AmalfiCORE Blog

Can Corporate Governance Affect Reslience?

Larson proposes a “Basic Resiliency Model” where employee resiliency is a modifier to risk and organizational change and therefore productivity (and performance) is less impacted by the changes. The value of this model, if true, is that a company can create an environment that promotes resiliency and avoids the loss in productivity during ever increasing times of change. [1]

Lee provides guidance (based on material from R.M. Kantor) on what makes for a more resilient workforce with the intent of helping companies create policies that promote healthy resiliency. When individuals exhibit qualities such as being “fast, friendly, flexible, and focused”, organizations can withstand the pressures of fast-paced changes and better cope with uncertain times. [2]

Addressing employee stress can create a more controlled environment which has been found to be one of the key attributes of resilient individuals and their sense of self-efficacy. An organization can build trust by providing an open, friendly, focused, and goal-driven environment. This can also attract new talent and keep existing talent.

I recall our company working closely with a high-value consulting firm which presented the concept (among many in the model) that once a corporation provides a clear governance model, with expected behaviors, individuals will self -select in or out. [3] This can be an approach which helps develop a more resilient workforce. An organization can set policies that promote reduced risk, increased resource attainment, and a more process-focused environment (including training), all characteristics found to be present in resilient organizations. [4]

Robb suggests that organizations can be more resilient by building both an adaptive and performance- based culture [5]. By focusing on goals and tasks for immediate survival (performance culture) and providing a safe, supportive, and innovative atmosphere (adaptive culture), an organization and its employees can weather most major events. [6]

Organizations that do not foster resilience will find themselves having a difficult time surviving major changes, particularly emotionally draining and stressful events.

References

[1] Larson, Milan. “Resiliency: A Resource For Today’s Employees“. University of Nebraska Organizational Behavior Organizational Theory Track. (date unknown)

[2] Lee, David. “Why You Will Need a Resilient Workforce in Today’s Economy“. HumanNatureAtWork.com, 2008.

[3] Meagher, Ed. “The Woodstone High Performance Model“. Woodstone Consulting. 2000

[4] Larson, Ibid, 10

[5] Robb, Dean, 2000. “Building Resilient Organizations“. Robb Consulting. Vol 32 No 3. Source accessed 4-18-10: http://www.robbconsulting.com/resilientarticle.pdf

[6] Ibid

Nike and Crisis Management

In 1996, Nike was embroiled in a scandal when allegations were brought to light regarding child labor used in offshore factories around the globe. In 1997, Nike was in violation of OSHA standards in Vietnam with workers allegedly exposed to toxic fumes. [1]

At the time, Nike CEO Phil Knight issued a statement identifying the ways in which Nike was going to make things better by creating improved working conditions. The six promises were:

• “1st Promise: All Nike shoe factories will meet the U.S. Occupational Safety and Health Administration’s (OSHA) standards in indoor air quality.”
• 2nd Promise: The minimum age for Nike factory workers will be raised to 18 for footwear factories and 16 for apparel factories.
• 3rd Promise: Nike will include non-government organizations in its factory monitoring, with summaries of that monitoring released to the public.
• 4th Promise: Nike will expand its worker education program, making free high school equivalency courses available to all workers in Nike footwear factories.
• 5th Promise: Nike will expand its micro-enterprise loan program to benefit four thousand families in Vietnam, Indonesia, Pakistan, and Thailand.
• 6th Promise: Funding university research and open forums on responsible business practices, including programs at four universities in the 1998–99 academic year.” [2]

Subsequently and during the next few years, Nike is said to have made changes to working conditions. However, independent sources suggest that not all the steps were taken that should have been for Nike to stop unfair labor practices in southeast Asia. [3] Further, a current article refers to “…Nike’s 2007-2009 Corporate Social Responsibility Report… [indicating that] …more than 20% of Nike’s original equipment manufacturers have asked their employees to work excessive overtime hours and this number is still on the increase“. [4]

My view is that Nike appears to have launched a campaign to divert attention away from the primary issues (negative press about their labor practices in southeast Asia) and focus attention on their promises and programs (Global Alliance for Workers) and what they were doing to make things right. A reasonable crisis reaction. What would be more credible is if the company actually made significant progress and did not repeat the offenses. As we see from the recent report, Nike’s OEMs are asking workers to work excessive overtime hours.

What Nike did right was mount a campaign to demonstrate change. What they did wrong was not make the changes 100% throughout their operations and repeat similar violations of worker’s rights. Nike now seems to be addressing the OEM issues through an improved OEM supply chain relationship program. I’m not convinced that it is working. [5]

From personal experience, I know that a proper factory audit by an independent team can be helpful. However, we found that there are ways for factories to temporarily hide the true conditions. Also, if the ‘home-workers’ are not part of the audit, then companies and their supply chains can get away with continuing practices.

References

[1] Connor, Tim, 2001. “Still Waiting For Nike To Do It-Nike’s Labor Practices in the Three Years Since CEO Phil Knight’s Speech to the National Press Club“. ISBN 0-9711443-0-3. Source accessed 4-11-10: http://www.globalexchange.org/campaigns/sweatshops/nike/NikeReport.pdf

[2[ Ibid , 2-3

[3] Ibid, 3-5

[4] China CSR. 2010. “Nike Admits Poor Labor Practice By OEM”, Source accessed 4-11-10: http://www.chinacsr.com/en/2010/01/28/7060-nike-admits-poor-labor-practice-by-oem/

[5] Norwich University, “Nike Case Study“, Lesson 6 Discussion Question #2, MSBC Seminar 3, 2010

Issues Management

Crisis readiness and issues management is absolutely possible before a crisis. Also, both methodologies can be evaluated after the crisis has passed.

Issue management-IM can be defined as the preparatory activity that occurs before a crisis occurs. IM can be characterized as providing well-informed scenarios and signal detection and is a management process consisting of “[six] steps: identification; prioritization; analysis; strategy selection; strategy implementation; evaluation/learning“. [1] IM is a holistic approach to building an understanding of possible issues that could develop into a crisis and using a task team of stakeholders to develop mitigations of each issue. [2] After a crisis has passed, the IM process can be modified in such a way as to improve its detection and signal capabilities.

Crisis readiness-CM can be defined as the manner by which an organization (or individuals) communicates and responds from the inception of a crisis occurring. [3] CM can be characterized by the implementation of a set of plans by trained and designated leaders to evaluate situations, gather data and information, communicate and direct response and prepare for the transition to recovery.

The marriage of IM and CM can be useful as a constant rejuvenation of existing crisis plans based on new external influences and input, changing global conditions, and lessons learned from previous events.

I really like the issue management process tool I found from one of the United Nations sites. By using a ranking system, issues can be categorized during the evaluation process which helps determine criticality and response timing.  [4] I can see this tool used in combination with risk management tools to develop the scenarios we read about in the Issue Management Council white paper.

References

[1] “Issue Management: Tool for Crisis Recovery and Mitigation; A public service white paper from members of the Issue Management Council in the wake of 11 September 2001 terrorist attacks“. Issue Management Council Virginia, 2001, 2-3

[2] Ibid

[3] Ibid, 2

[4] Hogan, Mike, and Rettie, Claire, 2002. “Issue Management“, Forest Communicators Network, Riga, Latvia, Canada. Source accessed 4-11-10: http://www.unece.org/timber/pr/docs/imw.pdf

Crisis Leaders – Make the Decision – Now!

Of the wide variety of attributes that make a good crisis leader (communicator) I like integrity, trust, and accountability. The ‘cool head’ during times of trouble can also be a great asset.

The concept of leaders having a willingness to make decisions and not waiver is another important talent.

I don’t watch TV, just can’t stand commercials. However, I really get a kick out of watching shows on DVD, like ‘24‘ because I like espionage stories. The entire ’24′ show is one crisis decision after another, episode after episode, year after year. The writers have delved into all the major crisis and disaster topics. In season four, there were three presidents acting in the same shows: the current president who becomes incapacitated, the vice president who takes over via 25th amendment, and the ex-president who is called into help. Each one of these characters has a different approach, style, and set of values that directly impacts their decision-making capabilities. After watching with frustration as the vice-president reluctantly and sheepishly played politics with critical, life-threatening decisions, it was both refreshing and a relief to watch the ex-president gather data, seek counsel, and make significant and immediate decisions in rapid-fire time. Of course, not every decision is best, but at least a decision was made and communicated properly.

One of retired General Colin Powell’s famous 18 management axioms speaks to decision making and I think it applies to our discussion on attributes of crisis leaders.

“Part 1: Use the formula P=40 to 70, in which P stands for the probability of success and the numbers indicate the percentage of information acquired. Part II: Once the information is in the 40 to 70 range, go with your gut.” [2]

I think more crisis leaders should behave and operate with the axioms in mind, particularly this one, Powell’s number 15.

Reference:

[1] ’24′ TV show. Source accessed 4-1-10: http://www.fox.com/24/

[2] Harari, Oren, “The Leadership Secrets of Colin Powell”, McGraw-Hill, New York, 2002, 260