The Evolution of Risk Management Part I

Next week IDB senior faculty member Jim Brunke (former VP, The Boeing Company) will kick off LOGTECH’s Advanced Program in Logistics and Technology with a presentation on “Risk Management and Effective Leadership.”

With a career that began more than 40 years ago, Brunke started as an aircraft mechanic on the hanger floor in Southern California and advanced to senior management and CEO positions in global aerospace services and support. Brunke is able to give insight into the real world fundamentals of business management after establishing and managing all aspects of aviation logistics and product support services for a number of multinational aerospace companies.

Here’s the first of a two-part article by Jim Brunke on “The Evolution of Risk Management” that tackles issues such as:

  • project management leadership challenges
  • strategic set of risk management techniques
  • behavioral component of risk management

The Evolution of Risk Management Part I

In the current world of dwindling resources, increased competition and rapid environmental shifts, many organizations are seeking greater returns on those resources invested in process and technological changes.  Many managers are becoming increasingly frustrated with the lack of progress they are making to adapt to these changing conditions.  Senior executives are becoming uneasy with the quality of decision making and cite a significant body of research that indicates cognitive biases affecting the most important strategic decisions made by even the smartest managers in the best companies.   Mergers routinely fail to deliver the expected synergies.  Strategic plans are not achieved and large investment projects are over budget and behind schedule—over and over again.  When surveyed, 75% of senior managers admitted that major change initiatives had failed to achieve the results that were expected. Further, 31% of major change initiatives are simply canceled before they are ever fully implemented. That means nearly a third of all major changes across corporate America don’t even get fully implemented. When one considers the costs associated with these failed efforts the numbers are staggering.

In the military environment, infrastructure changes and acquisition programs are falling further and further behind while costs are increasing.  Program managers are finding that fewer programs are meeting reliability expectations established during the requirements development phase.   Much of the lack of success in obtaining the rewards of change is due to the inability to effectively bound the risks associated with change.  Many managers have implemented structured risk management tools and processes but have failed to successfully balance the risk/reward equation.  The leader’s actions and the culture of the organization inhibit free thought and risk taking.   The bias for risk aversion has constrained the opportunity for reward.

Without risk taking, and the prudent management of those
risks….the rewards will not materialize

The application of a strategic set of risk management techniques is essential to effectively lead change.  These include a behavioral strategy combined with a traditional enterprise strategy, the understanding of individual and team biases that constrain and derail innovation, and a set of effective tools that provide appropriate boundaries and permissions aligned to team dynamics are underpinnings of creating a healthy culture of change. A point those in leadership positions often miss is that the culture of the organization is, over time, a direct reflection of them and the leadership style they demonstrate. The elements of culture can be directly impacted and changed by leaders through changing core beliefs or adjusting core values, consistently demonstrating new behaviors, and developing artifacts that reflect the beliefs and behaviors they are attempting to reinforce.

Brunke Levels of Risk

Three Interconnected Levels of Risk Management. Jim Brunke, Brunke & Associates, LLC

The techniques and tools identified above are essential in the environment of
complex organizational systems.  Managers are beginning to realize that the shift from managing teams and/or projects is significantly different from facilitating teams in the creation of process change innovation. The leadership challenges have shifted from problem understanding and definition, direction setting, and ultimate decision making to:

  1. Balancing competing forces such as overconfidence vs. insufficient confidence;
  2. Fostering constructive dissent;
  3. Establishing buy in or enthusiasm vs. reluctant obedience;
  4. Shaping perceptions and beliefs; and
  5. Learning from failure.

Leadership must provide a clear picture of what the organization is trying to achieve—the vivid description of the future must be defined and clearly communicated across the organization so people know the vision and direction. The minimum critical boundaries must also be defined so the team is clear on the design space. Skills and capabilities must be developed so they can rapidly respond to changing conditions in the environment.  An empowered staff will contribute to the creativity and innovation necessary in today’s global marketplace.

Next week – Part II of Jim Brunke’s, “The Evolution of Risk Management” where he will address the application of behavioral risk management and will give recommendations on specific risks when it comes to supply chain management, lean, global outsourcing and process recommendations.

For information on the LOGTECH Advanced Program in Logistics and Technology please contact April McGill or Lindsay Stone.