I'll be quick today, as I'm just back from a long weekend of catching up with my large family (eight of us siblings and my 92-year-old mother, plus spouses and kids and now even a few grandkids) at a niece's wedding three time zones away. But I did want to steer your attention to a McKinsey article that's worth some study on how leaders can steer their organizations through today's craziness (high inflation, war in Ukraine, political uncertainty and on and on) while preparing for what may well be a global recession in the next year. Although I often find leadership articles too airy-fairy, I think the article's suggestions are spot-on for organizations ranging from a small agency up to a massive corporation.
The short version is:
--Don't follow the old rules (such as setting up a crisis task force, which takes too long).
--Prepare for the recession but at the same time prepare to exit it.
--Use scenarios rather than forecasting (which is too broad-brush to identify big problems and opportunities).
--Address burning short-term issues such as financial flows, as well as the longer-term issues.
--Play offense, as well as defense, by looking for growth opportunities as all your competitors struggle, too.
The (slightly) longer version follows.
The McKinsey article goes into more detail on the five suggestions:
--"Don’t follow the old rules. Setting up a crisis task force, for example, the go-to move in past years, is a waste of time; it will be outmoded before it is up and running. Leaders need to find a more flexible and consequently durable stance, engaging the whole organization by embedding a crisis-resistant DNA over time.
--:Prepare for the recession, but at the same time, prepare to exit it. Recessions may be shallow and brief; companies can accelerate through the downturn. This is essential: resilient organizations open an early lead, however small, in comparison with peers. This lead can be significantly widened during the following recovery and growth period. The early advantage can help companies succeed in the long run.
--"Use scenarios rather than forecasting. Forecasting has failed to adequately capture many key events of recent decades, including slowing globalization, the COVID-19 pandemic, the supply chain disruption, and the return of inflation. Learn to plan with scenarios and triggers, regularly revisiting and adjusting them.
--"Develop a resilience agenda that addresses burning short-term issues (for example, financial flows, supply chain disruptions) as well as longer-term challenges (for example, geopolitical shifts or the speed of organizational adaptations). Ensure that resilience is measured, so progress can be tracked and return on resilience investments can be maximized.
--"Focus on resilient growth by reviewing your competitive position and finding strategic opportunities in the current environment (such as acquisitions or new business-building ideas)."
While I'll count on you to read the article if you're interested in learning more about what McKinsey experience and research have gleaned from prior times of chaos, I'll point out a few more things.
The article talks about how companies can benefit from restructuring their balance sheets heading into a recession, and that strikes me as something that could help insurance companies position themselves both for a recession and for the opportunities that would emerge as the world then rebounds from it.
Many other examples related to manufacturing companies and issues such as their supply chains, which are not only threatened by a possible recession but by the war in Ukraine and by the political emphasis in a growing number of nations to reduce reliance on foreign suppliers. While those considerations don't directly affect an industry like insurance, which moves bits around, not physical products, insurers still must be prepared for all the upheaval that manufacturers and other clients will go through in our fraught environment.
Finally, McKinsey offers summary observations about what separates winners from losers in troubled times, including that winners:
--"make faster and harder moves in productivity, preserving growth capacity...
--"act swiftly on divestments in the downturn phase of disruption and on acquisitions at the inflection point of recovery."
I hope those observations help.
More next week, when my life will be back to normal....
Cheers,
Paul