Rethinking ROI and the Value of Business Resilience Programs
It’s Monday morning and you need to convince new members of the executive leadership team your business resilience program is worth their support. What will you say? What points will you use to actually demonstrate your program’s worth? What evidence do you have to back up your case? Is financial return on investment (ROI) your “go to” argument?
If so, you are not alone. Practitioners in our field for any time at all have likely encountered claims of resilience programs’ ROI.
(Note: For the purposes of this article, resilience programs are common operational risk management activities: business continuity, risk assessments and mitigation, IT disaster recovery, crisis management, associated planning, analyses, training, response exercises, and so on.)
Very simply, the ROI argument claims that financial benefits of such programs will exceed their costs. Typically, ROI is calculated using the “probability X impact” formula to identify fiscal risk.
The ROI argument introduces three problems. First, our profession generally lacks hard evidence of financial benefits. We assume they exist, but to a great extent we are speculating, as there just has not been much research establishing meaningful measures for resilience program ROI.
Second, making ROI claims would suggest we’ve collected the data needed to credibly quantify the financial impacts of disruptive events, and we can say with certainty how our programs can reduce those impacts. Again, lacking information, this is just conjecture.
Third, the probability a disruptive event will occur is a prediction, not a known fact. For this reason, the ROI argument puts executives into the decision frame of a gamble: will we or won’t we experience this risk? This “roll-the-dice” decision frame is known to be problematic, as it introduces any number of uncertain influences which can change from person to person and from time to time. In retrospect, how do we value resilience in the absence of any crises or disruptions? Were our programs merely insurance policies that were not used?
For those reasons, ROI is an incomplete and speculative way of valuing resilience.
Fortunately, we can think about things differently, as resilience programs yield a number of benefits during normal business conditions. In other words, resilience programs can inherently improve organizational performance whether or not we experience crises or business interruptions. Perhaps these benefits are appropriately described as “return on performance.” Allow me to explain.
Elements of Performance
An extensive collection of studies strongly indicates performance is related to identifiable employee and team attributes. Just a few of these attributes include collaboration, trust and confidence, stress avoidance, and learning. The main question for us to consider is whether or not resilience programs foster those attributes. If they do, we can also say they contribute to performance improvement. However, before we link resilience programs to these attributes, let us briefly take a look at them.
Collaboration. If you talk to company leaders about the work environments they strive to create, an adjective you’re likely to hear is “collaborative.” The benefits of a collaborative work climate are well-established and the performance benefits are numerous: employees experience higher success rates in performing tasks, they enjoy work more, experience lower levels of fatigue, and are more motivated to complete tasks. According to a Stanford study, collaborative employees persisted in solving challenging problems up to 64% longer than those in non-collaborative organizations. Despite these benefits, organizational silos persist.
Learning. As employees contribute to an organization’s collective wealth of knowledge and insights, levels of performance, and competitiveness increase. Organizational learning can be thought of as ways in which companies obtain, share, and store new information and knowledge. The more adept organizations are in these areas, the more its performance is positively affected.
Trust and Confidence. Unsurprisingly, levels of trust and confidence between team members have been shown to improve team performance. While there are many ways to build trust, common approaches involve engaging employees in problem solving, task design, and decision-making. Studies such as the Google Aristotle Project reinforce the importance of mutual trust and confidence in team dynamics. As trust and confidence increase, so do employee engagement, communication, learning, and performance.
Stress Avoidance. While moderate levels of stress can contribute to performance, excessive stress causes physiological and psychological harm. According to the Centers for Disease Control, workplace stress is the leading workplace health problem in the U.S. The physical, emotional, and psychological effects of stress not only decrease our productivity, but can also lead to increased absenteeism and turnover, and lower levels of job satisfaction. Companies can decrease stress by giving employees more control over their work, and by including them in decisions and problem-solving which affect them.
The Role of Resilience in Organizational Performance
So far, this article has discussed a merely few contributors to performance. Now, let us consider whether resilience programs foster these attributes. If we believe this is true, can we also say these programs support performance? A better argument would exist if ample studies had directly confirmed the positive effects of resilience on performance, but that is not the case at the moment. Instead, we have some dots to connect. And importantly, it must be mentioned resilience programs cannot be expected to deliver positive results by their very nature. They must be high-quality and sustainable efforts. “Checking the resilience box” or treating the process as a compliance exercise will likely have little or no effect in these areas.
Resilience programs and collaboration. By design, resilience programs should be collaborative efforts. Consider business continuity planning, in which a key element considers functional interdependencies. It is hardly reasonable to expect we can identify interdependencies and design contingencies to fix broken organizational links in the absence of stakeholder collaboration. The same is true for connections between operational business units and IT departments. In effect, all types of response planning require people work together in unique ways; a task we are unable to achieve effectively without building collaborative relationships.
Resilience programs and learning. The learning process may be the single most important outcome of resilience programs. As organizations learn, they evolve: they improve and refine processes, they adjust roles and responsibilities, they re-allocate resources, they develop plans, and they make better decisions. Who of us have participated in a business impact analysis, risk assessment, planning session, or exercise, and did not learn anything? To the extent these lessons learned are considered, shared, and incorporated into business activities, the overall knowledge base of the organization increases.
Resilience programs, trust, and confidence. As mentioned, involving team members in decisions which affect them and their work is an effective way to foster trust. Now consider, say, business continuity or IT disaster recovery plan development. Managers build trust when then involve team members in developing contingencies and response procedures. The open communication between members during this process contributes to a climate of trust. The same arguments apply to the design of risk mitigation measures, crisis management protocols, and other resilience measures.
Resilience programs and stress avoidance. Some might say (perhaps in jest) resilience programs do nothing but add to their stress. In reality, employees experience stress when they have little or no control over their work, or when their work introduces a great deal of uncertainty. In reality, we would expect resilience activities actually give employees control over their work. Such is the case with the development of work contingencies and recovery procedures. By including team members in the design of various resilience activities, we are likely to address unanswered questions which have caused uncertainty and anxiety. The importance of stress avoidance may be particularly true during the COVID-era, during which many employees are likely to be on edge about job security.
To be sure, our profession will benefit from more in-depth studies into “what works,” and to understand the direct relationships between resilience activities, financial benefits, and performance. Should we disregard ROI in valuing resilience? Not at all. But when we base arguments on financial matters, a good executive is likely to say, “Show me the data. I want proof.”
For the time being, we are likely on thin ice when we make strong assertions about ROI. So, back to the Monday morning meeting. Perhaps we make our case by saying, “Our program will contribute to our performance regardless of whether we experience any disruptions … and here’s why.”