February 8, 2021

Boards Should Build Organizational Resilience in Their Company's Future-Readiness Plans

"Resilience," as defined by Merriam-Webster, is "an ability to recover from or adjust easily to misfortune or change." Although not part of the lexicon of many business leaders prior to the coronavirus pandemic, the word now appears regularly in articles and is mentioned during most webinars focusing on how covid-19 is impacting businesses of all sizes. And while not specifically mentioned in posts on this blog including "EY's Six Priorities for Boards in 2021" or "Six Ways a Board of Directors Can Ensure Future-Readiness," resilience is the underlying theme. It was an article, however, Dr. Linton Wells II authored for BoardTalk, the official blog for the National Association of Corporate Directors, that prompted me to think about what it means for a company to be resilient and the boards' responsibility to build organizational resilience in a company's future-readiness plan.

"Resilient companies produce impressive results," Dr. Wells writes. "They have shown positive earnings and sales growth during recessionary years, improved their corporate image by effective strategic responses to natural disasters, raised dividends for several consecutive decades, and won back market share against low cost and online competitors." Crucially, companies "also invest wisely."

Dr. Wells, an Executive Advisor to the Center for Resilient and Sustainable Communities (C-RASC) at George Mason University and chairs the Advisory Group of the C4I and Cyber Center there, notes that "the examples mentioned above support the claim that organizational resilience is an important concept for corporate boards and senior executives, but companies often don't include it in executive planning exercises. Instead, many mistakenly categorize resilience as disaster recovery plans or business continuity plans, leaving the details to mid-level operations."

He also explains that "Others see resilience as a part of corporate succession planning, risk management, or other programs that are important. However, in today's dynamic, disruptive operating environments, organizational resilience requires that companies integrate features that others' plans and programs lack."

What is more, "To succeed, leadership, supported by the board, must resource and incent resilience into the infrastructure and the culture of the company. Similar to other cultural paradigms like workplace safety, resilience matures and becomes integral to people, processes and technology. Suggestions for doing so follow."

With respect to the board of directors' role of building the capacity for resilience in the companies they serve, Dr. Wells says: "Successful corporate directors are keen to build resilience. Only senior leadership, supported by the board, has the breadth of vision and the experience to address these issues comprehensively. Far more important than compliance checklists, the board members' strategic impact on business and cultural resilience can help leadership build valuation through quality control incentives and measurements like MOE" or measurements of effectiveness.

In describing the essence of resilience, Dr. Wells importantly notes that "resilience involves strategy. It's not just a plan. It includes two critical concepts: organizational capacity and," citing a speech Dr. Judith Rodin, former president of the Rockefeller Foundation, gave at the National Disaster Resilience Competition Summit in 2014, "the ability to 'adapt and grow from a disruptive experience.'" Below is Dr. Rodin's full definition:
Resilience is the capacity of any entity—an individual, a community, an organization, or a natural system—to prepare for disruptions, to recover from shocks and stresses, and then to adapt and grow from a disruptive experience.
Covid-19 is impacting businesses in ways most business executives never anticipated. While my own ventures have plans for how to prepare for any number of risk factors, the global pandemic is testing their resilience. Companies cannot avoid uncertainty and volatility, but they should take specific actions to build greater resilience. In Dr. Wells' words: "Be prepared to bounce forward better."

"Resilience: Building an Essential Corporate Capacity" is the first of a series of articles by Dr. Wells that explore the board's role in corporate resilience. Additional articles in the series include "Looming Risks Are Driving the Need for Resilience," "Defining Resilience," and "Identifying Strong Resilience Practices."

How is your company building greater resilience?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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