Flexibility vs. Brittleness
Today's emphasis on cost reduction and elimination of slack has a serious downside in a highly uncertain world: It often makes an organization brittle.
Brittle in this context means that the organization cracks or breaks under relatively minor impacts. It has little ability in the short term to accommodate many types of events.
Adjustment in the short term nearly always requires some degree of organizational slack. If you are extremely efficient, you may have little or no slack. This makes you especially vulnerable to sharp blows.
Flexibility has two dimensions. It includes some degree of slackness (generally in the form of underutilized resources) that provides the ability to accommodate unexpected stresses and blows. It also includes adaptability that can provide alternative or multiple ways to handle such events.
This perspective offers some range for practical action. You may be able to remain highly efficient, with little slack, while providing substantial adaptability in specific areas. Where you adaptability is limited, then you need to have slack.
The right sidebar offers some examples of how flexibility might be increased in your organization.
Financial Brittleness
Perhaps the most common type of brittleness is financial. An organization can become overleveraged, limiting its ability to withstand downturns. Stock volatility may result in costly or even restricted ability to sell additional stock. Heavy investments in illiquid assets such as production facilities in developing countries may require sale at far below book or real value. Investment in high-risk assets has an enormous downside as the past two years have demonstrated.
Financial flexibility is vital in uncertain times. This may require passing on certain investment opportunities or making them in smaller steps. It may require paying down debt instead of building a new facility or expanding into a new market.
Mental Brittleness
So many organizations enshrine "how we do things" and embed them in standard practices. Initiative is severely restricted. Tradition rules. This mental brittleness may work in stable environments but it can prove disastrous when uncertainty is high. Once people in an organization lose the ability to adapt quickly and think on their feet, they create brittleness.
An adaptive culture has to be built. Organizations by nature are resistant to change. Ability and openness to change have to be leadership-driven. Words without strong reinforcing action will not work.
Planning Implications
Planning for flexibility is rarely an issue addressed in normal annual planning processes. This is another reason why addressing major uncertainties has to be handled separately using a different planning process. Designing slack and adaptability into an organization has to be carefully with adequate lead time.
Planning for Flexibility
Here are a few ways to make your organization more flexible:
1. Cross-training
2. Job rotation
3. Backup and redundant offsite systems
4. Saleable assets
5. Emergency credit facilities
6. Alternative sourcing
7. Succession plans
8. Innovation
9. Effective communications
10. Market diversity
11. Product quality
12. Clear priorities
13. Scenario planning
14. Strategic partnerships
15. Agile management