Organisational Resilience and Anti-fragility: How businesses can grow through stress

In increasingly uncertain times leaders have been struggling with how to build organisations that are resilient to anticipated and unanticipated threats. A whole genre of literature and practice has emerged on the subject of resilience, however, the conversation is already moving on. The issue now is how we build organisations that thrive and develop, not just in spite of stress, but because of the stress. In my career as a line executive, and as a process and structure advisor, I have seen people and organisations thrive under the most extraordinary of circumstances. Regrettably, the opposite is also true. In this article I will examine resilience from the perspective of the individual and the organisation. In doing so, I will draw on the latest literature, but also on years of experience helping organisations through major transformations.

Resilience – an attribute now assessed during talent recruitment

We will begin this journey with a consideration of the individual. Recently I had the fortune to have a fascinating discussion with the executive responsible for talent recruitment at one of Australia’s largest businesses. His job is, quite literally, to find intelligent, resourceful and resilientyoung people who can run future businesses off-shore and on-shore. In this search and selection process resilience was specifically targeted as a primary attribute. This business is no longer alone, many are looking for people who can match the challenge that Kipling put to us, ”If you can keep your head when all about you are losing theirs and blaming it on you, […] Yours is the Earth and everything that’s in it”.

So, what is this phenomenon called resilience? Two well-known writers on the subject (Zolli and Healey, 2012) have described it as ‘the capacity of a system, enterprise, or a person to maintain its core purpose and integrity in the face of dramatically changed circumstances.” Fortunately, psychologists have been focusing on this subject for some time now, albeit in different guises such as Rational Emotive Therapy, or Positive Psychology. Whatever the label, psychologists have drawn lessons from sources ancient and new to understand what makes us resilient, and to advise us on how we can be more so.  Some of the lessons have been drawn from studying Post Traumatic Stress Disorder (PTSD) in returned service personnel.

Surprisingly it has now been found that PTSD has a lesser known sibling: Post Traumatic Stress Growth. Simply put it is eminently possible for humans to grow and get stronger even from highly stressful circumstances. This phenomenon has been reported by many of our leading researchers and writers on resilience from Reivich and Shatte (2013) to Martin Seligman (2011). It now seems possible that we can prepare ourselves, to some extent, for life’s stressors and changes by developing particular thinking skills. For example Reivich and Shatte proposed up to seven such skills. At the risk of butchering their detailed exposition on resilience, I would summarise their recommendations as follows. We can develop enhanced resilience by understanding not just what stresses us, but what, in our underlying assumptions and beliefs, is causing us to react with distress. What thoughts are making us consider any particular situation a threat, or a loss, or a breach of our rights?  In a sense, this is a sophisticated exposition of Shakespeare’s observation in Hamlet “there is nothing good or bad, but thinking makes it so.” However, the challenge is to develop the skills to understand and adapt the assumptions underlying our thinking.

Let’s take an everyday example. Someone cuts you off whilst you are driving to a meeting. You feel angry, a feeling which can arise when you think someone has violated your rights. Psychologists such as Michael Bernard (1991) might say that the anger arises because your expectations are out of alignment with reality.  If you were being rational you would expect to encounter rude drivers because you know that a certain proportion of the population will be rude drivers (at least some of the time). If you can accept this reality, even before you get into the car, then you might have a more relaxed drive.  It seems to me that we are discovering, in modern science, some of the lessons of the old masters, for as the Roman Emperor Philosopher Marcus Aurelius put is “Our life is what our thoughts make it.”

Business restructuring for organisational resilience and growth

The writings for Zolli and Healy (2102) allow us to go further than the individual perspective; they take us into the world of organisations and even entire systems.  They take a systems view to the extent that they stress the ever increasing interconnectedness of our world, and how this makes it a more fragile place. We need only look to recent history and the GFC to understand how a failure in another market, in another nation, can lead to financial problems in our own back-yard. They highlight some fascinating phenomena which seem to increase our fragilities, including risk compensation. This is the idea that risk mitigants might encourage us to take more risks, an example of which might be driving faster because we have seat belts.

In a world which is increasingly interconnected and fragile, Zolli and Healy offer some very practical insights on how to enhance resilience. They start with contingencies and buffers.  As a practicing lean process improvement specialist I am often faced with the misapprehension that “lean” means no buffer. Indeed this could not be further from the truth, lean actually advocates an appropriately calculated buffer to deal with inevitable variability, whilst it targets as much of the controllable waste as possible. However, buffers are not enough. We are also asked to consider improved sense and response systems. The earlier we see a problem the earlier we can adapt. Yet I am often astounded at the inherent weakness in many of the information systems of our large enterprises. They may be flooded with data, but often have very little information.

Zolli and Healy also provide advice that might make us think twice about our current organisational designs. They stress that the more tightly linked the components of an enterprise are the more likely they will suffer from contagion effects in the event of a crisis. It seems that loosely coupled organisational units, which have considerable response autonomy, increase the chances of survival of an entire enterprise or system. Diversification also helps: if different parts of an enterprise have different coping strategies it is more likely that someone in the organisation will find a coping mechanism that works. So, we need to be very astute in our design of organisations, so that we get the efficiency benefits of integration, but the risk mitigation benefits of localised control. One way of dealing with this apparent conundrum is to be diverse at the edges but simple at the core. The example Zolli and Healy use is that of the internet. It has a very simple core messaging system, which has proven incredibly robust. Failures at the periphery amongst the plethora of web based applications, will not affect the core. Indeed this principle of organisational design is one that the best process improvement professionals have been employing for decades in their approaches to business restructuring.

Zolli and Healy say more than can be summarised here, but they do form part of an increasing movement interested in resilience. However, this movement is taking an interesting turn which is most effectively expressed in the phrase used by Taleb (2012): antifragility. This is the tendency to grow as a result of stress, as long as the person, enterprise or system has some time to recover. It is reminiscent of the research on Post Traumatic Growth, in that Taleb seeks out instances and ways to get stronger from life’s inevitable trials. In Taleb’s view resilience is the ability to stay as you were in spite of stress; antifragility is the ability to get stronger because of stress.

The best leaders will add understanding of resilience to their armoury

Taleb’s work is full of implications to us as leaders. Perhaps his most striking advice is that of the barbell strategy. Simply put, this presumes that organisations which have only one way to achieve their purpose will fail as the world changes. However, it is possible for us as individuals, or collectively as organisations, to deliberately experiment with new ways to survive and thrive. In the barbell strategy he suggests that one side of the barbell is the maintenance of the way we do business today. This side generates our maintainable earnings for now, and also must also fund our experiments in new ways to work: which the other side of the barbell. In essence he suggests that we constantly use trial and error experimentation, dropping the approaches that do not work, and benefiting from those that do. He argues that trial-and-error approaches work better than any grandly theoretical approaches because this is the way that most knowledge has actually been acquired (think of Fleming’s accidental discovery of penicillin). The trick with the bar-bell strategy is to know how much the trial will cost you, whilst seeking unknown (potentially unlimited) upside. This means that we might sometimes have to think more like an options strategist than a corporate planner (and indeed Taleb was an options strategist before turning to philosophy).

Taleb’s thinking on trial-and-error based thriving, is strikingly similar to the business development approaches advocated by Eric Ries (2011) in his book “The Lean Startup”. In this book Reis describes ways in which successful start-ups consciously build in rapid experimentation into everything they do, but most spectacularly in developing new products for customers. He advocates the use of Minimum Viable Products to test new ideas before a more fulsome development of a solution, and then very close monitoring of results in one trial vs another. It seems that multiple streams of thought are landing on a common theme based on experimental innovation.

In considering these streams of thinking there are important lessons for us as leaders. Firstly, in any business where our people are our advantage, we would be foolish to be entirely ignorant of the increasingly sophisticated understanding of how people can get stronger, under stressful conditions. Indeed I would argue that an understanding of resilience should be an important part of any future leaders thinking armoury. Furthermore, we would be well served to ensure that our organisational processes, structures and practices are taking advantage of the significant developments in the science of resilience. We have had time here to discuss only a few strategies such as “simple at the core, diverse at the periphery’ or the barbell strategy. However, the curious leader could be amply rewarded by delving further into this field which might well predict some of the winners and losers of tomorrow.

Roger Perry is Managing Director of the Bevington Group, Australia’s leading specialist in process improvement, business restructuring and change management. He publishes widely and is one of the region’s foremost productivity improvement and organisational design experts.

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