We must solve for the virus and the economy. It starts with battling the virus.
Everything has changed. Just a few weeks ago, all of us were living our usual busy lives. Now, things normally taken for granted—an evening with friends, the daily commute, a plane flight home—are no longer possible. Daily reports of increasing infections and deaths across the world raise our anxiety and, in cases of personal loss, plunge us into grief. There is uncertainty about tomorrow; about the health and safety of our families, friends, and loved ones; and about our ability to live the lives we love.
To solve for both the virus and the economy, we need to establish behaviors that stem the spread of the virus, and work towards a situation in which most people can return to work, to family duties, and to social lives.
To date, the only proven way of containing the virus, once community transmission is widespread, is by enforcing significant lockdowns; disciplined physical distancing; testing; and contact tracing. China, Japan, Singapore and South Korea have shown that these measures can stop the virus from spreading and enable economic activity to resume, at least to some extent. Everyone is closely following the developments in Italy and many other nations to find out whether the control measures there are sufficient to slow the growth of new infections and fatalities. Our common goal must be to implement the best possible response to stop this crisis.
At the same time, global and local leaders are also considering the economic impact of such measures. What will happen if many businesses stop operating or have to significantly reduce their activity? For how long can we do that? How deep an economic shock can we sustain without causing human suffering that our societies are unable or unwilling to bear?
In the following sections, we offer ways to think about these pressing issues. (Please also see “Beyond coronavirus: The path to the next normal,” by our colleagues Kevin Sneader and Shubham Singhal, which tries to imagine what the future might look like.)
Dealing with the uncertainty related to COVID-19
The spread of COVID-19. How many new infections will we have? Is the mortality rate falling? Will the spread of the virus show any seasonality? Will a new strain of the virus evolve?
The public-health response in each country, state, municipality. Will there be lockdowns? Will it still be possible to go to work? Will factories be allowed to operate? Do we need to submit to an official quarantine center upon arrival, or can we self-quarantine?
The impact on the economy and our livelihoods. Will companies suffer and go bankrupt? Can the supply of essential goods and services be maintained? Will we have a job? How long will this last?
The consequences for our lives. Will we be able to avoid infection? Are our loved ones safe? Can we still train for the sporting event we have been preparing for? Can we earn university degrees, now that many schools are closed and exams canceled?
These and a million more questions are racing through our minds, adding stress to the already challenging reality of living in the time of the coronavirus.
Two things are reasonably certain: If we do not stop the virus, many people will die. If our attempts to stop the pandemic severely damage our economies, it is hard to envision how there will not be even more suffering ahead.
The impact of lockdowns on consumption and economic activity
We are learning what happens during a lockdown of the kind implemented in China, Italy, and increasingly across Europe and the United States: economic activity drops more sharply than any of us have experienced. People do not shop, other than for essentials; people do not travel; people do not buy cars.
We estimate that 40 to 50 percent of discretionary consumer spending might not occur. In every recession, people will cut back on purchases that can easily be postponed (such as cars and appliances), and increase precautionary saving in anticipation of a worsening crisis. What makes the coronavirus pandemic different is that people will also eliminate spending for restaurants, travel, and other services that usually fall but do not drop to zero.
A 40 to 50 percent drop in discretionary spending translates to a roughly 10 percent reduction in GDP—without considering the second- and third-order effects. That’s not only unprecedented in modern history, it has been historically almost unimaginable—until now.
Already, we have some factual evidence for an economic shock on this scale, such as the COVID-19-related economic downturn in China, and early indications in US “high-frequency data” such as credit-card spending.
The longer a lockdown is in place, the worse the impact on our lives will get. To visualize what this means for people in lockdown areas, imagine cab drivers whose customers are not allowed to go onto the streets; professional chefs whose restaurants have been forced to close; and grounded flight attendants, their planes parked at the airports—for months. With 25 percent of US households living from paycheck to paycheck, and 40 percent of Americans unable to cover an unexpected expense of $400 without borrowing, the impact of extended lockdowns for many, many people will be nothing short of catastrophic.
The answer cannot be that we accept that the pandemic will overwhelm our healthcare system, and thousands, if not millions, will die. But can the answer be that we cause potentially even greater human suffering by permanently damaging our economy?
Bounding the uncertainty around this crisis
The worst and most typical reactions for humans when confronted with high uncertainty are to freeze, or to jump to a simple answer, such as “this problem will go away as quickly as it came, it is just like the annual flu.” COVID-19 is particularly challenging in this regard because the majority of those infected will feel only minor symptoms, or none at all. It is an invisible but pernicious enemy. We must try to bound the uncertainty with reason and think about solutions within a limited number of scenarios that could evolve.
Next we describe the impact of COVID-19 on the world’s economy along two dimensions which will primarily drive the outcomes of the crisis for all of us:
The economic impact of the Virus Spread: the characteristics of the virus and its disease, such as transmission modes, rates, and mortality rates; and Public-Health Response, such as lockdowns, travel bans, physical distancing, comprehensive testing, contact tracing, health care provision capacity, the introduction of vaccines and better treatment methods
The economic impact of the Knock-on Effects of the public-health responses, such as rising unemployment, shuttered businesses, corporate failures, credit defaults, falling asset prices, market volatility, and financial system vulnerabilities; and Public-Policy Responses to mitigate these knock-on effects, such as policies to prevent widespread bankruptcies, support incomes for furloughed workers, and protect the financial system and the viability of the most affected sectors.
In terms of Virus Spread and Public-Health Response, we currently see three “archetypes” of interventions and outcomes:
A strong public-health response succeeds in controlling the spread in each country within two to three months, and physical distancing can be phased out quickly (as seen in China, Taiwan, Korea, and Singapore).
Public-health response succeeds at first, but physical distancing has to continue (regionally) for several additional months to prevent viral resurgence.
Public-health response fails to control the spread of the virus for an extended period of time, perhaps until vaccines are available, or herd immunity is achieved.
In terms of Knock-on Effects and Public-Policy Response, we anticipate three potential levels of effectiveness:
Ineffective: self-reinforcing recession dynamics kick in; widespread bankruptcies and credit defaults; potential banking crisis
Partially effective: policy responses offset economic damage to some degree; a banking crisis is avoided; but high unemployment and business closures mute the recovery
Highly effective: strong policy response prevents structural damage to the economy; a strong rebound after the virus is controlled returns the economy to pre-crisis levels and momentum, as justified by the economy’s fundamentals.
If we combine these three archetypes of viral spread and three degrees of effectiveness of economic policy, we see nine scenarios for the next year or more (Exhibit 2).
We believe that many currently expect one of the shaded scenarios, A1–A4, to materialize. In each of these, the COVID-19 spread is eventually controlled, and catastrophic structural economic damage is avoided. These scenarios describe a global average, while scenarios will inevitably vary by country and region. But all four of these scenarios lead to V- or U-shaped recoveries.
Other, more extreme scenarios can also be conceived, and some of them are already being discussed (B1–B5). One cannot exclude the possibility of a “black swan of black swans,” with structural damage to the economy, caused by a year-long spread of the virus until a vaccine is widely available, combined with lack of policy response to prevent widescale bankruptcies, unemployment, and a financial crisis. This would result in a prolonged L- or W-shaped economic trajectory. With the number of new cases expanding exponentially in many countries in Europe and in the United States, we cannot exclude these more extreme scenarios for now.
However, as we still have little information about the probability of more extreme scenarios, we focus on the four that are more tangible for now. Within the next week, we will add breadth and depth to this view, working closely with Oxford Economics to develop several macroeconomic scenarios for each country, and for the world.
Making it real: How this could unfold
With a little bit of luck, China will undergo a sharp but brief slowdown and relatively quickly rebound to pre-crisis levels of activity. While GDP is expected to drop sharply in Q2 2020, some signs of normal life are returning in Beijing, Shanghai, and most major cities outside Hubei. In this scenario, China’s annual GDP growth for 2020 would end up roughly flat, wiping out the growth of 6 percent we expected just three months ago. Nevertheless, by 2021, China’s economy would be on the way to regaining its pre-crisis trajectory, if not adversely affected by developments in the rest of the world.
In this scenario, the virus in Europe and the United States would be controlled effectively with between two to three months of economic shutdown. Monetary and fiscal policy would mitigate some of the economic damage with some delays in transmission, so that a strong rebound could begin after the virus was contained at the end of Q2 2020. This would place Europe and the United States in scenario A3 (Exhibit 3).
Even in this optimistic scenario, however, all countries would experience sharp GDP declines in Q2, most of which would be unprecedented. Consumer spending in most advanced economies accounts for roughly two-thirds of the economy, and about half of that is consumer discretionary spending. Real-time data suggests that spending on durable goods including automobiles in areas affected by shutdowns could fall as much as 50 to 70 percent; spending on airline flights and transportation could fall by about 70 percent; and spending on services such as restaurants could decline in affected cities by 50 to 90 percent. Overall, as mentioned earlier, consumer discretionary spending could abruptly fall by as much as 50 percent in areas subject to shutdowns.
While increased government spending would help offset some of the economic impact, it is unlikely to offset rapidly enough nor in full. We estimate that the US could see a decline in GDP at an annualized pace of 25 to 30 percent in Q2 2020; major economies in the eurozone are expected to turn in similar numbers when all is said and done. To put this in perspective, the largest quarterly decline in GDP in the 2008–09 financial crisis occurred at an annualized pace of 8.4 percent in Q4 2008. The pace of decline would far outstrip any recession since the Second World War (Exhibit 4).
A darker picture of the future
Of course, it is entirely possible that countries are not very effective in controlling the virus, or in mitigating the economic damage that results from efforts to control the virus spread. In this case, economic outcomes in 2020 and beyond would be even more severe.
In this more pessimistic scenario, China would recover more slowly and would perhaps need to clamp down on regional resurgences of the virus. It would also be hurt by falling exports to the rest of the world. Its economy could face a potentially unprecedented contraction.
The United States and Europe could also face more dire outcomes in this scenario. They could fail to contain the virus within one quarter and be forced to implement some form of physical distancing and quarantines throughout the summer. This could end up producing a decline in GDP at an annualized pace of 35 to 40 percent in Q2, with major economies in Europe registering similar performance. Economic policy would fail to prevent a huge spike in unemployment and business closures, creating a far slower recovery even after the virus is contained. In this darker scenario, it could take more than two years before GDP recovers to its pre-virus level, placing both Europe and the United States in scenario A1 (Exhibit 5).
The economic impact in these scenarios would be unprecedented for most people living today in advanced economies. Developing countries that have faced currency crises have some experience in events of this order of magnitude.
We are not writing to predict that this will happen but rather issuing a call to action: to take the measures needed to stop the spread of this virus and the damage to the economy as quickly as humanly possible. As we write this, countries in Europe and the United States have not yet taken the strong public-policy responses needed to effectively contain the virus. If we do not act to contain the virus quickly, then the scale of economic destruction that comes with extended lockdowns would become more likely, with severe consequences for our livelihoods.
Safeguarding our lives and our livelihoods
To solve the conundrum of how to save lives without destroying our livelihoods, we must find ways to make lockdowns effective, such that they break the trajectory of the virus in as short a time as possible. The effectiveness of lockdowns will be measured in their ability to control the spread of COVID-19.
East Asian nations have shown this can be done through enforcing stringent lockdowns, surveillance, and monitoring of people’s movements. As we write this, similar actions in most of Europe and the United States have so far been narrower, less vigorous, and not as effective. To be sure, these steps are challenging to enact in the West. But to break the momentum of the virus, we must act decisively.
The world’s answer to breaking the conundrum will need to be robust, no matter whether we fully control the spread of the virus and prevent resurgence (ahead of vaccines or treatment innovations), or whether we cannot fully contain the virus and need to rely on continuing interventions for some time. In both cases we must find ways to protect lives and livelihoods.
We propose to move much faster in establishing comprehensive and clear Behavioral Protocols to allow authorities to safely release some parts of the blanket lockdown measures that choke our livelihoods today. These can only work if we also find Acceptable Enforcement Mechanisms for these protocols so that we do not run the risk of placing socially unacceptable demands on people.
These protocols are guidelines on how to operate businesses and provide government services under pandemic conditions. Some of these protocols are already in use. Could they be more widely adopted?
Courageous healthcare professionals work in hospitals where the virus is rampant; they have strict rules regarding all aspects of their tasks, movements, and behaviors to keep them and their patients safe. Could your supermarket operate safely with these kinds of rules in place?
In high-tech factories in China today, every person must have passed a COVID-19 test. Everybody. How would you feel about entering a plane today, if you knew that every passenger, crew member, and maintenance worker in contact with the plane had tested negative for the virus?
Some restaurants have already shifted entirely to home delivery, changing their business model and protocols to adapt to the virus. Could you operate your own service business safely by adopting new protocols?
These protocols cannot be static. Today, lockdowns are often implemented uniformly for everybody, everywhere, regardless of specific infection risks. Imagine a world in which, based on a deep understanding of infectious risks, tailored sets of protocols with different levels of rigor could be implemented for every city, every quarter, and suburban neighborhood.
Such dynamic protocols are technically possible. Modern technologies and data analytics can help track and predict infection threat levels to vulnerable population segments and areas; protocols and public-health interventions can be dynamically adjusted to provide protection when and where needed.
With such protocols, lockdown measures could be eased faster, for more people, in more places, while still maintaining the effectiveness of public-health interventions to control the virus. Much greater availability of personal protective equipment and test kits is also essential, of course.
Acceptable Enforcement Mechanisms
This is the harder part. How do we get everybody to accept the consequences of creating and implementing such behavioral protocols? The areas of sensitivity are many, including our personal freedoms, right to privacy, and fairness in access to services. There are no uniform answers to these issues. The level of sensitivity in each of these areas differs by country, and there also are huge differences in what is socially acceptable. In each country, people will have to work together to find ways to enforce behavioral protocols that fit their specific situation and circumstances. But make no mistake, the starting point will not be pre-COVID-19 social and societal norms—it will be the blanket lockdowns now in place across many countries.
In Hong Kong, the government has extended COVID-19 testing to all arriving passengers. It will allow asymptomatic travelers with the disease to self-quarantine at home. But because of the high risk of further transmission, the country requires these people to wear electronic wristbands to “geo-fence” them in their home. Compliance is enforced with the threat of long prison terms for violations.
We will need to develop and enforce protocols that allow us, as quickly as possible, to release some of the most stringent measures in appropriate places. And for that to happen, each government will need to find effective, yet socially acceptable ways of enforcing these measures and new protocols.
We need a plan to achieve both imperatives—Now!
We will keep updating our scenarios, and we hope that in coming weeks we will have a better sense for which scenario the world is likely to follow. However, a few things are already clear:
This could be the most abrupt shock to the global economy in modern history.
There is a real risk for our lives and our livelihoods to suffer permanent and possibly irreversible damage from this crisis.
While we must take actions to control the spread of the virus and save lives vigorously, we must also take action to protect our livelihoods.
Behavioral protocols and dynamic interventions could help us release lockdowns earlier, get most people back to work, and get everybody’s lives back on track.
As Angela Merkel said last week in an appeal to Germany, and others have echoed, our ability to come through this crisis will primarily depend on the behavior of each of us. The initial and immediate lockdowns are necessary to break the spread of the virus and safe lives. We believe that with the right protocols in place, and people following these protocols, the lockdown constraints can be gradually released sooner rather than later.
The question is: Can the world work fast enough on these protocols, and can we get societal acceptance to enforce them? If so, we should be able to control the virus, soften the inevitable economic crisis to sustainable levels, and safeguard our lives and livelihoods.
That is the imperative of our time.
COVID-19 is an unprecedented humanitarian challenge for all countries. Six weeks of national lockdown have given India the time to make a concerted effort to flatten the pandemic’s curve. Now attention is shifting to reopening the economy while containing the virus: a conundrum many other nations are also grappling with.
In the past six weeks, India’s economy has functioned at 49 to 57 percent of its full activity level, by our estimates. That economic cost, though unavoidable in the early stages of a lockdown, might not be sustainable in the longer term. It is becoming increasingly clear that COVID-19 will not disappear immediately; the economy will need to be managed alongside persistent infection risks, possibly for a prolonged period. After reopening, some countries have needed to resume lockdowns in response to rising infection rates, and India may be no exception.
How Indian businesses, consumers, and workers are equipped to resume their activities, even amid the ebb and flow of the virus, will decide how lives and livelihoods fare in India. Effective management of lockdowns, along with health-system preparedness1 to manage and contain the virus), will be a critical capability for Indian administrators, since restarting the economy comes with risks. The lockdown- and restart-management capability will have to be granular and dynamic, with local implementation closely aligned to state- and central-government policy and support from high-quality communication.
Implications of lockdown to consider
Looking ahead, three considerations may shape a suitable approach for India.
1. India’s intertwined supply chains need a sharply targeted lockdown approach.
India’s manufacturing, labor, and distribution chains are intertwined across sectors and geographies, particularly in the wake of the Goods and Services Tax that has eased interstate trade and commerce.
As a result, an economic activity allowed in one part of the country or economy could be constrained by supply-and-demand bottlenecks in other parts. Supply chains, demand centers, and labor corridors would need to be restored while the country ensures that lockdowns are sharply targeted in the locations and for the activities required to contain the virus. Those targeted guardrails would need to be adjusted dynamically as the situation evolves over the coming year.
The following examples highlight a few of the dependencies across Indian sectors and geographies:
In the textiles sector, cotton is bought in the western parts of India, yarn is spun in the north and west, weaving takes place in the south, and apparel is manufactured in clusters in the north and south.
In the chemical industry, the acetic-acid value-chain supplies diverse industries, such as pharmaceuticals, pesticides, paper, food processing, and construction. Any blockage to its supply chain would therefore have ripple effects in many other seemingly unrelated sectors.
Electronics manufacturing requires inputs from sectors as diverse as metal working, plastic molding, paper processing, chemical processing, and electrical supplies. Disallowing activity in any of them would affect electronics-manufacturing output.
Six states (including Andhra Pradesh, Kerala, Maharashtra, and Tamil Nadu, which account for 30 percent of construction activity) rely heavily on migrant construction workers from other states. Bottlenecks in the return of migrants would affect building activity in such states.
Half of all drivers engaged in freight movement across the country come from just 14 districts, according to our analysis. Restrictions on the movement of people from these districts could affect the ramping up of national logistics activity.
2. Economic activity is concentrated in red-zone districts that are critical centers of production and consumption
The Indian Ministry of Health and Family Welfare (MoHFW) has classified districts into red, orange, and green zones, based on multiple criteria.2 The 130 districts classified as red-zone districts are some of the most urbanized and industrialized parts of the country. They account for some 41 percent of national economic activity, 38 percent of industrial output, 40 percent of nonfarm employment, and more than half of India’s consuming-class households3 (Exhibit 1). Within this set of red-zone districts, 27 districts that have relatively higher infection rates and are more urbanized account for roughly one-third of the economic activity. Finding methods of keeping these red-zone districts operational and safe would be critical in keeping economic activity sustainable.
3. Significant on-the-ground implementation challenges need to be addressed
Under the most recent guidelines from the Indian Ministry of Home Affairs (MHA) on May 1, 2020, almost all activities have been permitted, including in red-zone districts, while specific containment zones within districts are required to stay locked down. State governments are empowered to reopen local district-level economies within the overall central guidelines.
The dominant concerns at the state and local levels are infection and mortality rates, indicators that tragically affect communities and are counted daily or even hourly. Economic consequences of lockdowns, such as job loss and poverty, show up over weeks and months. State governments are naturally considering their healthcare-capacity levels; virus-screening, -tracing, and -containment resources; and ability to enforce safe work protocols on the ground. With these factors coming into play, many red-zone districts could continue to remain fully locked down in the near term, and some others could be locked down again. Based on current announcements, two of India’s largest cities, Mumbai and Pune, representing 6 percent of India’s GDP, will stay locked down until May 17, 2020; the containment zones within them house a fraction of their populations.
Even where districts have reopened, varying interpretations of government guidelines by local frontline administrators could confound the issue. For example, current guidelines stipulate that industries with “access control” can be reopened, but state authorities need to determine what that means—and the interpretation may vary, even among frontline functionaries within a particular state or district. In the dynamic environment anticipated, such guidelines may change frequently as Indians live and work alongside COVID-19 in the coming months, needing an agile implementation capability on the ground.
Potential reopening implications for economic activity and workers
Based on district-level data on employment for more than 700 districts across 19 sectors, we estimate that only 49 to 57 percent of India’s economic activity has operated during the lockdown so far, with 143 million to 186 million inactive nonfarm workers.4 Economic activity on the ground may rise going forward, although reaching full potential would require considerable effort to boost local confidence in large swathes of the country.
We conducted a thought experiment to simulate potential changes in economic activity and work levels under different assumptions. Exhibit 2 shows three potential cases under various implementation levels of the recent MHA and MoHFW guidelines:
In the moderate-opening case, we assume the recent reopening guidelines from MHA (to allow all districts, except for their containment zones, to operate most activities) are implemented in all but 130 red-zone districts. In those 130 districts, we assume urban areas allow only essential services and rural areas allow manufacturing and construction to resume. In this case, only 66 percent of national economic activity is operational, with around 107 million inactive nonfarm workers.
In the broad-opening case, we assume that MHA guidelines are implemented in all but 27 red-zone districts (the most urbanized ones that also have relatively high infection rates), which we assume remain locked down and permit only essential services in urban areas. In this case, around 80 percent of national economic activity is operational, and the number of inactive nonfarm workers is around 67 million.
In the extensive-opening case, we assume that all districts restart permitted activities outside their containment zones, with careful monitoring of health implications. Here, at least 96 percent of economic activity is operational, with 17 million inactive nonfarm workers.
In both the moderate- and broad-opening cases, the lack of adequate work opportunities and a consequent increase in the vulnerable population are significant concerns. Populous states such as Maharashtra, Tamil Nadu, Uttar Pradesh, and West Bengal could each see around five million inactive nonfarm workers, even in the broad-opening case (Exhibit 3). That level of unemployment would pose a considerable burden of providing social safety nets: we estimate that meeting just the most essential needs of those workers and their dependents could cost more than $12 billion per quarter.
Granular, dynamic, and locally driven lockdown- and restart-management capabilities
To enable the economy to reopen sustainably championing the health and safety of citizens, India needs to take into consideration several types of measures:
Strengthening local health preparedness. To reopen sustainably, health-system preparedness needs to be enhanced across a large number of districts, particularly the red-zone ones.
Moving from a list of permissible activities to a not-permitted or “negative” list. Short, sharp communication around what is not permitted would be easier to understand and implement than would a list of permissible activities. It would also help avoid the risk of entire sectors or industries being disallowed if they were not mentioned in the permitted list.
Reinforcing the principle of locking down only the containment zones, not entire districts, in line with MHA guidelines. Administrators, particularly at the district level, are focused on what is being reported daily—disease statistics. Providing a 360-degree view that tracks health impacts across both lives and livelihoods will enable better-informed decision making.
Increasing implementation capacity at the district level. More than 700 capable and trained officers could be deputed to work with district magistrates in each district to execute locally tailored back-to-work plans. They could receive support from cross-functional centers of excellence in states or a center that channels medical, administrative, social, economic, and business expertise and best practices; conducts rapid analyses; and provides valuable feedback to the districts. This happens in every Indian election.
Operationalizing safe passage along key labor corridors. Guidelines that restrict the interstate movement of people could be rapidly reviewed. Given the supply-chain linkages, the safe and controlled movement of labor between urban and rural areas, as well as within cities, will be critical if economic activity is to resume.
Strengthening coordination and communication. Tight coordination among various arms of the government—central departments, states, local administration, and regulators—and with stakeholders from industry and commerce is important. A senior-level state-cum-central government COVID-19 forum that meets weekly could be created to interact frequently, sharing cross-functional learnings. This could help deliver clearer communication to stakeholders at all levels.
Looking ahead and planning for contingencies. The future remains uncertain, and India will need to be ready for all sorts of eventualities. It would be wise at all levels of government to develop contingency plans based on scenarios of potential COVID-19 impacts.
India’s economy will need to function alongside COVID-19 for a prolonged period. A well-implemented, granular, dynamic, and locally driven lockdown- and restart-management capability while managing health risks is required. There is much at stake for India—in both lives and livelihoods—in getting this right.
In these stressful, surreal times, it’s understandable for CEOs to fixate on urgent corporate priorities at the expense of more intangible, personal considerations. How important is getting your people to think about their “purpose in life” right now when you’re worried about their well-being—not to mention corporate survival?
It’s more important than you think. During times of crisis, individual purpose can be a guidepost that helps people face up to uncertainties and navigate them better, and thus mitigate the damaging effects of long-term stress. People who have a strong sense of purpose tend to be more resilient and exhibit better recovery from negative events.1 Indeed, our research conducted during the pandemic finds that when comparing people who say they are “living their purpose” at work with those who say they aren’t, the former report levels of well-being that are five times higher than the latter. Moreover, those in the former group are four times more likely to report higher engagement levels.
Purposeful people also live longer and healthier lives. One longitudinal study found that a single standard deviation increase in purpose decreased the risk of dying over the next decade by 15 percent—a finding that held regardless of the age at which people identified their purpose. Similarly, the Rush Memory and Aging project, which began in 1997, finds that when comparing patients who say they have a sense of purpose with those who say they don’t, the former are:
2.5 times more likely to be free of dementia
22 percent less likely to exhibit risk factors for stroke
52 percent less likely to have experienced a stroke
And if this wasn’t enough, individual purpose benefits organizations, too. Purpose can be an important contributor to employee experience, which in turn is linked to higher levels of employee engagement, stronger organizational commitment, and increased feelings of well-being. People who find their individual purpose congruent with their jobs tend to get more meaning from their roles, making them more productive and more likely to outperform their peers. Our own research finds a positive correlation between the purposefulness of employees and their company’s EBITDA4 margin.
Purpose can be an important contributor to employee experience, which in turn is linked to higher levels of employee engagement, stronger organizational commitment, and increased feelings of well-being.
Against this backdrop, CEOs and other senior executives should pay more attention to individual purpose as companies return to operations and begin feeling their way into the subsequent phases of the “next normal.”
It’s a sure bet your employees will be doing just that. People seek psychological fulfillment from work, and, as the crisis recedes and companies ramp up new ways of working, some people will experience friction, and even dissonance, around issues of purpose. Workplace interactions that felt meaningful and energizing face-to-face, for example, may feel much less so over a video call. Meanwhile, other employees will be looking to see if their companies’ actions during the crisis matched their companies’ high-minded words beforehand—and basing their career plans on the answer. And at companies where employees excelled during the crisis, business leaders will want to find ways to recapture, and sustain, the sense of organizational energy, urgency, and speed—without the accompanying fear and stress.
In this article, we explore the organization’s role in individual purpose by highlighting results from an ongoing research project into the intersection of organizational purpose and individual purpose, and examine how the two interact and fuel each other through the medium of the employee experience. Along the way, we highlight ways that companies can help employees find or articulate their purpose, explore how it applies to their working life, and seek to make purpose a tangible part of people’s jobs. Finally, we hope to provide an occasion for deeper introspection on the parts of CEOs and other leaders themselves. After all, if we don’t reflect on life’s direction and meaning when life as we know it feels so threatened, when will we?
Individual purpose can be thought of as an overarching sense of what matters in our lives, and we experience purposefulness when we strive or work toward something personally meaningful or valued. Research shows that most people say they have a purpose when asked, although it’s often difficult for them to identify or articulate.
Yet even when a person’s purpose is clear, it can intersect with an organization’s purpose in counterintuitive ways. Consider Alice, Maya, and Peter—fictitious composites drawn from our experience. All three work for a global healthcare organization with a strong, well-communicated purpose: to transform the lives of patients and their families by developing lifesaving therapies. This is music to Alice’s ears—she sees her purpose as alleviating the suffering experienced by people living with chronic diseases; the company’s purpose is a big part of why she joined. Maya appreciates the company’s purpose, but it’s much less inspiring for her than it is for Alice. Kaan feels a deeper sense of meaning from taking care of her family and supporting it financially. John, meanwhile, clearly sees his purpose as caring for others and alleviating their suffering. Yet unlike Alice, who loves her job because of how well it aligns with her purpose, Peter is saving his paychecks and counting the months until he can quit and begin nursing school, where he expects to start truly living his purpose.
As these examples suggest, what people need from work and what drives them personally can be complicated. Sometimes an individual’s purpose aligns perfectly with organizational purpose, as with Alice. But other times it’s only a partial match, as with Maya and Peter. And for still other employees, it may be a poor match or none at all.As CEO, part of your job as organizational architect is to ensure that these two different forms of purpose—organizational and individual—are connected and mutually reinforcing, and are ultimately a consideration in everything from hiring, feedback and incentives, and learning to matching individuals to jobs they will find most fulfilling.
Before you can do any of that, however, you need to help your employees better understand their own purpose and how it operates, starting with the general types that help describe and characterize it. And don’t forget: this applies to you, too. The more purposeful, open, and empathetic the leader, the more likely that he or she can instill the trust necessary to encourage people to leave their comfort zones and explore how their purpose might be better met at work.
What we measured
Human values are an important factor when defining individual purpose, as they help people determine what is personally important to pursue in life and work. Therefore, to better understand how people think about and experience purpose, we developed a survey to map the type and intensity of a range of universally held human values including tradition, security, power, and achievement, among others.
Subsequent statistical analysis of the survey responses highlighted nine common ways that people orient themselves toward purpose (see sidebar “Nine types of purpose”). While an individual’s purpose may hew quite closely to one of these nine types (exhibit), it may instead arise from combinations of them, with the relative emphasis and priority of elements varying from person to person. The interactive further below shows three such patterns (or purpose archetypes) that arose from our research.
Academic research and our own experience tell us that an individual’s sense of purpose isn’t fixed or static—it can be clarified, strengthened, and, for some, may serve as a lifelong aspiration, or North Star. And, while what people find meaningful tends to evolve over long timeframes, it can shift relatively quickly, particularly in response to the kinds of life-changing events that many people are experiencing now as a result of the pandemic, or the more recent racial-justice protests. A leader previously fueled by personal achievement, for example, might emerge from the trauma of these times more motivated by issues of equality or by contributing to community. Or a leader formerly motivated by freedom and independence might find the tug of stability meaningful.
What to do about it
The pandemic has been a cruel reminder for companies everywhere of how important it is to never take healthy or motivated employees for granted. Since individual purpose directly affects both health and motivation, forward-looking companies will be focusing on purpose as part of a broader effort to ensure that talent is given the primacy it deserves.
While it may be early days in understanding precisely how an individual’s purpose connects to what he or she wants and needs from work—or how these tie to an organization’s purpose—now is the time to start figuring it out. Start by simply discussing these matters with your team openly, honestly, and thoughtfully. By treating this as the beginning of an ongoing conversation about purpose, meaning, and what your employees want from work, you can help people better identify and articulate their purpose, and even start finding ways to help them live it more fully at work—an outcome that will benefit everyone.
And as you get started, remember that your actions and your capacity to lead with compassion play an outsize role now. You will have access to only what your people give you access to. Treat these conversations and resulting insights as the gifts that they are, and you’ll increase the odds of seeing more of both.
During times of crisis, effective leaders are important sources of trust, stability, meaning, and resilience. They also play a vital ‘sensemaking’ role for those around them.
Start the conversation—yesterday
During times of crisis, effective leaders are important sources of trust, stability, meaning, and resilience. They also play a vital “sensemaking” role for those around them. For many people in your organization, the urgency of this time is to blend exhilaration with extraordinary stress. Those who compartmentalize the pressure and trauma may face stress, anxiety, and burnout later—and purpose will be a catalyst in these dynamics.
Consider, for example, the teammate who feels tension between the imperative to meet foundational needs by earning a paycheck, and the frustration (which may be unconscious) of not having the time, opportunity, or license to focus on their purpose. Or the colleague who thrives on face-to-face interactions with customers and coworkers but finds days filled with video interactions draining and deadening. People need empathetic and caring leadership to help be aware of, understand, and grapple with such tensions as they develop.
Simply talking about the pressures can help heighten your colleagues’ sense of purpose at work, as will encouraging your team to step back from the immediacy of the crisis to focus on the bigger picture and what matters to them.
One effective way to do this is through periodic, guided conversations with your direct reports. Don’t think of these as project check-ins, or even as purpose check-ins, but rather as empathetic check-ins—a chance to understand how employees are doing and learn how you can support what they need. Have your company’s managers make these meetings a recurring part of how they lead as well.
Make personal reflection a business priority
By creating a space for honest discussions about purpose—including your own—your team will hopefully be more willing to explore the topic for themselves. A “purpose audit” can help. Create the time that people need to consider how their work is fitting into the bigger picture, using the nine types of purpose as a starting point to explore what elements resonate and why. When people can articulate a purpose, do they feel they are living it? What barriers prevent them from living it more fully? How—if at all—have recent events changed the way they think about purpose? One deceptively simple ice-breaking question that we’ve seen elicit rich conversations is: “When do you feel most alive?”
Help people take action
There are many things leaders can do to help ignite purpose for their colleagues. For example, one large retailer dedicates time for a regular “purpose pause,” where teammates are encouraged to celebrate their involvement in local community projects and to identify new ones to support. The company uses an app to spur connectivity and increase the odds that good ideas are applauded and shared.
For its part, Zappos created a customer-service line to answer questions and help find solutions for people dealing with the pandemic. The kicker? Callers need not be Zappos customers, and the topics can be anything—from food delivery and finding essential supplies to literally anything on a caller’s mind. To be sure, with business slower and call volumes down, the hotline gives the company’s customer-service reps something to do between their regular calls. Yet it also offers reps the chance to help others and connect with them, which is one way that people can help satisfy the psychological need for belonging. And research around job design suggests that even simple tasks are perceived as more meaningful when our psychological needs are satisfied.
As these examples suggest, purpose and meaning can be valuable considerations in adjusting day-to-day routines or even in designing roles. But even if you’re not ready to go as far as Zappos, there are other ways to give people license to be purposeful now. When possible, create opportunities, such as the following, for people to live their purpose during this time by tailoring projects, support, communication, and coaching to suit different needs, values, and situations:
For the up-and-coming leader who views her purpose as freedom to learn, grow, and experiment, empower her to try new things in service of customers and stakeholders, keeping projects within guardrails but without multiple layers of oversight. Be sure to frame any negative outcomes as learning, not failure.
For a team member who values preserving and upholding tradition, invite him to help plan important organizational or community rituals (like team events or company days). Such events create connection and can be critical to build and maintain culture.
For colleagues whose purpose is aligned with equality and opportunity for others, consider connecting them to the forefront of company initiatives and projects where your organization is helping the communities in which you operate.
Keep in mind that some people view their purpose as caring and providing for those closest to them—and practically everyone else in your organization will be feeling anxiety around these issues right now. Be sure to tailor your communication to address their needs, too, so that this time takes less of a toll on their personal purpose.
As much as the pandemic is testing your leadership right now, the real test with purpose starts as the immediate crisis fades and the hard work of reimagining and reforming your business for a postpandemic world begins.
Reimagine a purpose-led future
As much as the pandemic is testing your leadership right now, the real test with purpose starts as the immediate crisis fades and the hard work of reimagining and reforming your business for a postpandemic world begins. Embedding and activating individual purpose more thoroughly in the various elements of the employee experience will take hard work and commitment. While it’s too soon to say what best practice will look like, it’s safe to say that the more you can connect purpose to the following areas, the more likely the benefits will build upon one another:
Recruiting. Explicitly connect the purpose of the organization to the personal contributions an individual in the role could bring to the company. By backing it up with real, purpose-rich stories from hiring managers who have seen this in action, you will increase the odds of attracting people whose purpose fits well with the organization and the work, and help them be productive sooner.
Onboarding. Make purpose part of the first conversation with both the manager and the team to build a shared vocabulary. Start people off right by helping them reflect on how the work and the organization connect with their own purpose. In fact, applied research finds that encouraging new employees to focus on expressing personal values at work allowed them to significantly outperform peers, be more satisfied at work, and increased retention by more than 30 percent. 7
Feedback and performance management. The value of strengths-based feedback is well known; purpose is a natural extension that can help connect an individual’s broader self to their work. Activating purpose during feedback sessions may even help buffer people against the uncomfortable aspects of receiving negative feedback. Try starting a performance conversation with a reflection on purpose and how the work the individual has been doing—as well as their performance—illuminates their purpose and values.
Other employee journeys present moments for purpose as well. Ask yourself at each point: How could we make purpose part of this conversation or interaction? What unexpected benefits might result? How might the accumulation of these small moments build a purpose movement in my team and organization?
These are challenging times, and people who are able to draw energy and direction from a sense of individual purpose will weather them with more resilience, and will recover better afterward. Companies that embed and activate individual purpose in the employee experience can benefit as well, including through improved performance. And, of course, purposeful work and a purposeful life are enduring benefits in and of themselves—ones that everyone should have the opportunity to seek.