Resilience: what does it mean for an organisation?

By Dr. Erica Seville

Invited opinion piece published in the CAE Bulletin, March 2006 (www.caenz.com)

 

 

What is a ‘Resilient Organisation’? The term resilience is used in several different fields of study, and takes on slightly different definitions for each. However, a generic definition refers to resilience as the ability of a material or system to absorb change gracefully whilst retaining core properties or functions.

 

Organisations deal with uncertainties and unexpected events all the time, and managing these presents both opportunities and risks for the organisation. Above a certain scale however, crisis events differ from day-to-day management, in that organisations have to operate out of their comfort zone, interact with organisations they do not normally work alongside, and have to make and share strategic decisions quickly and effectively. Being able to respond effectively to crisis events is a real test of what makes an organisation ‘tick’.

 

The economic implications of organisations being unprepared for crises are significant. In the September 11th attacks, business interruption losses far exceeded the sum of all property losses. In our increasingly interconnected business environment, consequences go well beyond the zone of any physical damage, affecting businesses right along the supply chain.
An organisation’s ability to survive a major crisis depends on their organisational structure, the management and operational systems they have in place, and the resilience of these. As part of a six year FRST funded research programme (www.resorgs.org.nz) we have been looking at ways to define resilience that is useful for organisations, and to develop strategies for NZ organisations to become more resilient. Out of this research we have identified three key aspects of organisational resilience: vulnerability, adaptive capacity and awareness.

 

 

Resilience is about ensuring that an organisation is still able to achieve its core objectives in the face of adversity. This means not only reducing the size and frequency of crises (vulnerability), but also improving the ability and speed of the organisation to manage crises effectively (adaptive capacity). Awareness is a recent addition to this definition and reflects a growing appreciation of the need to manage strategic risks as a process and not an event; by that we mean the ability of the organisation to seek out new opportunities even in times of crisis. In highly dynamic environments, such as the business world, an organisation is never a static entity. Some sectors will be more stable than others, but nevertheless, an organisation that remains exactly the same over time will eventually erode its potential. This means that to be truly resilient an organisation should not seek to just recover back to exactly where it was before the crisis, but have the reserves to continue looking for emerging risks and opportunities on the horizon.

 

Severity and duration of impact on performance as a measure of an organisation’s resilience, where resilience is inversely proportional to the area under the curve.

Whilst risk management is being used more extensively in New Zealand today, there are few organisations that apply risk management at a strategic level across the organisation. Uptake of business continuity/emergency planning is increasing, but still only a small proportion of organisations have any planning in place.  Those organisations that do have plans often lack the depth required to sustain a prolonged response capability. In our research we are also finding that although many resilience issues cross organisational boundaries, much of the planning being done is very inward looking. One of the biggest potentials for forward progress is to get organisations working together to manage risks across this interface, and developing and practicing strategies for working together during crises. This is particularly needed where outsourcing means that contracted organisations are relied upon to deliver critical services or supplies.

During our research, we are also seeing that the key underlying resilience issues are often more about the softer, less tangible aspects of an organisation that relate to its culture and leadership, and vision.  For example qualities such as good communication and relationships within the organisation and with key customers and stakeholders, trust, and a shared vision and priorities across the organisation are all fundamental to enabling different parts of the organisation to work together to achieve a common objective.  This is particularly true at times of crisis when it is often the informal networks and relationships (who you know that you can call on for a favour…) that count. Building resilience is therefore also about reviewing the culture of the organisation and recognising the strengths and weaknesses that culture brings to the organisation in times of crisis. In order to build resilience, a broad cross-section of the organisation (and not just the crisis management team) need to be involved in regular ‘war-game’ type exercises to actually experience what and how decisions will be made during crises and the role that they can play in facilitating the response and recovery of the organisation. These crisis simulation exercises are critical for:

• highlighting vulnerabilities (and creating the motivation for reducing them),
• improving the adaptive capacity of the organisation by gaining experience in working together to solve unique problems,
• and enhancing awareness of critical dependencies and functions within the organisation, plus giving the confidence to seek out opportunities even in times of crisis.

Unfortunately, there is no ‘silver bullet’; resilience is something that an organisation must continually work at. But because it is so intrinsically related to the day-to-day ethos of the organisation, it can also create significant payback in terms of helping to refocus on what is important to the organisation and creating a shared understanding of the roles people play in making those a reality.  Most importantly, resilience needs to move from being a ‘back room’ issue to being a strategic one and be regularly debated as part of strategic planning for any organisation.