Prepared by Joanne R. Stevenson, Dr. Erica Seville and John Vargo
Here we present a case study of Health Systems Ltd. (Health Systems Ltd is a pseudonym) a technology company, focused on specialised software sales, service, and maintenance, which was badly affected by the 2010/2011 earthquakes in Christchurch, New Zealand.
On 4 September 2010, the city of Christchurch was struck by a magnitude 7.1 earthquake. On 22 February 2011 Christchurch was struck again by a magnitude 6.3 earthquake, centred within 10km of the central city. This caused significant damage, and large parts of the Central Business District were cordoned off for more than two years.
The Resilient Organisations research programme began following Health Systems Ltd. approximately three months after the 4 September 2010 earthquake and has continued to track the business’s progress into 2013.
Health Systems Ltd.’s performed well in some aspects of their response and recovery to the earthquake, but struggled to implement improvements and maintain relationships with some staff and customers. Following the Christchurch earthquake, Health Systems Ltd. implemented actions to identify vulnerabilities and put systems in place to ensure business continuity and on-going development.
Health Systems Ltd. started in the 1980s, and grew to have offices in Auckland and Christchurch, New Zealand, as well as Sydney and Melbourne, Australia. At the time of the September 2010 earthquake, the Christchurch office had around 40 full-time equivalent staff. Health Systems Ltd. has local customers as well as international, though almost all of the organisation’s growth and development is in its international market.
Prior to the September 2010 earthquake, Health Systems Ltd. was comprehensively insured but had done no emergency or business continuity planning.
The September 2010 earthquake was a major shock for Heath Systems Ltd., but they suffered no damage and minimal disruption. Their building, which was located in the Central Business District of Christchurch, was inaccessible behind the official cordon for less than a week (Table 1) after the first earthquake. Health Systems Ltd. enabled their staff to work from home and rerouted business related calls through their offices in other cities.
Table 1: Earthquake Impacts on Health Systems Ltd.
|September 2010 Earthquake||February 2010 Earthquake|
|Building||Located within the CBD cordon for 4 days, then approved for safe re-entry||Located within the CBD cordon, “red tagged” and demolished in 2012|
|Equipment/Computers/ Non-structural damage||No damage||Moderate damage to equipment, computers, inventory, and other non-structural features|
|Utility Disruption||Electricity disrupted for up to 4 days||Electricity disrupted (~ 1 month) Communications disruptions (~1 month) Road networks (reduced capacity for ~6 months)|
|Closure||Temporarily closed for 4 days, reopened partially with many staff working from home for 2 weeks||3 weeks|
|Staff Loss||No loss||2 full-time employees (FTEs) resigned soon after the February earthquakes 3 additional FTEs resigned during the recovery|
|Staff Hiring||Hired 1 FTE||Hired 5 FTEs in 2012|
The 22 February 2011 earthquake was far more disruptive. Health Systems Ltd.’s building and the surrounding area were severely damaged. Their IT server had gone down, and they had no way of restarting it or accessing their data without entering the cordon. The CEO in Christchurch responded quickly, which enabled Health Systems Ltd.’s staff to access their cordoned building, restart their server and retrieve important files. This reduced potential income losses and avoided damaging their reputation with international customers.
Health Systems Ltd.’s employees worked from home for approximately six months following the February earthquake, finding spaces for collective meetings as needed. The organisation eventually relocated to a relatively undamaged suburb of Christchurch.
Health Systems Ltd. lost 5 full-time staff members in 2011 and 2012, in large part due to earthquake related stress and on-going uncertainty. They were forced to operate understaffed for nearly a year before fully replacing those who had left.
The company’s revenue remained stable between 2010 and 2011, but decreased from 2011 to 2012. Health Systems attributed this to slowed implementation of business improvement projects (planned before the earthquakes), delays to new product development, and decreased sales. All of these issues were exacerbated by reactive and often slow decision making and a compromised internal culture which led to poor morale, reduced productivity, and resistance to change.
Crises and disasters can be excellent learning opportunities for organisations, but often an organisation will wait months to review their systems, evaluate their vulnerabilities, and assess their response and recovery procedures. Health Systems Ltd.’s story provides an important lesson to other businesses:
Evaluate vulnerabilities and implement any necessary changes as soon as possible following a crisis.
Instead of incorporating lessons learned from the September 2010 earthquake ‘near miss’ Health Systems Ltd. delayed the improvement process to focus on the immediate needs of the business.
Despite doing almost all of their business remotely, Health Systems Ltd. had no data or services on the cloud and no apparent way of transferring operations if their onsite server went down. Prior to the September 2010 earthquake, Health Systems Ltd. had no business continuity or emergency response plans. In February, even though they were able to restart their server quickly enough to avoid major losses, the situation served as a major impetus for change in the way Health Systems Ltd. approached business continuity planning.
Health Systems Ltd. ‘connected the dots’ during their recovery by accessing support from other parts of their organisation, other businesses dealing with the recovery, and forging new connections to serve their immediate response.
However, they were slow to make connections between the near miss of the September earthquake, and events that could happen in the future. They emphasised reactive responses over strategic and transparent planning and decision making which damaged relationships with employees and customers. They are currently in the process of re-evaluating their systems and becoming a more resilient enterprise as a result.