A real leader should be able to motivate the employees to do the right thing whether it is preparedness for disaster or response to customer demands and requests.
YOSSI SHEFFI, Professor, MIT School of Engineering
What can go wrong? What is the likelihood that it will happen? How severe is the possible impact likely to be? These are the three questions you need to answer when assessing your organisation's vulnerability, says Yossi Sheffi in The Resilient Enterprise (www.pearsoned.co.in). "The normal human tendency to see the world as we want it to be, rather than as it is, stands in the way of preparedness," he warns. His book doesn't spew out new jargon or algorithms; it urges companies to incorporate flexibility in their supply chains, not only to win in the marketplace but also to be resilient.
"Avoided disruptions do not show up as revenues, costs, profits, assets, or in any other form on the company's financial statements," concedes Yossi Sheffi, Professor, MIT School of Engineering, and Director, MIT Center for Transportation and Logistics (http://web.mit.edu). And, more agonisingly for the accountant, `only the costs associated with disruption avoidance show up'.
So, how does one argue `the business case for avoiding and mitigating disruptions'? Justify security investments `both by their contribution to avoiding disruptions (even when not all the benefits can be quantified) and by the collateral benefits they provide,' advises the professor. Also, gauge resilience investments by `their contribution to flexibility'. For example, `a low-cost offshore supplier may be supplemented with a local supplier that has reactive capacity and can respond quickly to market changes'.
Does he also talk about individual resilience? "That is a personal trait," says Sheffi, in an interaction with Business Line. "Clearly some of us can bear difficulties and personal setbacks better than others. This, however, is an area of psychology, which I am not an expert on."
Excerpts from an interview:
How can a company know whether it is resilient or not? Are there metrics? Can information systems help monitor resilience?
This is a good and complex question. There are no ready metrics to assess a company's resilience. Resilience depends on many factors, which include:
The amount of redundancy in the company's operations (safety stock at various stages; extra capacity available, etc).
How flexible the operation is: Can supplier be changed quickly? Are parts unique or more of a commodity? Can different factories produce the same product?
Corporate culture (I will touch on this later) which is difficult to measure and even define.
What are the giveaway signs of a non-resilient firm?
Long supply chain with no realistic business continuity plan which is being drilled frequently; no clear decision making authority in emergency situations; command-and-control organisation; little communications; bad relationships with suppliers and customers
If theemployer sees the importance of resilience and wants to act on it, but the employees are mired in habits such as sluggishness and indifference, what is he supposed to do?
The easy answer is to replace them. A real leader, however, should be able to motivate the employees to do the right thing whether it is preparedness for disaster or response to customer demands and requests. The situation you describe is bad not only for resilience but for customer service, quality and general competitiveness.
Is there a risk that companies may become paranoid about safety and vulnerability of the company and, therefore, become counter-productive? Is there something like over-resilience?
Of course, one can over-invest in any part of the business. The trick is always to find the right balance. The point in my book is that building resilience means building flexibility, which will serve the company well every day since markets are becoming more and more volatile.
You say company culture maybe the real secret to success. What's a near-ideal company culture?
A good culture is one in which employees are very motivated to see the company succeed and are ready to do great things for the company not because they are worried about losing a workplace but because they are genuinely proud of the company, its values and what it does. The management makes sure that constant communications keep employees on top of all the important things going on and employees are empowered to take decisions quickly without fear of being reprimanded. If they are wrong they should be educated and coached and if they are right they should be rewarded and celebrated.
In terms of resilience, do you have any views about Indian companies?
I am not intimately familiar with Indian companies. Clearly, however, many Indian companies succeed in the world marketplace because they do have the right culture. However, many parts of the Indian government, like other governments in the world, do not exhibit flexibility, customer service and other indicators of resilient culture.
You have cited Dell's tenet `leadership at all levels'. How does that help build resilience?
It means that employees take responsibility at all levels of the organisation. They are expected to make decisions regarding their part of the organisation without waiting for the top management to consider and approve an action when immediacy is required.
Do societies and countries have to think of being resilient? Can that lead to aggressiveness?
Societies and countries definitely need to think about resilience. Many parts of the US government did exhibit shocking lack of resilience during the Katrina hurricane in Louisiana and Mississippi. They did not act in time, lacked good decision-making process, people at lower levels did not take responsibility, and the results were disastrous. I am not sure that resilience has anything to do with aggressiveness. Resilience is the ability to bounce back from disruption, minimise the consequence and get back to the prior level of performance quickly.