Why some organisations thrive and others don’t?

A modern Board and executive dilemma

The 21st century dilemma for Boards and Executives of any organisation is how to effectively prioritise and focus on the things that matter in order to be sustainable and also grow. In an age of increasing information overload and significant noise, the perennial questions for today’s leaders are:

1. How does one stand out and perform?
2. Do we change for change’s sake, act quickly or ignore what is going to avoid the issue or make a mistake?
3. How does an organisation determine the important from the trivial; in other words, how does one sift ‘through the forest to decipher the wood from the trees’, the ‘wheat from the chaff’, and the ‘truth from the fiction’?
    

Why, am I raising this?

We live complex lives these days. We try to pack it all in. We are constantly connected with work and our personal lives through technology, mobile devices, social media that bombard us all on the sense of urgency to address certain topical areas (eg OHS, Cybersecurity, increasing regulatory requirements, agility, innovation, improved employee engagement, fraud & corruption, better connectedness, communication and promotion through social media), which if we followed would mean that our own strategies and day to day robust operations could remain untouched and treated as ‘second cousins’ to the fads. As an example, I know of a major financial services organisation CEO that uses a real time monitor of the social media communications, feedback and references to his organisation. Sounds great - but really it could be distracting. 

At board level and governance oversight committee level, I know that when both the Board and Management don’t know what to do, have less confidence in their understanding and risks, the symptoms are more paper work (without balanced and key performance area context) flows into the boardroom for reviewing and discussion.

We have more and more regulatory compliance requirements, reporting, monitoring and pressures from competitors, shareholders, customers, media and our industries. The mantra is 'innovate or perish' to stay in the pack or even improve to be one step ahead of the industry pack!  This adds to the frustration and the ability to get lost in the detail and omit seeing what needs to be seen and there needs to be a simpler and more common-sense approach and ‘call to action’ that improves and gives us comfort that we know where we are going, know what we are doing and are doing this effectively.

Why the basics are more important more than ever
Let’s get back to basics rather than get lost in the technology, the latest fads, the catch cry or the need to keep up with the Joneses. The basics that I refer to are:

1. Disciplined and Robust systems and practices (in process, decision making and review)
2. Measured risk taking, including analysis, testing prior to change
3. Transparency, openness and a willingness to independently identify, assess, determine approaches and a way forward

Yes, the basics! That is, the good old fashioned ‘SWOT’, Balanced scorecard, Process engineering and ‘Risk’ analysis and tolerance assessment in decision making, process reviews and strategic goal setting and evaluation. These tools and practices need to be supported by sound governance monitoring and operational system platforms and practices that are fit for purpose.

Breakthrough research findings

Has anyone ever read the Jim Collins’ books, “Built to last” and from “Good to Great”?

Well, in recent years, collaborative research by Jim Collins and Morten Hansen in the much applauded recent book: “Great by Choice” outline their learnings that provide surprising insight into organisations that outperformed their industries 10 times over a 15 year horizon.

According to the Collins and Hansen study, the following areas were dispelled as the main approaches of organisations (ie, the 10xers) that make them sustainable and outperform their industry tenfold?

1. ‘Innovation’
2. ‘Agility’
3. ‘Visionary’
4. ‘Risk seeking’ and ‘Bold’
5. “Good Luck

Also, do we really need to clarify the terms: “agility”, “innovative”, “robust processes”, “effective risk management” and “performance”? Yes, we do. Because, at times, I see that consultants, organisations and media ‘spin’ use these terms out of context that push change, or create a myth about what is happening or a way of doing that is not really robust, fair or appropriate.


This Research dispels entrenched myths about what brings company success

Collins and Hansen in "Great by Choice" also dispelled the following entrenched business myths and identified the following contrary findings:

Myth 1: Successful leaders in a turbulent world are bold, risk-seeking visionaries
Contrary findings: 
a) The best leaders studied did not have a visionary ability to predict the future. They observed what worked, figured out why it worked, and built upon proven foundations. 
b) They were not more risk taking, more bold, more visionary, and more creative than the comparisons and were instead more disciplined, more empirical, and more paranoid.


Myth 2: Innovation distinguishes high performing companies in a fast-moving, uncertain, and chaotic world 
Contrary findings:
a) To Collin’s and Hansen’s surprise, no. Yes, they innovated, a lot. But the evidence does not support the premise that these companies will be more innovative than their less successful comparisons; rather in some cases, these companies were less innovative.

b) Innovation by itself turns out not to be the trump card; more important is the ability to scale innovation, to blend creativity with discipline.


Myth 3: A threat-filled world favors the speedy; you’re either the quick or the dead
Contrary findings:
a) The idea that leading in a “fast world” always requires “fast decisions” and “fast action” – and that we should embrace an overall ethos of “Fast! Fast! Fast!” – is a good way to get killed.

b) Successful company leaders figure out when to go fast, and when not to. Rather these companies don't jump onto the next trend / fad without robust low cost, low risk and low distraction testing


Myth 4: Radical change on the outside requires radical change on the inside
Contrary finding:
a) These high performing companies changed less in reaction to their changing world than the comparison cases.


Myth 5: Great enterprises with higher performing success have a lot more good luck
Contrary findings:
a) The higher performing companies did not generally have more luck than the comparisons. They had lots of luck good and bad.

b) The critical question is not whether you’ll have luck, but what you do with the luck that you get.


Collins and Hansen's research findings to get back to robust basics is convincing

Bottom line... organisations today don’t have the time, money and people to do all the ‘nice to haves’ and ‘be hit and miss’ about what we do by jumping to the next latest fad.

  

Today, organisations need to prioritise, focus, 'cut out the clutter' and ‘look before they leap’. 

In a nutshell, robust practices to analyse, test and review through the traditional S W O T Balanced Scorecard and Risk analysis for major decisions and initiatives. Yes, I am right! Let’s get back to basics and the key traditional approaches that cover the strategic and operational context as well as the external and internal influences that have a major impact on the organisation’s performance in the short to long term.

This is food for thought! So, think before you act, test before you launch and ensure you have the right checks and balances to reduce the impact of detrimental decision making.

Enable change by including PEOPLE

In today’s world, the new constant in our personal, social and work lives is ‘change’.  We have seen our parents, friends and peers go through major restructures, change in work practices, emerging and dying industries and the introduction of more flexibility and instability in our work and personal lives.  Significant change in technology, economics, generational preferences, the way we do business and globalisation dynamics means that we need to think, act and do differently to ride the change wave.  That means we need to understand the change benefits, their implications, embrace them and go with the flow rather than resist change.

The current buzz words in our world are all about how we can adapt without resistance and despair.  Terms like how to be ‘agile’, ‘resilient’, ‘inspired’, ‘purposeful’, 'accepting and adapting to change' and yet 'keeping it simple in a world of complexity'. These now form the current business mantra!  Easier said than done. 

Did you know that nearly two-thirds of the following major changes in organizations fail? 

• re-engineering project success 

• mergers covering their costs

• quality improvements worth the effort; and 

• major software applications worth the cost.  

Fortune 500 executives recently said that resistance was the primary reason changes failed. 

We are all human and the majority of us say we can deal with change until it actually occurs.  The thought of change can, for some, be a ‘God send’ and for others it can lead to ‘dread, despair, denial’ and 'resistance'.  It depends on our past experiences and our innate responses of either fight or flight as well as how well we have been supported through the change in the past.  

Rick Maurer, a US based and established global leading change expert in his recent book “Beyond the wall of resistance” outlines the main reasons for people’s resistance to change at 3 levels. These being: 

Level 1: People don’t get it (Intellectual)      
Level 2: People don’t like it (Emotional)

Level 3: People don’t like you (Personal)  

The key for Change Agents is to engage all stakeholders that will be instrumental to make the successful change. They need to be able to understand the need, the sense of urgency, their part in the process and to feel this need with their hearts.  So, no matter what the change program is, it needs to really consider the Major Project plan and management approach for a success outcome. The change project leader and team will need to have engaged, focused and supportive people as part of its core . Without the people’s hearts, minds and hands being engaged to enable change, forget even doing the change.

As an experienced auditor, chief risk officer, project governance expert and board member, I have always said that the focus of a change program needs to be about systems, process and please don't forget the PEOPLE:

1. Proper planning and project management disciplines - in terms of governance, project scope approach and key challenges to be addressed leads to successful project performance; and
2. PEOPLE (within your organisation and also external stakeholders and customers / clients) will make or break an organisation. What is needed is involvement in terms of communication, understanding, engagement, support, training and successful change enablement.

The fundamental shift in change models that I have observed over the past 5 years is the focus on bringing along people and treat them as part of the solution. Instead of the process driving the solution without the people being engaged, supported and united.

The culture drive to clearly communicate to all key stakeholders: the why, what and how, by providing clarity, inspiration and motivation is now ‘King’. In relation to PEOPLE, current leading change experts recognise the importance of Change Agent skills encompassing leading and motivating people, communicating and engaging key stakeholder hearts, minds and hands on the reason for the change and their contribution. 

Of course there are processes that we can utilise to strategise, plan, monitor progress and support change. We just need to field an effective change management approach (eg. Prof John Kotter’s 8 step leading change model and Prosci’s Enterprise Change Management Model) and Project governance and management model (eg Prince2 / PMBok) tailored for your organisation's needs.  

Remember PEOPLE will make or break the difference.  Engage them to transform your organisation and deliver your project outcomes!

Why Change for Change's sake? A Reflection

Leadership focus should only be on change that will capitalise on the big benefit opportunities and/or ensure preparedness for catastrophic situations impacting on the organisation's reputation.

Executive leaders of organisations need to know the difference between a change for a big or small benefit as well a change that will have a big or small cost to the organisation and its stakeholders. Frequent or too much change that is incremental, insipid and insignificant can mean that an organisation’s employees and stakeholders may question whether it is really worth all the effort for little benefit. 

Of course, it all depends on the source, the sense of urgency and need for the change, rather than ‘change for change’s sake’. Why I am raising this premise is because recently I have observed more frequent so called ‘change’ / ‘transformational change’ events than in the past which has stretched resources and not delivered the significant benefits to all key stakeholders. Some changes are definitely transformational and really needed, other changes are not.  The types of ‘change’ can range from the very big and important to the very small for little benefit. 

It is important for executive leaders of organisations to review and consider what the change benefit is and whether it is worth the effort. Is it for the important and high benefit reasons (survival or obtain a great opportunity) or insignificant ego driven or not appropriately risk analysed (change for change’s sake) that will cause more disruption than a benefit?

Examples of ‘big’ benefit changes:

• Capitalise on a big opportunity and/or minimise a potential catastrophic risk scenario (after big picture scanning and risk analysis)

• Mergers and acquisitions in an organisation and industry (where there are win-win and major growth opportunities or survival for all key stakeholders)
  
  
• Economic drivers (for survival and maintain / increase its competitive edge in the market – it may involve leaner management, re-prioritising, cutting out of a declining industry, restructuring, cost cutting and outsourcing)
  
  
• New Leadership / CEO (fixing the messes of the past that is really needed for significant improvement)

Examples of  ‘small’ benefit changes:

• Economic drivers (as an excuse for tinkering with processes, restructuring and downsizing) 
  
  
• Politically driven change (as in private or public sector reshuffled structures eg. – centralised vs decentralised, re-sizing, reshuffling portfolios) 

• New Chief Executive (creating restructures to make their mark that will not be a big benefit to organisation.)

When should we make the Change?

'Change for change’s sake' for little benefit may cause heightened disruption to existing services and ‘change fatigue’ across management and employees. On the other hand, calling resources effectively to enable big benefit change can create greater efficiency and opportunity actualisation. 

When do you call it a change and transformation improvement program and when don’t you?  Some change may seem like a great idea but really was ill conceived and may be in the small benefits bucket. Far worse is when the organisation's stakeholders and people do not see or feel the need for change, have not had an effective history for successful change enablement and/or does not have the right supportive leadership and management culture to support, drive and enable the change.  

So why bother? I liken it to heightening an issue as a crisis and using crisis management techniques. However, the fact is, it is only a minor matter that didn’t need all the hype, response and high impact resources that provides detrimental rather than beneficial change. On the other hand, I see organisations that dismiss a perfectly golden ‘carpe diem’ opportunity or 'sweep under the carpet' a looming potential catastrophic situation because they are too busy focusing on lower order / small things. Perhaps I have seen this all too often as an overseer Board and Audit and Risk Management Committee member and experienced past Auditor.

Let’s focus on the big Change that will really make the difference and matter!

My view is that significant and enforced change (ie, means survival or capitalising on a big opportunity for the company and industry) requires a radical change management effectiveness technique. There is an urgency and a compelling reason to keep afloat and it needs to be done.

I have just been reading the more recent "Leading Change" book sequel “Accelerate”  by John P Kotter, an Emeritus Professor of Leadership at Harvard Business School and ‘Leading Change’ guru. The interesting premise that Kotter highlights is that, in today's world, change is required on a faster time scale due to increasing volatility and therefore requires an agile and new network framework (systems, structures and cultures) in addition to the tried and proven traditional change management approaches to guide successful change. Kotter reinforces that enabling fast ‘change is premised on the fact that it is generally because of a matter of urgency, a big opportunity or to avert a catastrophic impact on the organisation’.

So, why am I highlighting this?

When we intend to marshal the whole organisation and our stakeholders to buy in and support ‘the change’ it better be worth the effort.  Once bitten twice shy... or it could be case of  'Peter crying wolf' if it wasn't a change that was urgently needed after all. So, when you do call people and stakeholders to action for a major change that is worth the effort, the people you need to volunteer, the sponsors and buy in from the people for the change may not really be there to support the change when needed!

Let’s reflect and ask ourselves

Are you constantly making small, insipid changes that really don’t make a real positive improvement to your organisation, systems, practices and organisation's outcomes? Do your management and employees feel that they are spinning wheels, going nowhere fast and for little benefit? 

If so, this only creates people fatigue, disruption and little employee / stakeholder buy in. This in turn will make it difficult to marshal everyone when a much needed major change in the future is required. So, think first before jumping into enforcing change that could have more cost than benefit.

My next blog will be on how ‘high benefit' change can be supported.

Are you appropriately managing your Organisation's Brand?

As an expert in integrated risk thinking, I assist Boards and Executives to help prioritise their focus and management activities. That is, to focus on the big stuff and don’t sweat or overdo the small stuff. By the way, don’t forget that we all need to be good corporation citizens and do the right thing for all our stakeholders (both within and outside our organisations)....

So, how can we utilise and consider risk management thinking in the way we do business?
I will use a recent case study to elaborate on this further.

Today, I want to talk about Brand and Reputation and how management decisions to outsource and not effectively manage this situation can affect your organisation’s 'Reputation' risk and your stakeholders.  One recent example that occured in Australia relates to a wholesome and well established homeland brand: ‘Nannas’, famous for its frozen foods - in particular, frozen berries.  Similar to most Western economy organisations, Nanna’s outsourced its manufacturing operations (ie, growth, production and packaging) of berries to a manufacturer (in the Shandong province, China) to reduce its' manufacturing costs.

Unbeknown to most Australians, and recently reported in our local media, Nanna’s berries were grown in heavily polluted waters where, on a weekly basis, one person in this community dies of a cancer related illness due mainly to the environmental pollution. Recently, in Australia, some of Nanna’s ‘frozen berries’ consumers contracted Hepatitis A immediately after consuming the product.  Given the health scare and number of Hepatitis A cases, all Nanna’s frozen berries’ products were removed from supermarket shelves and our home freezers. 

Nannas’ Board and Executive were silent throughout the media and community outfall and it is unsure whether the organisation will ever fully recover from the reputational damage from this incident.  The Regulator was also questioned given they could have seen this coming as similar incidents had occurred in North America before this Australian incident?!

So, what can we learn from this case?  Hindsight is a wonderful thing! As a good corporate citizen, Nanna’s like all organisations should be meeting the acceptable levels of risk appetite and tolerance that its stakeholders and customers would expect of this organisation.  That is, at the very least, good reliable systems and services, quality products, no harm to the community and meeting the required health and safety standards. In this case, outsourcing the services to a Chinese manufacturer, did not outsource the risk to Nannas.  However, in the operational cost reduction drive to secure growth, profits and shareholder expectations, the company had inadvertently not ensured the consumer expectations for the highest product quality and health & safety standards.

Warren Buffet, a Global Authority on risk and investing once said: 

"It takes 20 years to build a reputation and 5 minutes to ruin it and if you understand this you will do things differently"  

So, my question to you is.... learning from this recent incident what would you do differently in your organisation?  Also, if you were in the same situation as Nanna’s Board and Executive, what would you do now?

The reason that I raise this is because, in this current environment there is a significant Organisational risk appetite  to amplify cost cutting and seek major operational efficiencies for profits and/or financial survival. In fact, we have seen over the past 15 years widespread and exponential growth of outsourced services to cheaper alternative suppliers, mainly in other countries.  The risk here is that some other part of your organisation is affected and compromised. Cutting out an operation does not mean a change in the operating model of ensuring health and safety, quality, reliability of the productions, products and services. Management and effective monitoring of outsourced services needs to ensure that there is a high standard of quality of service, product and standards for employees, consumers and stakeholders.  Also, in the outsourced servicing countries, your organisation should ensure it is a good corporate social citizen by ensuring that the health and safety of suppliers’ employees and communities are met as well.

What New Gen Consulting do and how we help organisations is having Board directors and Executives periodically reflect on their business by undertaking a ‘reality’ health check on  the organisation’s strategic and operational areas by walking through an environmental scan of the organisation's business (using the traditional SWOT, PESTL approaches). We also take into account the risk tolerance expectations of each key stakeholder of the organisation, ranging from external regulators, competitors, shareholders, consumers, standard setter directions, industry associations, partners and internally in terms of the board, management, employees and suppliers. 

Sometimes, as Board directors and Executives of our organisations we get into ‘group think’, ‘blind sided’ thinking without taking a real fresh look of what are the things that matter to all our stakeholders and what our expected outcomes and associated risks in getting there are.  We tend to get hooked into fad programs (such as cost cutting, transformational change and outsourcing) without calculated risk consideration of the compromises that are made and whether they would be tolerated or not tolerated by our key stakeholders. And on top of this, we are trying to figure out how we navigate in a world of fast changing technology, big data, social media communications and security without understanding what real upside and downside risks we need to effectively manage and who we are really managing for. Let’s not forget our Customers, our Shareholders, our Regulators, our People, Suppliers and our Industries. It’s a risk balancing act which requires Boards and Executives to understand what they are really there for and that each decision or non-decision made has a consequence with a big or small unacceptable risk attached. 

Regular ‘reality’ health checks assist in fleshing out what areas are compromised or managed to an unacceptable risk level. The key is to work out what needs to be done and it all depends on whether it is the big stuff (ie, not tolerable and needs to be fixed urgently) or it is the small stuff (ie, is tolerated by all stakeholders and would not impact on all strategic outcomes of the organisation).  It is only by objectively understanding our business and stakeholder context that this can be done.

I hope that this blog reinforces some of the responsibilities of boards and management and also the importance of considering each key stakeholders’ risk appetite and tolerance for all aspects of your organisation. Regular reality checks from a helicopter and objective view will facilitate fleshing out the not negotiable big stuff from the small stuff. This is so that your Board and Executive can confidently make better decisions and improve management actions to achieve better outcomes.

If you like this blog article, please provide feedback, like and share it to who you think might benefit from this.

Thank you for taking the time to read this.....

This is a transcript from my recent video log (on 1 March 2015)

Risk management

Welcome to my first 'official' blog on behalf of New Gen Consulting.

I decided to start this blog to demystify what is Governance and Risk Management and how it could be utilised for better effect to organisations and individuals. 

This will be the start of a regular series of information and learnings that I would like to share.

Always think of risk management as being one of many tools to improve business excellence, strategy development and operational performance.  Risk management should be tailored and integrated in the way that you think and do work.  It’s more of a mindset backed by frameworks and written procedures rather than the other way around. 

It's all about:

• Taking the 'helicopter' view to determine the priorities and key areas of focus and then having the capacity and discipline to drill and manage in line with your organisation's risk appetite and tolerance levels"
  
  
• "Managing the risks (both challenges and opportunities) that will impact on your defined goals and objectives"
  
  
• “Focus on the big stuff, don't sweat the small stuff”
  
  
• “Focus your efforts on continuously improving the “management of risk in your business” and don’t just focus on the risk itself”
  
  
• “Making the most of the upside and minimising the effects of the downside”
  
  
• "Good business and commonsense management."

Risk management as a discipline provides the understanding to know the difference between big and small, imminent and rare, effectively managed and un-managed, objective reasoning and subjective bias!  How do you want your team and you to be thinking and doing?


If you would like to speak to New Gen Consulting about how to get the right risk management focus and mindset, please contact us at info@newgenconsulting.com.au    


We listen, understand and tailor!