Organizational resilience: Making your organization crisis-proof

What is organizational resilience?

Basically, resilience is the ability to overcome crises and emerge stronger from them. Research into this initially began with the observation that some people come out of crises stronger than others.

At the same time, people often talk about the so-called pillars of resilience:

1. Optimism
2. Acceptance
3. Solution orientation
4. Leaving the role of victim
5. Taking responsibility
6. Network orientation
7. Planning for the future

When resilience is used in the context of companies, it is referred to as organizational resilience. However, the concept behind it remains the same: companies want to learn how to improve their handling of crises and emerge stronger from them. 

The definition of organizational resilience is supported by a specific standard from the International Organization for Standardization (ISO), which offers concrete recommendations for promoting this resilience.

What actually is a crisis?

Not every challenge in everyday business life is also a crisis. The most important characteristic is that a crisis usually occurs suddenly and largely unexpectedly. It can be caused by external or internal factors.

External factors:

• Competition
• Economic situation
• Natural events
• Epidemics
• Trends such as digitalization

Internal factors:

• Personnel changes
• Management decisions
• Disloyalty
• Corruption
• Accidents
• Innovations

In its guidelines for the preparation of restructuring reports (IDW S6), the Institute of Public Auditors in Germany has described five crisis stages that companies typically go through.

1. Stakeholder crisis
2. Strategy crisis
3. Product crisis
4. Success crisis
5. Liquidity crisis

While the first three phases are still part of the latent crisis, the last two phases in particular are part of the acute crisis and pose a massive threat to a company’s existence. How quickly a company goes through the phases – and whether it reaches the last two phases at all – is always individual. 

What is important, however, is that a crisis can always represent an opportunity. Namely, if the organization behaves well during it and emerges from it with new strategies and models.

Why companies need to be particularly resilient today

Now more than ever, it is important for companies to be aware of the challenges facing our world. This is the only way they can react to changes in good time. 

Rapid technological change: The digital transformation is progressing rapidly. Resilient companies are better able to adapt to new technologies and business models.

Global networking: In a networked global economy, crises can spread quickly. Hardy companies are better equipped to absorb external shocks.

Increased competition: Disruptive innovations can revolutionize entire industries. Organizational resilience helps to react flexibly to new competitors.

Market volatility: Economic and geopolitical uncertainties are on the rise. Hardy companies are better able to withstand market turbulence.

Increasing cost pressure: Efficiency alone is often no longer enough. Resilience makes it possible to remain capable of acting even under difficult conditions.

More complex supply chains: Global supply chains are susceptible to disruption. Resilient organizations can better cushion supply bottlenecks.

Higher customer expectations: Customers today expect more flexibility and adaptability. Adapted companies are better able to meet these expectations.

Regulatory changes: Changing laws and regulations require adaptability. Hardy companies master such challenges more easily.

Demographic change: Changes in the world of work require new concepts. Resilience helps to adapt to new forms of work.

Climate change and sustainability: Environmental risks are increasing. Hardy companies are better prepared to deal with these challenges.

How does organizational resilience manifest itself in a crisis?

Probably the most important characteristic of organizational resilience is that companies have the capabilities to deal with crises more quickly and effectively. 

If a crisis occurs, it is recognized and acknowledged more quickly within the company. Instead of falling into a state of shock, the company quickly switches to crisis mode and begins crisis management. Strategies for sustainable handling are developed immediately.

At the same time, attention is paid to each other – managers in particular take fears seriously and know how to deal with them. This helps to maintain the collective ability to act. Those responsible also ensure that there is a climate that makes creativity and innovation possible.

Processes, methods and skills are created that enable effective, efficient and smooth management of the crisis. This is how opportunities can be recognized and seized in the first place.

Companies cultivate resilient structures and a healthy approach to stress in order to strengthen both the organization’s resilience and the well-being of its employees.

The different facets of organizational resilience

Resilience facets are the decisive factors that make up resilience in the first place. They can be seen across a wide range of industries, companies and outcomes – and are repeated time and time again. 

Anticipation

Anticipation is evident even before a crisis occurs. Instead of “waiting” for problems to occur, an active attempt is made to foresee possible disruptions. In this way, a potential crisis can even be prevented by early intervention. 

Example: A car manufacturer analyzes market trends and recognizes the growing demand for electric vehicles at an early stage. The company then proactively invests in the development of electric drives and battery technologies even before strict emissions regulations come into force.

Buffering

If a fault nevertheless occurs, buffering – i.e. cushioning the effects of faults – comes into play. If faults cannot be avoided, the impact on the entire process is prevented or at least buffered.

Example: A food manufacturer deliberately builds up overcapacity in its production and stores additional raw materials. These buffers enable the company to cope with short-term peaks in demand or supply bottlenecks without interrupting production.

Coping & Adaptation

If the disruptive effect has now unfolded, coping and adaptation can at best ensure that the organization’s ability to function is maintained even under an acute disruptive effect.

Example: A retail company responds to the COVID-19 pandemic by quickly reorganizing its business operations. It introduces contactless delivery options, strengthens its online store and trains employees in new digital sales methods.

Recovery

Recovery refers to all actions that are intended to restore the functionality of a company after a disruption. The aim is for the company to regain its ability to act as quickly as possible by normalizing the flow of resources. 

Example: Following a serious cyberattack that has paralyzed the IT systems, a bank activates its prepared emergency plan. It quickly restores the most important services, communicates transparently with customers and authorities and implements improved security measures to prevent future attacks.

Learn

Once the disruption has subsided, the organization and its processes are adapted. The main focus here is on recognizing and intervening in the event of possible future disruptions.

Example: A pharmaceutical company conducts systematic debriefings after every completed research project – regardless of its success. It analyzes successes and failures, documents learnings and adapts its research processes and risk assessments for upcoming projects on the basis of these findings.

Resilience concepts at a glance

There are various resilience concepts for companies that can support or even reinforce each other. 

• Agility: The ability to overcome problems that arise quickly and with little friction.
• Redundancy: Backup systems and resources are kept available, for example through duplication.
• Robustness: Physical, conceptual and systemic insensitivity to challenges.
• Simplification: Avoidance of overly complex processes, simplification of existing processes.
• Regionalization: Regional partners are preferred over global partners.
• Continuity: Building good long-term relationships with partners, stakeholders and customers.
• Diversification: Risk diversification of business activities, diversification of solution areas. 

The 9 keys to organizational resilience

The german ISO standard “ISO 22317:2017 Security and resilience – Principles and characteristics” is a guideline for companies that want to become more hardy. It describes 9 factors that promote organizational resilience. 

1) Visions and goals

Companies need to develop a clear, long-term direction. A strong vision provides orientation in times of crisis and helps to set priorities. Goals should be formulated SMART (Specific, Measurable, Attractive, Realistic, Time-bound) and reviewed regularly.

2) Strengthen relationships

Strong relationships create trust and support, which can be crucial in difficult times. Organizations therefore need to think outside the box – and actively work with partners who share their values and vision. At the same time, they maintain customer relationships, analyze the competition and identify market changes. 

3) Supportive leadership

Managers must encourage, support and tolerate mistakes. A resilient leadership style is based on trust, integrity and effectiveness. This is the only way for managers to remain capable of acting even in times of crisis and to provide guidance that enables employees to take responsibility and participate in the process. 

4) Promoting culture

An open error culture, a commitment to shared values and a positive attitude are the cornerstones of organizational resilience. This is the only way to create open communication about opportunities, risks, creativity and innovation. 

5) Sharing knowledge

In hardy companies, knowledge and information are shared effectively and systematically. This means that knowledge and skills are not lost or remain limited to one department. Instead, learning from each other and from experiences and mistakes is encouraged.

6) Provide resources

Existing resources should be regularly reviewed and expanded. Employees are deployed where they are needed most – and are supported in their further growth. Work processes are continuously improved and weaknesses are eliminated.

7) Interdisciplinary collaboration

A hardy company is also characterized by the fact that different management disciplines interact and cooperate with each other. This creates a cross-organizational network that can draw on different perspectives and skills. 

8) Continuous further development

Those who constantly evaluate and review their own results and measures automatically continue to develop. Transparent feedback is part of everyday life in resilient companies – continuous improvement is enforced at all levels. 

9) Proactive changes

Resilient companies are not only able to respond quickly and flexibly to changes – they even anticipate these changes. This is a decisive advantage over non-resilient companies.