By: Catherine Daw and Gail Severini
| Published: August 2018
People are at the heart of every organization—no work gets done without involving people, assessing information, problem solving, and making decisions. And no strategies get executed 1) without people planning and executing the change, and 2) with people adopting the new approach. This dynamic combination of making change happen and being affected by change is a potent risk to strategy execution. We can’t always anticipate the reaction, subterfuge, or support that will happen when we plan and execute change, but a little planning goes a long way.
In executing strategy, employees are often the prime targets of change and disruption. Strategies often ask employees to change the work they are doing and sometimes even how they think about the work. For example, the execution of Customer Centricity requires changes in processes, but it also requires many employees to change the priority of the work (e.g., “When a customer is in front of you, their experience is paramount”). This is a mindset shift from efficiency to experience. The degree to which employees can successfully ‘live this shift’ affects the bottom line. When they are slow to adopt the new approach, or fail altogether, the risk is often overlooked.
If we would consider people at the core of risk management, we would have a higher chance of identifying and managing end-to-end risk. By recognizing a wider application of human risk and making it part of the “way we do business around here”, we could expect to create a more robust risk plan with commitment, awareness, and an action orientation.
What should Human Risk mitigation look like? It should take into consideration how the risks will be included in planning and execution as well as what types of risks to consider.
Risks in planning and execution include:
• Change Leadership: Leading change requires a different set of capabilities and experience than is required for leading operations. Novice change leaders present a significant risk.
• Strategy Execution: The more transformational the strategy and the more complex the implementation, the higher the risk. It is insufficient to look only at project risk. A view of the portfolio of change risk is essential.
• Elements of structure and process change: Present in most transformational change, these introduce risks such as organization design and development (e.g., role clarity, compensation), talent management and maintaining quality, health and safety, compliance standards.
Risks in adoption include:
• Performance and productivity: We are asking people to do their current “job” and transition to their new “job”. This puts their current performance at risk (consider current output, re-work, and safety implications) as well as puts the speed and proficiency of their adoption of the new job at risk.
• Retention: Often employees get frustrated and fearful during change and look for other employment. The cost of churn is significant enough, but also consider the risks to institutional memory, intellectual property, and team productivity to name a few.
• Capability building: We need to ask ourselves, “Can our employees develop the capabilities required to deliver results in the new approach in the time frames required, during other concurrent changes?”
• Resilience: Do our employees have the adaptability (the “change muscles”), as individuals and teams to make this strategic shift (and others either concurrently or subsequently) or are we burning them out?
• Effective conflict management: Strategies are often controversial and the execution extremely stressful. Leaders and employees will disagree. The ability to resolve conflict becomes increasingly important. Conflict introduces additional risks to communication and performance.
Human risk is costly when not led and managed well. This risk often makes or breaks results. Furthermore, if the effects of human risk throughout a process are not properly understood, it can spark unintended “chain of effect” risks. For example, rewarding a certain kind of behaviour such as collaboration can increase time spent on planning. If benefits are not directly tracked, this can be perceived as a net increase in costs.
Our own experiences as consultants and working within organizations, demonstrate human fundamentals are at the core of any undertaking where risk may be involved. The risks may manifest themselves as enterprise- or initiative-oriented risks, while they actually sit at the core of how people behave, interact, and undertake their work in addition to the overall culture of the organization. After all, we are only human.