Resilience from within

by 14 Apr 2009

Companies that are strong on the inside are showing resilience in the economic storm. Richard Barrett outlines how companies can build resilience through a value-based approach

If there is one thing that companies are learning in the cur rent economic crisis, it is the importance of resilience – the ability of an organisation to withstand shocks and remain sustainable under prolonged periods of duress.

The most resilient companies display the following char acteristics:

• A high level of staff engagement

• A low level of cultural entropy

• A vision of the future shared by all employees

• A set of values shared by all employees

• A focus on adaptability and innovation

Not only do these qualities create resilience, they also lead to internal cohesion – a key component in building a strong internal community that can drive the goals and performance of the organisation. The current crisis shows us that organisations that are strong on the inside are also strong on the outside.

Being strong on the inside means having a values-driven culture, a highly aligned, cohesive and effective leadership team, a low level of cultural entropy, and a high level of staff engagement.

Cultural entropy is the degree of dysfunction in an organ isation. It is the amount of energy unavailable for useful work. Cultural entropy arises from the presence of limit ing values such as bureaucracy, internal competition, blame, short-term focus, firefighting, etc. Research shows that low levels of cultural entropy are accompanied by high levels of financial performance and high staff engagement. Com panies with these attributes are able to grow their incomes three times faster than companies with high entropy.

The following checklist of actions will help you to build your company’s resilience, support you in traversing the economic downturn, and place you in a strong position for success when normalcy returns.

Based on the core principles of the Barrett Model, each of the seven items on the checklist represents a critical step in building a full-spectrum, sustainable organisation.

Step 1: Focus on building financial stability. Build up your cash reserves. Seek ways to stay financially sustainable.

Step 2: Communicate with staff and customers. Confi dence is important. Ensure everyone knows what you are doing to get through this crisis.

Step 3: Focus on your core business. Get lean. Streamline your systems and process to reduce costs and increase agility.

Step 4: Learn to adapt to a changing environment. Work on reducing cultural entropy and building innovation.

Step 5: Get clear on your direction. Re-energise your vision, mission and values to build internal cohesion.

Step 6: Build strategic alliances. Align with your cus tomers and suppliers to create mutually supportive, ben eficial relationships.

Step 7: Keep the long-term in mind. Ensure that your short-term plans do not compromise your long-term via bility.

1. Focus on survival & build stability

In an economic downturn, where money is in short sup ply, cash is king. Your first objective in an economic down turn is to make sure you survive the immediate impacts of the situation by building up your cash reserves. The sec ond objective is to strengthen your long-term financial position so that you may grow and expand when eco nomic conditions improve.

The danger right now is knee-jerk reaction to cutting costs by firing people. This would destroy your cultural capital and undermine the commitment of your organi sation’s top talent. Your first line of attack when faced with difficult trading conditions is to improve your per formance by reducing cultural entropy and increasing staff engagement.

The opportunity: focus on financial prudence and eco nomic sustainability so that you remain in a strong posi tion to secure loans for future growth. In difficult times, a strong cash reserve gives you better access to credit.

The values: in an economic downturn the values you need to focus on are economic prudence and financial sus tainability. Let these values guide your decision-making.

2. Communicate with Staff and Customers

In an economic downturn, people worry about their future – employees and customers alike. Maintaining open com munication with staff is essential at this time. Communica tion is a key ingredient to building trust. Trust is the antidote to the fear your staff or customers may be feeling.

More frequent communication with customers also is important at this time. They need to know that they can count on you to be a solid partner. The more your cus tomers depend on you for their business success, the more you need to reassure them of your support in keeping their businesses going.

It is important for the CEO and executive team to appear calm and on top of the situation in order for peo ple to maintain focus on the business of earning income and providing superlative customer experience.

The opportunity: reach out to your customers to find out how the economic downturn is affecting their buy ing decisions.

The values: all stakeholders need to be assured that your organisation will withstand the economic down turn. The values to focus on are open communication and customer loyalty.

3. Focus on your Core Business

In hard times, focus on what is essential to your busi ness success – strengthen your core business and delay or eliminate speculative projects and investments.

The opportunity: remove unnecessary bureaucracy. Think of steps you can take to improve agility, reliabil ity and quality while maintaining your competitive edge.

The values: at this time, focus on your internal effi ciency and effectiveness in supplying and delivering prod ucts and services.

4. Learn to adapt to a changing environment

The Fortune 500 constantly changes as companies go bankrupt or are taken over by fitter and more resilient companies. The principal impediments to achieving high levels of adaptability are control and micromanagement; blame and internal competition and elitism,

Key antidotes to these issues include: teamwork – dis solving the barriers of separation; accountability – empowering people to take responsibility for delivering on time and in budget; and adaptability – rapidly responding to changes in market conditions. Focus on unleashing innovation by empowering employees and giving them a voice.

The opportunity: get to grips with what is not work ing in the organisation, and more importantly, strengthen what is working. If you have conducted a Cultural Val ues Assessment, focus your attention on the desired cul ture values and the top value jumps. Also, work on reducing cultural entropy.

The values: values that promote adaptability are accountability, responsibility and empowerment.

5. Get clear on your direction

There is no better time than periods of deep uncertainty to revisit your vision, values, mission, and strategy – with the objectives of refocusing everyone’s energy around your core business and building internal cohesion.

The four critical elements to this are: vision, values, mission, strategy.

The evidence is clear – long-lasting companies have a compelling vision and a shared set of values that are embraced by the company as a whole.

The opportunity: in difficult times people naturally come together to protect themselves from external threats. Set a clear intention for the future direction of the com pany and the values that will support the company on its journey.

The values: to create an environment of trust, focus on the values of honesty, integrity, openness, and transparency.

6. Build strategic alliances

Ultimately, the resilience of your company is not only about developing collaborative internal relationships, but also about developing collaborative external rela tionships with your customers, suppliers and the local community.

In difficult economic circumstances, relationships really matter. Companies with strong links to their customers and suppliers stand the best chances of survival.

The opportunity: when the going gets tough you need the support of others, and others need your support so that everyone can weather the crisis. The opportunity given to you now is to reach out to your customers and suppliers – in fact, to all your stakeholder groups – to develop mutu ally beneficial alliances.

The values: to build strategic alliances, embrace the values of empathy, customer/supplier collaboration, and partnerships.

7. Keep in mind the long term

In times of difficulty and crisis, there is a natural tendency to focus on the short term, forgetting that you may have to live with the implications of your decisions once the crisis is over.

Ask yourself if the decisions and actions you want to take now are also right for the long term. A knee-jerk reaction now may cause more problems in the future. Be considered in your responses and bring experience and wisdom to bear.

The opportunity: in an interconnected global world, those who reach out to each other for mutual support survive and thrive. This is the opportunity. Overcome your fear-based reactions that are rooted in self-interest, and collaborate with your customers, competitors and suppliers to create the con ditions that support the common good and provide a sus tainable future for everyone.

The values: at times such as these, we need wisdom, humil ity and ethics to build a sustainable future for everyone.

Richard Barrett is author of Building a Values-Driven Organisatiaon.