Any risk or resilience plan needs to be sensitive enough to evaluate all of the critical dependencies and account for the compounding of multiple risks at times of crisis.
1. The CRO finds himself in the hot seat
The CRO learns the hard way that just because a risk is unlikely doesn’t mean it won’t happen.
Joel Taskman took a long look in the mirror before his 8am video call. He felt as if he had aged 10 years in 12 months. As CRO at FooderFodder Appliance Manufacturing, he had lost more sleep than hair as his company faced a crisis, first in lack of supply, then in increasing demand.
As a global manufacturer primarily of commercial-grade kitchen appliances, with a niche luxury consumer kitchen appliance line, Joel’s hands were full before the pandemic assessing a range of organizational, operational, reputational, financial, geopolitical, regulatory, climate change, digital, cyber and talent risks.
Joel and his team had conducted scenario planning, developing risk assessments to rank the top 10 threats based on likelihood and impact, putting together a plan geared to mitigate those risks. He thought FooderFodder’s risk strategy was sound. Unfortunately, a global pandemic didn’t make the top 10 list and he learned the hard way: the past is often a poor predictor of future risks, data-driven risk intelligence is more important than he gave it credit for, and just because a risk is unlikely doesn’t mean it won’t happen — or have a devastating impact.
Joel sat at his home office sit-stand desk, which mostly stayed in the sit position now, put in his ear buds and waved hello to his colleagues who had already joined the call. He thought Sabrina de Haan, FooderFodder’s CSCO, looked tired and a little pale, but he kept that to himself.
Digitally networked supply chains are data-driven and can react to events, enabling near real time changes.
2. The CSCO struggles to contain the crisis within a crisis
The linear, just-in-time supply-chain model may be great in good times, but in bad times it’s highly vulnerable to disruption.
Sabrina sipped her fourth cup of coffee, thinking it may be a good idea to dial back the caffeine when the pandemic crisis was finally over. But not today. She’d been awakened just after 3am by the production manager at FooderFodder’s European factory with yet another cry for help.
Demand for its line of high-end bread makers was suddenly through the roof again and one of its main Asia-Pacific suppliers had only shipped a fraction of the parts needed to keep the next shift going. It was the third time in a week among countless times over the past several months that the supplier had come up short. The production manager had already changed the shop floor production schedule four times in a day and was at his wits’ end.
Although her call with Joel and Maha Menon, FooderFodder’s CHRO, was meant to focus on where to go next and how to build resilience into the organization based on lessons learned, Sabrina felt there was still too much to be done now to think about what was next. “I blame bloody social media,” she said as she explained today’s crisis. “How can we keep up with changing customer demand when every new social-media video glamorizes the DIY gastro addiction?”
“And then there’s the remodeling,” Joel added.
Sabrina sighed audibly. “I thought when the pandemic hit and everyone went into lockdown, we’d have no demand whatsoever. And while our commercial appliance numbers have taken a hit, we can’t manufacture enough to meet demand for every residential kitchen renovation going on around the world. Sales and marketing are texting and emailing constantly with the number of consumers we’re disappointing — or losing — because we aren’t meeting their expectations for personalization, prediction or delivery.”
FooderFodder’s leaders will want to create a structure and a culture that is less top-down and more collaborative.
3. Short-term thinking dims the CHRO’s hope for an agile workforce
Knee-jerk reactions to disruption early make it hard for the organization to pivot quickly to meet demand later.
Maha was thinking with some frustration how a lack of end-to-end visibility across customer segmentation, data and supply chain had created one workforce headache after another for her.
At the onset of the pandemic, production ground to a halt, first because the company couldn’t get the raw materials or parts it needed from third-party suppliers, and then — more importantly in her mind — because whole shifts of workers began to fall ill or refused to come to work because the company couldn’t secure enough personal protective equipment. The same was true for FooderFodder’s distribution centers, resulting in not enough labor to get products they were able to finish out the door.
The COO and CFO responded by immediately laying off 50% of production, logistics and fulfilment workers to mitigate the anticipated negative financial impact. Two months later, Maha’s HR team couldn’t hire people fast enough to keep up with demand from either its retail customers or its own new (and still glitchy) direct-to-consumer ecommerce platform. Twelve months later, they were still playing catch-up.
And although the COO had just warned a new round of layoffs may be coming once the new robotics, shop floor and warehouse automation systems were installed, Maha didn’t hold her breath. At the rate IT and operations were going, it would be years before FooderFodder’s plants and distribution centers were automated to a point where she’d be needing to sort out layoff notices again — at which point she hoped she would have a reskilling/upskilling strategy in place to transform the workers they had into the workers they would need for the future.
Meanwhile, Charles Kumbo, FooderFodder’s CEO, indicated with the vaccine rollouts going so well, he wanted office personnel back in its downtown towers ASAP. Maha suggested a hybrid work model may be the way to go as not everyone was going to feel comfortable returning to an office environment, but Charles wasn’t terribly interested in her opinion on the matter. “Get ‘er done,” was all he said.
Keeping our focus on what humans need to perform at their best, will help you define the organizational changes to achieve resilience across the enterprise.
4. Relationships strengthened during the pandemic begin to fray
A lack of individual resilience creates a disconnect among C-suite executives as they try to build resilience across the enterprise
Sabrina was explaining her supply chain issues when Joel abruptly cut her off: “Sab, I hear what you’re saying, but we’re here to talk about the next, not the now.”
Sabrina hated being called Sab. “With all due respect, Joe,” Sabrina replied pointedly, “We could have had a conversation about the next, if we had anticipated the risks we are dealing with right now — or had some kind of business continuity or disaster recovery plan to help address things earlier in the pandemic. But until we have the ‘now’ risks sorted, I don’t see how we can move on to ‘the next’.”
“And,” Joel replied tartly, “if you had moved faster toward a networked supply chain rather than sticking with linear silos, as my last risk assessment suggested, you might have been able to get a better handle on your supply chain issues.”
“You know I tried,” Sabrina said hotly, “but I couldn’t get nearly enough budget or IT resources to get it off the ground, so we’re stuck with our disconnected, on-premise systems, versus the investment in cloud-enabled solutions I’d been lobbying for. Speaking of which, why is our esteemed CIO not on this call?”
“You know,” Maha said, “I keep hearing the two of you talk about this risk model or that scenario plan or a digital transformation plan that can’t get off the ground, but at no point have I heard you once mention the people — our people.”
“I’m not really sure where you’re going with this, Maha …” Sabrina started to say.
“… Or what our people have to do with resilience,” Joel added. “We’re talking about, or, at least, we’re supposed to be talking about, organizational resilience so that we can get ahead of the risks.”
“But don’t you think organizational resilience needs to start with individual resilience? With the health and wellbeing of our people?” Maha asked.
“Well, of course we want to make sure our people are healthy and safe,” Joel said offhandedly. “But the board has demanded that we get out of a crisis mindset and prioritize enterprise resilience…emphasis on the enterprise part. Charles has tasked me with putting an enterprise resilience plan together and needs to report to the board on our progress at the end of the month. That’s where our attention needs to be.”
“That’s where your attention needs to be, Joel,” Sabrina said. “I’m going to be busy putting out fires until I get some budget to move our supply chain model into the twenty-first century.”
And with that, Sabrina left the video call.
“So, see you next week?” Joel asked Maha.
“See you next week,” Maha replied.
Question: How can FooderFodder reverse the crisis management lifecycle so that it can prepare for change instead of reacting to it?
5. Reversing FooderFodder’s crisis-management lifestyle
Three EY leaders focused on people, supply chain and risk provide perspectives on challenges FooderFodder executives face.
Stephen Koss, EY Asia-Pacific Workforce Advisory Leader
I fundamentally believe that to achieve enterprise resilience organizations first need to talk about individual resilience. Both Joel and Sabrina appear exhausted and, in that state, they can never perform at their best. Meanwhile, Maha is frustrated that FooderFodder’s people seem to be an afterthought for much of the C-suite. Physical and mental health are foundational elements for resilience.
Maha needs to focus on designing around what people need to perform at their best and work outward to design the organizational changes to support it. These organizational elements can be around balancing work capacity across teams, whether they are equipped with the right skills and capabilities to perform in their role, the right attitudes and motivations, performance frameworks, and work culture and environment, which is set through the leadership behaviors. Keeping their focus on what humans need to perform at their best will provide FooderFodder with the organizational changes to achieve resilience across the enterprise.
My recommendations for FooderFodder are:
Regenia Sanders, EY US-Central Consulting Supply Chain and Operations Leader
Supply chain reinvention is a process, not a project. In a time of continuous disruption, like the one Sabrina de Haan is experiencing, the only path to meeting FooderFodder’s goals is to continue to evolve toward a responsive supply chain.
My recommendations for Sabrina would be:
Kristina Albang, EY Global Enterprise Resilience Leader
If FooderFodder’s CRO can look beyond managing risk to building stakeholder trust and reframing risks into opportunities, the company has an opportunity to reposition for long-term value creation. But first, the CRO needs to get the C-suite out of playing damage control and into reimaging the business so that the company has the agility to thrive no matter the situation.
My recommendations for Sabrina would be:
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Summary
Organizations looking to create a resilient workforce, enterprise and ecosystem requires a coordinated team effort among risk, operations and supply chain, and human resources. By putting humans at the center of any resilience initiative, advancing technology at speed, and innovating at scale, organizations can pivot from surviving to thriving.
