Chapter Nine
Developing Resilience
“I have missed more than 9,000 shots in my career. I have lost almost 300 games. On 26 occasions I have been entrusted to take the game winning shot… and I missed. I have failed over and over and over again in my life. And that’s precisely why I succeed.”.
MICHAEL JORDAN, FORMER PROFESSIONAL BASKETBALL PLAYER
In a world defined by rapid change and volatility, resilience has taken on a whole new meaning. It is no longer simply a case of being able to fend off the occasional knock here and there – the capacity to quickly adapt, recover and return reinvigorated is a constant requirement. Consequently, resilience is now a critical part of any business strategy, and being flexible and ready to act should be the cornerstone of your business thinking. It is into this unpredictable world that we now enter, and resilience needs to be one of our closest companions.
“THE ONLY THING YOU’LL REGRET ABOUT A HARD DECISION IS THAT YOU DIDN’T DO IT SOONER.“
Cathie Black, President, Hearst Magazines, remembering advice from a colleague
RESILIENCE: WHAT IT MEANS AND WHY IT MATTERS
Resilience requires companies to evaluate their capabilities and address any weaknesses. The business world is unfortunately full of examples of once-successful firms that have hit hard times. Why is it that some companies are able to weather change, while others struggle? Blundering on regardless, companies often ignored the signs that things weren’t right. Given the difficult time of the current recession, companies and shareholders are increasingly looking to dependable, stable investments. This is not a climate where any company can afford to take their eye off the ball – they must constantly review internal capabilities and scan the business landscape to identify opportunities and threats. Drifting along, comfortable with the status quo, is not an option, as inertia is often a precursor to decline. Companies need to be proactive, dynamic, alert and flexible. Ideally, they must even be ready to completely change their business models before the need to change is forced upon them.
Building resilience requires a root and branch assessment and an overhaul of the organization. Every aspect needs to be addressed, from structures, procedures and strategy to the quality of leaders, individuals’ resilience and how teams work. Evaluate the level of cooperation between people and teams – there should be a high level of trust and a shared purpose. Do people go on with their jobs and take objective, realistic approaches? You need to assess the whole organization’s ability to respond swiftly and effectively to events and put systems and procedures in place and develop the necessary skills and resilience in your people. By planning ahead of time and having the right processes in place, your company will be better placed to cope with changes when they occur. However, you must also make sure that any rules and procedures that you put in place allow people the necessary space to innovate and be flexible, as these are essential to equipping the organization to develop new ideas and to react quickly. People are the most important part of an organization and everything depends on them. It is here that we will start our journey to create resilient companies.
DEVELOPING RESILIENCE: THE RIGHT PEOPLE, THE RIGHT TEAMS
Companies need to actively pursue a policy of building resilience – not only in terms of the organization but also for individuals and how teams work. The problems and volatile markets that companies face require everyone to be on the same page and pull together. Turbulence brings opportunities and risks in equal measure. As individuals, we should take responsibility and call on, or acquire, the necessary personal qualities to help us cope with change. Also, teams have to work well, and the organization as a whole should be strengthened. Leaders should ensure they have the necessary capabilities and they should develop these skills in others.
“CULTURE IS THE GLUE, THE UNDERLYING NETWORK THAT HOLDS US ALL TOGETHER … THERE IS NO MORE IMPORTANT TASK FOR SENIOR MANAGEMENT THAN TO NURTURE AND REFRESH THE CULTURE AND VALUES.“
Stephen Green, former Chairman, HSBC
RESILIENCE: THE KEY TO LONGEVITY AND SUCCESS
HSBC
Currently headquartered in London, HSBC bank was originally founded in Hong Kong in 1856 and, since then, it has expanded its operations around the world to become one of the largest banks in the industry. It has always had a sharp focus on customers, flexed with changing markets and been driven by a measured, entrepreneurial spirit. This has stood them in good stead over the
years, and never more so than during the recent financial crisis, when some of the largest names in the industry either fell by the wayside or went hat in hand to governments for bailout money. Of course, the reasons for such a disaster in the banking industry are many but one thing does stand out: many banks were not resilient enough. And this is what made the difference: HSBC was better placed than most to weather the storm, by making sure the company was already better insulated against potential shocks.
Since the recent, global meltdown, the focus is now on setting stronger liquidity and capital reserve levels for banks. HSBC was already ahead of the curve in this regard, since several years before the financial crisis it had its own view about capital requirements and what it considered to be sensible levels of liquidity. As a result, it took a short-term hit by paying off its exposure in the subprime market and putting aside greater reserves than was then formally required (a higher Tier 1 capital ratio than many competitors). This cushioned HSBC against the worst effects of the crisis that felled many of its rivals. Of particular significance was the fact that it had faced up to its own exposure in the subprime mortgage lending crisis long before other banks were prepared to acknowledge there was a real problem. In other words, resilience was, and is, an important factor in its strategy, operations, culture and values, which keeps them alert to changes and ready to react quickly.
In addition to the vagaries of the market, HSBC deals with many countries, all with a raft of legislation and compliance issues – and all with different attitudes and beliefs. The bank possesses an extensive and proactive capability for handling this. While it has not been immune to falling afoul of legislation, its efforts and vigilance have protected it from the harsher fates of other companies – whose fines have been significantly greater.
Stephen Green, former Chairman of HSBC, believes that the market itself is a tough adjudicator of resilience; a company will stand or fall on the response of the market to its offering and actions. This is where reason and resilience interlink. As Stephen Green argues, resilience is diminished when a company loses sight of the customer and when it forgets the reason it is in business in the first place. Today, customers and markets expect more from companies and banks, and this brings us to how another of our six Rs, relationships, is connected to resilience. At HSBC, there is a sharp focus on building relationships with customers. And this includes both direct contact and the many indirect routes to influencing relationships, such as how all HSBC’s actions affect how it is perceived – in other words, its reputation.
This move, toward greater responsibility and managing reputation in business, can be seen in the World Economic Forums, which now extend beyond pure economic issues to include discussions on values and ethics. It is hardly surprising that corporate values are crucial to HSBC building resilience. Stephen Green remarks that “some of the good old-fashioned principles by which we have always sought to run this company for the last hundred years – strong capital, strong liquidity, diversified business – have counted for quite a lot.” Stephen Green (The Focus, Volume XIV/1 www.ezsfocus.com Egon Zehnder International).
Accordingly, building resilience into the culture is an integral part of HSBC’s approach. In Stephen Green’s view, “Culture is the glue, the underlying network that holds us all together … There is no more important task for senior management than to nurture and refresh the culture and values.” (Reported in The Focus, Volume XIV/1 www.ezsfocus.com Egon Zehnder International.) At HSBC, to achieve sustainable profits in the long-term, the focus is on taking a long-term view of customer relationships, employee engagement and development, business investments and corporate social responsibility. This last point is increasingly important to building resilience because, as we have seen, both the reason why you are in business and your reputation are key aspects of resilience. Corporate social responsibility reflects who you are and what you stand for, and this is not lost on customers, employees, investors, the media, etc. The values that HSBC espouses as a company promote trust between the bank and its existing and potential customers (and its employees) and enhance its reputation in the market. This matters because customer retention and the acquisition of new customers are paramount, as is having an engaged, enthusiastic workforce. A key role of HSBC’s leadership is to make sure that its culture and values are firmly embedded throughout the organization and are renewed to keep the bank aligned with current needs and future opportunities. Moreover, whenever an acquisition is made, HSBC works hard to transfer its culture and values to the new company.
Every year, the board at HSBC meets to discuss corporate values and to assess whether they are achieving those values in practice. The bank also carries out yearly surveys to gauge the level of employee engagement. This reveals the bank’s strengths and weaknesses and where things could be improved. Interestingly, these surveys have revealed that the bank’s approach to corporate social responsibility is highly valued by employees. Stephen Green notes: “These kinds of things matter, and they are part of what it takes to ensure that there’s cohesiveness, and an enthusiasm for doing a good job. For the vast majority of people it is not enough simply to say, here’s a job and we’ll pay you for it. They actually want a sense of reward that is not monetary out of doing their job.” (The Focus, Volume XIV/1 www.ezsfocus.com Egon Zehnder International.) And, as we saw in Chapter 8 on relationships, enthusiastic, engaged employees lead to excellent customer service.
In such a volatile world, companies cannot afford to be complacent. Self-awareness and self-criticism are key factors for HSBC in order to avoid complacency and to improve. To do this, HSBC instills reflection, self-criticism and improvement into its culture. This is not to say that the bank avoids risk; rather, it is about having the right safeguards in place so that risks are managed carefully to maintain overall resilience within the bank, should anything go wrong. Stephen Green recognizes the importance of being, “honest with yourself; to recognize when things have gone wrong; to recognize when it’s your fault, but also to recognize that you always have the chance of renewal and a fresh start.” (The Focus, Volume XIV/1 www.ezsfocus.com Egon Zehnder International.) Not wasting time berating yourself but, instead, learning from all your experiences and mistakes and moving on is essential – otherwise, the atmosphere runs the risk of becoming overly negative, counter-productive and even toxic.
A significant policy at HSBC that contributes to employee motivation and retention is to recruit senior people from within the company. Consequently, the people in senior roles or at board level have been with the company for a long time. The advantage is that these people know the bank very well, have a demonstrated commitment to the company, are a good fit and share the values and culture. Similarly, recruitment is focused on looking for people who fit with HSBC’s values and culture. The bank’s International Management Program for graduates takes people with the right fit, ability, and motivation and develops them for a lifelong career in a high-powered, exciting, global environment. This level of commitment and training from the company is how they attract and retain the best candidates. HSBC’s policy toward recruitment, development and promotion provides consistency and that undoubtedly contributes to the bank’s resilience.
The world economy has changed, with the weakening of traditional power blocs and the rise of others. To navigate this new landscape, HSBC repositions and realigns itself in order to take advantage of opportunities, avert threats, overcome vulnerabilities and minimize risk. Resilience is a conscious and constant activity that should reach every part of the organization. There is no place for complacency – the markets can be fickle and volatile, and you have to be prepared for any eventuality. Even though HSBC did not suffer as badly as other banks during the financial crisis, its leaders are not resting on their laurels. They have reviewed, planned and initiated an extensive, root and branch overhaul of systems and procedures to avert the possibility of future problems. This is not just in response to the demands from regulators, governments, investors and customers; it is because HSBC’s leaders know the value of resilience – it has always been a cornerstone of the bank’s approach. HSBC knows that without resilience, the fate that befell other giants of the banking industry, such as Lehman Brothers, will be waiting, ready to strike..
Resilience rule #1: look after your people
Avoiding or minimizing stress is a key issue in today’s frantic, uncertain world. People under stress are often not alert to what is happening around them, as, understandably, they can be almost entirely internally focused. They may also have poor attention skills or be prone to oversights and mistakes. It is useful to establish a network of mutual support so that people do not feel isolated and they will know how to obtain help should they need it. In addition, you should develop your people so that they have personal flexibility and the ability and readiness to adapt to changing situations. Brittle people do not react well to stress or change. Interestingly, this applies to businesses as well as people. A brittle, unbending business is likely to snap when faced with change. Enduring businesses, like successful people, are both strong and flexible.
Resilience rule #2: develop confidence in yourself and others
People need inner strength and the ability to remain calm, focused and confident when handling crises. They will need energy, drive, determination and conviction. If these qualities are part of the organization’s culture and values, you are more likely to build a workforce and leaders that are more resilient. Experience is a good teacher, in this regard, as it exposes us to pressures and challenges, and we will take this learning to other situations. Being positive, having clear goals and being open to new ideas and possibilities are ideal attributes, as are being innovative, asking questions and being able to think ahead.
Confidence is particularly important. It will make a significant difference knowing that you can control situations and direct your own responses and the future of the company. Be good at planning and be organized and reliable and always be aware of what you want the future to look like, maintaining the flexibility to make any changes –or even to completely overhaul the organization’s direction if you think that is necessary.
Resilience rule #3: provide support and challenge
Spend some time reassessing the way things are done. Ask yourself: is there a better way of approaching an issue or completing tasks? Seek the opinions of others and, together, improve the systems and procedures to make them more resilient. Ensure that your people will be able to respond to changes, including sudden crises, quickly, efficiently and successfully. This will also require you to make the necessary resources and support available to enable people to respond.
Leaders need to be strong and resilient. In particular, people in senior roles need the necessary experience, skills and behaviors to steer the company and its people through difficult or turbulent times and to maintain everyone’s morale, commitment and enthusiasm. Do this by identifying individuals with resilience and using them to keep others motivated. They will need outstanding people skills and influencing skills, to be calm and measured, able to take control of situations, be proactive and have enormous reserves of energy and drive. An often overlooked aspect of how easy it is for a company to become vulnerable to the inevitability of decline is the erosion of hope. During difficult times, it is essential that leaders handle situations and people properly and that they maintain morale.
“You get people to help yo u by telling the truth.”
Randy Pausch, former professor of computer science, Carnegie Mellon University
Resilience rule #4: look for original – and possibly unconventional – insights
Senior people should possess excellent critical, strategic and lateral thinking skills, and have the ability to be objective, realistic and factual, innovative and creative. In addition, they should possess market awareness and be able to get ‘the big picture view’ and understand the details, avoiding inertia. All of these qualities figure prominently in the list of skills required for improving resilience.
Resilience rule #5: value learning and experience
Expose people to experiences that will equip them for dealing with crises and difficult situations. Experience is certainly a great teacher; if individuals are used to dealing with difficult situations, they will be more comfortable with, and confident in, their ability to handle any event, be less likely to panic, able to remain in control and retain the ability to think both logically and creatively in times of crisis. In particular, experience keeps people alert to signs in the business environment of any potential problems that are looming. It is not just about experiencing difficulties it is also about learning how to handle them positively and well. Make sure that people are supported and guided and have positive experiences and successes and that they learn valuable lessons to take into future situations. This is not to say that you have to hold someone’s hand, since this would hardly test an individual’s mettle in coping with challenges. Rather, it is about providing support where necessary, to ensure that learning experiences do not erode confidence to the point where an individual can no longer function effectively in the present and consequently, become unlikely to perform well in future crises.
Resilience rule #6: put the right people in the right roles
There are many assessment tests that are available to help find the right candidate for a particular role or task. While these can be useful, there is no substitute for a person’s actual record of achievement – in particular, the challenges they faced, the mistakes they made, how they tackled the issue and what they have learned from the experience.
Evaluate your recruitment criteria and make sure you are not looking backwards. There is often a tendency to recruit people according to certain characteristics and skills based on what worked well in the company’s past. However, the past has gone. Remember that you are not just hiring for today, you are hiring to prepare your company for tomorrow, which will undoubtedly have new challenges and may require new approaches.
Resilience needs to be part of all succession planning decisions. It needs to be handled well, as the consequences of failure can be extremely serious and costly. The person selected should be ideally suited to the demands of the job and have the necessary experience to help them cope with any eventuality. They need to be strong and they also need to be open and flexible.
While internal recruitment can be a great source of resilience, as in the case of HSBC, it does run the risk of inertia and can entail overlooking even better candidates with experience more suited to new challenges and changes in the market. At the highest levels, finding the right candidate from outside the organization can be extremely difficult; that’s why companies often take the easier route of recruiting from within – although, it has to be said, there are also perfectly valid reasons for appointing a well-qualified, internal candidate. That said, it is always advisable to look further afield, as you may realize that there are skill gaps in internal candidates’ abilities – gaps you may not even be aware of if you are always looking internally. Moreover, succession planning is exactly that: it is a planning process. As such, it should be viewed as a continual activity. By staying alert to both internal and external people, how they are developing, their record and experience, you will be in a better position when you next need to go shopping for a new candidate.
“YOU NEED PEOPLE WHO HAVE COURAGE AND DETERMINATION AND WHO ARE WILLING TO TAKE A RISK AND PUT IN A LOT OF HARD WORK.“
Cathie Black, President, Hearst Magazines
Furthermore, any succession planning decision starts with a clear description of what skills and experience the candidate should possess. This will only be of use if the criteria have been arrived at following consultation with key people and groups and by considering the demands of the job in light of current and future strategy and issues that are in line with the company’s culture.
Resilience rule #7: develop teamwork – the vital component for resilience
The challenges facing companies and the sheer scale of the tasks involved require teamwork all the way to the top. The variety and complexity of issues demand the resources and abilities of many different people, with different areas of expertise and various skills. Consequently, effective teamworking is crucial, and is the only way to achieve goals. It is essential that everyone in the team is clear about the problems that need to be faced and what has to be done. Also, it is useful to plan ahead of time exactly who will be responsible for making sure that each task is completed. Assigning tasks to the best-suited person or team will promote a successful outcome – in other words, play to people’s strengths. This will make everything run smoothly and minimize panic. Teams should work well together. Trust, dependability, and openness are essential, as is strong leadership qualities and a realistic attitude. By working closely together, supporting each other, sharing ideas and spreading the workload, facing an overwhelming challenge will be less daunting, much easier to tackle and more successfully resolved.
Teams need to be seen holistically. By this I mean that effective teams result from all the people within them and, most importantly, how they work together. They also need to be able to look beyond the organizational walls and be aware of external factors and stakeholders. Teams work within the whole organization and, as such, need to relate well to others. Essentially, the whole organization is a team and the individuals and teams within it still have to work together, moving in the same direction and supporting each other toward one aim: the success of the company.
RESILIENCE AT WORK
Hearst Magazines
Hearst Magazines is part of the Hearst Corporation and it publishes some of the most popular magazines in over 100 countries around the world, including Marie Claire, Cosmopolitan and Good Housekeeping. It currently enjoys a healthy portfolio and revenue stream but it has not always been a straightforward journey. A few bumps led to the derailment of some projects, and, like many in publishing, it has faced a very difficult time. But, with Cathie Black as president, the company has shown remarkable resilience and is now one of the most successful magazine publishing houses in the world. A key aspect of surviving difficult times, at the Hearst Corporation, has been to remember what the company stands for – and stick to their convictions. Innovation and diversification have always been part of the company’s approach. In the past, when threats appeared, the Hearst Corporation diversified into other areas, including television, to build resilience. In the magazine division, new projects are constantly being reviewed and it uses technology to add value to the business.
At Hearst Magazines it is also important to look for synergies, to plug the gaps in the product offering and to be bold. While the company produced magazines that included some articles on food, it did not have a magazine focused solely on food. So, even during the grips of a recession, the company launched a new and fairly risky publication called Food Network Magazine in a joint venture with Scripps, who ran the popular cable TV channel called the Food Network (which, at the time, had almost 100 million subscribers and aired in other countries). In a highly competitive market that is already awash with cookery journals, this was not without risk. This challenge did not faze the leadership, however, who trusted in the organization’s ability to leverage skills, experience and reputation. This required confidence and boldness.
Key to making such a bold investment decision was breaking the typical mold in the publication industry that dictates that a return on a new publication can take five years. During a recession, a new mindset was needed. They scaled back the usual costs and scope involved in launching a new publication and set new, challenging parameters. Two things made a significant difference. First, they launched the magazine when it was good enough to go onto the market, accepting that further changes could be made later – previously, they underwent a costly and protracted development period. Second, they massively reduced the number of people working on the magazine and that slashed costs. Basically, the company did more with less. The results vindicated the decision: within one year of launch, the magazine enjoyed a circulation of 1.3 million, and in 2009, there were 300 million subscribers. It now occupies the coveted number one slot in the U.S. for food magazines at newsstands. Undoubtedly, the synergy with the Food Network channel has boosted sales.
Critically, the leaders at Hearst Magazines responded innovatively to changes in the market. The economic downturn meant that advertisers were no longer willing (or able) to pay as much. So they tried a different approach by not charging for test advertising. Previously, the industry would charge a low initial rate for advertising in a newly launched test magazine, which would then be increased should the magazine sell more copies than expected. This situation was never popular with advertisers, since they had no idea what the final bill would be – hardly a satisfactory state of affairs, especially during a recession, since this prevented advertisers from managing their costs. Not charging for advertising may sound like a recipe for disaster for a product that usually doesn’t break even for five years (it broke even in much less time) but this was a calculated and measured tactic. The people at Hearst Magazines felt that test advertising would not make a huge, immediate difference to revenue but that getting the right sorts of advertisers in the beginning, and showing them the difference that advertising in the magazine could make would matter for future revenue. Also, this offer meant that they had more control over which companies advertised and that enabled them to create the right look and feel in order to make the magazine more appealing to customers.
Having the right team around is essential. As Cathie Black says, you need “people who have courage and determination and who are willing to take a risk and put in a lot of hard work.” (The Focus, Volume XIV/1 www.ezsfocus.com Egon Zehnder International) She believes in treating her people well and being open to their ideas. The company rewards people for their contributions and hard work, which keeps morale high and employees engaged – particularly important in such a high-pressured environment. Also, Hearst Magazines regularly conducts sessions with people from different parts of the company to explore what kind of future people would like for the company. This inclusive approach certainly makes people know they are valued but, significantly, it leads to the development of many ideas and viewpoints. All of this information better informs strategic and operational decisions and it fosters a sense of shared direction and purpose.
Leading from the front and inspiring others is paramount to Cathie Black’s leadership style. This matters, if you want the commitment and dedication of your people, since employees are less likely to follow someone that doesn’t set a good example. Similarly, she believes that the leadership team should show unanimity. Obviously, disunity can leave people throughout the organization feeling unsettled, nervous, directionless and demotivated. In addition, when handling difficult situations, being honest with people is particularly important for gaining trust, support and commitment to plans.
A fundamental aspect of resilience at Hearst Magazines is that leaders take control of issues and situations, rather than allowing themselves to be led in directions they did not choose. A case in point is how they reacted to the general negativity of the dwindling impact and arena of newspaper publications. Rather than wait for this negative attitude to spread to magazines, Cathie Black, along with other key figures in the industry, took control, stuck to her strong conviction that magazines are an effective medium and commissioned an advertising campaign to put forward the case for the vibrancy and effectiveness of magazines based on facts rather than incorrect speculation. She is proactive and brings people along with her – including external parties. Contrary to popular belief, despite the downturn, magazines have enjoyed increasing sales and in particular, their readership is drawn heavily from the most prized demographic – the 18-34 year-old segment. As their advertising campaign has demonstrated, this makes magazines a particularly effective medium for advertisers.
Resilience, as the old adage ‘forewarned is forearmed’ suggests, relies on the ability to scan the environment and be aware of changing circumstances. Significantly, the people at Hearst Magazines keep alert to signs of impending problems. For example, when they received fewer replies to the subscription card inserts from the magazine Talk, they suspected that trouble was brewing. Sure enough, circulation figures soon fell precipitously.
Experiencing difficulties has certainly taught the people at Hearst Magazines. In 2001, the magazine Talk was pulled in its third year of publication. It had been the product of a joint venture. Unfortunately, most of the editorial decisions and business plans had been made before Hearst Magazines joined, and those involved did not fully appreciate the ramifications of this. This mistake was avoided in the joint venture with the Food Network channel. Similarly, when Cathie Black helped set up USA Today earlier in her career, she faced immense challenges that equipped her for the future. “I think that experience [at USA Today] prepared me for any eventuality, from dealing with Wall Street to giving speeches and presentations to exercising editorial involvement and figuring out our strategies.“
Building and running a resilient company involves making many difficult choices. You need inner strength to cope with the pressure and the energy and commitment to carry your policies through. It is not for the faint of heart but Cathie Black remembers some advice given to her by a previous employee at Hearst Magazines, “the only thing you’ll regret about a hard decision is that you didn’t do it sooner.“
SUSTAINABILITY
By integrating sustainability into your strategy and operations you will build stronger, more resilient organizations. To do this, make sure that you get the right team and leader to manage sustainability so that your company is better placed to operate successfully. A sustainability program needs a leader who can manage change, influence others and win support. Without the ability to persuade others, especially key influencers within the organization, progress is likely to be slow and ineffectual. It is essential to educate everyone in the organization about the merits of sustainability so that they fully appreciate the risks and opportunities involved, and to gain their commitment. You need to make the case for sustainability, point out the advantages and win people over.
“THE PAST CANNOT BE OVERCOME. IT IS THE PAST. BUT ITS TRACES AND, ABOVE ALL, THE LESSONS TO BE LEARNED FROM IT EXTEND TO THE PRESENT.“
Gerhard Schröder, Chancellor of Germany 1998-2005
There is a compelling case to be made for the commercial advantages of a program of sustainability. It circumvents or minimizes risk and provides considerable competitive advantage. By making departments responsible for achieving specific goals, you will ensure participation and commitment.
Realigning a company in order to achieve sustainability targets is not easy. It requires purposeful dedication, clarity of objectives and the ability to handle a myriad of issues. Compliance also figures prominently and actions must always be measured against any regulatory requirements. Nonetheless, sustainability goes beyond compliance and should also focus on commercial benefits – from limiting risks and reducing costs to enhancing reputation and appealing to customers.
A key aspect of any sustainability program is to remain open to new ideas and to be ready to flex, as new information or challenges come to light. Fundamentally, sustainability has to be a part of all strategic and operational developments, to ensure that the company does not stray into areas that will be ultimately harmful to long-term profitable growth. The role of sustainability in building resilient organizations cannot be overstated. Far from being a soft issue and ‘I have to comply with regulations’ chore, it should be a core value of the organization – a powerful means of reducing risk, sourcing new opportunities and moving the company onto a path of sustainable growth.
Sustainability is much more than concern for environmental issues. Today, it goes beyond the traditional view of sustainability to include other aspects that ensure the long-term, sustainable growth of the company.
Avoiding inertia and having foresight are essential to exposing weaknesses, exploiting opportunities and building long-term resilience. For example, Ford’s CEO, Alan Mulally, took advantage of low interest rates to borrow substantial sums of money to restructure the company, improve manufacturing processes and overhaul their product offerings. He was widely criticized for this tactic, since borrowing so much money seemed all out of proportion for a company that was facing an immediate and serious threat. However, as Alan Mulally foresaw, this upgrade prepared the company for the future. And this is the point: at its best, resilience is about adapting before a potential problem becomes a real problem. While we can all be caught off guard from time to time or need to immediately react to events, ideally, resilience should be proactive rather than reactive.
Interestingly, Jim Collins identifies several stages where companies repeatedly ignore signs and inevitably decline. Initially, companies can be overconfident and overstretch themselves into areas that do not necessarily fit with the rest of the company. Then they will ignore signs that indicate that things aren’t going well – or even deny that a problem exists at all. When the problems can no longer be avoided, it is often so late that these companies go into desperation mode and fail to turn the situation around.
Complacency, lack of objectivity and forgetting what the company’s purpose is and what the company stands for are significant factors that lead to this situation. Here, it is important to keep an eye on two of our six Rs: reason and in particular, revenue. Any plan has to be funded; without generating the appropriate level of revenue to implement and sustain those plans, the business is likely to run into trouble. This, however, is not an inevitable situation: if you take control and are prepared to do whatever it takes, including completely restructuring or realigning the business, you can turn a company around.
An idea of the extent of the changes that you may have to implement is highlighted by the example of the Finnish company, Nokia. Starting as a paper mill in the 19th century, it has faced many challenges and market changes and has diversified, realigned its company and offered different products, accordingly – from generating electricity to making car tires. When the company faced difficulties in the 1980s it was completely restructured and is now a major telecommunications company. This flexibility and adaptability enhanced its ability to survive many market upheavals and take advantage of opportunities. The company did not worry about what it was producing; it was focused on the overall success and survival of the business. After all, a company is about making money, first and foremost – nothing else can be achieved without revenue.
Although it is possible to rescue a company, it is obviously better to build resilience before problems occur – either to avoid difficulties or to equip you to handle challenges more effectively. The examples of HSBC and Hearst Magazines show how companies put resilience front and center in all their strategic, operational and people issues, and reveal exactly how important it is to instill resilience throughout an organization.
HOW DO YOU DEVELOP RESILIENCE?
There are several techniques, capabilities and ways of thinking that will help you ensure success.
• Align the company’s culture and its goals
• Know your organization and your people – their strengths and weaknesses
• Evaluate available options
• Imagine solutions and see likely or different possible futures
• Be flexible
• Inspire and lead others
• Be open to new ideas and to change
• Possess the drive needed to handle demanding situations, stress and pressure
• Learn from experience
• Expose yourself and your people to new, challenging experiences
• Cultivate inner strength
• Nurture creativity and innovation
• Surround yourself with the right people
• Avoid inertia
• Develop insight and foresight
• Build a culture of resilience
VALUES, SKILLS AND RESiLiENCE ARE INDIVIDUAL
Strong corporate values matter. They provide a sense of shared purpose and keep people working together for the same goals. These values are the very foundation that everything else is built upon and are especially important when dealing with change and uncertain times. Boldness and imagination are other key aspects for surviving crises and growing a business, as is awareness of the environment around you. It is certainly the case that we are often unaware of opportunities or problems until it is so late that it becomes much harder to react successfully or to resolve issues. However, the key word here is ‘harder.’ This is not the same thing as impossible. With the right attitude and approach, by figuring out how to change the situation, it can be possible to turn even the direst of situations around. After all, as Archimedes said, “Give me a place to stand, and I will change the world.“
What matters, however, is that each individual comes to their own belief that these issues – values, purpose, boldness, imagination and others – are important and interprets them in their own personal, individual way. In fact, the most significant lesson for any business leader is to know that, while structures, procedures, processes and systems can all be improved, the true source of resilience is people. Everything rests with them: they are the reason a company succeeds. This leads us to the next part of the book: people need to think holistically, as a team and with the six Rs clearly in mind, but they also need to take personal responsibility for making this happen. This is a challenge we describe as Thinking Holistically, Acting Personally, and it provides the focus for the next chapter.