Building Resilience - In Individuals and Organizations

Paul was a successful executive whom I met a few times and, over the course of several conversations, learned his life story. Abandoned by his drug-afflicted mother, he grew up in an orphanage until he was adopted by a couple when he was five. Paul was sexually abused and at thirteen, he left home and stayed with friends until he finished high school. He eventually got a scholarship to go to college and found his passion in engineering. When I met him, he had become a senior executive in one of the major automobile companies and was widely respected and admired as an empowering leader. Or take Penn State’s former running back Saquon Barkley, who has just started his NFL career. His father had a drug problem and was in and out of jail, while his mother uprooted him when he was four, along with his four siblings, so they could have a better life. Despite it all, Saquon has graduated and by all accounts is thoughtful, self-aware and very personable.

Many others in Paul’s and Saquon’s situation might not have succeeded under similar circumstances. Psychologists and management theorists attribute part of their overcoming all these obstacles to “resilience.” Yes, resilience seems to be a term often invoked these days. Even the U.S. military has recognized the importance of resilience and has built this concept into some of its training. For example, Field Manual 6-22 points to resilience as a critical leadership attribute: “Resilient leaders can recover quickly from setbacks, shock, injuries, adversity, and stress while maintaining their mission and organizational focus.” (Sewell, 2011).

There have been a number of research studies attempting to identify the characteristics of resilient people. Marston and Marston (2018) write that they have identified six characteristics of what they refer to as Type R: adaptability, a healthy relationship to control, continual learning, a sense of purpose, leveraging support, and active engagement. Cacioppo et al. (2011) introduced an additional aspect of resilience with their concept of social resilience, which they define as “…the capacity to foster, engage in, and sustain positive relationships and to endure and recover from life stresses and social isolation.” (p. 44). Within communities and organizations, this collective resilience can be very powerful; workers who feel they are part of a larger whole can find strength when dealing with adverse working conditions or challenging situations. Rodin (2014) suggests that resilience is “the capacity of any entity – an individual, a community, an organization, or a natural system – to prepare for disruptions, to recover from shocks and stresses, and to adapt and grow from a disruptive experience.” (p. 3) She uses the term “resilience dividend” as the capacity to be more adept at managing disruptions and in creating new opportunities.

Coutu’s (2002) research has concluded that resilient individuals (and organizations for that matter) have three characteristics: a grounded view and acceptance of reality, a deep belief that there is meaning in what they are doing and what they are going through, and an uncanny ability to learn, adapt and improvise.

Let’s take her first characteristic, a grounded view and acceptance of reality. In my interpretation, this seems to be unrelated to optimism or pessimism. It simply means that you are unflinching in your view of what is going on (in his book Good to Great, Jim Collins explains this brilliantly). This is different from optimism, which is what others like Seligman (2011) argue is one of the key drivers of resilience. I tend to agree with the social critic Barbara Ehrenreich (2009), who took a cynical view of optimism and suggested that this was nothing more than wishful thinking. In my opinion, resilience reflects realism about the present, but optimism about the future.

A great example is Best Buy. A few years ago, many would have predicted, with the rise of e-commerce and monster competitors like Amazon, that Best Buy would eventually close shop, like Circuit City did a few years earlier. Best Buy was losing money and, in 2012, the CEO resigned in the wake of a scandal involving a romantic relationship with an employee. New CEO Herb Joly recognized the challenges; turning the company around was not going to be easy. One of his first decisions was to announce that he was going to match Amazon’s prices. Given Best Buy’s uncertain financial situation at that time, this was a bold move. Then he and his team tackled customer service by fixing delivery issues so that customers ordering on-line would receive their orders from the Best Buy location that could deliver their orders fastest rather than from centralized warehouses. They also offered free in-home consultations to customers who were considering making some purchases. Joly also reinstated employee discounts (a popular benefit for its workforce) and avoided mass layoffs. Today, Best Buy’s stock price continues to rise, and worker morale is up. In fact, Samsung, Apple and Microsoft have signed deals with Best Buy to feature their products on dedicated kiosks in branded areas within the store.

Making meaningful sense is what I would call Coutu’s second characteristic. The classic example, as many know, is Victor Frankl’s experiences in a concentration camp, as described in his masterpiece, Man’s Search for Meaning. Bennis and Thomas (2002) describe these experiences as “crucibles” that leaders go through (especially with traumatic and negative experiences) where they somehow find meaning in these experiences and become transformed by them. In organizations, we see employees who get inspired by the purpose of their work, and what their organization stands for. Some of these organizations have created mission statements that are intended to be inspirational, although for many, the reality does not live up to the promise. Nonetheless, organizations view this as a powerful motivator. For example, despite the negative press about the pharmaceutical industry, I know many employees in these companies who view their work as truly meaningful and of benefit to mankind, and this drives their passion and motivation.

Coutu’s third characteristic is making do with what you have and improvising to address your problems. A good example of this is Home Depot, which had been losing revenue and in fact under CEO Robert Nardelli had lost its market share to Lowe’s. When he left and Frank Blake took over, Blake realized that the company had lost sight of providing a great customer experience. It had expanded by purchasing Home Depot Supply, which was targeted to the commercial construction market. Home Depot Supply was increasing market share and was an important source of revenue for Home Depot (in 2006, its sales hit $12.1 billion); analysts argued that it was an important hedge against the soft housing market at that time.

But Blake decided that this business did not fit in with his plans to create a great customer experience. In fact, customer satisfaction ratings had been declining in recent years. He sold Home Depot Supply and began to improvise. He empowered regional managers to make decisions on what merchandise to stock based on their knowledge of the local markets. He invested more in employees and stores and reconfigured the incentive program so that more employees would be eligible to participate. And he hired over 3000 skilled tradesmen (e.g., plumbers, electricians) to train store employees so they would be more knowledgeable in answering customers’ questions. Blake retired in 2014, but the company continues to do well (despite a recent data breach); in 2016, Home Depot had a 24% market share versus Lowe’s’ 17%, and it has been operating on a higher margin with significantly more stores.

Here are three take-aways from the research and from my coaching experience with executives. First, resilient individuals share the following characteristics: a belief that they have some control over their situation; a propensity to bounce back and respond positively and improvise; and an ability to learn from adversity and failure. Of course, some individuals can find it hard to recover from setbacks when they get caught up with what Seligman (1991) refers to as the three Ps: personalization (a belief that we are at fault), pervasiveness (a belief that one event will affect all areas of your life), and permanence (a belief that the ripple effects of the event will last forever). As Sandberg and Grant (2017) have pointed out: “Hundreds of studies have shown that children and adults recover more quickly when they realize that hardships aren’t entirely their fault, don’t affect every aspect of their lives, and won’t follow them everywhere forever.” (p. 16)

Second, resilience can be learned and developed.  To build individual resilience (and it is both an attitude and a skill) requires focusing on what I categorize as all three aspects of your “self”: your cognitive (your mind), behavioral (your body) and emotional (your heart) selves. The following are three practices that help to develop this skill: learn to apply perspective-taking regularly (to help your understanding of what it’s like to be in the other person’s shoes); get out of your comfort zone (Eleanor Roosevelt once suggested to do one thing every day that scares you); and build empathy (to learn what they are experiencing). All these practices will help develop your capability to become more resilient.

Third, resilience can be developed not only in individuals but also in larger entities such as communities and organizations. And this is where leaders can play an important role – by encouraging resilience in others, as well as building resilience in their work groups.

To build resilience in their teams, I suggest that managers focus on these basic practices: treat employees with dignity and respect; help their team with creating some kind of shared meaning or higher purpose; and encourage a learning environment and a “try-it culture.”

Bennis, W. and Thomas, R. (September, 2002). Crucibles of Leadership. Harvard Business Review.

Cacioppo, J. et al. (2011). Social Resilience: The Value of Social Fitness with an Application to the Military. American Psychologist, 66 (1): 43-52.

Coutu, (2002). How Resilience Works. Harvard Business Review.

Ehrenreich, B. (2009). Overrated Optimism: The Peril of Positive Thinking. Time Magazine, October 10.

Marson, A. and Marston, S. (2018). Type R: Transformative Resilience for Thriving in a Turbulent World. New York: Public Affairs.

Rodin, J. (2014). The Resilience Dividend: Being Strong in a World Where Things Go Wrong. New York: PublicAffairs.

Sandberg, S. and Grant, A. (2017). Option B: Facing Adversity, Building Resilience, and Finding Joy. New York: Knopf.

Seligman, M. (1991). Learned Optimism: How to Change Your Mind and Your Life. New York: Pocket Books.

Seligman, M. (2011). Building Resilience. Harvard Business Review.

Sewell, G. (2011). How Emotional Intelligence Can Make a Difference. Military Review, March-April, 79-83.

Lessons from Aqui-Hiring

What happens when two rival companies, each with a strong culture and intense dislike for each other, merge – with one company acquiring the other? This was the case with two regional travel companies based in the Asia Pacific region. As one employee described it, “The rivalry between the two was comparable to a university rivalry, each of its loyal employees bleeding either green or yellow (note that names and other identifying information have been altered for anonymity). Nearly all internal reports would benchmark performance against the other, and sales pitches were designed to compete directly against each other.”

When the acquisition was announced, employees of both companies were in shock. This was like sleeping with the enemy. Furthermore, there was very little communication from senior management of both companies (and in fact, there seemed to be a lack of agreement even within the management ranks of each company on the benefits of the merger).

Not long after the acquisition was announced, the merged company sent an e-mail to all employees declaring that it was going to use its annual year-end celebration as an opportunity to have the two workforces get together. The party was held in a hotel with tables seating ten each. Not surprisingly, the employees of each company sat with another. Only at the VIP table was there a mixing together of the two companies, with the two incumbent Managing Directors of each company sitting together, along with a few executive managers from both companies. One year later, the integration still had not been completed. There were still two Managing Directors, two sets of functional heads, and duplicate activities. Many managers were still in the dark on the future of the company, and as a result, a number of talented employees left the company.

Despite the research showing that over 60% of mergers and acquisitions destroy shareholder value (remember AOL-Time Warner or Daimler-Chrysler?), we continue to see the thirst for merging and acquiring continuing unabated. One of the biggest recently is Disney’s $71 billion deal to acquire Fox. The biggest momentum seems to be among grocers, especially after Amazon acquired Whole Foods in 2017. Global food retailing is a huge business and only 3% is done online. The New York Times (August 22, 2018) has reported the following recent acquisitions in the grocery industry: Kroger with Ocado, an online grocery company using robots to pack online orders; Target with Shipt, a start-up offering same-day delivery services; Walmart with Parcel, another start-up with same-day delivery; and Aeon (one of the largest retail chains in Japan) with Boxed, a grocery e-commerce company. 

Perhaps because of the high failure rate of M&As, a more recent trend known as “acqui-hiring” has been growing, especially among technology companies. In acqui-hiring, a large company (such as Google, Amazon, Facebook, General Motors, and Wal-Mart) acquires a smaller company (such as Lytro, Zappos, Faciometrics, Cruise Automation, and Parcel respectively) primarily to obtain ownership of that company’s talent, rather than its products and services.

Coyle and Polsky (2013) were among the first to describe this trend, and they interviewed key players in Silicon Valley to get a better understanding of the motivations behind acqui-hiring. They started out by asking themselves why companies even go to the trouble of doing this, when simply targeting selected employees would be less costly (note that at least in California, where many technology companies are headquartered, non-compete agreements are generally not enforced tightly). In their analysis, such acqui-hire transactions are completed not for the purpose of the larger company acquiring the smaller company’s assets but to hire some or all of the smaller company’s employees. As they put it:

One frequently cited rationale for acqui-hiring is that it allows a large technology company to obtain the services of several talented engineers and entrepreneurs in one fell swoop. It also allows the buyer to hire an existing, well-functioning team of individuals who will often continue to work as a team with expertise in a certain field, as opposed to trying to assemble such a team from scratch.

An acqui-hire also enables the buyer to utilize the talents of its new, experienced employee team to enter into a new space quickly despite the buyer’s inexperience in that space. This is especially useful in Silicon Valley, where the pace of technological innovations creates a frenetic environment in which time is frequently of the essence and business plans rapidly shift and pivot.

In one of their examples, Apple a few years ago acqui-hired a team of engineers from Lala that had extensive experience in streaming music online. That team stayed together at Apple to work on its own cloud-based music service even after Apple terminated the Lala service six months after the acquisition. Coyle and Polsky’s explanation rests partly on what they consider the informal social norms of Silicon Valley, which among other things suggest that software engineers themselves prefer acqui-hiring rather than jumping to the competition so as not to incur the possible wrath of colleagues and other companies. They suggest that due to the “non-adversarial culture of Silicon Valley,” this is actually an easier path for the buyers as well as the acquired firms.

Here are three pieces of advice for organizations, especially for those interested in acqui-hiring. First, be clear on the objectives and rationale of the acquisition, and conduct a thorough analysis and due diligence (Christensen et al., 2011). Unfortunately, all too many executives are not clear on the specific purpose of the acquisition and rush too quickly to get things done. According to a McKinsey report, executives involved in M&As reported that due diligence was inadequate in more than 40% of their deals (McKinsey, 2010). More worrisome for an organizational psychologist like myself are those executives with an “overconfidence bias” (alas, all too many of them do) who believe that despite the statistics, they can beat the odds, as well as those who are well aware that the acquisition might eventually fail but in the short-term will drive shareholder value and make them very wealthy.

Second, follow the basic principles of change management, especially around the integration of cultures. McKinsey found that over 70% of the executives they interviewed reported that too little effort was made on focusing on culture during the integration. From my own experience, it seems to me that too many executives assume that cultural challenges can be overcome easily as long as both organizations see “what’s in it for them;” besides, they rationalize, their organizations are really not that different. Here are four change principles that I have found useful in my experience having been involved with several change initiatives:

1.     Make sure you create a change team (or, in Professor John Kotter’s words, a guiding coalition), a group of engaged individuals and leaders who are totally behind the change and will help you throughout the effort. These individuals do not all have to be senior managers; some can come from lower down in the organization, as long as they have the credibility and respect of their peers.

2.     Communicate relentlessly especially around what will change and what will stay the same (that is, what won’t change), and keep in mind that the most effective communication is when there is face-to-face dialogue and feedback and not simply sending out e-mails.

3.     Create a compelling and exciting vision of the future. A senior manager I know was tasked with reducing operating expenses in her division by 30%, a tall order especially since she had already been reducing expenses aggressively for the past two years. She framed this challenge to her team by describing how their mission could help transform the company, contribute to its success, and at the same time elevate their functional area to become world-class.

4.     Follow through and have a change execution plan. Don’t declare victory too quickly; integration often takes months if not years. In an acquisition effort I was involved with several years ago with a Japanese company, integration teams from both companies in different functional areas (e.g., Sales, Human Resources, Operations) were created and met regularly over the next two years to execute the overall plan.

The case of the two regional companies I described earlier failed to follow these four principles. There was no change team, communication was almost non-existent, there was no sense of identification with the new organization, and no plan especially for retaining key talent. Sometimes it makes sense to keep the two companies separate, such as with Amazon and Zappos. For example, when GM acquired Cruise Automation recently, it kept the acquired company separate to make sure it continued to operate very much like a start-up.

Third, perhaps most important when acqui-hiring, have a rigorous process in place for determining the talent you will need in your organization. Many organizations will focus on the technical skills of potential employees; as important, perhaps even more so, are the soft skills and the cultural fit that will determine whether the acqui-hires will be able to work effectively in their new environment. As the Wall Street Journal has reported (April 25, 2017), some of the more recent startups have begun to realize that getting the culture right and hiring people for cultural fit is just as important as their technical skills. It quotes CodeFights CEO Tigran Sloyan, who said: “Even with five to 10 people, if you don’t get the right culture going early, it’s almost impossible to get it right later … and quickly adding staff without building the right team can hurt, not help, the bottom line of an early startup.”

Christensen et al. (2011). The Big Idea: The New M&A Playbook. Harvard Business Review, March.

Coyle, J. and Polsky, G. (2013). Acqui-hiring. Duke Law Journal, 63 (2): 281-346.

McKinsey (2010). Perspectives on Merger Integration. https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Merger%20Manager%20Compendium/A%20McKinsey%20perspective%20on%20the%20opportunities%20and%20challenges.ashx