Employers must strive to balance next quarter

By Manish SabharwalA useful question for post-Covid-19 employer choices comes from Jonas Salk, the inventor of the polio vaccine: Are we being good ancestors? Balancing the next quarter and the next quarter-century is hard, but will decide which employers come out of Covid-19 stronger or weaker. Presentism – the belief that today’s circumstances are unique, permanent and unprecedented – is unhelpful in strategy. Covid-19’s short-term pain is exactly when employers should take the longue duree, heed historian Fernand Braudel’s warning against “fireflies and froth” and ensure they allocate real capital and strong talent to their biggest opportunities.Covid-19 accelerates three favourable windows for India – structural, global and policy. The structural window has three components: World of Work (the life expectancy of a Fortune 500 company has come down from 64 years to 14 over the past 50 years, employment has shifted from a lifetime contract to a taxicab relationship, and capitalism is without capital where intangible assets matter more than physical assets); World of Organisations (employers staff themselves in concentric circles, their organisation structures that had become cylinders instead of pyramids are now becoming Eiffel towers, more workforce diversity, and more variabilisation of fixed costs), and World of Education (knowing is useless in a world where Google knows everything, employed learners in higher education will soon exceed full-time learners and make the sequential 25 years of learning/earning/retirement redundant, and soft skills matter more than hard skills).The global window has five components – capital markets (a global capital glut that has made fixed income no income, with 25% of the world’s bonds trading at negative or zero interest rates means investors will overvalue growth. Our past sins mean India is the only big country with decades of growth left); US policy short-termism (the Federal Reserve’s exploding balance sheet, shifting the goalpost on monetary policy, and a $3 trillion fiscal deficit); China (its credit to GDP is an unsustainable 300%, many of its big companies are animals bred in captivity that will not survive in the jungle, and domestic consumption is not sufficient to substitute for global trade); digitisation supercycle (the Covid-19 mandatory global digital literacy programme is exploding software demand), and economic outlook (low oil prices are a huge macroeconomic gift).The most important window is our policy window: change happens when problems, solutions and timing come together. A crisis like Covid-19 has weakened resistance to overdue reforms in financialisation, formalisation, urbanisation, industrialisation and skilling.Covid-19 reminds employers that aspects of their working with roots in the industrial revolution need revisiting. Vertical organisations need flattening because information and insights travel fast and without distortion in less hierarchical organisations.People supply chains need rejigging to reflect concentric circles of permanent employees, fixed-term contracts, apprentices, third-party employees, consultants and freelancers. Fixed costs need variabilisation because business outcomes are no longer guaranteed, forecasting has become difficult and resilience matters as much as performance.Organisational structures must reflect goals and strategy rather than drawing circles around employees. Middle management pruning must make pyramids an Eiffel tower. Companies must monetise asymmetrically valued benefits and move to cost-to-company compensation.The acceptance and increasing effectiveness of online learning means that the biggest costs for corporate learning – travel and stay – are no longer alibis for the lack of a vibrant learning ecosystem. Performance management systems need a higher frequency and more differentiated outcomes. Expect higher flexibility in working from home, some blunting of business travel and a spike in women’s labour force participation with the higher acceptance of online meetings and paperless workflows.But the notion that offices are dead may be premature: 90% of India’s labour force can’t work from home because they work with their hands and legs, the cognitive elite is currently making more withdrawals than deposits in social capital and this is particularly difficult for young people, and let’s not underestimate the benefits of coming together (New York’s GDP exceeds that of Russia's).Covid-19 is a passing shower, not climate change. But it does make strong hands stronger. Employers have a chance to be good ancestors by using this opportunity to renew themselves and prepare for the next quarter-century.(Manish Sabharwal is with TeamLease Services)

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