How to Foster Resilience in Your Company

Companies are regularly confronted with challenges that threaten their very survival. Most recently, these have included the COVID-19 pandemic, rising energy prices, and the shortage of skilled workers. However, such disruptive factors are not a phenomenon of the recent past. Whether unpredictable events like the war in Ukraine or long-standing challenges such as climate change—both types of uncertainty have been affecting companies since the dawn of economic activity.

To successfully and sustainably navigate such challenging situations, it is essential for companies to be resilient. But what does resilience actually mean?

What does resilience mean?

The term “resilience” (from the Latin verb *resilire*: “to spring back, to bounce off” and “to contract, to shrink”) does not originally come from a business context, but rather from physics. In physics, it is used in particular in materials science to describe materials that return to their original shape after being deformed.

In psychology, the term was first used in the 1950s and has since been used to describe the process by which people positively adapt their behavior to adverse situations in order to cope with them and recover from them. Resilience is often referred to as psychological resilience. Since this suggests that resilient people possess a kind of shield that protects them from difficult situations, this description is misleading. Even resilient people find challenging situations stressful. However, they are better able to cope with them and thus have more time to recover; as a result, they are able to replenish their resources relatively quickly to face new challenges. If a person has only a low level of resilience, recovery takes longer, and recurring problematic situations can lead to mental health issues.

Why is resilience important?

Resilient people are able to overcome challenging situations and crises more quickly than others and cope better with emotional stressors such as grief or pain. At the same time, they recognize their own role in crises and the steps they can take to overcome them. As a result, they feel less at the mercy of fate in difficult situations. This reduces their vulnerability to mental illness.

What are the seven pillars of resilience?

In the literature on resilience, there are various models of resilience factors. There is often talk of “pillars of resilience.” The number of these pillars varies depending on the source. In Germany, the model of the seven pillars of resilience developed by certified psychologist Ursula Nuber is widely used. This model emphasizes seven specific factors that can promote individual well-being and the ability to cope with challenges. Dr. Franziska Wiebel has broken down the model into four basic attitudes and three practices.

The four foundational elements within the seven pillars of resilience are:

• Acceptance: Accepting a difficult situation enables a person to take steps to cope with it more quickly.
• Network-Oriented Approach: A stable network is important during difficult times, allowing you to share your experiences with others and confide in them. Outsiders offer new perspectives and can provide support during crises.
• Solution-Focused Approach: Another important pillar is the solution-focused approach. This involves seeking solutions to challenges in order to free oneself from a stressful situation.
• Optimism: In challenging times, optimism can help us overcome the situation. This does not mean naivety, but rather a realistic assessment of the situation and the conviction that we can influence events in our lives.

The three practices within the seven pillars of resilience are:

• Taking Responsibility: Taking appropriate responsibility for one’s own actions is another factor that can strengthen resilience. It is important for individuals to recognize that they themselves are responsible for both the positive and negative experiences in their lives.
• Self-regulation: Resilient people do not wallow in self-pity indefinitely; instead, they realistically assess their own role in the crisis, actively advocate for their needs, and in this way overcome their feelings of guilt.
• Planning for the Future: Future obstacles can be avoided—or at least better managed—through thorough preparation. When planning, risks should be proactively factored into the plan.

Organizational Resilience – Resilience in the Workplace

While the seven pillars describe psychological resilience factors that enable people to overcome challenges in the long term, organizational resilience refers to the resilience of companies. This involves the ability to cushion the impact of external crises or upheavals in economic, social, or political conditions and to adapt to the changed circumstances. Furthermore, the term describes a company’s tolerance for internal disruptions.

In companies, problems are addressed through resilient behavior at various levels. On the one hand, there is the level of individuals within the organization, who ensure that challenges are overcome through their resilient behavior. On the other hand, there are the teams that ensure companies remain resilient in the face of a dynamic environment. Furthermore, at the organizational level, there are structures and processes that can support resilient behavior among employees and teams.

Since different factors contribute to resilience at each of the three levels, one cannot simply infer resilience at one level from resilience at another. For example, a team’s resilience is not equal to the sum of the resilience of the individuals in the team. Nevertheless, these levels interact with one another and influence each other. Resilience within an organization should therefore be viewed holistically.

That's Why Resilience Is Important in a Company

In today’s globalized economy, companies face numerous challenges. In addition to the shortage of skilled workers mentioned earlier, these include digitalization and Industry 4.0. The pace at which these challenges are evolving is accelerating. Companies are finding themselves under increasing pressure. Competition is intensifying, accompanied by the threat that emerging technologies pose to established business models. It is therefore crucial for companies to gain an edge over the competition and position themselves to be as resilient as possible.

When organizations are resilient, they can benefit from a significant competitive advantage. There are many reasons for this. For one thing, resilient companies identify crises early on and manage them more easily. They also actively respond to challenges rather than passively waiting for things to change. As a result, they are less severely affected by negative influences and can recover from them more quickly. This usually prevents long-term consequences from arising. Furthermore, they can identify and capitalize on opportunities relatively early on. Resilience within a company strengthens the work environment, as employees feel more comfortable in a crisis-resistant setting. This, in turn, has a positive impact on employee motivation. Promoting resilience also enhances a company’s capacity for innovation.

Here's How You Can Foster Resilience in Your Company

Since challenges within a company are overcome, among other things, through resilient behavior at the individual and team levels, the seven pillars of resilience offer important approaches for increasing resilience in organizations. For example, emotional resources such as the pillars “acceptance” and “optimism” are important factors in resilience in everyday work life. Emotional intelligence is also a key factor, particularly during periods of prolonged stress. Other relevant individual resilience factors in a corporate context include physical health resources. These ensure that work can be performed adequately and that people are physically prepared to cope with adversity. Furthermore, cognitive resources such as analytical skills, self-confidence, a solution-oriented mindset, and the ability to reflect are important resilience factors in the workplace.

At the organizational level, areas such as the implementation of control measures, a conscious approach to risk management, and a solid understanding of the organization’s stakeholders should be actively promoted within a company to enhance corporate resilience. In addition, ensuring operational continuity through backup systems and resources can help companies be better prepared during difficult times. A robust infrastructure and reducing complexity within the company can also contribute to increased resilience.

A 2021 study by the accounting firm Deloitte offers organizations five additional strategies for strengthening their resilience:

1. Level of Preparedness: Companies that prepare for potential disruptions are more resilient. It is important not only to plan short- and long-term measures, but also to ensure that planning is balanced. A key pillar here is systematic strategic scenario planning.
2. Adaptability: Adaptable individuals within a company are essential for weathering crises. Employees should also be able to think critically and question the status quo in order to ensure an adequate ability to respond to challenges.
3. Collaboration: When employees and teams within a company work closely together, decisions can be made more quickly, risks can be minimized, and innovation can be accelerated.
4. Trust: Treating stakeholders with respect and fostering open communication among them helps build trust within an organization. This is another important prerequisite for resilience.
5. Responsibility: Companies that embrace social responsibility are generally better able to adapt during crises in a way that allows them to successfully overcome the situation.

Strengthening Financial Resilience Within the Company

The finance department, too, can contribute significantly to a company’s resilience. In fact, fostering resilience within an organization is best started here. After all, only financially sound companies are capable of taking action. In general, building resilience in the finance department is primarily about establishing processes and structures that make the company more flexible in crisis situations.

Specific approaches could include the following:

• Liquidity Management: Companies should have sufficient liquidity to cover short-term liabilities during periods of economic turmoil. To this end, current and future liquidity needs should be accurately determined. Since efforts to maximize liquidity within a company do not necessarily align with the goal of maximizing profitability, companies should also prepare detailed liquidity forecasts for various scenarios and develop contingency plans for raising liquidity. These plans should take into account additional factors such as asset turnover, actual revenue growth, and the flexibility of capital expenditures, as these factors have a significant impact on financial resilience.
• Strong Equity Base: Companies with a strong equity base are better able to absorb disruptive factors and are therefore more resilient to sudden crises. At the same time, a strong equity base has a positive impact on a company’s creditworthiness and, consequently, on its ability to secure liquidity.
• Diversification of Funding Sources: If companies focus on more than one source of financing—such as loans, venture capital, or equity financing—they can reduce the risk that a single default could jeopardize the company’s entire financing.
• Minimizing Costs: Whether by reducing fixed costs or optimizing business processes, cutting expenses can help a company better withstand adverse events such as a recession.
• Adaptability of Financial Plans: An important part of a resilient financial strategy is the ability to flexibly adapt financial plans to changing conditions. When necessary, it must be possible to postpone investments and reduce expenses so that the company can better respond to challenges.

Conclusion

In a business world increasingly shaped by disruption, resilience is essential for successfully overcoming challenges. To create the necessary structures, companies must take a holistic approach to the issue and actively promote it. To this end, resilience factors must be fostered at the individual, team, and organizational levels. Another key factor for organizational resilience is the creation of processes and structures within the finance department that enhance adaptability to disruptive factors. If a company succeeds in increasing its resilience, it is not only more resilient in crisis situations but also operates more efficiently and is better positioned for the future.