Triple Witching Hour in the C-Suite

It has always struck me that patterns developed en masse as children seem to show up again in our adult lives. I’ve spent the better part of the last 30 years around Corporate America (really, Corporate Everywhere), and have always been surprised at the burst of activity that follows Labor Day. Like eager school kids rushing into a new classroom (remember that?) companies tend to leap back to life in September.

Some of this is explained by the propensity of people to take vacation in August, and some by suddenly clear line of sight to the end of the year. And some is explained by the fact that, for a substantial majority of US companies, the last few months of the year are also the period when they lay the foundation of next year’s budget and targets. About 2/3 of US companies, and a larger share of private companies, treat the calendar year as their fiscal year; as a result, a decent chunk of the autumn is spent setting goals for growth and profit, iterating with line managers and boards, and formulating plans for communicating these targets to investors. 

As with pretty much every other human activity, this process will be different in 2020 – for some obvious and some not-so-obvious reasons. The first, and more obvious, is the inherent unpredictability in imagining what year two of the pandemic might look like. In volatile markets, trying to budget with precision is always a little bit of a fool’s errand. (In their book, Competing Against Luck, the late Clay Christensen, Taddy Hall, Karen Dillon and David Duncan made public my long-issued threat to fund and build “The Museum of False Precision” to house overly precise corporate budgets if I ever got really rich.) The still-evolving economic implications of the pandemic will make 2021 budgeting an exercise in understanding a wide variety of scenarios, at best. 

The less obvious and more challenging element for many large companies will be the need to revisit some important, and often public, assertions about their businesses and their relationships to their employees, communities, and investors. Budgeting is always an exercise in deciding which promises to break. But this year, companies will need to formulate 2021 outlooks that will force leaders to choose between multiple competing goods – in ways that will challenge their brands and reputations. In charting a course for 2021 and beyond, many companies will face an inherent conflict between three “promises” that they have made in the runup to and during the 2020 pandemic and economic crisis.

1.       First – a whole host of companies have nobly and boldly articulated a “no layoffs in 2020” pledge.  Most of these were made as the crisis hit, and few contemplated that six months later the United States would still be struggling to contain the pandemic. To date, few, if any of these companies have extended this commitment to 2021, and – based on a range of recent conversations – many have begun to prepare plans for reducing their workforces early in the new year.

2.      Second – a vast majority of major companies have announced some sort of digital transformation over the past several years. Often these transformations have been public promises to Wall Street about return levels and timetables from investment. These business cases make promises all over the map – and for many companies, these projects are matters of corporate viability. Two things are also true – digital transformation usually includes a healthy dose of automation, and automation usually has productivity gains as the key element of return. (I’ve yet to see a business case for automation that ends with “and this will allow us to hire a bunch more people.”) There is also a growing body of evidence that the projected job losses from automation disproportionately affect people of color and women. 

3.      Third – there has been a mounting set of corporate commitments aimed at ensuring equity and justice in American society. These conversations – always present – first gathered momentum with Larry Fink’s 2019 letter to CEOs and the Business Roundtable’s 2019 restatement of corporate purpose. And in the aftermath of George Floyd’s killing in May of 2020, companies (mine included) made substantial public comments and commitments to advancing racial and social equity and justice in the United States and beyond – often linking their consumer and employment brands in a very public way. These should – and often do – include commitments to employment and advancement of minority communities. 

You can see where this is going. Current course and speed, a significant number of America’s major employers are going to spend the fall deciding which promises to break. Fulfill the reality of automation-enabled digital transformation and accept job losses in historically disadvantaged communities suffering even more due to COVID-19? Or persist in protecting jobs and facilitating broader opportunity pathways but fall far short of the performance targets assumed in digital business cases? These are agonizing choices for corporate leadership and boards, and navigating them will require careful focus on a few key questions:

1.      Have we thought through how work will change post-“transformation” as newer technologies come to scale? (e.g., will reductions in information processing-related jobs due to RPA be offset by more field support jobs due to IoT/Edge? Will retail staff be replaced by service techs that can support touchless commerce?)

2.      Do we fully understand which employee populations will be most affected by the next leg of our digital transformation? And for those populations, have we identified the shortest path to their next meaningful corporate contribution?

3.      Do our budgets incorporate strategies for successfully managing the realization of digital transformation – even as we honor our social commitments in spirit? This will require considerable thought about internal talent mobility, training and career pathing -- well beyond what most companies contemplate right now. 

We at DeVry recognize that these are not easy choices, but careful navigation of these competing promises will be essential to simultaneously realizing the economic power of digital transformation and the economic power of a company whose actions reflect commitments to greater social responsibility.

How are others thinking about these questions? Share your comments or reach out to me or my DeVry colleagues to discuss.