Businesses around the world have been scrambling to restructure in the wake of COVID-19 disruption, frequently with stringent cost control methods that result in business shrinkage. But are they moving in the right direction? In a conversation with People Matters, Dustin W. Seale, Managing Partner of Heidrick Consulting in Europe, explained that the way forward ought to be intelligent restructuring—not just cost cuts but a full rethink of business models and cost bases. Here's what he shared.

Could you share some context around how intelligent restructuring differs from the cost-cutting strategies that most companies appear to be implementing at the moment?

When faced with a crisis of such massive proportions as that of the ongoing COVID-19 pandemic, it is understandable that the initial reaction for many companies would be to attempt to lower expenditure. This may be necessary, but doing so in a way that cuts fat, not muscle, is mission critical. A blunt instrument, rather than intelligent restructure, can destroy value. Instead, it is vital that leaders remain agile, cut only where it is necessary, and focus on shaping a company culture that makes the leaner organization even more productive.

Intelligent restructuring involves targeted cost change, rewiring the organization, changing mindsets, and bringing about real transformation, not fixing the cost problem in isolation.

Now, more than ever, culture is at the forefront of the minds of leaders. Many industries are currently facing a tumultuous situation with an uncertain future. Saying this, during the pandemic, we have seen unexpected positive outcomes. These include: better leadership behavior, more collaboration, more transparency, more trust and more agility throughout this crisis than ever before. However, now that we’re six months in, many companies are losing these advantage-creating cultural traits. A better approach would help an organization become leaner in a focused way, while also sustainably bringing the cultural attributes that existed in the early pandemic.

Does that mean organizations should be shaping their survival strategies around culture, rather than cost reduction?

Yes, in many cases. If survival is at risk without changing the cost base, cost-cutting must be undertaken, but it should be done in a strategically intelligent way. However, counter-intuitive as it might seem, organizations should be prioritizing the creation of an optimized culture which may require investment. Culture is one of the biggest determinants of future success for businesses facing this crisis. It is what’s going to determine the outcome of all crisis scenarios. The desire to know and to be able to see and connect in a specific framework is core to how we are as people and what brings us together and enables us to overcome new challenges.

There is no single recipe for successful company culture either; you can't just borrow somebody else’s culture, there's one that is a right fit for your organization and one that’s right for what your organization is facing at that moment in time.

Diversity is also a worthy investment. Traditionally, the vast majority of board members were male but that is beginning to change. The more skills and experiences that board members have the better; experiential and cognitive diversity can only bring benefits to business. Board Monitor Europe 2020 found that of the 341 UK Board seats filled in 2019, appointments have reflected a renewed focus on efficiencies, cost-cutting, and intelligent restructuring, most likely in anticipation of Brexit. A significant increase was recorded in seats filled by executives with financial risk expertise, which rose from 4% in 2018 to 39% in 2019.

Conversations about overhauling business and cost models aren't new, yet there always seems to be something holding organizations and even entire industries back. Where do you think the main obstacles lie?

Change can be difficult; making that commitment to change and taking the leap in following through with actions is no easy feat. A crisis brings out our best and worst instincts, this is particularly true when it comes to leaders. Leaders will have to anticipate and navigate change if they want to get to the other side of the situation we are in whilst ensuring not only business continuity but also future prosperity. Leaders will have to have great strength in foresight, but also the agility necessary as changes in the environment crop up.

Developing leaders and culture that anticipates better and is more agile, is probably the largest obstacle and opportunity industries are facing at the moment. Businesses must be open to adapting and demonstrating agility in leadership in an uncertain landscape.

Those that are going to succeed will be the ones that had the foresight to adopt a growth mindset and demonstrate agility almost every step of the way during the crisis.

How can organizations can get the impetus they need to execute major changes?

In regard to the general trends we are seeing, what is certain is that we are living in the most unpredictable time of at least the past two decades. A post- COVID-19 world could fall under a combination of the following 4 scenarios: Digital enclaves, Tech-powered humanity, a growing divide or an ‘In this together’ scenario. The eventual combination of these scenarios can’t actually be determined, there are thousands of possible futures that we may endure after this pandemic. So leaders must prepare for any of those outcomes by readying their leaders and organizations as best they can for those multiple futures while ensuring that agility becomes their ultimate goal. In all honesty, if a company does not see an impetus to change in the present environment, it never will.

What kind of leadership qualities are required to successfully pull off an intelligent restructure?

Cuts must be driven through a strategic lens and also be driven by empirical data. In the analysis, levels of agility must be weighed, as agility is essential for success. Those that succeed must act in the face of uncertainty while maintaining fluidity until the time is right. Leading with agility was something that many companies had struggled to achieve prior to the situation we are facing, but it has now become a make or break capability among thriving leaders.

Agile leaders pivot faster, adapt smarter, and look forward rather than backwards in times of crisis. We are seeing agile, responsive, fast, seamless, and purpose-driven leaders ensure the future success of their organizations

These leaders are also demonstrating deep principles. By showing compassion and care in how they navigate through this crisis, agile leaders are proving that the heart of any successful organization lies within that organization's people. Prior to this situation, compassion, or social agility, was mostly overlooked, but now it is the currency in strong, effective leadership.

Are these qualities something that can be trained into existing leaders, or would organizations be better off finding someone new?

Without speaking too much in the proverbial, there is a delicate balance between “better the devil you know” and “out with the old and in with the new”. Sometimes, the perfect candidate could be within a company and with very little training or development, the current employee would be able to step into the role. In other cases, the current team doesn’t have the correct skill set or outlook to take the organization where it needs to go.

There is a tendency to stick with what has worked previously, as opposed to seeking out those with more diverse experience, and this may favor men or people of historically similar backgrounds. In our FTSE 100 Report, it was very evident that boards are reflecting on how they have come so far through the COVID-19 crisis and questioning whether they have the skills around the table. Brexit is also a significant factor shaping the boards of companies on the United Kingdom’s FTSE 350. If the organization has navigated the crisis well, they may be reluctant to make drastic changes to current board composition; on the other hand, they may be looking to refresh the skill sets available to them.

My bias is to go inside, but to do so with data and development, so that executive seats are filled more often from within the company. However, there are organizations that simply need an outside view to make the changes they need to make, and thus you go outside for talent.