Recent years have proven a test in organizational resilience—an organization’s ability to withstand a change or challenge, then emerge stronger from it. Organizations that champion resilience are best positioned to absorb shocks and navigate trials with a pragmatic plan.
Cultivating such a capability has become increasingly difficult given the compounding disruptions that organizations have encountered. And yet, these are the times that organizations can benefit most from resilience.
What about this capability sets up an organization to succeed despite the challenges, and what should leaders prioritize to foster it? We connected with the coleaders of the McKinsey People & Organizational Performance Practice, Dana Maor and Michael Park, to find out.
Why is resilience important at the organizational level?
Dana: Resilience is often discussed at the individual level, but it is equally important at organizational scale. Our research early in the pandemic on the relationship between companies’ organizational health and their financial performance showed that businesses exhibiting healthy, resilient behaviors—such as knowledge sharing, performance reviews, and bottom-up innovation—were less likely than “unhealthy” companies to go bankrupt over the following two years.
Resilience brings two important benefits to organizations and their leaders:
First, cultivating resilience helps organizations approach difficult circumstances with agility, accountability, and adaptability. Leaders and teams can evaluate a situation, identify a course of action, commit to what works, and pivot away from what doesn’t.
Second, organizations that practice resilience find opportunity in challenge. For example, the Great Attrition exacerbated existing talent shortages within organizations and reprioritized employee experience. The most resilient seized this opportunity to champion a new company culture and invest in their people.
Resilient organizations not only bounce back from challenges and setbacks but also bounce forward with a competitive advantage.
How can resilience help organizations bounce forward from the potential challenges of 2023?
Michael: Uncertainty in the year ahead may feel daunting, but remember: change is constant. While the circumstances themselves may vary, every organization and its leaders have faced and conquered challenges before—and they will do so again.
Our past experiences in working with organizations during uncertain times suggest how companies may benefit from resilience in 2023. The advantages include faster and more dynamic decision making, greater efficiency, stronger and more adaptable leadership, and an environment that is more attractive to top talent.
In turn, resilient organizations are more likely to demonstrate better shareholder returns and excel at integrating new technologies, supporting customers, building partnerships, and attracting and retaining employees. They also fuel investment in new business and strengthen gross domestic product (GDP)—key to addressing the big-picture challenges that are expected in 2023.
Where can organizations start when building resilience?
Dana: Organizations should prioritize four key efforts when building resilience. First, champion agile principles like fast decision making and “good enough” outcomes so teams can test, learn, and adjust to circumstances as needed. Second, empower teams with psychological safety and self-sufficiency by holding them accountable and giving them ownership of outcomes. Third, find and promote adaptable leaders who are willing to coach colleagues and nurture new behaviors and mindsets. And fourth, make an investment in talent and company culture.
Addressing all of these capabilities, often simultaneously, is important to cultivate resilience. While it will take time and effort, starting this work now will pay off later.
What can leaders do to foster resilience?
Michael: Tying back to the third effort that Dana suggested, adaptable leaders ultimately set the tone for resilience. Characteristics that we use to define adaptable leaders are often what set these organizations apart, especially when it comes to culture.
To foster a more resilient organization, leaders should focus on developing certain behaviors and mindsets—both on their part and from their teams. These can include finding lessons and opportunities in situations, acknowledging the nuance of workplace paradoxes like correct versus incorrect, and challenging colleagues to step out of their comfort zones. Leaders should champion purpose and well-being. Also, ongoing listening tours and surveys can help to gather feedback about the organization, its culture, and what employees need.
More information about the benefits of organizational resilience and how to cultivate it can be found in our article “Raising the resilience of your organization.”