To successfully lead a company through an era of constant change, a CEO should consider simplifying the company’s portfolio and prepare for shareholder activism, a Harvard Business Review blog says.
Inflation, geopolitics, supply chain issues, labour costs, divisiveness, unsettled equity markets and stakeholder expectations seem to “change the game” daily, Tim Ryan, U.S. chairman and senior partner of PwC and founder of the Trust Leadership Institute, writes in CEOs, Here’s How to Lead in an Era of Constant Change. To navigate through these changes, CEOs need to simplify their portfolio, prepare for shareholder activism, prioritize what matters most, and invest in building trust with stakeholders.
Change in the Canadian P&C insurance industry — whether through integration and breaking down silos; changing operating models; automating for efficiencies, or moving to the cloud to drive new revenue streams, for example — is difficult, even with investment. To be successful, a CEO not only has to change their organization, they need to be highly skilled in leading people through change. This requires four actions:
During disruptive times, it’s often good to take a step back and ask whether the businesses in the portfolio make sense or whether some businesses are better owned by someone else. A more streamlined portfolio underpins an organization’s ability to stay agile and increases the likelihood of successful transformation, Ryan writes in the blog published last week.
Prepare for shareholder activism
Another reason for objective portfolio analysis is the rise of activist investors. In the Canadian P&C sector, the industry only needs to look as far as the reluctance of insurers to underwrite or embrace risks such as oil and gas and coal.
“Some CEOs and boards are objectively ‘looking themselves in the mirror’ to challenge established strategies and execution results to ensure that they are not prone to an activist’s target,” Ryan writes. “Companies benefit from aggressive role playing and analyzing what activist investors would be looking for. Sharp and direct questions such as ‘Are our results as strong as our peers?’ or ‘Are our transformation efforts paying off?’ can help leaders ward off activists.”
CEOs are also talking with their boards more about alternative strategies or perspectives on results to avoid surprises. “The discipline of the discussion, as well as the objectivity of the process and judgments, are an area of improvement for many companies — and absolutely a skill to refine before an activist shows up.”
Prioritize, prioritize, prioritize
Engaging in scenario planning around key issues (such as COVID-19, supply chain and price elasticity) can help leaders position their organization to pivot quickly in a new direction when needed.
“Too many priorities are the enemy of focus and run the risk of doing a lot of things poorly or ‘just okay,’” Ryan writes. “Even if that means pulling back on initiatives or pivoting the mindset of the company to focus on the right things, leaders have to prioritize what matters most to their stakeholders and do it well.”
Invest in trust
Today’s leaders may overestimate how much their businesses are trusted by employees and consumers. A recent PwC study found a trust perception gap with businesses among both their consumers (57% gap) and, to a lesser degree, employees (15% gap).
For example, some stakeholders are looking to businesses’ answers to questions like, “Are we doing the right thing on diversity, equity and inclusion” or, “Are we doing everything we said we would do surrounding the environment?”
Companies also need to look at the appropriateness of their algorithms, as well as privacy and data policies, and other topics that will drive both value and improve trust.
Leaders need to ask themselves if the executive team is truly aligned around the change effort and outcomes, and if they have confirmed that their people and line management understand how their role will differ.
“Again, change is difficult — managing through it might even be more challenging,” Ryan writes. “Yet, CEOs have no choice but to be even more aggressive with change efforts in their companies to simply stay competitive. This is the time to lean into change to drive more differentiation and thrive.”
Feature image by iStock.com/shotbydave