Resilience in the geographical world describes the ability of a system to continue functioning after it has experienced a disturbance – for example, an earthquake or tsunami. In physics, a resilient material is able to absorb energy and revert back to its original shape. Resilience is a powerful quality in nature. And so is it in business.
A resilient company should be able to adapt and thrive regardless of the crises it is facing. Business leaders need to be able to develop a long-term vision – and balance this against short-term decisions that maintain the company’s overall health.
Business resilience has been put to the test over the past two years. We are still feeling the impact of the global pandemic – and the challenges continue to appear. The Ukraine War – and subsequent supply shortages – have contributed to a global cost of living crisis. The USA’s Federal Reserve recently announced a 0.75% hike to the country’s benchmark interest rate, the biggest rise in almost 30 years.
But these current challenges aren’t unprecedented. Market volatility isn’t a new concept – just look at the oil inflation of the ‘70s and the dotcom crash of the late ‘90s. Leaders in these eras steered their businesses in the right direction without compromising on their overarching goals – and left playbooks that can be built upon.
Modern businesses should concentrate on investments that drive future growth – rather than focus on protecting their bottom line. And this starts with those at the top.
The Question of Experience
Rising inflation – and increased cost of goods – is disrupting global markets. Companies have to make a choice. Do you spend money on initiatives that don’t immediately drive value – or allow the current climate to dictate your operations?
Countless companies changed their strategies – and tone of voice – overnight in the wake of the pandemic. Long-term strategies were parked in favour of reactive, short-term actions designed to ensure survival. But this was detrimental to their operations. Consumers didn’t like the changes to the status quo – and neither did shareholders.
Resilient businesses are resilient from bottom to top. Resilient brands, resilient people – and resilient investors. Stakeholders need to buy into the long-term vision of a business. Belief in overarching strategy trumps panic sparked by quarterly reports.
You can’t lead a resilient company if you’re not resilient. And you can’t be a resilient leader if you’re not prepared to take risks.
Some industry leading groups recently laid off many senior roles after reporting declining earnings-per-share. Their replacements were younger, required reduced salaries – and lacked much of the previous board’s expertise. The business preferred to cut short-term costs rather than commit to the long-term vision.
This new school of leaders – aged 35 and below – aren’t short of innovative ideas or energy. They are prepared to be bold and willing to take necessary risks. But they have come from a leadership era which has enjoyed 12 years of sustainable growth – and have been able to make average decisions pay off.
Resilient leaders should be thoughtful. They need to be able to look at the bigger picture, assess future challenges – and prepare against them. And they need to be empathetic. Embedding this positive emotion – alongside purpose – into the culture and spirit of their people is a key trait.
Sustainability vs. Profits
Capitalism revolves around growth. Traditional corporate success is defined by the size of the company’s profit margins.
But growth for the sake of growth is unsustainable. Economy targets shouldn’t be the only factor driving business decisions. It may be time to adopt a different mindset.
Long-term, sustainable growth is built upon having a strong sense of direction. A clearly defined ‘North Star’ can be a guiding light that everyone – stakeholders, employees and consumers – can rally around. Selling a vision that is aligned to the business’ goals should be a priority.
Internal buy-in is paramount. Leaders alone can’t drive the necessary changes. Paul Polman and Emmanuel Faber – former CEO’s at Unilever and Danone respectively – tried to introduce environmentally-positive messages within their organisations. And the results couldn’t have been more different.
Environmental advocates praised both company’s initiatives – but each programme caused the respective businesses to miss key financial targets. Unilever recognises that short-term monetary gains could be sacrificed in favour of long-term rewards and kept faith with Polman. Danone’s shareholders couldn’t get past the bottom line – and Faber was ousted.
A resilient business has a clearly defined proposition – and the backing of all interested parties.
Rome Wasn’t Built In A Day
Ecosystems didn’t magically develop the durability needed to survive natural disasters. They evolved over millions of years before they achieved their current state. Resilient businesses, similarly, don’t appear from thin air – their growth stems from long-term goals being managed against short-term performance levels.
A company’s value doesn’t have to be determined by its quarterly earnings report. Unilever and Danone showed that other factors – such as sustainability – can define a business’ success. Leaders can learn from and adapt previous playbooks to navigate the current industry instability and emerge victories. But true resilience comes from a complete understanding of the vision across the board. With this foundation in place, your company will adapt, survive – and thrive.
This season, our series of masterclasses focus on how you can drive Sustainable Growth in FY22 – growth that is both good to the planet and commercially rewarding; it’s the business of aligning profit, purpose and planet.
Our next masterclass ‘Building Resilience in a time of Volatility’ will focus on how to drive – and at least maintain – profit in an environment that is becoming more dynamic and unpredictable, with multiple forces stressing and stretching business systems.
