The human face of risk

4 10 2010

Attending a CXO briefing on risk this Weds, can see everything on the agenda except the rather fundamental one of the human factor. After all, better locks simply force the evolution of better picklocks, so technological and systems solutions will never, of themselves, solve the problem.

So what is the human factor in risk? There is criminality. There is incompetence. And there is one more…

Someone who is already dishonest, simply needs to be identified and removed from the business. Of course, you had better be sure that you are not asking anyone to be dishonest for the business. The person who is dishonest for the business has no reason not to turn their dishonesty against the business some day. If you require someone to be dishonest as part of their job, then frankly I wouldn’t trust you either!

But to matters that an Operating System for Talent can deal with, it is possible, at least to an extent, to manage risk by understanding people better. I emphatically don’t mean that we can help you identify the potential criminals in your midst. Rather, most of us have some needs and potential stress responses which if not understood and managed can lead us to cross a line. The line might be defined in terms of “meeting social and moral expectations”. Once that line is crossed, all bets are off as to whether a person’s integrity will remain intact. A short blog isn’t the place to write a dissertation on this, but look at most corporate criminals and you will find, not a career criminal, but a reasonably decent person who at some point either felt unappreciated or undervalued or taken advantage of and whose behaviour thereafter was justified in their own mind – and criminal in everyone else’s. Good leaders and managers understand what matters to their people enough that their people shouldn’t ever get near that line; or if they do, it should be clear to everyone that this is happening.

Second, incompetence. Most incompetence is not absolute but situational. Understand where a person will shine and make sure they work in that context. Don’t promote (or hire) them into a context where they will only display incompetence. Incompotence and risk are in a direct relationship.

Lastly, risk comes with… your strengths. What are you best at? It may well be the thing that takes you down. For example, I am hardly the first person to notice that Toyota’s greatest strength – continuous improvement powered by line workers empowered to identify and fix problems – has become its “achilles’ heel”. Too many solutions arrived at at the coal face without some overarching intelligent view means the global picture starts to blur; how do these changes – these undoubted improvements – impact the system as a whole? I would be the last to suggest Toyota should be dropping kaizen (as if they ever would!); but they will doubtless have been learning some lessons to mitigate the risk inherent in their great strength.

And that is  the issue: not strength per se, but unmoderated, unbalanced strength. You can only safely play to your strengths when there are one or two people around with very different, complementary strengths. In risk terms, assembling a team comprising the brightest minds on the planet in a particular field, and who all see exactly the same world out there is about as risky as it gets. Go figure.