What Makes An Organization Resilient?

In response to growing global uncertainty there is an interest in what makes organizations more or less resilient - but what do we mean by resilience and what are the properties of resilient organisations? In this article we consider the view of 50 CEOs from critical infrastructure and other organisations. The CEOs were interviewed during late 2011 as part of a project designed to identify research priorities in the area of organisational resilience. The resulting analysis suggested three broad capabilities:

- Effective 'Business as usual capability: the amount of change an organisation can undergo and still have its current business plan, structures, policies and procedures remain effective and relevant; - The ability to change and adapt: a capacity to respond and recover without the need for external intervention or top down planned redesign; - The ability to shape the environment: a capacity to continually improve to deal with and even benefit from uncertainty - both that generated from within and without.

These are applicable to all organisations regardless of circumstance or industry, however, the ability of an organisation to undertake them is limited by a combination of factors that will be discussed in more detail later. Firstly, we need to consider each dimension in more detail.

Effective 'Business As Usual' Capability: this refers to the efficiency and effectiveness with which the organisation undertakes its 'business as usual' activities under normal conditions. Put simply, if the organisation isn't good at 'business as usual' during the good times, it will be less able to cope when it needs to deal with unexpected disruptions. As one CEO noted:

My take on it would be if you've got a strong core, your ability to have strength in other areas is probably enhanced, by core, organizationally I mean your ability to do business as usual.

The Ability to Change & Adapt: Here organisational resilience comes from the organisation's ability to adapt and change in response disruptions in its environment. The CEOs distinguished between short-term and long-term disruption and change. Typically short-term disruptions take the form of natural disasters, like storms, earthquakes and floods. However they could also be of a non-physical nature, for example reputational damage through media scandals or adverse social network campaigns. Long-term disruptions take the form of 'slow-burn' events like changes in market trends, climate change or change in regulatory environments. The distinction between and short and long-term adaptation was neatly summarised by one CEO:

So I think when we talk short-term resilience it's about an organisation that's fit for purpose, that's adapting and is evolving as the global market is evolving; is able to respond to short-term shocks, whether that be natural disasters or significant changes in market dynamics. And longer term it's more about the strategic direction that the company takes and where we're positioning ourselves so that we can be successful for the next 100 years.

Typically the ability to change and adapt was discussed in a reactive way. Whilst the organisation may have a clear and sophisticated strategy, the strategy and or purpose of the organisation was used as a backboard against which to make decisions about how to deal with the environment, rather than an explicit attempt to proactively create the environment of the organisation, as was the case in the third dimension.

Shaping the environment: Here the focus of the organisation is to actively create the environment it operates in, either through the innovation of new categories of products and services, the influence of regulation, or fundamental reinvention of the industry in which it operates. Only a small number of CEOs discussed this dimension as a core characteristic of resilience, and those that did all came from long established, global firms. Furthermore, it was not the ability to shape the environment once that characterised resilience here, but the organisation's track record of having done it multiple times, such that it actually represented a capability it itself. A quote again illustrates the point:

So when you look at resilience, I look at, you know, what has the organisation got that is going to maintain that resilience long term. So, you know, if you look at technology companies for example that's a very crowded space: are they reinventing their future?

To some extent the dimensions of organisational resilience describe above represent a proxy for the level of organisational maturity in relation to resilience. Nearly all the CEOs in the sample saw the need for Effective 'Business as Usual' Capability as a precondition for the development of the other dimensions, all spoke about the 'Ability to Change and Adapt', but only a small number identified the organisation's ability to 'Shape its Environment' in the context of organisational resilience.

Whilst in the ideal world all organisations would pursue all three dimensions, there are mitigating factors that limit their ability to do so. Primary amongst these is the degree of commoditisation of the product or service the organisation produces. Organisations that operate in a highly commoditised market can operate on extremely small margins that, in many cases, are beyond their control or influence. This comes down to a lack of financial redundancy in the organisation's operating dynamic. Without this financial redundancy, the organisation is unable to invest in the development of the capabilities that underpin the dimensions of Ability to Change and Adapt, or Shape the Environment, and as a consequence its organizational resilience approach is more likely to be limited to improvements in 'Business as Usual' capabilities that help to maintain or increase its margin. All CEOs who discussed the ability to Shape the Environment operated in industries or markets that involved high margin goods and services. This dynamic would appear to buy these organisation's the time and resource to continuously develop the other dimensions of organisational resilience. Indeed CEOs from commoditised industries, such as mining, recognised that positive fluctuations in the margin received for the commodities they produced, needed to be used to increase their resilience for when commodity prices move in the other direction and their margin disappears. As a consequence, whilst it would be fair to say that the behavioural attributes of organisational resilience and their associated way of thinking are applicable to all organisations, not all organisations will be in a position to take advantage of them.

Behavioural Attributes of Organisational Resilience

The CEOs also identified a range of more specific behavioural attributes that they associated with resilience. Some of these were associated with one or more of the three broad areas identified above while some applied to all. The critical behavioural attributes identified by the CEOs (in no particular order) are as follows:

- Clarity of purpose; - Innovation capacity; - A culture of learning & deep knowledge of the organisation's activities; - Effective risk management systems; - Strong engagement with external partners; - A long-term orientation; - Strong leadership; - Effective communication; - Sophisticated strategy.

Many of these characteristics relate to what are generally referred to as the 'soft' aspects of organisation - such as staff engagement, values, learning and communication. There are several which are to do with managerial capability, such as leadership and strategic capacity and then there are the more systems capabilities such as innovation and risk management.

Overall then resilience, understood from the perspective of 50 CEOs from critical infrastructure and other organisations, suggested three stages of resilience maturity from 'business as usual' to 'shaping their environment'. These derive from underpinning capabilities many of which rely on cultures of commitment and engagement and a capacity to learn and adapt. With this combination of capability organisations can respond to the unexpected in the short term while positioning to capitalise on the opportunity uncertainty creates in the long. Resilience does not come from being compliant and safe but from being adaptive and responsive. While the CEOs identified these attributes as necessary, most organisations in our sample did not get to the capacity to 'shape their environment'. Perhaps this is because it is one thing to identify the necessary underpinning capabilities but achieving them in practice is far more difficult.

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