What is the CEO’s role in building resilience? In the seventh episode of the CEO Insights series, senior partner Ida Kristensen speaks with Laurel Moglen, McKinsey’s managing producer, to share best practices for modern leaders embedding resilience into the DNA of their organization.
CEO Insights, which features short, sharp perspectives on the evolving role of the CEO, is produced by The McKinsey Podcast in partnership with the CEO Special Initiative.
This transcript has been edited for clarity and length. To catch the full episode, click here.
Laurel Moglen: How should a CEO organize their thoughts around building a resilient company?
Ida Kristensen: I like to think about this as three types of resilience. I like to talk about financial, operational, and organizational resilience. Financial resilience is fundamentally about having both enough capital and liquidity to withstand and take advantage of things that might change and to invest in new opportunities. Operational resilience is about the agility to move and operate in different ways when circumstances change. And then last, organizational resilience is about your individual resilience. So individuals and teams not freaking out but taking change as it happens and not being overwhelmed by it, and using that energy to drive progress and to make really interesting changes.
Laurel Moglen: Do you have an example of resiliency that comes to mind?
Ida Kristensen: Corie Barry came in as the CEO of Best Buy right before the pandemic. There was a lot of innovation about in-store solutions. She invested in empowering individual store managers, which allowed the individual stores to make decisions fast. There was a lot of digital growth, and it allowed Best Buy to pivot really fast at a time when the old business model and in-store model clearly weren’t meeting the demands of the consumer.
Laurel Moglen: Would you say resilience is not always a pretty process?
Ida Kristensen: Indeed. I think sometimes when we talk to CEOs or executive leaders in general, there can be a bit of a preoccupation with how it is going to look. The companies we see as the most resilient are the ones that are comfortable taking some risks, making decisions without full information, because you will never have that in a crisis situation. Some CEOs talk about if they have 70 percent of the information, it’s time to move. And that means, by definition, it’s not always going to be pretty. Some of your decisions are not going to be the right ones. But a culture of learning from imperfection and moving ahead is where we see the ability to learn and grow. Also, growth comes to those who have the ability to take the greatest advantage of the upside in spite of disruptions.
Laurel Moglen: How resilient do organizations and companies feel these days?
Ida Kristensen: Not very resilient. We’ve done research that shows that about 16 percent of companies believe their organization is prepared to anticipate different types of external shocks and disruptions.
Laurel Moglen: How important is it for a CEO to role model resilience? And what does that look like exactly?
Ida Kristensen: On one hand, you want to make sure the CEO shows composure when going through disruptions. It’s about absorbing, not amplifying. But at the same time, the CEO should not confuse that with being stoic. They have to show that individual vulnerability, that there’s aspects of the situation that are hard. Great CEOs role model things like “It’s OK not to be OK.”
In our research, we see many examples of how CEO vulnerability can truly be a superpower. One of the examples I really like is Brad Smith, the former CEO of Intuit, who made a habit of publishing his performance reviews. He would literally plaster them on the glass window of his office. And what happened over time at Intuit is that this type of role modeling had a trickle-down effect within the organization and allowed others to show their vulnerability, making it more normal to have open conversations about people’s strengths, development opportunities, and goals. That’s a big shift.
So since CEOs can’t be everywhere all the time, how do they pick and choose carefully where they weigh in? When it comes to resilience, we see that there are a number of decisions that have disproportional weight in building resilience in a company.
I know right now, there are a lot of CEOs having conversations about tariffs going up and coming in. And in an environment with higher tariffs, how do we think about hedging what happens right now? How do we think about potentially filling up inventories?
Anticipating disruptions that can happen in the cost structure and the supply chains, we see CEOs leaning in on topics like talent rotation—the habit of rotating people across the different parts of the company. That gives individuals more experience, it challenges them more, it creates some battle scars, and it builds that resilience.
I was in a conversation with the CEO of a financial institution who basically put his thumb on the scale in exactly that way. He was meeting with an executive. The executive was building up a new area of the company. And the CEO asked a simple question. He said, “What message will it send to our organization if you build up this area solely with external hires?”
What I think is interesting about that example is the CEO taking that longer-term view, but also stopping short of saying, “I’m going to tell you what to do,” and asking a well-timed question.
Laurel Moglen: Is there anything organizations commonly do that stands in the way of developing a resilient company?
Ida Kristensen: I talked about financial, organizational, and operational resilience, and I think of these as muscles that work together and partially compensate for each other.
One kind of error I sometimes see is that companies, particularly companies with a very high level of talent, can sometimes over rely on organizational resilience, and it’s a bit what I like to call a hero culture. So something disruptive happens, something the organization was unprepared for, and there might not be a lot of resilience protocols or other things built up over time. But you have a group of very intelligent and very hardworking people who get the job done.
In my experience, that can be very effective. But the issue is it’s not sustainable. It is absolutely exhausting for people to be in that role for more than a short amount of time.
On the other hand, if you equally or more evenly invest in the different types of resilience, you will see that these different elements will support each other. If you are intentionally investing a little less in one area, at least make sure you know how the other areas are compensating.
Your employees will still do heroic things at times, but they will do so feeling more supported and feeling more accomplished.