Page 113 - The Resilient Organization

100 Part Three: Step 2. Building Resilience into the Organization

Hagel, Brown, and Davison (2009) have found that corporate returns on
assets (ROA) in the United States have, since 1965, dropped drastically.
Cost savings may be competed away, as the authors suggest, or the leverage
strategy is causing a lack of resilience that penalizes companies over time.
Clearly, a rethink is needed.

Mitigation of Risk

One way to mitigate risk is to have reserves. Savings help us cover any
unexpected expenses. Most governments maintain oil reserves in case of
supply disruptions. Military reserves that can be called upon in a crisis may
provide a feeling of national security. Resilience is often interpreted as a sort
of mental reserve—the capacity to draw strength from at times of crisis.
Family and friends help here too.
Organizational reserves are basic building blocks for collective efforts
where the harnessing of human effort together is needed. For example,
Germany has a strong middle-sized company sector (so-called mittelstand
companies); and the Silicon Valley in California is vibrant in entrepreneur-
ial reserves: founding of companies and pursuing emergent business oppor-
tunities in high technology. South Korea has its chaebol: large corporations
that have dominated particular industries for decades. France has its
national champions. Whether these organizational reserves provide
resilience for a country or region in question depends on their capabilities
to turn threats into opportunities. Nevertheless, they constitute the collec-
tive reserves these countries naturally depend on in times of crisis. (Witness
Nicolas Sarkozy’s and Angela Merkel’s 2008 responses to the financial cri-
sis in France and Germany, seeking to ensure the viability of their incum-
bent companies and business models—emphasizing the role of public
institutions in France and export industries in Germany.)

Redundancy

Airplanes have multiple landing systems. People have two kidneys.
Companies use double-entry accounting systems. We are advised to think
twice before embarking on a venture. Most people have two parents. DNA
is a double helix.