Using Risk Management to Prevent Failure
“Progress always involves risk. You can’t steal second base and keep your foot on first.” – Frederick Wilcox
“All choices are gambles. An effective leader is one who minimizes the risks without being paralyzed by the fear of gambling ” –Madeline Marie Daniels
In my last blog, I wrote about coming back from failure. Wouldn’t it be great if we never had to deal with failure in the first place? This question may seem to suggest I’m advocating for denial of the probability of failure. In fact, I want to encourage you to contemplate the possibility of failure before you begin every major endeavor. This edition of my blog introduces some important risk management concepts based on the work of professionals who understand what it takes to prevent or minimize failure. Oh, and by the way, if you don’t like the word failure, simply refer to any collapse or breakdown as being unsuccessful.
Risk Management Rule #1: Tap the Power of Visualization
Steven Covey first published THE 7 HABITS OF HIGHLY EFFECTIVE PEOPLE in 1989. One of his 7 habits was to begin with the end in mind. Oftentimes we make an outrageous declaration about expected outcomes (Think of Paul Newman in Cool Hand Luke, who said he was going to eat 50 eggs.). Sometimes a declaration has a lot of substance and sometimes it is merely an empty announcement. In any event, whether your assertion is realistic or hallucinatory, the thing that may bring it to reality is to have a vision of what it would look like to achieve your announced goal or state.
Many top athletes visualize situations ahead of time – and go for it. Some people put together a list of features and benefits. Others look for the feelings they will experience when they successfully achieve their goal. Whatever your approach, doesn’t it make sense to fast-forward and try to experience “the end” result with as much clarity as you can muster before you begin? This can be a very fun-filled exercise if you literally become excited about the outcome. When you turn off the analytical, deliberative part of your brain, you can move quickly through many scenarios as you focus on seeing and understanding how the result plays out.
Risk Management Rule #2: Plan Ahead
“A dream planned is a dream realized” –John Edmund Haggar
Assuming you have a good sense of what a successful outcome looks like, feels like, sounds like, tastes like and even smells like, you can use your creative energy to propel you to the next phase – planning. How are you going to get there? What resources do you need to make it happen? What are your specific actions steps? When are you going to work on it? Is there a production schedule to which you will adhere? There are many questions to ask as part of the planning process.
But planning is very often neglected and, in many cases, it is incomplete. The pre-frontal cortex of your brain has to be brought to bear in thinking your way through the myriad steps and landmines that have to be navigated to see yourself to completion of your objective. Some people move in a very linear fashion while planning and others are all over the lot not seeming to grasp the importance of organization, sequencing and controlling the outcomes of steps in the process of getting something done. Whatever your approach may be, your plan has to be designed for ultimate execution. This means the actions steps have to be understandable, implementable, straightforward, efficient (unless you want to waste time and money) and effective. I liken developing a plan to putting together a puzzle or drawing a road map. The question is do we have all the pieces in place and do we know where we’re headed?
Risk Management Rule #3: Maintain Perspective
I am reminded of another tool described in Jim Collins’ book, GREAT BY CHOICE. Collins talks about the ability of successful companies to zoom in and zoom out in making decisions – in an effort to maintain perspective. Some of the common notions about this: the ability to see the forest for the trees, being at runway level or at 5, 10, 20 or 30,000 feet. You can be so overwhelmed by details that you lose the essence of a well-crafted plan. Without zooming in to maintain context, every step in a plan can be experienced as one-off, isolated, dead-ended and unrelated to anything else. Zooming out enables you to look for things like reasonableness, integration, relevance, pitfalls and opportunities, and synergy. Zooming out also allows you the luxury of simplification – in other words, getting rid of unnecessary work, compressing timeframes and adding more value to the plan.
Risk Management Rule #4: Perform Pre- and Post-Mortems
So let’s assume that you do a good job planning. What’s next? Blow up the plan! What? You heard me. Blow up the plan by using stress testing. Ask yourself a lot of “What if…” questions. One of the most interesting ideas I have ever heard comes from Daniel Kahneman in his book, THINKING FAST AND SLOW. The best way to understand it is first by describing what generally happens after something does not work. You may have heard this quote:
“There's an old saying that victory has 100 fathers and defeat is an orphan” –President John F. Kennedy
I call people who run away from defeat the Monday morning quarterbacks. They participate in the blame game and start second guessing everyone and everything. This approach is clearly not productive.
But on a more positive note, most forward thinking organizations do a post-mortem of all projects to learn the good, the bad and the ugly. In fact, many branches of the military have their version of a post-mortem that they call an “After-Action Review.” The military tries to get all of the negative emotions about the particular action on the table before they start to do their analysis. This is a clear-headed, no nonsense approach.
Daniel Kahneman, in commenting on the unbridled optimism of most entrepreneurs, says there is a way to blend over-optimism with rational, deliberative thought. He calls his process the “Pre-Mortem.” In a Pre-mortem you look out one year in the future. The project is done. What went wrong? Obviously, no one likes to assume something will go bad but he encourages you to assume the project went bad and asks you to figure out why it went bad. In effect, the question of what went wrong creates a vacuum that most people try to fill. So you start speculating about what could be the possible cause or causes. You make your list. You find your weak spots, you identify your contingencies and you become more realistic. Next you find the workarounds, the Plan B’s, C’s and so on. You then prepare for risk because you have some sense of what the risks could or would be.
Risk Management Rule #5: Conduct a Component Analysis
Did you ever hear of Failure Mode and Effects Analysis (FMEA)? Wikipedia describes it as one of the first systematic techniques for failure analysis. It is highly structured and as Wikipedia indicates:
“FMEA was developed by reliability engineers in the 1950s to study problems that might arise from malfunctions of military systems. A FMEA is often the first step of a system reliability study. It involves reviewing as many components, assemblies and subsystems as possible to identify failure modes, and their causes and effects. For each component, the failure modes and their resulting effects on the rest of the system are recorded in a specific FMEA worksheet. There are numerous variations of such worksheets. A FMEA is mainly a qualitative analysis.”
Obviously, this approach is of the most value when we are looking at complex implementations with a lot of moving parts. Maybe something like launching and implementing the U.S. federal systems for the Affordable Care Act – which has been all over the news the past 60 days or so.
Risk Management Rule #6: Embrace Pasteur’s Law
Isn’t it interesting that both Kahneman and the U.S. military have developed ways of looking at initiatives up front to understand what can go wrong – before you get started? I find it frustrating when people, often superiors, say, “It won’t go bad” or even more imperiously, “It better not go bad.” Murphy had it partially right: If anything can go wrong, it will. Most people take Murphy’s comments and say it was really bad luck that made it go bad. This is not very empowering. I like this one better:
“Did you ever observe to whom the accidents happen? Chance favors only the prepared mind” – Louis Pasteur
So the bottom line is if you want to be successful in just about anything, you have to manage risk. Know that there is risk in every decision you make. Go into your discomfort, taper your irrational exuberance and get real. Have a plan and make it feasible with room for contingencies and an execution strategy that’s do-able. Be successful and by all means, celebrate your success. You will be glad you did.
And, there is more, there always is.
Be genuine.
Copyright 2013 © John J. Trakselis, Chicago CEO Coaching
Join the Discussion
What’s on your mind? What’s keeping you up at night? What are the thoughts from your desktop? If you have topics you’d like John to cover in this blog, please email john.trakselis@vistage.com or call (708)443-5518.