, it’s important to recognize that while technologies and overall business processes must change, the fundamental objective of supporting your customers with relevant, high-quality products and services should not.

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JEFF WEBB, Founder Varsity Brands, Dallas We keep growing because we have used digital technology to give all of our customers the ultimate in online communications and customization, which is what they all want when it comes to our businesses. Everything we do in our digital transformation is about making the customer experience as great as possible. On the uniforms side, for example, our sales reps can be online and on the phone with a cheerleading coach and bring any outfit up on the screen and immediately [render] it in that school’s colors, and from all angles, so they can see exactly what the uniform is going to look like. Actually taking part in designing the uniform is something the customer sees as a great service. We bring the fashion component to the uniform. And our ability to do custom design and manufacturing—and do it efficiently—is hard for competitors to compete with. When it comes to our cheerleading events, we’ve focused a lot of digital resources on computerized scoring. We make sure that competitions are set up smoothly and meets everyone’s expectations for instant access to scoring, so people can see how the competition is coming along. It’s an important part of what we do to make the customer experience as easy and pleasant as possible.

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RESILIENCE AND RESULTS:

2020 IMPERATIVES TODAY, EVERY CHIEF EXECUTIVE IS FOCUSED ON TWO 2020 imperatives: Resilience and results. While executives have little control over demand resilience, they have direct control over operational resilience and results focus. In Resilience Thinking, scientists Brian Walker and David Salt describe resilience as “the capacity of a system to absorb disturbance and still retain its basic function and structure.” The enterprise test is whether it can shift where work is done and still drive its best potential results despite employee diaspora and turmoil. To adapt and respond to new realities, organizations need three fundamental capabilities: 1. The company needs to shift strategic priorities quarterly and get everyone re-aligned. 2. People need a source of truth on current strategic priorities for their organization, business function and group. 3. Team members need to work cohesively yet independently to be productive without proximity. Organizations will need to exercise these capabilities long after Spring 2020, so many are adopting platform-enabled Objectives and Key Results (OKRs) to close these resilience gaps and optimize business outcomes. RESPOND & RUN FASTER OKRs are a technique for aligning objectives, defining desired results and measuring progress in shorter, focused intervals. Made popular by startups, large enterprises have adopted them to respond to dynamic markets, close strategy alignment gaps and engage more of their organization in strategy execution. An OKR platform provides enterprise-wide transparency on what each team is trying to achieve and its progress to plan, automates management reporting like QBRs and operating reviews and connects company outcomes with team output. Organizations like Comcast, Microsoft, Cisco, Zuora, GHX and others that had an OKR process and platform before the crisis were able to quickly adjust strategic priorities, align teams and shift efforts in March 2020. Moreover, they can see where re-alignment breaks down and drive focus faster. Fortuitous at crisis onset, it will also help them navigate through and out of it. Tony Werner, president of Comcast Technology Products & Experience, says his process and platform “have helped amplify and accelerate results.” The core tenets of a good OKR practice include: • Quarterly iteration on strategic priorities. Quarterly objectives and key results replace annual strategic plans that quickly get stale. Aligning and re-aligning on near-term results drives higher focus, fosters a fast-learning organization and improves overall outcomes. • Explicit rather than implied alignment. The OKR process makes alignment an overt step in a company’s operating

model. OKRs are localized to each team, not just leadership teams (typically less than 2 percent of your workforce) so more of the organization’s capacity is leveraged against its strategy. Broad alignment is the source of startups’ speed but is often the Achilles’ heel of large enterprises. • Best possible results. The process helps teams define, align and organize to achieve their best possible results. It rallies people to greatness rather than mediocrity. By spending three hours aligning on objectives and key results at the beginning of the quarter, people can focus on what matters for the 500 hours they spend in the quarter. • Speed as a competitive advantage. OKRs focus effort on outcomes that matter most in the next 90 days, and platforms provide a continuous picture of the gap to plan. That visibility helps teams identify and resolve risks earlier in the quarter. • Teams are the engine of value creation. OKRs enable functional and cross-functional teams to clarify what they want to achieve and how success is measured. Working groups, pods and squads can be more self-directed, aligned and accountable. To drive productivity without proximity, employees need the ability to make progress and good decisions independently. Clarity on intended outcomes and transparency on commitments, actions and decisions helps interdependent colleagues be effective asynchronously. Automating and accelerating management reporting is imperative now as well because leaders need self-service data in the moment—and management-by-meeting has become exhausting. The future of work is here, and it requires the ability to work with autonomy, get information and feedback digitally and circulate business facts in more automated ways. IT’S ALL DIGITAL NOW Operating drag that wasn’t visible in person or in growth climates will now be magnified. While the external situation is changing very quickly, you may find that your internal response isn’t changing fast enough. To drive your best results in difficult conditions, you’ll need to accelerate your operational response, iterate frequently on strategic priorities and mobilize everyone faster. Fortunately, these can be accelerated and automated with proven, purpose-built OKR solutions. Zuora’s CEO Tien Tzou says, “A strong platform partner that provides expert coaching can help you unify the organization on OKRs and implement a platform in a few weeks.” Turn on the digital capacity to align, measure and optimize outcomes now—just in time to rally on the company’s best possible results for the second half of 2020. Deidre Paknad is CEO of WorkBoard, a three-time founder and former IBM executive. To hear about OKRs at Microsoft, Cisco, IBM and others, visit workboard.com/customers.

INDUSTRIAL AUTOMATION

START YOUR OWN STEM ACADEMY BLAKE MORET, CEO Rockwell Automation, Milwaukee We know there’s going to be a shortage of people with advanced-manufacturing skills and the interest in moving to manufacturing companies. That’s a persistent threat to our industry. So part of our digital road is to start with STEMbased education when future workers are very young, then proceed to additional education and hands-on experience on the job, and really to lifelong learning. We have to maintain our commitment to investing in employees throughout what could be a 40-year career. For example, we partnered with ManpowerGroup to create the Academy of Advanced Manufacturing, which is an intensive 12-week program that certifies highly qualified military veterans for work in high-demand technician roles for us. They’re able to get good-paying jobs, which is the right next step for many of them, instead of going on to formal schooling. A lot of them don’t recognize how valuable they can be at the heart of an industrial company with their soft skills from the armed forces and hands-on experience with manufacturing training.

INFORMATION SERVICES

INTEGRATION SOLUTIONS PROVIDER

VALUE WHAT YOUR CUSTOMERS VALUE

COMPETE WITH AMAZON— AND WIN!

DEAN SONDEREGGER, Senior Vice President and General Manager, Legal and Regulatory, U.S., Wolters Kluwer, New York City

DAVID WENGER, CEO Bridge Connector, Nashville

We survey our customers on an ongoing basis online using the Net Promoter Score survey. It’s a good measure of our health. Virtually everyone who responds to us— both promoters and detractors—we call. Not everyone answers. But it has allowed us to get very close to our customers and get lots of feedback. Then we organize the feedback into categories. And there are patterns that reflect some of the shortcomings of where we’re at. Then we ask: Can we address that in our current situation? What’s the cost of that? Or do we have to go through and rethink everything? This tool helps in our digital transformation by making sure that we understand what our customers are doing and want instead of taking an ivory-tower approach. It helps us know our market and our value story.

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Nashville has become a tech hub, with Amazon setting up a big new complex here and also a big campus of Google, and other major tech companies. But we have managed to build an employee base of 130 people across the country, most in Nashville, with our creation of the first “no-code” platform for integrating health-care software. There’s actually an abundance of talent here because this has been a healthcare hub. Plus, we are capturing a number of people from California, New York and Austin, and have built a significant level of IP on our team. We could have gone to San Francisco or New York or many different places, but we found a very good foundation here and decided to build from there. And we don’t view our staff as wanting to move to Amazon or Google. We pride ourselves on our culture and our innovation. We want to help change an industry, and everyone on CE our team has gravitated toward that mission.

THOUGHT LEADERSHIP CONTENT PROVIDED BY KHORUS

Back to the Basics of Business Performance A time of crisis is the right time to double-down on the fundamentals of your business. ince March 2020, nearly every business in the United States has faced unprecedented adversity. Due to the fallout of the deadly Covid-19 pandemic—including the shutting down of entire sectors of the economy—many businesses have closed. Many more will close. This tragic period of lost lives and lost livelihoods is an extremely difficult time to be a leader. Over the past few months, you’ve probably taken several important steps as a CEO: You’ve determined whether this is an existential crisis to your business, preserved cash as much as possible and done your best to communicate candidly to your employees, customers and shareholders. But a time of adversity is also a critical time for CEOs to reexamine the fundamentals of their business. My time serving as CEO of NetQoS was bookended by the recession after 9/11 and the Great Recession beginning in 2008. Both of these became opportunities to redefine the essentials of success—and to define who I was as a CEO. When the terrorist attacks of September 11, 2001, happened, the country seemed to grind to a halt, including our business. Things were so bad in the wake of the tragedy that I had a customer tell me that he thought we had the best new product he had ever seen, but if it cost more than the dollar in his pocket, he couldn’t buy it. As we walked the halls of NetQoS in those days, the fear and uncertainty were visible on passing faces. Fortunately, by doubling down on the essence of the business over the following weeks and months, we were able to survive the slowdown, once again reaching regular double-digit growth. In many ways, the current economic situation is different from previous recessions. But as you preserve and rebuild your company through whatever comes, I encourage you to use this opportunity to return to the fundamentals of your business using a simple framework: Align, Engage, Predict. ALIGN After 9/11, our team at NetQoS needed a crystal-clear game plan for how we would succeed in a new reality. That meant creating alignment around what success looked like. We started by reexamining our mission and vision to make sure we hadn’t missed a fundamental change in the market. From there, we implemented the practice of measuring what was most important across every division of the organization. For each department, we asked: What is our mission? Whom do we serve, and how do we serve them? I asked my HR head, what is a good HR department? What does it do, and how do you measure that? I asked my marketing head the same. And so on. By the end of the exercise, we knew precisely what each department needed to focus on. Each department displayed their key metrics on a bulletin board outside their office. The big-picture result? We created a fresh sense of alignment around the things that mattered most.

ENGAGE Next, the executive team and CEO must engage the entire organization in the newly refreshed mission and vision. The primary tool here is consistent, abundant communication. To remain engaged even as they feel uncertain about the future, the entire workforce needs to hear from the CEO consistently about the top-level priorities of the company. And each manager in the company should work with employees to set specific, near-term goals that allow each person to engage in the broader success of the company. The Engage step also demands transparency. During the downturn of 2001–2002, I told employees that, while I couldn’t promise that we would never have to lay people off, I could promise that I would be honest with them about how the business was performing. When we did have to do a small layoff, no one was shocked, because we had consistently communicated the struggles in the business and the need to cut expenses. This type of transparency is key to keeping people engaged in the mission. PREDICT Finally, CEOs need to constantly keep their eyes on the road ahead. That is never truer than in a period of adversity, when circumstances can change rapidly. Each week, the CEO must revisit the business fundamentals with executives, asking each to project whether key metrics will be hit. Asking people to predict an outcome—rating the likelihood of meeting a certain revenue number, launch date or other measurement—results in far more insight than asking for historical data. As CEO, your concern is not what’s already happened, but whether the organization will predictably meet its commitments. In the years since I led NetQoS, I have served as CEO of both public companies and startups. This core process of Align, Engage, Predict has become critical to how I lead and even became the backbone of an enterprise CEO platform called Khorus. As the coronavirus, and the actions taken to contain it, ravage lives and the economy, we have decided to make Khorus free to CEOs at companies of all sizes. This is not some watered-down version of Khorus, either, but our full-featured enterprise-class software—no strings attached. You will be able to align every member of the team around corporate priorities, engage them with goals of their own and have everyone predict key outcomes each week. In these difficult times, every company should be focused on aligning, engaging, and predicting the performance of their organization. They will now be able to do that free of charge. Please visit www.khorus.com to get started today.

Joel Trammell CEO, Khorus

TEC H NOLOGY G UI D E

“A manager’s sole job is to set up our team members to succeed. Consequently, our processes, policies and systems have to be designed to succeed.” —Dan Smith, CEO, Watco

UPDATE YOUR

PEOPLE OS New software and new employee expectations unleash new ways of working. BY RUSS BANHAM IM MULLIGAN JOINED VULCAN AS ITS CHIEF HUMAN resources officer in 2017 with a mandate from CEO Bill Hilf to overhaul the company’s performance management system. Mulligan’s task was to make the employee performance review process transparent, objective and motivational at Seattle-based Vulcan, a private company founded by the late Microsoft cofounder, Paul Allen, to oversee his family’s businesses and philanthropic activities. “In a city as tech-focused and competitive as Seattle, we needed to deliver a new system that was cutting edge and sophisticated, and not what other companies were delivering,” Mulligan says. To entice the best and brightest people to hire on at Vulcan, Mulligan turned to Saba, a provider of talent management software. Today, employees across Vulcan’s wide-ranging enterprises—real estate development, venture capital, filmmaking, philanthropy, the Seattle Seahawks professional football team and a handful of museums on pop culture, computing and flight—leverage the Saba tool to review feedback on their work performance. These informal comments may surface deficiencies in specific skills, which employees can strengthen through Vulcan’s continuous learning initiatives. “By making performance information transparent, employees understand management decisions around compensation and promotions,” says Mulligan. “These insights motivate them to sharpen their skills and move their careers and our mission forward.” Motivating employees to seize strategic business growth is a story as old as business itself. How it’s being attained today is startlingly new. Long before the current coronavirus crisis, companies were jettisoning yesteryear’s command-and-control talent management structure in favor of project teams with the autonomy to speak truth to power and make decisions. That’s likely to accelerate now, with a growing arsenal of cognitive computing and digital technology tools to collaborate, making work more efficient, flexible, remote and fun. Other evolving technologies in use at more sophisticated employers include recruitment and onboarding solutions that automate these processes while conveying the organization’s unique brand and culture, and an array of survey tools using AI and predictive analytics to discern specific reasons for employee disengagement from their work and how to resolve these issues. Today’s new work structures and ways of work are predicated on fulfilling the work expectations of millennials and Gen Z employees. In many organizations, they are the price of entry to attract these digital natives’ skill sets.

CHIEFEXECUTIVE.NET / MAY/JUNE 2020 / 51

“Nurturing the development of highperformance employees is fundamental to fulfilling the vision of the company. We now have a culture of continuous feedback.” —Tim Mulligan, Vulcan WORKING DIFFERENTLY FOR THE MONEY

Watco Companies has such a workforce. The largest privately owned shortline railroad in the country has reengineered work around project teams of employees motivated to provide exceptional customer service. “Our culture is centered on people,” says Dan Smith, Watco’s CEO. “A manager’s sole job is to set up our team members to succeed. Consequently, our processes, policies and systems have to be designed for their success.” Helping generate this success is a talent management solution provided by SAP SuccessFactors that runs the gamut from recruiting and onboarding through performance development. “We needed a solution that would not only support our team members in their day-to-day work but would also help their overall professional development,” Smith says. “With the solution, a team member can apply for a job, complete the necessary employment paperwork, complete the performance review, set goals, take online learning courses, register for instructor-led courses, review their pay stubs,

52 / CHIEFEXECUTIVE.NET / MAY/JUNE 2020

and more” (See “A CEO’s Guide to Talent Technology,” p. 55). At Los Angeles-based BlackLine, job tasks are also often self-directed. Once hired, employees have the opportunity to manage their career progression, joining diverse project teams on an as-needed and as-desired basis. “Twenty percent of the workforce in one role a year ago are in a new role today,” says Therese Tucker, CEO and founder of the global provider of financial and accounting software automation solutions. “We encourage people to seek opportunities beyond their current roles to broaden their skill sets. And we make it easy and organic to do that.” Most employees rotate from one project team to another, absorbing different skills along the way. BlackLine also offers shortterm international work to further employee talent development assignments in the nearly dozen countries in which it has offices. Most importantly, Tucker says the company instills the purpose-driven nature of the company’s products, which are predicated on making the work of accountants less burdensome and more fulfilling, in its workforce. “Our technology solutions have an impact on the lives of others, which connects strongly with the purpose-driven nature of many young people,” Tucker says. This high-tech and empathy-driven way of providing work is here to stay, says Deborah Ancona, founder of the MIT Leadership Center and a professor of organization studies at MIT’s Sloan School of Management. More than a dozen years ago, Ancona and her colleagues predicted that mobile technology would disrupt the autocratic and highly bureaucratic business management model that had prevailed since the end of World War II. Just in time, too. “The world and business environment were changing so fast that we realized even the best CEO could not possibly stay on top of everything,” she says. “Leadership needed to be pushed down into the lowest ranks of the organization, to the people closest to what was really going on.” To achieve that aim, many companies ditch the hierarchical form of management that predominated in the 20th century.

They move to nimbler, network-distributed learning models, where the traditional management pyramid has been inverted, Ancona says. “Managers now realize they need to engage and motivate the bottom parts of the organization to lead upwards with their ideas and innovations, and the way to pull people together is to articulate what you do that is truly meaningful.” Assuming this is the case, employees will find true merit in the work they perform for the business—just the message that today’s younger generation of workers want to hear. “Young people come out of educational institutions where they enjoy face-to-face collaborations on teams, purposeful and engaging assignments, and learning opportunities to fill perceived skills gaps,” Ancona adds. “They have the option in many cases to skip an early morning class and take it online in the evening.” Students bring these expectations into the workplace. “You can’t hire young people, stick them in front of a computer for eight hours a day, fail to give them the technology tools they’ve come to rely on and then expect them to be motivated and productive,” she says. ENGAGEMENT ENGINES

This new work model requires investments in talent-focused technologies. Such software solutions have expanded from the original HR information systems introduced in the early 1990s to process payroll, employee benefits calculations and expense reporting and reimbursements. HR systems now manage recruitment and talent performance. In this journey, HR itself has evolved into a key strategic resource overseeing the employment brand and culture to recruit and retain desired skill sets and training in the development of data analytics and cognitive computing solutions like AI, chatbots, RPA (robotic process automation), machine learning, natural language processing and predictive analytics. This progression alters the ways companies calculate the return on investment in HR solutions. “Back when these were a bunch of tools automating manual HR practices, ROI was calculated in the amount

WHAT TO BUY: FINDING SOFTWARE THAT CONFORMS TO WORK EXPECTATIONS INVESTMENT DOLLARS ARE FLOWING into the HR technol-

ogy space at the same time that revolutionary innovations in work paradigms are hyper-accelerating, making the decision of which HR software to purchase from which provider a daunting task. (For details on some of the programs available, see “A CEO’s Guide to Talent Technology,” p. 56.) To strike a delicate balance between need and cost, Franz Gilbert, vice president and HR solutions provider at Big Four firm Deloitte, suggests beginning with a determination of what the organization is looking to achieve through its HR technology strategy. “Think about the problem to be solved first and then how the HR solution fits into your overall plans and budget,” says Gilbert. In some cases, a company’s existing HR vendors may have new talent management and collaborative work technology tools that address the problem to be solved at a reduced cost than buying it elsewhere. Nevertheless, for comparative purposes, the product features and functions of other vendors must be vetted before making a decision. “A new HR platform can generate new perspectives for how HR processes can be accomplished,” Gilbert says. “Given the wide range of HR providers out there, it makes sense to assess the company’s experience working with current HR providers versus startups and larger companies.” In evaluating both camps, beware of buying shiny new HR software and sticking with older HR processes, which “negates the proposed benefits [of the new solution],” Gilbert says. “Instead, take the opportunity to optimize processes using the new features and functions.” Since HR systems affect how work is to be performed, workforce adoption is crucial to achieving the desired end state. To mitigate the potential fallout produced by a new system, Gilbert advises that HR invest in a change management discipline that addresses the people side of the software implementation. “This is a critical step toward achieving both widescale adoption and a successful software deployment,” he says. Josh Bersin, founder of Bersin by Deloitte and currently dean of the Bersin Academy, agrees that any HR technology decision must be driven by the use of the tools by the workforce. “The number one criterion in selecting the right HR software from the right provider is pretty simple: do your employees like using it,” he says. “My advice to CEOs is to direct the chief human resources officer to insist to the provider on a pilot project. The provider would agree to offering workshops where employees use the tool for a month or two to see if it makes work more efficient and productive. If that’s not the case, it’s not the right solution.”

CHIEFEXECUTIVE.NET / MARCH/APRIL 2020 / 53

of paper and labor that was reduced,” says Josh Bersin, a longtime HR industry analyst, previous CEO and founder of Bersin by Deloitte, and currently CEO and dean of the Bersin Academy. “Today, driven by the benefits of running the business through a network of data-oriented project teams, the ROI is hinged to how the tool helps you assemble teams, “Our focus is to create a new approach create goals for them, determine to work experiences, driven by the who on the team goals of the company and the needs of is succeeding the individual. We learn as much as we or not, which can about the employee to deliver very person should lead the team personal work experiences.” and who needs to go to another team.” No longer are providers just building software for HR; they’re building the tools for people. Longtime HRIS providers like 30-yearold Ultimate Software gradually evolved to assist these revolutionary developments. Says Cecile Alper-Leroux, Ultimate Software’s vice president of human capital management innovations: “We’ve always been focused on people, initially making the work of employees less manual, time-consuming and burdensome. We still do that, but we’re increasingly involved in developing and providing technology solutions that make work more productive, collaborative and engaging. If you take care of your people first, they will then take care of your customers.” One solution is UltiPro Perception, an engagement survey tool that brings together a portfolio of AI technologies to unearth how employees actually feel about their work. Survey questions are based on occupational psychology principles, an applied discipline within psychology focused on human behaviors related to work. Using natural language processing and machine learning, the tool analyzes the survey data to understand each employee’s motivations, interests and concerns. “You’re able to gauge how people really feel about a project or their workload, the kinds of things that they otherwise might

54 / CHIEFEXECUTIVE.NET / MAY/JUNE 2020

not reveal,” Alper-Leroux says. “Once understood, the employer can take corrective actions, ranging from learning opportunities to career-planning conversations and other direct manager suggestions.” Other providers of talent management solutions also seek to align corporate strategy and culture with employee work needs and expectations. “Our focus is to create a new approach to work experiences, driven by the goals of the company and the needs of the individual,” says Karen Williams, executive vice president, products & customer success at Saba, Vulcan’s performance management provider. “We learn as much as we can about the employee to deliver very personal work experiences.” Like Ultimate Software, Saba uses sophisticated algorithms and AI to analyze workforce talent to divine ways to make work more engaging, while offering employees learning and career development opportunities aligned with business strategies. This dual purpose resonated with Mulligan, who implemented Saba’s TalentSpace solution at Vulcan in 2017. “Nurturing the development of high-performance employees is fundamental to fulfilling the vision of the company,” he says. “We now have a culture of continuous performance feedback.” Transparency into the performance review process motivates employees to seize learning opportunities that ultimately result in higher compensation and rising career prospects, while helping Vulcan achieve its vision and mission. This year, Vulcan will roll out a new pay-for-performance system that ties compensation entirely to a new mathematical equation that also is transparent. “Our people now know where they stand and how their work impacts our success,” Mulligan says. HIGH-TOUCH RECRUITMENT TO WIN THE TALENT WAR

Vulcan is far from alone in leveraging technology to make work more productive. Booster Box, a three-year-old Tuscany, Italy-based global digital marketing firm, wanted to scale its business geographically.

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A CEO’S GUIDE TO TALENT TECHNOLOGY Company strategy tracking?

Individual goal tracking?

Can managers set/amend goals? Can employees?

How does solution facilitate 1:1s/reviews?

Employee polling/ surveys/pulses?

ALIGN aligntoday.com

Yes. Create, record, share and edit company mission, vision and performance goals with everyone on team. Long-term goals are created in One Page Strategic Plan.

Color-coded progress tracking through measurement of key results or KPIs lets employees see whether they’re on track to meet goals or falling behind.

Admin users and assigned owners of each item can amend those goals. All Admin users have access to amend the “one-page strategic plan” and other secure features.

Weekly huddle tool allows managers to do 1:1s. Managers can structure and customize the meeting agenda. Every huddle is stored as a record for review.

Allows employee Net Promoter Scoring, surveys, suggestion box. Employees can issue “Stucks” to anyone else to let them know that they need assistance on goals.

ACHIEVEIT achieveit.com

Yes

AchieveIt focuses on aligning plans, initiatives and goals to ensure everyone feels engaged and connected to the organizational plan.

Permissions are customizable to enable amending of goals where applicable. Employees can collaborate and chat within the application to memorialize any decision-making.

Helps organizations with reviews by allowing custom reporting and dashboarding. These reports can be set up for individuals, teams, departments.

CASCADE STRATEGY executestrategy.net

Yes. Track and manage company-wide strategy. Also allows for multi-level tracking, i.e.: multiple business units can have their own strategic plans.

Yes, the platform allows for individual goals and task tracking.

Yes, permissions can also be created if required. Frontline employees can collaborate.

Not explicitly, but you can create a “snapshot” of an individual’s goals, projects and KPIs to facilitate this.

Yes

CLEARPOINT STRATEGY clearpointstrategy.com

Yes. Users track goals, measures, projects and action items, and link and align them to see progress. Automates strategy management with reminders and schedules.

ClearPoint has a “My Scorecard” page where individuals can track all items that they own and link to the organization’s strategy.

Each organization can configure user permissions in their ClearPoint account so that only those with appropriate access can make changes.

Employees can have their own scorecard that the employee and their manager can reference to see which goals were accomplished and where improvements need to be made.

GTMHUB gtmhub.com

Yes. Recognize benefits in five core areas of business development: focus, alignment, engagement, transparency and accountability using OKR methodology.

Gtmhub’s OKRs are generally thought of as a management tool, however, there are individuals that use them as an individual tracking and goal-setting method.

Frontline employees are encouraged to collaborate with decision-makers to set and amend goals.

Reviews for organizational OKRs progress, including actions and tasks, are facilitated by the requestor’s manager.

N/A

KHORUS khorus.com

Yes. CEOs use Khorus to capture the organization’s long-term strategy, then break it down into measurable strategic objectives for each quarter.

Yes. Employees create goals aligned with strategic objectives, then update their goals with predictions each week. CEOs can track aggregated goal insight week to week.

Any individual can amend their goals throughout the quarter. Goal edits are submitted to the employee’s manager for approval.

Prompts managers to complete a lightweight appraisal process at the end of each quarter. Space for managers to take notes during weekly or biweekly 1:1 meetings.

Every week, employees update each of their goals using a color-coded 1–5 scale to show whether the goal is on track.

KOAN koan.co

Multiple teams can work on an objective or key result simultaneously. Also provides a Tree View to see how company goals align across the organization.

While Koan is primarily focused on how individuals support team goals, it also offers option for individuals to track their own goals.

Everyone can set goals and measure progress. Goals can be amended by any individual.

Creates repository of accomplishments for reviews, though Koan encourages organizations to resist tying goals to performance management.

Prompts employee to complete weekly “Reflection” that captures the important things you got done, are planning to get done next week and any problems.

QUANTUM WORKPLACE QuantumWorkplace.com

Allows everyone in the organization to have visibility on initiatives and progress towards strategies. They can also be linked and aligned to individual goals.

Any individual can create personal or developmental goals and document, and track their progress over time.

All goals are amendable by the goal owner, upline manager(s) or admin. The goal keeps history of any amendments.

Any employee or manager can launch a 1:1 at any time. Admins can launch reviews for the whole workforce within minutes and set recurring cycles to eliminate admin work.

Surveys can be created and launched to all users or a small group within minutes. It includes a best practice library that has sample pulse and engagement surveys.

QUESTBACK questback.com

Out-of-the-box self-service leadership evaluation lets CEOs gauge where their leadership teams track on execution to see if leadership is moving the company strategy forward.

Yes, there is individual goal tracking. Users can set individual targets for engagement tracking and measure the goals against actual employee performance and feedback.

Any user or administrator can amend the set goals without being dependent on a central HR initiative.

Allows for 1:1 and 360 reviews. Users can choose how they’d like to conduct the review.

Yes

SAP SUCCESSFACTORS HXM SUITE sap.com/products/humanresources-hcm/hxm-suite.html

Yes. SAP SuccessFactors customers have the ability to manage and create a set of corporate level objectives and have each user link their own goals to corporate initiatives.

Yes. Users can develop goals with recommendations from Goal Library, which includes 500+ SMART (specific, measurable, attainable, realistic and timely) goals.

Managers and employees have the ability to set cascading goals and edit goals as business needs change.

Employees can keep managers up to date on activities, request and share feedback from peers and capture live summary of achievements to discuss during one-on-ones.

Can gather employee experience data throughout the entire employee lifecycle, surface predictive and personal insights based on employee feedback.

PRIORITY MATRIX appfluence.com

Yes. Allows executive teams to create a 2x2 matrix that outlines critical key initiatives and goals for anything from the runway to 30,000 feet level.

Yes. Individuals can manage personal priorities and receive productivity insight reports that show how much is accomplished, along with categories of tasks.

Goals can be shared in a fluid way, allowing individuals to collaborate or comment regardless of corporate structure. Goals can also be shared in a read-only view.

One-on-one view available on desktop, web and Microsoft Teams and Outlook apps allows a manager to see all open and completed action items.

SABA Saba.com

Yes

INSPIRE SOFTWARE Inspiresoftware.com

Empowers leaders to manage enterprise-wide goals, build culture and track company strategy through one integrated platform.

Goal Science software lets users set OKR and SMART goals, benchmark and track data, have performance conversations and align with goals company-wide.

Yes, Inspire allows members of all levels in the organization to amend goals.

Supports continuous feedback and meaningful 1:1 conversations all year long. Leadership development is integrated into framework.

Pulse surveys, conversation starters, feedback and recognition tools.

15FIVE 15Five.com

Able to track objectives for the quarter, half quarter or year for the full company, and see all the department-wide objectives that ladder into the company objectives.

Includes OKRs as part of the full solution. Within OKRs, employees can put in objectives along with key results to update on a weekly basis through check-ins.

Everyone is able to collaborate with goals, modifying key results/goals to better support the department or company-wide objectives for the quarter.

Schedule 1:1s with Google Calendar, add talking points as a manager or as a direct report. During 1:1, write in action items and assign to either the employee or manager.

Weekly check-in for performance feedback. Can pull questions from “question bank” to determine how the employee is feeling, any obstacles/hurdles they’re facing.

WORKFRONT Workfront.com

Strategy set by leadership in organizational plans. Teams then build their execution plans with respect to the strategy. Reports and dashboards help stakeholders track progress.

Each person can connect their individual priorities to company plans, aligning individual work to overall company strategy.

Enables CEOs and managers to amend goals, providing audit trail of changes. Employees can have dialogue with managers and goal owners about modifying goals.

Metrics can be viewed/tailored at an aggregated team level (or higher) or individual level so employees and managers can have data-driven 1:1s and performance reviews.

No. But provides pre-built connectors to business apps designed expressly for surveys or have survey capability, such as to Qualtrics and Slack.

PROFIT Profit.co

Can define strategic (3-5 year) initiatives and priorities, as well as company-level and department-level OKRs for the year.

Employees create their own OKRs, and you can have OKRs defined and aligning up the management hierarchy.

CEOs and top- level managers can create objectives and key results and assign them downward. OKRs can then be modified by the assigned employees.

Supports OKR reviews and employee 1:1 reviews using the PPP methodology by default, or customize to your approach.

Expected soon.

RHYTHM SYSTEMS Rhythmsystems.com

Yes. CEO KPI and project dashboards for total visibility into the organization. Real-time view to see how strategy is being executed and quickly identify areas that are off track.

Yes. Measure and manage KPIs, OKRs, MBOs or goals through dashboards for departmental and company strategic alignment.

Yes. Link strategy to annual initiatives, down to quarterly plans and weekly projects. Connected comments allow you to know what is going on at all times.

Job Scorecards create role and goal clarity from the start. Pull the Job Scorecard up in a private 1:1 meeting and see how the employee is performing against it.

KAZOO kazoohr.com

Set company, department and individual goals to align strategy; Manager and admin dashboards help leadership be accountable for their strategy and work of their teams.

Yes. Allows individual goal tracking. In addition, managers can see, comment and nudge progress of their direct reports within the goal itself.

Approval chains within goal process ensure goals are accurate and focused on the right thing.

Use “Sync-ups,” an ad-hoc conversation tool that enables off-cycle discussions or scheduled meetings between an employee and their manager. Admins set cadence.

Offers eNPS, pulse surveys and custom questions.

MYOBJECTIVES MyObjectives.com

Make company goals visible to everyone in the organization, and reward teams for identifying how the work they have planned aligns with company goals.

While designed to foster team coordination and company goal alignment, organizations can allow individuals to build their own scorecards.

Anyone can set or amend goals.

MyObjectives approach is a weekly team meeting where progress and blocks are reviewed using a “Flag for Discussion” feature that maintains a team’s focus.

WORKBOARD Workboard.com

Every employee can access single dashboard with all of the company’s priorities. Platform automates heatmaps with red/ yellow/green on every team’s progress.

Yes. Individuals can set, align, measure and manage individual goals. Managers have a dashboard of both team objectives and the personal objectives and goals of their reports.

Team typically has 4-6 key results; individuals on the team may own or be on point for a key result. As the team makes progress, every member gets notified on results.

Structured framework for 1:1s that integrates with calendars. Includes “PACE meter” that enables the team member and manager to track performance.

Heatmaps and dashboards rate the risk of achieving key results; Post-meeting pulses; ratings and narratives on objectives and others.

BETTERWORKS Betterworks.com

Yes. Allows goal tracking and management on a continuous and ongoing basis.

Platform helps managers and employees set their individual objectives and key results, and update those goals.

Automatically prompts employees and managers to record ongoing conversations at any cadence and schedule in-person coaching conversations every quarter.

Yes

VENDOR

Stand-alone or module within a larger package?

Does solution integrate with MS365? G Suite?

Price for 50 users/year and 1,000 users/year

Number of total clients

Approximate client mix

Notable clients

Stand-alone product.

Office 365 task integration. Link support throughout software for any cloud-based documents, Microsoft, Google or others.

$6,000 for up to 50 users, $60,000 for up to 1,000 users for an annual subscription. Optional onboarding and educational services in addition to software licensing.

More than 2,200 companies

Enterprise: 1% Mid Market: 51% Small Business: 48%

Hagerty, SportSafe, Scaling Up

Stand-alone product.

No direct integration.

Contact for pricing.

200+

Enterprise: 50% Mid Market: 25% Small Business: 25%

John Hopkins Medicine, Sysco, CHI Health, Fulton County Government, University of California San Francisco (UCSF)

Stand-alone product.

Cascade integrates with more than 1,000 systems, including the Office 365 Suite and the Google Suite.

Enterprise pricing starts at $12,000/year.

1000+

Enterprise: 20% Mid Market: 50% Small Business: 30%

Spectrum, Johnson & Johnson, The University of Sydney, BMW

Stand-alone product.

Connects to Excel to automatically upload information; sends email reminders and notifications to all email clients including Outlook and Gmail.

Starting at $25,000/year.

200

Enterprise: 30% Mid Market: 60% Small Business: 10%

New York Power Authority, Origin Bank, United Nations Federal Credit Union, Globe Union, Hill-Rom, Jefferson Health, CPA Canada, City of Miami, FL, City of Fort Worth, TX

Stand-alone product.

Yes. 150+ native data integrations, including Microsoft Office and G Suite.

Contact for pricing.

More than 10,000 users

N/A

Adobe, Société Genéralé, TomTom, AIG, CNN, Home Depot

Stand-alone product.

Very limited. MS PowerPoint report export that puts each goal and its details slide by slide.

$15 per month user. Custom quote to customers of 1,000 employees or more.

Hundreds

N/A

Alamo Drafthouse, Transnetyx, Kaufman Hall

Stand-alone product.

Yes, Office 365, G Suite authentication available.

$600 year/50 users; $114,000/year 1,000 users.

200

Enterprise: 5% Mid Market: 75% Small Business: 20%

Vacasa, New Relic, Nielsen, SurveyMonkey, HealthSparq, Dollar Shave Club

Stand-alone product.

Yes. Outlook and Chrome extensions allow for employees to give or receive feedback, take private notes for 1-on-1s or give social recognition.

$10,000/year for performance suite for 50 employees; $33,000/year for 1,000 employees.

2,375

Enterprise: 10% Mid Market: 70% Small Business: 20%

Fossil Group, Hy-Vee, BKD, Inspire Brands, University of Miami, Safelite AutoGlass

Stand-alone product.

The solution rests on a stand-alone platform in the Public Cloud, and there are APIs available for integration.

Contact for pricing.

5,000

Enterprise: 30% Mid Market: 50% Small Business: 20%

NHS, Hugo Boss, John Lewis, Deloitte, Citi

Can be used as stand-alone product or with broader suite of solutions, including SAP SuccessFactors Recruiting, Learning, Compensation and others.

Users can add a Performance Review, 360 Review or Goal Setting event to their MS Outlook calendar. Does not integrate with G Suite.

Contact for pricing.

7,000+

N/A

American Airlines, Cintas, Corning, SF 49ers, EY, many others.

Stand-alone product or works as a add-on for Office 365, Microsoft Teams, Outlook.

Yes. Integrates with Microsoft Graph, Power Apps, Azure Active Directory, Gmail, Chrome, and supports Google Single Sign On.

Starting price $3,000/year for 50 employees, $60,000/year for 1,000 employees.

N/A

Enterprise: 5% Mid Market: 35% Small Business: 60%

Cushman & Wakefield, Barrick Gold, Reinsurance Group of America, Hexpol

Stand-alone product.

Yes

Contact for pricing.

4,000+

N/A

Air Canada, ApexBrasil, Bentley University, Black River Memorial Hospital, China Construction Bank

Stand-alone product with open API.

Yes. Integrates with Microsoft Office suite and G Suite

$10-$12 per employee per month.

N/A

Small to Mid Market

Ameriprise Financial, QMI, Sonendo, InnovaSystems International

Stand-alone product.

$14/per person, per month, billed annually.

2,200

We largely target SMBs

Spotify, Hubspot, Credit Karma, Pendo

Stand-alone product.

Yes

Contact for pricing.

3,000+

N/A

All top 10 of Forbes 2019 Most Valuable Brands and 58 of 100 of the Fortune 100

Stand-alone product.

Yes

$7 per user per month, paid annually or $9 per user per month, paid monthly. Enterprise pricing can be customized.

1000+

Enterprise: 5% Mid Market: 90% Small Business: 5%

Wex Inc., Vonage, State of West Virginia, Department of Energy, UAE, Uhaul

Stand-alone product.

Yes. Our solution offers API integration.

Contact for pricing.

100+ active software clients

Primarily Mid Market

AvidXchange, Pendo, Dude Solutions, Zelis, Signature Consultants

Module within a larger package that offers continuous performance management, recognition & rewards and employee engagement surveys.

Yes. Finalizing Chrome integration.

Minimum 100 users; starts at $12 per user/month, varies based on number of employees and functionality.

700+

Focus is Mid Market

Allianz, Meredith, Hitachi, Kaiser Permanente, Patagonia

Stand-alone product.

Limited. Links to OneNotes, SharePoint, etc. No integration with G Suite.

$5,400/year for 50 employees; $12,000/ year for 1,000.

N/A

Mid Market: 20% Small Business: 80%

Alliance Enterprises

Stand-alone product, but integrates with many other solutions via off-the-shelf connectors.

Yes. Integrates with email, calendar, Excel, MS Planner and runs inside Microsoft Teams so users can use Teams chat. Microsoft is WorkBoard customer, investor and selling partner.

Minimum 500 employees. Pricing for 1,000 seats of both the platform and process coaching ranges from $175,000 to $400,000 a year.

100+ enterprise customers with 270,000+ user seats.

Enterprise: 60% Mid Market: 35% Small Business: 5%

Microsoft, Cisco, Comcast, Workday (also a WorkBoard investor), Juniper Networks, IBM, Samsung, Cision, Applied Materials, Zuora, Transamerica, Secureworks, Seismic

Stand-alone product.

Outlook plugin for updating and managing team OKRs in the flow of work. Integrates with G Suite.

Contact for pricing.

N/A

Vertiv, Optimizely, Spurs Sports & Entertainment

To do that, Booster Box needed to recruit topnotch data scientists and software developers possessing the same skill sets being sought by giant tech companies like Google, where Gianluca Binelli, Booster Box founder and CEO, previously headed up EMEA online marketing. “We’re aiming for the same talent and needed a way to stand out,” he says. The tool needed to attract great people at less effort and cost, too. “We process thousands of CVs on a monthly basis to fill the roles we need,” Binelli says. “I wanted a way to automate and simplify the task, while giving every job applicant a superior experience.” Talent software provider Breezy HR offered a solution. The company created what Binelli calls a “captivat“We process thousands of CVs on ing career page” that presents a monthly basis to fill the roles we available jobs need. I wanted a way to automate and and related simplify the task, while giving every compensation, benefits and cajob applicant a superior experience.” reer progression —Gianluca Binelli, Booster Box opportunities, as well as employee workplace reviews. “The app is mobile optimized, meaning job applicants can download the employment application, upload their resumes and ask questions to a chatbot,” says Nina Cofer, product marketing manager. If Booster Box is interested in interviewing a job applicant, an email is automatically sent out with a selection of days and times in a Google or Microsoft Outlook calendar invite. Each step of the hiring process is automated, reducing traditional back-and-forth recruitment activities that often result in weeks of waiting for candidates, who might move on to look elsewhere in the meantime. For a growing company dependent on talent, the human touch, represented by Russ Banham is a the ease and speed of service, is essenPulitzer-nominated tial, says Cofer. “Hiring decisions can be financial journalist and made in real time because the analytics best-selling author.

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driving the process are customized to each client’s specific talent needs, beginning with the creation of the perfect job description... [and] the solution also suggests to candidates that the company cares about providing efficient and engaging work experiences.” EYEING THE LANDSCAPE

Like any new paradigm, today’s shifting model of work and the technologies being deployed to enable it are apt to change. A case in point is remote work by employees, something in which every worker has now taken a crash course. While younger generations insist upon the freedom to perform tasks where they want and when, the collaborative nature of project teams requires a reasonable amount of face-to-face input at the office. Consequently, the pendulum is swinging back toward clocking in at least part of the day. Technologies assisting recruitment through performance talent management also are expected to evolve along the lines that Bersin mentioned—toward greater utility by people to do their work more efficiently, collaboratively and successfully. More providers will crowd the already crowded HR solutions market, he adds. “VC firms are throwing money at any startup with a new take on how to enhance the work of project teams, particularly those developing at midsize companies with 500 to 1,000 employees,” he says, noting that when “the economy flattens there will be a huge shakeup.” In many ways, the new work paradigms and advancements in people-oriented HR technologies put employees in an extraordinary position of decision-making power, despite dystopian reports of robots replacing people. As Ancona puts it, “Empowering employees with the autonomy to choose work they want to do and providing them with learning opportunities and technology tools to do this work efficiently and effectively results in more engaged people and a more productive workforce.” Talent is important but how you treat people is everything. CE

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P L A N E ADVANTAG E

CRISIS CONTROL

A pandemic isn’t the only time it’s great to have a private plane at your disposal—but it certainly is one of them. BY DALE BUSS VICTOR INTERNATIONAL CEO David Johnson has experienced the crisis management virtues of private aviation firsthand. While he often spends a full day flying from his home office in suburban Detroit to his base in the British Virgin Islands on commercial airlines, his Dassault Falcon business jet became his only option for getting there after Hurricane Irma ravaged his company’s Oil Nut Bay resort in 2017. In addition to denuding the landscape, wrecking utility infrastructure, leaving about 200 employees task-less and devastating the entire protectorate, the storm made commercial air service impossible for a while. But Johnson was able to turn his 10-seat jet and its two pilots into a hard-working ferry. “We used it like a giant Suburban, jam-packing it with chain saws, generators, extension cords, water, food, air-mattress beds and medical supplies,” Johnson recalls. “We jammed it to the hull. And as we were meeting with local government and other businesses on recovery, we also used the Falcon to bring key personnel back and forth.” The coronavirus pandemic has underscored the precious transportation capabilities that business aviation can provide during a crisis, easing times of individual suffering as well as helping to relieve community and

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societal stress. As Johnson’s experience three years ago demonstrated, corporate planes and their owners have been coming through repeatedly in dire times for decades, for nearly as long as CEOs have been airborne. “Corporate aviation is among the first things to respond in a crisis,” says Sheryl Barden, president and CEO of Aviation Personnel International. “It’s faster than government and even faster than the Red Cross.” Prepping for a Pandemic

Corporate-aviation activity skyrocketed in March as CEOs sought to squeeze in crucial last-minute actions and get key people where they needed to be in advance of governments’ social-distancing shutdowns. “You can’t overstate the measure of security and surety of travel that it provided then,” says David Nolletti, a former commercial pilot and aviation executive who now is a director of Conway MacKenzie, a workout firm based in Birmingham, Michigan. “When you want to fly, you’re able to fly, going directly even to out-of-theway places where many companies have operations.” WeatherTech’s David MacNeil, who flies his own pair of jets and two helicopters, also pressed them into service. “During the coro-

navirus time, we were able to move personnel around the country in complete safety and security,” says the CEO and owner of the Bolingbrook, Illinois-based manufacturer of automotive accessories. “We didn’t have any worries about the person sitting next to you or how healthy or unhealthy they may not be. Having a corporate jet available in times of crisis is priceless.” Certainly the 106 people brought back home from an ill-fated Caribbean cruise in March could agree. Someone on the ship had the coronavirus, so all passengers had to enter quarantine. Once the cruise line flew them all to Dallas Fort-Worth Airport, JetSuite, an on-demand charter service, brought 13 of its light jets to the tarmac, which then took off to 22 different destinations to get the passengers back home safely. Charter to the Rescue

“It would have been very difficult for any airline to do what we did,” says Stephanie Chung, president of Dallas-based JetSuite,

who declines to identify the cruise line involved. “We did it very quickly and worked not only with the cruise line but with two different governments. And we could get those people home because we can fly into 5,000 North American airports, whereas an airline can only fly into about 500.” There are countless similar examples. Some are widely known and celebrated, such as in May, 1997, when Joan Kroc, widow of McDonald’s founder Ray Kroc, quickly hopped onto her Gulfstream IV in San Diego and jetted to Grand Forks, North Dakota. That community and others on the Red River had just been devastated by record flooding, and the daughter of the Midwest wanted to donate $15 million to recovery efforts, translating to about $2,000 per needy family in the region. Anonymously, Kroc got a van tour of the devastation with the mayor, but a reporter looked up the plane’s tail number and identified her. Local officials dubbed Kroc the “Angel of Grand Forks.” While she declined

Arkin Group CEO Robert Arkin loading donations onto a plane he flew on a hurricane-relief mission to the Bahamas in 2019.

CHIEFEXECUTIVE.NET / MAY/JUNE 2020 / 61

some politicians tried to shame business jets as egregious luxuries. “We have had to fight back against the negative and underscore the quiet, unsung heroes who donate time, resources and expensive tools to rise to the occasion in the face of disaster,” says Janine Iannarelli, founder and president of Par Avion aircraft brokers. “That message never was put out there before.” Ferrying Patients

JetSuite President Stephanie Chung (front left) was part of a team that helped bring home cruise passengers stranded after a coronovirus quarantine.

recognition or thanks, Kroc’s Gulfstreamenabled demonstration of generosity was a prominent anecdote in the Los Angeles Times obituary upon her death in 2003. Many other company-plane owners have also taken it upon themselves to help out. Last fall, for instance, Robert Arkin, CEO of Arkin Group, a Miami Beach, Florida-based construction firm and a pilot, personally flew his six-seat Cherokee Six more than 54 flight hours back and forth to the Bahamas. His plane ferried more than 6,000 pounds of donations in total, dedicated to helping islanders deal with the aftermath of Hurricane Dorian. Arkin also carried 41 volunteers and medical personnel, two Great Danes and two cats. He also helped organize similar responses by other Florida-based plane owners over a month’s time. “It was such a massive thing that sometimes you felt your one little bit didn’t help—but it did,” says Arkin. “If you have the wherewithal, you do it.” After the monumental 7.0-magnitude earthquake in Haiti in 2010, a group of volunteers organized by the National Business Aviation Association coordinated the use of 125 of their aircraft, making more than 700 flights with nearly 4,000 passengers and more than 1.4 million pounds of critical supplies. Tapping into the association’s formalized Humanitarian Emergency Response Operation in 2018 in the wake of Hurricane Harvey, owners dispatched business jets to the Houston area by the dozens to help out. How corporate aviation has responded in such cases has helped to offset some of the vilification that the industry endured at the onset of the Great Recession, when

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Add to this how the business-aviation community has organized itself over the last few decades to respond continually to moments of need by individuals in crisis, especially life-threatening illness. Since 1981, for example, the Corporate Angel Network (CAN) has coordinated no-cost flights for cancer patients via donated idle hours on participating privately owned aircraft. “The ease of pulling up to a hangar or a [fixed base of operations for business jets] for a cancer patient, and having a car service drop you off at the plane, is a whole different experience than flying commercially,” says Gina Russo, executive director of the not-for-profit based in White Plains, New York. “And that one hour they save may make the difference for someone getting to or from care.” CAN members demonstrated their devotion by making their planes available during the coronavirus shock to serve patients unrelated to the pandemic, even though many U.S. companies had grounded their aircraft. In late March, the network flew a very sick three-year-old from Boston to Wichita, Kansas, for instance, and a 30-year-old with advanced melanoma from Connecticut to Houston “because he was potentially eligible for a clinical trial there and couldn’t wait any longer,” Russo says. After a boomlet in corporate-jet travel in March as CEOs reacted to the exigencies of the coronavirus, business-aviation activity essentially idled along with commercial travel. But with the country poised to reopen, the industry will soon be airborne again— and its crisis-service component coupled with advantages underscored by the crisis will help ensure that it soars once more. CE

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THE DIGITIZATION IMPERATIVE

Every CEO who has not truly started on this path must do so now, even in the midst of the Covid-19 crisis, even if it seems impossible. Here’s how.

Ram Charan is a worldrenowned business adviser, author and speaker who has spent the past 35 years working with many of the top companies, CEOs and boards of our time. His latest book, The Amazon Management System (Ideapress, 2019), was a Wall Street Journal bestseller.

THE COVID-19 CRISIS isn’t behind us yet, but companies have to start putting the economic pieces together for their business to not just survive but also build a new future. At this point, there are three priorities most companies should act on with great haste: employee safety, cash management week by week and a digital connection with customers, suppliers and ecosystem partners. Missing any of the three could seriously jeopardize the continuity of the business. Companies that are not already on their way to being digital have to realize the urgency. It’s not just digital giants like Amazon that threaten their future. It’s also legacy companies that are becoming digital. In the pandemic, they’ve been able to adapt more quickly. And, under normal circumstances, they can gain share very fast. Maybe you’ve come to terms with the fact that you must become a digital company. But you’re convinced that this is not the time to act. You have to realize that waiting for stability is a luxury you can’t afford. Really, there is no need to wait. Talking to a number of CEOs, I have learned that there are myths about what digitization costs, how much cash it will use, and how long it will take. Business leaders don’t think they can show a clear return on their investment. Besides, they’re convinced that people in the organization will resist it. Well, that’s no longer the case. You can now pick the most urgent, most critical tasks—the ones that will help you get cash, increase revenues or connect with customers, suppliers and ecosystem partners—and achieve them in bite-size portions. You can see benefits in weeks or months, not years. Here are some examples: • Dynamic pricing. It is a necessity when uncertainty is here to stay. • Collection of receivables. The collections process is critical to liquidity. • A continuous connection with customers. You will need this to help you pick up how their behavior is changing, how de-

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mand is shifting and what the voice of the customer is. It will help with forecasting, with impacts on inventory and cash flow. • A single source of data. Data-based decision-making, whether or not it’s automated, is now an imperative. But it is difficult to use data for decision-making if it is spread across many silos; it is highly inconsistent, and managers don’t trust it. A number of small vendors now exist that can do projects like these for you in less than 90 days for less than $400,000. Make your own list and take one or two tasks at a time. Then, reach out to small vendors (UST Global and Altimetrik are two I’m familiar with). Define your tasks clearly and precisely, just as you’ve done with outsourcing, facilities construction or other turnkey projects. You might not realize that digital giants like Amazon all began using digital technology for one task at a time. They used small vendors—and still do—because they are fast, they cost less, and they take the project to completion. They become partners in operationalizing it. You focus on what needs to be digitized and why, and how it will create revenues, cash, margins, customer satisfaction or speed. The vendors focus on giving you the relevant digital platform or digital apps. When it comes to organizational resistance, that is unlikely to exist anymore. If someone does resist, you have to deal with it right away. One more thing: don’t be put off by terminology and tools with which you’re not familiar, like algorithms and big data. Algorithms—the mathematical rules by which data is processed—have been around for hundreds of years. Roughly two dozen of them are used for common tasks and are readily available. So, take the mystery out and take on small turnkey tasks that can build your business and ensure its continuity. CE

We know change can be difficult because we live in that world on a daily basis, collaborating with companies across the globe to transform the way they do business. From managing new cost pressures and supply chain challenges to organizational shifts and more, weâ&#x20AC;&#x2122;ll help you see opportunities clearly and navigate change with confidence. Learn more at MyrtleGroup.com and by reading 6,000 Dreams by Edwin Bosso, ForbesBooks author and CEO of Myrtle Consulting Group.

May/June 2020 Chief Executive Magazine

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A Litigation Pandemic