An HR perspective on recognizing and adapting company strategy in a volatile environment

We live in a time of constant and sudden change, risk, and instability. The pandemic, global conflict, disrupted logistical chains, tech, strong demand for sustainability, and increased transparency, has changed the business environment and created some sense of unease among leaders.

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Sudden disruption and uncertainty, poses an enormous challenge to strategy development. Even though we assume that traditional strategic tactics are a proactive response to change, they are based on a relatively stable and predictable world.?

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“The goal of most strategies is to build a durable (and implicitly static) competitive advantage through clever market positioning or by building the right capabilities and competencies to produce or deliver an offering. Companies regularly review their strategy and set direction and organizational structure based on an analysis of their industry and some projections of how it will evolve” (Reeves, 2016).

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Yet, in the face of these new factors, companies are asking:

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???????????How can we apply old strategic planning practices and forecasting in a volatile, uncertain, complex, and ambiguous environment?

???????????How can we enable our managers to recognize indicators of change and then adapt the way they lead and operate when there is an increased amount of information overload?

???????????Is a 12-to-36-month strategy cycle still relevant when we cannot keep up with the speed of change?

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Companies need to become good at relearning and learning new ways of doing things, rather than clinging desperately to a particular organizational capability or competence that past success has made to seem promising for the future. The biggest challenge is dealing with high levels of uncertainty and complexity. Instead of devoting themselves to improving and increasing the efficiency of existing processes, structures, services, or products as a response to the ever-increasing volatility and uncertainty, organizations first need the willingness and courage of their members to accept this new and volatile reality and to learn to work with it without feeling that they have to live in a state of constant emergency.

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This could mean moving from efficiency mode to agility mode. If organizations want to be crisis-proof, they must make quick decisions despite the complexity. Not only should they be able to make quick decisions, but they should be comfortable accepting that the outcome of quick decisions may not always end up where they anticipated. They must be ok with failing fast or having a contingency plan if there is a negative outcome because of their decisions.?This is possible if they are both agile and resilient. Covid allowed us to step back and observe how other companies were able to adapt and adjust their performance capability. It is possible. More directly, being agile and resilient does not compromise efficiency.

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Many characteristics distinguish agile and resilient organizations, which are worth looking at in more detail. At this point, I would like to mention one characteristic that successful agile and resilient organizations have in common: their ability to recognize the signs and indicators of change.

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They have figured out how to identify the business-critical signals from the multitude of environmental indicators and how to derive actions and experiment with them quickly, frequently, and cost-effectively. Not only with their products and services, but also with business models, processes, and strategies. They have acquired skills in dealing with complex, multi-stakeholder systems in an increasingly interconnected world. Most importantly, they have tapped into their greatest resource – their people.

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Now, one does not have to look far for companies that have developed such an atmosphere. They exist under the term ‘High-Reliability Organisations’ (HRO). To name a few: nuclear power plants, air traffic control systems, hospitals, and healthcare systems, emergency response teams, oil and gas production, transportation systems, and financial institutions (Coutu, 2014).

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HROs operate in complex and dynamic environments and could fail at any time in their daily work. They rarely do. These organizations have peculiarities in teamwork and the cognitive processes of their employees. They contribute to the prevention and reduction of incidents.

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Essential practices of these organizations and their members are:

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???????????Developing a strong safety culture: HROs put safety above all else and have a culture of continuous improvement in this area.

???????????Dealing with failure: They are on the lookout for potential sources of failure and take proactive measures to avoid them.

???????????Aversion to simplistic interpretations: These companies are aware that situations can be complex and resist the temptation to jump to conclusions or simplify situations.

???????????Commitment to resilience: HROs can adapt to unexpected events and recover from disruptions.

???????????Strong communication and coordination: HROs have effective communication systems and can coordinate at different levels of the organization.

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To implement these practices and improve the resilience of an organization and its members, it is helpful to integrate the following aspects in both the team and the leadership:

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???????????Autonomy: having agency in one’s work and control over behaviour in key tasks, develops a sense of capability and competence.

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???????????Competency awareness and improvement: when we improve our capability, we become more aware, which empowers us to respond better to unfamiliar or challenging situations, and to persevere despite failures and challenges.

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To promote the suggested aspects, leaders need to:

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???????????Establish a spirit of contradiction in the organization:

By encouraging and fostering a vigilant, curious attentiveness in employees, and being open to unwanted variations, misjudgements, aberrations, surprising events, and taking weak signals seriously. We have to say goodbye to the previous and unfortunately still prevailing opinion in many minds that "no news is good news". No, "no news is bad news", "good news reports the surprises, mistakes, and successes”.?With experience and skilful listening and looking at the signs of change, we become better at analyzing these signals and decreasing misinterpretations. At the same time, this development of listening for quiet signals promotes a culture of speaking out.?We are often caught in the trap of conformity by not speaking up. But we need a certain spirit of dissent in teams and organizations so that it is possible to point out these quiet signals to others. Otherwise, such signals get swept under the carpet and no one learns.

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???????????Focus on strength-based leadership practice:

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We need to create a framework that empowers and encourages staff. This would involve leaders encouraging and projecting a positive work atmosphere; learning and leading through employee strengths and not focusing on weaknesses and gaps. Nurturing relationships in teams, amongst staff and leadership. Creating meaning and autonomy in the work whilst celebrating small wins and successes, makes self-efficacy demonstrable to the employee contingent.

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In conclusion, ?it is up to the leadership in cooperation with HR and other enabling functions, to recognize and adapt the company strategy in a volatile environment. HR and leadership should establish a spirit of contradiction that empowers everyone to raise their hands when they identify something that is incorrect or wrong in the system. Without this investment of contradictions, staff may recognise issues but not feel comfortable to speak up or the issues may be ignored by management.?Lastly, HR and leadership should enable and encourage all members of the company to identify and analyze the small and subtle changes in the market or industry that requires a proactive approach and a willingness to experiment and take calculated risks. By staying attuned to weak signals and adjusting their strategies, businesses can stay ahead of the competition and position themselves for long-term success.

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Reeves, M. (2016, May 27). Adaptability: The New Competitive Advantage. Harvard Business Review. https://hbr.org/2011/07/adaptability-the-new-competitive-advantage

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Coutu, D. (2014, August 1). Sense and Reliability. Harvard Business Review. https://hbr.org/2003/04/sense-and-reliability