Organisational Resilience: Why Fear Shouldn’t Lead Your Business Response To Brexit
Brexit has officially begun, and already has many business leaders worried about the impact on trade and industry. But rather than just preparing for the worst, bosses should also consider embracing the risks, and opportunities, if they want to succeed, according to a new global management studyJermaine Haughton
Just over nine months after the UK’s historic vote to leave the European Union the government has triggered Article 50, formally starting proceedings to leave the bloc. The delivering of the letter to Donald Tusk, the president of the European Council, sets the deadline of March 29th 2019 for the UK to leave the EU – and starts two years to negotiate new agreements.
But with the nature of new trading deals still unclear, and UK Prime Minister Theresa May seemingly backing away from her threat that “no deal for Britain is better than a bad deal”, many business leaders and senior managers across the country are understandably concerned about how the economic fallout will potentially impact their business operations, growth and profits.
Should fearful bosses change their approach, focusing on the positives? A new report from BSI, in partnership with Cranfield School of Management, suggests so.
The study warns that many chief executives are “sleepwalking” their companies towards disaster. Their struggle to balance risk with opportunity has left many ill-equipped to adapt to major geo-political and economic changes such as Brexit, or new innovative competitors.
The paper says a negative and fearful approach from managers to changes in the marketplace threatens to thwart the long-term survival of firms.
Based on the analysis of more than 180 academic papers on best-practice management research, researchers explained that this is because conflicting management advice has left senior executives reluctant to intervene, with the subsequent organisational paralysis potentially leading firms to sleepwalk into disaster.
Author of the study, Professor David Denyer, explained that the best CEOs tend to have a multi-faceted approach to managing their organisations – accepting the bad times and the good in equal measure.
“Great businesses are built by leaders prepared to take the bad with the good,” he said. “They recognise the tension between consistent defensive behaviours that stop bad things happening, and progressive, flexible ideas that allow the good to prosper.
“Put simply, senior leaders must manage the tensions between control, action, performance and innovation if organisations are to be truly resilient – and this requires paradoxical thinking.”
The Organisational Resilience Tension Quadrant – The Solution?
Described as the ability of “an organisation to anticipate, prepare for, respond and adapt to incremental change and sudden disruptions in order to survive and prosper”, organisational resilience is highlighted by the BSI report as the key method for businesses to succeed despite external disturbances.
Howard Kerr, BSI chief executive, said: “A resilient organisation is one that not merely survives over the long term, but flourishes. We believe that mastering organisational resilience offers the best opportunity to pass the test of time, unlocking future prosperity and securing longevity.
“Those that learn to spring forward and not back, reap dividends for their company, employees, investors, customers and society in general.”
The Organisational Resilience Tension Quadrant provides a proactive way of thinking about how to reinforce organisational resilience at your firm. By building competence and capability across all aspects of an organisation, this allows leaders to take measured risks with confidence, making the most of opportunities that present themselves.
According to the BSI report, the Quadrant includes four factors: preventative control (defensive consistency), mindful action (defensive flexibility), performance optimisation (progressive consistency) and adaptive innovation (progressive flexibility).
Preventative control involves protecting your company, products and services by promoting constancy and predictability through fail-safe system designs. By comparison, mindful action is a defensive move that relies upon resources to proactively investigate, learn, and act to solve new challenges and problems.
Privately-owned Australian poultry provider Baiada invested in taking a “step beyond compliance” by refocusing its management to look primarily at the emerging risks, such as protecting the health of the animals and biosecurity, and working on “prevention rather than reaction”.
Elaine Dickson was recently appointed as chief risk officer at Baiada, alongside a new head of compliance, and the traditional prescriptive system has also matured into a performance-based system. This shifts the focus from asking whether or not a particular procedure is being followed to asking how effective it is and having an open discussion about potential problems.
Dickson said: “You need to have good systems, but not be overburdened with red tape; make your documentation and your monitoring capture what is not only necessary but also streamlined. The aim is to balance operational efficiencies and resources. What this means is not throwing unnecessary or additional resources into the business, especially in our industry where the margins can be so tight that you need to have systems that are efficient as well as robust.”
Performance optimisation is a more positive action for managers to use, whereby business operations and activities are analysed to learn how to do existing things better, delivering goals and meeting the needs of all stakeholders. Leadership is a critical aspect of optimisation, often achieved by helping followers understand role and task requirements, providing answers, creating and using rewards as reinforcement and intervening when best practice is not met.
On the other hand, bosses who embrace adaptive innovation are willing to experiment and look beyond what they already know to make new discoveries and inventions in their industry. For this to happen, managers are advised to create an atmosphere that tolerates dissent and divergent perspectives on problems.
Innovation requires people to experience and observe the situation from multiple viewpoints, listen to dissident voices and encourage divergent perspectives on problems.
Technology services and consulting provider Infosys showed adaptive innovation by changing its whole business model to meet the rise in automated technology. The business has moved from a pure services model to a “software plus services” model to gain a better profit contribution and margin by means of investing in intellectual property.
Deepak Padaki, Infosys corporate strategy and chief risk officer, Infosys said: “You always have risks like business continuity, operational risks, fraud and compliance, but we felt the biggest risk to longer-term shareholder value was strategy and the successful execution of strategy.”
The backbone of the change of model was the change in office culture. Infosys was moving from a ‘factory and assembly-line like’ atmosphere to an environment where it is saying “everybody needs to come up with something new, and they need to innovate”. Therefore, the corporation allowed an open access Internet policy giving its people access to browse the internet at work as they wish, despite the cybersecurity risks.