Tapping on human capital to work through the ups and downs of the new normal

This year has been challenging, to say the least. Eight months after Covid-19 surfaced, the world has gone into lockdown — forcing people to minimise social interaction and pushing companies to rethink their operations.

But there is a silver lining: Crisis often accelerates change while businesses and individuals are learning new ways of working to stay relevant. For many organisations, the pandemic also presents an opportunity to fast-track its business to not only digitalise but also be aligned to sustainable management practices at the intersection of three elements — the environment, the needs of people and the economy.

The Human Capital Leadership Institute (HCLI) believes that there is always a light at the end of the dark tunnel. In its recent four-part series webinar on July 9 titled Hitting Reset: Designing the Next Normal, HCLI discusses how leaders are responding to the opportunity that the crisis presents and what can be done to step up the organisational game in balancing the planet, its people while making a profit.

The Cynefin frame to work out complex issues

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The first of the webinars focused on Leading through Complexity and Chaos, giving businesses insight on how to find opportunities and navigating the recession brought on by Covid-19. Dave Snowden, founder and chief scientific officer of Cognitive Edge, led the webinar and shed light on the importance of leading through a chaotic situation using a framework that he himself developed in 1999 while he was the director of the Institution for Knowledge Management for IBM. He calls this The Cynefin framework or a conceptual framework that draws on research into systems, complexity networks and learning theories, which is used to help leaders in decision-making processes. Over the years, the Cynefin Framework has evolved over the years and identifies five main domains or states that make up the situation.

“The first is where the relationship between cause and effect is clear to any reasonable person,” says Snowden. In such a situation, one is able to apply best practices as the constraint structure is rigid and has no ambiguity. The second domain is where there is a repeating relationship between cause and effect, which means that there may be clear or obvious to an expert but not to a decision-maker.

“Here, the situation cannot be simply categorised, instead some analysis or investigation needs to be done to come up with a solution. “So here, we sense, we analyse, respond and we have what are called governing constraints rather than fixed constraints, so we allow a degree of ambiguity,” explains Snowden.

The third domain is the “black elephant” and the Covid-19 pandemic is an example of this The expression means something that could or was expected to happen, yet there was no planning done for the eventuality of this situation. It is derived from the combination of the “black swan” idea — which means a sudden surprise — and “an elephant in the room”, which means something that is expected.

“And at that point the response is to act, sense, respond. You have to act decisively to create some sort of pattern or structure. There are no constraints, everything is open,” continues Snowden. “With Covid-19, there is no constraint [for the government], so the constraints have just disappeared for a period, they’ll come back, but the constraints vanish [for now]. And therefore, there’s nothing so good as a crisis to create novelty, and the one thing we know from crises is that new predators or new dominant players emerge,” he adds.

The fourth domain is complexity. As Snowden elaborates, there are competing hypotheses about what should be done and yet why evidence-based decisions can’t be made within the time frame available. “So, under those circumstances you don’t actually bother,” he says.

Each hypothesis gets a small amount of resources to do a safe-to-fail experiment. It is unlikely any of the experiments will succeed, but the way that they partially succeed or partially fail will create structure in the space to dictate the next move. And it is in the complex domain where exaptation is practiced, where the focus is on radical repurposing. “You haven’t got time to invent from scratch, so you have to find out what you’re good at and find ways to reuse it very quickly,” explains Snowden.

The fifth domain, or central domain at the simplest level, is being confused —the state of not knowing which domain one is in. “At which point you’ll do whatever you feel more comfortable. Now you might be aware of that confusion, at which point there are things you can do, or you might be unaware of it,” says Snowden.

For this last domain, Snowden has created a five-step solution. First, impose a type of constraint to create breathing space, then find out if there are any experts out there who can shed some light on the issue. In step three, create a competitive environment for the experts from different backgrounds and allocate your resources to “the winner”. Next, where there are coherent hypotheses, start the experiments and find the patterns. Finally, nullify to create order in a complex and messy situation. With the knowledge of how to handle different situations at hand, Snowden advises companies to start training for the next crisis when the issue is still fresh in their minds.

The pros and the cons of the new norm

With Covid-19 spurring digitalisation and disrupting normal workflow, changing the way things are done is the way the “future of work” has been brought forward to today. Now, remote working, video-conferencing and cloud storage are the norm and no longer just fancy new peripheral uses of technologies. Heather Emslie, Google Cloud’s APAC head for collaboration and productivity, noted some of the “new norms” in the workplace now include video conferencing to replace in-face meetings as well as presentations and digital signing applications for contracts to be signed by parties who are in different countries, for example.

At Google, there were 100 million active daily users of video calls. The number of calls surged as people were compelled to communicate. “We started off with over a billion active video calls a day, which quickly moved to two billion, and in April we had over three billion video calls. That’s more than the population of most countries,” says Emslie.

Property consultancy CBRE found that just 3% of respondents to a study wanted to go back to their offices and resume work as they were used to, immediately. The vast majority prefers the new norm of working from home. This is because of people becoming comfortable and especially safe at home, which he terms this idea “cocooning”, which ties back to the idea of safety, says Peter Andrew, executive director of workplace strategies for Asia Pacific at CBRE Singapore.

“We are feeling quite fragile and vulnerable at the moment, even though there are those of us that are quite healthy. If it’s not health-wise, its economic in terms of concerns of having a job and so forth. And that is going to cause a kind of introversion in every person, as they feel safe at home,” he explains. But for those who have the choice to go back to work, some showed keenness to head back to their workplace, because they miss the socialness and the vibrancy that is found in their workplace.

What Covid-19 has presented to the workforce is options. Simon Piff, vice president of security practice at market research firm IDC Asia Pacific, cites a global study done by the group on the future of work. He says: “Globally, 51.6% of organisations or enterprises with 500 employees and above are planning to incorporate remote working within their HR policies.”

To facilitate remote working, companies will have to rely on cloud technology and that means having to digitalise data, and often also includes confidential information. Hence, the need for cyber security has increased. Research done by IDC has also shown that 60% of people working from home are working on a company issued device. “So, what they are working from home from is not encompassed by the traditional security policy. And as a result, on the security side of things, we have seen a huge surge in hacks,” says Piff.

“Security is one of the key areas that companies are looking into now,” notes Emslie, who adds that companies have to acknowledge that they do not control the network and understand the technology that is being used. On top of that, companies need to implement rules and policies to ensure that both the company’s data and its employees are secure.

The right kind of digital culture at work

Grace Kerrison, managing director of Pymetrics in Asia Pacific, says a recent survey by Fortune Magazine of their 2020 Fortune 500 CEO community found that 75% of CEOs said that the crisis significantly accelerated a digital transformation, with 40% of the 75% already spending more on IT infrastructures and platforms.

During Microsoft Corp’s 3Q earnings call in April, Microsoft CEO Satya Nadella said that the company has experienced two years’ worth of digital transformation in just two months. Moreover, Forbes also reported that a study by research firm Econsultancy found out that a fifth of large enterprises are investing in digital transformation initiatives during the Covid-19 pandemic.

Kerrison says to lead digitally and transform companies amid a crisis, business leaders have to leverage technology to unlock productivity for employees. They also have to create “experiences to be more efficient and effective in our roles and ideally matching that technology with the right human skills”. At the same time, they also have “to be competitive in the market by creating great customer experiences and creating value to drive engagement.”

If nothing else, the pandemic has demonstrated that “we are agile as a global community and that agility is human led and technology supported. Humans are the common denominator to the concept of future proofing or digital transformation”.

She also cited remote working for banks when they moved large portions of the workforce and harnessed the power of data and insights, providing the ability to redeploy and pivot employees were required.

“The status quo was also challenged and businesses pivoted their business models to different channels such as online, and you can see that from the micro businesses, such as cafes to businesses pivoting their production and manufacturing of goods towards healthcare,” Kerrison notes, adding that this was possible because leaders were able to empower the workforce and employees were able to be reskilled quickly. Ultimately, Kerrison believes digital transformation is not about the technology but about the people that are being able to utilise it. “When it comes to digital transformation, we think of innovation, but innovation is entirely dependent on people and it’s why digital transformation is not just about technology.”

The key, she said, is to match technology with human skills and to leverage human adaptability to re-skill and upscale our workforce.

So, how should companies adapt to the new norms of working? IDC’s Piff says organisations that are really successful at digital transformation have certain characteristics in common. “A big part of that is the culture of an organisation. Do you have a culture of innovation? Do you have that ‘fail fast and recover’ culture as part of your organisation?”

The second portion of digital transformation, according to Piff, is to focus on customers and what they want. More importantly, these technologies must be embraced by employees. As he said, how the company motivates and empowers its workers to utilise these technologies — such as a multi hybrid cloud infrastructure platform — is “the only platform of the future”.

Ultimately, the idea behind digital transformation is to solve problems, not by using only technology but also with “employees being suitably empowered and therefore suitably productive in the right areas.” To achieve this, companies have to “provide the right environment, the right kind of tools, the right culture as well the soft skills for our employees,” he adds.

Building for a sustainable recovery

While the world pushes towards innovation, digital transformation and embracing the use of technology in this pandemic, it cannot only do so in the pursuit of profits. Instead, business leaders are realising that doing business sustainably is also important as the pandemic has exposed not only the gaps in healthcare systems but also in society.

As most of the world moved to working online, there are also those who are left out. For those who are unable to afford computers or even broadband internet, lockdowns have left them cooped up at home, unable to access the web for learning, work, or play. Workers who made a living via the gig or informal economy were also hit as many saw their jobs disappear overnight.

In another webinar organised by HCLI on leading sustainably, deputy manager of sustainable development at media organisation Eco-business Junice Yeo said Covid-19 “has come as a rude shock to our systems” and “a bit of a wakeup call” to a lot of the businesses, governments and policymakers. She added it highlighted the need to see the systemic problems facing the most vulnerable among us today.

Vincent Stanley, clothing brand Patagonia’s director of philosophy, said the crisis has been extremely painful socially but it has changed the way people think. For his company, he said it “focuses us on the core values of the company, how we go back to basics in some ways, so that we can be more nimble for more shocks that we see coming both from social inequality and from especially from climate change.”

He said companies have to take a quick look at their business, how they’re going to do business over the next 10 years or so, and then I do think that that attitude is good for people who are trying to make their companies more responsible and more sustainable.”

However, S Venkat, president and global head of finance at Olam International, is more optimistic. He said if the heart (for sustainability) has opened up, at the individual level, the belief that “if I can make a change, then the world will change.” Venkat also cites the example of his children, and lauded how the younger generation thinks about the society. “Especially in the after post-Covid. They feel for it. They want to give back to the society. They really caused me to turn off the air conditioner because they see that there are animals dying everywhere in the world.”

To drive toward a sustainable business model is not only in search of profits, but for the future. For Stanley, he said during the pandemic in California, “everything was shut down. You could feel all of the elements of the natural world, coming back to life and at the same time you were conscious of this extraordinary human pain. Not just for people who are sick, but the economic pain, the people who are challenged.”

Venkat also gave what he called a 3Ps model (“profit, planet and people”). In the past, what people have taken to the very extreme is profit. “Because they want to save costs and hence, they go overboard — I mean, if you look at it in terms of supply chain, most of the products go to the lowest cost, and they produce in a massive way, and take it for granted, thinking that nothing will go wrong,” he adds.

In January, CNBC reported that green investments, “whether it’s in equities, government bonds, ETFs (exchange-traded funds) or hedge funds, investors around the world are demanding socially and environmentally conscious options”. The report also quoted Saxo Bank chief economist Steen Jakobsen as saying: “For the first time since World War Two we sense a shift in which climate and the environment — not growth — will become the priority of governments and their citizens, as shortages of food, clean water and air become existential questions.”

Jakobsen also predicted that increasing climate awareness and the growing shift in policy and behaviour, coupled with technological advancements lowering the cost of green technologies, makes green stocks increasingly attractive.

So, is the answer for a sustainable recovery — and by extension — leading sustainability means to simply pump money to green projects or investments? DBS’s chief sustainability officer Mikkel Larsen said it is not just about the figures, but also to where the money is going. Larsen also said the difference between traditional investments is that investors must not see only green investments as a “financially viable” product, where they see an investment gap in the trillions and conflate these with a pure investment opportunity.

He also gave the example of the coffee trade, and cited problems like education for the farmers and at those who work at the micro-level. “These areas are much harder to finance and that’s why you still see, you still see a pattern of money moving around within the same circle, not always reaching those who really need it. We must not be too blinded by the great numbers and we have to see if we are solving the problems the world is facing.”

Finally, Stanley uses his experience in California to sum up nicely the goal of sustainability and sustainable investment. “What we really need to do is to have a world that’s working for all people and a world that’s working for the planet and the crisis is forcing us to change. And the question is whether we change in the right direction is up to us.”