Company Culture is the Key to Resilience

Resilient Winter Tree

On Monday this week we announced news of the Willis Resilience Expedition—a world record attempt to break the speed record for transiting Antarctica from the coast to the South Pole on foot. In the spirit of this feat of human resilience I wanted to share some thoughts on what I believe the hallmarks of a resilient company are.

AIRMIC—the UK risk management association—recently released important conclusions from case studies of eight companies that have faced and survived reversals of fortune. Four ‘enablers’ and five principles are named in the Roads to Resilience report as key to a company’s ability to bounce back from adversity, and are summarised below:

ENABLERS

  • People and culture
  • Business structure
  • Strategy, tactics and operations
  • Leadership and governance.

PRINCIPLES

  • Resilient companies have exceptional radar.
  • Resilient companies value and build strong relationships internally and externally.
  • Resilient companies have leaders that are respected and respectful.
  • Resilient companies have the ability to respond rapidly.
  • Resilient companies have diversified resources.

The authors eloquently describe how these enablers and principles are applied, and I urge readers to study the report closely. People and culture is the first enabler they mention and it runs through at least three of the five principles (2, 3 and 4). This is a critical and even remarkable fact. The factors that are often diminished by the adjective ‘soft’ in business discussions are now clearly seen as the foundation of strong risk management.

I would like to focus here on a key cultural element that underpins resilience, and that is the bond of trust that exists in resilient companies among leaders, managers, employees, the Board, financiers, partners suppliers and indeed all stakeholders.

Culture of Trust

When a crisis strikes, every constituent needs to believe in the values, the skills, the effort, and the intent of every other constituent in order to survive, learn from, and even thrive as a result of a crisis. All hands pull at the oars and in the same direction during the storm.

A culture of trust is a culture in which each player believes he/she is respected by other players. There is a virtuous cycle of behaviour going on in these cultures, in which a person believes that his actions are contributing to the greater good, and the greater good is clearly understood in terms of the destination that leadership has defined with the participation of all stakeholders and for all stakeholders to see.

How is a Culture of Trust Built?

1. Recognize Inter-Dependence

Great companies know they are in a ‘team sport’. There is no greater signal to employees that this is the case than when top management and supervisors in general sacrifice when they sacrifice during and as a result of a crisis – in terms of time, effort, and remuneration. Information is nearly completely transparent in public companies, and it is safe to assume that employees will understand the subtleties of top management effort and compensation.The trusting company is the antithesis of the cynical company – and there is no better way to avoid cynicism than by management sharing the pains as well as the gains. Similarly, management needs to believe that employees will endeavour and tend to do the right thing in a crisis. This mutual dependence creates a flexibility and responsiveness that is critical to surviving a crisis. This can be extended to external partners, such as banks and suppliers. Building relationships with these parties based on a clear understanding of inter-dependence will lead to better outcomes in a crisis.

2. Know That a Crisis Will Happen

Our research into company crises demonstrates that the most respected, prominent companies suffer severe reversals of fortune on average every seven years, and that 95% of such companies will suffer at least one such event in a twenty-year period. No company, however strong or virtuous, is immune. When this is understood, then a firm will act more maturely when a crisis does hit – there will be less of an inclination to blame others and more of the grim determination required to prevail. Our view is that companies can do much more to recognize crisis risk and prepare for it than is typically the case, and we’ll address steps we think are necessary in a future issue.

 3. Be Part of Wins and Survivals

There is nothing more trust-building than being in a storm together and coming through it. Stories of this kind should be communicated in formal and informal ways in a company so that they become part of a positive ‘folklore’ which allows everyone to feel a part of them regardless of whether they were directly involved or even employed at the time. When a unit within a company faces a crisis and comes through it, management should find a way to lock in that experience in a positive way and to communicate this tale of survival to the broader company. In these ways, a shared experience is built up across the company to be drawn upon when a corporate-wide crisis hits.

 4. Be the Beneficiary of Investment

In other words, know you are trusted and entrusted. Employees know when they are valued. They measure the degree of value a company has for them not merely by compensation decisions but by training and career development and indeed all aspects of caring for someone’s professional development. The greater the consistency and intensity of this attention by an organisation to its employees the more likely an employee will perform extraordinarily during a time of crisis.

5. Know That the Competition is ‘Out There’

This can be described as an outcome of the characteristics defined above, but it also stands on its own in importance. The more successful a company is in focusing human effort on surpassing the competition rather than on getting more of the internal pie for him/herself, the more likely employees will bond even more closely during a crisis and come out winners. The more teams (rather than individuals) come out as winners in compensation and other recognition decisions, the more likely people will focus (and collaborate) on winning.

The result of all of this will be in the kind of individual and corporate behaviour that leads to survival and thriving in and after a crisis. People who exist in such a corporate culture develop a set of beliefs, habits, and inclinations that engender mutual trust, and trust creates winners.

About Phil Ellis

Phil is Global Head of Strategic Risk Consulting for Willis' Risk & Analytics. He works with large and complex …
Categories: Global Risks | Tags: , ,

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