Posts Tagged ‘McKinsey & Company’

Acknowledging risks…ooh scary!

May 15, 2013
"John T. Raymond as the insurance agent i...

Random dude…I’ll bet you started to create a story behind this guy. (Photo credit: Wikipedia)

We are all irrational to some extent. That truth is undeniable. Fear affects our behavior whether we like to admit it or not. However, how we deal with that fear differs widely among organizations, which is affected greatly by the leadership in those organizations.

For a more thorough treatise on this topic, check out the McKinsey article on managing the people side of risk here.

I’ll take the lazy way out and add a couple random thoughts and experiences of my own. I have worked closely with a couple different organizations who are in similar situations with wildly varying standard operating procedures when it comes to risk. If risks were openly discussed with Organization A, the outcome of the conversation would be one of the following scenarios:

  1. The risk would be greatly exaggerated, and there would be a mad scramble to ‘fix’ the issue without regard to costs or resources. Blame would be assigned in a structured, post-event analysis. 
  2. The risk would be quickly dismissed as not valid if it was judged to be something requiring a top-level, systematic fix to which there was no readily apparent solution. Business would carry on as usual until the problem came to a head. There are no worse headaches than those caused by cognitive dissonance.
  3. Whoever raised the risk would be blamed for not having fixed it already as it fell under their area of responsibility. It would then be classified into either scenario 1 or 2.

In Organization B, there is a more rational approach to risk. Risks and assumptions are brought to the forefront. Sometimes, those risks would be acknowledged and accepted. Other times, an immediate fix was decided. In still other instances, there would be an acceptance of the current way of doing business as the cost would be too great to change, with a view to adapting in future decisions.

The important thing to remember is that in business, there is no such thing as a free lunch. Decisions that impact profitability are complex and do not involve easy solutions. The test? If they were easy, someone would have already figured out the way forward.

So what can we do? The first step is developing the mental discipline to overcome one’s gut reaction to hand out blame. Where issues are complex, our mind tends to distill the world’s randomness by creating stories, often assigning malevolent motives to people that, in fact, had no such motives. Understanding this tendency will provide some perspective, so that next time, risks can be openly discussed.

The next step is to choose which risks are truly the most important, and be relentless in finding and implementing the answer. If we swing wildly from one worry to the next, based on the randomness of one person’s perspective, we’ll be stuck in an eternal loop. However, if we pool our mental resources, talented people working together can do extraordinary things.

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Culture, Irrationality, Arnie and Guan. Boom.

April 12, 2013
  • Company culture is huge. From my time as a military officer to production manager and consultant, I have always taken a keen interest in the type of culture that exists wherever I go. McKinsey has an excellent take on the ‘givers and takers’ of company culture. A ‘giver’ culture is one where employees freely help each other as opposed to being pitted against one another. In this particular study, this factor was the greatest single predictor of success for various intelligence units. From my own experience and using a bit of logic, I believe that where there is what I call a ‘hero and blame’ culture, it is impossible to have a ‘giver’ culture.
  • In case you don’t go through the trouble of actually reading the article…there is a great story in there about Pixar division heads, Ed and Alvy. To make a long story short, they were asked for a list of employees to lay-off. Their list contained two names; Ed and Alvy. Obviously, establishing a giver culture starts at the top. It involves giving credit where its due – i.e. to everyone involved. I was once in a situation in which one person would routinely say things like ‘I did this great thing’ (One of these stories involved a possible sale to some sort of high government official from Kazakhstan…so there was a bit of delusion artfully stirred into the mix as well) and sometimes ‘I and (person of equal rank/position) are really good at X’. Miraculously, no one else seemed to live up to this lofty standard. Needless to say, the culture could have used a bit of a boost.
  • If you are a fan of Arnold Palmer, and you are a fan of helping children with social, emotional, and behavioral problems, then you have a great opportunity in front of you. Click on Adelphoi USA’s website for an auction that contains cool stuff from Arnie’s personal collection. But only if you promise to come back.
  • Guan Tianlang shoots one over par on the first day of the Masters. Guan’s interview afterward was just as impressive as his round. 14 years old, Chinese, and doing an interview in English on worldwide television. By the end, I wanted to feed him the answers as he became progressively more terrified, but still an amazing performance. I probably care more about Guan making the cut than just about anything else that could happen this weekend.
  • Good negotiation lesson from my own experience that is highlighted by the the North Korea stand-off. When faced with an irrational actor – often caused by anger, ego, etc. – try to stay cool and resist ratcheting up the tension. Stand your ground and work behind the scenes to change the balance of power. Create a situation such that the bully can throw all the tantrums they want, but it won’t make a bit of difference to you.
    Arnold Palmer

     


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