Business leaders have taken significant steps to improve the resilience of their companies, but are still facing significant risks around people management, with both their ability to secure skilled employees and to lead effectively through change under scrutiny.
In a year of political and economic uncertainty, the Organizational Resilience Index shows that business leaders’ attention is largely focused on tackling the external challenges that might threaten their businesses. Concerns around skill shortages have soared up the priority list, cited by one in six of the 800 businesses leaders we interviewed. This reveals a significant gap between the perceived importance of having a strong and skilled workforce, and an organisation’s ability to secure one.
It is encouraging to see an overall improvement and awareness of resilience – defined as the ability to anticipate, prepare for, respond and adapt to incremental change and sudden disruptions to survive and prosper. But leaders must maintain their focus on shoring up their organisations and developing their internal resilience through more effective people management. New procedures and safeguards alone do not provide resilience; culture and leadership are key.
The performance of leaders, in terms of the culture they create and the performance they galvanise, was one of the top five priorities identified by business leaders in last year’s Index. But, while leadership has risen in perceived importance this year, it is the only priority area in which relative performance has declined.
This may be due in part to the struggle in reconciling differing internal priorities and dealing with potential tensions within organisations. Of the executives we spoke to, HR professionals consistently placed culture at the top of their agendas, but their colleagues in operations ranked it far lower.
In addition to these inconsistencies, we identified a worrying gap in the perception of leadership culture between the shop floor and the board room: c-suite executives rank their own performance more highly than their teams do. This is especially pronounced amongst organisations which are over 50 years old; these are the businesses that often struggle to embed structural agility and innovation.
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, perhaps more attention needs to be paid to bringing more high-potential 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.
A strong focus in one area inevitably draws time and attention away from other priorities. It is important that businesses keep an eye on internal resilience factors such as culture and leadership as they focus on the external issues that dominate headlines. This is particularly true for businesses in the West, where there has been a significant reduction in the attention paid to product and service innovation, while leaders in China are focusing on innovation as the most important factor for preserving long-term resilience.
Internal efforts that companies undertake to make themselves more attractive to prospective employees, and to promote greater commitment and performance among their existing workforce, are key to helping them stay resilient to a range of external challenges. Organisations must acknowledge that innovation is driven by people as well as technology, and that an organisation’s people are central to its performance and results, if they are to remain resilient into the future.
Howard Kerr is chief executive of BSI Group