"The past few years have seen a range of challenges such as financial crises, Brexit, cyber threats, COVID-19, extreme weather events and international conflicts, which have disrupted business operations and posed risks to their survival. These challenges emphasise the importance of building resilience in order to prosper in a rapidly evolving world. With technological, economic, social, and environmental changes presenting both opportunities and risks, organisations can no longer afford to simply wait for the storm to pass."
David Denyer is Professor of Leadership and Organisational Change and Strategic Business Director at Cranfield School of Management. He advises boards and executive teams, designs and delivers executive development programmes, evaluates organisational maturity levels and undertakes research that addresses real-world problems. David is also chairing this year's Cranfield Alumni Conference, which all alumni are invited to attend.
The UK Government Resilience Framework has set out ambitious plans to tackle the most critical and acute challenges that confront us. With the anticipated rise in the size and complexity of crises over the next ten years, there will always be more obstacles to overcome. By focusing on organisational resilience, you can best equip yourself to face these challenges and ensure the future success of your organisation.
What is organisational resilience?
The concept of resilience is widely applied in several fields and definitions can differ between sectors and disciplines. In simple terms, it is the ability an organisation has to be prepared for disruption and to adapt and thrive in a changing environment.
The Organisational Resilience report from the BSI and Cranfield School of Management provides insight into how organisations build their resilience to respond to disruptions and also positively adapt in the face of challenging conditions, leveraging opportunities and delivering sustainable performance improvement.
The 'five capitals'
The Resilience Reimagined report by Cranfield, the National Preparedness Commission, and Deloitte reviewed best practices for building resilience and identified proactive and reactive strategies. Findings also showed that leaders are prioritising resilience in the new social contract by considering the "five capitals" – natural, human, financial, social, and built, and their interdependencies and feedbacks – that comprise the system in which we live.
Natural capital, (which is also sometimes referred to as ecological or environmental capital) encompasses the energy, matter, and natural processes that organisations require to produce and deliver their services. This encompasses resources that absorb, neutralise, or recycle wastes, such as forests and oceans, as well as both renewable resources like timber, grain, fish and water, and non-renewable resources like fossil fuels. Additionally, natural capital includes processes like climate regulation and the carbon cycle, which sustain life in a balanced manner.
Human capital refers to the knowledge, skills, intellectual outputs, motivation, and ability to form relationships that individuals possess. It also encompasses aspects of health, happiness, motivation, empathy, and overall well-being.
Financial capital includes those assets of an organisation that exist in a form of currency that can be owned or traded, including (but not limited to) shares, bonds, banknotes, coins and cryptocurrencies. Financial capital reflects the productive power of the other types of capital.
Social capital encompasses the value that human relationships, partnerships, and cooperation add to an organisation's economic outputs and activities. This includes networks, communication channels, families, communities, businesses, trade unions, schools, voluntary organisations, as well as social norms, values, and trust.
Built (or manufactured) capital is material goods and infrastructure owned, leased or controlled by an organisation that contributes to production or service provision. The main components include buildings, infrastructure (transport networks, communications, waste disposal systems) and technologies (from simple tools and machines to IT and engineering).
By examining the interrelationships between these five elements, organisations can more accurately evaluate the actual effects of disruptions, resulting in a more comprehensive approach to improving and measuring resilience.
3 ways you can build organisational resilience
The ‘Resilience Reimagined’ report also identified three ways leaders can build organisational resilience:
1. Discuss future failure to generate a more positive outcome
Resilient organisations recognize the potential for their designs, plans, and operations to fail and proactively ask, "what if?" They also make less complacent assumptions about future challenges by asking, "what's next?" Furthermore, they foster an environment of psychological safety, encouraging people to speak up and share their thoughts without fear of negative repercussions.
To enhance their resilience, organisations should establish diverse teams that include individuals with varying skill sets, as well as newcomers with fresh perspectives and long-term staff with extensive knowledge and experience. This approach can help identify areas that require improvement, assess near misses, and promote continuous learning.
2. Stress test your ability to deliver essential outcomes
Essential outcomes are the services provided that, if disrupted, could cause unacceptable levels of harm to an organisation's customers, end-users, or other key stakeholders. To achieve resilience, an organisation must have a thorough understanding of how these important business services are delivered, from end-to-end and surface to core, in order to identify vulnerabilities.
By adopting an outcome-focused approach, organisations can consider alternative methods for meeting the needs of their customers or other critical stakeholders in the event of a disruption. When dealing with more complex and severe scenarios, organisations should transition from a pre-planned recovery of assets approach to a more adaptable response that prioritises essential business services.
By employing stress tests, an organisation can investigate if it can stay within acceptable thresholds when faced with severe yet plausible scenarios. 'What if' scenarios can be utilised to challenge assumptions, evaluate contingencies, and assess the recoverability of outcomes.
3. Future-proof your organisation from the bottom-up
As businesses and society strive to recover from disruption, we have come to understand that innovation is often the only exit strategy from a crisis. For instance, in the first six months of the pandemic, many organisations instigated more digital transformation than they had achieved in the previous six years in an effort to overcome disruption.
To future-proof services and products, organisations must be receptive to new ideas and collaborate closely with teams on the front line to truly comprehend the impact that disruptions could have on the customer experience and develop innovative solutions to mitigate their effects.
Achieving direction, alignment, and commitment to resilience is crucial, and leadership plays a key role in this. The development of resilience is an adaptive process rather than a technical one. This requires people to take on new roles, relationships, values, behaviours, and approaches to work. As environments become more uncertain and ambiguous, leaders must foster a culture of adaptation and collective action.
Alumni conference 2023 - Understand the role you play in building organisational and societal resilience
While everyone can contribute to building resilience, people often struggle to know where to begin. Join me at the 2023 Cranfield Alumni Conference on Friday 19 May 2023 to gain the confidence to take action as we examine two interrelated questions: What does it take to build a more resilient organisation and what role does business play in societal resilience?
Alumni and their guests will learn how to:
- Analyse the five capitals of connected resilience and how they impact each other.
- Build strategic capability for your organisation to thrive in a changing environment.
- Play your part in building a resilient organisation and empower everyone to contribute.
