We’d love to send you our monthly newsletter!
Long before COVID was a household word, I developed a series of hand gestures to explain my consulting business based on a single, simple concept: as businesses evolve over time, their goals pivot from one ideal to another. By twisting my hands around, I demonstrated how these evolving business goals create misalignments between the new goals and the people-systems (such as org structures) already in place. The key takeaway was that these misalignments reduce efficiency and engagement. I even made a video around the concept that became the star of my company’s website.
Fast forward to May 2020 when “pivot” became one of the most overused business terms of the year and decisions to refocus became far more common, and happened much faster, than at any time in the past decade. As businesses across the country have decided to pivot their target markets, their internal processes, or even the composition of their teams, the challenge of keeping all of these elements in alignment has become increasingly complex. But what does all of this mean in practical terms? What is a “pivot” and how can pivoting create the misalignments that slowly undermine an organization’s ability to execute against their business goals? Having realized that I will be unable to directly consult with all the leaders who need to understand the answers to these questions, I have decided that the least I can do is write an article to get the gears turning in the right direction.
One of the most talked-about pivots of the COVID era is the decision to shift from a Business to Business (B2B) model to a Business to Consumer (B2C) one. This has been particularly common in the food supply industry due to restaurant closures and the increased fervor of home cooking and baking efforts. Regardless of the industry, however, an easy way to understand the misalignments that can result from the B2B -> B2C market shift is to consider the customer service department. Many B2B companies find that the vast majority of their revenue comes from a small percent of their customer base. Despite their smaller absolute number, the outsized impact to revenue means that most decisions, particularly around customer service, are therefore focused on this subset of customers. The result is that customer service departments are often structured into teams dedicated to one or two specific customers, tasked with providing high touch service, and incentivized with plans based around detailed feedback and Voice of the Customer surveys. These deep, long-term relationships between customers and support teams, as well as the high value customers’ understanding of their importance to the company, motivate these customers to provide sufficiently detailed feedback to support such customized plans.
In a B2C model, however, the goal is to acquire as many customers as possible since B2C revenue is generally far more evenly distributed across the customer base. As a result, customer service efforts must also be spread more evenly across the individual consumers in a generally lower-touch, and far more commoditized, approach. If a company that is shifting from B2B to B2C tries to keep their customer service teams structured into isolated units, carefully trained to keep very specific customers happy, the organization will quickly become overwhelmed and frustrated. Instead, the teams must learn to work together and share knowledge much faster than most B2B units would require. Of course, updating the customer service org structure is only one piece of the puzzle as any incentive plans must also be adapted. Long surveys that ask for extensive detail and insights may still be useful but unlike in the B2B world, very few consumers will provide such detailed feedback. If surveys are still used in the B2C world, they must be shorter and very simplistic to reflect the commoditized support and far more generic metrics must be implemented. Failing to shift a customer service team’s incentive plans when their customer base changes can result in teams continuing to focus on their dwindling business customers while ignoring their growing consumer customer base. Representatives will focus on the work that they are paid to complete.
COVID has also wrought havoc on supply chains and even businesses retaining their B2B models may face significant changes to their contractual agreements. Some of these changes will require significant adjustments to other elements of the business in order to be successful. For example, some suppliers are allowing the retailers they supply to pay after the goods have been sold rather than upon receipt to the storefront. This contingency-based model moves much of the financial risk from the retailers to the suppliers but may be necessary for the overall health of the ecosystem. The resulting variations to the supplier’s cash flow would likely require changes to operations and other elements of the business to compensate. These adaptations may be nothing more than a note in the accounting books ( I think they are more — maybe say — may only take a short time to adjust to the new process?) but I suspect that in most cases, the supplier will need to rethink their entire data collection and analytics infrastructure, to say nothing of their approach to working capital.
When retailers pay upon receipt of goods, the supplier need look no further than the latest order request from the retailer but when payment becomes contingent upon sale to the consumer, the supplier needs increased transparency into the turnover rate of the goods on retail shelves. What may start as a “simple” variation to allow delayed payments can quickly lead to an unrecoverable debt for the supplier if the shipments continue on the old schedule but sales to the consumers slow. The supplier likely cannot send goods already “warehoused” with one retailer to another, leaving the supplier with neither their goods nor their payments. Furthermore, the traditional “NET 30” (or similar) payment terms that make sense for payments centered around large deliveries may need to be reimagined entirely once payments become predicated upon unit by unit sales. Detailed and transparent data sharing and collaboration between supplier and retailer can avoid catastrophe in such a situation but such changes require active efforts and clear agreements. Changing nothing more than the payment terms of a contract can easily spell disaster for the supplier who simply wanted to support their downstream partners.
Having discussed product and process pivots, it is only reasonable to round out this article by considering what a “pivot” might mean in the context of people. Although some companies are finding growth and success in this pandemic, many have needed to reduce their workforces through either layoffs or furloughs. Reducing headcount may feel less like a “pivot” than the changes previously discussed but the decision to lay off or furlough employees triggers the same cascade of necessary, interconnected changes as the prior examples. If a leadership team reduces their staff and then does nothing more than pat themselves on the back for reducing expenses, they may see minimal consequences over the short term but the situation will quickly become untenable. Few companies reduce their staff at a rate that is commensurate with the reduction in work to be done, if there is any reduction at all. Instead, workforces tend to shrink far faster than the task list. Short term panic and fear, or passion for the greater good of the organization, might jolt teams into compensating for their missing colleagues immediately after the layoff occurs but eventually the remaining employees can become burned out and exhausted.
For companies to be successful in the wake of layoffs or furloughs, processes and procedures must be adapted for the now-smaller team. Without any such changes, fewer employees, regardless of intention and dedication, will eventually produce less total output than the fully staffed workforce. Sadly, overburdening and burnout can even result in the remaining staff contributing less on a per capita basis than they would have achieved prior to the layoffs. As a leader, it is critical to take ownership of changes to the priority and task list, as well as revisions to processes and procedures, when making adjustments to your workforce. Cutting tasks can feel almost as difficult as reducing headcount but long term success depends on making these tough decisions. Similarly, larger teams require more administrative and collaborative overhead. If none of these administrative systems are reduced when a team becomes smaller, the individual overhead burden will increase and efficiency will go down. A successful layoff requires at least some changes to be made to both the team’s overall delivery capacity and to their administrative burden.
Whether pivoting a business model, a business process, or the composition of a team, believing that a single change will place the company on a path to success is overly simplistic. In reality, all elements of a business are deeply intertwined and when a change is made to one facet, the others must adapt for the business to charge forward successfully. This might mean rethinking org structures and incentive plans when addressing a new market or it might mean changing business practices to match revised billing agreements. Perhaps the need is to adjust capacity expectations and refine administrative overhead in the wake of staffing reductions. Realistically, these examples are still overly simplified. There are nearly infinite options for how a business might take a holistic approach to succeeding in their chosen adaptations to the economic and social challenges of 2020. What is uniformly consistent, however, is that failure to make such adjustments will wear away at employee morale and reduce the organization’s ability to execute effectively. Maintaining engagement is difficult enough when work wars with a pandemic for attention. Allowing one facet of a business to pivot without bringing the rest of the systems along will create conflicting messages and directives that will further alienate employees. For a business to succeed, particularly in this Time of COVID, “pivot” must always be treated as a plural.