Stern Value Management - Management Consulting Services

COVID-19: A Catalyst


Wars accelerate the Second Law of Thermodynamics. They destroy the physical and the psychological. But, they also create anew. They propel medicine, technology, and ideology forward. Wars are catalysts for change. In the aftermath of each major twentieth-century world war, the US and Western European societies experienced reduced rigidity and greater flexibility.

Precedent I: Part of the Great Change
The Great War put paid to monarchies and ancient hierarchies. The Western Front tested chemical warfare and medical practices. With peace, socialism, communism, and democracy flourished. The roaring twenties saw major changes in technology (e.g., cars), in dress, and in formality.

For soldiers returning from the war, cities and new factory towns brought greater opportunities. An influx of immigrants brought further laborers to work in new firms in new industries, created by entrepreneurs and funded by booming capital markets. But, industry was quite hard for most. Men, and those few employed women, were viewed as part of the production process. Few had decision power and the variable pay benefits.

Precedent II: A Piece of the Peace
The Second World War ended European hegemony and empires. Fire bombings of cities and total war forced medicine to adapt. Women manned factory floors. Nuclear technology, information technology, and aerospace moved forward. The year 1945 saw the world split into two. Subsequent decades saw even greater changes in technology and in society, both in the workplace and in the home.

Soldiers and their families were rewarded with lots of perks, their piece of the peace dividend. The post-war boom provided a new generation with a chance for betterment. Many became “company men”—and women—with loyalty rewarded with a job for life, promotions, and retirement. Work was less onerous for most, but senior managers retained most decision-making power and the spoils.

Precedent III: The Promise of Capitalism
The Cold War further accelerated information technology. Capitalism—challenged by communism—evolved to become more inclusive. Fewer people fit neatly into Marx’s critique.

Peter Drucker’s “knowledge worker” started to have much more discretion over decisions and the rewards from making good ones. With the rise of the internet, this meant shares and options or profit sharing for a larger number of people. Responsibility and accountability were not always matched, but sharing the wealth became acceptable to owners and executives—sometimes even with shop floor employees. Some eight hundred firms around the world implemented our EVA® framework to align owners and employees.

The Present
The war on Covid-19 has been a catalyst for remote working and for control (contact tracing): the fear of biological viruses now outpaces the anxiety of tech viruses. The global hunt for a vaccine is transforming the stage-gate process of developing medicine. Rigid social distancing is changing the norms amongst those locked down together and between everyone Zooming and Skyping.

The 2020s should see the Covid-19 changes embedded, whether in the speed of medical trials, the relationship among citizens and with their government, and between employees and their firms. It could be transformative.

Not all jobs are currently built for flexible work and pay. Content-based businesses will have an easier time than logistics-based ones. But, as AR, VR, 3D-printing, and other technologies transform everything, many more jobs will be revolutionized.

For companies, this challenges the idea of control systems built on the rigidity of hours and a workplace designed by guilds for textile factories. The new type of work could be less a revolt than a multi-century revolution to pre-industrial pay-by-the-piece practices—paying-for-performance, for delivery—of quality, on time.

Paying for delivery reduces fixed costs and capital for firms, but raises the risk for employees—the cost of flexibility. It demands new structures and processes to allow a disparate and physically distant group of people to work together seamlessly. It requires innovative contracting, including for variable pay, and performance evaluation systems to match. Contracting within a firm and contracting outside it could become equally lucrative for owners of firms and “contract” employees, who will have much greater responsibility but much greater accountability.

This marketplace of the 2020s will allow women to more easily return after maternity leave as well as retired people and students to participate equally. A goal-oriented culture does not discriminate against race, religion, sex, or sexual orientation. Everyone adds to the value chain. All are aligned to the value creed.

The World of the “Information Worker”
Covid-19, like the three world wars before it, will kill, displace, and destroy. The totalitarian lockdowns will cause many casualties. But, in its aftermath, society, for the survivors, will be uplifted. They will enjoy an acceleration in the use of technology and medicine, and an increase in flexibility, for work and for fun.


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