It’s no secret that adversity is a key ingredient for progress. And this year has provided enough challenge, struggle, and pain to go a very long way. Simultaneous, cascading crises have stretched, pushed, and nearly severed the connections that hold our societies, economies, and political systems together. We see clearly how much organizational cultures depend on transparency, leadership, and valuing people. But as necessary as adversity is for progress, it is far from sufficient. Without embracing the difficulty and the change ahead, organizations will stagnate and ultimately fail. We have work to do—for ourselves and each other. Equally important, we have hope. Let’s get to it.
For most organizations, the beginning of 2020 was filled with cautious optimism. Business investment spending had slowed, but promising advancements in technology—coupled with moderate-but-steady consumer spending—set expectations for more innovation and economic growth. Households continued to benefit from a strong labor market, low unemployment, and rising disposable income, all of which fueled consumer confidence. Experts predicted growth over the coming year would be slow, but steady.1
Then, a novel coronavirus went global.
Between March and April, the US alone lost more than 20 million jobs across all industries. Logically, but no less frighteningly, a massive decline in consumer spending and a 14% drop in GDP over the first two quarters followed. By late July, it was clear that any attempts to defeat the virus by freezing the economy had not produced the rebound many envisioned. We now see investment spending declining due to lower consumption, while market and consumer uncertainty continue to rise.3
“There’s always an opportunity with crisis. Just as it forces an individual to look inside himself, it forces a company to reexamine its policies and practices.”
—JUDY SMITH, CEO, SMITH & COMPANY
As alarming as these economic indicators are, the disruption to the underlying cultures of countless organizations is equally troubling. For many, the shared experiences, stories, and connections that influence how employees interact, think, and work are fractured. According to a study by SHRM, two-thirds of companies say keeping employee morale up is a challenge, and one-third say the same about maintaining company culture.4 The pandemic is not only altering how organizations do business; it’s testing our ability to preserve the thriving cultures that make business possible.
GLOBAL DISRUPTION NEGATIVELY IMPACTS ORGANIZATIONAL CULTURE
As reported in the Introduction, the year-over-year trend for cultural outcomes and engagement was already on a slight decline. With the widespread disruption resulting from Covid-19, this downward trend has only accelerated, and we see it in lower scores for cultural outcomes and engagement and increased scores for burnout.
Interestingly, the two areas that appear almost immune to the effects of the pandemic are purpose and intention to leave. With economic uncertainty likely to linger through next year, employees may not feel comfortable leaving their jobs quite yet. They may also still find their work provides them with purpose as their social and personal lives suffer from social distancing and isolation.
Figure 3. COVID-19 STRIKES THE TALENT MAGNETS™
The pandemic takes a large toll on the six essential elements that define thriving cultures.
YEAR-OVER-YEAR CHANGE | IMPACT OF COVID-19
SOME CULTURES DO BETTER THAN OTHERS
The pandemic has significantly impacted the culture of all organizations, but those that went into the crisis with a healthy culture have weathered the storm far better than those that did not. The difference in impact between thriving and non-thriving cultures on cultural outcomes and overall satisfaction levels is profound:
“We use our culture to frame [the pandemic]. We always had a collaborative culture and a supportive one. We are engaging our employees more than ever. We are an agile culture, and we pivoted to the needs of our employees. I also think this situation made us do things over a matter of weeks that might have taken us years to do otherwise.”
—TRACY KEOGH, CHRO, HP
THE IMPACT OF ORGANIZATIONAL (RE)ACTIONS
In response to the economic and operational challenges of the Covid-19 pandemic, organizations have made difficult decisions to protect their long-term viability. But many of these actions have had unintended consequences on employees and culture:
1. Making layoffs and furloughs
At the beginning of the pandemic, 49% of companies were considering layoffs,5 and a month into the pandemic Gallup’s research found nearly 20% of companies did cut jobs.6 Unemployment in the US increased from 3.8% in February 2020 to 13% in May 2020.7 The absence of these employees, even though many were working remotely, has taken a painful toll on culture.
2. Returning to the workplace too soon
Many organizations have debated the right time to bring remote workers back, and many workers have not felt ready.
Pressuring workers to return to the office also has a significant impact on their health and wellbeing. Those who had to return were 19% more likely to feel depressed, 16% more likely to feel burned out, and 22% more likely to be scared about Covid-19 in the workplace.
3. Cutting recognition
For many businesses, less revenue has meant less recognition. During Covid-19, organizations have cut career anniversary programs by 17%, performance recognition programs by 20%, and everyday-effort recognition programs by 7%.
It may not always be obvious—and at times it may feel risky—but the pandemic gives every organization an enormous opportunity to evolve and improve its culture. When employees believe their culture adapts quickly to change, the odds are 475% greater that they will believe their organization sees disruption as an opportunity for learning and growth. The truth is cultures will inevitably change. The 2020 pandemic has forced and accelerated change. But organizations can still choose how.
Now is the time for leaders to transition from being traditional bosses to modern mentors capable of helping their people navigate the psychological uncertainty of a radically different work experience. Technology readiness is no longer an aspirational consideration, but a survival necessity. Inclusion is no longer an optional aspect of workplace culture; it’s something employees of all backgrounds demand. Above all, recognition has never been more important because it gives the most essential part of any organization a desperately needed sense of appreciation and security during times of uncertainty and transition.
“There will be interruptions, and I don’t know when they will occur, and I don’t know how deep they will occur. I do know they will occur from time to time, and I also know that we’ll come out better on the other end.”
—WARREN BUFFET, CEO, BERKSHIRE HATHAWAY
RECOMMENDATIONS & IMPACT
To help leaders of organizations navigate the Covid-19 crisis, our research supports taking the following actions:
1. Be transparent with employees
During times of uncertainty, companies must assess their leadership practices and how they engage their people. Leaders who communicate decisions honestly, completely, and proactively build trust and reassure their employees.
Organizational transparency is paramount to protecting culture, particularly during challenging times. For organizations that have been less than transparent in the past, this crisis provides an opportunity to change perceptions.
2. Stay connected to employees
“You’ve got 3,000 to 4,000 people at home and they need a community. We have been creating online communities that have nothing to do with how much you’re going to sell this week.”
—MOHAMAD ALI, CEO, INTERNATIONAL DATA GROUP
As we continue to work remotely and socially distance, we lose the easy opportunities to catch up with one another in the hallways or the break room. Employees have to make more of an effort to stay connected virtually, and organizations need to actively foster connection across teams.
We suggest leaders make an effort to connect with employees daily, in one way or another. Likewise, one-to-one meetings have always been an effective way for a leader to check in on work and progress, but they can be even more important for employee wellbeing and engagement. Our research last year showed a meaningful impact when leaders had regular one-to-ones with their people.
This year we see a statistically significant difference in the effectiveness of one-to-ones held weekly versus every other week (biweekly) and monthly:
During a crisis, one-to-ones should allow time for mentorship and coaching; asking about concerns and wellbeing; listening to employee feedback; and providing purpose, opportunity,
3. Leverage the power of recognition
Recognition has always been important, but during times of crisis it’s even more crucial in helping employees feel seen, valued, and connected.
4. Be proactive about addressing inequality and discrimination
Both the pandemic and racial unrest in 2020 have elevated equality and discrimination issues that impact society. But they’ve also highlighted how employees interact with each other, leaders, and clients. The way an organization responds to issues of discrimination—both internally and within the community—has a direct impact on how workers view the integrity of their culture, their leadership, and their roles within the organization.
According to our surveys, 59% of employees are satisfied with how their leaders respond to instances of racism or discrimination. Additionally, 58% feel safe sharing their thoughts about racism or discrimination with leaders and colleagues.
When employees are satisfied with how their leaders respond to instances of racism and discrimination, and when leaders connect their responses to the company’s purpose and values, the impact on cultural outcomes is clear and powerful:
Employees respond positively to organizations that are willing to take a stand and make their values known. Nearly half (42%) of employees believe their organization would publicly communicate their opinion on issues of race and discrimination, even if it meant losing customers. Additionally, 77% report that their organization’s response aligns with their personal values. When that happens, the sense of inclusion increases 14x and belonging increases 5x.
Organizations have a unique opportunity to treat the crises of 2020 as important catalysts, make positive changes, and invest in the lives of their employees and their communities. Even small improvements, when implemented daily, will have a large, lasting impact on culture. And a stronger culture will help any organization be more ready, resilient, and adaptable for the next crisis.
“This [pandemic] experience has raised the level of importance of having trust in each other to be successful in whatever is the mission of the company. It has also emphasized our interconnectedness as well as our responsibilities to each other.”
—JANE DELGADO, PRESIDENT AND CEO, THE NATIONAL ALLIANCE FOR HISPANIC HEALTH
CRISIS—4 KEY TAKEAWAYS
The crises of 2020 have dramatically changed the employee experience and how workplaces function.
Layoffs, returning to work too early, and cutting recognition have unintended consequences on culture.
There will be no return to “normal.” Organizations must change and improve their cultures for the future.
To thrive, organizations must double down on best practices like modern leadership, recognition, and inclusion.
1. “The Budget and Economic Outlook: 2020 to 2030,” Congressional Budget Office, January 28, 2020.
2. “Positive product of the pandemic: Culture,” Kevin Oakes, Human Resource Executive, June 2, 2020.
3. “United States Economic Forecast: 2nd Quarter 2020,” Daniel Bachman, Deloitte Insights, June 15, 2020.
4, 9. “How post-pandemic office spaces could change corporate culture,” Jen Geller, Riley de Leon, CNBC, May 18, 2020.
5. “Coronavirus jobs survey: 49% of companies considering layoffs, more than one-third freezing new hires,” Sully Barrett, CNBC, March 30, 2020.
6. “3 Ways to Create a Necessary Culture Shift Amid COVID-19,” Ed O’Boyle and Adam Hickman, Gallup, May 6, 2020.
7. “Unemployment rose higher in three months of COVID-19 than it did in two years of the Great Recession,” Rakesh Kochhar, Pew Research Center, June 11, 2020.
8. “Lessons from Chinese Companies’ Response to COVID-19,” Das Narayandas, Vinay Hebbar, Liangliang Li, Harvard Business Review, June 5, 2020.
10. “Puget Sound Energy: Connecting employees and boosting morale in uncertain times with recognition,” O.C. Tanner.
11. IDEO Commitments, www.ideo.com.
CASE STUDY—WHAT CHINESE COMPANIES TAUGHT US ABOUT TRANSPARENCY
The coronavirus infected China weeks before it reached the rest of the world, and many Chinese companies quickly adapted and innovated. The key for many of them was transparency.
They regularly kept their teams up to date on the state of their business and shared information that was direct, honest, and personal. After a major engineering and technology company shut down one of its R&D centers that represented the future of the business, employees asked the CEO why. His answer: “If we cannot survive the next three months, we will have no future.”
Leaders knew their actions were under a microscope and that not all employees would be happy with them. But when workers understood the business situation and had the information behind decisions, they felt that “we are all in this battle together and fighting the same enemy.” Transparency enabled organizations to rally their people to make the changes needed to survive the crisis.8
CASE STUDY—STAYING CONNECTED DURING COVID-19
HP is engaging with employees in even more ways during the pandemic. Examples include weekly town halls through Zoom with doctors to give updates on Covid-19 as well as homeschooling seminars for parents. The company has also taken new steps to support employees’ mental health and invested in more leadership training to help managers take care of their people. Managers check in with their teams regularly, and the CEO uses video to reach more people and speak with them directly.
As a result of these efforts, HP finds employees are more able to connect on a global level and have a greater sense of inclusion. Says Tracy Keogh, CHRO at HP, “You are leading through a crisis and connecting with your people. This is the most authentic time in business history.”9
CASE STUDY—USING RECOGNITION TO CONNECT EMPLOYEES AND BOOST MORALE
Since the start of the pandemic, Puget Sound Energy (PSE) has used their recognition platform to help leaders stay connected to employees. Karl Frunz, PSE’s Recognition Lead, regularly encourages leaders to recognize their people in a variety of ways:
- Sending positive messages and thanks to their teams
- Celebrating company results, like compliance (an important industry measure)
- Using ecards to reduce stress and retain connection
- Encouraging leaders to celebrate and make service anniversaries meaningful
The company recognized its IT teams with special packages, certificates, and handwritten notes to thank them for helping employees transition to remote work and continuing to support their IT needs. PSE also created a special award to reinforce and recognize employee safety. Providing services and taking care of customers doesn’t stop in a pandemic, and neither does recognition at PSE.10
CASE STUDY—COMMITTING TO RACIAL EQUALITY
During the summer of 2020, the global design firm IDEO directly addressed how it had perpetuated inequality in the past and how it would change going forward. The company’s public statement supporting diversity and inclusion admitted that it had not done enough and detailed its failures as an organization—from staying silent on issues, to poor choices of words in social media posts, to slow progress on making systems and processes more inclusive.
IDEO also committed to re-evaluate its culture through the lens of inclusion and redefine “what it means to be an IDEOer.”s.11