In their new book Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage (2011), McKinsey senior partners Scott Keller and Colin Price make some interesting observations about organisational transformation and the achievement of excellence.
Leaders wanting to „beat the odds‟ must find answers to questions related to:
- Dramatically (and quickly) improving the organisation‟s performance
- Avoiding the pitfalls of transforming an organisation
- Ensuring that performance improvements will last
- Creating a culture of continuous change for sustained competitive advantage
In answering these questions, the book offers some counter-intuitive insights about what matters for success. A few of these are useful in thinking about and addressing uncertainty and dealing with risk and opportunity in organisations:
To sustain high performance, give equal attention to performance and the organisation's health (or 'fitness')
The 'soft stuff' can (and should) be managed as rigorously as the 'hard stuff', i.e. tools to measure and manage health (fitness) should be applied by any leader who wants to succeed in making change happen.
A more rigorous understanding of health (fitness) facilitates organisations‟ understanding of how management practices complement - or impede - one another.
It's clear that 'best practices' don't work in a vacuum, and that's why trying to replicate them in other organisations consistently fails to deliver 'best performance'.
Common sense and the so-called rational, logic-driven approaches to creating organisationwide change are open to bias. How to overcome this is a challenge for organisation change both in the general sense, but also for risk management implementation. Diagnostic risk assessment offers a way of doing this.
The Risk Management implementation dilemma and the role of Diagnostic Risk Assessment
Risk consulting practitioners and internal risk facilitators work hard to implement risk management improvement initiatives. Various aspects of ISO 31000 fuel the debates about implementation issues and challenges. As a Standard, ISO 31000 is an excellent document. It describes the 'what' of risk management best practice, but (not unexpectedly) does not set out the 'how' (Standards seldom describe the 'how' in any detail). So, what do we do to facilitate the 'how' from a diagnostic risk assessment perspective?
Using this approach, those involved in risk management implementation initiatives in organisations are able to provide advantages that are time-saving, cost-saving, performance-(or 'fitness'-) focused and repeatable (future benchmarks, either internally or by sector).
According to Keith Philips, CEO of QLBS.com (refer to A Disruptive Technology for the Consultancy Practice), the time has arrived to move from antiquated survey-based and other approaches to dynamic diagnostic consulting approaches using cloud-based and online self-assessments.
The cloud-based approach supports the diagnostic and consultancy process by:
- capturing Best or desired Practice
- converting them into diagnostic tools
- enabling measurement of current practice against desired practice
- visualization of strengths and opportunities for improvement
- facilitating action planning and automating report writing
- managing the Diagnostic Consulting process across the organisation / practice
- capturing the client interaction in databases for monitoring progress
- aggregating data for cluster analysis, benchmarking and development
- systematic development of action plans
- enabling the monitoring of improvement through dashboards
The future consultancy (internal or external) will have a professional diagnostics capability in which future and best practices can be shared across the consultancy and its clients. Recommendations will be developed quickly and execution monitored. This will aide faster learning, aggregating and storing knowledge quicker, and sharing of knowledge more widely internally and externally. All of this is designed to be part of the organisation's continuous improvement systems.
The Benefits of Diagnostic Risk Assessment
Feedback from organisations using the Diagnostic approach includes the advantages of being able to see the areas needing improvement and get on top of the issues. Using the methodology supporting the diagnosis ensures the execution of action plans for improvement.
For risk consultants and internal facilitators, the Diagnostic approach offers the opportunity to provide a professional, well-structured, leading edge, engaging approach. Automated processes enable faster reports and dashboards to support the implementation of improvement initiatives.
Within sectors or industries, there is an opportunity, over time, to develop greater industry knowledge, capturing all client or organisational interactions and building industry databases for trend, cluster and benchmarking reports.
The Diagnostic Assessment approach has been applied to ISO 31000 to support the ISO31000Rx (a risk management index) that enables organisations to measure their risk management practices, processes and approaches to guide risk management action planning and improvements. This forms part of the organisation‟s drive towards 'fitness' and as part of a continuous improvement process.
Achieving sustained high performance and organisational 'fitness' means focusing on uncertainty in a structured way to address risks and opportunities (the things that will promote or detract from the achievement of objectives). In the words of Keller and Price, both the 'soft stuff' and the 'hard stuff' needs to be addressed. The principles contained in ISO 31000 include both 'hard' and 'soft' aspects. The challenge is to address these in a balanced way to make lasting improvements and move the organisation forward.
Diagnostic Risk Assessment using ISO 31000Rx helps organisations to understand how risk management practices complement - or impede - one another.
Go to the ISO 31000Rx Diagnostic Risk Forum to access a Webinar series on the above topics and consider joining this Group.
Dr Dean Myburgh, Associate - QLBS.com, Director: 80-20 Options NZ Ltd.