Stronger Than Covid19
RESOURCES, ORGANIZATIONAL PROCESSES CAPABLE OF ANTICIPATING CRISES AND PROCEDURES TO RESPOND TO THEM. THESE ARE THE THREE FACTORS THAT DETERMINE THE RESILIENCE OF A COMPANY AND MAKE IT POSSIBLE NOT ONLY TO OVERCOME THE CRISIS BUT, IN SOME CASES, ALSO ATTAIN POSTTRAUMATIC GROWTHby Carlo Salvato, Full professor at Department of Management and Technology
What is a crisis for a company or an economy and what is the key to overcome it and even seize the opportunity to come out stronger? The word "crisis" comes from the Greek kríno: I separate, I decide, hence the Latin cernere, to choose. A crisis therefore separates two ways of being, one status or set of phenomena from another, thus deciding the fate of a situation and requiring strong will-power to determine it.
A crisis is therefore not a time-limited event. A crisis is a process. A process with a "before" (the incubation phase), a "during" (the triggering event or the explosion of phenomena gradually accumulated over time) and an "after" (the phase in which the outcomes of the crisis need to be faced). The vision of the crisis as a process certainly applies to crises that arise from the accumulation of phenomena over time, such as economic and financial crises or those resulting from defective products and production processes, or the lack of adequate cyber security systems. But the crisis can also be seen as a process in the case of sudden and unexpected events, such as earthquakes, fire blazes or pandemics. Even in these cases, the behavior of actors and the context in the period preceding the triggering event, are decisive in deciding the outcomes, be they disastrous or positive. Here lies the key to surviving and thriving in a crisis: to manage the entire process.
Decades of research have shown that the companies that survive and prosper in crises are the ones committed to tackling the whole process. The ability of a company or an economic agent to obtain and use resources in dealing with crisis processes is called resilience. It includes a company's ability not only to resist and pay remedy to phenomena that could threaten its survival, but also the ability, in some cases, to take advantage of them by identifying new business opportunities.
What enables an economic agent (individual, company or institution) to be resilient? Numerous empirical studies have highlighted the centrality of three factors: the availability of certain resources; organizational processes aimed at anticipating, preventing and mitigating potential risks; the response to the effects and manifestations of a crisis once it has exploded.
First of all, there are the resources to face the emergence of a crisis. A first type of essential resources are obviously financial resources, the availability of substantial reserves of liquidity to cushion the effects of the crisis, but also to invest in order to seize the potential opportunities that may arise from it. But money is not enough. The companies that best navigate crisis processes are those that also have cognitive resources, such as a clear and long-term vision, strong and shared values, deep and rooted knowledge and expertise throughout the organization, not only in top management or R&D. These enterprises are also characterized by resilience-oriented organizational structures and processes, such as widespread and well-established creative and innovation processes, combined with a deep-rooted habit of cooperation and coordination between organizational units. The ability to regulate emotional responses is also an important, but often overlooked, resource for resilience. Emotional capital includes a culture of widespread optimism and hope, the presence of numerous opportunities to appropriately express and discuss one's emotions - whether positive or negative - in meetings and workshops, and tolerance for failure with respect to those who experiment and innovate. Finally, an essential resource is given by the social and relational capital of resilient companies. This is about social relations inside and outside the organization. Thanks to them, a company has access to many essential resources to tackle the crisis, including social trust.
The second resilience factor is provided by the organizational processes aimed at anticipating, preventing and mitigating potential risks in a crisis. Companies that succeed have a proactive orientation to invest in networks, and coordination techniques within and between organizations. These firms establish organizational practices that allow them to improvise and take decisions quickly in contexts characterized by ambiguity and uncertainty. These practices require that knowledge, attention and resources are distributed throughout the organization, not just at the top, to facilitate the timely recognition of the first signs of a potential crisis and the identification of the actions to counter it.
The third factor is furnished by the elements that enable a response to the effects and manifestations of crises once they have exploded. The most effective answer to crises comes from companies that are able to improvise, to change spontaneously and implement constantly changing and innovative corporate behavior. These are the most innovative companies, those that even in normal times do not see the introduction of innovative business models as a threat but as an opportunity. These companies are therefore characterized by flexible decision-making processes put in place by managers linked by strong bonds of trust and operating in large and diversified networks outside the company.
The set of three factors - resources, organizational arrangements capable of anticipating, and processes to respond to crises - guarantees the resilience of a company. In some cases, the business response to the crisis leads not only to a return to the previous situation, but even to what is now called post-traumatic growth. During the COVID-19 pandemic, for example, there were companies in the pharmaceutical or healthcare sectors that doubled their sales. Their market positioning has certainly favored them, but not all competitors achieved the same results and some have gone bankrupt. The combination of resources, processes and networks has allowed them to survive and thrive in difficult and complex conditions, thanks to their level of preparedness and agile and innovation-oriented decision-making processes. In the coming months, national plans aimed at obtaining funds from the Next Generation EU program will offer many other possibilities to transform the crisis into an opportunity for recovery and growth. Again, only the most agile companies, predisposed to the new and embedded into networks of trust will be able to seize this possibility, by interacting proactively with the players in the industry and with public administrations.
