Discussions of the effects of Covid-19 on work, organization and leadership often come down to “home office” and “digitization”. But do these buzzwords capture the multifaceted reality of organizations and how they function?

I asked seven Austrian top executives about their experiences: Otmar Frauenholz (GF Illy Caffè Austria), Stefan Graf (GF Leyrer+Graf), Julian Hadschieff (CEO PremiQaMed), Georg Kopetz (CEO TTTech), Peter Lenz (CEO T-Systems Austria and Switzerland), Karin Ramser (Director Wr. Wohnen) and Heinz Scharl (former board member IFN-Holding/Internorm). From these conversations, I drew 10  conclusions about the effects and issues that will need to be addressed after Covid:

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This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.
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1. The first lockdown created bonding and engagement; since then we have been struggling with exhaustion

For many, the initial effect of the crisis was to create stronger bonds between employees: “There couldn’t have been a better time for team building,” sums up Scharl. But while the initial impact was quite positive, subsequent waves have seen increasing employee fatigue which may be invisible to managers under remote working.

Post-crisis, organizations should make a conscious effort to revitalize and “recharge” themselves, encouraging employees to rediscover the organization as a source of meaning, energy, and community. Take your time to celebrate the success of having mastered the crisis!

2. Digital tools in lockdown: higher productivity in transactional processes…

Digitization resulted in significant productivity gains for almost everyone. Travel times were eliminated, meetings were better prepared and more punctual (Ramser). For Hadschieff, the crisis provoked important innovations in internal processes and procedures. This resonated with Graf, who urges leaders to view the crisis as a catalyst and opportunity to craft a new vision of the organization. Scharl sees a danger of default to old ways with a corresponding fading of the will to challenge redundant activities.

The upside potential of the crisis lies not only in digitization but more espically in questioning and freeing up organizations from obsolete routines and assumptions (“why do we do it like this anyway?”).

3. … but remote working hindered transformative processes

For Ramser, thinking creatively and strategically about the organization’s future direction is almost impossible when done remotely. Frauenholz and Graf likewise regret the absence of  the “physical counterpart”  and the “energetic connection” with others. One of the major challenges of video conferencing is the dwindling or divided attention of participants, endangering the organization’s “thinking power” and causing potential “reflection deficits” over the long run.

Do not underestimate the need for more reflection time after the crisis to make up for accumulated past deficits.

4. Less lateral communication, more silo thinking

Not all information in an organization follows official communication channels. Informal chats at the coffee machine, canteen or bar are vital for exchanging information and generating ideas. These channels have dwindled significantly for all the executives surveyed. As a result, silos have multiplied and deepened during lockdown, Lenz warns.

The importance of physical presence and informal gossip for exchange and generation of ideas is often underestimated and should be taken into account in determining future levels of remote work.

5. Hierarchy becomes more marked, bringing the danger of bubbles

The immediacy of videoconferencing is deceptive: employees are directly visible on screen, but not their thoughts and feelings. The danger of managers and leaders becoming trapped in a bubble needs to be taken seriously, say Lenz and Kopetz.

Digital bubbles can easily lead managers to misjudge the real state of their organizations. Leaders need to develop more sensitive probes for gauging “the temperature on the ground”.

6. Loneliness is on the rise and the organization has suffered as a community

For many employees, the office is a source of purpose, belonging, motivation, and ultimately bonding – sometimes also a refuge from loneliness or difficulties in private life. In lockdown, this resource is out of bounds. For Graf, virtual socializing tools cannot replace this community-building function; face-to-face encounters will still be needed in organizations.

Organizations must (re)revive their community-building function after the crisis.

7. Leadership: needs to be more active, more emotionally intelligent

Digital tools are little help in leadership tasks, warns Kopetz, reducing opportunities for personal encounters, communication, and debate. Discussing conflicts, problems, and personal concerns on screen is difficult if not impossible, adds Frauenholz. In addition, virtualization can highlight leadership weaknesses (Lenz), something that as Hadschieff notes cannot easily be compensated for in a crisis. Kopetz’s conclusion: in the age of digitization and remote working, leadership must be exercised more actively.

Paradoxically, digitization demands not only technological abilities but, above all, more social and leadership skills.

8. Lockdown has made organizations more inturned

During lockdown, the relational richness of an organization suffers, notes Kopetz. The result: people and organizations are more likely to become preoccupied with themselves. Physical meetings with people and organizations from outside, as at on-site trade or job fairs, will thus continue to be important (Scharl).

Under remote working external contacts and inputs must be cultivated to ensure they do not wither away.

9. Organizational boundaries have blurred – and employees’ identification with the organization too?

Covid-19 has shifted or blurred boundaries due to remote working. On one hand it’s harder to separate professional and private spheres, as unresolved legal issues around the home office show. On the other, home working risks causing employees to lose touch and hence engagement with the organization. Home workers may wonder: why do we even need the organization? Conversely, joining an organization is tricky for new employees where colleagues work remotely.

Organizations risk degenerating into mere networks of freelancers if they fail to pay attention to the design of their external boundaries and the nature of specific added value as organizations.

10. The purpose of the office needs to be redefined.

Many companies are currently planning to reduce office space to cut costs. But isn’t this one-sided? What can and should we use offices for in the future to develop the organization? These are the big questions that arise for respondents like Kopetz. For him, we need to find new purposes for the office.

Offices need to be developed further: from places for routine work to sites for social encounters, community building, reflection, debate, and wrestling over difficult decisions.

About the Author:
Wolfgang Lassl is a management advisor, author, and associate partner at Pure Management Group, Vienna

This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.
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“Those who only gradually improve their performance in exponential times fall back exponentially.” Curt Carlson, former CEO Stanford Research Institute

Following the business news in the weeks after this year’s Drucker Forum, it became clear that management, as taught at business schools, is headed for irrelevance. Today it no longer solves problems. It creates them. So-called “best practices” of management have caused a multitude of problems that only became apparent after a delay of decades, but are now making themselves felt with force. Every newly graduated MBA contributed in good faith to the spread of these practices. Now that they are being applied in all companies worldwide, their limitations and weaknesses are becoming increasingly obvious.

They fall short in dynamic market environments. They stifle innovation with bureaucracy and rigid processes. They overextend the decision-making capabilities of companies in increasingly complex and uncertain environments. They are way too slow in learning from and adapting to new challenges. They pitch scarce and valuable human assets into senseless battles of domination. They frustrate workers, discourage entrepreneurial creativity and risk-taking, and impede cooperation across domains or companies.

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This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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Relevance lost

In short, our “best practices” have lost much of their business value. But why? First, let’s take a look at why they worked so well for so long.

At the dawn of the 20th century F. W. Taylor established the discipline of scientific management. His approaches created immediate benefits for companies by increasing productivity and quality, and reducing personnel costs. It was, in fact, one of the basic innovations of the second industrial revolution. Business schools emerging at this time adopted Taylor’s theories, weaving them into the DNA of management education.

Strict functional separation of the organization, combined with central control, and a shift of knowledge from skilled workers to management, boosted industrial productivity. This was such an advance that specialization, planning and control came to be regarded as general principles for efficient organization of all kinds of work. Taylorian practices were extended to strategic planning, accounting, people management and product innovation. And it all worked quite well, at a time of predictable market growth, with sufficient unconquered space still available for competitors.

Enter globalization and the internet

Yet this situation would not last forever. Enter the disruptive forces of globalization and the internet. Globally distributed value chains and just-in-time delivery increased the complexity of product markets. The internet democratized communication and opened up markets on a global scale by lowering entry barriers to many industries. Competition became ever tougher. Competitors multiplied, as did customer choice, prices fell and margins disappeared in the blink of an eye. Flexibility, speed and adaptability suddenly were in high demand. “Best practices” aimed at achieving maximum efficiency largely lost their power and thus their usefulness. But they had become firmly embedded as the gold standard of corporate management in the mind of managers who cling on to what they once learned, despite the fact that it doesn’t work any more.

Peter Drucker once wrote that the greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.

Today’s market environments are complex and hyper-dynamic. The conditions for success have changed fundamentally. The old “best practices” are no longer even good. Companies need to find better ones if they are to thrive.

New practices for new times

We can do this by overcoming the self-imposed limitations of current management. Why plan in fixed yearly periods, when customers easily turn away from your products at any time? Why wait for the next budget cycle before approving funds for a new market opportunity? Why report and control tasks and resources along predetermined hierarchies, when relevant business activities require fast ad-hoc communication and coordination across networks of knowledge workers?

Today’s market environments call for management practices that can cope with complexity and change, with increasing customization of products and digital processes. In short: With customer-directed innovation at speed. New management principles are emerging from innovative leaders such as Amazon, Haier, Handelsbanken, Nucor, and Morning Star, which have broken up silos and decision-making bottlenecks to focus on customer needs and establishing entrepreneurial skills and incentives throughout the organization. Haier, Handelsbanken and Nucor impressively showcased these new principles at the GPDF20. As these and many more companies around the world demonstrate, such practices are not a privilege of start-ups or digital disruptors. They successfully work for companies of all sizes and industries. But beware: this time it won’t be done with the application of a few new methods at the operational level. The change is more fundamental. It will affect all levels of management.

Frederick Taylor brought one of the biggest management innovations of all time. But his practices have now reached their limits of their usefulness. Today, we need something else. Something better. Something that helps navigating the uncertainties of the digital age. Something that gives purpose again to management.

Change is here. Time to adapt.

About the Authors:
Janka Krings-Klebe and Jörg Schreiner are founders and managing partners of co-shift GmbH, helping companies to transform into business ecosystems, and authors of “Future Legends – Business in Hyper-Dynamic Markets“ (Tredition 2017)

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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