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A Case of Two Managers: Different Approaches to Managing People Risk

Risk Management is officially published by Kogan Page on April 3rd 2015 and available to order now. Just enter the code PROC25 when prompted at checkout on www.koganpage.com for a 25% discount.

Imagine you are the CEO of a large multinational company and it is appraisal time. It’s been a busy year and the business has had to cope with a large number of projects which have been necessary to help secure the future development plans of the organization. Amongst these are a number of e-commerce projects. You decide to review a couple of the appraisals for two of the project managers, one who whom had implemented the system on time, while the other hadn’t. Here’s how they sum up their performance:

The Risk Taker:

‘Well, I know that we had to cut a few corners on the way to making this project a great success but if you were in my shoes you would have done exactly the same. Let’s not forget, we managed to implement the new e-commerce system in just 12 months with staff working around the clock, and nobody believed we could do it. A few customers may not return as we continue to iron out the remaining bugs, the paperwork is behind and the press picked up on the teething problems we originally had, but despite the problems, I know the company will be pleased with the admittedly lower than expected profit we’re now generating and I’m looking forward to a significant bonus.’

The Risk Manager:

‘Whilst I appreciate that we are six months behind schedule with our implementation of the e-commerce system, we need to look at the bigger picture. The most recent survey of the project team illustrated how highly motivated the staff are, with all of the training schedules fully met and the project documentation being marked as excellent by the Quality Assurance team. Most importantly, we are fully compliant with the recently introduced corporate guidelines on work-life balance; the first team to do this. Despite being behind schedule, I know the company will be pleased with all the hard work we have put in and I’m looking forward to a significant bonus.’

So, what would drive the two project managers to display completely different behaviours in the same organization? And who do you think deserves a bonus?

The reality in most organizations is unlikely to be as black and white as this situation, and there is no right or wrong answer. The purpose was to use this example to illustrate how culture can influence People Risk across an organization.

When it comes to risk management, corporate culture matters. In fact, it matters a lot and this is an important message for frontline managers to understand. It matters because if culture is not actively managed, it can create a climate in which risks, and people risks in particular, can emerge and grow/ There are numerous examples of where the word ‘culture’ has been used as a reason why a major disaster has happened; for example, the Columbia Space Shuttle disaster and BAE Systems.

A Good Risk Culture

What are the things that make a good risk culture, i.e. a culture that helps all staff to understand the importance of risk within the organization? In short, many things, some of which are illustrated in this article from the same authors: 'What Makes a Good Risk Culture'?

Having a good risk culture will not prevent People Risk events from happening- all it can do is hope to reduce their likelihood (to as close to zero as possible). This raises the question as to what is going to cause an event to take place and is there anything that can be done to prevent it? We are, of course, discussing people, their fallibilities, their foibles and those ‘hard to control things’ that influence the way they behave at certain times. We all have bad days, we all miss things, we all avoid things, we all fear things, we are after all human. The best we can hope to do is recognize that mistakes are more likely to be made when individuals:

  • are overworked or underworked;
  • are tired;
  • are stressed;
  • are overconfident or underconfident;
  • are forgetful;
  • are complacent;
  • are in the wrong job;
  • have been promoted above their level of competence;
  • have problems at home;
  • have different priorities (to doing their work)

Returning to our two managers, every organization is likely to benefit from having individuals who lean towards being Risk Takers/Risk managers when it comes to risk management. Why both? Imagine the organization as a car and the accelerator pedal represents the business moving forward and taking risks, whilst the brake pedal represents the business holding back and managing risks. If you are going to drive the car well, you need both pedals to work and people to operate them.

This is an extract from Chapter 7 of  People Risk Management by Keith Blacker and Patrick McConnell.

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