Business leaders’ confidence in the resilience of their organisations has faltered for the first time since 2017, according to the third annual Organizational Resilience Index report, published by BSI (British Standards).
While most have reported stronger financial performance in the last 12 months, the UK and Ireland – with Japan – lag behind other markets. Some 23 per cent of businesses in Japan and 14 per cent in the UK and Ireland report their financial performance is worse than five years ago. That is at least double the proportion of any other market.
Consequently, Adaptive Capacity is now seen as the most important factor to maintain Organizational Resilience, up ten places on last year’s Index and overtaking Financial Management. It appears that an increase in the disruptive effects of technology, alongside changes to government policies and regulation, are the driving forces behind the Adaptive Capacity agenda. The survey of 800 senior leaders globally identify technology as both the greatest opportunity and most severe threat to their success. The Index finds that Innovation, Horizon Scanning and Adaptive Capacity have the greatest impact on resilience, but that relative performance in these areas has declined over the last 12 months.
Howard Kerr, Chief Executive at BSI, said: “While we have seen a changing emphasis in Organizational Resilience in the past, this year reveals a decline in organizations’ ability to adapt to change. To survive and prosper, business leaders must be aware of issues on the horizon and remain vigilant in ensuring that they – along with their teams – are focused on strategic priorities. In balancing short-term business results with long-term resilience, businesses can use this year’s uncertainty as a springboard to future success.”
The report identifies a shift in the skills required of business leaders, with financial management no longer rated as the most important skill. The top five skills are:
1. Staff engagement and recruitment
2. Clear Direction
3. Business performance
4. Leadership skills
5. Use of technology
It appears that growing pressure on business has caused it to look inwards, prioritising these skills ahead of innovation and political acumen. This introspection was initially seen in last year’s report, and is a reaction to growing uncertainty and faster, more drastic change. But this change has accelerated in the last year, causing organisations to doubt their ability to predict future market conditions to the extent that the ability to ‘horizon scan’ is now seen as the lowest performing factor.
Concerns over employee turnover have risen by five per cent year-on-year, while staff engagement is one of the lowest performing elements. As the Millennial workforce continues to grow and with the careers of Generation Z on the horizon, businesses are beginning to place ethics and sustainability at the core of their HR strategies. The need for this strategic change was evidenced in a report earlier this year that suggested that 40 per cent of Millennials have chosen a job due to a company’s superior sustainability credentials.
Of the 16 elements that make up Organizational Resilience, the report found that the most and least important are (+/- numbers denote annual move in rank):
Highest impact elements
1. Adaptive Capacity (+10)
2. Leadership (=)
3. Alignment (+10)
4. Horizon Scanning (+10)
5. Vision and Purpose (+2)
6. Innovation (+6)
7. Resource Management (+2)
8. Awareness and Training (-3)
9. Culture (+1)
10. Financial Management (-9)
11. Suppliers Management (+2)
12. Reputational Risk (-6)
13. Information and Knowledge Management (-6)
14. Governance and Accountability (-10)
15. Community Engagement (+1)
16. Business Continuity (-8)
Highest performing elements
1. Financial Management (=)
2. Vision and Purpose (+1)
3. Business Continuity (+11)
4. Information and Knowledge Management (+3)
5. Leadership (+3)
6. Suppliers Management (=)
7. Governance and Accountability (-5)
8. Reputational Risk (-4)
9. Awareness and Training (-4)
10. Resource Management (=)
11. Innovation (+1)
12. Culture (+2)
13. Adaptive Capacity (+2)
14. Community Engagement (+2)
15. Alignment (-6)
16. Horizon Scanning (-4)
The full report is published at www.bsigroup.com/organizational-resilience.
