Managing Risk through Alignment
“Any intelligent fool can make things bigger and more complex... It takes a touch of genius — and a lot of courage — to move in the opposite direction.”
– Albert Einstein
As increasingly sophisticated technologies, the global economy, and many other factors continue to complicate our world, risk management becomes an ever-more critical part of not only our business, but also of our leadership skills portfolio. And as organizational boundaries blur, and creative partnerships, outsourcing, and other approaches become more prevalent in service to the customer, the role and scope of risk management also becomes more complicated. As evidence of this trend, one need only look as far as Monster.com, where corporate America now advertises for a myriad of full-time management and leadership roles associated with programmatic and large-scale risk management. And in the public sector, risk management discussions and expertise are shaping the very framework of future responses to terrorism and natural disasters such as Hurricane Katrina.
Risk itself can take many forms. Certainly, the types of risks faced by a private or public sector entity will vary greatly by industry and function. In the insurance or banking industries, risk management has a decidedly financial bent, as their very business is often based on the understanding and balancing of profit and risk. In the IT industry, risk can take the form of cost or financial risk, but also schedule risks, staffing risks, contract risks, or many others. In this context, risk management is the proactive process of analyzing exposure to risks, and the actions that can best mitigate against unwanted outcomes.
For leaders, risk often manifests itself as an unwelcome surprise– the customer that decides “out of the blue” to not renew a contract, the project that is “suddenly” late or over budget, or the key employee that has accepted an offer from a competing firm. We typically oversee and address these kinds of risks through day-to-day corporate processes — account management, project management, human capital management, etc. — but how can leaders reach beyond these to further reduce these surprises and the underlying risks?
We have found that leaders can reduce business risks, and more specifically, reduce the number of unwanted surprises, by focusing on the alignment of key stakeholders within the business and/or program in question. On the surface, this may seem self-evident — but how do leaders truly achieve this kind of alignment? We’ve all been in strategy meetings or program review sessions where everyone around the table nods their head in agreement with a key decision; but how often do some of those same leaders go back to their own offices and teams mumbling about what “should have been done?” Most leaders would agree that this happens — but in our experience, almost all of them underestimate the frequency with which it occurs. And this is particularly true when some of the stakeholders come from external organizations — customers, business partners, or even other divisions within your own organization. It’s harder to understand root cause issues and motivators for leaders in these outside organizations, where the incentive systems, culture, and other drivers are not as well understood. And worse yet, it’s often not in their best interest to expose this kind of information to “outsiders.” But in our experience, Risk Management is incomplete if it does not address the alignment of key internal and external stakeholders.
So what does this kind of alignment look like? As a leader looking to reduce surprises, or more proactively manage risk on a large, complex engagement, think about the following:
• Create a regular forum for the discussions. Keep this separate from programmatic reviews and status meetings that tend to involve more people, and inhibit the kind of frank and open discussion that will be necessary. And try to keep the ratio of people per organization as close to 1:1 as possible.
• Think in terms of priorities. Misalignment can often be identified through a discussion of strategic priorities, especially in large, complex initiatives and programs.
• Look for root causes, not symptoms. Is a customer’s dissatisfaction really due to some technical shortcomings, or is there a more fundamental issue (like trust) at play?
One other point to note — alignment is nearly impossible without an available outlet for each party to have open and honest discussions. In some cases, the use of a trusted advisor and independent 3rd party can help, especially when numerous outside entities are involved. The difficulty in alignment rises exponentially as the number of external stakeholders goes from two to three, then three to four, and beyond. Outside experts can have an enormous impact in helping these diverse groups to address root cause issues.
Without question, there are many dimensions to risk management. And to paraphrase Albert Einstein, we are destined to make managing risk even more complex in the future. Good leaders, however, can look for opportunities to reduce risk — and simplify — by helping to truly align stakeholders to the core objectives and priorities of the initiative or strategy in question.
Save your next big “surprise” for something good.