The State of Organizations 2023 - Flipbook - Page 8
CHAPTER 1: TEN DEEP DIVES
Strengthening
resilience
Dealing with serial crises and being able to bounce
forward out of them are more important than ever.
W
hat’s changing?
Business shocks requiring
quick responses have
become the new norm for
organizations. Companies
need to focus on being prepared and ready to act
at all times—and quickly. In the current volatile age,
individual and organizational resilience combined
with speed can be determinant factors for success
and survival. Yet our research and experience in
the field suggest that while some organizations
do emphasize preparation, many focus only on
some singular aspect of it (anticipating and then
addressing an acute challenge, for instance). They
forgo the holistic approach of routinely reviewing
and transforming structures, processes, and people
so that they don’t just bounce out of crises but
bounce forward—landing on their feet relatively
unscathed and racing ahead with new energy.
As recent experience has once again demonstrated,
crises will emerge. Global business today is fast
moving, highly interdependent, and complicated.
People understand the importance of organizational
resilience: more than 60 percent of respondents in
our State of Organizations Survey report that it will
only become more important in the future. Yet many
say they don’t feel that their organizations are well
prepared for the external shocks that may emerge
over the next few years—or the further disruption
that those shocks might bring (Exhibit 1).
Structure may be a factor here. Almost 60
percent of respondents say their organizations
have adopted agile ways of working in certain
functions, but only 14 percent report that their
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organizations have adopted a fully agile operating
model. Meanwhile, experience shows that
organizations with little to no experience with
agility or adaptability can end up in a double bind:
unmotivated to prepare for crises during periods
of calm and unable to change course and respond
quickly when disruption occurs.
The benefits of getting it right
In our experience, companies with capabilities in
both adaptability and resilience are better able
than others to absorb shocks and turn them
into opportunities for capturing sustainable,
inclusive growth. Leaders and teams in adaptable
organizations are better prepared than others to
assess the situation at hand, reorient themselves,
double down on what’s working, and walk away from
what’s not—and do it all quickly. With each bounce
forward, they become more resilient.
The competitive advantage that resilience provides
was evident during the 2007–09 global financial
crisis. Per McKinsey research, resilient companies
in that time generated about 20 percent more TSR
than their peers did—an advantage that accelerated
to about 50 percent in the turnaround years of
2009–11 and 120 percent during the stable period
of 2011–17. And that resilience premium was visible
again during the height of the COVID-19 pandemic.
McKinsey research shows that resilient companies
generated 10 percent more in TSR than less resilient
peers did during the economic downturn between
the fourth quarter of 2019 and the second quarter
of 2020. In the ensuing economic recovery, from the
second quarter of 2020 to the third quarter of 2021,
the differential grew to as much as 50 percent.
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