The response from the world to COVID-19 has led to the greatest organizational transition of our times. Social distancing is the new normal and we are in an era of unprecedented isolation, disconnection, and financial challenge. We are catalyzing the digitalization of the business-customer relationship and employer-employee relationship simultaneously. We are working at an even faster pace than ever before.
The current global pandemic has forced us to change many things, including fast-track innovations such as digitalization and automation. It wouldn’t be wrong to claim that the world we knew in 2020 no longer exists. As businesses slowly reopen and workers return to their duties, they find that they are entering into a new world—one that they aren’t quite ready.
Businesses are also at a transition point: when the situation stabilizes, those that seize the post-COVID opportunities will be in a strong position to maintain their current workforce and attract new talent to take the company forward. Those who refuse to adapt would not only be left behind by their competitors, but they also will be forced to cut salaries, lay off employees, or permanently close some office/branches, all of which can harm the company’s bottom line and future.
In 2020, almost 80% of board members and CEOs at 500 different companies felt unprepared for a major crisis like COVID-19.
As bad as the present situation may seem, how business owners and the executives leading companies respond to the crisis will determine their organizations’ future once the economy recovers and order is restored. Perhaps, one of the most important decisions that business owners and the top hierarchy of companies need to make now for a post-COVID-19 world is an amended corporate structure to move forward. A Corporate structure may seem trivial, but it has the power to make or break a business.
The Need for Reviewing Your Corporate Structure
With billions of people affected by lockdowns and work-from-home measures globally, there is an urgent need for businesses to rethink how they will manage their workforce in a post-COVID-19 world.
Today, many organizations have processes intended to help them adapt to crises of this nature. Some have precise contingency arrangements within those processes.
Some companies have opted to use ad hoc initiatives intended to complement corporate structures that are already in place. Social distancing measures are likely to be in place for the foreseeable future. New social distancing measures may be reintroduced from time to time once the worst of the pandemic has passed. Now is the time to evaluate the sustainability of an organization’s existing corporate structures and if they function as well as they should.
Perhaps, the best way to do this is by assessing what caused the previous ‘big shift’ in the organizational structure. Digitalization and the unrestricted movement of ideas and people are two developments that played a significant role in shaping today’s organizational frameworks.
Digitalization has had a significant impact on how we work. On the other hand, the increase in air travel and the widespread availability of the internet has ensured that knowledge and cultural references are accessible globally.
Fundamental digitalization elements fuelled the free flow of information and expertise. Thanks to social platforms like LinkedIn, individuals now have the same opportunity as corporations to share their ideas.
Universal access to the same knowledge increased the speed of transition. While culture influenced some organizational practices in different parts of the world, people working for the same company in other regions now had a shared understanding and working way.
Before the previous significant shift in corporate structure, information was managed by and accessible to an ‘elite expert.’ However, this information became available to all after the significant change. How organizations handled their resources also changed.
Previously, companies had traditional, hierarchical corporate structures with clearly defined job responsibilities and outcomes. Forecasting was consistent and straightforward; budgets appointed and roles filled based on the precise work to be completed within a specified timeframe. Predictable processes changed to flexible, project-based work that is increasingly common today.
As markets and opportunities change, consumers’/clients’ behavior has become more volatile, and projections have become less reliable. And, the rise of freelance and gig-economy employment has forced a change in the old status quo.
How COVID-19 Is Changing the Old Status Quo
COVID-19 is cementing the changes that occurred during the previous significant shift in the corporate structure. The old status quo mandated that only those at the top of an organization’s hierarchy develop the plan to ascertain definite goals. Then supervisors would decide how this would work, and eventually, operations would enforce the plan.
This disparity between top-level planning and implementation at the floor level has created significant hurdles for many organizations as decision-makers disconnect from consumers, clients, and other end-users who usually only communicate with operations.
The strategy needing to be updated and applied rapidly during an emergency and executives having to grasp the everyday consumer experience first would be at a significant disadvantage. By emphasizing this and other vulnerabilities of conventional corporate structures, COVID-19 is speeding up the needed reform.
Organizations have no option but to ‘modernize.’ Many are transitioning to remote working environments to comply with social distancing protocols. On the other hand, those with more flexible structures with essential workers have been able to adjust quickly to this new reality to seize growth opportunities whenever they arise.
According to Mckinsey & Company, executives say that their organizations are making far-reaching changes with one overarching goal: increasing the speed at which they adapt corporate strategy, create and implement operational-level decisions, and allocate resources. However, the executives surveyed by Mckinsey also say that achieving this overarching goal is not as easy as it sounds. Due to organizational silos, ambiguous strategies, and sluggish decision-making, the challenge often meddles with efforts to enhance the work rate.
Executives can overcome these challenges in three ways:
- developing faster decision-making processes,
- enhancing collaboration and communication within the organization, and;
- increasing the use of technology.
A KPMG study that looks into operations restructuring for a post-COVID-19 world has a somewhat similar take on how companies should adapt their corporate structure for this new reality. While the study focuses mainly on restructuring the supply chain operating model, it provides some valuable lessons that organizations can use to perform corporate restructuring in a posy COVID-19 world.
Some of these lessons include accelerating self-sufficiency to lower dependency on third parties and other stakeholders that are not an actual part of the company, leveraging decentralization and increasing the use of AI and Big Data.
The current scenario provides companies with the perfect opportunity to build new organizational structures that are less rigid and more productive than the previous ones.
COVID-19 has forever changed businesses. This change will soon be evident in the operations of the company and how the organization is structured. When it comes to organizational structure, COVID-19 has not only relegated the old status quo to the backseat, but it is forcing the reshaping of jobs, inspiring greater emphasis on employee social safety, and causing a shift from the traditional pyramid hierarchy. The following is a brief discussion of how this is happening.
Reshaping of Jobs
Today, we are witnessing many companies reshape their work culture and jobs. COVID-19 will cause a significant change in how jobs need to perform. While some roles will be re-defined, others will transform. Nearly every organization has transitioned to or is heading towards digitalization and some form of remote work. This is helping companies to communicate and provide feedback to teams in real-time, empower employees to make operational-level decisions, and remotely deliver different services at various touchpoints.
Post COVID-19, many companies are likely to concentrate more on workers’ safety and mental health. As such, HR teams will broaden their role in employees’ lives and ensure improved interactions between individuals.
A Shift from Traditional Pyramid Hierarchy
To strengthen connectivity and teamwork, organizations have been looking to “flatten” their corporate structure since the coronavirus outbreak. The flattened form indicates that the conventional, rigid pyramid hierarchy is no longer viable for modern enterprises. Thus, we will see a complete shift to flatter, more agile corporate structures soon with the CEO and C-suite still at the top.
Several corporate structures now offer alternatives to the conventional model; these alternatives might be better suited to the current processes and workforce. Three of these newer structures include flat, flatter, and holacratic.
Flat corporate structures eliminate seniority, the need for job titles, and a hierarchy. Flattening leads to open communication channels throughout the organization that enables workers to see all current projects and join whichever one they want.
Flatter structures are of the most widely used corporate systems today. They make it possible for employees to access anything from anywhere and at any time. Such organizations have flexible work arrangements, and employees typically want rather than need to work at the company.
Holacratic structures are corporate structures where teams are both quickly created to meet the organization’s goals and dissolve at the same pace. This corporate structure aims to distribute decision-making while allowing individual employees/team members to perform their core competency.
Which of these three corporate structures is best suited for the organization in a post-COVID-19 world? The best structure will depend on the company’s values, goals, and culture, as well as the individual goals and work ethic of its employees.
In a post-COVID-19 world, traditional, rigid corporate structures will become defunct. Some organizations will use a geographically dispersed workforce to ensure business continuity, while others will make their structures more agile.
In this new normal, there are no one-size-fits-all solutions to organizational structures. However, the new strategy must support every box in the old corporate pyramid. Assess things with long-term, big picture thinking, and everything will start to fall into place.