Don’t squander that crisis-induced transformation

Phil Fasano has served as CIO at AIG, Kaiser Permanente, Capital One, JP Morgan Chase, American Financial Group, and Deutsche Bank. He is a 2017 CIO Hall of Fame inductee. He serves on several boards and is CEO of an advisory firm that consults to high-tech and other start-up companies. It’s not a stretch to say he has some insight into the future of work.

In a recent interview, we discussed how CEOs need to capitalize on remote work and embed transformational DNA into their companies, among other things business leaders need to keep in mind as they consider the future of work. What follows is an edited transcript of that conversation.

Martha Heller: As CEOs of mature companies plan for a post-COVID environment, how should they be thinking about technology investments?

Phil Fasano: For nearly a decade now, most businesses have been unwilling to carve out enough technology budget to drive real transformation. The attitude has been, “Our technology is good enough. Let’s wait another year.” And then all of the sudden, here we are.

For these CEOs and their boards, COVID-19 has highlighted the fact that they are not prepared to operate a company in the modern era, where technology lets people do their jobs effectively from anywhere. CEOs are going to find, post-crisis, that they need to take money that is tied up in leases and physical assets and deploy it into technology.

This pandemic is creating a real demand for CEOs to fund a new five-year investment plan, because this new world isn’t going away. People are working from home effectively. You don’t need to tire out your best people by having them spend all day on a plane for one customer meeting. They can spend more time with their families and still be productive in their jobs. The genie is out of the bottle.

How has shareholder activism affected companies’ ability to respond to the crisis?

Shareholder activism turns most courageous CEOs into children. It divides businesses into pieces that are winners or losers and demands that CEOs sell the losers. In a conglomerate, you might have a division in healthcare, which is booming because of the pandemic, and another in media, which is shut down. Activist shareholders box CEOs in for the next quarterly result and the stock price improvement that comes with it. As a consequence, corporate thinking is short term, and that short-termism has hurt longer-term infrastructure investment in these companies. So, there they are, flat-footed.

In response to COVID-19, we’re all working differently. Will we all go back to offices or are these changes permanent?

I don’t think we’ll ever go back to our old way of working. Employees are finding that they can be effective working remotely, and will likely not stay with companies that demand that they return to work. If COVID is with us for a while, and we need social distancing, we can’t quadruple our office space to allow everyone to come back at the same time.

Every CEO is asking the finance team to analyze facilities cost and realizing that they can lower them if they support new ways of working. Either they’re going to use bankruptcy to get out of their leases, or they’re going to build transition plans to move into offices with far fewer people in them than in the past. They will use those cost savings to perform more profitably and to invest in new products or customer engagement technologies that will allow them to thrive in this new world.

There will always be that one CEO who says, “I need to see my people to know they’re working,” but that attitude is based on fear and it will damage the future of their business. These legacy executives will not be able to compete with CEOs who accept our new reality.

CEOs who accept our new reality will find new ways to create a corporate culture of passion and commitment in a remote workforce. They will learn how to motivate and engage their teams remotely; they will require different skill sets in their leaders.

Humans love to be close to each other, and we have short memories. Who’s to say the desire to be together won’t overcome fear from the virus?

We can bring people together in large conference rooms or send teams off-site for in person meetings, but video will be the primary way we interact going forward, and this has real benefits. I know a CEO who has a video channel open all day, and he gives people time slots for when to come onto that channel. He also posts office hours for anyone who wants to see him, and people just show up on his video channel. All of the sudden, they have one-on-one access to their CEO, which they never had before.

How will these changes impact how companies recruit, retain, and on-board talent?

We are all realizing that we can get to know people over video. I recently hired a marketing director I have never met in person, and she’s had a strong impact on my company in a very short period of time. We used to believe that if our workforce is home, they are probably not working; they’re just hanging out having a beer. But we are seeing that people are actually working harder than ever. I think retention will be improved, post-COVID, because we can interact with our teams all the time.

Since the pandemic, I’ve joined a new board of directors; we never meet physically, and all of our board meetings are through video. It’s striking how well things have worked. The whole notion that an executive committee needs to live in the same city to have the right team dynamic will go away. Why not spend a week together at a hotel having meetings, and then go back home and work remotely? Going forward, teams can come together for purposeful, planned management meetings, and through those interactions, build the relationships and trust to allow team members to live anywhere.

How has this crisis impacted a company’s ability to drive transformation?

Companies plan end-to-end business transformations, but those plans often get sidelined by distractions and resistance to change. This crisis has necessitated so much change so fast, that whether CEO’s intended or not, transformation is now part of the DNA of every company. We were forced there, dragged into the future. We have proven that we can transform. Now, we need to embed that forced transformation into the culture going forward.