Survival of the Fittest: Traits of organisations that survive a crisis

Evy Fellas

Evy Fellas

As countries slowly start moving out of lockdown, leaders are being faced with a whole new set of challenges. What’s the new normal for organisations? Where do leaders focus their efforts in trying to rebuild and navigate this paradigm shift?

In this article we’ll look at:

  • Key lessons from past crises.

  • Who survived, thrived, and what they have in common.

  • What you should do now to make sure you survive and thrive coming out of this crisis.

What can we learn from companies who survived previous crises?

IMF projections suggest that the coronavirus recession will be the most severe global economic downturn since the Great Depression, and that it’ll be far worse than the Great Recession of 2009.

But what can we learn from companies that have weathered the storms of previous crises? 

Did they purely hunker down and focus on cost-savings and other financial and operational measures? Where were the ‘People’ decisions in all of this? What can we learn from the survival of these companies?

Amazon: Don’t Stop Innovating

Throughout the recession period of 2007 to 2009, Amazon’s stock declined 9%, compared to an overall average market decline of 36%. The e-commerce giant defied all expectations in 2009 with profits up 68% from the previous year. The fundamental reason Amazon achieved these incredible successes was the continued focus on innovation.

  • 2006: Amazon prime is launched. Assured monthly income based on the popular subscription-based model.

  • Late 2007: The Amazon Kindle comes onto the market. First e-reader to achieve high levels of popularity with consumers. First edition sold out in just 5.5 hours.

  • Then, Amazon Web Services (AWS) was launched right before the onset of the recession and proved to be yet another weapon in Amazon’s Innovation arsenal that helped the company thrive in difficult market conditions. 

In the months leading up to the start of the 2009 recession, Amazon launched a diverse range of products and services that all contributed to the long term success of the company.

In response to the recent COVID-19 crisis, it seems the company has doubled down on this approach. From its own coronavirus testing program to new projects in manufacturing and in analysing the social distancing of warehouse employees, Amazon is again prioritising its focus on innovation to get ahead of the pandemic.

Nike: Take a stand to (re)establish your purpose and values

Against the backdrop of a post 2016 divided America, brands couldn’t afford to be neutral. Consumers were voting with their wallets and boycotting those brands that didn’t align with their values. 

September 2018: A simple tweet from Colin Kaepernick: “Believe in something, even if it means sacrificing everything. #JustDoIt”.

Years before the death of George Floyd, Kaepernick was using his platform as a prominent quarterback to protest against police brutality - by taking a knee during the national anthem. He had subsequently been dropped from the NFL. The tweet kicked off an advertising campaign that was timed to mark the start of the 2018/2019 NFL season and celebrating the 30th anniversary of the tagline “Just Do It”.

It was a hugely divisive campaign, centered around some of the USA’s hottest hotspots; race, patriotism, sports and business. It saw people buying / burning Nikes, and sparked a cultural discussion, the likes of which had never been seen before.

People loved it, people hated it. According to Nike founder Phil Knight, that was the point.

“It doesn’t matter how many people hate your brand as long as enough people love it,” Knight told Fast Company last year. “And as long as you have that attitude, you can’t be afraid of offending people. You can’t try and go down the middle of the road. You have to take a stand on something, which is ultimately I think why the Kaepernick ad worked.” 

Nike’s results seemed to have backed that up. Despite Fox News and others predicting Nike’s downfall, the company claimed $163 million in earned media, a $6 billion brand value increase, and a 31% boost in sales. Lesson learned - companies that know what they stand for are the ones who will win.

Netflix: Consistent decision-making and focus on customer

One of the most thriving businesses during the 2009 recession was borne out of a response to the once-profitable but failing video rental stores, e.g., Blockbuster and new video on demand services.

In 2009, the peak of the Great Recession, Netflix, with their new offer of tv / movie streaming plans, which allowed subscribers to stream an unlimited amount of entertainment every month, along with their disc-delivery service, had gained a staggering 3 million members.

Netflix became known for their 'no-nonsense’ culture, notably, by encouraging its employees to “make wise decisions despite ambiguity.” The company empowers its team members not only to make the decision but to do so “based on the long-term, not near term.” 

Additionally, by providing a variety of price plans and different services to cater to multiple needs, they are also known for their excellent customer service.

Netflix is of course one of the few companies to prosper during COVID-19 lockdown when we had nothing else to do but hunker down and watch tv. With the recent decision to start cancelling inactive members if they don’t hear back from them (anyone who had not watched anything in a year or more), has further  solidified their brand. As of April 2020, Netflix had over 182 million paid subscriptions worldwide.

 

What do organisations that survive crises and go on to thrive all have in common?

It turns out those companies that pay attention to, what we at Qlearsite call their 'Organisational Fitness’, are more likely to weather the storm better. Organisational Fitness measures 16 areas across your company (see Qlearfit map below). 

Organisational Fitness

 

Amazon, Nike and Netflix focused on 4 key areas and were able to survive the various crises they face. Organisations that look Innovation, Purpose and Values, Decision-making and Customer are generally fitter.

Our research shows that if you actively manage your company using these and the remaining 12 key dimensions, you’ll get better outcomes such as:

  • high employee engagement scores,
  • high profitability,
  • high growth and
  • higher customer net promoter scores.
Ironically, a sole focus on financial measures, at the expense of people measures, doesn’t bring you prosperity.

All 16 dimensions are important and you need all of them to score above a minimum threshold for the organisation to be considered ‘fit’. That said, some dimensions matter more than others when it comes to recovering quickly from set-backs, so you should pay attention to these ones in particular to build resilience. 

How to build a fitter organisation that can survive a crisis

There are 5 steps to managing the impact that a crisis has on your organisation. 

  1. Listening.

    Creating a listening strategy for employees’ needs to be heard and acted upon. This is one of the most important dimensions and is one of the things that companies struggle the most with in the UK. In our study of over 2,000 UK companies, we found that listening was one of the top 3 poorest scoring dimensions, with fewer than half of all people surveyed saying that they felt listened to by their company.

  2. Purpose & Values.

    As demonstrated by Nike and others, during crisis situations, one of the best things organisations can do is align employees around a common vision and purpose and (re) establish their company values, asking ‘what do we stand for?’. During the COVID-19 crisis, many companies have been vocal about wanting to treat employees well and in accordance with their stated values, seeking to minimise redundancies wherever possible and opting for salary sacrifice schemes etc. instead. This has been very encouraging to see. Purpose is also strongly predictive of profit and customer NPS and in addition to listening, simultaneously one of the things companies struggle the most with in the UK.

  3. Decision-making.

    As demonstrated by Netflix and others, putting the organisation's purpose, direction and strategy at the centre to inform and guide decision-making, including decisions about customers, employees and the wider community. When faced with difficult choices, going back to organisational identity and purpose to guide the ‘why’ behind what the organisation ultimately decides to do, is the hallmark of good decision making. Good decision-making as we define it, is linked to higher profitability and growth in our research.

  4. Communication.

    This is another one of the hallmarks of a fit organisation and one of the dimensions that, thankfully, we saw organisations prioritise during the beginning stages of the COVID crisis. Thoughtfully communicating the ‘what’ and ‘why’ of organisational decisions is critical - as shown recently by AirBnB who cut their workforce by 25%. The reasons were very frankly and honestly communicated in a now infamous email communication from the CEO. Communicating in this very human way served to minimise the impact of the layoffs and protect the brand.

  5. Innovation.

    Last but not least, as illustrated by Amazon and others, continuing to innovate during economic crises is a key way to build Organisational Fitness. A crisis can pose a danger but can also pose a great opportunity - those companies who are savvy to these opportunities may be the ones to survive and eventually thrive coming out of this crisis.

As a leader, where do you start?

We’re facing the prospect of one of the worst financial crises in history, and of course leaders need to be thinking about cost-savings, maximising financial and operational agility. However, a sole focus on financial performance at the expense of people and Organisational Fitness is a recipe for failure - as we have seen from many companies and brands who are no longer around today. 

The best place to start is always going to be gaining an understanding of where your organisation currently stands, deciding where you want to get to and then building a plan to bridge the gap:

  1. Start by understanding / diagnosing how the current crisis has impacted your company’s strengths and what potential issues may have emerged.

  2. Prioritise action that can be taken in both the short and long term to improve fitness and recover organisationally.

  3. Align your people around positive change and take action to imbed change into the company at all levels.

  4. Follow-up to understand / diagnose the success of your interventions and course-correct as necessary.

Organisations that quickly adapt to the new reality, protecting their strengths and addressing opportunities to improve, will not just survive but thrive ahead of their competitors as we emerge from COVID-19. Organisations that fail to look at the landscape and adjust will, as the Darwinian principle states, disappear forever.

 


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Topics: Organisational Fitness, News, Road to Recovery

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