Organizational
Resilience: Key Factors to
overcome
and survive a Business Crisis.
Learnings
from a family owned business in Crisis.
Támara
Piedrahíta Seifert
Main
field of study - Leadership and Organization
Degree
of Master of Arts (60 credits) with a Major in Leadership and Organization
Master Thesis with focus on Leadership and Organization for Sustainability (OL646E),
15
credits
Autom
2017
Supervisor:
Hope Witmer, Ph.D
Acknowledgements
This thesis would not have been possible without the unconditional support of my family, Susi, Evaristo, Palma and Macarena, and my swedish family, Luz, Markus, Victoria and Isabella.
I would like to give thanks to Malmö University for accepting me as a student in its Master program: Leadership for Sustainability. It has been challenging and extremely rewarding.
One year has passed and this programme provided my academic development with immensely valuable knowledge. Thank you to all professors who guided me through this process, specially to Hope Witmer who acted as a mentor and guided this study as an advisor.
I would also like to thank Susi Panadería and all interviewees who participated; without their openness and collaboration, this research would not exist.
Finally I would like to thank Ken Townsend, Grace Uribe and Sara Lee for their great and valuable comments during the whole research process.
Abstract
BACKGROUND: Organizations are not prepared for crisis and are vulnerable to disruptive changes. SMEs, and organizations in general, are key elements of our society and need to learn how to be resilient, in order to be sustainable. A case study was used to explore key organizational resilience factors to overcome a business crisis.
OBJECTIVE: Explore through the theoretical lense of organizational resilience, how the studied SME was lead and organized during crisis towards a sustainable business outcome. With the aim to present learnings and recommendations for organizational resilience and sustainability.
THE CASE: Business crisis, generated by a fire, consumed 90% of the production plant of an SME (Small and Medium-sized Enterprise) in Colombia. This SME (Susi Bakery) managed to recover completely from the crisis in 7 months. Different perspectives of the stakeholders across the bakery’s network were analyzed to understand the strategy of this SME, to overcome the crisis and be resilient.
METHODS: Single case-exploratory case study, with in-depth semi-structured interviews to different stakeholders across the Bakery’s network. A theoretical framework in organizational resilience was built and used to answer the research questions: What are the factors that make the analyzed SME (Susi Bakery) a resilient organization? What moved key stakeholders towards engaging the recovery of the business crisis? The analysis of the collected data is based on phenomenography, since stakeholders present different subjective perceptions. THEORETICAL CONTRIBUTION: Organizational resilience’ theory explored through the case of an SME in Colombia.
CONCLUSIONS: Resilience strengthens the capabilities to adapt and see disruptive changes as opportunities. Organizations can learn to be resilient through the development of resilient business models' and their enabling factors. Currently, 11 enabling factors for organizational resilience can be found in resilient business models theory: Adaptability and innovation, Motivation, Diversity, Collective efficacy, Effective communication, Loosening of control, Sustained relationships, Minimize layoffs, Financial slack, Competence and Acceptance. 3 Additional enabling factors were found in this case: Leadership, Reciprocity and Reputation. There is a research gap regarding the relations and causalities of the resilient enabling factors, and the relationship between organizational resilience and business crisis management.
Index
Acknowledgements 2 Abstract 4 Index 5 1. Introduction 8 1.1 Context 8Figure 1: Line of thought 9
1.1.1 Organizations within sustainable development 9
1.1.2 Resilient organizations towards sustainable development 10
1.1.3 Resilient SMEs 10
1.2 Complementary concepts 10
1.2.1 Sustainable development 10
1.2.2 Triple bottom line 10
1.2.3 Crisis 10
1.2.4 Organizational resilience 11
1.2.5 SME 11
1.3 Susi Bakery, one SME that overcame business crisis 11 1.3.1 Small family owned business, Susi Panadería 11
Figure 2: Organizational structure 12
1.3.2 The crisis 12
Picture 1: Susi Bakery, before and after. Source: www. facebook.com/susipanaderia 14
1.4 Motivation 14
1.5 Purpose 14
1.6 Research questions 15
2. Theoretical framework 16
2.1 Organizational resilience 16
Figure 3: Organizational resilience research 17
2.2 Theoretical focus: resilient business models 18
Figure 4: Supply chain 19
2.3 Eleven enabling factors in resilient business models theory 20
1. Adaptability and innovation 20
2. Diversity 21
3. Effective communication 21
4. Loosening of control 21
5. Sustained relationships 21 6. Minimize layoffs 21 7. Financial slack 22 8. Collective efficacy 22 9. Competence 23 10. Motivation 23
11. Acceptance 23
Table 1: Enabling factors 24
3. Methodology 25
3.1 Research approach and inference 25
3.1.1 Single case study 25
3.1.2 Exploratory approach 26
3.1.3 Inductive process 26
Figure 5: Inductive process 27
3.2 Epistemology and Ontology 27
3.3 Research design 28
3.4 Role of the researcher 28
3.5 Limitations 28
3.6 Ethics 29
4. Methods 30
4.1 Data Collection 30
4.1.1 Selection process 31
Figure 6: Relationship-Stakeholder model 32
4.2 Data analysis 33
4.2.1 Building a theoretical frame 33
4.2.2 Data analysis 34
4.3 Validity and reliability 35
5. Findings 36
5.1 Findings using the eleven enabling factors found in resilient business models theory 36
5.1.1. Adaptability and innovation 36
5.1.2. Motivation 37
5.1.3. Diversity 37
5.1.4. Collective efficacy 38
5.1.5. Effective communication 39
5.1.6. Loosening of control 40
5.1.7. Sustained relationships 40
5.1.8. Minimize layoffs 42
5.1.9. Financial slack 42
5.1.10. Competence 43
5.1.11. Acceptance 43
5.2 Additional resilient enabling factors found in common and recurrent themes within the data. 44
Leadership 44
Reciprocity 44
Reputation 44
6. Discussion and conclusions 45
References 50
Appendix 54
1 Interviews 54
Semi-structured interview: 54
2. Susi Bakery, about the company 54
1.
Introduction
Our society has developed through organizations and these are the basic structure of our society, providing us the capacity to develop (Tolbert & Hall, 2009). Understanding that organizations are key for societal change and development, reinforces the necessity of moving organizations towards sustainability in order to shift towards societal sustainable development (Gunasekaran & Griffin, 2011).
More specifically, organizations like small and medium size enterprises (SMEs) “are the backbone of the economy (...) and continue to dominate, as the core of economic growth” (Gunasekaran & Griffin, 2011:5489-5490). However, SMEs are not prepared for unexpected events (Gunasekaran & Griffin, 2011; Spillan & Hough, 2003) and rapid changes, which represent the reality of our current society (Sutcliffe & Vogus, 2003) risking their survival. Based on this issue, this study explores a successful case, of overcoming a business crisis, through the lens of organizational resilience theory. Arguing that, for an SME to be sustainable and last in time, it needs to be resilient to overcome a business crisis.
This document is structured as follows: first, this document presents the context, together with complementary concepts for this study in order to provide a common ground for the reader and the study. Then, it describes the case of Susi Bakery, that will be analyzed later in this study. This section also presents the motivation, the purpose and the research questions for doing this study.
Second, Section 2 presents the theoretical framework used to analyze this case. This section guides the reader through the available theory that was organized and put together to analyze the case, and produce the conclusions and recommendations derived from this research. Third, Sections 3 and 4 present the methodology and methods used to build the research and collect the data, used to explore and analyze the case.
Fourth, Section 5 introduces the findings and analysis of the collected data through the theoretical lens of organizational resilience presented in section 2.
Finally, in section 6 the discussion for further research and conclusions for practical recommendations are presented. In the last sections of this document, the reader can find the references that support this study, together with the appendix that provides additional information about the case and this study.
1.1
Context
This section explains the context of this research presenting the line of thought followed to develop this study. It starts by presenting in a simple manner the concept of sustainability. Then migrates to the importance of organizations for a sustainable societal development and ends presenting the importance of learning about how organizations can be resilient, and how the chosen case can help add to resilient business models’ theory (See the line of thought in a graphical presentation below).
Figure 1: Line of thought
1.1.1 Organizations within sustainable development
Sustainability is a contemporary topic and today is highly debated. Together with the establishment of the Sustainable Development Goals 2017 (SDGs 17), the global international associations are uniting efforts towards the shift of our development to a sustainable one. Sustainability is often understood as “environmentally friendly” practices, but the common definition leaves behind key aspects of this complex concept. Many organizations and corporations communicate their efforts related to Corporate Social Responsibility (CSR) and usually these are focused on social and environmental responsibility (Werther & Chandler, 2011). However, during this research, sustainability is understood by integrating the definition of sustainable development presented by Werther and Chandler (2011) and the triple bottom line model (Elkington, 2004). First, sustainable development is defined as “ development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland, 1987, p. 41). Second, sustainability, from a triple bottom line model perspective, has three interconnected and interdependent topics: social, environmental and economic responsibility (Elkington, 2004). In other words, for an organization to be sustainable, theory suggests a balance of this three topics and acting responsible regarding the impacts of their actions (Werther & Chandler, 2011).
As mentioned before, sustainability is a complex and broad concept; this study will focus on sustainability from an organizational perspective. Since organizations are the basic structure of our society and provide us the capacity to develop (Tolbert & Hall, 2009), it is necessary to build organizations that are sustainable, in order to reach a sustainable development.
1.1.2 Resilient organizations towards sustainable development
In today's reality characterized by rapid change, “organizations face increasingly complex and incomprehensible environments” (Sutcliffe & Vogus, 2003:99)”. Therefore, they need to learn how to cope with unanticipated changes (Williams et al., 2017; and Sutcliffe & Vogus, 2003) in order to be sustainable over time. Drastic changes can compromise the survival of the organization by provoking business crisis. Organizations can adapt to the environment and have a better chance to overcome a business crisis, by developing characteristics of organizational resilience (Williams et al., 2017; Linnenluecke, 2017; Gittell et al., 2006; Sutcliffe & Vogus, 2003; and Hamel & Valikangas, 2003).
Organizational resilience is defined as “the maintenance of positive adjustment under challenging conditions” (Sutcliffe & Vogus, 2003:95), and the capacity to bounce back and recover from adversity (Linnenluecke, 2017). This is how organizational resilience can guide the exploration of how organizations are able to respond and recover fast from adversity (Linnenluecke, 2017; Sutcliffe & Vogus, 2003).
1.1.3 Resilient SMEs
As mentioned before, SMEs play a relevant role in the economy and societal development. But, in general, they are not well prepared for dealing with unexpected events (Gunasekaran & Griffin, 2011; Spillan & Hough, 2003). This shows that there is a need for learning ways of how SMEs can be prepared to overcome unexpected change, and with it be sustainable over time.
With this in mind, this study focuses on the case of one SME that successfully overcame a business crisis reaching a sustainable outcome of financial equilibrium. The section 1.3 presents the Susi Bakery case that will we analyzed throughout this study.
1.2
Complementary concepts
This section presents concepts that are complementary and useful to understand this study. 1.2.1 Sustainable development
Sustainable development is defined as the “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland, 1987, p. 41).
1.2.2 Triple bottom line
The triple bottom line model (TBL), has three interconnected and interdependent topics: social, environmental and economic responsibility (Elkington, 2004). It represents in a visual and simple way the definition of sustainability; in the sense that shows sustainable development as a balance between the economy, the people and the environment.
1.2.3 Crisis
The concept of crisis is defined in this study as a synonym of catastrophe, defined as “an event causing great and usually sudden damage or suffering. A large-scale disaster” (Hagen et al., 2013:1063).
1.2.4 Organizational resilience
Resilience is the positive adaptability of a system and capacity to overcome quickly the negative effects of change and risk exposure or to resist damage (Hagen et al., 2013; Wang et al., 2015), while retaining the essence of the system’s structure, function and identity; while becoming stronger and more resourceful (Walker et al., 2004; Vogus & Sutcliffe, 2007). In other words, resilience refers to the capacity of a system to bounce back to equilibrium after being displaced (Hagen et al., 2013), responding with speed and determination (Bell, 2002). Sutcliffe and Vogus (2003) suggest that resilience are processes and dynamics that lead to the creation or retention of resources in a “flexible, storable, convertible, and malleable” way, as a result resilient organizations can successfully learn and cope with unexpected situations and perceive challenges as opportunities (Vogus & Sutcliffe, 2007). (This concept can be found in a more detailed description in section 2).
1.2.5 SME
Small and Medium size Enterprises (SMEs), are companies that employ between 50–200 people (Gunasekaran & Griffin, 2011) and have assets valued between 501-5000 minimum 1 Colombian wages (MinCit, May 2017). SMEs “are the backbone of economy in many countries (...) and continue to dominate as the core of economic growth and therefore, their resilience is critical to be competitive in the global market of the twenty-first century” (Gunasekaran & Griffin, 2011:5489-5490).
1.3
Susi Bakery, one SME that overcame business crisis
1.3.1 Small family owned business, Susi PanaderíaSusi Panadería, which translates to Susi Bakery, is an SME family business, in the food
industry located in Medellín, Colombia. This bakery was founded thirty years ago by a German entrepreneur, born in Colombia. The owner founded the bakery after returning to Colombia, having completed her studies in pastry and bakery in Germany. Through the years, the company grew and with it, the complexity of the administrative and managerial processes. This is when, the husband of the owner gradually started to get involved in the development of the bakery, to later join the organization as the CEO (joined in 2002) (this information was gathered throughout the interviews and the company's online resources).
The bakery sells its products at a national level through the main supermarket chains, but the only production plant is located in the city of Medellín. It also has direct contact with its customers through their shops; open in two different commercial malls. The company has had a transformation, regarding the focus and strategy of the products, starting with artisan bread and cakes to packaged healthy snacks and premixes for restaurants and hotels. Their
commercial promise is selling products free of conservatives and chemicals, “products that taste delicious, and are natural and good for you” (Susi Bakery, 2015).
The bakery has been given several recognitions for the quality of its products, and more recently was given an innovation prize for the best innovation concept in the city (see Appendix 2).
Up to June 2016, the company employed 45 persons and had total assets valued between 501-5000 minimum Colombian wages (MinCit, May 2017), which qualifies it as an SME (as2 stated by the Colombian ministry of commerce and industry ). 3
The organizational structure of the company (June 2016) can be observed in the figure below (Figure 2).
Figure 2: Organizational structure
1.3.2 The crisis
On August the 3rd 2016, at 2am the owner and CEO were called to be informed that the production warehouse of the bakery was burning. The firemen’ report was that 90% of the warehouse, together with machinery and office furniture had burned and was not able to be recovered.
The owner and CEO, together with the management team, contacted the employees and informed them about the fire. That same morning at 7am, most of the employees were outside the (now burned) building confused and uncertain of what would happen next. The CEO informed the employees that they were welcome to work, once they would know how they would manage the situation, and also invited them to make a decision (regarding staying or leaving) based on their priorities.
2 Salario Mínimo Mensual Legal Vigente (SMMLV).
3 Colombian ministry of commerce and industry (MinCit): http://www.mipymes.gov.co/publicaciones/2761/definicion_tamano_empresarial_micro_pequena_medi ana_o_grande
Different meetings started to occur, during the next days, with different stakeholders of the bakery (insurance, some suppliers, employees, service providers), and were focused on deciding what to do next and how to handle the crisis.
The three first steps that were taken after the fire, were on insurance management (acquaintances with knowledge about insurance were contacted), communication strategy (direct, through phone and mail, with main customers and clients, and through social media to the community of consumers), and production infrastructure (1. Reconstruction of the warehouse, 2. Search for suitable location to produce while reconstructing).
Unexpected external persons, friends and family started contacting the bakery and offering help in different forms of resources. Stakeholders such as suppliers, customers and consumers showed support in different ways: some service providers stopped charging for their services during the crisis, suppliers expanded the debt quota for the bakery, clients improved and renegotiated payment agreements, external persons across the country donated all types of resources (desks, computers, money, office furniture, etc), and consumers posted pictures in social media with the products of the bakery together with messages of hope and appreciation. (Appendix 2; Table 2 provides links with additional information about the case).
7 Months later, on March 3rd. 2017, Susi Bakery was celebrating the opening of the rebuilt production warehouse and the end of the business crisis (see picture below and Appendix 2, Table 2). This case is considered a success story because, only 10 days after the bakery experienced the fire, it was producing; even without having their own warehouse available to produce. It did not get out of business after losing 90% of its production infrastructure, and 1 year after the fire, it was selling through new commercial channels and having night shifts (given the big size of the orders).
The picture below shows the burned warehouse in 2016 and the reconstructed warehouse in 2017.
Picture 1: Susi Bakery, before and after. Source: www. facebook.com/susipanaderia
1.4
Motivation
After experiencing in an active way the business crisis and the process of recovery of Susi Bakery, and being able to observe how stakeholders got involved in the process of overcoming the crisis, and repeatedly hearing people commenting that it was a special case, the researcher was curious to explore and understand through a leadership for sustainability perspective, the factors that made it possible for the Bakery to overcome this crisis and have a better understanding of why stakeholders wanted to help.
1.5
Purpose
To explore the Susi Bakery case, through the lens of organizational resilience, in order to understand the characteristics that allowed this SME to achieve a resilient outcome towards a sustainable business. Consequently, provide practical insights and contribute to existing theory.
1.6
Research questions
- What are the factors that make the analyzed SME (Susi Bakery) a resilient organization? - What moved key stakeholders towards engaging the recovery of the business crisis?
2.
Theoretical framework
2.1
Organizational resilience
In order to understand the concept of organizational resilience, it is necessary to trace back the development of this concept within business management research, together with the different research lines that have developed through time.
Organizational resilience has developed as a concept in business and management research since Staw et al. (1981) and Meyer (1982) started analyzing how organizations could respond to external unexpected threats, that would trigger processes that would represent the survival or not of the organization (Linnenluecke, 2017).
This approach to organizational resilience, as a response to external threats, remained unexplored up until after the 9/11 attack, which unfolded new interest on analyzing the effects of external threats (see figure 3 below).
After Staw et al. (1981) and Meyer´s (1982) first approach to organizational resilience, technological development within organizational processes represented an increase in complexity, that often led to business crisis. This context promoted research in organizational resilience focused on business crisis generated by internal mistakes or failures (Linnenluecke, 2017). Within this research focus, the line of internal organizational reliability developed, together with two main theories: High Reliability Organizing and Normal Accident Theory. These theories analyze how the accumulation of various operational mistakes can escalate into high consequence events and business crisis (Linnenluecke, 2017).
Organizational resilience research is highly context-dependent and it has developed depending on the current context (Linnenluecke, 2017). Researchers agree on that the theories and perspectives have been developed in a fragmented way, presenting various definitions and approaches to theory (Williams et al., 2017; and Linnenluecke, 2017). With this in mind, it is clear that the 9/11 attack brought with it renewed interest in analyzing the effects of external unexpected threats for business crisis, adding three new lines of thought to the existing organizational resilience theory.
In the figure below, one can observe the development of organizational resilience research represented in a simple figure. This figure shows the focus of research though time, within organizational theory (top of the figure), and it presents in a visual manner, the meaning of business crisis originated by internal or external factors (represented by the thinner arrows coming from inside the organization as internal factors, and the thicker arrow as external threats affecting the organization). As can be noticed, one key event represented a total shift-back on the research focus to external threats, the 9/11 attack (see figure 3 below).
Figure 3: Organizational resilience research
Three main lines of thought, within organizational resilience theory, developed after 9/11: (1) employee strengths, (2) adaptability of business models and (3) resilient supply chain design (Linnenluecke, 2017).
These lines of research focus on (1) the importance of psychological capital for positive organizational behavior (consisting of hope, efficacy, optimism and resilience), together with three resilient characteristics (acceptance of reality, propensity to make a meaning of an adverse situation and the ability to “make do” with whatever is in hand) in order to bounce back from setbacks (Linnenluecke, 2017).
(2) The need for organizations to be adaptable in order to cope with disruptive changes, and the role of enabling conditions (such as broader information processing, loosening of control and utilization of slack) to overcome challenging situations (Linnenluecke, 2017).
(3) Design principles, as elements of resilience, such as flexibility, adaptability, redundancy, diversification, access to timely information, improved collaboration, speed and agility. Also focused on the findings that a company can respond to disruptions through flexibility and redundancy (Linnenluecke, 2017). And highlights the collateral benefits that resilience generates and the ability to turn disruptions into opportunities (Linnenluecke, 2017).
As mentioned before, resilience in organizational theory has evolved depending on the contextual circumstances, and therefore it has different definitions depending on the approach (Linnenluecke, 2017). It has been understood as a fixed set of organizational characteristics or traits (either the organization is or is not resilient), as a dynamic process (a set of adaptive processes and learned skills that can be acquired and activated to avoid and overcome crisis) and as an outcome (a state that is or not achieved after a crisis) (Hamel & Valikangas, 2003; Sutcliffe & Vogus, 2003).
For this study, resilience is understood as a set of characteristics that an organization builds throughout its operational life, before experiencing a disruptive change, that can be tested when experiencing a crisis. It is also a process that can be followed to overcome a crisis. Finally, organizational resilience it is also understood as a result: When achieving financial equilibrium after experiencing a business crisis, an organization can be labeled as resilient. It is important to note that after overcoming a business crisis and being a resilient organization, there is no insurance for that organization to survive when facing a different business crisis. Nevertheless, the organization is more resilient than before, by learning from previous crisis (Sutcliffe & Vogus, 2003).
2.2
Theoretical focus: resilient business models
As can be noticed from the previous subsection (introduction to organizational resilience), organizational resilience is a broad concept with different focuses that have developed different theories and definitions; there is a generalized agreement in the research community, that organizational resilience research still needs to work on integrating its different concepts and definitions (Linnenluecke, 2017; Sutcliffe & Vogus 2003). With this in mind, it can be understood that in order to have a clear theoretical focus for the analysis of this case, one of the previous presented research lines was chosen as the main theoretical lens to analyze the Susi Bakery case. The fact that the theoretical lens focuses on one line of research, does not mean that the other four research lines within organizational resilience will be ignored, these will be taken into consideration in the discussion section.
Given the nature of the Susi Bakery case of an external threat risking the survival of the organization, the theoretical area of research in which this thesis focuses, is within the after 9/11 research lines. As explained in the section 1.3, the business crisis of Susi Bakery was originated by an external threat (fire), which leaves the focus on internal threats outside our theoretical frame.
The fire affected directly the Bakery’s production area, with of course consequences for the whole system, but did not have a direct impact on the employees (this can be observed in Figure 4). An example of business crisis that affected the employees directly is the mining accident in Chile (2010) where the miners (employees) experienced being stuck in the mine because the infrastructure of the mine was threatened . This is why, the line of research on 4 employee resilience is not the main focus of this theoretical framework.
In the same line of thought, the fire that provoked the business crisis of the bakery did not affect directly the other structures in the supply chain; contrary to an external threat where a
4 Chile mining accident 2010, CNN:
whole area or supply chain might be affected. This is why, the line of research about resilient supply chains is also not the focus of this theoretical framework.
On the contrary, the line of research about resilient business models provides an accurate approach to explore the case. When experiencing the business crisis, the bakery used as a strategy the implementation of drastic changes in its business model in order to overcome the crisis (see a graphic description below in Figure 4). This will be analyzed in more detail in the next sections of this document.
Figure 4: Supply chain
Resilientbusinessmodels
The main focus of the theoretical framework for this thesis, is within the line of research on adaptability of business models, in other words, resilient business models. "Organizations are better able to cope with a crisis when (...) they have business models that fit the needs of the existing competitive environment" (Gittell et al., 2006:301).
This line of research focuses on “understanding how companies adjust, adapt and reinvent their business models in an ever-changing environment” (Linnenluecke, 2017:12).
Within this line of research, there are several authors that have had specially influential publications. The main influential studies within resilient business models are the ones from Meyer (1982), Sutcliffe and Vogus (2003), Hamel and Valikangas (2003), and Gittell et al. (2006) (Linnenluecke, 2017). Organizational resilience is defined, within resilient business models and with reference to Sutcliffe and Vogus (2003), Weick et al. (1999) and Wildavsky (1988) as (a) “the maintenance of positive adjustment under challenging conditions” (Sutcliffe and Vogus, 2003:P. 95), (b) the ability to bounce back from untoward events, and (c) the capacity to maintain desirable functions and outcomes in the midst of strain (Linnenluecke, 2017).
These influential publications present the theory that in order to be a resilient organization, enabling factors should be present (Sutcliffe & Vogus, 2003). Through the different studies, the authors present organizational resilience as a set of enabling factors that characterize resilient organizations from non-resilient organizations (Sutcliffe & Vogus, 2003).
Enabling factors can be understood as characteristics that allow an organization to face disruptive challenges and reach resilient outcomes (Sutcliffe & Vogus, 2003; Hamel & Valikangas, 2003; Gittell et al., 2006; Linnenluecke, 2017).
The main propositions, conclusions and theories from the above mentioned influential publications were used to build the theoretical framework for analyzing the Susi Bakery case. The enabling factors discussed in the above mentioned publications, are defined below and can be observed in Table 1. It is important to notice that the enabling factors in section 2.3 were found in theory after carefully exploring the most influential publications within resilient business models theory (Table 1 presents the four publications that were intensively explored to build the theoretical frame, together with the enabling factors found in each study), and were then put together by the author, in order to build a theoretical frame that would provide enough theory to explore and analyse the case (more detailed information about the process of building the theoretical framework can be found in section 4.2).
2.3
Eleven enabling factors in resilient business models theory
This section presents and explains the eleven resilient enabling factors found in resilient business models theory. It is important to note that these enabling factors can be defined and understood differently in other disciplines or research areas; this is why this section explains each factor, understood under the umbrella of resilient business models theory.
As mentioned before, it is relevant to notice that these resilient enabling factors are the result of intensively exploring the most influential publications within resilient business models theory (presented in the study made by Linnenluecke, 2017). These publications do not specifically focus on presenting a holistic picture of the resilient enabling factors within resilient business models, rather each of them focuses on specific areas and development of resilient business models theory.
Nevertheless, these studies present the main findings in theory related to resilient business models and provided enough information for building a useful theoretical frame to analyze the Susi Bakery case. The author of this thesis suggests for further research, building a holistic and integrated theory for resilient business models.
1. Adaptability and innovation
These two enabling factors are presented through the different studies with different names, but having the same meaning. After exploring the different definitions and approaches of the studies, it was concluded that the enabling factors pointed at the same characteristics, this is why adaptability and innovation are defined together, but keeping both names as one enabling factor.
A resilient organization has a dynamic, constant and continuous capacity to positively adapt to current circumstances and to recombine and place resources in new ways to a “broad range of turbulence" (Linnenluecke, 2017:12, referencing to Hamel & Valikangas, 2003). This capacity develops over time through flexible and convertible processes (such as product innovation, strategic decision making and creating alliances with partner firms) that allows organizations to learn how to cope positively with the unexpected (Sutcliffe & Vogus, 2003; Hamel & Valikangas, 2003; Gittell et al., 2006).
2. Diversity
Diversity in groups, understood as people that are experimentally broad, come from diverse sets of knowledge, experiences and backgrounds, promotes resilience through developing capabilities to innovate (Hamel & Valikangas, 2003), by being better at combining existing resources into novel combinations, key to adapt to new unexpected situations and deal with complexity; in the sense that members are able to grasp and see variations in their environment from their analytical perspective and expertise. The group's capacity to deal with complexity is influenced by diversity in group members. (Sutcliffe & Vogus, 2003; Hamel & Valikangas, 2003). As evolutionary and systems theory argues, "the larger the variety of actions available to a system, the larger the variety of perturbations it is able to accommodate" (Hamel & Valikangas 2003:11).
3. Effective communication
Effective communication processes is key for respectful interaction and are necessary to accelerate, mediate and enrich exchange of information, and capabilities of broad information processing in diverse groups (Sutcliffe & Vogus, 2003).
4. Loosening of control
Permits individuals with specific knowledge, be given decision making authority (Sutcliffe & Vogus, 2003) and decentralized decision making (Hamel & Valikangas 2003), necessary for promoting fast and innovative action (Hamel & Valikangas 2003) in moments of high uncertainty.
5. Sustained relationships
Sustained relationships are positive relationships in the organization that facilitate the transfer of knowledge, enable cohesive responses to overcome disruptive changes in innovative ways, develop commitment and productivity, and alleviate the achievement of coordinated action between organizational members (Gittel et al., 2006). Sustained relationships can be promoted and influenced by managers, who can act as role models, and who provide environments where group members feel they can exercise behaviors of creativity and judgement (Sutcliffe & Vogus, 2003).
Sustained relationships are challenged during moments of crisis, as can be noticed below (enabling factor #6). Sustained relationships are tightly related to avoiding layoffs during crisis. In moments of crisis, managers influence sustained relationships by avoiding layoffs (Gittel et al., 2006). As mentioned before, for an organization to recover from adversity, human skills are critical. This combined with compromised employees, who understand that transformational projects lead to transformational opportunities for personal growth, organizations to experience transformational opportunities, during crisis provided by compromised employees (Hamel & Valikangas, 2003).
6. Minimize layoffs
A current reaction of organizations that go through crisis is to fire people in order to cut costs (Gittell et al., 2006). This response might alleviate costs in the short term, but as Gittell et al. (2006) found in their study about 9/11 airline crisis, layoffs risk damaging the relationships
needed for a long term recovery. "By avoiding layoffs, these organizations maintain or even strengthen human relationships, creating coping resources that enable organizational members to respond cohesively to the crisis in innovative ways" (Gittell et al., 2006:324)
However, it is not sufficient to want to avoid layoffs during crisis, resilient organizations have resilient business models that are able to financially sustain short term losses and avoid personnel reductions.
This keeps and strengthens positive employee relationships (sustained relationships) during moments of crisis (Gittell et al., 2006). Providing "employee security is essential for achieving sustained innovation and productivity that benefit both employees and stockholders" (Gittell et al., 2006:305, referencing Kochan & Osterman, 1994). Additionally, there is evidence that "most organizations experience deteriorating profitability, product and service quality, innovation, and organizational climate after downsizing" (Gittell et al., 2006:304, referencing to Cameron, 1998).
7. Financial slack
From another perspective, financial slack, as presented by Gittell et al. (2006) referencing Meyer (1982) "slack resources work as organizational shock absorbers” (Gittell et al., 2006:304) smoothing the impact of unexpected disruptions. "Retaining cash to cover immediate financial pressures and maintaining low debt levels, thereby allowing the firm to finance longer term expenses, are key elements in preserving relational reserves in a firm" (Gittell et al., 2006:319).
Meyer (1982) and Gittell et al. (2006), conclude that accumulating resources (including financial and human resources) builds resilience by helping absorb the impacts of disruptive changes and by helping preserve relations over time (Linnenluecke, 2017). A key characteristic of resilient business models is the capacity to accumulate financial reserves (financial slack). Having financial slack and low debt levels allows flexibility when trying new business strategies, experiments and innovation, and develop competence (another key enabling factor, read below) (Hamel & Valikangas, 2003; Vogus & Sutcliffe, 2003; Gittell et al., 2006). Additionally, it helps preserve social relations during critical times (Gittell et al., 2006), for example as explained in by Gittell et al. (2006), not having enough resources to sustain and provide security to employees results in layoffs, affecting the social capital of the organization and its capacity to recover from crisis. Having low levels of debt allow the organization to acquire new debt to get through periods of high uncertainty (Gittell et al., 2006).
8. Collective efficacy
Collective efficacy, also known as "performance under adversity" (Vogus & Sutcliffe, 2003:102). It is an enabling factor for organizational resilience as it promotes "a group's shared belief in their conjoint capabilities to organize and execute the actions required to overcome adversity" (Vogus & Sutcliffe, 2003:102, referencing Bandura, 1998; and Wood & Bandura, 1989). "Collective efficacy materializes from individual's perceptions of the group's functioning" (Vogus & Sutcliffe, 2003:102-103) and is the result of "interactive and coordinative dynamics among team members" (Vogus & Sutcliffe, 2003:103, referencing Bandura, 1998). Collective efficacy is an enabling factor, because it influences the amount of effort that each group member puts into the overcoming the crisis (Vogus & Sutcliffe, 2003) and for "how long the group will persist when collective efforts fail to produce quick results" (Vogus & Sutcliffe, 2003:103). Promoting collective efficacy by "enhancing the ability to
rapidly process feedback and flexibly rearrange or transfer knowledge and resources" leads to resilience (Vogus & Sutcliffe, 2003:104).
9. Competence
Based on past research in organizational resilience, competence is defined as the ability to learn and learn from mistakes. It is suggested that group members who are adaptable and "are oriented toward seeking out challenges and opportunities to learn" (Vogus & Sutcliffe, 2003:101) are more resilient, since they perceive mistakes as "a natural part of competence-building" (Vogus & Sutcliffe, 2003:101), persist through hard times are "more readily to tackle failures" (Vogus & Sutcliffe, 2003:101) and come up with more innovative solutions. As Vogus and Sutcliffe (2003) propose, groups who have competence have the ability to positively adapt and "handle the complexity of dynamic decision environments" (Vogus & Sutcliffe, 2003:101) and be motivated to persevere. Additionally, organizations with competence learn from past experience and are better prepared for later experience (Vogus & Sutcliffe, 2003).
10. Motivation
When individuals experience success and feel that their experiences allow them to grow and build competence and self-efficacy, their motivation system is mobilized. Additionally, when they perceive that they have the capability to act, group members are drawn to better coping with each other (Vogus & Sutcliffe, 2003).
11. Acceptance
Acceptance means to realize and accept the current situation of change or crisis as it is, and take action, rather than denying it. By taking action it is meant to adopt completely new strategies and processes to overcome the disruption. When acceptance is missing, managers deny the situation of crisis, putting on hold the needed work to renewal, increasing the cost for recovering and overcome crisis (Hamel & Valikangas, 2003).
Table 1: Enabling factors Research topic Organizational resilience Focus of research development
External threats Internal threats
Lines of
thought within research topic
Resilient business models Employee resilience
Resilient supply chains
Main authors Meyer 1982 Sutcliffe and Vogus, 2003
Hamel and
Valikangas 2003
Gittell et al. 2006
Enabling factors (main focus per study) -Adaptability -Competence -Financial slack -Adaptability -Diversity -Broader information processing -Effective communication -Loosening of control -Financial slack -Collective efficacy -Innovation -Motivation -Competence -Adaptability -Diversity -Loosening of control -Financial slack -Sustained relationships -Innovation -Acceptance -Adaptability -Financial slack -Sustained relationships -Minimize layoffs Result: Enabling factors found in theory, used to analyze the case
Adaptability and innovation, diversity, effective communication, loosening of control, sustained relationships, minimize layoffs, financial slack, collective efficacy, competence, motivation, acceptance.
*Note: the areas in grey were not further developed in this table, in order for the reader to be able to follow the white boxes, with a line of thought in form of top-down. The left column presents the label of each line of the table.
3.
Methodology
In order to make judgements and conclusions about the empirical facts, a defined methodology was chosen to conduct this research (6 & Bellamy, 2012). Methodology, for this study, is defined as “how to proceed from the findings of empirical research, to make inferences about the truth, or at least the adequacy, of theories” (6 & Bellamy, 2012:1). In this line of thought, this section provides the description of the used methodology and its limitations, together with the ontology and epistemology, and the ethical approach. It is worth noting that, the methodology is complemented with the next section about methods. Section 4 provides a detailed description of the used methods to undertake this study. These two sections (3. Methodology and 4. Methods), are necessary to accomplish the research and analysis of the case (6 & Bellamy, 2012).
3.1
Research approach and inference
This master thesis has an inductive research approach, following an iterative process, and is conducted as an exploratory-single case study. This subsection presents the explanations and arguments that led to use of this methodology for studying this case.
3.1.1 Single case study
The case study methodology was chosen, because is a form of social science research (Yin, 2014) and is the preferred method when (1) the research questions are what questions and the research aims to develop hypothesis and propositions for further research; as can be read in the introduction section of this document, the research questions of this study begin with what, and section 6 presents findings and recommendations for further research. (2) When the researcher has no control over behavioral events; one of the main characteristics of this case is that it happened unexpectedly and the reactions and behaviors of the individuals and organizations involved during the process, were spontaneous and not premeditated. To illustrate, it is not likely that a company would want to provoke a fire leading to business crisis, in order to analyze the behaviors of key stakeholders. Therefore one can conclude that there was no control over the behaviors and actions of the people involved, but these could be observed and described. Finally, (3) the main focus of the conducted study is a contemporary phenomenon; this case took place six months before the research started, therefore can be understood as contemporary (Yin, 2014). Additionally, because of the unusual nature of this case, a single case study provides the advantage to focus in one case and explore in depth the unusual case (Yin, 2014).
The fact that the researcher had the uncommon opportunity to experience the business crisis and have an active role within the organization, provided her with access to the data, and also be able to observe closely the recovery of the company. This is one of the arguments for the researcher to chose spending all available resources in this one case, rather than exploring several cases and doing a multiple-case study. Additionally, the lack of published research and information about similar cases, would have complicated the procedure of multiple cases (Yin, 2014; 6 & Bellamy, 2012).
Finally, the “essence of a case study is to illuminate a decision: why they were taken, how they were implemented and with what result” (Yin, 2014:15), with this and the research questions in mind, it can be argued that a single case study is a useful methodology to achieve the main purpose of this thesis (see section 1.5).
3.1.2 Exploratory approach
The type of inference of this study is mainly exploratory. This approach was chosen over a descriptive approach, because the first one focuses on exploring the event in order to understand the behaviours and achievements of agents, rather than focusing on describing the situation (Yin, 2014). Nevertheless, a descriptive approach was used in different moments of the research, in order to develop the study and provide an understanding of the case. Regarding the option of doing an explanatory approach, the aim of this research is not to prove existing theories with observable behaviors, but to explore the observations and support them with existing theories (Yin, 2014).
The possibility of using different available research methodologies was taken into consideration, but was finally dropped, since this case is not a historical event (is a contemporary event), and is not an experiment, since the context and the behaviors are not controlled by the researcher. In other words, the exploratory case study methodology was chosen over other options, because of the features described before that allow in-depth exploration of complex social phenomena (Yin, 2014), and for also allowing the researcher to “focus on a case and retain a holistic and real-world perspective” (Yin, 2014:4). These characteristics accurately filled the needs to answer the researcher's curiosity regarding this case.
3.1.3 Inductive process
This research is developed through an inductive process, as recommended by Bryman and Bell (2003), when conducting a qualitative study. This type of research process was key to explore in depth the case, starting with observations and migrating towards theory. It also follows an iterative process that can be observed in the spiral timeline shown below, built with the aim of describing in a graphic way the inductive and iterative process followed in this study (see figure 5).
This research started by observing the unusual case. From observing the behaviors and outcomes of the stakeholders involved in the business crisis of the company, the curiosity of the researcher led to preliminary research questions, followed by a preliminary data exploration.
In order to avoid the lack of scope or generality of the inductive process (Patel & Davidson, 1991), a pre-data-collection literature review was made and complemented during the data-collection and analysis process. The focus of the preliminary literature review was in business crisis management and later migrated to organizational resilience theory, which provided more useful information to understand the Susi Bakery case.
The next step in the process was related to designing the interviews to collect the data and the reinforcement of the preliminary theoretical framework. This led to a revision of the research questions and to building the theoretical framework. Which allowed building a data collection process (through interviews) that complemented the research questions and the theoretical framework, leading to phrasing the conclusions and learnings of the conducted study (Bryman & Bell, 2003) (see figure 5 below).
Figure 5: Inductive process
As it can be noticed in Figure 5, the spiral has two main returning axis, theoretical framework development (x axis) and research questions review (y axis). The corners of the model represent the different phases of the research, such as data exploration, data analysis, conclusions and learnings.
The whole research process gravitates around the middle square that represents the Susi Bakery case.
3.2
Epistemology and Ontology
Ontology and epistemology are the philosophy of science; they frame and expose the way we obtain and understand knowledge and reality (6 & Bellamy, 2012). With this in mind and considering the different philosophical perspectives and how they influence the conclusions deriving from analysis (6 & Bellamy, 2012), this research takes mainly a realistic position. A realistic position claims that “there are facts which are not directly observable about social phenomenon” (6 & Bellamy, 2012:60), but in order to be able to conclude and learn about these facts, it is necessary to infer “about things that we cannot observe” (6 & Bellamy, 2012:60). The truthfulness or not about the inferences, depends on “how well they conform with those facts” (6 & Bellamy, 2012:60). The development of our understanding about unobservable things, is accomplished by carefully building and empirically examining theories and models (6 & Bellamy, 2012).
Having a realistic position, the ontology of this study claims that the truthfulness of knowledge is neither absolutely true nor false, it depends on the context of the study. As 6 and Bellamy (2012) explain, there are facts that are not directly observable about social phenomena, but it is possible to draw conclusions and make inferences about them, by carefully, progressively and empirically exploring them through the lens of theories and models. This is how, through observation and inference, knowledge can be acquired.
Given the characteristic of direct observations, of being partial (not covering the whole reality), the acquired knowledge is an approximation to the truth and therefore, provisional. With this is mind, knowledge needs constant research to develop, from the theories and concepts, and their relations with empirical findings (6 & Bellamy, 2012). In other words, this research makes inferences from observable behaviors and facts (behaviors observed during the case and facts obtained through the interviews and available data), based and framed in theory and concepts (organizational resilience theory was chosen as the theoretical framework for this thesis) (6 & Bellamy, 2012).
3.3
Research design
This subsection explains the process under which this study was developed.
The structure of this paper follows a more traditional structure (starting with an introduction to the case and key concepts, problem discussion, description of the methodology and methods, continuing with the data analysis and finishing with main conclusions, learnings and follow up questions for further research), but internally follows a circular structure influenced by the inductive process described in the previous section (see figure 5). As described before, this study is conducted as an inductive, exploratory case study; where the exploratory-inductive process affects the whole structure and findings of this research, because of its characteristic of not knowing precisely in forehand the results of the research (6 & Bellamy, 2012).
Some processes took place simultaneously, this is related to the iterative process followed in this research, that influences the evolution of the research process when advancing in the process itself. For example, the preliminary literature review influenced the building of the data collection process; and the preliminary data collection process influenced the building of the theoretical frame, in the sense that it provided information about which line of thought would provide enough theoretical knowledge to explore and understand the case.
3.4
Role of the researcher
The researcher experienced in an active way the process of recovery of the business crisis of Susi Bakery, due to the close relationship of the researcher to the organization. This allowed access to detailed information (organizational structure, stakeholders, resources, etc) and a deep exploration of the case through the theoretical lens of organizational resilience. Due to this close relationship, the researcher was specially careful (see sections 3.5 and 3.6 below) with the research process and welcomed recommendations and processes generally accepted by the research community. This was done in order to deliver relevant, useful and valuable findings for theory and further research.
3.5
Limitations
Several limitations should be taken into consideration.
First, one limitation of working on one single case, is that the conclusions and learnings are limited to the chosen case and generalizations on a single case can bring complications (Yin, 2014). However, it can be argued that the relevance of this study, relies in the exploration of this particular case, allowing to spend all resources in exploring in depth an unusual case (Yin, 2014). This case, analyzed through the lens of resilient business models adds to the understanding of organizational resilience; which is also valuable and contributes to research (Yin, 2014).
Second, as with most research, it is important to acknowledge the possibility of introducing bias into the study, from the researcher's point of view and its’ close relationship with the organization (as mentioned before). Third, the time limitation is considerable, given the amount of available information and the complexity of the case. Fourth, further research is suggested in order to find a more clear relationship between business crisis management and organizational resilience. Fifth, research in organizational resilience is context-dependent, and therefore the available research is fragmented and limited to exploration of past events. Finally, this research takes as the unit of analysis the company with the business crisis, and it does not focus on how the environment and culture affected the behaviors of the stakeholders; this can be a focus for further research.
3.6
Ethics
In order to provide a high quality case study, the researcher strived for the highest ethical standards as recommended by Yin (2014) and Silverman (2011). Some of these recommendations and procedures are: not plagiarizing nor falsifying information, being honest, accepting responsibility for this paper, keeping up with related research as well as ensuring accuracy and following general research methodologies recommended by the scientific community. The researcher was also aware of the ethical pitfalls and took care of treating all interviewees in the same way and not abusing possible vulnerabilities of the interviewees (Silverman, 2011).
The researcher wants to emphasize with this section, the awareness of the importance of her values and ethics when doing research (Silverman, 2011). This subsection illustrates the commitment of the researcher to ethics and values in an explicit way, and they were present in every stage of every process and during the whole study.
In order to avoid the tendency to stick to a preconceived position and not tolerating contrary evidence, the researcher presented preliminary findings to its mentor and several colleagues of the master course, that were open to discuss the topic and data (Yin, 2014).
Finally, regarding the close relationship of the researcher to the unit of analysis, the researcher took special care of handling the data in a consciente state of awareness regarding possible bias.
