Tampereen teknillinen yliopisto. Julkaisu 1153 Tampere University of Technology. Publication 1153 Rudrajeet Pal Organizational Resilience through Crisis Strategic Planning Thesis for the degree of Doctor of Science in Technology to be presented with due permission for public examination and criticism in Festia Building, Auditorium Pieni Sali 1, at Tampere University of Technology, on the 11th of October 2013, at 12 noon. Tampereen teknillinen yliopisto - Tampere University of Technology Tampere 2013 ISBN 978-952-15-3126-2 (printed) ISBN 978-952-15-3152-1 (PDF) ISSN 1459-2045 This Ph.D. thesis is dedicated to all resilient things of our planet, Earth! ABSTRACT Resilience, in an organizational sense meaning the ability to withstand crises and disturbances, has become a keyword during the last ten years. It is associated with established activities like risk and crisis management and business continuity planning or with strategic management, but it allows for new perspectives and insights into the conditions for doing business. Applied to the whole supply chain it also provides tools for managing and aligning the logistics flows in an appropriate way. But why is resilience essential for success or survival? In context to the Swedish textile and clothing (T&C) industry, the average number of firms that went bankrupt during the recent crisis (2007-09) escalated twofold compared to the average over 2000-10 due to tremendous pressure on the Swedish credit system. The structural industrial statistics also plummeted in these crisis years aggravating other inherent or internal problems as a ’ripple effect’. The small and medium sized enterprises (SMEs) were the most affected of all, facing major threats to their financial performance and ultimately to their survival, at times of economic crises. In such a context, study of organizational resilience (ORes), to survive and thrive becomes increasingly significant. To address this issue the thesis concentrates on understanding the resilience development process through crisis strategic planning in context to Swedish textile-related SMEs amidst economic crises. It investigates and answers how resilience development can be considered as a precursor for business success, how to develop and monitor resilience, and identifies its antecedents and key strategic initiatives and their differential degrees of influence. No prior studies describing organizational resilience and crisis strategic planning in an integrated processual approach using both short-term and long-term strategies through planning and adaptation were found in the literature. The thesis adopts a critical realist-grounded theory (CR-GT) approach along the metaphysical level as the structure for the resilience development process follows a causal relationship between the object (the organization), its structure (competences and strategies), the causal power (crisis strategic planning) for attaining an event/outcome (resilience) in a particular context (economic crisis). For addressing this issue of devising an outcome-based processual approach, a multivariate financial indicator called the Altman’s Z-score (used basically for calculating bankruptcy potential in firms) was used for quantifying resilience. For investigating the causal mechanism epistemological relativism along the grounded theory approach was chosen for theory generation. A mixed methodology was adopted based on quantitative statistical analyses, at first, followed by a detailed qualitative work based on surveys, interviews, case studies and secondary data for data triangulation. Analysis of data was conducted through certain thematic coding principles. A four-step hermeneutic spiral was followed by systematically combining the pre-understanding, empirics and extant literature to develop a theoretical framework through constant modification. Overall, the resilience development was highlighted along a processual framework adopted along the CR-GT view of causation. The findings are manifold. Firstly there is a need to develop economic resilience in SMEs to shift from just component-view to a more holistic systemic view of organizations, upheld by an integrated crisis strategic planning (CSP) approach, for facing dynamic environments. Secondly, the CSP process prescribed in the thesis is quite integrated and holistic, taking a view from all angles, viz. organizational structure (capabilities and strategies), processual approach etc. Such a resilience development process through CSP is based on a six-step process: (i) identification of environmental context, (ii) impact analysis, (iii) leadership analysis, (iv) capability analysis, (v) formulation/selection and implementation of strategies, and (vi) evaluation and review of strategic options, utilizing a suite of strategic tools and techniques and is particularly simple for application in an SME setting. Third, operationalization of such a causal mechanism based upon implementation of strategic tools is based upon using a multivariate financial indicator like Altman’s Z-score to outline the relation between ORes and business ‘health’, thus quantifying it. Finally, in order to develop a resilient organization it is important to engage and utilize effectively the key resources and assets (financial, material, social, networks) by developing dynamic capabilities (strategic and operational flexibilities, redundancy, robustness) and organizational learning (culture, employee wellbeing, attentive leadership and decision-making). These competences must be employed for the appropriate strategy development (selection, implementation, and evaluation) framed on both growth and continuity strategies, both planned and adaptive in nature. The research develops a holistic analytical framework of organizational structure for resilience development based on these two criteria. It also tests this framework for Swedish textile-related SMEs amidst economic crises. The findings in this contextual delimitation suggest that the i resilient SMEs possess better financial resources, relational networks, operational & strategic flexibilities. The economically resilient firms mostly showed planned resilience in economic crises based on long-term strategies through business continuity planning (BCP) and in terms of growth strategies through market penetration, diversification and transformational initiatives. These firms also showed better short-term crisis management (CM) through higher operational flexibility while the less resilient ones lacked in strategic readiness due to resource scarcity. This is beneficial for firms to understand the key areas in which to invest and develop a multi- strategic CSP model, categorizing firms along different resilience types – planned or adaptive. Keywords: Organizational resilience, crisis strategic planning, economic crisis, Sweden, textile and clothing, small and medium -sized enterprise ii ACKNOWLEDGEMENT The work presented in the thesis was carried out at the University of Borås, Swedish School of Textiles (THS), and the Tampere University of Technology (TUT), Department of Materials Science. The Swedish School of Textiles has generously provided me with financial support for the preparation and completion of the thesis, without which it might never have been done. My special thanks to Erik Bresky, The Head of THS for employing me for this Ph.D. endeavour. Next, I wish to thank my supervisors. Professor Heikki Mattila has contributed immensely in making it possible for me to undertake research studies at TUT along with his open-minded and knowledge- laden guidance and support from the beginning to end. I also wish to express appreciation to my supervisor at The Swedish School of Textiles, Professor Håkan Torstensson for his oversight and assistance during the whole Ph.D. process. He has always been motivating, inspiring and essential through his supervision and critical reflections at all stages of the research endeavour. Thanks for being an indispensable co-author in all my thesis publications! Next, I would like to thank the other academicians and practitioners I have worked with in these past years. Dr. Roy Andersson, thank you very much for co-authoring paper 4. Working with you was a pleasure, especially the joint interviewing sessions. I am looking forward to continuing our work together in future. I would also like to thank all the interviewees and survey respondents along the entire research process. These interviewees and respondents were CEOs and/or owner managers of Swedish textile-related firms. My special thanks to all of them who has contributed in various ways and degrees in this journey. However, in particular, I would like to express my gratitude to Reimar Westerlind, owner of ACG Group, whose association with this research has been immense. A lot of data for this thesis was collected from the company. My gratitude goes to the official external examiners of this thesis, Professor Lauri Ojala and Professor Gyöngyi Kovacs, and I gratefully acknowledge them for their useful comments and suggestions. I would also like to take the opportunity to thank my soon-to-be opponents in the Ph.D. defence, Professor Lauri Ojala and Dr. Helen Peck. I am also thankful for the guidance, encouragement, and support of a number of people who encouraged me to bring this work to a conclusion. Dr. Arun Aneja of Noeton Policy of Innovation has been very inspirational in the later stage of this Ph.D. process through his reflections over the topic of the research and futuristic ideas about further collaborative