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Writer's pictureDivya Eapen

Parallels between Personal Resilience and Organizational Resilience: How Early Problem Recognition is a key factor in Organizational Resilience and Corporate Longevity

I have been writing and speaking a lot recently about individual resilience, and the events in my life that have shaped me both personally and professionally. It’s no coincidence that one of Risk Strategy Consulting’s core services is building corporate resilience and longevity through Early Problem Recognition.


For those unfamiliar with this concept, Early Problem Recognition is recognizing that something is potentially going wrong and warrants further investigation, allowing you to take action before it becomes outsized or unmanageable.


Much like personal resilience, corporate resilience isn't just about surviving crises - it's about thriving in the face of adversity, learning from past experiences, and evolving for the future. Crucial to this ability to endure and prosper is to create an environment where Early Problem Recognition is part of your corporate DNA.


There are two main themes that cut across Individual and Organizational resilience, and both of these are key to Early Problem Recognition


1. Experience and Intuition / Intelligence (internal strength)

We think of resilient people as those that have faced hardship, learned from it, and emerged stronger. People who are resilient have an inner strength that they can keep pulling from; the phrase “whatever doesn’t kill you makes you stronger” is often used. I compare these experiences to a deep wound: it does permanently affect and change you, but you develop scar tissue over it that is even tougher than what was there before.


The main characteristic I see in people who are resilient is that they accept that something has failed, but they don’t let it define them and take them into a downward spiral. It’s not so much the ability to bounce back, it’s the ability to put one foot in front of the other and keep going.


For resilience to be useful, we need to learn from failures or painful experiences. How do you become a better person and avoid future bear traps? Our incredibly evolved and complex brains allow us to do this intuitively. We have a muscle memory that gives us signals that allow us to assess and react to risks. Jessica Pryce-Jones has written an excellent book called “Intuition at Work” that really delves into this, and more. My personal resilience has been tested and strengthened by professional events too, the most well known being the failure of Greensill Capital - in administration. My “gut” gives me a signal when professional situations aren’t quite right, and I use this as a tool to investigate further when I’m not comfortable with a decision or outcome.


A hallmark of resilient people is that they can fail, internalize those lessons in a positive way, and keep going again. Our brain and nervous system help us use intuition to not make the same mistakes again. How does this translate this into a corporate setting?


While companies are complex, they don’t have the level of complexity as our brains. A company’s history of successes, failures, and lessons learned form its collective "intelligence." Companies that have faced crises in the past often develop an early-warning system to spot emerging challenges. Unfortunately, many companies get so immobilized by failure that they stop making any decisions to move forward.


The best companies use failures and crises to:

  1. Undergo root cause analysis to really understand what caused the crisis, and then address that root cause;

  2. Use lessons learned from these crises, and talk about them widely, so that other teams can learn and look out for early warning signs.


However, as business leaders, especially in start-ups and scale-ups, we don’t want a big existential crisis to learn from. Unless your company has a huge liquidity buffer, these crises cause our companies to fail.


In one of the leadership training sessions I attended while at an SC Ventures by Standard Chartered Company, the facilitator, Adam Turner talked about a central node or brain that we all feed into. Equally, team members that have faced challenges in previous roles should be able to feed those experiences into the corporate “brain”, so that individual experiences can feed into corporate intelligence. This is yet another reason why diversity in boards and leadership teams is so important.


Early Problem Recognition means that you recognize, raise, and address problems while they are small, and before they catalyze into something that can bring a company down. While a human brain is able to recognize early warning signs and react, companies need to have this more formally established. So what can companies do to make sure that they “fail small” and learn from these failures by recognizing early warning signs? They should:


  1. Have diverse boards and leadership teams - make sure your “corporate brain” has a wealth of experience to pull from;

  2. Encourage discussion both on successes and failures - this feeds your corporate brain, and the various networks it feeds into. This means that one team can learn from the failures of other teams, one company can learn from the failures of other companies.


These factors will aid the rapid identification of issues and encourage the ability to fail fast and fail small before issues snowball into larger, catastrophic failures (ex. Greensill, Lehman, Theranos, Credit Suisse).


2. Support Systems / Eco Systems (external strength)


You know what is behind the most resilient people, the ones that keep going no matter how tough it gets? A strong support system. These are the people that show up day in day out. I attended Marie-Claire Frederick's Nurture Network event called “It Takes a Village”, and every speaker talked about the importance of their support system or village. I have an incredible village - comprising of family, friends, and a very strong professional network. Everyone I know that is thriving in senior positions has this. These relationships provide emotional and intellectual support, enabling individuals to endure and adapt to adversity.


Just like individuals rely on their support systems, companies must make sure that employees have these networks, and the company itself has a network with its industry peers, suppliers, buyers, and funders. In this article, we focus on the internal networks that exist across a firm - within teams, across teams, or even across geographies.


In order for these networks to succeed, you need a strong culture of transparency, and willingness to discuss failure. The Board and Executive Committee need to lead by example, and talk about personal failures. This needs to trickle down to all levels. Psychological safety is so important - everyone in the company needs to feel safe raising concerns, talking about mistakes or raising concerns.


Unfortunately, a lot of the most ambitious companies forget this, and the focus is on success at all times and accountability. When I was at Greensill, we had regular Town Halls. These were sessions where we talked about our wins. Never our mistakes, or what we could have done better. Excitingly, it made for a company with unlimited ambition, but it was a place where junior people didn’t feel comfortable raising their voice to express concerns.


In addition to a culture in which psychological safety is embedded, you need those people that you can escalate to no matter what. Every company needs a governance model that is focused on ethics and values rather than short term self preservation, or preservation of an individual.


People like the Chief Risk Officer, General Counsel, the Whistleblowing Champion, the HR team need to provide a space where each employee knows they will be listened to, and concerns will be addressed empathetically without blowback to the individual raising the concern. Unfortunately, this isn’t always the case, and we regularly see senior managers coming together to protect the CEO or the reputation of the firm, as we have so recently seen with Al Fayed and Harrods. Hopefully the issues in your company are not as extreme, but these key people need to do the right thing, and be known for doing the right thing, even if it is the hard thing.


So what can actions can your organization take to build psychological safety, and make sure that people feel safe and protected to raise concerns. Here are some thoughts:


  1. Leadership forums and town halls that have dedicated time to talk about what didn’t work, and lessons learned;

  2. Leaders who own mistakes and publicly talk about them;

  3. Core people in the firm have a board mandate to be impartial and focus on the long term values of the firm rather than short term protection;

  4. Incentive structures for these core people to be decoupled from short term successes of the firm.



Conclusion


One of the key elements to corporate longevity is to be able to recognize when your company is making a mistake, and correcting the path before a small problem snowballs into a catastrophic failure. It means taking small failures, learning from them, and constantly moving forward. This means building corporate resilience, which like individual resilience is based on:


  1. A strong support system that provides strength to the individual or company;

  2. Inner strength or corporate intelligence.


At Risk Strategy Consulting, we work with Boards and Executive Committees to help companies put in place the infrastructure to ensure corporate longevity.



Contact me at divya.eapen@riskstrategyconsulting.com to see how we can help you.





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