Better prepared and ready to adapt?

Business leaders have taken significant steps to improve the resilience of their organisations, as high levels of political and economic uncertainty mean that executives are putting renewed focus on governance. At the same time, innovation has slipped down the list of priorities for businesses in the UK, potentially leaving them exposed.

Our annual Organisational Resilience Index surveys 800 firms around the globe, assessing them against 16 elements derived from international standards of best practice relevant to resilience.

Encouragingly, in the past year businesses have become more aware of the importance of resilience – defined as the ability to anticipate, prepare for, respond and adapt to either incremental or sudden change. But leaders are wary about the future and are shifting focus from internal risks such as product and service innovation, to external changes such as regulatory regimes and new technologies.

Differing priorities

Technological challenges emerged this year as the most significant source of risk, identified by more than a fifth (21 percent) of senior leaders. Governance concerns and skills shortages were similarly recognised as key challenges – more than six in ten respondents considered one of these three factors a top risk for their organisation.

But a strong focus on one risk area inevitably draws time and attention away from other priorities, and our research is beginning to reveal the impact of continued political uncertainty on British businesses. Leaders in the UK are alone in listing government policies and international politics as their top future challenge; executives from all other countries place innovation and technology at the top of their future challenge list.

While other firms focus their energy on staying resilient through technological disruptions, British businesses are expending valuable time and energy preparing for political change. This could be putting them on the back foot compared to global competitors, particularly those from China and India, where the perception that innovation secures resilience is especially strong.

Good leadership

Faced with these challenges, the importance of good leadership to resilience has increased over the past year, now coming second in overall importance behind financial management. Yet our respondents perceive leadership performance in their organisation to have declined since last year – the only factor among organisations’ top five priorities where this is the case.

Our research uncovered a worrying discrepancy in the perceptions of leadership performance between the boardroom and the shop floor. Members of senior management teams rank their own leadership performance more highly than their team members do. This trend is particularly pronounced in organisations that are over 50 years old, where leaders are perceived as less dynamic.

Leaders seem to be struggling to reconcile their strategic ideals of business culture with the reality of day-to-day operations. At a time when CEO tenure continues to increase, and the challenges of the external landscape continue to consume time and energy, more attention needs to be paid to bringing junior employees on a company’s journey towards resilience. This may help leaders to develop the dual-speed approach which is characteristic of resilient businesses: developing and executing new business models while maintaining current ones to generate baseline revenue.

While it is encouraging to see an overall improvement in businesses resilience levels, and increasing awareness of its importance, leaders must maintain that focus.

As businesses become more aware of the importance of resilience to long term success, they have increased their focus on governance and internal training, recognising that business resilience necessitates a continual exercise of improvement. The more employees that can be educated and empowered to work towards international standards of best practice, the more resilient our organisations will become.