Kirschenbaum and Rapaport

INNOVATION FROM A DIFFERENT PERSPECTIVE:

BUSINESSES UNDER SEIGE

  1. KirschenbaumC. Rapaport

Technion – Israel Institute of Technology

Faculty of Industrial Engenireeng and Management

TechnionCity, Haifa 32000

ABSTRACT

By examining the actual behavior of both managers and employees in work organizations during a crisis, we were able to better understand conditions facilitating an organization's ability to maintain operational continuity. Based on both perceived and actual financial performance levels during the crisis, we discerned that on the one hand, the organization's managers react within the administrative constraints of their organizations according to their perception of its performance. The day-to-day operations, however, are maintained as employees' adapt their own behavior to the changing demands of the situation. The analysis further shows that although plans, drills and emergency regulations are important for performance behaviors during the emergency, it was employees' innovative socially-based adaptive behaviors that contributed to maintaining actual organizational performance.

AIM OF THE RESEARCH

The performance of both managers and employees during a crisis can prove critical for an organizations operational continuity. Given the continual threat of disasters that might result in potential catastrophic financial losses, organizational and business continuity solutions have become a sought after commodity by both private and public organizations. Our aim here is to empirically exploring how work-organizations and businesses achieve continuity of operation and recovery in surviving a disaster. We will do so by focusing on critical social processes inherent in work organizations, those primarily involving both employees and managers. To do so we will frame our research in terms of "Business Continuity" (BC), a process whereby organizations seek to achieve resilience and confront the threats of a disaster (Shaw and Harrald, 2004). We will argue that BC is not only the outcome of an organization's response to a disaster, but rather it is the process of mitigating the hazardous effects of the disaster on the organization by focusing on disaster-behavior of the human-factor in the organization. This process is socially-based, reflecting both managerial and employees' emergent behavior (including, social networks, pro-social behavior, and family attitudes). Our argument is that, although pre-disaster actions, such as preparedness and risk perception, and managerial decision making process are important for the organization's capacity to effectively response to disasters, it is the actual behavior and performance of employees during such emergencies in achieving accepted goals and maintaining routine that is also critical.

METHODOLOGY

The core data set was based on purposeful sampling of private and public sector organizations from manufacturing, retail service providers to public institutions. We surveyed twenty-six, using structured questionnaires. All the organizations were in full operation before the war and were all located in areas under bombardment. We randomly sampled fifty percent of the employees in each of the companieswith the final sample composed of 275 individual responses.

RESULTS

A basic assumption was that the war caused a serious interruption to organizations operation. To do so, we first traced factual based performance records based on sales, cash flow, production and budget on a weekly basis. We opted for a mix of actual outputs but transcribed them all into a single common denominator, namely revenues. It should be recalled that all the organizations were directly threatened by missiles that potentially affected their production or services, supply and delivery chains and manpower requirements. As can be seen in figure 1 the initial start of the war led to a sharp dip in actual performance measured by objective output data during the first week followed by a slow but steady increase towards its end; but never-the-less reduced capacity performance after the war ended.

Figure 1. Average Actual Financial Performance of All Sampled Organizations Before, During and After Missile Attacks

The initial dampening of production and its steady increase suggested that some form of organizational change occurred in performance levels as the frequency of the bombardment did not abate during the entire war period. During this same period over a third of the Northern residents being bombarded left the area (Inbar, 2007) depleting manpower recourses and potentially affecting the maintenance of production and services. All this strongly suggests that after the initial "shock" of the disruption during the first week of the crisis, there began a process which led to changes within the organizational structure. Indeed, interviews with managers noted that pre-disaster preparedness plans (especially for a massive missile attack) were lacking giving greater credence to the possibility that various forms of innovative adaptation – rather than pre-determined changes - were taking place. We thus contend that this resurgence in performance was due primarily to the emergence of adaptive organizational behaviors, a contention to be evaluated below.

The regression results clearly pointing toward how adaptive emergent behavior continues to be a key to determining less disruption in performance (table 1).The parsimonious summary results show that the key significant explanatory variables are emergent behaviors, patterns of information flow and the strength of social networks. In addition, educational level was found to be significant. In the second case of perceived performance, we repeated the regression (See Table 2) with the results revealing that "managerial" variables were significant, namely the composite of administrative framework and management behaviors. These findings strongly suggest that during the constant bombardment of missiles two sets of criteria were being employed to assess the "health" of the organizations ability to maintain its operational continuity. One, actual performance, was based on social process variables primarily among employees. The other, perception of the organizations performance, was derived on the basis of managerial-administrative criteria, most likely expressed by the organizations managerial staff.

Table 1. Linear regression predicting performance by all model variables

Sig. / S.E / B / Variable
0.001** / 0.54 / -1.80 / Emergent behavior
0.40 / 0.43 / 0.36 / Prosocial behavior
0.013* / 0.46 / 1.17 / Social networks
0.08 / 0.38 / -0.66 / Administrative framework
0.63 / 0.74 / 0.36 / Management functioning
0.01** / 0.65 / -1.70 / Information flow
0.43 / 2.90 / 2.31 / Male
0.000** / 1.45 / 7.80 / Academic education
28.85 / (constant)
0.45 / R2
**p<0.01
*p<0.05

Table 2. Linear regression predicting perception of continuity by all model variables

Sig. / S.E / B / Variable
0.11 / 0.08 / 0.11 / Emergent behavior
0.39 / 0.08 / -0.07 / Prosocial behavior
0.15 / 0.07 / -0.01 / Social networks
0.008** / 0.07 / 0.19 / Administrative framework
0.000** / 0.12 / 0.45 / Management functioning
0.83 / 0.14 / -0.03 / Information flow
0.39 / 0.49 / 0.42 / Male
0.39 / 0.49 / -0.23 / Academic education
9.936 / (constant)
0.41 / R2
**p<0.01
*p<0.05

CONCLUSIONS

The ability of managers and employees to maintain organizational continuity during a major crisis is a litmus test of an organizations ability to survive and develop. How and what is involved in maintaining continuity of operations is, however, still stymied by the lack of interdisciplinary consensus of what constitutes the core social processes involved. We have argued that combining both disaster and organizational behaviors should provide a theoretical framework from which to better understand what constitutes organizational continuity and the role that managers and employees play in this process.

We noted a complex number of socially based organizational behaviors that were directly applicable to the crisis situation. These included innovative emergent behaviors that acted to fill in gaps in disrupted service and production systems, pro-social helping and support activities among workmates, an intensification of social network interactions among employees as well as greater sensitivity to the flow of information that would affect maintaining operational continuity.What this suggests is that organizational continuity involves employees whose actions to save their company are dependent upon intense involvement in social processes that support such innovative and adaptive behaviors while managers, caught within their administrative structural framework, are more bound by the constraints of administrative rules and less flexible in their actions during a crisis.

From the analysis here, the common belief among managers that business continuity is an economically driven process may be partially misplaced. From our results, it became apparent the importance of creating and setting an appropriate administrative framework that will be assessed by employees as providing a social environment of "safety" in times of emergencies. Such a social environment is primarily dependent upon enriching human capital through intensifying social networks that foster employee cooperation provide the incentives to maintain the operational routine associated with business continuity.

REFERENCES

Inbar E. 2007. How Israel bungled the Second Lebanon War Middle East Quarterly, 16(3):57-65 Available at: f22

Shaw, G. L., & Harrald, J. R. Identification of the core competencies required of executive level business crisis and continuity managers. Journal of Homeland Security and Emergency Management, 1:1-14.