Risk and Change in these Economics – Is Your Organization Ready?
Never before in our work life-time has there been such a need for management to lead and direct their organization. There are a number of key areas that are crucial for management to focus on in order to ensure their organizations have the clear direction necessary to weather the storm and come out of it successfully. These include: clear strategic direction, a process of innovation, a process to manage the change and risk management to ensure the opportunities are realized.
Clear Strategic Direction
The process of developing a clear strategic plan to outline your organization’s direction may seem enormous to some of us and perhaps of little value to others. In my experience, the fault lies not in the concept of strategic planning itself, but rather in the process that many organizations use to develop their plan. Oftentimes, planning does not get the necessary attention it deserves from the senior management group to ensure success. The most effective planning occurs when the senior management team makes time available from their daily responsibilities to think about their present and future organizational requirements and pre-planning is undertaken to gather together data and input from all levels of the organization.
Once these two things occur, the Strategic Planning process can be completed very quickly and comes together during a facilitated strategy session.
During pre-planning you will want to undertake the following two data gathering exercises:
Review your past and present and collecting customer and staff feedback
Review your history and present products and services, organizational structure, operational effectiveness, etc. Collect input from your customers and staff as well as owners, partners and suppliers. This will provide you with a comprehensive review of your strengths, weaknesses, emergent opportunities and threats to your business.
Benchmarking ensures a focus on the external environment and strengthens the use of factual information in developing your plans. Comparisons to other similar and dissimilar organizations and their departments can yield valuable insights into determining the right strategies to improve overall quality, process, procedures, structure, and so on.
Facilitated Planning Session
Once pre-planning is completed, the management team is ready to go away for a few days to delve into an exploration of the opportunities they must seize in order to continue momentum into what seems an uncertain future. This session will focus on:
- Review of the Organization’s Current Situation
The management team will come prepared to present a summary of what they’ve accomplished in their own area of responsibility over the past year. As well, they will include any long and short-term problems that they encountered as well as emergent concerns, issues and challenges. Discussions should include the current situation and its potential impact on the future.
- Exploration of the future opportunities
All of the identified constraints will be put aside so that the team can explore possible future scenarios. The benchmarking information, staff and stakeholder feedback will help in the development of this vision. It is critical to remove concerns with budget, time, etc. Allow this creative process to remain unencumbered with present concerns.
- Closing the gap between the present and this future
Using various tools such as a SWOT analysis ((i.e., strengths, weaknesses, opportunities, threats) and/or Force-Field Analysis, the management team will explore the key areas of opportunity identified in their description of the future state.
- Identification of the key strategies required to move the organization into this future reality
Develop your key strategies necessary to close the gap between the present and the future based on the analysis of the various scenarios identified in the previous step.
- Incorporation of innovation, change management and a risk assessment to ensure your future is secured
Now the management team is ready to explore in more depth, how to generate more innovations, how to manage the change required by employees to operate in this new era and how to manage the risks currently facing the organization.
Organizations that have a culture which supports innovation are often customer focused, value-driven and strategic. They ensure that their operating strategies are developed through interactions with their employees, customers, partners, vendors, suppliers and consultants. They review market trends and identify, through benchmarking, what is required to out-perform their competition.
Innovation It creates new knowledge, methods, implementations, and paradigms. It helps to develop new products that can serve new customers in new markets, in order to compete more effectively and gain new revenues. Innovation helps all levels of staff to cope through increased knowledge including: technical, economic, competitive, environmental, political, and social. It helps them to manage within their global framework.
As well, innovation leads change in so far as it is a process by which new directions are set, new ideas are created, and possibilities are turned into reality. In fact, an effective process for innovation prepares the organization for change. It is the catalyst for moving beyond today and into the future created through your strategic plan.
Barriers to Creating a Culture of Innovation
Organizations that focus on short-term, bottom-line oriented thinking create pressures on management and staff that diminish the focus on the long-term innovation process. This is usually evident in organizations that are obsessive about quarter-by-quarter results. Such short-term focus forces people to spend most of their time sustaining existing products and services and they have little to no time to think “outside the box.” This constant examination of quarter- by-quarter results versus longer-term planning creates a culture that is not supportive of innovation. Although it may be difficult to ignore the short term in these economic times, keep in mind that over-indulgence in this activity will diminish a culture of innovation.
In my experience those organizations that are characterized as innovative focus on both theirs, and their customer’s, needs and opportunities. They focus on achieving and maintaining profitable operations. These organizations are constantly looking for ways to reinvent themselves and constantly introduce new varieties and generations of products and services.
Additionally, organizations that have a culture of innovation will measure management’s performance based on their ability to create new value-added products, services and ideas. They will also examine the extent to which they do this with staff rather than independent of their staff and that they can demonstrate a clearer understanding of the use of an innovation process versus management directive in getting staff cooperation.
Managerial performance in creating a culture of innovation can be demonstrated in their regular department meetings. To what extent are these meetings focused on exploring new ideas? How many of their staff are genuinely interested in (and willing to pursue) new ideas? Is staff being trained to understand the innovation process? Is there an aggressive effort in the organization to build new opportunities based on the development of new services and products?
Innovative cultures permit all levels of staff to try new things. A barrier to realizing this can be found in cultures which insist on a requirement for compliance in every dimension. Individuals who do experiment are often punished – especially if they fail.
Here are some ideas about how to build the culture for innovation:
- Open communication within and between departments and across all management levels.
- Hire people with diverse backgrounds and experiences and avoid “cloning”.
- Encourage employees to find new ways to do work and empower them to make decisions.
- Create an organization that extends out to customers, suppliers, partners and the environment.
- Stimulate research activities and provide employees some free time to experiment.
- Allow employees to take measured risks (with small costs) and seize opportunities.
- Create processes to evaluate any idea on merit, regardless of where it is coming from.
- Identify and separate the creative from operational functions in the organization.
- Use group creativity techniques frequently to promote team building and generate new ideas.
The outcome of the Strategic Planning process should be a requirement for change on the part of the employees to manage in the new organizational constraints. This includes the need for more innovative approaches to how work is managed, how customer requirements are met, how new products and services are developed, etc. The change process is an exciting journey that engages all levels of employees in helping the management implement their strategic plan. Some of the key steps to follow:
- Accept that change is a process
First, recognize that change is a process. It follows a series of stages which engages everyone in the change. It is not complex but it is a journey.
- Move forward step by step
When organizations strive to restructure or refocus or create a culture of innovation, etc. it is important not to skip any of the steps in this process. John Kotter said, “Skipping steps creates only the illusion of speed and never produces satisfactory results” and “Making critical mistakes in any of the phases can have a devastating impact, slowing momentum and negating hard-won gains.” Yes, there is a sense of urgency to bring about change as quickly as possible. This can be achieved, without skipping any of the steps.
- Generate motivation
First, executives or other players in the organization need to stir up a sense of urgency among employees and other affected stakeholders in order to generate the motivation to spur change within the organization. However, this sense of urgency has to be strong enough and perpetuated by outside analysis, customers, economics, etc. in order to propel change forward. The results of the strategic planning process will help with the messaging.
- Form a powerful guiding coalition
Once change is identified as the best solution to market share, profit losses, or other catalysts, leaders throughout the organization have to band together to guide the transformation process, and these leaders can include board members, customers, union leaders, executives, chairmen, and others.
- Create a shared vision for corporate change
The management team then communicates to all employees, creating a shared vision for corporate change. A clear vision should also include the transformation steps that are required to propel the organization towards reaching the strategic plan. The transformation of an organization includes short-term goals based on the strategic plan that can be tracked to show all employees how progress will be measured. It must include descriptions of the new environment of innovation. Employees need to be aware that this will be a long journey but will be worth it, even in spite of short-term job cuts or other immediate changes.
- Continuously communicate the vision
The change process effort will fail unless most of the organization understands, appreciates, commits to and tries to make the effort happen. The guiding principle is simple: use every existing communication channel and opportunity.
- Empower others to act on the vision
Remove obstacles there may be to getting on with change. This entails several actions. Allocate budget money to the new initiative and free up key people from existing responsibilities so they can concentrate on the new effort. Allow people to start living the new ways and make changes in their areas of involvement. Nothing is more frustrating than believing in the change but then not having the time, money, help or support needed to effect it.
- Plan for and create short-term wins
Real transformation takes time therefore; the loss of momentum and the onset of disappointment are real factors. Actively plan to achieve short-term gains which people will be able to see and celebrate. This will provide proof that efforts are working and adds to the motivation to keep going.
- Consolidate improvement and keep the momentum for change moving
A premature declaration of victory can kill momentum, allowing the powerful forces of tradition to regain ground. Keep in mind that new approaches are fragile and subject to regression. Use the feeling of victory as the motivation to delve more deeply into the organization: to explore changes in the basic culture, expose the systems relationships of the organization that need tuning, and to move people committed to the new ways into key roles.
- Institutionalize the new approaches
At the end of the day, change sticks when it seeps into the bloodstream of the corporate body and becomes “the way we do things around here.” This requires a conscious attempt to: show people how the new approaches, behaviours and attitudes have helped improve the organization and when the next generation of leaders believe in and embody the new ways.
This is process of identifying, analyzing and responding to the risk factors that might prevent the successful implementation of the strategic plan, developing the culture of innovation and implementing organizational change.
The purpose of conducting risk management is to:
- Identify possible risks which might prevent success.
- Identify actions which will reduce the likelihood of these risks.
- Provide a rational basis for better decision making in regards to all risks.
- Plan appropriate responses to the eventual outcome of a risk, should it occur.
Proper risk management implies control of possible future events, and is proactive rather than reactive. It will reduce not only the likelihood of an event occurring, but also the magnitude of its impact
Follow this risk management process to reduce management by crisis. There will always be some things that will occur but most of these, through sound risk management, can be managed, rather than reacted to.
- Identify the risks
This is largely a brainstorming activity by the management team. It can also be done by various members of employees. A cross-section of employees can add insights into potential risks.
- Assess the risks
The team will combine various risks into categories of similar responses. These might include risks to creating a culture of innovation, to developing new products and services, to employee motivation, etc. Then an analysis of the root causes of each group of risks is identified. Questions the team can ask include;
- What would cause this risk?
- How will this risk impact the project?
- Identify how to reduce risk likelihood
The team will examine the risk groups, their root causes and begin to brainstorm strategies which will reduce the likelihood of the risks? These might even eliminate risk likelihood.
- Develop contingency plans
The team will then brainstorm ideas which will help to manage risk, should it occur? These identified strategies should be developed into short contingency plans that can be put aside. Should the risk occur, they can be brought forward and quickly put into action, thereby reducing the need to manage the risk by crisis.
I began this article by stating that never before, in our work life-time has there been such a need for management to lead and direct their organization. I have described the areas that I feel are crucial for management to focus on in order to ensure their organizations have the clear direction necessary to weather the storm and come out of it successfully. With clear strategic direction, a process of innovation, a process to manage the change and risk assessment to ensure the opportunities are realized, your organization will be ready to meet today’s economic and competitive challenges.