Building resilient organizations: creating a culture of adaptability and growth
The external environment becomes increasingly aggressive for businesses with each passing day. The world trembles with crises, competition intensifies, customers demand customized products at mass-market prices, and sales occur in real-time mode. In such a volatile environment, businesses need profit now to thrive. Keeping up with industry trends is crucial for business leaders who are fostering adaptability and prioritizing the well-being of their employees. It seems challenging to achieve, but there is a solution. And it lies in building organizational resilience. I will explain in the article what is the culture of resilience and why it works.
Defining the resilient Organization
A resilient culture or organization is the building a resilient ability of an organization to adapt and evolve, even when facing problems and disruptions. This approach typically involves viewing a company as a set of modules or isolated elements that are arranged in a specific sequence.
An example of building a resilient organization is Ford’s assembly line. At the end of the 19th to the beginning of the 20th centuries, all cars at the factory were assembled manually. It was a slow and expensive process, so Ford attempted to build a resilient assembly line. Despite skepticism, he managed to implement it. As a result, the cost of the car decreased several times. Everyone else had to either follow Ford’s example or leave the market.
What did Ford actually do? He broke down the entire car assembly process into stages. He redesigned production so that each worker specialized in one stage, and all stages were arranged one after another. As a result, tasks were performed sequentially, people didn’t switch from one task to another, and the same car was produced, but faster. This innovation not only improved decision-making processes but also required workers to acquire new skills, ultimately leading Ford to emerge stronger in the automotive industry. Such initiatives by business leaders contribute to the overall well-being of the organization.
Why should companies transition to a resilient culture?
In short, the aim is to save money. While it’s still possible to manage a business using old methods, the cost and time involved make such management expensive. I will dissect the weaknesses of the traditional management system.
Long and complex restructuring of the entire system or part of it when changes occur in one particular area. In companies with traditional management, employees are situated within a certain hierarchy and interconnected through business processes. They hold much information in their minds, hence the concept of ‘ramp-up time’.
Let’s suppose a new employee joins the company. They may excel at their job, but do it slightly differently from their predecessor. In this case, they negotiate with colleagues they directly work with. In response, all of them are forced to adjust their work. Otherwise, processes may be disrupted. It turns out that any change in the system automatically affects many people.
Centralized coordination is the bottleneck of the traditional system. In any company, there’s a CEO who oversees the entire operation. At some point, their capacity might decrease, leading to coordination errors. Consequently, the company’s manageability deteriorates. Often, this results in the company losing time and money.
Building a resilient culture involves continuous learning, encouraging employees, and fostering adaptability. This approach is devoid of the shortcomings mentioned. For instance, changes in one module do not affect all the others. But we’ll discuss this in more detail later on.
Characteristics and Importance of resilient Culture
The culture of resilience is characterized by a number of features. Below, I elaborate on each of them in more detail.
Adaptability
When the external environment changes, the business model may no longer align with reality and may prevent conducting business as usual. The resilient organizational cultures are capable of quickly regrouping to adapt to new conditions, often with minimal time and financial losses, while also actively working to mitigate risks.
The efficiency of the production system
It is achieved through the ability to optimize the knowledge circulation system and facilitate continuous learning, enabling the swift replacement of any inefficient element, done so cost-effectively and with high quality.
Manageability of the company
Comparing it to driving a car, imagine turning the steering wheel to the left, and as a result, the wheels also turn left. You understand when to turn to navigate the car through a curve. In this sense, the maneuverability of a car is almost close to one hundred percent.
Similarly, with a company, business leaders can implement ideas, introduce changes, come up with them quickly and in large quantities, fostering adaptability and encouraging employees to engage in continuous learning to acquire new skills. This approach enables the company to emerge stronger and thrive in the long run.
Fractality of structure
The company, within the framework of a culture of resilience, is a collection of modules, or micro-businesses, that interact with each other within a specified value creation chain. This requires effective decision-making, open communication, and a keen awareness of industry trends. As a result, the company produces its final product.
What are the five principles of resilient organizational culture?
The first principle — efficient interaction fosters resilience. In a modular system, this is achieved through special interfaces that connect different modules. Imagine two sticks connected by a hundred wires. To connect or disconnect them correctly, you would need to untangle the wires each time, and then twist them back together. In a modular system, instead of wires, there are plugs and sockets. Modules interact using these interfaces.
The benefits of resilient organizational culture are that changes within one module do not affect other parts of the system. If your business consists of multiple modules, you can seamlessly replace a malfunctioning module. Others will continue to operate without disruption
Strong leadership, effective leadership. A leader should think like an entrepreneur. When creating a product or service, they investigate the needs of the audience to avoid inventing something that no one needs. After confirming the demand, they work on reducing production costs and so on.
Employees are at the core of a resilient culture. Continuous learning, fostering adaptability, and promoting the acquisition of new skills are essential components. Additionally, open communication and a culture of resilience are crucial for providing adequate training, motivation, support, and ensuring the well-being of each team member. Clear responsibilities for each employee further enhance their readiness and ability to effectively respond and adapt to changes and unexpected circumstances.
Isolation of Changes. This means that changes within one module do not affect other parts of the system. It is this principle that allows changes to be made simultaneously in different parts of the system, adapting to changing circumstances.
Risk Management. Active risk management involves identifying potential threats, assessing their impact, and developing strategies to mitigate or respond to them, considering changing circumstances. The resilient culture continuously monitors risks, adapts its strategies, and learns from experiences, creating resilient teams.
What are the levels of resilient culture?
Company Level. Suppose there are companies A and B. Company A produces a certain product in demand on the market. It has raw materials as input and a useful product as output. This building a resilient company purchases raw materials from company B. In turn, company B also has raw materials as input and a useful product as output. Thus, in this chain, one company represents one module. In this case, two companies interact with each other based on the modular principle.
Company Level 1. Let’s take a look at the next level. A company can be represented as building a resilient set of business processes or modules. Suppose the company consists of three modules. The first module is responsible for assembling the product from two elements, each of which is produced in a separate module. Each of them has its own input and output. This means that the final product is assembled as a result of the interaction of three modules: 1-2 and 1-3. As a result, a product is obtained.
A company as a module is a set of pairwise demand-supply relationships. In this sense, it is convenient to imagine a resilient organizational culture as a collection of isolated elements arranged in a certain sequence.
3 resilient culture examples
To better understand how resilient culture works, let me provide examples of real companies.
The American film industry complex, Hollywood, consists of independent modules. They come together for a project — filming a movie — and then disperse. In new shoots, other modules may participate that were not involved in the previous project.
Hollywood demonstrates flexibility and adaptability in working with creating resilient teams and projects. The organization quickly changes its composition and adapts to new market requirements, fostering a culture of resilience and promoting psychological safety. Its agile decision-making processes and emphasis on acquiring new skills contribute to its long-term success.
Container shipping. I managed a container shipping line, so I can confirm that the modular approach has been applied in this industry for the last 30 years.
The essence of the business is as follows: the cost of transportation depends significantly on the size of the vessel and its utilization. The cost of transportation becomes non-competitive if the company has a small vessel or if it is not utilized efficiently.
All players, including the largest companies, belong to alliances. On the one hand, they compete with each other. On the other hand, they have common modules of the production system — shared vessels, containers, and so on. As a result, companies in the alliance are both competitors and partners to each other. After all, survival is only possible through partnership.
IKEA. The chain in this case looks like this: many designers, many production facilities, retail networks owned by the company showcasing the products.
In reality, in the furniture industry, there is another module — furniture assembly. Other manufacturers sell furniture already assembled. IKEA, however, did something ingenious — they handed over this module to the customers. In this way, the company expanded its capacity in this module.
How to create a resilient culture framework for small and big teams?
Here are the four basic methodological tools we use to build modular structures in resilient teams. Each of them is responsible for its own aspect, but the maximum effect is achieved through their comprehensive application.
Modularity. We divide large and complex entities into individual parts. As a result, performers who used to do everything start specializing in specific elements. The higher the specialization of the specialist, the higher the productivity. Continuous learning, fostering adaptability, acquiring new skills, and promoting open communication are essential components for effectively implementing modularity within resilient teams.
A complex system is divided into several simple ones.
The production and knowledge circulation system enhances productivity and significantly reduces dependence on key performers. Let me explain how this happens.
In any process, there are key performers. Often, information about their area of responsibility is stored in their heads. In this case, the company becomes dependent on their knowledge. On the other hand, there may be colleagues with a smaller set of knowledge nearby. As a result, they may work less efficiently.
The knowledge circulation system allows for employee training. Additionally, if a key performer decides to resign or falls ill, production will not stop without them.
Standardization is a way to organize seamless interaction between modules, or a set of rules that allow modules to interact as seamlessly as possible. Thanks to this, business processes are not interrupted, and customers receive quality products or services. Thus, standardization directly affects the financial results of the company, as it optimizes processes and increases their efficiency, ultimately contributing to increased profitability.
Standardization helps to quickly restructure production or business processes. This allows satisfying additional demand or adapting to the external environment promptly.
Differentiation of roles or activities. Performers can act as managers and as entrepreneurs. The difference between them lies in their mindset and how they carry out their activities. A manager is responsible for the business process and KPIs. They ensure that everything operates according to regulations. An entrepreneur is responsible for creating value for the consumer. Additionally, they optimize processes.
When a performer thinks like an entrepreneur, we get a self-balancing system. They do not need to be coordinated because, in the entrepreneurial position, they are self-sufficient. They are motivated because their income depends on how many resources they can save through process optimization.
On the other hand, a manager will never strive to increase productivity. They do not want to double the plan. They understand that it will be difficult to achieve the same plan next time.
If a person is in an entrepreneurial position, they understand the importance of process optimization. They use the other tools listed above. In this case, the resilient culture starts to work.
Moreover, it is crucial to ensure open communication, foster a culture of continuous learning, promote psychological safety, and encourage well-being among employees. Strong leadership plays a pivotal role in decision-making, especially when facing challenges. These elements collectively contribute to build a resilient and adaptable organization.
What are the challenges and barriers to building resilient culture
In this section, I will list the main challenges in building a resilient culture.
Challenge: Transition from the old system to the modular one is lengthy and complex.
Solution to this challenge: Yes, it is a lengthy process that can span years. However, starting with any process in the company and progressing at a comfortable pace is where a resilient culture starts.
Transformation always occurs gradually. Initially, we change certain parts of processes into modules. When they begin to interact with the rest of the system according to new rules, we move on to replacing others. This way, we gradually break down the monolith into parts. At any point, we can stop when there is a sense that everything is working as it should.
Challenge: Employees may resist change.
Solution to this challenge: To address this issue, effective and open communication, involvement of employees in the change process, and demonstration of the benefits of the new system will be required. Explain to all participants how the organization’s work is structured. Calculate the theoretical effect that can be achieved as a result of the transformation for a specific department or business process.
Challenge: Changes in modules or company structure may be ineffective.
Solution to this challenge: Point experiments, combined with building resilience and fostering continuous learning, can help. When transitioning from the old structure to the new one, experiment with changes and test them under real conditions. This approach, coupled with ensuring psychological safety and promoting the well-being of employees, allows you to assess whether the planned changes actually bring the expected effect. Encouraging employees to participate in these experiments contributes to their sense of well-being and engagement, ultimately helping to avoid problems associated with the implementation of ineffective or unproductive changes in the organization
Challenge: Scaling may be ineffective.
Solution to this challenge: Building resilience is a managed process. It involves stakeholders – shareholders and module team managers. Separate tracks are developed for each of them, focusing on fostering a culture of resilience. Additionally, artifacts are described that should appear during the process to demonstrate the commitment to strong leadership and effective decision-making. Over time, it will be possible to see the dynamics and calculate the economic effect of the transformation, paving the way for long-term success.
