It has once again been a little more than two years since I last summarized the topics that are keeping CEOs up at night. And what a ride we have had over the last two years! In my new study, I have found a great overlap with the themes I articulated two years ago. However, I also found significant focus that offers much greater specificity, complexity, and integration of interwoven priorities.
As in the past, I have combined what I heard from senior executives across sectors, what I read in blogs and publications, and what I learned from numerous studies. I have once again identified six areas that are important to CEOs as we enter the future normal.
I will briefly describe the 17 articles that had the greatest influence on the current study, share the six themes for consideration in 2022 and briefly relate how the 2021-2022 Baldrige Excellence Framework® addresses these topics, comment on the relationship to the themes from two years ago, and provide some food for thought as the Baldrige framework is being revised this year to remain at the leading edge of validated leadership and performance practice.
Six articles/studies were the most informative for me. The first, "Find Your Essential: How to Thrive in a Post-Pandemic Reality (PDF)" was produced by the IBM Institute for Business Value, in cooperation with Oxford Economics (IBM). It is based on interviews of 3,000 CEOs from nearly 50 countries and 26 industries. The second article, "Building on Hope: Forging Ahead (PDF)," is the product of the 2021 Fortune/Deloitte CEO survey conducted in September 2021 and involving 117 CEOs from more than15 industries (Fortune). The third article, "7 Deepwater Business Challenges We'll Be Facing in 2022," by Angela Yurchenko is based on interviews of over 100 entrepreneurs (Medium). The fourth article, based on a Business Roundtable survey (BRT), was authored by Eric Rosenbaum, published by CNBC, and summarized as "more volatility, no end to Covid." The fifth article, "The CEO: Architect of the New Operations Agenda," from McKinsey & Company (McKinsey1), was co-authored by Andreas Behrendt, Axel Karlsson, and Daniel Swan. The sixth article, "The Next Normal Arrives:Trends that Will Define 2021 – and Beyond," also from McKinsey (McKinsey2), was co-authored by Kevin Sneader and Shubham Singhal.
The remaining articles are as follows: "Our Leap of Faith," by Gary Burnison, Korn Ferry (KF); "The Paradox of Leadership after COVID-19," by Deborah Stadtler, SHRM (SHRM); "Leadership after Covid-19: Learning to Navigate the Unknown Unknowns," by Koldo Echebarria, Forbes (Forbes); "Sustainable Business Went Mainstream in 2021," by Andrew Winston, Harvard Business Review (HBR); "2022: The Year Ahead," Korn Ferry Insights (KFI); "The Old Style of Leadership Is Dead. Life After COVID-19 Will Require New Kinds of Leaders," by Robert E. Hall, Dallas Morning News (DMN); "Leading for 'the Human Moment," by Amy Bradley, 13th Global Peter Drucker Forum (PDF); "What Matters Most? Five Priorities for CEOs in the Next Normal," by Homayoun Halami and Liz Hilton Segel, McKinsey & Company (McKinsey3); "The CEO Moment: Leadership for a New Era," by Carolyn Dewar, Scott Keller, Kevin Sneader, and Kurt Strovink, McKinsey Quarterly (MQ); "The Future of Work Is through Workforce Ecosystems," by Elizabeth J. Altman, David Kiron, Jeff Schwartz, and Robin Jones, MIT Sloan Management Review (MIT); and, "Majority of Workers Who Quit a Job in 2021 Cite Low Pay, No Opportunities for Advancement, Feeling Disrespected," by Kim Parker and Juliana Menasce Horowitz, Pew Research Center (Pew).
At first, the title of this blog might appear contradictory. How do you both provide organizational focus and reinvent the organization at the same time? That is part of the opportunity and challenge senior leaders face: to focus on the vital few areas that will create impact, while keeping an eye on constant reinvention to continue to achieve positive impact.
Below, I have divided this year's six themes into two categories, listing three as opportunities and three as challenges. While this decision is somewhat arbitrary, I see three areas as providing great opportunity and three more as challenges (that could create opportunities).
To introduce each 2022 theme, I will start with some data. According to the DMN, in the year from April 2020 to March 2021, people "absorbed at least five years' worth of chaos, crisis, technological disruption and change," and they now demand a greater voice in creating a better and fairer future. Some data from McKinsey (MQ) indicate that 87% of customers will buy from companies that support what they care about; 94% of millennials want skills to benefit a cause; and sustainable investing has grown 18-fold since 1995. From its study, Fortune reported that 68% of CEOs have increased their emphasis on corporate purpose and 90% said climate change needed to be urgently addressed. More than 70% of the CEOs agreed that their investors support a proactive climate agenda; 85% agreed that executing on their climate agenda would impact their ability to attract, retain, and engage workforce members; and 70% said their organizations would reach net-zero carbon emissions by 2050 (as have the governments of 137 countries). According to the entrepreneur survey conducted by Medium, a growing number of the entrepreneurs' customers base their loyalty on sustainability and inclusivity efforts.
Employees, customers, and investors want to associate with organizations that serve a larger purpose than may be expressed in their mission statement. They want to be associated with organizations that live their values and have a commitment to societal responsibilities, environmental stewardship, and equity and inclusivity.
Ira Bedzow, UNESCO chair in bioethics at the New York Medical College, provided this advice to senior leaders: "Take some time every day to think broadly of the social implications of the new normal and not simply the immediate financial ones."
By building social capital, organizations build trust. And trust results in long-term stakeholder and shareholder loyalty. As a first sign of the interconnectedness of my six themes, the competition for talent is going to grow, and engaged workers are looking for organizations to commit to a larger purpose. This is especially true of younger workers, who make up 50% or more of today's workforce. They have the power, and they are going to use it.
The Baldrige Criteria for Performance Excellence® (PDF) currently address societal contributions as part of the leadership category and equity and inclusion as part of workforce engagement. Related results are addressed in the results category. The Baldrige core values of valuing people and societal contributions point to the foundational nature of these topics.
The 3,000 CEOs surveyed in the IBM study identified technological factors as the most important external force that will impact their organizations over the next several years. According to the same study, during the height of COVID-19, more tech-savvy organizations outperformed their less-savvy peers on revenue growth by an average of six percentage points across 12 industries. Six hundred and five (605) of the executives surveyed indicated that they are accelerating their organizations' digital transformation. According to Mckinsey1, companies with "digitization success" have seen 30% reductions in inventory and cost of goods sold, 50% reductions in cost of quality, and 30% improvements in cash and productivity. Furthermore, 64% of the companies in one study said digitization has helped them meet sustainability goals.
Technology, e-wisdom, and digitization are frequently associated with the business sector's fourth industrial revolution. Technologies generally cited include automation, advanced analytics and big data, machine learning, artificial intelligence (AI), the internet of things (IoT), and the related area of cybersecurity. These technologies enable organizational agility and are considered central to innovation, enhancing operational efficiencies, customer and stakeholder engagement, and smooth operation of a hybrid workforce.
In the IBM study, 72% of the identified customer-focused "outperforming organizations" identified cybersecurity as a top-three priority, accompanied by agility and empowering a remote workforce.
The use of technology and e-wisdom is another example of the interconnectedness of this year's six theme areas. The description above clearly relates this focus area to people ecosystems and constant reinvention.
The Baldrige framework has numerous touchpoints with technology, e-wisdom, and cybersecurity. Several of the core values relate to use of technology and e-wisdom. The Baldrige Criteria for Performance Excellence® address technological change as one of the strategy considerations and have items that address performance analysis, data and information, managing opportunities for innovation, and cybersecurity.
As stated above, focusing on the vital few and leading for constant reinvention (discussed later) might appear to be contradictory. However, I believe they highlight the opportunity and challenge that organizations face. Organizations must be agile, yet focus on priorities to remain competitive and relevant. BRT senior executives phrased this opportunity for focus as simplifying and doing better with less.
Focusing on the vital few begins with reexamining vision and strategy, following the upheavals of the last couple of years. With strategy comes identification of a focused set of action plans (priorities); action plans must include a process for action plan modification if necessitated. Rapid execution of new plans can be due to emergencies, breaking technological change, and other external forces.
Topics that senior executives included in regard to the need for focusing on the vital few dealt with more effective execution, addressing pandemic-driven customer behavior changes, virtual work changes, and massive ongoing innovation of all types. MIT summarized the workforce-driven need for focus as flipping a perennial workforce ecosystem strategic challenge from "What workforce do I need for my strategy?" to "What strategy is possible with my workforce?"
The Baldrige framework's core value of focusing on success and innovation addresses all aspects of balancing short-term and longer-term needs, resource allocation, and the ability to deal with uncertainty. The Baldrige Criteria devote a complete category to strategy, including an organization's ability to execute, resource allocation, action plans, and action plan modification. Strategy results are addressed in the results category.
I am using the MIT definition of people ecosystem, that is, "a structure that consists of interdependent actors, from within the organization and beyond, working to pursue individual and collective goals." According to the same study, more than 75% of managers in a global survey of 5,118 managers view their workforce as both employees and non-employees, and non-employees are responsible for performing more than 25% of the organization's work. Organizations report that they "inconsistently manage or have no process to manage alternative workers." Managing this blended workforce in alignment with the organization's strategic objectives, culture, and values is a critical business imperative. Given this business imperative, PDF reports that 90% of organizations state they put people at the heart of their long-term strategies for value creation, but only two-thirds of employees agree.
Some additional people-related data worth noting come from numerous recent studies. Pew reports that about 20% of non-retired adults in the U.S. say they quit their jobs during 2021. Low pay, lack of opportunity for advancement, and feeling disrespected at work were the top reasons for quitting their jobs. Those who quit and are then employed elsewhere generally say their new job has better pay, more opportunities for advancement, and more work-life balance and flexibility. According to IBM, 80% of executives in its study agreed or strongly agreed that they were supporting the physical and emotional health of employees. When employees were asked the same question, only 46% agreed or strongly agreed. When asked about receiving adequate training on new ways of work prompted by the pandemic, 74% of executives agreed, but only 38% of employees agreed. When IBM asked the executives about the most important attributes for engaging employees, diversity and inclusion ranked near the bottom of a 13-choice list. Yet the same leaders ranked diversity and inclusion as central criteria for leadership.
The McKinsey studies (1&2) estimate that more than 20% of the global workforce will spend the majority of their work time away from the "office." Furthermore, across the world's eight largest economies, more than 100 million people (one in every 16 workers) will need to transform to new roles by 2030.
Yet many organizations consider themselves "stuck" in old paradigms, according to KF. Becoming unstuck requires a decision and a discipline to elevate the horizon and focus on a future that encompasses workforce diversity and inclusivity, development, reskilling, coaching, creativity, well-being, compassion, flexibility, and empowerment.
In order to gain loyalty and retention, leaders must provide a values-based environment with less hierarchy; a hybrid, blended, partially remote and partially non-employee workforce; and engagement that respects workforce members' differing needs.
Finally, it is important to emphasize that none of the other five opportunities and challenges facing senior leaders in 2022 can be addressed without the right people in their ecosystem.
The Baldrige core values of valuing people, ethics and transparency, and visionary leadership all address the underpinnings of a good people ecosystem. The Baldrige Criteria devote a complete category and a results item to workforce. The workforce is addressed in the Organizational Profile (the prefatory section of the Criteria) and is an important component of the leadership and strategy categories.
Our reliance on organizations' suppliers and partners has affected and dazzled every business and every consumer in the last two years. In a McKinsey (McKinsey1) survey of supply-chain leaders, 93% of the respondents said COVID-19 had exposed problems with their global manufacturing and supply footprints. Nevertheless, by the middle of 2021, only 15% had made changes such as nearshoring of production and diversification of their supplier base. According to one smaller product company (Medium article), in 2020, 8% of all canceled orders were the result of stock issues; in 2021 that rate was 43%. IBM's outperforming organizations prioritized spare capacity seven times higher than just-in-time inventory.
In addition to availability of supplies, according to McKinsey1, 80-90 % of greenhouse gas emissions arise from companies' value chains. As a result, there is a need and interest in making those supply chains more sustainable. According to HBR, companies are requiring more information, setting higher standards, and placing higher demands related to climate and human rights on their suppliers.
More and more, organizations need to focus on just-in-case rather than just-in-time. They must rebalance their priorities to better manage risk. Risk management strategies are becoming increasingly complex due to supply ecosystem challenges (as well as workforce uncertainties, disruptive technologies/innovation, and societal demands). On the flip side, supply ecosystems also offer expanded opportunities for partnering and collaboration in problem solving and invention.
The Baldrige core value of delivering value and results addresses the need to balance value for all stakeholders — including your suppliers, partners, and collaborators. The Baldrige Criteria ask about key suppliers, partners, and collaborators in the Organizational Profile and address the supply network as strategic and operational components of an organization's work systems.
We have already experienced the fact that the most significant change over recent times is the accelerating rate of change. The ability to be perpetually "unstuck" has become a strategic and operational imperative and a competitive differentiator. Resilience, bouncing forward in the face of disruptive challenges, will distinguish the outperformers. According to the IBM study, 56% of CEOs emphasize the need to "aggressively pursue" operational agility and flexibility over the next several years. Key questions on every leader's (indeed, every person's) mind are: What has changed forever? What will return to a prior state? What will continue evolving? What will the next big (disruptive) change be? How will it all affect my organization (and me)?
We are in an environment where the ability to constantly reinvent must be part of an organization's strategic and operational DNA.
According to Forbes, leaders and managers must move from a role of containing uncertainty to one of encouraging it, while making it tolerable as a norm in partnership with their people and supply (partner/collaborator) ecosystems. Processes that were characterized by deciding and acting need to be supplemented with processes for asking, doubting, and testing.
MQ challenges leaders to "aspire 10x higher." I believe the challenges of constant reinvention are to aspire ten times higher and act ten times faster, recognizing that the need for intelligent risk taking will be riskier and therefore must be accompanied by the ten times faster ability to ask, doubt, and do rapid testing or prototyping.
The Baldrige core values of agility and resilience and focus on success and innovation form a foundation for reinvention. The Baldrige Criteria item on strategy development asks about strategy considerations, including disruptive forces, technological change, and blind spots, The strategy execution item asks about your ability to rapidly execute new plans. The operations category poses questions about your pursuit of intelligent risks and your organizational resilience in the face of disruptions.
The 2022 CEO issues show a striking overlap with many of those identified in 2020. However, while there is overlap in "title," the interpretation, complexity, and specificity in 2022 have been reframed and clarify the opportunities and challenges. The six areas identified in 2020 are as follows:
While customer experience is no longer a separate area in 2022, it is certainly an important factor in why we need to reinvent and use technology. Many customers are also favoring organizations that make a difference. The issue of global markets focused on sales, but also was related to uncertainty in supply chains. However, the causes of the uncertainty were not anticipated in the 2020 study. And now that supply ecosystem is a major focus for organizations broadly. Product availability, resilience, and responsibility for the societal impact of that supply system are keeping CEOs up at night.
The remaining four areas from the 2020 study are still subjects of the 2022 opportunities and challenges. The right people is now the right people ecosystem, with workforce and workforce structure drawing equal attention. In 2022, technology and e-wisdom are at the center of opportunities for those who can and choose to capitalize on them. Responding to society's call is now an imperative from employees, customers, and investors.
New this year is the need to focus on the vital few. Prioritization, with agility, may be the biggest source of competitive advantage for successful organizations. The opportunity is to achieve this focus while using the other five focus areas as lenses to help guide your organization's vital few.
While the next set of Baldrige framework revisions are being contemplated now, some of the 2022 CEO focus areas will probably be played out over more than the next few years. The 2021-2022 Baldrige framework already deal with them, but they might result in a clarity and added emphasis in areas related to prioritization (vital few), workforce, resilience, and innovation. Because of the inter-related nature of this year's focus areas, they emphasize and elicit numerous examples of the need for a systems perspective. Other Baldrige core values take on added meaning, as already described in the sections above.
The Baldrige framework definition and interpretation of innovation take on added meaning when thinking about the 2022 focus areas of making a difference and constant reinvention.
Workforce considerations should now include the recent changes in where we work, how we work, and the empowerment and flexibilities that workforce members have come to expect over the past two years. We also must pay more attention to a blended workforce with on-site, at-home, remote, and non-employee members all contributing to the work of the organization.
The last two years have made more clear to us the needed components of agility and resilience. While already embedded in the Baldrige framework, these concepts suddenly have much more gravitas.
Forefront organizations are now doing a lot more with their strategic supply ecosystem partners, while also building redundancy and proximity in relation to their direct suppliers.
Finally, the appreciation of all that digital technologies can offer in competitive advantage is expanding on an exponential basis.
Let me start with a comment on the title for this blog. I emphasized building trust because the great dependence on people across an organization's sphere of interactions will only succeed if there is a great sense of trust and a building of truly trusting relationships. Now, more than ever before, a systems perspective deals not only with processes, but with people, organizations, and processes.
As in the past, I look forward to observing ongoing changes in performance excellence over the next few years. And I look forward to another look at CEO opportunities and challenges a few years down the road, with ever-evolving insights on the road to performance excellence!
The Baldrige Excellence Framework has empowered organizations to accomplish their missions, improve results, and become more competitive. It includes the Criteria for Performance Excellence, core values and concepts, and guidelines for evaluating your processes and results.
The major crisis that is looming before humanity must also concern CEO'S too but painfully the Baldrige Framework is silent about it, that is why we are going from crisis to crisis with only temporary, local and shallow solutions.
Thank you for your comment. Baldrige cannot solve humanity's crises, but the blog points to the issues CEOs face and how the Baldrige Framework addresses them.