Just because the world has clearly become more uncertain doesn't mean companies should be focusing only on its dangers, says PwC's chairman and senior partner, Robert E. Moritz. We caught up with him at his New York office to talk about the opportunity in risky environments and what CEOs can do to encourage everyone in their organizations to remain creative and keep pushing the envelope — without going too far.
Is the world a riskier place today than it has been in the past, or does it just seem that way?
The world has absolutely become more uncertain — and in more ways. First, you have a great many uncertain political and economic events, as well as a highly uncertain regulatory environment. Second, new communication vehicles have radically increased transparency. And third, we have instantaneous movement of data, actions, and points of view. The combination of these three has created what I'd call a new world order of risk — one that can have a tremendous impact on your brand.
So, do companies now need to manage risk differently than they have in the past?
I think so, yes. And in two ways. First, in terms of managing the current uncertainty. The ups and downs of the stock market, shaky economic outlooks in different regions, and other various events are creating a great deal of volatility that may be short-term in nature. But the advice we're giving everybody — including ourselves — is to keep a focus on the long term.
Second, in terms of risk, you need to be minimizing risks as best you can, of course, but not so much that you're eliminating risk-taking altogether. You need to be thinking in terms of resilience — that is, to be thinking as much about the upside opportunities as about the downside need for risk protection.
That's easy to say but how does this translate into behavior, day to day?
I'll take PwC as an example. Within our organization, we want everyone to be innovative; we want them to challenge the status quo. But to do that productively we need to deeply engage them in our strategy and culture so they understand how far we want them to go — and how far is too far. We send a strong message: Don't go it alone. Consult with others. Leverage those in the chain of command. Make sure that you're leveraging the team's work, not just individual behaviors. Over the long term, we want people in the organization pushing the envelope — but we want them to do it within the context of PwC.
Let me give you a specific example. A while ago we did something we call PowerPitch, in which we challenged our people to give us our next $100 million idea. PowerPitch engaged a tremendous number of people within the organization and generated many great ideas that we are pursuing. But if I look at the other ideas, a few of them were extensions of the brand that went too far. Great ideas, great innovative thinking, but in the context of what we stand for, they just pushed the envelope a little bit too far.
It was your job to tell people which ideas were too far out?
Absolutely. This goes to the heart of the leader's responsibilities for strategy, for the culture, for setting clear expectations. Calling out behavior — good and bad — in nonthreatening ways, without calling out anyone's name, is the only way you can demonstrate from the leadership team down what the great things are that people are doing and what may be stretching the bounds of imagination a little bit too much. It's the CEO's job to convey that unmistakably — to tell stories about your strategy and your culture that clearly illustrate the individual behaviors necessary to making the company work and the behaviors you don't want.
Your role then is to tell stories? What sort of stories?
I think of them in three buckets. The first have to do with our audit organization. We talk freely about the clients we want as part of the PwC portfolio — and the clients we don't want. In some cases, they may not be willing to pay the fees, and as a result we don't want to go too low because we couldn't do the work in a way that meets our standard of quality. We're clearly trying to grow revenue, but people need to understand that we have to do it in a profitable and risk-adjusted way. So, without naming any names of companies, we talk about times when we walked away from work, for whatever reason. That's one series of stories.
The second set is about individual behavior. Your personal brand is tremendously important. What you put on social media today is tremendously important. So talking about what is appropriate to put on there and what is not, what builds your personal brand and what detracts from it, that's another series of stories that I tell.
The third set has to do with our people. The average age of our employees is 27. We as senior managers need to model the same behaviors we expect of them. So we tell stories about how the leadership team — top management, middle management — does the same things as everyone else so they can see those goals come to life. Every year, for instance, I do three town halls for the entire firm — that's about 35,000 people. One of the first questions we ask at these town halls is: Tell us about your last vacation when you actually got a chance to leave? How did you balance the work/life flexibility issue? So each town hall starts with a story about how a senior manager found that balance. These are powerful examples of behavior we want our people to emulate.
How important is storytelling in the great scheme of things?
We see companies that are doing really well even with the uncertainty, even with the new risks that are out there. They're the ones with leadership teams that are thinking about scenarios, that are thinking about the upside potential as much as the downside. At the end of the day, and six months from now and six years from now, those are the companies that will end up coming out better than they are now because they've engaged their talent in the right ways and have taken steps to make their vision come to life.
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