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HOW BUSINESSES CAN BRACE FOR CATASTROPHE
by Yvette Mucharraz y Cano
On Sept. 19, 2017, a severe earthquake struck Mexico City, killing 370, injuring thousands, and destroying scores of buildings. For a short time, the city ground to a halt as rescue efforts took priority over normal commerce. But then something curious happened: Some businesses were able to return to work relatively quickly, while others lagged behind or even failed to recover and disappeared.
The earthquake provided a natural laboratory to study a crucial but often elusive business capacity: organizational resilience. Two years after the disaster, I met with a group of leaders whose businesses survived the quake to understand what set them apart. I found that their answers fit nicely with a leading theory about organizational resilience: that it falls into successive stages—anticipation, coping, and adaptation.1
Anticipation
Resilience starts with the awareness generation of potential risks to the organization, supported by data collected through risk assessments and experience. Resilient organizations put in place the necessary action protocols, business continuity efforts, financial provisions, human resources, technology, and infrastructure to ensure they can respond well to high-consequence, low-probability events. For instance, a consulting services company that lost a building in the center of the city and did not have human casualties developed in advance the emergency processes and protocols that protected their clients and employees when the earthquake hit because they evacuated easily and knew how to act. Also, the leaders acquired the insurance coverage that would protect the organization from a catastrophic incident, and the organization received the benefits almost immediately to establish a new office in a few weeks.
Specifically, the businesses I met with undertook several steps to help prepare them in advance for unforeseen catastrophes:
They built a strong organizational culture
The corporate culture serves as a preparedness mechanism for environmental events, especially when it is supported by a strong commitment from organizational leaders with ethics and values and when trust is present in the organizational community. For instance, in another organization in which the building collapsed only 15 seconds after the earthquake started, the team and the group of leaders who were interviewed shared a common view about how they lived their corporate values of empowerment, innovation, teamwork, integrity, and inclusion. In the recovery phase, the leaders relied on the team members to make decisions and create solutions to continue operating while the business partners looked for financial support, addressed the legal issues, and supported the families of the affected employees.
They promoted emergent leadership
Organizations’ emergency responses are activated by emergent leaders during crises, and they are tested during minor crises. Emergent leadership is observed in the response to extreme events and is associated with organizations that have low power distance, distributed leadership, flexible structures, and processes that reflect empowerment and delegation of authority.
They invested in safe and secure workspaces
The concept of “leadership through place” is critical in environmental hazards that affect organizations, as the loss of the space—for example, a building—impacts individuals deeply, and the feeling of being lost may be relieved by redefining the organization’s identity to foster a sense of belonging and create a “new normalcy” in a new space.
Consequently, the selection of the space in which an organization operates is more than an incidental aspect. Leaders must provide a safe environment to preserve physical integrity. Adherence to official standards and norms is critical to protect individuals who attend an organizational setting, including employees, contractors, and visitors. Facilities must be evaluated by construction and civil protection experts and secured by insurance coverage. Additionally, employees must be covered by health and life insurance policies and social security in compliance with labor and civil protection laws.
Leaders must be aware and accept that the threat of an environmental hazard is continuously latent. Action is therefore required on a daily basis. Evacuation drills are not enough; for instance, as part of the continuity of business strategies, it is critical to identify alternate sites from which to operate and to simulate the communication flow, as there may be a suspension of services such as Wi-Fi or social media during an emergency due to a lack of power and the saturation of communication networks. It is also necessary to verify that security measures such as bars or locks installed on access doors or emergency exits do not become obstacles to evacuation during an emergency. In the case of organizations that have animals in their facilities, they also need to be part of the emergency protocols. Finally, critical prevention decisions include the location of company servers, official documents, or objects difficult to replace (for example, art) and cash vaults to secure them in case of an emergency.
Technology can make a difference
One of the primary considerations that leaders mentioned repeatedly was the use of information and technology to back up organizational data and provide connectivity as a precautionary measure to preserve information. This is a critical intangible asset for the organization and for continuity of business purposes.
Coping
To cope with an environmental crisis effectively, interorganizational and multisectoral coordination is essential—among governmental institutions, the private sector, universities, nongovernmental entities, and civil society. This coordination can become a source of solidarity and a potential source of relief during a crisis. Resilience must be cultivated cross-functionally, from the prevention stage, activated during the event, and in the recovery phase. For instance, an alliance known as ARISE—the private-sector alliance for disaster-resilient societies led by the UN office for Disaster Risk Reduction (UNDRR)—was established in 2018 in Mexico. Though a global initiative, its Mexican operation fosters the participation of the business community, governmental entities such as the National Coordination of Civil Protection, and other nongovernmental institutions. The ARISE alliance is focused on building resilient societies by disaster prevention and risk reduction.
After the earthquake, there were exemplary organizations that worked actively in the emergency response efforts. As an illustration, an organization in the south of Mexico City dedicated time and energy to the rescue efforts of the neighborhood. One of the leaders became the leader of a donations center and coordinated the support mechanisms with public entities. Another private company, dedicated to rebuilding damaged buildings, has participated in an ongoing initiative with governmental institutions to support the reconstruction process.
Furthermore, the role of social media is fundamental during the immediate response stage, as it is a potential source of aid that activates social capital and is directly related to the reduction of human casualties. An example of this coordination was the emergence of #Verificado19s, a digital platform that verified social media information with civil society participation and managed data to make the citizens’ response more efficient after the 2017 earthquake.
Adaptation
Address the grief that results from the crisis
Emotional support by leaders is essential following traumatic events. The socialization of the grieving process in the corporate community is a means of promoting this emotional response and may lead to posttraumatic growth. Resilience in this context is not only a return to normalcy after a disaster but also involves leaders’ acknowledgment of the grieving process to mourn for what was lost. Companies are more than their assets; at their core are human beings who collaborate, and they should be in the center.
For instance, a rescuer who was interviewed for the research mentioned that every day during the emergency response following the earthquake, the group of rescuers formed a circle to share their emotions and tell the day’s stories in a safe community as a way to prevent posttraumatic stress. Similar rituals should be introduced into corporate settings as well.
Learn and grow from adversity
Posttraumatic growth in an organization is related to the organization’s adaptability and is promoted by a learning process in which leaders reflect on what they did well after an environmental incident. Resilient leaders are capable of sharing their vulnerability, are not afraid to look for emotional support, and let themselves be guided by their teams when needed.
Post-disaster resilience is an adaptive capacity to grow and develop that does not occur by chance. As has been evident in the years after the earthquake in Mexico, resilience is developed collaboratively. Resilient organizations demonstrated responsibility and solidarity with their employees and with the community and were supported by strong internal and multisectoral networks. These networks were developed primarily in the anticipation stage, and the return on the investment to build them has been the survival of the organization despite the critical nature of the emergency. The enemies of resilience were corruption, conformity with the status quo, a lack of flexibility, and the inability to accept the crisis before it escalated.
TAKEAWAYS
In the face of catastrophe, companies need a crucial but often elusive business capacity: organizational resilience. By looking at how businesses responded to the devastating earthquake in Mexico City, all leaders can learn how to build such resilience before, during, and after a crisis:
- Anticipation: In advance of potential events, build a strong organizational culture that’s supported by leaders, promote emergent leadership during crises, invest in safe and secure workspaces, and use information and technology to back up data and provide connectivity.
- Coping: Encourage coordination among governmental institutions, the private sector, universities, and other sectors. Such alliances can then become a source of solidarity and disaster relief during a crisis.
- Adaptation: Acknowledge the emotions employees are feeling, like grief, and encourage learning and posttraumatic growth. Such resilience is developed collaboratively, with employees, the community, and other networks built before disaster strikes.
NOTES
1. Stephanie Duchek, “Organizational Resilience: A Capability-Based Conceptualization,” Business Research 13 (January 2019): 215–246.
Adapted from content posted on hbr.org, February 6, 2020 (product #H05EE7).