Author: David Lancefield, Partner, PwC UK
Following Brexit, the British government and the E.U. will spend the next several years negotiating a divorce that balances their economic, political, and social interests. The terms of exit and the trade deals that will follow will be unprecedented in their complexity, and there are no clear rules to follow. Nor is there a certain timetable. The negotiations were supposed to be concluded in two years, but the High Court’s recent decision mandating that Parliament must be involved, and the ongoing Supreme Court hearing, calls that into question.
As a leader of private enterprise, you can build an effective post-Brexit strategy around these basic principles in the meantime:
1. Develop a course of action that will be robust under many scenarios. Scenario planning will help you chart a course. First, think about the possible big-picture effects. Then take an existing element of your business and think through all the possible ways it could be affected by those larger changes. Consolidate your alternative futures into a few scenarios that demonstrate how this situation could evolve. They should all be mutually exclusive and have a counterintuitive aspect, something you can learn from. Consider the unintended consequences of actions that are relevant to your business. Then look into the impact each alternative future could have on your company, highlighting risks or opportunities involved.
Finally, instead of devising a separate response for each scenario, consider these questions: What strategy could we adopt that would be robust under any scenario? What investments could we make now to ensure that whatever scenario comes to pass, we will be glad we made that choice? And what can we do now to influence the development of the preferred scenario?
2. Rethink your global footprint.The aftershocks of the Brexit vote provide an opening to launch soul-searching exercises to examine the map of countries where you manufacture and sell your portfolio of goods and services. These exercises can also help you reconsider cost allocation, to adjust expenses to match your new global needs. Focus on strategic objectives: making the most of your capabilities, ensuring access to markets where your capabilities can help you stand out, managing regulators, finding suitable labor pools, and providing opportunities for innovation.
3. Encourage a diversity of perspectives within your company. Employees will hold a wide range of views about the risks of your post-Brexit strategy and the direction your company should take. This diversity of perspective is a strength of your enterprise. Give a large group of trusted managers and employees the task of developing a course of action in Europe and the U.K. Then encourage them to question one another’s biases and assumptions.
Draw in people with a range of experiences, professional backgrounds, interests, and expertise. Include advisors with deep sets of intelligence in areas as diverse as economic development, political engagement, devolution, immigration policy, industry trends, and customer data. Ask open questions to make sure that responses are not exclusively what people believe management wants to hear.
4. As a leader, be transparent and choose your words carefully.In difficult periods, executives must be cautious about what they say and the stances they take. Express sincere compassion and be on guard against statements that may ruffle feathers throughout the organization. Allow people to communicate their views freely. If people express fear or concern, offer tangible aid whenever possible. Avoid language that can be perceived as callous or threatening; even low-key statements such as “We’re thinking differently about next year’s budget” could be heard in a menacing way. Be self-aware when interacting with customers, suppliers, and shareholders.
5. Develop your company’s “foreign policy.”Multinational companies will have to become adept at navigating the changing regulations, consumer preferences, and cultural mores in regional and local markets. If you move into foreign territories that have their own evolving post-Brexit characteristics, you will need to integrate your company with the local society and government, capabilities you may need to build. Use your expertise in your current business locations to collect on-the-ground intelligence that can inform strategies designed to minimize risk. Instituting a well-resourced corporate foreign policy can buoy your localization strategy.
Your thoughtful engagement of issues related to Brexit, trade barriers, and globalization is critical. The Japanese government, and some U.S. officials have encouraged businesses to speak out publicly about Brexit, even if it takes them out of their comfort zone. This type of unprecedented encouragement may lead some companies to take positions on Brexit or other geopolitical issues before they have developed true diplomatic skills. More prowess with a foreign policy will lead to a more powerful impact.
6. Prepare for further expressions of public antipathy to the establishment. Recognize the public’s ongoing resentment of income inequality — and of generous executive pay and high dividends. Your employees will be worried about pension deficits and the potential impact of economic uncertainty on their job and wage prospects. We may also see the rise of conscious capitalism, more attuned to the needs of the people business serves and employs. Pay attention to attitudes about immigration. Borders will be tighter, and moving people across them will be harder, in terms of both managing the regulations and navigating public opinion. If migration of labor is part of your business model, you’ll have to consider these issues now.
By taking these steps, you can keep your business healthy while also addressing post-Brexit political and social issues. This process can catalyze innovation and growth even amidst turbulence. You will gain new insight into your distinctive identity, your capabilities, and your people. You’ll align your company with the devolution of power that appears to be occurring in many countries. Indeed, one of the surprising long-term results of Brexit may be a higher level of connectivity among citizens, government, business, the environment, and society at large.
For more insights, check out Business Beyond Brexit in strategy+business.
David shapes the strategic and commercial decisions taken by companies in the context of growth, restructuring and regulation. He focuses on the media and entertainment sector, working with organisations to transform their organisation and services for the digital age. Read more