How leaders can build business resilience

Across all sectors and regions, resilience has become a desirable trait — for leaders, their businesses, and employees. This was the case even before the recent COVID-19 outbreak and is now critical for all organisations.

The term resilience is used colloquially to refer to the ability to take a knock, but its broader business meaning is having the capacity to withstand a knock, quick to learn, and agile enough to recover quickly. An immediate example of a nonresilient business is the UK regional airline Flybe, which was already not financially fit when it collapsed and entered administration on 5 March as a result of a fall in demand caused by the coronavirus outbreak.

Eleanor Murray, senior fellow in management practice at Oxford University’s Saïd Business School, told FM that creating resilience is an iterative, learning process rather than “trying to bounce back to where you were”. For the current coronavirus outbreak, she said, “All businesses are going to be learning from prior disruptions and hopefully incorporating that learning in what they do next.”

Murray said that leaders need to work on rapidly building business resilience in the short term in response to COVID-19 and use this emergency as an opportunity to create resilience in the long term. She added: “Most organisations will have some form of business continuity plans in place, but these plans may be insufficient for the scale and duration of the COVID-19 public health emergency.”

Building resilience in the short term

In the short term, businesses can take several measures to build resilience, Murray said. These include:

• Reviewing and upgrading continuity and crisis management plans in the light of new risk scenarios created by the COVID-19 outbreak. 
  
• Thinking about designing and practising COVID-19 simulations for a range of scenarios, including further regional or country lockdowns, education closures, and large numbers of employees testing positive for the virus or in self-isolation or quarantine.
• Companies should consider how to mitigate the potential impact of reduced sales, lowered forecasts, and reduced revenues through rapid redeployment of teams to alternative temporary sites, home working arrangements, and technology workarounds where possible.

Resilience for the long term

Building on learning from this crisis and other disruptions, businesses should design resilience into their organisation, Murray said. She added: “Systems approaches lend themselves to long-term resilience.”

A systems approach is a holistic one — it considers a problem in its context, as part of the business’s wider system, which in turn is within an ecosystem.

Murray’s advice for businesses to build long-term resilience is:

• To consider what “adaptations and redundancy” they need to design into global supply chains, production, facilities, human resource arrangements, and communications.
• Consider diversification. This is an important feature of long-term resilience, in terms of spreading risk across products, markets, services, and investments.
• Develop industry alliances and business networks. This creates capacities and capabilities beyond organisations that provide greater resilience to future disruption.

Leadership’s role

“In crisis situations, leaders need to balance their focus between the immediate challenges of a dynamic situation and the need to anticipate midterm disruptions,” Murray said. She explained that amidst the current health and economic crisis, leaders need to “anticipate, adapt, and act” to maintain resilience.

Her advice for business leaders includes:

• Stay curious. Leaders need to maintain curiosity about issues that are emerging, in addition to those that have emerged. This might involve running simulations to identify how their business can anticipate potential challenges ahead.
  
• Operate flexibly. They need to operate flexibly and focus on adapting operational arrangements to respond to a rapidly changing situation. This might involve relocating facilities, introducing home working arrangements and strengthening the use of digital communications. Leaders also need an ability to identify, using available data, the areas or countries where production could be moved to.
• Act decisively. Leaders need to act decisively and rapidly to institute revised arrangements to prevent business disruption and potentially business failure.
• Be aware of local measures. They need to be aware of local and regional approaches being taken to the outbreak, especially if they lead a global business.
• Maintain employee performance. Business leaders need to consider how they maintain employee performance and how they manage people when they are more remote.

Leaders’ health

When a crisis such as a global health emergency hits businesses, the psychological health and physical wellbeing of leaders can also be adversely affected with a knock-on effect on their performance.

According to global business advisory firm FTI Consulting’s Resilience Barometer 2020, 90% of C-suite and senior managers in large firms across G20 countries faced a crisis situation over the past 12 months, and 87% said there had been some negative impact on themselves.

More than a third (36%) reported mental health issues as a result of the crisis, and 34% said their physical health — for example, exhaustion, burnout, or poor diet — had been affected. A similar number suffered interrupted sleep.

The report said the methods relied upon to keep executives well in normal times — exercise, hobbies, and relaxation — “get pushed to one side” during a crisis.

Crisis simulations for leaders provide a method, the report found, to develop their personal readiness to deal with these situations — and this preparation also identifies the gaps where support is needed.

The report said that resilient organisations often demonstrated “low power-distance ratios — enabling junior employees to engage with or challenge people who are senior to them, as well as enabling senior staff members to engage with, consult, or listen to people in their teams”.

Other practical considerations

One large practical consideration arising from the COVID-19 outbreak, Murray said, is the impact on employees trying to manage childcare alongside working, if schools or colleges continue to close as has happened In Italy. “[It] might be [possible to put] in place temporary childcare arrangements to enable employees to continue working,” she said, although “that might be tricky depending on regulatory setups around childcare in different countries.”

The global health emergency offers opportunities for businesses to examine how they use communication technology in terms of virtual meetings and virtual events, particularly for global businesses that rely on travel, Murray said. They should look at “whether there are technology-based alternatives they could invest in now to help manage the situation as it unfolds”, she suggested.

Murray said the uncertainty of multiple people potentially being removed from the workplace at various points in time due to illness with no knowledge of who is going to be affected and in what order was problematic.

However, she suggested: “[Consider] what skills different people have … and who else could potentially step into their roles — a sort of cross-cover arrangement.” Businesses, she said, should consider how key individuals’ knowledge and skills can be contained elsewhere in the short term.

For more news and reporting on the coronavirus and how management accountants can handle challenges related to the outbreak, visit FM’s coronavirus resources page.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.