21st century risk management – the era of mega risks

The current COVID-19 pandemic is a global catastrophe on a scale that we’ve never experienced in business. It has forced choices upon us that a year ago we never thought possible – community versus economy, health versus wealth, freedom versus conformance, prioritising who to save and who to let die. In Australia, we are turning the corner. With smart choices, the worst could be behind us. Smart choices include learning lessons from the pandemic to strengthen our understanding of risk.

In the first week of February 2020, in the capacity as my organisation’s Chief Risk Officer, I developed a Coronavirus Response Plan. In doing so, I pored over information that was emanating from China. I checked in with global risk experts who were analysing probabilities of a broader pandemic. In my Collins Street office, I was playing out a range of ‘what if’ scenarios on the whiteboard. They all seemed bad:

  • What if people are prohibited from coming into the Melbourne CBD? How does that even happen? Would the army patrol the streets?
  • What if we become confined to our houses like in Wuhan City? How could that happen in a city of 5 million? 

The possibilities were almost incomprehensible in Australia at that moment. Nothing like this had ever happened in our country before, so the prospect of it happening now seemed far fetched. My strongest memory of that time was a feeling of deep anxiety. The scenarios were ridiculous, even if the data suggested otherwise. I was anxious about my professional reputation if the scenario analysis was wrong. It would be a massive over-reaction if the virus didn’t travel. Discussing the topic with others didn’t help. Most were dismissive, unable to grasp the possibility of something that has not happened in our lifetimes. One-in-one-hundred-year events are like that.

And then the world changed.

Five weeks later we evacuated our CBD office and switched to home-based working, just as the plan outlined.  Welcome to 21st century risk management.

What now?

Seven months later and many are planning for a ‘Covid-Normal’ business environment. COVID-19 isn’t going away any time soon. Our task is to be clear about our risk capacity whilst implementing a range of new compliance measures. Some of the emerging COVID-19 regulations will seem draconian and intrusive. But we have no choice but to work within the emerging regulatory system and not confuse compliance with risk.

Our revised risk protocols will need to be understood by everybody in our business (clear appetites, tolerances, controls, roles and responsibilities) so that we can quickly identify and rapidly respond when things start to go wrong. Some customers and employees will invariably have personal risk tolerances that vary from our organisational tolerances. Outlier behaviour cannot be the reason your business gets shut down. Behaviour such as refusing to wear a mask, refusing to physically distance or even refusing to come to work is foreseeable and there are no excuses for failing to have plans in place that protect the system.

Tactical verses strategic risk management

Tactical risks mostly involve those things where the solution lies inside your business, and therefore can be controlled. If you can control the risk, then you must. Focus on early detection, prevention and elimination.

Covid Safe Plans are an example of tactical risk management. Tactical risk management will necessarily dominate our thinking in coming months, as this is what will be required to get us operating effectively again and restore community confidence. This includes things like pedestrian circulation plans for your retail store, indoor and outdoor patron dining plans for your cafe and smart ticketing options for your sporting events that enable rapid tracing should an outbreak occur.

Tactical risk management is critical but will not be enough. That is why we must devote much more time to strategic risk management.

Strategic risks, in this context, mostly concern events which are external to your business and cannot be controlled. When they occur, they materially impact your business. The big strategic risks need to be considered and addressed differently to the tactical risks. At the heart of this difference is accepting that you do not hold the levers of control. No matter how well you prepare, big external events will still occur that may severely disrupt your business. So instead, place your focus on environmental scanning, buffering and recovery.

To assist in my environmental scanning, I allocate strategic risks into six mega risk categories:

  1. Habitat risks – destruction of the natural environment, often but not exclusively climate related, leading to irrevocable changes to ecosystems.
  2. Biological risks – such as COVID-19, which is dominating our lives right now.
  3. Water security risks – security and supply of water is fundamental to human survival. Breaches of water security bring life to a halt within days.
  4. Cyber risks – see how far you get into your day if you cannot log into the system tomorrow, if the traffic lights don’t work or if your smart phone is unresponsive.
  5. Energy risks – The engine room of industry and the basis of movement around the globe and across town. Do you even own candles and matches?
  6. Food security risk – Protection of food sources and supply is fundamental.

You might develop different risk categories to these. The important challenge is to think on a global scale and consider the potential events that might occur, which would impact your business. Risks may be indirect, such as impacts to supply chains, or direct, such as cyber-attacks.

Strategic risk management requires advanced ‘what-if’ capability. COVID-19 has demonstrated that business leaders must develop skills in looking over the horizon to those things that might occur and developing plans to survive and overcome these mega risk events.  Strategic risk management requires understanding and application of systems logic and its intersection with the complexities of human behaviour, often at scale.

Strategic risk management accepts that bad stuff is going to happen. Your task is to build a buffer into your operating model that protects your business from the immediate impact of a risk event. That gives you the most precious commodity – time.

Most importantly, strategic risk management requires us to practice failing and recovering. Do it regularly and make it the centrepiece of your risk culture. Regular scenario testing of disaster events and demonstrating your capacity for recovery builds resilience and confidence in your workforce. The first time you discuss how you might respond to denial of service and ransom demand from a Russian hacker better not be on the day when it happens.


The next mega event won’t just be a pandemic

We now know what a pandemic is. We also know that global and local connectedness has resulted in COVID-19 spreading faster than we could have ever imagined. Global connectedness, instant communication, ease of travel and access to information has created co-dependencies across economies and communities that will only increase. COVID-19 will re-set some of the rules of engagement and it will take some time to find a new normal, but we will return to most of the patterns that we once had.

But the mega risks are only going to increase. Old thinking about one-in-one-hundred-year events will be re-baselined. Pandemic risks will be rated as one-in-five or one-in-ten-year events from now on. But the real threat is the increasing probability of overlapping mega risk events.

This year in Australia, we had an eight-week gap between catastrophic bushfires along the east coast and the onset of COVID-19. Consider for a moment if those events had overlapped? Now add to the catastrophe the possibility that our telecommunications networks could be attacked and be off-line at the same time.

Risks that are complex now, will become chaotic when they merge. We need to be prepared.

So where do we start? 

Begin by splitting your thinking and effort across strategic risk and tactical risk.

Revisit your risk registers.  What is the mix of internal events and external events? There ought to be a balance of strategic and tactical risks, that makes sense for the business and the industry that you are in.

Don’t allow your risk registers to be clogged with ‘People and Culture’ risks.  When that occurs, it signals a culture of management avoidance. If you have people and culture issues, deal with them as a leadership priority. Addressing people issues will have a materially beneficial impact on long term risk culture.

Finally, learn to accept the discomfort that risk events never occur in the isolated way they are described in our risk registers. Your risks are linked. In the new era of mega risks, overlapping events will occur simultaneously. Your risk eco-system is connected in a subtle but complex way, often with the intersections occurring at the human level. When things start to go wrong, it is likely that problems will appear on several fronts. Whilst they may seem disconnected, they are likely to be highly connected, requiring systemic responses.

If you find yourself playing ‘whack-a-mole’ with a myriad of issues in your business, then ask whether you are dealing with strategic or tactical risks? Am I trying to control scenarios that cannot be controlled? Is your energy therefore better directed elsewhere? The answers may surprise you. 

Melbourne’s COVID19 moment of truth

I’ve been watching the global pandemic data accumulate for months now. Like many, I’ve been trying to make sense of trends and patterns. Where is Covid19 having the most impact? Who will be affected? Who is managing it best?

There appear to be increasingly predictable causation branches that can operate independently, but dramatically increase in impact when operating together. If you’ve been watching the pandemic closely, little of this will surprise you. What surprises me, however, is how often the controls that can reduce the risks, and which are readily available, are routinely ignored. The four main causations are:

1.      Age (median age and population over 65)

2.      Population density (total numbers per square kilometre)

3.      Being indoors (add to this the presence of circulating air conditioning and heating)

4.      Movement (virus transportation).

Older median aged populations are far more at risk than younger median aged populations. A higher median age, also typically includes a greater proportion of people in the 65+ year age bracket. This cohort is far more susceptible. Where do older people congregate? Aged care facilities and hospitals are the obvious places. Co-morbidities increase the impact of the virus once affected, but generally, people seem not to be at greater risk of initial infection by having other conditions. People with other health conditions are more likely to tick more of the four causation boxes, so can be simply in the wrong place at the wrong time. That is, they have a higher probability of coming into contact with an asymptomatic spreader.

In Australia, our median age is 37.9 years. This places us 144th out of 235 nations or nation states. The global median is 30.9 years. The global median is lowered due to the African continent having a median age of 19.7 years, across a population of 1.3 billion people. It is, in world terms a remarkably young continental population, which may provide some protection against Covid19. That is to say, the infection rate may be similar to other places, but the fatality rate could be lower. To date, that is exactly what is occurring.

Italy (second oldest global median age at 47.3) is a prime example of the age risk. But that only tells part of the story. It is age, coupled with population density that creates a much bigger risk. Countries where populations live at close quarters are their own high risk. Italy has 60 million people crammed into that boot which covers the same area as Victoria and Tasmania combined. Italian authorities acted quickly when Covid19 was detected, but the combination of age and population density created an infection hothouse.

In Australia, the ACT has the highest population density, but a relatively small population. It also has a median age which is lower than the national median. Tasmania and South Australia are ‘old’ states, with median ages above 40 years, but with tiny population densities. Victoria, on the other hand, has a median age of 37, but a population density almost three times higher than the next most dense state (26 people per square kilometre, followed by NSW with 9.5 people per square kilometre). Victoria’s (read Melbourne’s) population density is growing rapidly and creates a question of the new risks associated with 21st century higher density living.

International studies are demonstrating how the infection spreads indoors at an alarming rate, compared to its relative dissipation outdoors.  This recent article by Helen Thompson in Science News, unpacks studies across several countries and explains the risk of indoor work and dining. The lesson here is simple. Don’t work in office buildings at the moment, if you can work from home. More troubling though, Melbourne prides itself as being Australia’s food and bar capital. When that is combined with its population density and age profile, we have risk factors unrivalled in Australia.

The final risk factor is movement. This can be split into two sub-categories; (i) quarantine restrictions on returning travellers, and (ii) local movement within cities. With respect to returning travellers, Vietnam is the current world champion in managing this. With a population of 97 million, it went into hard lockdown on 23 January (one of the first in the world) and enforced strict quarantine for returning travellers. Over six months, Vietnam had had less than 400 cases and no deaths, which is an extraordinary outcome for a country of such high population density.

Local movement within cities is an unnecessary risk, particularly if basic control measures aren’t in place. We know that people can be infected but asymptomatic. When inconvenience is confused for deprivation of liberty, exacerbated by the stubborn refusal to regularly and thoroughly wash hands, not touch the face, use hand sanitiser and wear a mask, then we actively invite infection. The USA and Brazil are tragic examples of cultures that are literally killing themselves, on the insistence of freedom and individual rights, above caution and collective responsibility.

The lessons for us all in Australia self-evident if we take the time to look. In metropolitan Melbourne, we have one shot at avoiding Stage 4 lockdowns. Until mid-August:

  • Stay home, work from home if you can,
  • Wash hands regularly and thoroughly and use hand sanitiser,
  • Spend time outdoors if you have an outdoor area at home,
  • Care for older people by engaging with them virtually, rather than face to face, and
  • Wear a mask, as a reminder, a signal and an actual control measure.

Your strategy is someone else’s operations (and other workplace misunderstandings)

I was chatting with someone last week who was trying to solve a work problem. I suggested that they speak to a certain person in their business to get that colleague’s perspective, to which I was bluntly told, “I’m not going to speak to her, she’s not strategic.”  The response surprised me. I found it curious that this view seemed to be confusing strategic orientation with somebody’s place in the hierarchy. Moreover, it got me thinking about how often we develop blind spots or misunderstand each other, because of our own fixed perspectives.

In my years of working in the field of organisational performance and leadership development, some patterns have become clear.  Above all else, there are two perspectives we develop that have the biggest impact on our effectiveness, and also hold the secrets to our blind spots:

(i) How we lead, and

(ii) How we make decisions.

Leadership styles can be plotted on a continuum. At one end is the transactional leader, whose bias is toward control, order, planning and KPI’s. At the other is the transformational leader, more interested in vision, change and possibilities. These extremes represent a bias toward leadership for individual needs verses leadership for collective interests. 

Each is highly effective in the right circumstances, but spectacularly ineffective in the wrong circumstances. There are many other well documented leadership styles, but in my opinion, they all fall somewhere on this continuum, exhibiting more or less of the characteristics of each style at the extremity.

When it comes to decision making, there is also a decision-making continuum, although it is less obvious. Some enjoy strategic decision making, abstracting up to a high level, understanding the impact and the strategic choices necessary to achieve a vision.  Others are great operational decision makers.  They analyse data, spot trends and mobilise resources quickly to ensure the right outcome on the ground is achieved. The strategic and operational decision makers are both incredibly valuable, but capability for both rarely exists in the same person. 

Something interesting is revealed when we plot the transactional-transformational leadership continuum against the strategic-operational decision-making continuum.  The overlay creates four domains, which are illustrated below.  The domains embody four distinct characters in organisational life, each necessary, and each with real strengths and weaknesses. Importantly, we need to understand that the four domain characters don’t always play nicely with each other.  

1.  The Change domain (transformational and strategic).

I call these people our explorers and entrepreneurs. They create change. Unflinching optimists, they are obsessed about growth, opportunities and (occasionally) risks to achieve their vision.  These are our big picture thinkers.  They can miss the detail, but are great at trusting their instincts, often seeing possibilities that others cannot. They can get bored quickly with operational detail and can be dismissive of the effort and skill of the detailed operational people.

How to spot them – These types will often choose not to read a report that is provided to them in advance of a meeting, as they’ve simply not prioritised it as important.  If they take a peek at the report and don’t like its contents, they won’t come to the meeting at all.

2.  The Governance domain – (strategic and transactional).

These are our governors and auditors. They are exceptionally good at understanding and implementing controls and policies. They make, enforce and follow rules.  They are good strategic thinkers and keep the rest of us on track through their frameworks and policies. They make evidence-based decisions and ensure everybody else does as well.

They are not as deft at incorporating people into their rules-based frameworks, expecting everybody to work within their system and constantly being surprised when they don’t.  Consequently, they can be cutting in their assessments of people who don’t see the world like they do.

How to spot them – They know that there’s a policy for that issue, as well as what’s in it. But they will insist that you to read it for yourself.

3.  The Management domain (transactional and operational)

These are our traditional managers and analytic thinkers.  They take care of the detail.  They work well within existing systems and processes and will build them if they don’t exist. They ensure they have the right operational reporting in place and are close enough to the action to observe the strengths and weaknesses of the existing system that they work in. They are often suspicious of the ‘big thinkers’ and visionaries. They may present as stern and pessimistic, because they know exactly what can go wrong. Change generally represents danger for our managers.

How to spot them – Ask them to show you their work plan. They’ll have it, and the detail will blow your mind. 

4.  The Impact domain (transformational and operational)

I call these our sociologists and coaches. They have a great understanding of the impact of strategy on people and work diligently on the ground to ensure that operational performance meets strategic expectations. They are sensitive to indicators of climate and readily swing into coaching mode to get people back on track. 

They are masters of relationships but get frustrated with being boxed in by rules and policy requirements and often struggle with governance.  They can be loose with detail, preferring to leave some wriggle room, because they know that the human experience needs flexibility, but this frustrates others who need more structure.

How to spot them – They know what’s wrong with Kevin and are working with him on his problem.

The creation of the four domain characters reveal much about why we find alignment with some people but struggle with others. 

Firstly, the more you understand yourself, the more likely you will know which domain you fit into. Don’t kid yourself that you are a delightful mix of all four domains. That’s not how our brains work and it’s not how organisations work. If you are not sure which domain you belong to, ask a trusted colleague. It is relatively easy for somebody else who knows you well to judge where you sit.

Secondly, your domain can change over the years. As you experience the wins and losses of professional life, you transform and so do your thinking and work preferences. 

Thirdly, you will find it relatively easy to align with people in domains adjacent to yours, but very difficult to find common ground with those who occupy the domain diagonally opposite. That is because either your leadership style or your decision-making locus is aligned with those adjacent to you.  By contrast, the people you encounter in the opposite domain don’t approach leadership or decision making in the same way as you. It is almost certain that you will, at times, misunderstand each other.  At its worst, the irritation you feel with each other can result in a breakdown of trust, leading to confrontation.  If you get closer to these people and develop empathy for their perspective, then your effectiveness will skyrocket.

Understanding the different domain characters in your business and recognising and celebrating the roles they play, will substantially increase the likelihood of getting a great result.  When people play to their strengths and feel valued for those strengths, great outcomes are achieved. 

It takes all types to make a great business. So where do you sit on the leadership and decision-making continuums and which domain is your natural home? 

Looking out for your workmates’ mental health

The descent begins with the signs of disengagement:

  • Missing deadlines;
  • Not letting go of issues or re-prosecuting decisions that have already been made;
  • Deficit language and constantly finding fault;
  • Sarcasm, cynicism;

As it progresses, they become quiet, and increasingly invisible:

  • Physical separation from others – arriving last to meetings, sitting at the end of the table, never in the middle;
  • Using flexible work arrangements to avoid personal contact;
  • Over-reliance on email communication;
  • Disappearing from the office for extended periods;
  • Diary appointments cancelled without explanation.

To workmates, it’s out of character:

  • She didn’t used to be like that;
  • He’s been grumpy for weeks;

But before long, those same workmates adjust to the behaviour and incorporate it into their work routines:

  • Stop inviting him out for lunch;
  • Don’t invite her to the meeting;
  • Find somebody else to work on the project;
  • Look the other way.

And then one day, one of two things happen:

1.    An incident occurs, which everybody saw coming but nobody did anything to stop, or

2.    She stops coming to work, takes sick leave and quietly disappears.

The signs of deteriorating mental health, most commonly experienced through depression and anxiety, are often there for all of us to see. Left unaddressed, typical patterns of descent occur.

Men and women tend to behave differently, but predictably:

For many men, depression presents itself in the form of anger, irritation, or aggression instead of sadness.   Men use alcohol or other substances to cope.  Left unaddressed, the issues tend to worsen rather than resolve.

Women are more likely to notice symptoms of atypical depression like sleeping excessively, eating more, gaining weight, and experiencing feelings of guilt.

While men often direct their inner turmoil outward, lashing out verbally or physically, women tend to place the blame on themselves, causing feelings of sadness and worthlessness. Women shrink before our eyes.

Contemporary life is complex. The pressure to succeed, achieve, be perfect or just keep up can be overwhelming.  Contrary to what many people believe, the workplace is not usually the cause of our mental health problems, but because of workplace pressures it is often the place where we reach the tipping point. Pressure at work can exacerbate a mental health condition that has its origins elsewhere.

But a supportive workplace is also the place where the turnaround can start.  It starts with personal connection.

We spend so much time at work, that we need strategies to look out for each other.  If you are worried whether they are OK, ask them?

  • When they brush you off the first time, ask them again.
  • Let them know what you are seeing and that you are there for them.
  • Encourage them to see their GP and discuss what they are experiencing. Seeing a GP is the first step to getting a mental health plan.
  • Check in tomorrow, and the day after.
  • Be persistent and be present.
  • Help stop the descent.

The most powerful thing you can do at work is give somebody your undivided attention.

Put that to best use.

The Black Dog Institute has valuable resources

HR and Risk have merged – they just don’t realise it yet

If HR and Risk Management were single people looking for meaningful relationships and stumbled across each other on Tinder, they would probably swipe left and move to the next potential match. What they don’t realise is how compatible they are. They are both dog people, they love to keep fit, travel, cook and both believe they have a great sense of humour.

Risk and HR are evolving. They are moving into each other’s territory, so they’d better get ready to have grown up conversations about how they are going to make that work. In fact, within a few years I expect to see HR and Risk merge into the one function. And when they do, this will be the making of the HR profession, which has often struggled for impact. It will also see the humanising of risk management.

The overlap is culture. And if there were any confusion, Australia’s Hayne Royal Commission clarified beyond doubt that risk management must learn new skills to asses risk through the interaction of governance, culture, leadership and decision making.

Progressive risk leaders have already introduced the topic of Risk Culture. That is entirely appropriate. But don’t be fooled. Risk Culture is Organisational Culture. If your conversations are focusing on different things, then either your risk settings or your HR settings are wrong.

The legacy of the merging of these professional disciplines will be that better measures of culture will emerge. Today, the measures of culture are quite woolly. Our inability to describe culture is the first problem. Not that there isn’t a raft of great academic literature on the topic. It’s just that even when culture is defined, it generally isn’t measured well. And if not objectively measured, then efforts to change culture are abandoned the moment the current crisis passes.

The reality is that improving organisational culture and managing risk through better governance and decision making is not only hard to measure, it is hard to do. It takes time. It is about changing the collective psychology of the people in an organisation. It also requires an organisation to be clear about what it wants as the outcome of its efforts, and not just clarity about what it doesn’t want to be. 

What is our appetite and tolerance? What do we do check? What are the consequences?

The moment has arrived risk and culture professionals. Don’t blow it!

Culture on trial

Thanks to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, board directors and executives across Australia are dissecting organisational culture. This is simultaneously a blessing and a curse.

As a two-decade leadership and culture professional, I am delighted to see this most critical area of organisational life, one that I am deeply passionate about, finally being recognised for its importance.

The challenge of course is that everybody is an expert. And everybody has the fix. And none of us are contributing to poor culture, but if you look over there…

Optimistically, we should celebrate that strengthening organisational culture is now on the agenda and move swiftly so as not to miss the opportunity. The Hayne Royal Commission final report will be handed down at the start of February 2019. By my reckoning, this will open a window for change that will last around 12 months before organisational attention spans are exhausted. During that time, the need to be seen to be doing something will result in enormous amounts of money spent chasing the unicorn, often with little tangible return on investment.

What my years in this professional field have taught me, is that every organisation is simultaneously different and the same. Organisational leaders often insist that they have unique circumstances, but in truth, organisations are made up of people, and human behaviour and motivation is entirely consistent. Therefore, the approaches to strengthening culture remain consistent, whatever the circumstances.

Here are some thoughts that might guide a program of cultural transformation.

Culture is a system

When we try and describe desired culture, we often struggle and end up describing something quite abstract, making it difficult to pursue.  My perspective is that culture is the system of conduct and consequences that operate in every business. Sometimes the system attributes are clear but more often they are not. Expressed another way, culture is an outcome that follows a series of inputs and outputs. The inputs and outputs must be systemically designed and managed to increase the likelihood of achieving desired outcomes.

To describe desired culture, start with a conversation about organisational purpose and success. What are the underlying assumptions about purpose and success in your organisation? What do individuals and groups need to do to be successful here and is that consistent with the organisational ambition? 

From here we can develop a narrative of actual culture verses desired culture. Actual culture must be described realistically from the outset. Identifying the sacred cows that stand between desired and actual culture takes courage but creates an important platform for change.

So, what are the inputs and outputs that lead to culture?

Input A: Clarity of desired client experience

The Hayne Royal Commission provides important daily insights if you listen closely to the executives giving evidence. They mostly use the language of ‘products’ and rarely use the language of ‘client experience’. It’s a trick they play to insulate themselves for the impact of their behaviour. This is what I call ‘inside-out’ thinking. When executives use inside-out language, they limit the organisation’s thinking about culture.  

Describing the desired client experience requires ‘outside-in’ thinking and language. It forces participants to walk in the shoes of the customer and when done well, has a transformational impact on behaviour. 

Customers will describe their desired experience, but you must ask them first (don’t assume) and then you must describe, in detail, what components, make up that desired experience. 

Ensure everybody in the organisation participates in conversations about desired client experience.

Input B: Conduct described through performance and capability standards

Delivering the desired client experience requires the internal performance and capability standards to be carefully described along the value chain. This is where great OD practitioners are worth their weight in gold. The activities that deliver the desired client experience need to be described and the minimum acceptable standards must be clear. 

To achieve those standards, we must also describe the capabilities required from the people who will deliver those activities. Work out what these capabilities are and how will we systemically train and supervise our people to deliver to those standards?

The combination of performance and capability standards are what I categorise as conduct. Unless the desired conduct is clear, then variations in quality will occur, with the team eventually settling at the level of the lowest acceptable variable standard, built around the organisational consequence system.

Output C: Consequences

Consequences are the Achilles’ heel in Australian corporate culture and at the heart of the failings of the financial services sector. We need to take a systemic approach to designing how we recognise, reward, punish and ignore the conduct that occurs in our organisations.

Having described the desired client experience, and the expectations of conduct, there must be a system of acquittal. These are our consequence systems. 

There are many questions to answer regarding consequences:

What do we recognise? How and how often is this done? Do we have formal recognition systems? What role does the hierarchy play in formal and informal recognition? 

What do we reward? How are pay and financial rewards arranged? What systems of non-financial rewards are in place? What standards of conduct trigger rewards? Are reward systems quantitatively or qualitatively based? 

What conduct is unacceptable and requires the deployment of integrity processes? How are complaints dealt with? Do staff have confidence in internal integrity systems? What really happens to employees when they complain?

What do we overlook? What conduct do we put up with that effectively sets the minimum standard? Where do we have inconsistencies or blind spots? As leaders, what commitments have we made about supporting each other to minimise inconsistencies?

The culture equation

Culture is therefore the outcome of the desired client experience, plus conduct, plus consequences. I used the inputs and outputs and created the culture equation, as an illustrative way to express the sequencing.

Final thoughts

All employees want to work in a great culture, but most do not understand how to play their part in delivering it. By describing culture as a system and expressing it through the culture equation, employees can grasp how they influence the operation of the system at an individual and group level.

Like everything else that we ascribe value to in organisational life, we must measure culture and track its progress over time. There are various tools to measure culture and all that I have used are effective. But be sure that you are measuring culture and not engagement. 

And finally, training current and emerging leaders to supervise and to lead the systemic approach to culture will provide a healthy return on investment. This doesn’t require expensive external consultants (who often inhibit the necessary conversations because they lack the feel for the organisation) but requires strong and committed leaders to facilitate conversations that cascade across the organisation.

2019 will be the year of culture. Let’s put it to good use.

Employee engagement & culture – know the difference to be the difference

Employee engagement and organisational culture are different things. Whilst most of us believe that we know this, few of us are able to describe the differences and fewer still can apply strategies to achieve a lift in one or the other.

What I have observed after two decades working in this field is that front line supervisors have a much better natural instinct with regard to employee engagement than those higher up in the hierarchy. That is because they spend all day with their people and develop mastery at regulating and influencing the short term emotional climate. 

As we rise in the pecking order at work, we begin to take more notice of how systems of work influence outcomes. What leaders become aware of is culture, even if they don’t recognise it as that. That is, they develop deeply held assumptions about what must be done to be successful. The unfortunate trade-off is that as we become more attuned to long term cultural systems, we tend to lose our sensitivity to the short term engagement signals that are everywhere in our workplaces. Some leaders become blind to these signals, as they create seemingly irreconcilable conflicts.

“That report was not good enough! I don’t care how Amy feels, if she is going to turn in work of that standard she won’t have a job at all!”

Through my work with individuals and teams, I have isolated four domains of supervisory focus that have the greatest influence on short and long term outcomes. That is, applied thoughtfully, these supervisory practices have the highest impact on positive emotions (lifting engagement) whilst creating sustainable systems (constructive culture).

1.   The supervisor models the right behaviours

Short term: She displays positivity, sincerity and remains calm under pressure. She chooses optimism over pessimism and never resorts to displays of cynicism. 

Long term: Her behaviour is predictable and consistent. Employees know what they are going to get each day. Over time trust is built. 

2.   The supervisor communicates thoughtfully

Short term: Each person knows what is expected of them – today, this week, this month and this year. She communicates in a way that each person knows where they stand about the work that has to be done. Responsibility and accountability are clear. She demonstrates connection to the business dynamics and when priorities change, she swings into action, quickly communicating how this impacts every team member. 

Long term: She sells the long term vision through artful story telling. She clarifies the boundaries for the team and permits team members to work autonomously within those boundaries, resisting perfectionism in favour of achievement. 

3.   The supervisor establishes personal connection

Short term: She checks in with people regularly, taking an active interest in the emotional state of her team and other stakeholders. She regulates the connections between team members, sometimes intervening and sometimes not.

Long term: She avoids the traps of treating everyone equally and being blind to uniqueness and differing capabilities. She demonstrates her awareness to difference by actively investing in team members’ long term development.

4.   The supervisor maintains the customer focus

Short term: She ensures that allocated tasks have a place in the customer value chain. Nothing is ever done, “because I said so.” Sometimes the customer value is difficult for team members to understand, but she takes the time to explain.

Long term: The systems of performance feedback, individual and team recognition and rewards are fully aligned to delivering customer value. She understands that achieving this congruence minimises perceptions of favouritism or bias.

Measuring both employee engagement and culture are important practices if an organisation wants to understand its progress in short term emotional management and long term systems thinking. 

Engagement and culture need to be addressed simultaneously, but have vastly different maturity cycles. Progress on lifting engagement through the supervisor practices described here can occur relatively quickly. Progress on lifting culture has a much longer maturity cycle. 

Celebrating improved engagement through positive survey results has important symbolism. It needs to occur in conjunction with long term system changes that will eventually embed the desired culture. Supervisors need to become skilled at describing why longer term work system changes continue to occur in spite of healthy engagement results, to avoid confusion by team members and can develop into change fatigue. 

Changing core assumptions about what success looks and feels like requires systems to cycle through repeatedly and predictably before people fully buy-in. Once supervisors collectively buy-into systems thinking, the wheel of culture change starts to turn. 

Job and process design – keep the customer in mind

I get my take-away coffee from a busy little laneway café. It’s good coffee, served by two diligent and friendly characters called Roy and Gus. There is a casual familiarity. When it’s quiet (which is rare) they are happy to chat.  When it’s busy (mostly) they give a knowing nod to acknowledge your presence, mentally log your order and get on with what they do best. They know their customers’ routines and orders. When a new customer comes in, they ask their name, write it and the order on the paper cup and the newbie is seamlessly integrated into the system. You are only ever a new customer once. It’s a system that works.

You receive a little inclusiveness when you buy the coffee.

In recent weeks something changed. Actually, six months ago something changed. New owners took over. Early on the new owners wisely understood that that Roy and Gus knew their thing and let them get on with it, while they made other adjustments to food menus and ordering processes. They installed a nifty ticket system.

But ‘intelligent’ job design has befallen my baristas.  Firstly, Gus is gone. That makes me sad.

Has he been replaced by a better model?  Well, no. In fact coffee making is now a three person job.

Here is the improved process. 

  1. The customer gives their name and order to the person on the cash register, who also writes down every name and order on every cup, every time.
  2. The cups are stacked up for the coffee maker to retrieve.
  3. The coffee maker now twists around awkwardly to retrieve the cups from a bench behind him and then completes half of the coffee making process. This is still Roy, who, by the way, looks miserable.  You see Roy doesn’t get to enjoy the simple pleasure of task completion and customer interaction.
  4. Once he has ground the beans and dispensed the coffee, Roy hands the coffee cup to a third person, the milk curator, who heats and froths the milk, completes the coffee and then yells out the name of the customer, who dutifully comes forward, collects their coffee and gets out of the way as efficiently as possible.

The utter stupidity of the change was reinforced to me today. I popped in at lunchtime to grab a coffee. The new process played out right in front of me. That I happened to be the only person in the café didn’t deter the milk dispensing customer fulfilment officer. Only two feet away from me, she turned with my coffee and bellowed out my name, as if calling the roll in a noisy classroom.  Roy just sighed.

All up the process takes about the same time but is now more labour intensive. The human touch has disappeared even though there are now more humans involved.  

When contemplating changes to roles or processes the first test should always be to understand the impact on the customer. Stand in their shoes.  Don’t imagine or guess what the customer experience is – experience it for yourself.  

There are many aspects of running a business that are really difficult. This isn’t one of them.

Can’t find balance? Change your internal narrative and prioritise

The debate about work-life balance continues to circulate. Each fearless generation insists they can find the mythical ‘balance’, only to later concede defeat. It’s quite easy to make bold predictions when the see-saw has few items that require balancing. Once the joys and trials of marriage, parenthood, mortgages, elder care, retrenchment or illness beset the best of us, most of us tend to follow similar paths.

But what is the balance we are looking for?

First, forget balance. It is a self-defeating trick we play on ourselves that can only ever lead to disappointment. Think priorities. Lifestyle priorities, including work. What is most important to me? And why?

In my coaching work, clients increasingly describe lifestyle ambitions they could readily achieve, if only they could shift their thinking. Yes, some want to climb Everest, or live the rustic lifestyle in a Tuscan villa. But for the most part, these are just fantasies, which we know will never be attempted. Most however, have ambitions to paint, learn the guitar, spend more time with an elder in their life, get fit or write a novel. But then come the reasons why we can’t.

Listen closely to the pattern of excuses we make, triangulated in debate around money, time and health.

When we are younger, we are fit, healthy and have more time. We tend to idealise the ‘big’ goals but bemoan our lack of money. “If I had the cash…..”

Those at mid-career are more financially secure and still have their health, but lead hectic lives. “I just don’t have the time…”In later years, finances are generally OK, more time becomes available, but those things we planned to do slip beyond our reach because of failing health. Some of us are only a doctor’s visit away from our lives changing forever.

Too often it takes a life altering event to jolt us into changing our priorities. It doesn’t have to be that way.

Contemporary workplaces are catering for flexible working in so many different ways these days. Notwithstanding the options, surprising few employees seek out the opportunities, often, incorrectly assuming that their boss will be unwilling to consider their request for flexibility to incorporate another priority in their life. Within 20 years this will be the norm. Portfolio working – multiple roles, parallel careers and the simultaneous and prioritised pursuit of personal passions will be common. Right now there are few who attempt this, but those who do reap enormous benefits.

The first step is to be clear about your priorities. If you don’t know, then the rest will be a muddle. In the debate you have inside your head, choose to be the grown-up and have an adult conversation with yourself. Be realistic, or your plans may fall apart quickly. And don’t be a victim. If you want to achieve self-actualisation, you have to be disciplined and take total accountability for your choices.

Lock in on the one clear goal that you want to achieve that you believe will bring more joy or meaning to your life. Research it. Make sure it is actually available for you to do. Don’t commit to learning the saxophone if there are no teachers in your area. How long will it take? Does that matter? Does it involve a lifestyle change and if so, do I need to discuss and agree this with my partner?

Importantly, talk about it with your employer. Try honesty and transparency. You may be surprised how accommodating your boss will be.

Generating positive change in expert cultures

What is an expert culture?

Expert cultures exist in absolutes. There is a way of doing something that is the right way and then there is everything else. In this world inputs are valued as highly or higher than outcomes. Rules abound and are generally clear. Where they are not, outliers are made aware of the unwritten rules and quickly learn to work inside the boundaries. Status is everything.

At its best, an expert culture creates a feeling of safety for those who understand the limits and choose to accept the deal. Work is predictable and managed, everybody knows their place and either conform or leave. Members can confidently plan for the future, safe in the knowledge that it they keep their heads down they will enjoy the benefits of the predictability.

When an expert culture decays, the downside is palpable. Over time, a cycle plays out – direction, compliance, avoidance, pushing decisions to the top, leading to more direction. Frustrations build. Independent thinkers are treated with suspicion. If they persist with non-compliant behaviour, the system swings into action and brings them down. The experts reassure themselves that they are protecting the system.

Much of the public sector is an expert culture. Contemporary reports of widespread bullying across public sector environments are an outcome of expert cultures in decay. Adding to the confusion, achievement focused leaders are often transplanted into these environments to ‘fix’ them, but find that what worked in an ‘achiever’ culture, is perceived as heavy handed and bullying in the expert culture.

Influence is not a common trait in expert cultures, as its value is misunderstood. Why suggest or hint at something when I can just direct it to be done? Conversely, why would I risk rocking the boat if I have no authority? The misunderstood value of ‘influence’ and its lack of application in expert cultures restrict risk taking and leave little room for reflective learning.

To generate constructive change from an expert culture, we must acknowledge its limitations. Expert cultures value efficiency over effectiveness, and doing things right over doing the right things. To generate positive change in expert cultures, the impetus has to come from and be continuously sponsored from the top.  That’s tiring, but vital.

So what works?  The following tips will coax the experts to the boundaries. They will make their greatest contributions toward constructive change at their boundaries.  But never fall for the trap of abolishing the boundaries that experts need to operate within, or the expert system will quickly shut down:

  1. Assemble a leadership group that values outcomes over inputs. This includes removing members of the group who are unable or unwilling to adapt. Leaders need to understand and respect experts, but not be beholden or intimidated by them.
  2. Be open about the change that we need to see. Give illustrative examples of what is needed as well as what we no longer want. The expert workforce needs real examples at the start, or else it may decide that it is too unsafe to engage.
  3. Communicate that the change we want is imprecise. It is not a tight set of outcomes by a certain date, but expressed as a vision, which includes a degree of uncertainty of say, +/- 25%, which gives the workforce permission to have a go, with a large landing zone.
  4. Sponsor achievement oriented change from the top. Put programs in place that enable and encourage employees to test and learn. This includes trying new things that might fail. Fail quickly, learn and move on.  These innovation hubs may have a limited lifespan in an expert change cycle, but need to exist to allow early adopters the chance to engage safely.
  5. De-clutter. Contemporise or abolish outdated rules and policies.
  6. Focus on constructive behaviours. Beneath the surface of expert cultures lay deep passive-aggressive behaviours. Recognise constructive behaviour, never ignore poor behaviour and deal with it swiftly when it surfaces.
  7. Make influencing a habit.
  8. Introduce genuine accountability systems. Good governance, clear goal setting, measurable and achievable KPI’s must be in place and reported. Invest in de-centralised accountability, so that line managers have the authority, tools and capability to lead their teams holistically.
  9. Never confuse technical expertise with an expert culture. Invest in and celebrate the technical excellence and industry leading specialisation of our people. Encourage them onto the speakers’ circuit, to write white papers and blogs, apply for awards and showcase their talents.
  10. Celebrate achievement.