The COVID-19 pandemic has shown how vulnerable individuals, organizations, and countries at all levels of development are to disasters.
Experience of adversity and unforeseen situations are common to individuals, organizations and societies at large. In coping with forces beyond the control of an organization, resilience is an essential for continuity and sustainable growth. The McKinsey management and consulting group's study of the 2008 economic crisis noted that some companies were hurt but recovered more quickly than others. "By 2009, the earnings of the resilient companies had risen 10 percent, while that of the nonresilients had gone down almost 15 percent (Sneader & Singhal, 2020).
This note looks at resilience with a view to understand the factors that foster or hinder resilience.
The questions resilience seeks to answer: Why do some organizations experiencing operational and financial stress succumb while others prove resilient and even thrive? What are the key attributes that contribute to resiliency?
The search for competitive advantage is relentless following a crisis. Strategic leadership requires an understanding of how the resilience operates at different levels and their linkages to effectively cope with changes.
What Is Resilience?
Resilience, as defined by Hamel and Välikangas, "refers to a capacity for continuous reconstruction. It requires innovation with respect to those organizational values, processes, and behaviors that systematically favor perpetuation over innovation" (2003).
The concept of resilience has been examined from various perspectives. Ecologists such as Holling (1973) and Perrings (2001) have defined it as the capacity to absorb stress and shocks. Tinch (1998) notes characteristics such as stability, persistence, resistance, nonvulnerability, and stochastic return time.
An integral part of resilience is a business continuity plan (BCP) that identifies major risks of business interruption, plans to mitigate or reduce the impact of the identified risks, and tests the plan to ensure its effectiveness. Business continuity equals revenue continuity (Ruettgers, 2003).
Knowing what to secure, assessing risks, and developing business recovery policies is central to business continuity.
The challenge for individuals, organizations, and societies is to build their capacity to absorb or recover from change without draining resources. As part of the larger social fabric, organizational resilience is understood in the context of the communities and the society they operate in.
Why Resilience Matters
Organizations that fail to adjust to their changing environment soon lose their relevance as they go out of business or get acquired. While new entrants, takeovers, and bankruptcies are part of sustaining competitiveness, they cannot address the resilience problem. First, there are organizations that are not open to takeovers, such as privately owned companies, national service organizations such as the Red Cross, and government agencies. Lack of resilience would lead to their inability to serve their objectives. Failure of organizations means their intellectual capital disintegrates and may take years to recover. Nonadaptive organizations lead to gross underuse of society's resources. The reason to care about institutional resilience is that it improves its capacity for continual renewal.
Events such as the financial crisis of 2008, Hurricane Katrina in New Orleans in August 2005, the tsunami earthquake in the Indian Ocean in December 2004, the Fukushima Daiichi nuclear disaster in March 2011, terror attacks of September 2001, and the Chernobyl reactor failure in Ukraine in 1986 highlight the world's vulnerability to disasters. The devastating effects of the global COVID-19 pandemic have affected countries across the globe. In planning for the future, we must expect that all disasters are possible, assume the worst, plan for the impact, and lay the foundation for speedy recovery.
Upheavals profoundly change management practices. The Great Depression irrevocably transformed management theory which had until then relied on mechanical input-output measurements, giving rise to the human relations movement. The global financial crisis of 2008-10 led companies to shift from permanent employment. This eventually prompted individuals to take on multiple jobs, now referred to as the "gig" economy.
And the latest of these upheavals, COVID-19, will have a lasting impact on organizations and leadership styles. Supply chains will be relooked; companies will restructure as more work is done from home. As we become more digitally connected and more physically disconnected, trust may become more important and more fragile. Organizations have to step up to address such issues.
The degree of psychological and economic losses that individuals, organizations, and societies suffer depends upon their resilience. Resilience goes beyond survival; it is the ability to bounce back and even become stronger in spite of the threats to survival. Preventive and predictive actions may reduce our vulnerability. However, it is our ability to reduce loss through resilience that determines how well and how fast we return to normalcy.
Carver (1998) describes potential outcomes of adverse events as succumbing, surviving with impairment, recovery (resilience) and thriving. "A shared passion to be successful is a crucial ingredient in creating resilient enterprises" (Sheffi, p. 15).
To understand the role of strategic leadership in ensuring that organizations bounce back with speed in the face of adverse events, let us examine how resilience is developed.
Putting Resilience to Work
The environmental changes in recent years have created a keen interest in both management scholars and practitioners to understand how individuals and organizations cope with these changes. Psychiatrists have explored the factors that enable individuals perform well under stress and to recoil from setbacks. For business leaders, therefore, the focus is on both the individual and the organizational resilience.
According to Larry Mallak (1998), there are seven resilience principles that organization leaders can put in place to ensure a resilient organization.
- Perceive experiences constructively.
- Perform positive adaptive behaviors.
- Ensure adequate external resources.
- Expand decision-making boundaries.
- Practice bricolage.
- Develop tolerance for uncertainty.
- Build virtual role systems.
Why do many organizations succumb when adversity strikes them? Dalziell and McManus (2004) point out that the traditional approach was to make systems less vulnerable to hazards. However, system resilience can be increased by increasing the speed of the system to re-bounce from adverse events. The failure lies in their inability to execute (Charan & Colvin, 1999).
The indivisible element in coping with change is the individual. The reaction of the individual—
as a subordinate or a leader—determines how the organization would react to its changing internal and external demands. Dalziell and McManus (2004) say that a key in system resilience is the ability of the system to respond and recover from an event, but as they note, "recover to what?" is also important.
Charles Carver (1998) cites four potential consequences when adversity strikes.
- first, the downward slide in which the individual succumbs,
- second, where the individual survives but with capabilities weakened,
- third, when the individual bounces back to the original level, and
- fourth, where the individual surpasses previous levels of functioning.
Resilient individuals carve out coping strategies that may be either positive (resilient or thriving) or negative (surviving with impairment or succumbing). Resilience in individuals comprises of developing self-efficacy that consists of confidence in one's own ability to perform and its execution in the face of adversity (Mallak, 1998). They develop an innate ability to move forward and succeed.
According to Bandura (1989), individuals effect changes in themselves and their situations through their own efforts, including controlling thought processes, motivation, and actions. Through empirical tests, Bandura shows that persons make "causal contribution to their own motivation and action" within a system of what he calls "reciprocal causation (Bandura, 1989).
Individual self-efficacy beliefs affect thought patterns that Bandura terms "self-aiding or self-hindering" (1989). According to this social cognitive theory, much human behavior is regulated by cognized goals and self-appraisal of capabilities. As Bandura (1989) states, "The stronger their perceived self-efficacy, the higher the goals people set for themselves and the firmer their commitment to them." While short-term help is important for recovery, Bandura states the key to building personal resilience is to avoid dependency and therefore loss of control.
As organizations face unprecedented changes, they face a growing "boundarylessness" of their organizations. Baruch (2004) notes that DeFillippi and Arthur (1994) argue that "a major consequence of boundaryless organizations is the emergence of boundaryless careers." As careers become multidirectional, individual resilience in a turbulent environment demands that they retain a sense of their personal security through continuity of their jobs. The blurring of boundaries has demolished static career systems—"they have become more diverse and less controlled by employers" according to Baruch (2004), who notes that managing individual careers requires qualities that differ considerably from those in the past.
Baruch (2001) suggests that although the idea of employability is beneficial, it is impractical for organizations to use it as a substitute for loyalty and trust-based relationships. The multidirectional career model suggested by Baruch (2004) takes into account the full scale of what he calls "landscapes" in which the individual "can climb the mountain, opt for another mountain, take some hills instead, or wander along the plains" as a way of illustrating options. The focus of most scholarly work on individual resilience is on self-efficacy and self-navigation.
For a strategic leader, development of individual resilience is a first step to developing organizational resilience.
The model of a resilient organization is based on interaction between the individual and the environment. Dalziell and McManus (2004) use the term resilience to describe "the overarching goal of a system to continue to function to the fullest possible extent in the face of stress to achieve its purpose, where resilience is a function of both the vulnerability of the system and its adaptive capacity." They point to the "need to focus not only on the vulnerability of our systems to failure, but also on our ability to manage and minimize the impact of any failures (Dalziell & McManus, 2004).
The resiliency audit model for organizations developed by Hind et al. (1996) suggests that a critical dimension of the interaction between the individual and organization is the "psychological contract" based on a reciprocal relationship of individual's commitment and trust in exchange of the organization providing job satisfaction, job security and promotion prospects (Hind et al., 1996). Resilient organizations score high on the factors in resiliency audit and ensure that the risk of violating the "psychological contract" in periods of change is minimized. They do this through helping individuals regularly assess their skills and interests and support their life-long learning and career development to ensure their employability in times of downturns.
Peter Senge (2005) explains that rapid changes require organizations to be flexible and adaptable to stay competitive. The five disciplines that Senge identifies converging to innovate learning organizations are:
- systems thinking
- personal mastery
- mental models
- building shared vision
- team learning
Resilient organizations encourage and nurture a shift of mind, according to Senge, "from seeing parts to seeing wholes, from seeing people as mere reactors to becoming active participants in creating the future" (Senge, 2005).
Bricolage is the creation of solutions from whatever happens to be available. In times of rapid change, formal organizational roles systems often collapse but need not result in failure if the individuals retain the whole picture in their minds and assume whatever role is vacated. Faced with unforeseen situations, according to Weick (1993), leaders know they don't understand what is happening because they have never had to confront such an event. "Extreme confidence and extreme caution both destroy what organizations most need in changing times, namely, curiosity, openness, and complex sensing" (Weick, 1993).
When formal organizational structure is inadequate to meet with changes or it collapses, the individual and social interactions developed in the organizations have to come in play to counteract vulnerability.
Weick (1993) suggested a structure of organizational resilience by analyzing the Mann Gulch fire in 1949, made famous in Norman Maclean's Young Men and Fire, which resulted in the death of 13 men. He identified bricolage, virtual role systems, the attitude of wisdom, and respectful interaction as factors in organizational resilience.
The concepts of psychological contract, the learning organization, resiliency audit, and distributive leadership cut across all organizations, large or small, and situations brought about by change, gradual or sudden, and even in organizations where attention to routine working is critical to their safety and survival.
"Societal" resilience is our adaptive response to unforeseen events and takes place at the level of the individuals, private and public organizations, families, local communities and the county, state and federal governments. Rose (2004) shows economic resilience to disasters can be seen as dimensions of resilience. He also proposes a "general equilibrium model" for analyzing the behavior of individuals, businesses, and markets.
The measurement of resilience and its audit are important, Rose says, because they "enable us to evaluate strategy for reducing economic losses" from external changes (2004). Inclusion of resilience in policy-making helps react to adversity and reduce losses.
Reich (2006) provides a psychological perspective and incorporation of three principles of resilience in disaster planning: control, coherence, and connectedness. Disaster responses should focus on reducing uncertainty through extensive communications and understanding to generate cognitive clarity. Providing structure and coherence in interactions helps people understand how the events in their lives are going to be impacted. Reich notes: "The individual's need for social connectedness is probably never greater than in times of disaster" (2006). The value of an integrative model, according to Reich, "is that it provides a conceptual framework for understanding human resilience" (2006).
A resilient community is based on resilient individuals. The resilience at individual, organizational, and societal levels are interwoven, and any model of resilience should reflect this interconnectedness. See Appendix.
Metrics for Evaluating Resilience
In light of events that show the vulnerability of countries throughout the world to disasters, metrics are needed to measure and benchmark the resilience of organizations.
The 2019 FM Global Resilience Index Annual Report by Pentland Analytics provides ranked scores for 130 countries by combining the 12 core drivers of resilience (FM Global, 2019):
Exposure to Natural Hazards
Control of Corruption
Natural Hazard Risk Quality
Quality of Infrastructure
Fire Risk Quality
Inherent Cyber Risk
Supply Chain Visibility
The structure of the index enables business executives to identify the sources of strength and vulnerability in a country's resilience.
BSI explores organizational resilience best practices by tracking how confident business leaders
feel in the ability of their organizations to adapt to change. The BSI Organizational Resilience Benchmark tool focuses on 16 elements in building and developing organizational resilience, and its website allows a user to create a "spider diagram" for an organization (BSI, 2020):
Governance and Accountability
Vision and Purpose
Awareness Training and Testing
Information and Knowledge
Organizational resilience results help to review how an organization's strengths and vulnerabilities in leadership, people, processes, and product categories based on the 16 key elements compare against other organizations.
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