Executive
Perspectives

The CEO’s Dilemma

March 2023

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Copyright © 2022 by Boston Consulting Group. All rights reserved.

Organizational ResilienceVolatility and uncertainty—from geopolitical disruptions, theafter-effects of COVID, rising inflation, and changing
regulatory regimes—have significantly stressedorganizations and their people.
To capitalize on opportunities, pivot to secure advantage,accelerate through the downturn, and win, firms must
intentionally design their operating model, talent, andculture to be resilient. Cost-cutting measures alone are notenough. Companies must apply a thoughtful and tailoredapproach to their organizations to create competitive
advantage in the downturn and for the future.

In this BCG Executive
Perspectives edition, we
address the components oforganizational resilience andwhat it takes to implement
them successfully

This document addresses the capabilities and components
needed to build a resilient organization and the mindset
required to tackle this challenge right now.

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Introduction to this document

Executive Summary | Organizational resilience is the foundation for going on
the offensive during the downturn and creating competitive advantage

How other
organizations
have done it

Organizational resilience refers to the aspects of companies' organization, operating model, talent, and culture that prime them to be ready to
go on the offensive during downturns. Too often, we see companies simply liquidate costs in a defensive reaction to unfavorable macro
conditions. In doing so, these businesses are frequently also "liquidating" the capabilities and talent that are critical to executing their strategic
priorities. Companies that instead cultivate a resilient organization can help weather the down cycles and accelerate into the up cycles.
We find that, regardless of industry or region, companies that have successfully built organizational resilience have taken a holistic approach. Bystarting with data and facts, they use diagnostics to help define the tailored, de-averaged solutions that represent a complementary, mutually
reinforcing combination of offensive and defensive actions across people and organization levers.
To start building organizational resilience today, leaders must assess their current position and capabilities, and align their leadership teams
on a portfolio of mutually reinforcing solutions across three areas:

How to getstarted1.

Organization and operating model: Define a lean structure that creates cost advantage, while using re-org as an opportunity to enhance
adaptability, optimize for highest-priority sources of value, redefine core processes, and accelerate capability builds (e.g., digital, sustainability).

2.

Talent and skills: Identify talent needed to win today and in the future and chart a clear path to acquire, develop, and retain that talent.

3.

Culture and change: Inculcate traits that enable individuals and teams to thrive in volatile and uncertain times; tap into and activate
employees' emotions, explicitly build confidence, and lead by example.

Creating a resilient organization will support successful execution of existing strategies while capturing breakout opportunities whenothers are struggling, even in a volatile and challenging environment.

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Whyorganizational
resilience
matters

In today's highly uncertain global environment, combined with volatile labor market conditions (e.g., low global labor force participation, severe
talent shortages in many sectors and functions), business leaders need to arm themselves with the right people and organization to navigate
the complexity of the conditions and turn them into a source of competitive advantage.

BCG Executive
Perspectives
AGENDAWhy organizational resilience matters

How to get started

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How other organizations have done itAgainst a backdrop of social andeconomic pressures anduncertainty…

• Supply chain disruptions and geopolitical tension• Financial pressures (e.g., inflation, funding)• Persistent talent scarcity• High degree of stress and uncertainty…people and organization levers
are increasingly critical to deliveron core strategy…

• Increasing need for operating models that deliver both responsiveness and scale economies• Need to reduce work and streamline orgs to maintain margins in face of cost pressures• Imperative to continue building capabilities (e.g., digital, analytics, climate andsustainability) and acquire/retain high-demand talent while simultaneously managing costs• Need to build motivation and engagement to combat employee burnout…yet many companies struggle
to take decisive action, instead
repeatedly compromising• More C-suite leaders report planning "tentative" actions in next 12 months -- ~40%
expect to focus cuts on discretionary spending; ~25% to slow/stop hiring1• Only a few executives plan to take "bold" actions in 2023 such as innovating in productdesign or significantly optimizing their workforce

There's no perfect timing, but there is a path to break compromises through bolder actions
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1. 2023 BCG C-Suite survey (n=759)

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Why organizational resilience?

Organizational resilience gives you the ability to respond to pressures while
breaking perceived compromises (e.g., cost vs. flexibility)
A resilient organization is…
LEAN &EFFECTIVE

Cost-advantaged and customer-oriented
Appropriately (de)centralized governance, with efficient structure and lower overhead
Optimized location strategy and worker mix
Action-oriented and rapid decision making

ADAPTABLE

Able to perform in current environment and pivot on evolving objectives“Modular” org architecture with platform elements to create optionality at low cost
Ability to hire/exit/redeploy talent quickly, including pooling and cross-funding“Always-on transformation” mindset and ways of working

VALUE-FOCUSED

Aligned on clear value-capturing priorities to guide difficult and exciting decisions
Process rewiring and automation to ruthlessly remove lower-value work
Segmented talent investment to secure future advantage
Compelling purpose to ensure clear prioritization and rapid alignment

•
•
•
•
•
•

Org & Op Model

Talent & Skills

Culture & Change
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•••

How to enable decisive action? Act simultaneously on defense and offense
across three dimensions

People and org actions must be both defensive
and offensive, and mutually reinforcing
Example actions

DefenseOptimize cost to secure
viability, fund growth, andsupport adaptability

Org & Op
Model

Redesigning org to be more adaptable to drive cost
reductions and simplify processes and structure

I

OffenseOrganize and aggressively
build talent andcapabilities to win

Talent &SkillsStaffing to optimize talent; secure efficiency and alignhigh-caliber internal & external talent to top priorities

Culture &ChangeEquipping leaders to build confidence and increase
bandwidth for today's priorities and tomorrow's
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Organizational resilience enables companies to outperform and win inchallenging environments

Up to

~20%

Potential cost savings from resetof organization and op model1

5x

To be top performer if op model
is set up effectively2

as likely

increase in NPS points
10-20 Potential
with flexible op model2

Culture & Change

Talent & Skills
be top performer if talent
4x Topipeline
holistically sources talentas likely~20%

Longer tenure at companies
with higher internal mobility3

in productivity with
>70% Increasestrong onboarding~70 pp

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TSR performance for orgs
+2x Total
with high purpose and clarity
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1.5xHigher transformation successwhen leaders regularly activate key
behaviors (e.g., empathy)6

be top performer if teams feel
4x Toempowered
when priorities shift

as likely

2

Average outperformance over industry TSR
attributed to resiliency actions post-crisis7

1. Based on BCG case experience from organizational reset: process rewiring, holistic work-reduction, operating model re-alignment 2. Platform Operating Model survey; top performer is defined to "perform
significantly better than peers," with 10%+ YOY revenue growth. Likelihood outcomes are generated from ratios of similar answers between top performers and low performers 3. LinkedIn Global Talent Trends on
retention after 3 years for the US, Dec 2022. Within the US, after three years, employees have a 44% likelihood of staying an additional year if they have not internally moved, compared to a 63% likelihood to stay an
additional year if they have internally moved (promotion or lateral change) 4. Zippia; 17 Incredible Onboarding Statistics [2023]: HR Trends in Hiring, Training, and Retention, Sept. 2022 5. BrightHouse Impact of
Purpose; high purpose defined as employees whose connection to purpose is 10% greater on an index, Oct 2020 6. Generative Leadership: BCG Transformation Check 2022 7. How Resilient Businesses Created8
Advantage in Adversity During COVID-19 (Nov 2021); performance driven by recovery speed and extent. Post-crisis analysis period from February 2020 to August 2021

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Org & Op ModelBCG Executive
Perspectives
AGENDAWhy organizational resilience matters

How to get started

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How other organizations have done itCompanies across industries and regions have developed organizational
resilience to drive breakout performance
Europe | Automotive
Transformation through org optimization,
cost reduction, & employee engagement

North America | Health care

Global | Fashion

Growth and efficiency program toenable reinvestment

Capability investments fundedthrough optimized org structure
and work reduction• Shifted to platform-based org• Staffed for talent optimization• Embraced agile ways of working
Regions included in effort• Simplified organization• Reinvested into capabilities• Reset leadership behavior
Org & Op Model

Talent & Skills

Culture & Change
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• Redesigned operating model• Sourced & developed tech skills• Broadcast compelling narrativeNorth America | Health care company enabled growth strategy throughop model transformation

Org &Op ModelRedesigned op model with E2E platforms to efficiently evolve
member journeys. Established customer teams with E2E
accountability and built shared digital and technical platforms
leveraged to efficiently deliver member experience

Talent &SkillsOptimized talent via rigorous cross-enterprise pooling & slating;selecting leadership for desired cultural attributes (e.g., comfort
with ambiguity) in addition to expertise. Restructured recruiting
process to emphasize cultural fit assessment

Culture &changeAdopted agile ways of working to improve team effectiveness andremoved low-priority activity to increase bandwidth. Teams usedagile routines and backlog management to drive relentlessprioritization and alignment

Value delivered$50M run-rate customer lifetime value
created by first teams in first 6 months
More than doubled speed to market

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A health care company was facing high member attrition, siloed operations, and heavy
overhead. The organization launched a program to pivot from siloed structure toplatform-based operating model.

Europe | As part of a strategic pivot, auto manufacturer redesigned its
organization and reduced structural costs

Org &Op ModelRedesigned operating model via cascading process to leverage scaleand enhance business accountability and decision-making while
tailoring support levels to regional requirements

Talent &SkillsThoughtfully redeployed and reduced talent while building a newly
redesigned talent pipeline to attract tech skills needed forelectric vehicle strategy

Culture &changeSupported product design launch and up-skilling programs byrecognizing early wins and maintaining a consistent narrative tobuild momentum toward electric vehicle pivot

Value delivered>€1B in annual cost savings
Fully implemented op model & staffing
25% faster than expected

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A European auto manufacturer had significant profitability challenges and disruptionof its legacy passenger vehicle business. Company redesigned its organization andreduced costs as part of pivot into electric vehicle market.

Global | Fashion company executed organizational resilience andcapability program to drive performanceOrg &Op ModelOptimized structure and op model to align resources with newly
declared strategy, reduce work, gain flexibility, and improve
performance; elevated leaders of critical capabilities in theorganization; rationalized SKUs to create step change in simplification

Talent &SkillsBuilt digital and data-driven capabilities with immediate
application to revenue-generating campaigns; up-/re-skilled talent
on how to use digital channels to capture value of shifting demand
from brick-and-mortar to e-commerce and omnichannel

Culture &changeValue delivered$450M in cost savings
Achieved 100% run-rate impact
a year in advance
3x market cap increase

Rearticulated and activated enterprise and brand purpose andreset culture and leadership behaviors. Cascaded uplifted purposeand behaviors through all teams with focus on action-oriented
approach and empowerment
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A fashion company was performing below market expectations. It conducted anenterprise-wide program to increase revenue and establish a cost-competitive
organization that supported profitability and growth.

1

2

FACT-BASED perspectives on where
to optimize and where to invest

DE-AVERAGED solutions with different targets acrossbusiness functions, talent needs, time horizons

Adopt a fact-based approach to execute de-averaged solutions
that are value-focused and mutually reinforcing

3

4

VALUE-FOCUSED initiatives groundedin enterprise strategy rather than siloedor near-term priorities

MUTUALLY REINFORCING solutions to create
win-wins and drive synergies through integrating“offense and defense”
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While context, industry, and regions may vary, we find that companies thatsuccessfully build organizational resilience rely on four principles

BCG Executive
Perspectives
AGENDAWhy organizational resilience matters

How to get started

15

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How other organizations have done itHow to start instilling resilience in your organization

Step 2 | Align leadership team on portfolioof mutually reinforcing solutions

Cost structure to support margin in challenging
environments

Org & Op Model

Ability of organization to efficiently capture value
now and pivot to new opportunities

Talent & Skills

Gaps in talent and skills needed to perform now andin the future

Culture & Change

Engagement and motivation of employees to work
together and embrace change

See examples on following page
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Step 1 | Gather fact base and assess:Org & Op
Model || Efficiency
Efficient andoperatingmodels arefoundation
op modelandadaptable
adaptability
are a foundation
fora thrivingforthriving
underofconditionsof uncertainty
and volatility
underconditions
uncertainty
and volatility

Make de-averaged workforce reductions:
Preserve or enhance capacity in strategically criticalareas; make deep cuts in others
Aggressively reduce work:
Cut low-value activities, optimize processes, anddigitize/automate

FLEXIBLE RESOURCE (RE)ALLOCATION
Allows orgs to quickly shift investment
to fund strategic priorities

DYNAMIC TEAMSCreate dexterity to move people acrossinitiatives as priorities evolve

Streamline structure:
Simplify spans/layers, reduce interfaces

APPROPRIATE
DECENTRALIZATION

Institute scalable “platform teams”:
Create optionality at lower cost by assembling flexible
teams of shared resources (i.e., “platforms”)

MODULAR TECH

Favors decision making for local market
responsivenessEnables scalable, rapid, and efficientmodifications and enhancements
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Achieve sustainable cost advantage…

… and gain adaptability through agile waysof operating and value-focused initiatives

Talent & Skills | Powerful data and algorithms enable winning talent strategy
Powered by

Data inputs

Dynamic supply & demand matching

Resulting decisions
BUILD

10%

20%
30%

MARKET DATA

15%
10%
20%
15%

DEMAND SCENARIOSCURRENT SKILL SUPPLYAn example –European financial
services company•Supercharge talent acquisition when others cut•Attract high-demand talent for priority capabilities(e.g., newly available tech employees)

KEEP•Ensure match with high-value work
•Sharpen employee value proposition

REDEPLOY•Bolster strategic priorities•Retain capable, flexible talent

40%

35%

EXIT
•Remove low performers•Separate talent that cannot be redeployed

BUILD – attracted key talent bybuilding a best-in-classcandidate experience

KEEP – defined career paths
after completing transformation
to retain talent

REDEPLOY – leveraged upskilling platform to support
employees shifting to agile
methods and new roles

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BUSINESS IMPERATIVES

5%

Culture & Change | By building confidence and increasing bandwidth, leaders
can enable teams and individuals to accept uncertainty, persevere, and win
Use the “science of change” to reduce anxiety by giving clear
direction, increasing bandwidth, and boosting confidence

Of employees report anxiety
during times of change…

• Insist upon a few measurable, unambiguous goals (e.g., zero debt)• Develop and continually repeat emotionally compelling narrative
connected to organization's purpose• Distribute initiative ownership and performance accountability

Generate
capacity… which reduces productivity,
lowers job satisfaction, andincreases turnover & absenteeism• Explicitly identify and reward cooperation• Be visible; share teams' effort• Measure cognitive load; reduce distractions• Start with "meaningful, winnable victories" to build momentum

Increaseconfidence• Assume employees are change-averse; acknowledge challenges• Recognize contribution of individuals and teams• Test proven strategies (e.g., structured reflection) to boost team's output
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56%

Give
clarity

The time to act is now | Those who build organizational resilience today
will find themselves well positioned to accelerate out of a downturn

Companies with resilient organizations will be:• Operating with modular, streamlined processes
that can flex to meet the demands of tomorrow• Maintaining optimized people costs via
thoughtful resource reallocation

NOW

NEAR

FUTURE

Meanwhile, firms that do not strengthen theirorganizations may bank near-term savings,
but in the future experience:• Persistent need to address urgent issues in arigid system, with limited options• Missed opportunities due to lack of capabilities
to respond to customer demands• Disengaged, ill-equipped, and missing talent
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• Staffing with the right talent to achieve strategic
ambitionsHolistic, integrated programs•

Deep experience delivering integrated programs that incorporate initiatives
across org & op model, talent & skills, and culture & change

Tools and capabilities to help you deliver
Cloud-based platform that enables simultaneous,collaborative, and permission-based E2E org design
to expedite execution and direction

BCG helps clientsmove from theory
to action

Decentralized solution that provides transparency,
proactively mitigates risks, and drives outcome-drivenchange to realize full impact

Client-specific customization••

Approaches are tailored in size and focus for client-specific needs
We commit to partner for your long-term success – not one-and-done

Proven track record of success••

4,400+ projects over the past 5 years, supported by team of 650+ experts globally
Best-in-class approach recognized by industry experts, e.g., ALM Vanguard
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AI-powered modular platform that leverages internal
and market data to translate business strategy acrossthe talent value chain

Connect with our organizational resilience leadership team withany questions
Organizational ResilienceCentral Resilience Team

Allison Bailey

Kevin Kelley
Global Leader – Organizational Resilience
Kelley.Kevin@bcg.com
DallasFrank Breitling
Global Leader – Organizational Resilience
Breitling.Frank@bcg.com
New York

Jens Jahn
Europe, Middle East, South America & Africa Leader –Organizational Resilience
Jahn.Jens@bcg.com
Stuttgart

Fang Ruan
Asia Pacific Leader - People & Organization PracticeRuan.Fang@bcg.com
Hong Kong

Ryoji Kimura
Global Leader – Corporate Finance & Strategy
Kimura.Ryoji@bcg.com
Tokyo

Alexander Roos
Global Co-Leader – Center for CFO Excellence
Roos.Alexander@bcg.com
BerlinDaniel Feldkamp
Managing Director & Partner
Feldkamp.Daniel@bcg.com
MunichJessica Apotheker
Chief Marketing Officer
Apotheker.Jessica@bcg.com
Paris

Click here for our latest publications in the CEO's Dilemma Executive Perspective series and additional resilience insights

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Global Leader - People & Organization Practice
Bailey.Allison@bcg.com
Boston