- Michael Jary ~ OC&C
- Keith Barr ~ CEO, IHG
- Andy Hornby ~ CEO, The Restaurant Group
- Ken McMeikan ~ CEO, Moto-Way
Leading through crisis and what to take with us on the other side:
Looking back over the last year, while there are many things we would rather not bring with us as we enter the new normal, we must appreciate the changes for good brought about by the pandemic. One of the greatest positives has been the surge in employee engagement which OC&C saw spike in March 2020 – typically an increase of 10% was seen. This demonstrated the importance of employees, both in front line services and head office functions, feeling recognised and valued and that when engagement is high, huge change can be brought about quicker than we ever thought possible. Leaders need to be asking themselves how to sustain this sense of purpose in our workforces and ensure that all employees feel that they are essential going forwards.
As we begin to come out of lockdown and the easing of restrictions continues, businesses must be ready to make the most of the post-COVD world and, perhaps more importantly, the post-COVID economy. Barclays estimates that about £160bn of excess consumer savings are available to spend right now, roughly equivalent to 7% of GDP. Gross saving in 2020 was up by c. £150bn - reaching £250bn - and many consumers have paid down outstanding credit which they would not have otherwise been able to do. If just 20% of the excess savings were fed back into the economy over the next two years that would equate to a 6-7% increase in consumer spend – an unprecedented rise. Although this is dependent on many factors, not least restrictions easing in line with the government’s timetable and no further lockdowns, OC&C thinks that spending will increase; accordingly, businesses need to prepare to make the most of the return of the ‘roaring twenties.’
Finally, the last year has been used by many companies as an opportunity to (sometimes radically) change and/or restructure their business model. Direct to consumer sales and services have increased, as has M&A activity with businesses taking the opportunity to buy out competitors or execute strategic add-ons. Store portfolios have been rationalised, with a common theme being a move out of urban centres thanks to the changing role of the office, and ESG has never been higher on the board agenda. To set themselves up for success, businesses must look to the future and make plans for the long term.
Elaborating on such topics as the basis of discussion, key themes included:
Trust: There appears to be no alternative to business leaders getting comfortable with trusting employees and granting them freedom to self manage where appropriate. On the whole, it is felt that performance is enhanced when people are given responsibility and accountability.
Employee Engagement: Engagement is at an all time high, with businesses represented in our discussions seeing scores rise by at least 10-15%. To maintain this, it is critical that strong communication happens both company-wide and at more local levels.
Purpose: It has never been more important to have a well thought out and articulated purpose. For many businesses, the pandemic has brought about a realisation that they can – and do – have a greater impact on society than previously thought. From hotels providing accommodation to those having to quarantine, to restaurants feeding essential workers, the hospitality industry has come to see the hugely important role it plays in society more clearly over the last year.
Inequality: Whilst key workers have quite literally been risking their lives, others have had the privilege of working from the comfort of their homes. Those on the front line, being paid close to minimum wage, have been more impacted by the pandemic, yet without them we would have not survived this extraordinary event. It is vital that leaders continue to show appreciation for these individuals and ensure their recognition is not short lived; part of this will involve striking the right balance between home and office/field-based working.
Changing business models: Delivery and subscription models have become a cornerstone of many businesses with some predicting that delivery will account for 30-35% of revenue even when restaurant estates are fully open. Businesses which had never contemplated offering delivery are now doing so successfully with technology enabling the best customer experience. Drive-through models are also set to increase with some existing units seeing higher transaction values despite traffic levels still being lower than normal.
Demand: In some sectors, there has never been a time when maximum demand was guaranteed and supply so limited. Hospitality is seeing this particularly acutely at the moment with many venues now booked solidly for months to come. Increased availability will be wholly dependent on changing government advice and restrictions, which naturally makes any sort of forecasting extremely difficult.
Economy: With pent up savings and other stimuli there is now a huge amount of consumer and investor money ready to flood the market. Businesses which have successfully weathered the pandemic – often despite becoming leaner – will be able to command greater multiples than ever before.
Inflation: Many are predicting a rise in inflation, with some businesses already reporting higher commodity prices. Supermarkets and other large retailers, including Amazon, have granted pay rises, indicating that labour costs may further increase. For various businesses, a sense of duty and decency has led to wage increases and bonus pay outs despite challenging balance sheets – jobs need to be protected as well as lives.