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Building organizational resilience

Drawing on the work of Collins and Porras, which was published in their book ‘Built to Last’, Alberto G. Alexander explains that organizational resilience does not start with establishing and implementing a specific management system; instead, it is the outcome of a clear set of organizational characteristics.

In today’s business context, organizations are faced with an increased level of pressure from the external environment due to rapidly changing business circumstances. The competition intensifies each day and there is increased occurrence of crisis and disaster situations. In such a context, resilience has become a high concern for both practitioners and academicians.

Organizational resilience reaches beyond risk management and business continuity towards a more holistic view of business health and success. A resilient organization is Darwinian, in the sense that it adapts to a changing environment in order to remain fit for purpose over the long term. It is also one that learns from its own and others’ experiences in order to pass the test of time.

This article presents the organizational characteristics that firms need to develop to build and foster resilience. Guidelines to consider for organizational resilience management are also presented.

Introduction

Looking at today’s world there are increasing economic, social and environmental challenges, turbulences and uncertainties which cause disturbances and discontinuities for organizations (Bell, 2020). Organizations struggle and continuously adapt in order to flourish despite these disturbances, be they man-made or natural (Kayes, 2015).

Those organizations which are capable of surviving over time in the face of current and future challenges are referred to as ‘resilient organizations’. The concept of resilience within organizations may offer a potential framework to overcome breakdowns, disturbances, and discontinuities and allow for organizational development. Resilient organizations are essential as they contribute towards the on-going viability of the economy and the wider community: a crucial step towards creating a society which is resilient itself. In fact, it can be argued that “resilient organizations and communities or societies are two sides of the same coin”. (Bell, 2020).

The concept of ‘resilience’ as a formal paradigm of organizations is still relatively young, but continues to gain momentum in academia. In responding to any potential barriers such as expense, engagement, or cultural change, it is important to note that the “various elements of a resilient organization are all fundamental to an effective and efficient business that is cognizant of risk, crisis management, business continuity planning, organizational leadership, and contingency based management,” (Strycharczyk, 2016) Moreover, a “resilient organization’s objectives and strategies will not conflict with its overall business goals but will complement them. This makes resilience a multifaceted and multidimensional as well as very insightful concept,” (Strycharczyk, 2016).

As all organizations face unique risk landscapes, resilience is seen as both an outcome and a fundamental part of the governance of an organization. The resilience of an organization is, therefore, made up of the contribution of a wide range of different principles. Moreover, organizational resilience is not a one-off program or a management system that can be developed and then reviewed annually or as required. It is an approach that takes time to develop and as indicated in this article, is not ‘one size fits all’, but can be outlined in a process model.

Concept

The concept of organizational resilience has become an important topic for discussion. Traditionally, “resilience refers to the ability of an organization to carry out its functions and return to a stable state after major disturbance or stress by considering the before and the during,” (Bell, 2020). In other words, resilience is about ensuring that an organization is still able to achieve its core objectives in the face of adversity, before and after.

“Resilience suggests concepts of awareness, detection, communication, reaction (and if possible, avoidance), recovery and the willingness and capacity to adapt to changing contexts,” (Strycharczyk, 2016). A “resilient organization should be able to absorb disturbances or stresses through resistance or adaptation; maintain its basic services during a disturbance and; ‘bounce back’ after such a disturbance”. (Bell, 2020). “Resilience is not only about building back better, but also about transformation thereby requiring both innovation and creativity,” (Alexander, 2021). Within this view, resilience involves a rejection of the status quo; a return to the pre-event situation would leave the organization equally vulnerable to the next disturbance. The transformation view of resilience is concerned with concepts of renewal, regeneration, and re-organization (Bell, 2020). The word resilience goes much further than the more limited sense of being able to bounce back from events such as natural disasters or market adversity. We could conclude that resilience is the ability to dynamically reinvent business models and strategies as circumstances change.

What can be done to develop organizational resilience? This seems to be the big question! What top management does is usually to adapt specific standards or best practices guidelines to install a resilient model in the firm. This approach helps but is not enough.

Organizational resilience is not like establishing and implementing a specific management system. Organizational resilience is the outcome of a set of organizational characteristics that allow organizations to last overtime.

In this article an organizational approach will be developed to help organizations enhance their actual resilient approach or develop a new one. At the end guidelines for resilient organizational management will be presented.

Organizational resilience

In 1994, Jim Collins and Jerry Porras, published their book ‘Built to Last’. This is a philosophical blueprint based on research into the development of some of the United States’ most successful corporations.

Recognizing struggling competitors whose businesses disappear after a period of time, Collins and Porras focus their research towards eighteen bona fide ‘visionary’ companies and analyze them in accordance with guidelines they’ve set on what makes a good company. Visionary companies are premier institutions, the crown jewels, in their industries, widely admired by their peers and having a long track record of making a significant impact on the world around them. Selection criteria and research between the two authors was extensive, with attention paid towards companies with average founding dates of 1897 along with a surefire system evaluating companies as start-ups, midsize companies, and large companies. In the face of sociological events, Porras and Collins wanted to answer the question “What makes the truly exceptional companies different from the other companies?” with an emphasis on timeless management principles.

The authors mentioned that all the visionary companies in the study faced setbacks and made mistakes at some point during their lives. But they keep developing and adapting. “All the visionary firms display a remarkable resiliency, an ability to bounce back from adversity,” (Collins and Porras, 1994).

In figure one, below, the eleven most important findings of the Porras and Collins research are depicted. These characteristics are the main outcomes of organizational resilience that allow visionary organizations to last overtime.

Figure one: Characteristics of visionary firms

A brief description of each of the organizational characteristics that allow visionary firms to last, follows:

Clock building not time telling
Porras and Collins liken the longevity of a company to time telling and clock building. According to the authors, time telling is “having a great idea or being a charismatic visionary leader” and clock building is “building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles.” Porras and Collins explain the importance of building an organization’s “core value system” instead of relying on great product ideas, charismatic leaders, and paying too much attention to profit. They explain the “great idea” myth by pointing out Bill Hewlett and Dave Packard’s ventures into non-electronic products and Masaru Ibuka’s Sony Corporations brainstorming sessions on which products to make after starting the company.

More than profits
In order to meet the demands of a changing world, companies “must be prepared to change everything about itself except its basic beliefs as it moves through corporate life.” According to the authors, companies must preserve their core ideology while allowing room for the manifestations of the core ideologies to change. This means product lines, profit strategies, cultural tactics, and organizational structure can change – but a core ideology should not.

No ‘Tyranny of the or’
Porras and Collins make reference to their use of the yin/yang symbol from Chinese philosophy in order to explain the visionary mentality of not “oppressing themselves to the tyranny of the OR” – which means hell for those that cannot live with two contradictory ideas at the same time. According to the authors, inferior companies hold proclamations such as – “you can invest for the future or do well in the short-term” and “you can have low cost or high quality.” This limits companies to a short-minded frame of reference where there is only one choice, but not both. The authors ask readers to embrace both extremes and to figure out a way to have both choices. Visionary companies find ways to do well in the short-term and long-term, rather than sacrifice one for the other. They don’t look for a balance – rather, acquiring both to the max. The purpose of the yin/yang symbol is to illustrate this concept.

Preserve the core/stimulate progress
This describes the ways companies should do business by being able to adapt and change over time in response to market conditions. Over time, competencies, strategies, and goals change but the core ideology must remain intact. A visionary company that Porras and Collins use as an example of one preserving its core is Boeing and its fleet of 747 jumbo aircrafts. In the 1950s, Boeing ventured into new territory and took a gamble on building commercial airliners instead of sticking to military aircraft, which earned most of its profit. As a result, its rival Douglas Aircrafts was left in the dust.

Big hairy audacious goals (BHAG)
Taking risks and “setting super goals” is a hallmark for success. Porras and Collins discuss Boeing’s pursuit of the commercial airline market in the 1950s, which was underdeveloped and needing a major player for jet aircrafts. Unlike its rival Douglas Aircraft, who avoided entering the commercial market, Boeing took a gamble and developed a prototype for the commercial airliners used today.

Cult like cultures
Visionary companies are not a great place to work for everyone. All employees within a visionary company must adapt and embrace the core values assigned to them in order for the organization to make strides. According to the authors, visionary companies require employees to seek accomplishment and to follow the core ideology. The authors outline four common characteristics of cults that apply to the visionary organizational philosophy – fervently held ideology, indoctrination, tightness of fit, and elitism.

Try a lot of stuff and keep what works
Porras’ and Collins’ show that in visionary companies trial and error, accidents, and opportunism were ahead of detailed strategic planning. An example is Johnson & Johnson’s accidental discovery of using talc as a skin soother after customers complained of skin irritation from medicated plastics they were producing. They sold packaged ‘baby powder’ soon after. Other example companies include 3M getting into the masking tape business and Walmart introducing people greeters. The authors describe opportunistic experimentation through trial and error as a way to make evolutionary progress. According to Porras and Collins, five ways to make evolutionary progress includes:

  1. Giving ideas a quick try
  2. Accept mistakes
  3. Taking small steps to achieve small failures in order to get ahead
  4. Persistence
  5. Building a ‘ticking clock’ to turn the aforementioned points into a process.

Home grown management
Porras and Collins describe a characteristic of visionary companies as likely to hire inside employees to high positions as opposed to other organizations that “hire from the outside.” This allowed for consistent excellence in leadership from within the ranks, from employees who have adhered to the company’s core ideology. In the overall picture, this is a way for companies to preserve the core while stimulating progress.

To support their claims, both authors cite that comparison companies are six times more likely than visionary companies to hire their CEO from a pool of outside applications. At visionary companies, only 4 percent of CEOs came from the outside.

Good enough never is
Porras and Collins reject the idea of a ‘finish line’ and define a visionary company as one that is never satisfied with its results. All visionary companies hold high standards and reject the practices of comparison companies that make money off successful products. Porras and Collins stress investing for the future and adapting to newer ideas and technology earlier than others. Out of eighteen companies researched, sixteen were found to drive themselves harder for improvement.

The end of the beginning
Porras and Collins use the “end of the beginning” concept to explain how visionary companies translate their core ideologies into the everyday workings of the organization. Core ideology is translated into the strategies, behaviors, business practices, and goals of the organization. Porras and Collins used Hewlett-Packard as an example of a “core ideology into practice” organization with their management methods of providing well defined objectives to employees and allowing them as much freedom as they wanted to work towards that goal with the intention of recognizing the individual’s efforts throughout the organization.

Building the vision
“Building the vision” is a rearrangement of values intended to stimulate progress. It asks potential visionary organizations to strive for self-improvement day in and day out and to invest in new technologies and new management methods to take risks instead of lying back and remaining conservative. An eye should always be kept for the long term instead of the short term, even when it is hard to do so.

All these findings of Porras and Collins are very important. These 18 companies demonstrated that they are resilient. What is even more important is that the organizational characteristics of these firms allowed them to last over time.

In the following section, guidelines to develop organizational flexibility will be presented. These flexibility strategies are a very important ingredient for organizational resilience, as presented by Collins and Porras.

Building organizational flexibility

Organizations develop strategies for becoming flexible enough to adapt after a disruption and rapidly keep on working to keep their products/services available to the market.

Flexibility strategies can be divided into the following categories:

Inventory for redundancy
The basic form of redundancy used by all businesses is safety stock. Although the extra inventory of parts and raw materials on the one hand and finished product on the other hand can protect a company against small changes in the demand and supply patterns, it is expensive. Safety stocks are part of most resilience and business continuity plans. Even a relatively small amount of inventory can provide a disrupted company with time to prepare its response. A high level of redundancy, however, may be too costly.

Interchangeability
“Flexibility means viable alternatives in any situation. Standardization of parts, processes, and production systems, so that these elements are interchangeable, creates options for using them where there is shortfall,” (Sheffi, 2005). In the event of a disruption, firms can substitute alternative parts (or part suppliers) swap out damaged components, use alternative processes, or reroute the flow of business activities. Standardization creates interchangeability, which creates flexibility to respond to disruptions. Standard factories, standard equipment, standard components, and standard processes, allow companies to respond to disruptions effectively.

Organizational culture

Some organizations respond to disruption better than others not because their supply chain designs are fundamentally different, but there is something ‘in their DNA’ that is conducive to fast response.

What makes some organizations so flexible? What makes them contain disruptions quickly and bounce back from disruptions before they become catastrophes and possibly drive the organization out of business? It is not only because they have superior supply chain designs. Dr Sheffi, professor at M.I.T, explains in his book ‘The Resilient Enterprise’, that the element common to most resilient companies is culture.

The essence of resilience is the containment of disruptions and recovery from it. Culture contributes to resilience by endowing employees with a set of principles regarding the proper response when the unexpected does occur, and when the formal organizational policy does not cover the situation at hand or is too slow to react.

Guidelines to consider for organizational resilience management

Collins and Porras in their research, show that companies that enjoy enduring success have core values and a core purpose that remain fixed while their business strategies and practices endlessly adapt to a changing world. The dynamic of preserving the core while stimulating progress is the reason that some companies became elite institutions able to renew themselves and achieve superior long-term performance.

Great companies understand the difference between what should never change and what should be open for change, between what is genuinely sacred and what is not. This rare ability to manage continuity and change - requiring a consciously practiced discipline is closely linked to the ability to develop a vision. Vision provides guidance about what core to preserve and what future to stimulate progress toward.

A well-conceived vision consists of two major components: core ideology and envisioned future. Core ideology, the yin in Collins and Porras scheme, defines what we stand for and why we exist. Yin is unchanging and complements yang, the envisioned future. The envisioned future is what we aspire to become, to achieve, to create-something that will require significant change and progress to attain. Core ideology provides the glue that holds an organization together as it grows, decentralizes, diversifies, expands globally, and develops workplace diversity.

Core ideology defines the enduring character of an organization - a consistent identity that transcends product or market life cycles, technological breakthroughs, management fads, and individual leaders. In fact, the most lasting and significant contribution of those who build visionary companies is the core ideology. As Bill Hewlett said about his longtime friend and business partner David Packard upon Packard's death, "As far as the company is concerned the greatest thing, he left behind him was a code of ethics known as the HP Way," (Alexander, 2021).

“You do not create or set core ideology. You discover core ideology. You do not deduce it by looking at the external environment. You understand it by looking inside. Ideology has to be authentic. You cannot fake it. Discovering core ideology is not an intellectual exercise. Do not ask. What core values should we hold? Ask instead, what core values do we truly and passionately hold? You should not confuse values that you think the organization ought to have-but does not-with authentic core values,” (Collins and Porras, 1994).

In the following, organizational traits and habits prevalent in the more successful companies that pass the test of time are presented. These guidelines from Collins and Porras have to be adapted to the organizational culture of each organization. Top management needs to develop a protagonist leadership across the whole company.

You don’t need a great idea to start a great company
Visionary companies often get off to a slow start, but set ‘big hairy audacious goals’ and continue to experiment with ideas that move them towards their vision while sticking to their core values. The success of visionary companies comes primarily from successful underlying processes and core values, not a special idea, patent, or trade secret.

Charismatic, visionary, leaders are not required
Visionary companies benefit from strong leadership, but Collins and Porras found that the best leaders were more akin to architects building a company based on human ideals and values. Any leader, charismatic or not, can design a company that is built to last by following these lessons.

Don’t make ‘maximizing profit’ your primary goal
Visionary companies set a target that is about more than profit. Profitability is a necessary condition in any company, but it is not the why and reason for the company to exist. The organization exists to do something collectively that could not be accomplished separately. Paradoxically, visionary companies make more money than the more purely profit-driven comparison companies.

There is no ‘right’ set of core values
There is no ‘correct’ set of core values for a visionary company, and two companies with opposite values can both be visionary and highly successful.

Visionary companies almost religiously preserve their core ideology
The key is to maintain continuity and stability while simultaneously stimulating progress and continuous improvement. Companies that are built to last are constantly adapting and improving while keeping the core ideology fixed. Intentions don’t matter; it is the translation of intentions into concrete action and results that make the difference.

Visionary companies set big, hairy, audacious goals
Big, hairy, audacious goals stimulate progress by focusing and engaging the people on the team. Good BHAGs (pronounced bee-hags) are clear and compelling. They must be related to and preserve the core ideology of the company. BHAGs often appear nearly impossible to outsiders. Company employees must see the goals as challenging but achievable. A good way to develop your BHAG is to look for the alignment in three areas:

  • What are you deeply passionate about?
  • What drives your actions and income now?
  • What can you be the best in the world at?

Visionary companies do not try to be great places to work for everyone
Visionary companies are tough and disciplined. They have clarity about who they are, what they are for, and their goals. They don’t have patience for employees who are unwilling or unsuited to their demanding standards. Built to Last companies often create cult-like cultures. Not every person will agree with the core values and ideology of the business and fit-in.

Visionary companies succeed mainly through experimentation.
First, organizations should determine their core values and why they exist. Next, try a lot of stuff and see what works. The Built to Last companies experiment and learn what works. Collins and Porras note, “We found the concepts in Charles Darwin’s Origin of Species to be more helpful for replicating the success of certain visionary companies than any textbook on corporate strategic planning.”

Companies develop leaders from within the organization rather than hire outsiders
Built to Last companies typically developed and promoted leaders from within rather than hiring outsiders. This ensures an understanding and agreement with the core values and ideology that is not guaranteed when hiring an outsider.

Visionary companies focus on beating themselves, not the competition.
Visionary leaders build for the long term while simultaneously holding themselves accountable to highly demanding short-term standards. Any Lean practitioner knows that the goal of continuous improvement is perfection and never ends.

Visionary companies develop organizational flexibility.
Organizations develop strategies for becoming flexible enough to after a disruption and rapidly keep on working and have their products/services available to the market.

Lessons of alignment for CEOs, managers, and entrepreneurs

  • Paint the whole picture: a visionary company is like a great work of art – minor details matter! It is comprehensiveness and consistency over time that builds the culture.
  • Sweat the small stuff: vision statements, core values, etc. don’t matter as much as the day-to-day details of the company and culture. Employees notice little things. They want to believe in the vision, but will be on the lookout for inconsistencies that break the bonds of trust with management.
  • Cluster, don’t shotgun: Collins notes this again in Good to Great with the mantra: Fire bullets, then cannonballs. Once you have a successful experiment, leaders must put in place pieces that reinforce one another and combine into a powerful punch.
  • Swim in your own current, even if it is against the tide: the correct question to ask is not, “Is a practice good?” but rather “Is this practice appropriate for us – does it fit with our ideology and ambitions?” Alignment is about being guided by your own vision and values, even if it is contrary to trends and fads.
  • Obliterate misalignments: alignment is not just adding new things, it is also about correcting misalignments that move a company away from its core ideology. The only sacred cow in a visionary company is its core ideology. Anything else should be changed or eliminated if it isn’t aligned.
  • Keep universal requirements while inventing new methods: you must have a core ideology and drive for progress to be a visionary company. Every leader should be working to implement methods that share and preserve a core ideology to guide and inspire employees.

Conclusions

A resilient organization is Darwinian, in the sense that it adapts to a changing environment in order to remain fit for purpose over the long term. It is also one that learns from its own and others’ experiences in order to pass the test of time.

There are guidelines published regarding organizational resilience management, these frameworks help, but are not sufficient.

The concept of resilience within organizations may offer a potential framework to overcome breakdowns, disturbances and discontinuities and allow for organizational development.

Resilient organizations are essential as they contribute towards the on-going viability of the economy and the wider community: a crucial step towards creating a society which is resilient itself. In fact, it can be argued that resilient organizations and communities or societies are two sides of the same coin.

A resilient organization should be able to absorb disturbances or stresses through resistance or adaptation; maintain its basic services during a disturbance and; ‘bounce back’ after such a disturbance.

Organizational resilience is not like establishing and implementing a specific management system. Organizational resilience is the outcome of a set of organizational characteristics that allow organizations to last over time.

Resilience is the “organization’s capability to dynamically reinvent its business model as circumstances change.”

Organizational resilience can be developed. Porras and Collins book 'Built to Last' gives the 11 organizational characteristics that the companies that last overtime develop to become resilient. These organizational characteristics should be considered by top management to start a long process of developing organizational resilience.

Organizations develop strategies for becoming flexible enough to rapidly keep on working after a disruption and have their products/services available to the market. The strategies for operational flexibility can be divided in the following categories:

  • Inventory for redundancy
  • Interchangeability.

Organizational culture contributes to resilience by endowing employees with a set of principles regarding the proper response when the unexpected does occur, and when the formal organizational policy does not cover the situation at hand or is too slow to react.

The essence of resilient is the containment of disruptions and recovery from it.

Organizational resilience is not a one-off program or a management system that can be developed and then reviewed annually or as required. It is an approach that takes time to develop and, as indicated in this article, is not ‘one size fits all’, but can be outlined in a process model.

The author

Dr. Alberto G. Alexander holds a Ph.D from The University of Kansas, and a M.A., from Northern Michigan University. He is a MBCI, BCMS, ISMS and QMS, IRCA Lead Auditor and Approved Tutor. He is the managing director of the international consulting and managerial training firm Eficiencia Gerencial y Productividad located in Lima, Peru. He can be contacted at: alexander@egpsac.com and via  www.gerenciayproductividad.com He is professor at The Graduate Business School, at ESAN University, Lima, Perú.

References

Bell, Graham. The Organizational Resilience Handbook: A Practical Guide to Achieving Greater Resilience. Kogan Page Limited, 2020.

Collins, James. Porras, Jerry. Built to Last. Harper Business, 1994.

Kays, Christopher. Organizational Resilience: How Learning Sustains Organizations in Crisis, Disaster, and Breakdown, 2015. Kindle Edition

Strycharczyk, Doug. Developing Resilient Organizations: How to create an Adaptive, High Performance and Engaged Organization. Kogan Page, 2016.

Alexander, G. Alberto Gestión Organizacional de lo Inesperado. E-Book. Editions EGP,
2021.

Sheffi, Yossi. The Resilient Enterprise. M.I.T Press, 2005.



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