Category Archives: Leadership

Updates from McKinsey

The future of payments is frictionless—now more than ever
Amrita Ahuja, the CFO of Square, explains how the company’s payment platform and services have helped small enterprises stay afloat during the COVID-19 crisis.
By Amrita Ahuja – Cash is king when it comes to maintaining corporate liquidity. It is in a somewhat less prestigious position when it comes to fulfilling consumer-to-business transactions. The onset of the COVID-19 crisis and ongoing fears of infection have prompted consumers and businesses to rely more on digital and contactless payment options when buying and selling goods and services.

How have the past few months been, and what’s changed for Square as a result of the crisis?

We’re taking it a day at a time. We serve merchants, who we call sellers, and individual consumers. And we know that this has been an incredibly trying time for everyone, where a lot of people’s livelihoods have been in question. The first thing we did was focus on our employees and their health. We shut down our offices on March 2. We wanted to do right by our communities and do our part to halt the spread of the virus. We took an all-hands-on-deck approach to understand what was happening in our customers’ businesses and what was happening in our own business. Every single day in March and April felt like a year, frankly, in terms of our understanding and how fast things were moving. We ran through scenarios, and asked ourselves, “OK, if the situation resembles a V, or if things look like an L, or if it looks like a U, what does that mean for us and our ability to serve our various stakeholders, employees, customers, and investors?”

We’ve had to be fast and clear with our communications during a time in which there are still so many unknowns. It was important to own up to this uncertainty and yet not downplay the severity of the situation. We met far more frequently with the board than the typical quarterly cadence. We held an update call with [investment bankers and analysts] outside the typical earnings cadence. We suspended our formal guidance to Wall Street, but we actually shared more information about the real-time views that we were seeing in our business across a number of different metrics and geographies. And with employees, we had a far more frequent and transparent mode of communication. We were sending weekly email updates, we built comprehensive and regularly updated FAQs, we set up a Slack channel for questions, and we held biweekly virtual all-hands meetings. We didn’t know everything, but we had a process for learning things over time and communicating them transparently. Ultimately, that has served us well, in terms of motivating our employees, serving our customers, and giving stakeholders a clear understanding of where we are as a business and how we are proceeding. more>

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Updates from McKinsey

Managing the people side of risk
Companies can create a powerful risk culture without turning the organization upside down.
By Alexis Krivkovich and Cindy Levy – Most executives take managing risk quite seriously, the better to avoid the kinds of crises that can destroy value, ruin reputations, and even bring a company down. Especially in the wake of the global financial crisis, many have strived to put in place more thorough risk-related processes and oversight structures in order to detect and correct fraud, safety breaches, operational errors, and overleveraging long before they become full-blown disasters.

Yet processes and oversight structures, albeit essential, are only part of the story. Some organizations have found that crises can continue to emerge when they neglect to manage the frontline attitudes and behaviors that are their first line of defense against risk. This so-called risk culture is the milieu within which the human decisions that govern the day-to-day activities of every organization are made; even decisions that are small and seemingly innocuous can be critical. Having a strong risk culture does not necessarily mean taking less risk. Companies with the most effective risk cultures might, in fact, take a lot of risk, acquiring new businesses, entering new markets, and investing in organic growth. Those with an ineffective risk culture might be taking too little.

Of course, it is unlikely that any program will completely safeguard a company against unforeseen events or bad actors. But we believe it is possible to create a culture that makes it harder for an outlier, be it an event or an offender, to put the company at risk. In our risk-culture-profiling work with 30 global companies, supported by 20 detailed case studies, we have found that the most effective managers of risk exhibit certain traits—which enable them to respond quickly, whether by avoiding risks or taking advantage of them. We have also observed companies that take concrete steps to begin building an effective risk culture—often starting with data they already have. more>

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3 Keys to Engineering Success

Although success can be defined in different ways by different people, there are three very specific keys to engineering success.

By Jacob Beningo – Every engineer and engineering team wants to be successful. Success can be defined in many different ways whether it is meeting a deadline, making a customer happy, or completing work within the budget. Whatever the definition of success is, there are three keys to successful engineering, and they aren’t necessarily technical.

Success Key #1 – Maintaining Discipline

Related: 50 Top Private Engineering Firms of 2020

The first key to success is that even under the toughest conditions, discipline needs to be maintained. This isn’t a military thing, it’s common sense. I see a lot of teams that when things start to get tough, corners recklessly start getting cut. The loss of discipline creates additional problems that further get in the way of delivering and quickly become a self-feeding doom loop that wastes time and kills budget.

Maintaining discipline for success must be done at more than one level at the company. First, individual developers need to agree that no matter what pressure is put on them, they will follow their processes, perform their due diligence, and not allow themselves to decay into wild west programming. Individual developers form the foundation and if they crack, the whole project is going with them. Second, the collective team needs to agree that they will maintain their discipline no matter what. Everyone working together will help ensure that they are successful. Finally, the company management team needs to be on-board and understand that while there may be a fire today or a critical delivery date, the team has to maintain the discipline to make the delivery successful. All three levels of the business need to be on board.

In my experience, engineering success comes down to much more than technical prowess. It comes down to having and maintain discipline. It requires carefully managing expectations to deliver what is needed when it is needed not by overpromising and under-delivering. Perhaps most importantly, to have long-term success, it requires having fun doing whatever it is that you do and with the people you are doing it with. more>

US presidential election: last call for the liberal world order?

Some might have taken for granted the liberal world order of postwar decades. Until Donald Trump trashed it.
By Valerio Alfonso Bruno and Vittorio Emanuele Parsi – The pre-eminent theorist of liberal internationalism, from its origins to its prospects, G John Ikenberry, recently wrote that spring 2020 might well be considered by historians as the end of the ‘liberal world order’—the moment ‘when the United States and its allies, facing the gravest public health threat and economic catastrophe of the postwar era, could not even agree on a simple communiqué of common cause’. For Ikenberry, ‘the chaos of the coronavirus pandemic engulfing the world these days is only exposing and accelerating what was already happening for years. On public health, trade, human rights, and the environment, governments seem to have lost faith in the value of working together.’

May November 2020 then represent the last call for the liberal world order? In recent history, the elections of the president of the United States have represented decisive moments, not only for the country but for the dynamics of the international order tout court. Coming in the middle of a pandemic and counterposing two incompatible Weltanschauungen, the 2020 election may be of unprecedented decisiveness.

The liberal world order was built around a set of principles and institutions governing the international system in the aftermath of World War II. It was based on US leadership and operated through five core institutions: the United Nations, the International Monetary Fund, the World Bank, the World Trade Organization and the North Atlantic Treaty Organization.

For all its limits and weaknesses, during the cold war it granted economic development and security to a significant part of the world. ‘Free-market’ societies, conditioned by strong welfare policies, produced a long-term, if fragile, balance between economic competition and social cohesion.

The dynamic worked well until the 1980s. Thereafter, the foresight required to preserve such a fragile balance—based on postwar hindsight—gradually vanished. Liberal premises, such as equality of opportunity, and liberal promises, of a more equal, peaceful and wealthy world, became subverted by regressively ideological economics. A neoliberal world order has almost replaced the liberal one. more>

It’s the most important election in our lifetime, and it always will be

We never know how important an election really is until long after it’s over.
By Ezra Klein – “There’s just one month left before the most important election of our lifetime,” Democratic presidential nominee Joe Biden tweeted in early October.

Two days later, Sen. Bernie Sanders backed him up. “This is the most important election, not only in our lifetime but in the modern history of our country,” he said in Michigan.

In 2016, it was Donald Trump deploying the cliché. “This is by far the most important vote you’ve ever cast for anyone at any time,” he said.

I won’t be coy with my view: I think the most important election of my lifetime was 2000, and I’ll defend that view in this piece. But more interesting than the parlor game is the framework of this debate. What makes something the most important election of a lifetime? How would we know?

Before 2016, the campaign in which I heard the “most important election of our lifetime” talk most often was 2004, when George W. Bush ran for reelection against John Kerry. It certainly felt pivotal. It was a referendum on the Iraq War, which was built on lies and carried out by fools, and left Iraq soaked in blood. It was also a referendum on the hard right turn Bush had taken in office, away from “compassionate conservatism” and toward neoconservatism abroad, and a politics of patriotic paranoia at home.

Kerry lost that election. And yet, in retrospect, it clearly wasn’t the most important election of my lifetime, and it may even have been better that Kerry lost it. The ensuing four years forced Bush, and the Republican Party he led, to take responsibility for the disasters they’d created. The catastrophe of the Iraq War became clearer to the country, leading to a Democratic sweep in 2006. The financial crisis, which had been building for years, exploded, leading to Barack Obama’s election and the massive congressional majorities that passed the Affordable Care Act. more>

Reviving transatlantic relations after Trump

If Joe Biden were to win the White House, transatlantic relations could return to default or be transformed—with much depending on how Europe reacted.
By Max Bergmann – A political cliché is rehearsed every four years in the United States: ‘This is the most important election of our lifetime.’ Yet it is hard to think of a more important election in US history—rarely, if ever, has the country faced two such sharply divergent paths.

All its deep-seated divisions have been exposed in 2020. Covid-19 has foregrounded the jaw-dropping inequality, the frailty of a for-profit healthcare system and the impact of a generation-long, conservative effort to weaken the functioning of government. When Americans needed the state, the state couldn’t cope.

Economically, Wall Street hasn’t missed a beat but queues for food banks grow and ‘for lease’ signs populate vacant shop fronts. Socially, the murder of George Floyd in Minneapolis in May and the subsequent protests—believed to be the largest in US history—brought into the mainstream a conversation on systemic racism and exposed the abusive nature of law enforcement, militarized and immunized from public sensitivity after ‘9/11’.

Globally, as Covid-19 struck, the US withdrew from the world, failing to lead or even participate in a transnational response. Indeed, in the midst of a pandemic, the administration led by Donald Trump pulled out of the World Health Organization, its ineptness an international embarrassment.

This does make the coming election existential. If Trump were to be re-elected president, all these trends would worsen—with dire implications for the transatlantic alliance. If not, it might be thought an incoming Democratic administration, facing such domestic turmoil, would relegate foreign policy to the second tier. But that wouldn’t be the case if Joe Biden were to prevail.

The crises of the last year have been humbling for the US and there is broad recognition that it will need allies and partners as never before. Biden would be a foreign-policy president. During the administration of Barack Obama he was a central and active foreign-policy player. His experience as chair of the prestigious Senate Foreign Relations Committee was, after all, a major factor in Obama selecting him as running mate. For the last two decades, Biden has been consumed with international relations and his inner circle of trusted advisers are experienced professionals.

A new administration would therefore hit the ground running. The question is: where would they run to? more>

If we want more companies like Patagonia, we need laws to enforce it

If we want to get past “woke capitalism,” this is what it’ll take to get companies to an equitable relationship with both workers and society.
By Kristin Toussaint – A day after the August NBA strike in response to yet another police shooting—this time, Jacob Blake, in Kenosha, Wisconsin—Uber’s head of diversity and inclusion, Bo Young Lee, tweeted out the company’s new billboard campaign. “If you tolerate racism, delete Uber,” the sign read. Lee added, “Now is the time for all people and organizations to stand up for what is right.”

Corporate America had already been examining its complicity in furthering systemic racism and inequality in the wake of a summer rife with police killings of Black people. Uber, for its part, was one of many companies standing up for what’s right—so long as it didn’t have to change too radically. Several weeks earlier, Uber had committed to anti-racism education for riders and drivers, established that it had no tolerance for discrimination, and pledged $1 million toward criminal justice reform. Even so, the company had committed more than $30 million to overturn AB5, the California law that requires its contract drivers be treated as full-time employees. In other words, Uber was arguing against the single biggest thing it could do to foster equity: give its drivers, which some estimates have put at two-thirds non-white, the stability of healthcare and benefits. (When asked for comment, Uber pointed to previous statements on how it’s fighting AB5 because its workers want flexibility.)

Uber’s moves embody what’s known as “woke capitalism,” where businesses respond to societal issues such as systemic racism with representational gestures, from sobering statements to strategic donations. For some people, this is enough. Or so executives hope.

But for others, society’s multiple, overlapping crises have created an opportunity to make companies more accountable—and, ideally, more innovative. “There’s basically no one arguing for shareholder primacy anymore,” says Julius Krein, founder of the public-policy journal American Affairs. “[Corporate leaders] don’t want to leave the current model because they don’t know what comes next, and they’re afraid.” A movement argues that they don’t have to be.

For a glimpse of the future, business leaders need only look to the companies that have best handled the tumult of 2020. They were the ones that were “woke” long before this year. Patagonia’s decision to pay employees while stores were shuttered during lockdowns was not the first time it put workers first: The company has offered on-site childcare for more than three decades. The call Ben & Jerry’s made to dismantle white supremacy following the police killing of George Floyd was not a bandwagon move: The ice cream brand had supported a congressional bill that would study the effects of slavery and discrimination and recommend reparations. Both companies have built reputations as the rare institutions that care about their employees, the communities in which they operate, and the environment. more>

A Message From the Future II: The Years of Repair

Can we imagine a better future? If we stop talking about what winning actually looks like, isn’t that the same as giving up?
By Naomi Klein – Another Covid-19 lesson we wanted to highlight had to do with why the abuses that long predated the pandemic suddenly received so much more attention during it. It’s a lesson, perhaps, about the relationship between speed and solidarity. Because for those of us privileged enough to self-isolate, the virus forced a radical and sudden slowdown, a paring and editing down of life to its essentials that was undertaken in a bid to stop the virus’s spread. But that slowness had other, unintended effects as well. It turns out that when the deafening roar of capitalism-as-usual quiets, even a little, our capacity to notice things that were hidden in plain view may grow and expand.

There is no one answer or simple explanation for why we find ourselves in the throes of the deepest and most sustained public reckoning in a half-century with the evil that is white supremacy. But we cannot discount the “solidarity in vulnerability that the pandemic has generated,” as Eddie Glaude Jr. put it, while discussing his brilliant and highly relevant biography of James Baldwin, “Begin Again.” In forcing all of us to confront the porousness of our own bodies in relationship to the vast web of other bodies that sustain us and the people we love — caregivers, farmers, supermarket clerks, street cleaners, and more — the coronavirus instantly exploded the cherished, market-manufactured myth of the individual as self-made island.

For all of these reasons and more, as we searched for a unifying principle that could animate a future worth fighting for, we settled on “The Years of Repair.” The call to repair a deep brokenness has roots in many radical and religious traditions. And it provides a framework expansive enough to connect the interlocking crises in our social, economic, political, informational, and ecological spheres.

Repair work speaks to the need to repair our broken infrastructures of care: the schools, hospitals, and elder care facilities serving the poor and working classes, infrastructures that failed the test of this virus again and again. It also calls on us to repair the vast damage done to the natural world, to clean up toxic sites, rehabilitate wild landscapes, invest in nonpolluting energy sources. It is also a call to begin to repair our stuff rather than endlessly replace it in an ever-accelerating cycle of planned obsolescence — what the film refers to as “the right to repair.” more>

Why Modi’s government is not up to the task

By Prabhat Patnaik – A striking aspect of the 24 percent decline in India’s GDP in the first quarter of 2020-21 compared to the previous year’s first quarter is the decline by 10.3 percent in public administration, defense, and other public services. This is a sector where the GDP is estimated not by the “output” of the sector but by the government expenditure incurred under these heads. The decline in the GDP originating in this sector therefore means a decline in public expenditure. This is surprising for two reasons: first, it shows that government expenditure, instead of being “counter-contractionary” has been “pro-contractionary”; second, during the lockdown caused by the pandemic, one would expect government spending on health care to go up, and thereby raise the overall government expenditure, instead of the fall we are actually observing.

When there is a lockdown, and output contracts, it is incumbent on the government to increase its expenditure. The rise in expenditure reduces the degree of contraction; and it puts purchasing power in the hands of the people so that many of them can maintain their consumption without getting into debt. Even if the government is timid enough not to increase its expenditure, at least it must maintain its expenditure to limit the contraction in GDP; but a fall in government expenditure during the period of a lockdown, which accentuates the overall contraction, is just the opposite of what the government should have done.

True, in such a period, there is a fall in government revenue; but to reduce government spending because of this, so that the fiscal deficit does not increase, is the height of folly. It worsens the contraction of the economy and greatly increases the sufferings of the people. This, however, is exactly what the Indian Prime Minister Narendra Modi’s government has done.

What is more, the Modi government is persisting with this folly. Some may find this accusation strange since on the very first day of parliament the government has come with a supplementary demand of around $32 billion, which, it may be thought, represents substantial additional expenditure. But this impression is wrong. These supplementary demands are meant to cover the expenditure that the government had already announced earlier to cope with the pandemic, which was over and above the budgetary provisions. This already announced expenditure, we know, was quite trivial, amounting altogether to no more than about 1 percent of GDP. True, these supplementary demands will revive India’s flagship program for rural employment scheme under the Mahatma Gandhi National Rural Employment Guarantee Act 2005. This program had come to a virtual standstill because of lack of funds, but such revival will only entail what has already been promised, not any further expansion. more>

Updates from McKinsey

How executives can help sustain value creation for the long term
Companies create more shareholder value when executives and directors concentrate on long-term results. A new report highlights behaviors that allow them to maintain a long-term orientation.
By Kevin Sneader, Sarah Keohane Williamson, Victoria Potter, Tim Koller, and Ariel Babcock – Ample evidence shows that when executives consistently make decisions and investments with long-term objectives in mind, their companies generate more shareholder value, create more jobs, and contribute more to economic growth than do peer companies that focus on the short term. Addressing the interests of employees, customers, and other stakeholders also brings about better long-term performance. The future, it seems, should belong to leaders who have a long-term orientation and accept the importance of treating various stakeholders fairly

Nevertheless, our research shows that behavior geared toward short-term benefits has risen in recent years. In a recent survey conducted by FCLTGlobal and McKinsey, executives say they continue to feel pressure from shareholders and directors to meet their near-term earnings targets at the expense of strategies designed for the long term. Managers say they believe their CEOs would redirect capital and other resources, such as talent, away from strategic initiatives just to meet short-term financial goals.

Executives may continue to focus on short-term results because adopting a long-term orientation can be challenging. While previous studies have established that long-term companies perform better than others in the long run, they haven’t identified the management behaviors that enable that success. A new report, Corporate long-term behaviors: How CEOs and boards drive sustained value creation, represents our attempt to fill that gap. In it, we show that long-term companies adhere to certain management behaviors, and we recommend actions that CEOs and boards can take to institute those behaviors at their companies. more>

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