Lead with your Values, Follow with your Capabilities
For those who believe that political initiatives and three letter words (ESG, DEI, etc.) will save us from the risks we face, please consider that political thinking is not the best kind of thinking we humans do. Adam Grant, Harvard’s best-selling organizational psychologist, recently shared a pyramid chart showing a “Hierarchy of Thinking Styles” that locates “Cult leader” as the only form of thinking lower than “Politician,” with “Contrarian” dead center and “Critical thinker and “Learner” on the top of the aspirational chart. All is not lost if we are willing to think clearly and learn together. Margaret Mead’s words come to mind: “Never doubt that a small group of thoughtful committed citizens can change the world; indeed, it’s the only thing that ever has.”
Risk management communication to stakeholders in business at present has reflected a gradual but definite shift (the frog was in the water as the temperature was turned up) toward the bottom of that pyramid as national and global businesses have moved away from thinking, learning, and prioritizing issues where they can be most impactful and toward checking boxes they were told to check to manage risk. I’m not alone as an executive who watched with real concern as optics and the voices of the crowd took over a process of communicating a thoughtful approach to risk management. Great risk management may be happening, but if so we are not effectively communicating what is most important about what we are actually doing.
How did so many global businesses decide to adopt one size fits all approaches to stakeholder engagement in risk management that were not the best they could do? Simple - we are almost all impacted by the power of the loudest voices in the room, the push of the crowd; we give up making arguments because we know that no one is listening anymore. Don’t we all “know” what we must do? (We’re not idiots!) If the choice is between the hard work of critical thinking and the easier work of going along with the crowd, and you will put yourself at the risk of social ostracization and worse if you don’t go along with the crowd, then wouldn’t you be crazy not to go along? Never mind that no one can say for sure what progress toward that standard you’ve adopted means. If you can create a DEI initiative that shows you care about diversity (in the most diverse nation on earth where all your stakeholders are all about it) - how much easier then doing the hard work to make your business actually more diverse and inclusive? We’ve got a program! We invested millions! This appeals to politicians, but it rarely achieves results.
Thoughtful approaches produce better results because they are all and only about results.
Good risk management requires looking at your specific business situation, then identifying specific initiatives and disciplines, based on independent analysis and with an emphasis on your capabilities. Within this context, commitments to ongoing action to protect the downside and make things better to improve upside are judged based on what can be measured and reported. Simple, but not easy. Specific disciplines must take into account short-, medium- and long-term factors in order to be relevant. And analysis and action must include transparent, clear dialogue with stakeholders about the process to ensure accountability.
Here are the most important non-negotiables for effective risk management:
Adopt a culture of transparency
Transparency and accountability create integrity, making risks apparent to decision makers as a shared language and culture is created among stakeholders
Lead with your values, follow with your capabilities
Only within an ethical environment can your outputs can be aligned to consider how better to invest in risk mitigation strategies for the difference that you can make
Build the upside of risk management into everything you do
Turning downside protection into upside potential will help your stakeholders to build their tolerance for talking through the good, the bad and the opportunity of doing better.
The challenge right now is to make the move from box checking to real outcomes that make our world better. In many businesses, the best thing to do at present is simply to tell the truth! We know that stakeholders want to be engaged transparently and honestly. Lay out the challenges of what you have been doing, and let’s begin to discuss the best way forward to manage your most pressing risks. There is a real opportunity now to unearth the good things you have been doing all along, but not talking about.
How to begin? Start with stakeholder engagement on pressing short term serious risks and go from there. This is a good mental exercise – imagine a simple chart– risk level on one side, time frame on the other - ask each stakeholder group to rank the issues on the horizon. This will help you to identify actions you need to take now and commitments that you should make for the future. Extra points for managing risks that also improve results. Through critical thinking and learning, thoughtful people can and will make a difference together.
