Resilience – Thriving in a VUCA World

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In this episode we receive some lessons on resilience and how to thrive in a VUCA world from Stephen Carver.

Rated consistently as one of the top lecturers at Cranfield University School of Management, Stephen has a unique ability to enthuse others and create “buzz” around the subjects of project and program management. He is an inspirationalist, a mentor and a practitioner and today he is going to share with us some findings from recent research about resilience in a VUCA (Volatile, Uncertain, Complex and Ambiguous) world.

Stephen was our guest back in Episode 42 where he shared some valuable insights about how to manage the three major types of project complexity (Listen here ).

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Transcript from Episode 67: “Resilience – Thriving in a VUCA world” with Stephen Carver

Could you share with us a little bit about your background?
I used to work in the oil business for about 15 years as an engineer. And then pack me off to business school and I learned all about incremental cash flow and all these ghastly things that we need to know as project managers, contracts and law. Then I went to work for Richard Branson and he completely changed my view on projects and program management.

He was into agile before they even knew it was called agile. Then I went back to the oil business, I got into strategy, how do you manage projects 15, 20 years in the future. And then set myself up as a consultant and along the way, Cranfield University, God bless them, had me in and I am the bridge between the academics, the clever people there and the reality of how it actually works.

Can you tell us about Cranfield University of Management?

In fact, it’s celebrating its 50th year this year. One of the top business schools, one of the top MBAs and we also offer to run lots of public and company-specific courses in the whole range of management. We got a reputation for hands-on, taking the theory and see if it works in practice and vice versa.

Can you tell us what triggered the research around resilience?

It goes rather nicely with what’s been happening with the events in the Caribbean with Hawkins and everything else. There’s an organization who actually look after the interest, shall we say, of all of the insurance companies and reinsurance companies. It’s an organization called Airmic and they have big conferences and they share their knowledge about how the “crisis isn’t disaster” can affect companies.

Because they’re the people, in the end, end up paying for this crisis. Long story cut short, in 2011 they did a major piece of research with Cass Business School in London as to why companies got themselves into crisis in the first place. It was a brilliant report, you can still download it free of charge from the Airmic website. It was called “Roads to Ruin” and it looked at some of the big companies like BP and Shell, Cadbury’s, Land of Leather, AIG and Firestone, companies that had major problems.

Some of them actually collapsed after the crisis and some of them staggered on, but it took a lot of damage. Unsurprisingly, what they found was that these companies had something in common. There is a seven-point list. I will whistle quickly through it but basically:

  • The board not really understanding the business
  • Risk blindness – “It’ll never happen to us”
  • Poor cultural leadership – “Hey, you make the money so that I get my bonus this year”
  • Poor communication
  • Huge levels of complexity which no one understood
  • Inappropriate incentives – the banks in 2008 and
  • Glass ceilings – “Don’t tell the boss the bad news, you might lose your bonus or not get on”

So these were the common factors. What happened was after that reported being published, they came to Cranfield and said “Look, can we do the next step? If you put all of those bad things right, we would then have resilience, we’d have companies that were able to take crisis without actually collapsing and costing us a fortune. What we want you to do at Cranfield is to actually find out what makes companies resilient. In other words, how can they survive in this VUCA environment?” VUCA – V volatile, U uncertain, C complex and A  ambiguous.

In terms of the findings, were there any surprises or something you didn’t expect?

They found that a lot of the companies did just stagger along afterwards, some of them are still going badly damaged, other ones took a few years to die, some died quickly. So, it’s all about actually thriving in that environment as opposed to just surviving in it. Our biggest problem, if truth is to be told, is to actually find out what makes a resilient company.

It sounds crazy, but you’re looking for companies where nothing bad has ever happened. Now, that’s either obviously because they’re resilient, in other words, they absorb bad things and nothing bad happens to them or they have just been damn lucky. The biggest problem was actually sorting out which companies have been lucky and which ones were truly resilient.

That was our biggest surprise. We managed to find about 10 and including our friends at Virgin Atlantic, Land Rover, IHG, a huge hotel chain of Zurich who have been through bad times but they are now increasingly resilient, and AIG, again a company that was severely damaged by the crisis but has now become resilient. And the academics said “What we need that is what makes these companies resilient” and what we found was that there were four generic types of company.

And I’ll whistle through them now. Let’s imagine that two by two. On the vertical axis, we’ve got what I will call “empowerment”. This is the general culture of “I can get this done, I can use my own judgement to sort things out.” On the horizontal one, we’ve got what we call “risk management maturity”, how capable are people of actually understanding risk and managing that risk. So, in the bottom left-hand corner, we’ve got will be called “dodos”, these low empowerment companies and very low-risk management maturity.

We always say the dodos are hugely successful for many, many years but of course, one day the world changed around them, people arrived in boats and no more dodos and so we’ve looked at companies who have been tremendously successful for decades and then they just disappear in a blink of an eye. So, they’re dodo companies. Then we’ve got the ones who are low empowerment but very, very high-risk management maturity.

They have got protocols, governance, procedures, you name it, they’ve got it. And we call these ones the “tortoises” and what happens is that by using the tortoise analogy – these companies if a crisis hits them, they go into their shell and they’ve got brilliant governance, and they got brilliant contracts, and got good lawyers, and they’ve got Monte Carlo analysis and goodness knows what else. They will survive the crisis, but of course, like a tortoise, if they’re not actually moving during the crisis, then when the crisis is over, they are left behind.

During the crisis itself, they can’t actually see what’s happening. I’ll give you an example of that one, as some of you might remember Shell had a major problem in the North Sea in the mid-1990s with the Brent Spar disposal, where 12 men and women from Greenpeace round rings around Shell for months “as one”. So, Shall came out and said “What happened? We did everything right but we still lost.”

That’s an example of a tortoise defensive type company. In the bottom left are companies that are here today and gone tomorrow. I suppose companies like Land of Leather, which was very successful then the world changed around them, they had a problem and they were just gone. Companies like that. I suppose to a certain extent, Northern Block, although that did stagger on in the different form. Nokia also fits into that. Nokia certainly didn’t see the future as they were hugely successful and then yeah all over again. And you never know, it’s got a great brand name.

Now, top left is what we call them the “herd instinct”. If you can imagine a herd of deer, all highly wired, all very conscious of what’s around them, they all feel hugely empowered, but sadly and unfortunately, when the crisis comes, they can all go off in the right direction but it’s a stampede and it’s uncontrolled. And sometimes they can go straight off a cliff. So, you think of whatever the “.com” companies in early 2000, 2002. Everyone was into “.com” , everyone was charging along saying “Yeah, we can do this, we can do this, .com, .com, .com” and it turned basically into a stampede and within 24 months, the whole lot went over an edge and almost brought down again the whole world financial system.

They are the herding-stampeding type of organizations. I lost the money, too. Let’s go to the top right, which is where everyone always wants to be. The top right box we actually call the “fish box”. Rather bizarre, I was trying to kind of get a handle on this type of companies because I had spoken to them. I watched the nature programme on, it had fish and the big shark came along and the all the fish all of suddenly went into this shoal, which kind of acted like a super being, it moved as one. I’m sure you’ve seen the pictures, birds do it, as well.

The shark went straight to the middle, now, there must have been 10 or 20 000 fish for the shark to eat and it missed every single one because the whole of the shoal has formed around the shark and let it through and it just went to the other side and miss them all. The same with birds. You see, birds of prey attacking starlings and very seldom do they get a bird and yet there were thousands of the damn thing.

And so what we found in these companies, everyone was highly empowered they could make up their own minds, they felt as if he had the training and the permission to use their judgement. And their risk management awareness was extremely high. Put the two together and you got a company that acts like that shoal of fish or flock of birds, it becomes a super organism and went the threat hits the company as they always will, they absorb it at and the damage is incredibly low. We will show a video when we do this lecture of this bird of prey as it falls into the middle of about 120 miles an hour and goes straight through.

But then the interesting bit is a whole bunch of other flocks of birds who were way away from where the attacker is, start to join the main flock and you’re ought to thought “Hang on a minute, that makes no sense, if you are not being attacked as a flock, bugger off.”  But they actually join with the flock that’s being attacked, so it gets bigger and bigger and I suppose this question of safety numbers but it just becomes this super organism that the birds are attracted to. And it then becomes incredibly resilient.

How does that differ from just good risk management?

It’s a question of how empowered people find themselves. And unfortunately, a lot of people fall straight into the “tortoise” box which is “You can’t touch us, we’ve got a good contract, look at our procedures” and that’s all great but of course you lack the ability to move in time and space which is what the fish or the birds of the resilient companies can do. They can adapt to the changing situation. Unfortunately, most companies have got themselves into a bit of a state now that I’m just doing a paper on it, whereby there’s over compliance and over governance and they lose the ability to be agile, call it what you will, but deal with VUCA environments.

It falls down to the leaders of the organization and the more softer skills?

I’m not knocking out all the hard skills, you need them, my goodness me, all the Monte Carlos and all the rest of the of risk analysis that you do. But the leadership is key. What we found is that CEOs of these companies are usually quite quiet people, they weren’t the sort of alpha male, banging on tables “This the way it’s going to be.” They just created a culture where people really did feel that they could make decisions. Sometimes they could go wrong but they will be supported within that.

One company we have seen that done a fantastic job at a major crisis, an airline company and they had a big crisis with snow at Heathrow. They were the only company that survived in terms of PR anyway and I said to them “What happened?” they said “We had procedures and protocols but that day it all just seems to happen” and I sat there was a somewhat cynical researcher saying “It doesn’t just happen, you must have good communication list and protocols” and they said “Yeah, we had but it just happened organically”.

They saved the day and they made huge decisions about booking hotels and telling people not to come to the airport because there will be snow. And I said to them afterwards “Supposing you have got all of this wrong, supposing the snow hadn’t arrived because they predicted that it did even though the Met Office said that it wouldn’t, you ought to spend a fortune, you look absolutely stupid, what will the big boss, because they have a very charismatic boss” and one of them said “Well, we thought in the end that’s what he would have done and so we did what he thought we should have done” and if it was wrong he would have said “Don’t worry about it, you made a good call”.

In most companies, that’s not the way, people are frightened to make the decisions, in case of the big bad boss tell them afterwards it was the wrong decision. So they have something called “learned helplessness” which is a terrible state to be in, but a lot of companies are in their state at the moment.

In terms of hiring people in these roles of leadership and senior management, do you have any insights into what questions we could ask to check their level of resilience?

An easy one is something like “Where do you see this company in five years time?” and if they immediately come out with a great big long list of how it’s going to be, just don’t take them on. People who are resilient say “I really don’t know. I have dreams, I have ambitions but I know the world is VUCA and we will be where we will be and let’s hope we could all do it together.” So, it’s a good test if someone is absolutely sure of the future they are obviously a complete idiot.

In terms of overall project management, what’s your golden rule?
The golden rule is “communicate, communicate, communicate” followed by “communicate, communicate, communicate”.

Show Notes.

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