Last year, organizations were put to the test, upending operations to balance employee well-being, government regulation and making money. Those that successfully navigated COVID-19’s disruptions believed large-scale change was inevitable. “Companies that took steps to prepare for future disasters prior to 2020 were more likely to say they are weathering the pandemic better than their peers,” said the 2021 Deloitte Global Resilience Report.
Last year, organizations were put to the test, upending operations to balance employee well-being, government regulation and making money. Those that successfully navigated COVID-19’s disruptions believed large-scale change was inevitable. “Companies that took steps to prepare for future disasters prior to 2020 were more likely to say they are weathering the pandemic better than their peers,” said the 2021 Deloitte Global Resilience Report.
The fact that pandemics and other global economic shocks are likely to reoccur means companies need to build resiliency quickly. “Change and disruption will be a way of life going forward, so leaders who implement the building blocks of resilience now will be best positioned to thrive going forward,” said Michele Parmelee, Deloitte Global deputy CEO and chief people and purpose officer, in a blog on the company’s website.
Decision-makers in 2021 must shift quickly from survival mode to building for the future. “It’s understandable that you might want to just stabilize your organization after a crisis,” David Lancefield, a guest lecturer at London Business School, wrote in a Harvard Business Review (HBR) blog post. “But this is an opportune moment to take a fresh look at your company — and the landscape it occupies.”
Holistic approach
Matthew Hinton, a partner in the New York management firm Control Risks, said the problem decision-makers face is defining “resilience.”
For some organizations, the term “brings together all risk management functions,” said Hinton. “For others, it’s a theoretical or academic term or a buzzword that doesn’t translate well.” Control Risks research shows that while 70% of organizations use the term “resilient,” 65% of them have action plans, and only 26 percent implement them.
The key to being resilient starts with management and decision-makers, said Hinton. They need to change their mindsets and how they perceive the organization and environment where they operate. “In many ways, embracing [that] approach to resilience negates the need for a common definition,” he said. “It provides organizations with the flexibility to embrace resilience however they think is appropriate given their risk profiles and cultures.”
The first step in that holistic approach is to be aware of the risks that face the company and communicate them to all employees. To correctly identify those hazards, organizations must commit to plans based on concrete intelligence that reflects the nuances of their communities, in addition to the global view. “The companies … emerging stronger from crises often do so due to their deep commitment to continuous learning,” Hinton told HBR.
That resilience plan should be flexible, even during a crisis event. It also needs to look at the short and long terms simultaneously noted Parmelee of Delliotte. “Truly resilient organizations [empower] management to focus on the day-to-day of the crisis, while leadership focuses on their strategy and the future,” said Hinton. Any plan must also consider the organization’s culture and empathize with employees.
Building blocks
Implementing a holistic approach requires several prerequisites. According to Kevin Carmody, a senior McKinsey & Company partner in the Chicago office, companies need to adopt the “finance organization” concept, which has a “good balance of historic analysis and future view,” he said at a 2019 event.
Carmody stresses the importance of “embedding finance managers throughout the organization” to collect data for forecasts. Additionally, finance departments should adjust the company’s asset portfolio based on balance sheet results. “If you scrub the entire balance sheet, you can generate substantial value that will help drive a business and, frankly, protect the downside of a company,” he said.
Another building block is “strategic resilience,” said Kevin Lackowski, another senior partner at McKinsey, who noted that the competitive landscape is more than ever a “winner take all” market. “The top 20 percent of companies capture 90 percent of the economic profit. The bottom 80 percent capture either nothing or destroy value,” he said. “It’s almost riskier not to transform than it is to transform because that’s the only way to generate economic profit in a meaningful way and be relevant.”
Lackowski also stressed companies need to have action plans for every scenario, which is not common. Less than 30 percent of firms do so, according to McKinsey’s research.
The pandemic added more building blocks that organizations need to acknowledge in their plans, including hiring versatile employees, more interdepartmental collaboration, building employee confidence and meeting stakeholder needs.
Another vital building block is maintaining employee morale as the company builds resiliency, wrote Paul Pellman, CEO of Kazoo, a digital HR platform. “Morale is best at companies that put employees first during challenging times,” he wrote in a blog on CMSWiRE. “When employees appreciate the company’s commitment to them, they become engaged in finding new ways to reduce costs and generate new business. Which leads, ultimately, to organizational resilience.”
Decision-makers need to allocate more resources than ever to ensure those building blocks are concrete. “Now that we’ve seen what can happen and how quickly it can unfold, there’s a better understanding of how something like a virus or a major climate event can dramatically affect economies,” Parmelee of Deloitte told Forbes. “These issues and their potential impact aren’t theoretical anymore.”
One step back
Regularly pausing to reassess an organization’s resiliency plans is vital to ensure a company is on track toward growth and protection against future crises. Lancefield of the London School of Economics told HBR this is “how to reinvent [an] organization in the middle of a crisis.”
The first step is to assess the impact of the crisis on the company and make decisions using the right set of indicators, some of which should be specific to the organization. “A crisis rarely meets a neat and tidy ending,” said Lancefield. “So it’s critical that you make an informed decision when … to signal the end of the crisis for your organization.”
Another critical factor is to “refresh” decision-makers before planning for the next phase. “Executives are often expected to carry on even after long periods of intense working, which can lead to poor decision-making, inertia and even unethical behavior,” said Lancefield. He recommends “moments of decompression,” allowing them to be strategic about where they spend their energy and time.
The next step is to look at how much the business landscape has changed while implementing the resiliency plan. Some changes could be due to new regulations, an altered competitive landscape, or a shift in customer perception.
During that reassessment phase, Lancefield stressed the importance of monitoring for “weak signals of emerging crises … To ignore these dynamics would be a lost opportunity at best and a threat at worst.”
