Executive strategies

Building Organizational Resilience

Managed human resource solutions

that maximize the value of people

changing the world of work

This document contains information that is proprietary and trade secret to Ceridian Corporation and is intended solely for the use of our customers and prospects in evaluating Ceridian solutions. This document is not to be duplicated or distributed in printed or electronic format without the prior written consent of Ceridian Corporation.

2006 Ceridian Corporation. All rights reserved.

Overview
How resilient is your organization? How is it now adapting to massive shifts such as the aging of the work force and the rapid changes in the U.S. health care system? How well would it adapt if market changes rendered its major products or services obsolete? How well would it fare if hit with a shock such as the destruction and disruption caused by Hurricane Katrina? Or by a terrorist attack?
Those are tough questions to consider. At first glance they may seem unrelated. Some sort of disaster contingency planning has been a requirement at most businesses for some time. Responding to market shifts is the job of marketing and product management. Demographic shifts and benefits changes are the responsibility of human resources. The fact that most of us wouldnt know how to answer these questions for our organizations is evidence of how this kind of thinking and planning tends to be compartmentalized and isolated. In fact, all of these challenges are tests of an organizations resilience, its ability to respond and adapt to both sudden shocks and gradual change. A resilient organization maximizes performance over the long term, through changes foreseen and not yet foreseen and through disruptions that cant be predicted.

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The paradox of managing for short-term results and long-term success

One of the reasons that contingency planning and adaptation to change are not more central to business operations is that at one level, at least in the short term, they are in fundamental conflict with the goal of managing for performance and optimization. Managing for performance, the usual focus of business in a competitive marketplace, places high value on consistency, efficiency, and the eradication of waste. The key word here is maximize. Managing for adaptation, equally important for long-term survival and growth, recognizes that the competitive game is always changing, that known markets are constantly disappearing while unknown opportunities are constantly emerging. This focus values variety and recognizes the need for exploration and experimentation. The key word here is innovate.
Dean Robb points out that these two goals are in constant conflict and flux. A resilient organization accepts the paradox of this conflict, embraces both objectives and moves nimbly between the two. In order to succeed over the long term, organizations need to maximize what is (performance) and prepare for what is to come (adaptation). Kostas Dervitsiotis highlights the same paradox, noting that the conventional goal of business excellence competition for dominance in an identified market space must give way at times to landscape fitness. In this analogy, we need to recognize that the mountain we are competing to climb is not permanent. It may disappear, while other peaks emerge in different parts of the landscape. If the organization pursues its singleminded path of mastering the mountain it knows, it may ride its victory to failure while missing opportunities beyond its vision. Managing for landscape fitness, by contrast, requires constant exploration, appreciation of variety and diversity, broad communication networks, and diffuse decision-making. These are two different world views. In one, the organization is a machine to be tuned for ever-greater efficiency in pursuit of a set objective. In the other, the organization is a living organism, able to grow and adapt to changing conditions. A successful organization must be able to operate well in both modes. How can organizations operate successfully within that paradox? The key strategies are very similar for organizations and for the teams and individuals that compose them. In fact, organizational resilience depends, in large part, on building a workforce of resilient employees and teams, and managing and allowing them to manage themselves for both focused productivity and adaptive innovation. Research into resilience has focused most heavily on how individuals and organizations cope with negative experiences and trauma. But researchers in different fields have also looked at the factors associated with long-term success in the face of change why some

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Resilient companies develop the vision to discern changes that could undermine existing business emphases and turn them into directions of opportunity. They also maintain the flexibility and strategy to act quickly in response to changes, but remain focused enough on todays needs to be competitively effective. When these approaches have become part of a companys ingrained corporate culture, it is an attractive place to work for hardy individuals. . . . The resilient company is continually evolving in a fashion that not only keeps it ahead of the competition in terms of products and services, but also gains and deepens the admiration and enthusiasm of its employees and clients. Salavatore Maddi and Deborah Khoshaba

organizations survive and even benefit from change while others do not. The findings can be grouped into six interrelated strategies: Face down reality Encourage innovation and experimentation Build in flexibility Strengthen and broaden connection networks Build a sense of purpose Minimize emotional trauma

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Face down reality

Diane Coutou, in her article How Resilience Works, came up with this phrase for the key practice that organizations need in order to respond effectively to change and significant external events. We need to know what is happening in order to know how to react.
We need to face down reality. It seems so simple and obvious. But it is actually very difficult for both individuals and organizations to notice and recognize important changes in their environments. The far more common response is denial. We need to make deliberate efforts to look for indicators of change that could derail our carefully crafted strategies, strategies in which we are deeply invested, and then to accept the importance of that information when we get it. It takes courage and effort to see and accept reality. It takes work to overcome the tendency to ignore and deny information that doesnt fit into the patterns we are seeking. Yoram Wind and Colin Crook cite neuroscience research to explain how each of us interprets reality through our own frame of reference. We see what we want and are able to see. Each of us creates models for understanding the world, and we constantly interpret our experiences in terms of these models. Information that doesnt fit our models is largely ignored. We may not even consciously see it or hear it at all. Even when the information registers, we dont want to believe it. To accept a fact that challenges how we understand the world pushes us into uncertain territory, which can be uncomfortable and even frightening. It takes cognitive effort and emotional strength to tear one model down and build a new one. Its much easier to ignore or deny the new information, or to look even harder for information that supports our beliefs.

When Bill Gates became convinced that the Internet posed a challenge to the future of Microsoft and that the business needed to shift its focus, he had a video made of well-known and widely respected figures, including Stephen Spielberg and

Charles Schwab, talking about their views of the Internet. He wanted his employees to notice and accept the importance of the change, and the video helped him put the facts in front of them in ways they couldnt ignore.

It helps when an organization has a leader who notices an important change. People tend to listen to messages from the top. Its more common, though, for change to be detected much further down in the organization or in its remote outposts in sales or customer service, for example, or simply by an employee noticing something in a way no one had noticed it before. Its not enough for one person in the organization to see a new reality. Somehow the organization needs to take notice. As Yossi Sheffi puts it, Detecting and internalizing the unexpected is hardest because it often means questioning long-held assumptions about what is possible and moving information outside the normal channels. One of the keys to detection and fast response is the process of escalating knowledge, including the decisions regarding what to inform superiors about and when to do so. . . . Managers can either 1. do nothing and wait for additional data, 2. investigate the situation,

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3. notify their superiors (escalate the notification), or 4. take immediate action. Facing down reality for organizational resilience involves noticing and then communicating in ways that will raise the odds of an appropriate and timely response. How can an organization increase its chances of being aware of important changes in its environment? Here are some ideas for formalizing the process of watching for changes and seeing new realities: Monitor the environment. Measured and recorded data has credibility, as does information from outside experts. Customer surveys, focus group data, market data, and census and other government data are all good sources of new information. Know what is going on with your suppliers, what they are seeing, hearing and trying out. Pay attention to what your competitors are doing, the new products and services they are offering, which may be in response to emerging needs. Academic research and professional literature and meetings can also be doorways to new information. Push yourself to ask new questions and be open to new evidence. Some of the greatest leaps come from asking questions no one had thought to ask before, and by making connections across disciplines. Know whats going on within your business. Measure key early indicators and search for hidden factors. Airlines measure near misses, for example, rather than waiting to track accidents. Monitor employee resilience levels, and customer and employee loyalty. All need to be strong to get an organization through a major change or crisis. Understand layered effects. After the first Gulf War, the U.S. Armed Forces realized the impact of family responsibilities on operational readiness and responded with far-reaching family readiness programs, which were in place when forces were deployed to Afghanistan and Iraq a decade later. What will happen to employees families during a crisis at your organization, and how will employees respond to work needs when their families have pressing needs, too? How will your suppliers react to a change or crisis? Will they put your needs first? Realistic plans need to account for all constituencies. Go where changes are happening. Who is using your products in new and innovative ways? Who has stopped using them and moved on to something else? Where are new needs emerging? Who is driving innovation? People in your organization should be spending time with those people and in those places. Business books are full of examples of opportunities that were missed by organizations so comfortable in their frames of reference that they ignored important new information. The transistor was invented in the U.S., but domestic radio manufacturers dismissed its implications. Japanese firms saw the opportunity and acted, transforming the industry. Ken Olson built Digital Equipment Corp. into a powerful business through the 1970s and early 1980s on a model of efficient mainframe computers. But he and his organization failed to recognize the importance of the personal computer and that failure led to the companys quick decline.

Denial and avoidance, panic in the face of perceived catastrophe, are the opposite of resilience. These people view change as an aberration or abnormality. They dwell on things they have no control over. They avoid changes in which outcomes are uncertain. Salavatore Maddi and Deborah Khoshaba

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Encourage innovation and experimentation

An organization intent on absolute efficiency and maximizing returns (managing for performance) would never try anything new or risky. But we dont operate in a stable and unchanging world, and businesses recognize this by allocating resources to market research, product development and product and service improvements. Because businesses operate within the paradox of managing for performance and for adaptation, they do what they can to maximize returns on those efforts at innovation. Decision-makers tend to look for secure predictions of results before committing resources to new ventures. The result is generally a few large investments in big projects after long and thorough analysis, and a scarcity of resources for smaller projects and initiatives that respond quickly to emerging opportunities.
Research into organizational resilience suggests the promise of a different approach. Larry Mallak, in his article Putting Organizational Resilience to Work, introduces the concept of bricolage making quick innovations from whatever materials are at hand. A story illustrates how this can work: A well-paid executive on the final day of his vacation in the country comes out of a restaurant to find that one of the tires on his expensive car has been stolen, lug nuts and all. As he looks at the bare axle and wonders how hell get the car towed home, a farmer walks by and suggests that he replace it with the spare. You can take one lug nut from each of the other wheels and youll have three for each. That will get you home where you can get it fixed. Bricolage is the art of improvisation and ingenuity. Organizations with a culture of bricolage figure out how to adapt when faced with challenge and uncertainty. Coutou suggests a strategy of ritualizing innovation as a key element in achieving organizational resilience. Gary Hamel and Liisa Vlikangas propose a methodical investment in many small-scale experiments and product trials rather than a small number of huge product moves. The arithmetic is clear: they write. It takes thousands of ideas to produce dozens of promising stratlets to yield a few outsize successes. Markets reward widespread and small-scale innovations. New ventures spring up to fill the gaps left by larger organizations failure to flex and invent. Large organizations, by contrast, tend to operate more like totalitarian regimes, with their top-down decisionmaking. They efficiently channel resources to a limited set of existing operations and block funding to entrepreneurship and creative innovation. Responding to change, whether gradual or sudden, requires constant innovation. It demands that employees at all levels and in all functions think on their feet. Employees must pay close attention to the environment and to customer needs. And they need to participate in a culture of innovation. Its a shifting of mindsets from why? to why not?

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In 1999, David Whitwam, chairman of Whirlpool, decided to transform that company through widespread innovation. In a mature and cyclical industry with steady downward pressure on prices, he saw innovation as the only realistic route to growth. And he recognized that it would take lots of ideas and experiments to find the few that might give the organization the breakthrough boost it needed. Over three years, 10,000 of the companys 65,000 employees
An inventor is simply a person who doesnt take his education too seriously. You see, from the time a person is six years old until he graduates from college he has to take three or four examinations a year. If he flunks once, he is out. But an inventor is almost always failing. He tries and fails maybe a thousand times. It he succeeds once then he's in. These two things are diametrically opposite. We often say that the biggest job we have is to teach a newly hired employee how to fail intelligently. We have to train him to experiment over and over and to keep on trying and failing until he learns what will work. Charles Kettering, Vice President, General Motors Research Corp. 1920 to 1947

participated in workshops and training sessions that generated 7,000 ideas, which in turn led to 300 small-scale experiments. From those experiments came the handful of valuable innovations the company was seeking. To keep that pipeline of ideas flowing, senior executives watch metrics of the number of new ideas being generated and their progress through trial and experimentation.

Widespread innovation requires engaged employees and decision points further down in the organization. And innovation and employee engagement go hand in hand. It takes energized and committed employees to drive a culture of innovation. A culture of innovation, with expanded decision-making boundaries and greater respect for the ideas and opinions of employees the people closest to the work and to the customers tends to energize and engage employees. An important side benefit of such a culture of innovation is to help employees see that they can control more than they may have imagined possible. Research into individual resilience has found a close correlation between resilience and the belief that we can influence events. People who believe that they have some control over the events that affect their work and their lives are much more likely to show the kinds of positive behaviors associated with resilience. In addition, spontaneous, playful experimentation (behavior we might engage in when learning to play the guitar for fun, for example) leads to the strengthening of personal competence and to feelings of greater efficacy. It may be true that liberating employees to generate ideas and engage in experimentation at work can help them feel and be more effective at their jobs. People who have an image of themselves as victims, as powerless figures in a world over which they have little control, are more likely to exhibit behaviors that are the opposite of resilience rigidity, fear and heightened levels of negative stress.

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Build in flexibility
In his book, The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage, Yossi Sheffi focuses on flexibility as the most important strategy for building organizational resilience. Unexpected events are bound to happen. They happen all the time. Most organizations deal with them by building some cushions into their systems. A more effective strategy is to create a culture of flexibility.
The most common cushion against disruption is redundancy. Examples include extra inventory to cover for a delay from a supplier, backup plant capacity in different locations to minimize damage from local disruptions, higher staffing levels to ensure key work gets done even if a few people are out sick. But redundancy is expensive. Without great expense, it can be used to protect against only relatively small disruptions. And it does not protect against change. In fact, extra inventory and extra capacity can be impairments to responding efficiently to change because they increase an organizations investment in the status quo. Flexibility can be a far more effective strategy. Sheffi offers a number of business examples to explain why this is so, and he breaks flexibility down into a number of specific strategies.

On February 1, 1997, a fire at an Aisin Seiki Co. factory in Kari, Japan, destroyed most of the precision machine tools used to manufacture P-valves, the valves used in the rear brakes of cars to prevent skidding. That created an immediate crisis for Toyota, which relied on Aisin for 99 percent of the P-valves used in all of its car-making operations. A just-in-time manufacturer, Toyota had only enough valves in its plants and in trucks en route to its plants to last for a couple of days of production. Tens of thousands of Toyota manufacturing employees and hundreds of thousands of employees at parts suppliers would be idled and production delayed if a way could not be found to rebuild the supply stream. Aisin and Toyota began collaborating on a response while the fire was still burning. Both made emergency requests to their networks of suppliers for help, of which many responded, as did many suppliers of those suppliers. Aisin staff provided technical support to get new suppliers

into production and managed quality control on the finished parts. Because the new suppliers didnt have the specialized equipment Aisin had used, they had to improvise different production techniques, collaborating with each other to share information and tips. The first valves came off the new production lines two days after the fire. One week later production was back to a level high enough that work could resume at Toyotas plants at normal capacity. The makeshift production continued for two months until Aisin was able to resume production at pre-fire levels. As Sheffi tells the story, The effort entailed neither legal nor financial negotiations; suppliers simply went to work. Aisin provided engineering drawings and technical assistance to all participants. . . . Suppliers never asked Toyota or Aisin what they would be paid for rushing out the valves. We trusted them, said Masakazu Ishikawa, executive vice president at Somic Ishikawa. That

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trust, ingenuity and system-wide flexibility averted a major crisis for Toyota, Aisin, and all of its suppliers. What might have appeared, on the surface, to be a rigid single-source

supplier relationship one designed primarily for cost-control and short-term performance outcomes turned out to be a highly flexible and organic network.

Another critical aspect of flexibility for operational resilience is to give employees flexibility in how, when and where they do their work, with clear outcome measures.
Operational flexibility . . . involves close partnerships with suppliers, who can be called upon to help; flexible contracts, allowing for changes in quantities and delivery schedule; flexible manufacturing facilities that can be used to produce multiple products; a multiskilled workforce with empowered employees who can move quickly from one task to another; and strong customer relationships ensuring continuity in troubled times. Yossi Sheffi

In 2002, Best Buy introduced a work whenever and wherever you want policy with its headquarters employees. The company has a hard-driving work culture that has tended to attract hard-working employees. The problem was that it was also burning them out. A combination of stress-related health claims and the quitting of some good employees led the company to take a hard look at its culture and work practices. They found a pattern of recognition for long work hours, even if not associated with productive work output. The new policy recognizes work accomplished, not hours spent. Employees

are expected to get their work done and meet their output goals. When and where they do that is up to them. The result has been dramatic: a 35 percent increase in employee productivity paired with a boost in employee engagement and morale and a radical shift in how employees get their work done. In an interview for 60 Minutes, aired in April 2006, Best Buy manager Chap Achen said his area of the office sometimes looks like a ghost town. Some folks literally dont come into the office for weeks at a time. . . I have to trust that my team is going to get the work done in this environment. And the ironic thing about it is that its that trust factor that actually makes them work harder for you.

Flexibility in where and when work is done can also be critical in a crisis or during a change. Employees capable of and used to working from anywhere will adapt more easily and contribute productively after disruption more quickly. Telework and virtual work arrangements, once limited to groups such as sales staff or seen as a work-life benefit, have become a way of doing business for larger and larger segments of the workforce at many organizations. Preparations for dispersed work have been an important element in contingency plans as organizations prepare for the possibility of a flu pandemic in the spring of 2006. Flexible work schedules can also be used to extend coverage beyond traditional work hours while allowing employees to choose schedules that allow them to attend to personal and family priorities. A growing body of research is showing a strong link between flexible work practices and employee resilience and engagement, and this, too, is an important consideration in building organizational resilience. Employees with greater control over where and when they do their work are more likely to feel a greater sense of control over their work and take responsibility for adapting organizational practices to a changing environment. A recent summary of research into the business outcomes of flexible work practices by Corporate Voices for Working Families and WFD Consulting showed clear relationships between greater access to flexibility and both higher levels of employee commitment and lower levels of employee stress two critical factors in building a resilient organization.

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Another important element in operational flexibility is training to enable employees to help where help is needed. Employees cross-trained in multiple skills and functions, for example, allow an organization to dynamically expand capacity in specialized operations to meet fluctuating demand. Employees trained to understand the role of their work in overall business success can adjust their work on their own initiative. That can help the organization adjust quickly to meet business objectives when sudden change requires a more immediate reaction than top-down bureaucratic communication can deliver.

The Joy Cone Company is the leading manufacturer of cones for ice cream in the U.S. It is also a leader in the practice of flexibility. The company requires seasonal flexibility from its employees. With peak demand for its product in the summer months, it produces at capacity through the spring and summer. But then business slows down in the fall and winter. The company has worked out an annual up and down schedule which allows it to keep long-term employees without seasonal hiring and firing. Since the 1970s, the company has also formalized a scheduling process that builds biweekly work schedules around individual employee needs. Every week, employees submit schedule requests an afternoon and evening off for a childs graduation, for example, or a morning off to accompany a parent to a doctors appointment and those requests are factored into the plants master schedule. The most difficult job at the plant may well be that of the scheduler, who works late into the evening every Tuesday and Wednesday to devise a schedule that meets as many individual needs as possible. One factor that gives the scheduler extra maneuver room is the companys extraordinary dedication to training and cross training. Most employees learn more than one job. The more experienced employees can do many different jobs. This multi-faceted give and take between the company and its employees has led to an unusually

high degree of employee commitment. Joy Cones culture of flexibility and the commitment of its employees were tested in 2000 when the company opened a second baking plant in Flagstaff, Arizona, to more efficiently serve the western U.S. At 7,500 feet, the Flagstaff facility would be a good mile higher than the original Pennsylvania plant, so, as part of their planning, the owners and managers did a great deal of research on altitude differences in baking. They read whatever they could find, and consulted with other bakers in North America and Europe. But in spite of all their preparation, the first cones produced in the new plant were disastrous. The batter didnt rise, and the cones came out heavy and dense. Cone baking, it turned out, created some unique challenges not faced by other bakers. Ultimately, it took a community effort to find the solution. As the new plant struggled, Joy Cone sent a steady stream of its employees from Pennsylvania, sometimes as many as ten at a time, to share their expertise and try different experiments. This bottom-up effort, combining countless incremental changes and the input of many employees at all levels, finally produced the breakthroughs the company needed. Joy Cone is now a successful two-plant manufacturer of ice cream cones. Sales have doubled since the Flagstaff plant opened, and employees are committed to supporting further growth.

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Strengthen and broaden connection networks

Resilient organizations encourage and enable informed decisions at the level where those decisions can be made most efficiently. That requires broadly networked communication and access to information. People need to know whom to talk to and what information to consider when making decisions.
This networked model of communications and decision-making stands in contrast to the hierarchical model, in which information is passed up and down the chain of command. The hierarchical model may make sense in stable environments, where the long experience and knowledge of those at the top and their access to restricted information can improve the quality of decisions. But in a fast-moving situation, hierarchical decision-making can be disastrous. In times of rapid change, the people with needed information and expertise can be anywhere in the organization, and they are often in positions much farther down in the hierarchy. Chain-of-command decision-making slows down the process of information gathering and deliberation, and also pushes the decision point several removes from the people with the best information. Hierarchical information flow has two other serious drawbacks in times of rapid change: It is easily disrupted, and it is inclined to filter out difficult-to-hear realities. In the face of a threat from an environmental challenge, writes Dervitsiotis, the quality of conversations taking place within an organization plays a fundamental role in pursuing with success the necessary debate of whether to proceed or not to transform the organization. A high degree of connectivity is necessary to ensure that information is shared and noticed, but somehow the organization needs to recognize whats important and listen to those with the needed expertise. Only when those individuals who possess organizational power to allocate limited resources to a new idea and those that have the knowledge power to develop better strategic initiatives have the same shared vision can the organization maintain a high quality of conversations and a climate of trust that encourages experimentation and enables them to explore innovative solutions for effective adaptation. A strategy that encourages widespread innovation and experimentation can accomplish this by multiplying the number of decision points and pushing them farther down in the organization. An organization can also switch dynamically between hierarchical decision-making and networked operations depending on the situation. Sheffi cites the example of operations on an aircraft carrier.

During day-to-day operations, the carrier operates along its hierarchical structure of command, with discipline strictly enforced and procedures done by the book. But during hectic times, such as flight operations, the . . . command and control structure gives way to collegial cooperation based on communication between experts, rather than on the basis

of orders handed down from above. When a jet is brought in for landing, several teams must operate in very close coordination. These teams communicate constantly among themselves while the jet is approaching, making sure that the approach is open, the arresting wire is set, the deck is all clear, and emergency teams are standing by. At the same time,

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the landing signal officer communicates with the pilot regarding the approach, while the flight controller communicates with the pilot from the tower regarding the environment on the deck and in the air. To the uninitiated, these conversations sound like a lot of unnecessary chatter. Yet listening officers and team personnel know what to expect; the first sign of trouble is a phrase, a tone, or a response not according to expectation. This allows all involved from the captain to the air wing commander to the team members on deck to be aware immediately of a developing situation. Officers and

enlisted men on the deck can take corrective actions without the delay associated with going through channels, explaining the situation, and getting instructions. . . . Critical decisions made during flight operations on the deck are. . . characterized by deference to expertise rather than rank or seniority; team members on the deck defer to experienced petty officers and veteran enlisted men. . . . Even the person with the lowest rating on the deck has not only the authority but the obligation to suspend flight operations immediately, when circumstances demand it, without first clearing it with superiors.

Communication and decision-making on the flight deck of an aircraft carrier can be contrasted with the decision-making process in the hours before the launch of the space shuttle Challenger on January 28, 1986.

Record low temperatures the night before the scheduled launch of the Challenger led NASA and Morton-Thiokol, supplier of the solid-fuel booster rockets for the shuttle, to schedule a teleconference with engineers and management. MortonThiokols engineers advocated strongly for a delay of the launch, citing concerns about the performance of the O-rings at low temperatures. A launch the year before at 53F had resulted in greaterthan-expected O-ring erosion, and the engineers explained that the predicted launch temperature of 26 would be pushing the O-rings beyond the range for which they had been designed to perform. Cold temperatures would reduce their resilience and could lead to failure. But it was not a simple decision. There was tremendous pressure to proceed with the mission. The shuttle faced competition from the European Space Agency, and NASA had set a very

ambitious schedule of flights to prove the shuttle systems cost effectiveness, dependability and commercial potential. The shuttle mission just before the Challenger had been delayed several times because of weather and mechanical issues. On-time launch of the Challenger was also required in order to clear the launch pad to prepare the following mission, the launch of a probe to Halleys Comet. Adding to those pressures, the Challenger mission was the focus of heightened public attention because it was carrying the first teacher into space, Christa McAuliffe. So, while the engineers were convinced that delaying the mission was the prudent decision, management was divided. Morton-Thiokols managers stood by the recommendation for delay, while several NASA managers saw the data as inconclusive and challenged the engineers position. After several minutes

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of heated discussion, a Morton-Thiokol manager asked for time for the MortonThiokol group to review its data. During that subsequent discussion, according to later testimony of the engineers, one senior executive at Morton-Thiokol challenged the other managers to take off your engineering hat and put on your management hat. The Morton-Thiokol group returned to the teleconference with a new recommendation: The cold temperature was still a safety concern, but the data was deemed inconclusive and their engineering assessment was to recommend launch. In fact, the engineers had refused to sign the new recommendation. NASA managers

concurred with the recommendation and the countdown proceeded on schedule The temperature that night dropped to 8F, much lower than predicted. The cold temperatures required that safety limitations be waived several times during the final countdown, each time by people who were unaware of the discussions the night before about the O-ring concerns. At launch, as the boosters heated, the steel casings expanded and twisted, as expected. And as the engineers had feared, the primary O-ring was too cold to seat properly and maintain the required seal. Seventy-two seconds into its flight the Challenger exploded, killing all seven astronauts.

The quality of conversations in an organization is a matter of connectivity and information sharing. It also depends on the organizations ability to move between networked and hierarchical decision-making in times of change, and its willingness to listen to experts regardless of rank. In an interesting parallel, connections and communication are vital to maintaining personal resilience, too. Well-connected employees with strong personal support networks are better able to deal with stress and change. Resilient people build two-way social support networks friendships and professional relationships in which assistance and encouragement are exchanged and in which there is little competition or over-protection. These relationships of mutual support and independence are characterized by emotional empathy, a free sharing of appreciation, and two-way exchanges of help. Resilient people help pick up the slack for their friends and work allies, knowing that the favor will be returned when they need help themselves. And tying personal resilience back to organizational resilience, this kind of cooperative and supportive behavior at work can be encouraged with flexible work practices, cross training and a culture of innovative teamwork.

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Build a sense of purpose

Organizations that have responded well to changes in their environments share another quality: a strong sense of purpose that serves to motivate employees and align their efforts. This appears to be as true for organizations faced with gradual changes, such as those driven by shifts in technology or consumer preferences, as it is for organizations faced with traumatic and sudden disruption.
Research into organizational culture and employee engagement at work has shown the importance of values alignment to employee commitment and loyalty. Employees who feel that their personal values are aligned with the values of their employer as observed in the kinds of behaviors that are encouraged and rewarded in the organization and in the shared beliefs that drive decisions are more likely to give their discretionary effort to their work. They are more likely to volunteer their energy and ideas for change efforts. And when they apply those efforts in a time of flux and uncertainty, they are more likely to take actions that are aligned with the interests of the organization and its constituents.
Resilience is a deep fundamental human quality. Its about having a sense of control and purpose, about being able to solve problems and have energy and health. Building team resilience is about managing human beings and knowing how to develop their strengths and maintain their energies even in pressured, challenging times. Especially in pressured, challenging times. Arlene Johnson

A shared sense of purpose helps employees push through the confusion that often characterizes times of change and disruption. They have a sense of what the organization would want them to do when they encounter new situations. In the absence of clear direction they still know how to act. If that sense of purpose is shared by suppliers and customers, a whole system of flexibility and contribution can develop to help the organization through the transition. Without that goodwill and alignment, when times get tough its very easy for employees to disengage, and for customers and suppliers to switch their allegiance to competitors. Organizations need the aligned and energized efforts of their employees in order to navigate effectively through times of change and disruption. And no organization should assume it has the commitment of its employees. Many dont. A 2001 Gallup poll revealed that 55 percent of employees are not engaged in their work. 19 percent are actively disengaged. In a 2005 study, Towers Perrin extended that analysis to look at engagement of the global workforce. It found that only 14 percent of employees worldwide are highly engaged, while 24 percent are genuinely disengaged. The remaining 62 percent are only moderately engaged. There is no single country where employers can expect to find more than half of their critical population ready to go the proverbial extra mile regularly, say the studys authors. The phrase that best captures the mood of our global respondents is willing but wary. . . . But there is a world of difference between willing and engaged. . . . Willing employees get the job done as required. Engaged employee redefine the job to improve efficiency, effectiveness and results. Willing employees do whats necessary, but often no more. Engaged employees seek opportunities to go beyond to try new approaches, test boundaries, challenge the status quo, achieve personal or team bests because they find it stimulating, challenging and satisfying. As Salavatore Maddi and Deborah Khoshaba put it: Employee satisfaction polls leave no doubt that what todays workers look for and are motivated by in their jobs is a sense of purpose, continuing personal and professional development, and team effort toward a shared vision that contributes to the betterment of living. . . . Companies unable to count on their employees and customers are more likely to fail at discerning and mastering

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possible marketplace directions revealed by ongoing external changes, and thereby risk losing out to the competition.

Flexible organizations have one more element in common: . . . a personal, deeply felt concern and responsibility to serve the objective of the firm, or simply passion. . . . Flexible and fast-responding companies align the employees interests with the organizations. . . . Their employees identify deeply with the company. Yossi Sheffi

Many stories of survival and triumph came out of the tragic events of September 11, 2001. One of these is the remarkable recovery of Sandler ONeill & Partners, an investment bank that operated on the 104th floor of the World Trade Centers South Tower, described in a study by Freeman, Hirschhorn, and Maltz. In the attack and the collapse of the towers, the firm lost 66 of its 169 employees, including nine partners and two of the three members of its management committee. The firm not only survived, but a year later was doing better than it had been before the disaster. What drove that recovery and relaunch was a deep sense of moral purpose, shared by the firms partners, customers and industry colleagues. By the day after the attack, the partners had decided that the firm must survive. Jimmy Dunne, the surviving management committee member, appeared on CNBC to announce the firms commitment to rebuild and not let terrorists win and undermine America. That moral commitment included the goal of caring for the families of lost colleagues 46 widows or widowers and 71 children under the age of 18.

Inspired by that moral purpose, the firms survivors contributed heroically in the following weeks and months, reconstructing records and resuming connections with customers while attending funerals and coping with their own trauma. One person described work in that time as sprinting a marathon. When the firms salespeople sold stocks and bonds, they were doing it for their lost colleagues as well as for themselves. That sense of purpose motivated customers, suppliers and industry colleagues as well, and attracted skilled volunteers who helped the firm deal with media relations and other extraordinary challenges. Not one client left the firm, in spite of the uncertainty that clouded its future. Even competitors came to the firms aid, bringing it in on financial deals that directly aided its recovery. By May 2002, the firm was operating at pre-9/11 levels and its expansion into new areas of business positioned it for even greater success, a rebound that occurred while the rest of Wall Street experienced a major downturn.

How can an organizations leaders build that sense of purpose? Attend to the organizations culture. Find out what people believe your organizations values are by asking them, whether in surveys, focus groups or one-on-one conversations. And ask them how those values line up with their own values. If your employees see cost cutting as your organizations dominant value, for example, while their personal values place a higher priority on quality, customer service, continued learning or family and community involvement, you have a problem of misaligned values and an unshared sense of purpose. Culture change takes effort and time, but its possible. Engage employees in an effort to apply their personal values in their work and to identify and minimize actions and communications that create value clash. Clarify and articulate the organizations purpose in ways that employees will connect with. Help managers work with employees to heighten their awareness of how their work fits

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with their personal values and priorities. Over time, seek out and hire employees who share the organizations values. Help employees connect to the organization. This can be a particular challenge in organizations with dispersed populations, such as consulting or sales groups. Help employees engage at a personal level with others in the organization. Work to build a sense of belonging and community. Encourage employees to make time for activities that have meaning for them and bring them personal fulfillment. Work-life policies and programs can help promote the value that family matters. Policies and programs that encourage volunteer work help reinforce the value that community matters. Help managers understand that employees lives outside of work are relevant to their work performance. Activities outside of work that provide a sense of purpose keep people going even through difficult and pressured times.

Micheal Useem tells another story of moral commitment and alignment in his book, The Leadership Moment. In 1978, researchers at Merck recognized that a new medication in development for heartworm in dogs and other animal parasites might also be effective in treating river blindness, a parasite-caused disease afflicting some 20 million people in Africa and Latin America. In parts of its territory, the disease and eventual blindness were seen as virtually inevitable. Near the Nkam River in Cameroon, for example, four out of five people were infected and blindness was pervasive. Mercks researchers projected that a $3 pill, taken annually, could provide protection from the disease. The problem for Merck was that the people who needed the medication would not be able to pay even that. As a for-profit company responsible to shareholders, how could it justify the high cost of developing and distributing the drug estimated at $200 million with no prospect of revenue in return? P. Roy Vagelos, as senior vice president for research, approved initial funding for development and testing, which bore out the initial hopes for the drug. In extensive human trials in Africa it proved completely effective in ridding bodies of the parasite, with no negative side effects. In 1987, as chief executive officer, Vagelos faced the

bigger decision of what to do with this new miracle drug. He and his team of executives discussed the moral question of Mercks responsibility to shareholders to optimize return on investment or to the millions of people who could benefit so greatly from the drug. Vagelos made the decision to put the drug into production and to give it away to those who needed it, forever. Sometimes in your life youve got to take a leadership position and make a decision, he said. It was a unique situation in which the drug was needed only by people who couldnt afford it. By 1995, the World Bank would be able to report that the near elimination of river blindness as a public health problem and an obstacle to socio-economic development in West Africa stands as one of the most remarkable achievements in the history of development assistance. It makes an uplifting story for outsiders. For researchers and other employees at Merck it dramatically affirmed the companys core value of helping people through innovations in medicine. It is a story that goes far in attracting talented people to Merck and cementing their commitment to the organization. As former chairman George W. Merck put it, We try never to forget that medicine is for the people. It is not for the profits. The profits follow.

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Minimize emotional trauma

Change and uncertainty in an organization can breed fear and stress among employees. That doesnt have to be the case. Too often, organizational changes are planned with bottom-line outcomes in mind. They factor in known costs and benefits, but ignore the hidden costs of lost productivity due to human factors.
Fear and stress can be both crippling and costly. Employees in the grip of anxiety over their place in and future with the organization dont look for opportunity in change. They look for security or they look for escape. Stress caused by fear and worry exacts a toll in the form of poorer employee health, higher rates of absenteeism and higher heath care costs. It can cause distraction and attention paralysis, and what is coming to be known as presenteeism where employees put in their time at work but not their hearts and minds.
Highly resilient people are imbued with a mixture of hope, optimism, positive attitudes, and an ability to imagine a desired condition in a way that motivates and guides their purposeful coping actions. Such people expect and need good outcomes, and often get them. . . . Resilient people know that unfolding events are not totally predetermined. The world is more plastic; it is more malleable and shapeable than most people think.

Other factors compound the misery. Most people are motivated by positive feedback at work. And most people dont get as much of it as they would like, even in the best of times. Strong self-esteem gives people the emotional reserve to bridge the gap between the compliments they receive and what they need for emotional sustenance. In times of change, the flow of positive feedback tends to dry up. With less clarity around what needs to be done, it becomes harder for employees to take actions that clearly meet an objective, so they have fewer opportunities to act in ways that generate positive feedback. Feeling the stress themselves, co-workers and managers tend to be less generous with praise. The result can be a form of emotional market collapse. Employees self-esteem can plummet, leaving them starved for emotional support. They feel weak and Al Siebert powerless. They are anything but the shock troops an organization needs to clear a new pathway to success. A recent national study conducted by WFD, a consulting and research group that has been studying employee resilience and engagement since the 1990s, shows that half of all employees dont have the emotional reserves to maintain their job performance through times of change. The same study showed that less than half (only 42 percent) of employees surveyed felt that they consistently have enough energy to accomplish the tasks that are important to them.

GlaxoSmithKline has focused on employee health and resilience as a key element in its competitive strategy, defining resilience as the set of skills and behaviors necessary to be successful in the midst of a fast paced and continuously changing work environment. Robert Carr, vice president of Corporate Employee Health Management, explains the strategy in the companys annual Corporate Responsibility Report: The health of our employees is vital to our ultimate success. The companys performance depends on

people who are physically and mentally able and available to meet our business goals. To attract, retain and develop the best people, we need to have the right culture; a culture that supports a resilient, diverse, healthy and performance-focused workforce. GlaxoSmithKline pursues the resilience strategy on a number of fronts: Personal resilience workshops are offered to all employees and special resilience education materials have

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Resilient people have discovered personalities. . . . They get better and better at handling new situations because they learn from the consequences of their actions. Al Siebert

been developed and distributed broadly to employees. Managers have access to Web-based team resilience assessment tools. They are encouraged to review the results of their assessments with human resources and to seek consultative support on developing action plans. Managers are supported in promoting team resilience and in supporting the psychosocial well-being of their employees. They are trained and encouraged to promote open dialogue with employees on the sources of pressure and to work with their teams to clarify roles, objectives and personal priorities. Recruitment efforts seek candidates

with high emotional competence in addition to required functional skills. GlaxoSmithKline has seen a number of positive outcomes from the focus on employee health and resilience, including: Employee efforts are more effectively directed to critical business needs with the elimination of low-value work. Higher levels of employee commitment, discretionary effort and team performance. Improved management practices. A 60 percent reduction in global incidences of new cases of work-related mental illness and a 29 percent reduction in days lost due to workrelated mental ill-health.

The more resilient employees a company or an organization has, the more successful it will be in times of change. . . . This is because companies and organizations, like individuals, also need to be able to turn potentially disastrous changes into opportunities. . . . But companies cannot just rely on employing more resilient individuals and hope for the best. These individuals will be increasingly uncomfortable in a company that does not have a hardy organizational quality at its core and will be likely to jump ship for some other company more suited to their proactive style and creative abilities. Salavatore Maddi and Deborah Khoshaba

Organizations have to change. The goal of resilient organizations is to become capable of changing more responsively to external events which could mean faster and more frequent change. And organizations are made up of people. It is people who need to be facing down reality, experimenting, responding flexibly and taking all of the other actions that will spell success or failure for the organization. So it makes sense to focus on employee resilience as a core element in a strategy of organizational resilience. Here are some steps that can support that strategy: Teach resilience. Resilience skills can be learned. For example, training and coaching through an EAP or work-life program can help people see what they can and cant control, so they can focus efforts constructively and innovate where there is opportunity. Non-resilient employees tend to focus frustration on things they cant control. Resilient employees look for ways to influence change, and try not to be bothered by things they cant change. Stress management techniques and attention to healthy eating, sleep and exercise habits will also be part of a good resilience training program. Train and coach managers in the ways they can lead their groups for both performance and resilience. Managers have a huge impact on employee resilience. Where they fail, it is usually not from lack of expertise in the work they are managing, but rather from shortfalls in such managerial skills as involving employees in decisions, encouraging employees to be part of change efforts and soliciting and listening to employees on ways to improve their work and work output. Look at work loads. Managers often feel hopeless when caught between productivity demands from above and employees stresses and complaints from below. Work load can seem like a given, a non-negotiable bar set by others. While it may be true that output targets are fixed, theres often leeway in deciding what work is required to reach them. Find out from employees what aspects of the work load are causing their stress. Research by WFD has shown that its usually the lowest-value work that causes the most frustration time spent on reports that may not be looked at or on tasks

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that have always been done but no one is quite sure why. Most people like working hard at meaningful work, work with outputs that are valued and appreciated. But work with low value feels like wasted effort and an obstacle to focusing on whats important. Managers can work with employees to identify and either minimize or eliminate low-value work. Hire for qualities, not just skills. Look for people who can do the work and who can also sustain themselves and others emotionally during turbulent times. Look for people who have a history of dealing effectively with change, people who can give (or whose references can give) specific examples of changes theyve initiated, supported and weathered effectively. Howard Gardner drew attention to the idea of emotional intelligence. Resilience is an aspect of emotional intelligence and should be a sought-after quality when recruiting and screening candidates.

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Conclusion
Change and disruption frequently render the typical business model of managing for performance maximizing returns in a known market space inadequate and even counter to an organizations long-term interest. Managing for adaptation is the better strategy for success in unsettled circumstances. But the two strategies pull in opposite directions. Resilient organizations accept and master this paradox, dynamically matching strategy to situation by building six key strengths.
Face down reality. Getting past denial is step one in a resilient response to change. Without noticing and recognizing the relevance of challenging information, no response is possible. Resilient organizations seek out and examine potentially disturbing information in order to test their current models of understanding reality. Encourage innovation and experimentation. Resilient organizations increase their opportunities for growth in new directions by engaging in widespread experimentation. They involve employees in seeking opportunities for innovation. And they allow decisions about small-scale experimentation to occur where the knowledge is, far down in the organization. Build in flexibility. Adaptation to the unexpected requires flexibility. Resilient organizations put flexibility into their operations by building trust and commitment among employees, suppliers and customers; by cross training employees to enable work to move between operations and think on their feet in response to changing circumstances; and by finding ways to allow work to be done when, where and how it makes the most sense from day to day and moment to moment. Strengthen and broaden connection networks. Highly networked communications and decentralized decision-making are critical to success in quickly changing situations. Resilient organizations know when to rely on hierarchy for decisions and when to push decisions to experts regardless of their position in the hierarchy. Build a sense of purpose. Employees are more engaged in the work and more likely to respond energetically and creatively to change when they know and share the organizations values and are committed to its sense of purpose. A shared sense of purpose also helps ensure that people make good choices when decision-making is decentralized. Minimize emotional trauma. Resilient organizations need healthy, engaged and focused employees during times of change and crisis. In order to build those resilience reserves, the organization can help its people learn to be more resilient. It can also help managers improve their skills, look at work loads and hire for the qualities it seeks in people in addition to the skills it needs.

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Sources
Corporate Voices for Working Families and WFD Consulting. Business Impacts of Flexibility: An Imperative for Expansion. November 2005. Diane L. Coutou. How Resilience Works. Harvard Business Review. May 2002. Kostas N. Dervitsiotis. The Pursuit of Sustainable Business Excellence: Guiding Transformation for Effective Organizational Change. Total Quality Management. Vol. 14, No. 3, 2003. Steven F. Freeman, Larry Hirschhorn and Marc Maltz. Moral Purpose and Organizational Resilience: Sandler ONeill & Partners, L.P. in the Aftermath of September 11, 2001. Organizational Development and Change. Winter 2004. Gallup Organization. What Your Disaffected Workers Cost. Gallup Management Journal. March 15, 2001. Gary Hamel and Liisa Vlikangas. The Quest for Resilience. Harvard Business Review, September 2003. Arlene Johnson. Keeping Your Team Resilient. Audio recording developed by Ceridian Corp., GlaxoSmithKline and WFD Consulting. 2006. Salvatore R. Maddi and Deborah M. Khoshaba. Resilience at Work: How to Succeed No Matter What Life Throws at You. American Management Association. New York. 2005. Larry Mallak. Putting Organizational Resilience to Work. Industrial Management. November-December 1998. Rick Meyer, Pamela A. Cogdal and Richard James. Rebounding with Resilience: Training Agencies in the Wake of Terror. Presentation at 28th Annual Convening of Crisis Intervention Personnel and 2nd Collaborative Crisis Centers Conference, Chicago, IL. April 2004. Hal Morgan and Paul Rupert. Unpublished interviews with Joe George, president, and other employees and managers at Joy Cone Co., 1990-2006. Mike Rabins, Charles Harris, Michael Pritchard and Lee L. Lowery, Jr. Engineering Ethics: The Space Shuttle Challenger Disaster. Department of Philosophy and Department of Mechanical Engineering, Texas A&M University. Dean Robb. Building Resilient Organizations. OD Practitioner. Vol. 32, No. 3, 2000. Yossi Sheffi. The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage. MIT Press. Cambridge, MA. 2005. Al Siebert. The Resiliency Advantage: Master Change, Thrive Under Pressure, and Bounce Back from Setbacks. Berrett-Koehler Publishers. San Francisco. 2005. Lesley Stahl. Working 24/7. Sixty Minutes. Aired April 2, 2006. Towers Perrin. Winning Strategies for a Global Workforce: Attracting, Retaining and Engaging Employees for Competitive Advantage. 2005. Michael Useem. The Leadership Moment: Nine True Stories of Triumph and Disaster and Their Lessons for Us All. Three Rivers Press. New York, 1998. WFD Consulting. When the Going Gets Tough, Does Your Workforce Have the Resilience to Keep Going? Its About Time. Summer 2004. World Business Council for Sustainable Development. Enhancing Resilience and Mental Well-Being: GlaxoSmithKline. The Business of Health - The Health of Business. February 2006. Yoram Wind and Colin Crook, with Robert Gunther. The Power of Impossible Thinking: Transform the Business of Your Life and the Life of Your Business. Wharton School Publishing. Upper Saddle River, NJ. 2006.

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changing the world of work

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