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The best way to manage business risk: go toward it

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What’s the best way to manage business risk?

Go toward it.

Sounds risky, itself…walking toward the thing you fear?

It can be.

The alternative, however? Far worse.

Real business risks, ignored…well…it’s not pretty.

Remember, first, that not all risk is the cliff diving, high-flying, life-defying kind.

Circumstances that bring these types of extreme risk are, frankly, circumstances you can’t control anyway.

The national and world economy, for example is something you can’t do a lot about, individually.

Devastating acts of nature…same thing. You just have to be ready to adapt well to circumstances such as these, however things work out.

If these are the risks you worry most about, scenario analysis is a tool that could be helpful to you. I’ll tell you more about that in a post later this week.

Second, the real risks in business are often things you can do something about. 

And these risks are not far away. They’re often already inside your company.

They’re the risks that you either created (often unwittingly) or that you perpetuate by not addressing problems fully and directly.

Any of the following situations are a risk to your company. And these are all circumstances you can do something about:

– Lack of focus

– Inattention to important details (the details your customers care most about)

– Lack of clear and complete communication

– Inaction or ineffective action when a problem is discovered

– Confusing, inconsistent and ineffective ways of getting work done

– Ineffective and frustrating hiring, onboarding, training, managing and mentoring practices

The signs of potential risks and trouble can be subtle…or glaring.

And because you’re in the middle of the situation, you may not really see or grasp problems until they’ve been festering for a long time. You may have simply become used to them, and think that’s the way things are, and the way things will always be.

Start to remove risks inside your business in these ways:

1. Brainstorm

Start by considering the parts of your business that feel in control.

What gives you confidence that these things are working well?

Next, think about what feels out of control.

Which of these worry you the most, and why?

Be specific as you create both the “working well” and “worrisome” lists.

2. Pay attention

Don’t assume that all is as it seems.

What assumptions are you making that you need to check? (Often, you’re either very right, or very wrong in assumptions that you make).

What data and information do you have, or wish you had…and can get…to monitor and manage the things you’re most concerned about?

If risks prove to be real, the information you wish you had is information you’ll want to figure out how to gather and put to work.

3. Go toward the risk, and test to see if it’s real

Work to understand what’s really going on before you jump into action to prevent, mitigate or manage perceived risks.

Observe, research, inquire, test in whatever ways you can to start to see if the risks are real, or they’re worries that are unwarranted.

By the way, people may say, “Our work is different. We can’t possibly measure and manage what we do.”

I’m here to tell you, as a former operational analyst and process auditor at Apple and elsewhere, that there are ALWAYS things you can do to see how things are really working, compared to how you think they’re working, or how you wish they were.

The information you gain in this way is always clarifying. Usually, it helps make things work better for everyone involved. And that, when it happens, is good for employee morale, customer satisfaction, and, as a result, profits.

In addition, get to know people who can advise or teach you. They may quickly see potential problems that you’re blind to or are purposely avoiding. They can also help you figure out how best to address problems you might have missed.

5. Chunk the action

If changes are necessary, once you understand the risks that are present, break the change into a series of achievable actions.

You’re more likely to do the work if you “chunk” it into manageable projects and tasks.

Suddenly, big goals that were daunting or immobilizing become accessible and motivating as you make steady, observable, and felt progress, step by step.

Great communication is the lifeblood of great leadership

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Great leaders are great communicators.

Leaders’ effectiveness depends on their ability to inspire, engage, and activate many people to reach for and work for a shared vision, meet common goals, and create significant results together.

Being a great communicator is one of top ten characteristics of great leaders.

Powerful, effective leaders know when and how to communicate, no matter what’s going on with their teams or organizations.

Leaders may face many different emotions at different times in the teams that they lead (and, by the way, in themselves). Some people are excited and energetic, others feel fear, pressure, confusion, and at times, weariness or boredom on the long path to a major goal.

Great leaders know when to observe, when to listen, when to talk, when to show.

And they use all the vital communication skills of leadership effectively.

They also know that the most powerful communication of all is their attitude and their actions – far more than what they say in any circumstance.

Imagine any of the world’s great leaders and what might have been different, had they been an average communicator, at best.

For example, think of Franklin Roosevelt, Winston Churchill, Mahatma Gandhi, Martin Luther King or any of many other world leaders without their powerful oratorical and other communication skills.

Leaders face different communication needs and challenges, depending on the circumstances in which they’re leading their organizations. Here are a few of the main ones:

1. Normal, predictable cycles of operations

These circumstances involve vision-setting, planning, regular action, follow-up, problem-solving and process improvements.

During these times, great communication focuses a team or organization on goals, the path and processes to reach them, roles, consistent check-in points, the ways that progress is evaluated and ensured.

2. Major change or improvement efforts

These circumstances may involve reorganizations or mergers and acquisitions, very rapid growth, major improvements and other types of significant change.

During these times, great communication focuses on what is or will be different, how the change will be achieved, ways of evaluating and communicating progress, as well as how to sustain momentum as change proceeds.

It is essential that leadership communications and processes at these times keep people focused, energized, engaged and encouraged as they go through the often very difficult work of change.

3. High-stress or emergency communications

These include natural disasters, such as earthquakes or hurricanes, and man-made disasters, such as on 9/11/01 in the US, and during stressful times when US and world financial markets lurched wildly in 2008, and the recovery period afterwards.

During these times, great communication is focused on providing clear directions so people can try to meet their immediate and then longer-term health, safety, security and other needs.

In addition, there’s often a strong need for community in high stress times, with ways for people to share, express and process their often-frightening, yet memorable, shared experiences. (These are the conversations that begin with questions such as, “Where were you when you heard the news?” or “Where were you when it happened?”).

No matter what type of circumstance leaders and their organizations are in, most of the same stages of communication must be successfully addressed:

Focus

Earn and hold the attention of their audience.

Connect

Reach people in a personally significant way so that they can relate to what is being communicated, “enroll,” and take appropriate action.

Direct

Create a clear path for the many individual actions needed to achieve shared or individual goals.

Persist

Inspire people to draw on – and continue to draw on – persistence, if it is necessary to see a difficult effort through to completion.

Check/correct

Ensure that actions are moving along as needed in order to reach goals and significant milestones.

Achieve

Coordinate efforts and information so that people can reach goals, solve problems, and create success, hopefully, in the easiest, clearest, most effective way.

Celebrate/Complete

Acknowledge that major goals have been achieved, and create closure in a valued, positive way.

Four decision making mistakes to avoid

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Being able to make good decisions, at all levels of your organization, is vital to your company’s success.

Decision making skill, one of the top ten characteristics of great leaders, is more difficult than many people realize.

Consider this thought:

“Some problems are so complex that you have to be…well-informed just to be undecided about them.”

Laurence J. Peter

Great decisions can have deep, lasting and positive effects on many people.

Think about the far-reaching impact of these three decisions:

  • Columbus’ decision to seek the New World
  • John F. Kennedy’s decision that the US would land a man on the moon, and do so before the decade was out
  • Rosa Parks’ decision not to give up her seat on the bus one day in Montgomery, Alabama

Poor decision making is equally powerful, but in undesirable ways. Bad decisions can have devastating effects on people,  organizations, and even entire countries.

Here’s just one example (and there are many):

Think about the impact on US and world financial markets of a few false assumptions about market risk and how to best manage it in 2008 (and in the years leading up to it). In addition, what was deemed adequate oversight of financial institutions turned out not to be.

It all added up to very big, very bad, very sudden surprises for many people and institutions, with long-term repercussions.

What are some of the primary problems with decision making?

Here are just a few:

1. Being unable to decide without a lot of information.

And then, being unable to swim one’s way through the sea of data, information and opinions to reach a valid, effective and timely decision.

2. Being decisive – but too much so.

Decision-makers may reach conclusions quickly, based on too little information, or inaccurate, deceptive, or untimely information.

3. Simplifying information so much that it’s stripped of significance.

Data and information may be overly simplified – or it may be unwieldy.

Either way, it may be difficult to synthesize and understand for deeper meaning, the ability to draw meaningful conclusions, and to make good, sustainable decisions.

4. Disowning one’s decisions.

This can occur if a leader fears the pushback that naturally happens at some point in almost every change or transition process.

We’ve touched on significant ways that decisions can go wrong.

How can decision making go right?

Great leaders ensure that they have reliable, accurate, timely information for the decisions they must make.

And they make sure that their decision making process is effective and continually improved, as needed.

These are some of the main characteristics of good decisions:

  • Timely
  • Well-informed
  • Take into account the needs and desires of the people most affected by the decision and its outcomes
  • Match the criteria for making that decision

Decision making comes easily to some people, but for others, it is a continuing challenge.

Decision making skills can be learned and improved, with focus and practice. Such skills are absolutely, positively essential for leadership excellence. 

You place your bets when you set strategy

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Chess board pexels-photo-59197

Strategy. Strategic.

Do those words make you feel excited, eager, energized? Or does your heart start racing a bit in fear, at the mere mention of strategy, and the responsibility it brings?

Leaders’ reactions to strategic opportunities run the full gamut from fear and apprehension to eagerness to take on the challenge.

Some people like the excitement of sizing up the future and placing their bets on a particular course of action and events which strategy setting really represents.

For others, the word “strategy” and “strategic” make them break into a fearful sweat. For this group, the risks of getting it wrong seem far higher than the thrill of getting it right.

Strong strategic skills – strategic thinking, strategy setting, and strategic management – are among the top characteristics of great leaders.

The essence of strategic ability is that, of the many paths of action open to an organization, great leaders can see, and then take – or make – the strategic course most likely to lead to success.

They can find their way through uncertainty to high customer satisfaction, product, service and process excellence, and maximum profitability.

When you set strategy, you’re placing your bets – and committing your resources – to what you believe will happen in the future, and what your best response is likely to be to the anticipated future.

What’s really involved in being a great strategist?

You must be able to envision playing the game out completely, rather than to just hope things will work out, magically and effortlessly.

You must have alternative paths figured out in case the paths you envision are wrong, or eliminated for some reason.

You must have or be able to get the resources you need to turn the strategy into effective action.

You must have good information, and know how to use it for effective decision-making, having considered those decisions from many different points of view

You must have the confidence to choose the best course, and stay that course or adapt, as you see what’s happening, as conditions continue to change.

You must keep your eyes on the ultimate prize, the vision of success, given the circumstances at any point, and what may still lie ahead.

Taking the risk, and placing your bet on how you think the uncertain future will play out is not an easy task.

Strategic skills are essential as a leader, however. As with other leadership skills, you can build and refine strategic skills, too, through learning, focus and practice.

Leadership excellence: How to use clarity to cut confusion

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Clarity is one of the top characteristics of leaders who excel.

These are the leaders about whom inspiring stories are told for years, long after they’ve led their organizations through extreme circumstances or uncertainty, and met great challenges honorably.

Why is leadership clarity so important? It’s because people can’t follow what they don’t understand.

And because circumstances are constantly changing, ensuring clarity, as a leader, is a never-ending job.

Think of leadership clarity this way. Trying to follow a person who’s not clear about where he or she is leading a group is like trying to follow someone while driving in thick fog.

People on a team, in such a case, don’t know where the road is, or if there’s one at all. They don’t know where the dangers are, or how to handle them. They don’t know if, in that fog, they’re still traveling as a team, or eventually, on their own.

Teams immersed in uncertainty proceed nervously, slowly, trying to move as safely as they can. Or, metaphorically speaking, they may pull over to the side of the road, waiting for the fog to lift, the way to become clear, safety to be ensured.

In the meantime, time and opportunities are lost. Costs increase. Profits fall. Team cohesion falls apart.

Being clear, as a leader, may sound easy to achieve. It’s not.

It requires clear thinking in every circumstance – when the best way forward is apparent, as well as when the best path is not yet known and must be created, as you and the team move forward.

To reach this level of clarity, a leader and his or her team need good information, effective collaboration, clear and effective processes for prioritizing and decision-making. They also need a strong and accurate sense of who their customers are, and what those customers need and want.

Great leaders build strong organizations, which may include many people.

The work of everyone involved must be integrated and coordinated in some way. That may be done loosely, organically, or it may be accomplished in much more formal, structured ways.

The net effect, however it’s done, is that with the right direction, information, and other signposts along the way, individual employees can make the right decisions and choose the right actions in their daily flow of their work to create progress on shared company goals.

Combined with the other top characteristics of great leaders, leadership clarity turns good intentions, and precious limited resources into the best results possible for customers, and all company stakeholders.

Quote of the week

“Great acts are made up of small deeds.” Lao Tzu

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