HR: Why Broaden Your Risk Perspective?

Strategy is founded on risk and risk is inherently subjective to the views of the people involved, including employees and management. As a result, HR has a great opportunity to improve the way in which risk impacts strategic success for the business, going beyond the more tactical or operational perspective HR has previously taken.

All economic activity is by definition “high risk”. And defending yesterday–that is, not innovating– is far more risky than making tomorrow.
Peter Drucker

HR and Risk Up to Now

Although it might be over-generalizing, for quite some time, HR has mostly focused on risk in terms of how to identify and address workplace risk items such as harassment claims, EEOC violations, health and safety liability, etc. These are all vital areas to be risk-managed, but to be more strategic, HR needs to broaden that perspective to include how it can positively impact business risk.

Risk is frequently misunderstood and mismanaged[i]. This misunderstanding and mismanagement can have unexpected, even dire consequences due to people’s varying comfort with risk and the complex ways that people in general react to it. Here’s a sobering real-life example of just how that can happen[ii]:

Blowing It on Business Risk and People – an Example

In oil & gas exploration, the odds are high against finding anything, let alone a find suitable for extraction. People working in this field apply their diverse expertise towards figuring which locations are most likely to be profitable. In addition, there is the added pressure to locate larger, more profitable reserves, which are even harder to find.

The decision on whether to bid on a lease and then drill is based on “pessimistic/low, likely/medium, and optimistic/high” estimates[iii] for how much can oil or gas can be extracted. If the “likely” estimate is large enough, then a bid is made and if that succeeds and drilling is approved and the actual output is on track to meet that large estimate, the folks behind that estimate are very happy as they can expect some kind of bonus.

However, it’s easy for a manager to only see the “optimistic” estimate and let that “frame” their expectations. Then, when in fact the more realistic “likely” value does result instead, the manager perceives a “loss” and they can end up taking it out on the troops. This did happen to a team and they were told they wouldn’t get a bonus because “the company wants those higher outputs” i.e. the optimistic level.

And here’s what happened next. The team then saw that only results that met the “optimistic” estimate get praise, so they naturally became more conservative in their estimates. They lowered their “optimistic” estimate to be closer to what they normally would have given as the “likely” estimate. In turn, the “likely” estimate was lowered as well. Because of these more conservative estimates, when budgets were decided, the allocations didn’t go to that team as much because their estimates are now lower than those of other teams. With a lower budget, that unit couldn’t bid as much on the leases (especially the riskier but higher potential ones – remember that the competition is bidding higher because they have higher, non-distorted estimates) so they missed out on more of the big finds.

Since there were fewer large finds returns were lower for the whole company. Investors were expecting higher returns when they chose the company, since they already understood it was higher risk. As a result, lower earnings and less capital were available for the company, it couldn’t compete, and eventually it was acquired.

What HR Can Do

All of this happened because management didn’t understand the relationship between the company business risk and the incentives and motivation of the people working there. If HR had an understanding of the strategic impact (e.g. company survival) of this relationship and had a role in making sure that managers understood it and practiced it as well, this poor management decision could very well have been avoided.

This was just one example from oil & gas exploration, but the same scenario plays out in a multitude of “high-risk” businesses ranging from software development and airplane manufacturing to drug development. However, the difficulty that management in particular has with dealing with the interaction of risk and incentives can even disrupt the competitiveness of “low-risk” enterprises. HR’s ability to apply its expertise with people coupled with a broader, strategic perspective of risk can bring huge advantage to a company.

Photo by hellolapomme

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[i] The definition of risk is not well agreed upon, but we will use the following: the existence of more than one possible outcome where some of them are undesirable (e.g. loss or catastrophe). Risk only has real meaning when a decision must be made and human decision makers are decidedly not “risk neutral.” That is, they will not simply choose the highest “expected values” with cold logic, but will favor certain choices over others depending on factors such as current wealth, level of possible loss, gain, framing, ownership, etc.

 

[ii] Credit goes to “Why Can’t You Just Give Me the Number?” by Patrick Leach, an excellent, succinct book that shows executives how to manage risk and make better decisions using probabilistic thinking. Also recommended is “The Flaw of Averages” by Sam Savage and as previously mentioned, “The Failure of Risk Management” by Douglas Hubbard.

[iii] The medium or likely value has about a 50% chance of finding at least that amount. The high or optimistic value has only about a 10% chance of finding at least that amount. In other words, they might happen occasionally, but not on average.

Bill Kutik’s Musings on HR Technology® 2009

After reflecting on his personal experience at September’s conference and expo and the observations made by many bloggers that attended (including mine), Bill has put together a very good column summarizing his takeaway of the important issues happening in business, HR, and social media. Go check it out.

Bill links together the oft-mentioned “generational issue” with the “digital immigrants and natives” observation and concludes that it might really be different this time. He goes on to make the point that the fear that drives organizations and HR departments to ban social media will put their companies at a competitive disadvantage. I agree and have posted previously how fear can lead to actions that ultimately destroy a company because it can’t learn anymore.

Bill ends his column by asking that those who attended email him with what they’ve learned. Bill is quite up front about his expectations and opinions, but is also just as open to input, so here’s a great chance to have your voice heard in shaping the next conference. This conference has shown to be an important gathering place for not only learning what is going on in HR technology, but also of those in the industry with great ideas and thinking about where and how business and HR can improve.

Yankees Win World Series – What’s the Verdict on Moneyball?

All you need is a stone and a sling. Neither sword, nor armor.

To borrow some phraseology from Kris Dunn, “Wrong question, Sparky.” The takeaway from Moneyball is not about it being right or wrong, but how it asks you to reconsider the way you look at how talent creates value for your organization. The aftermath of its publication in 2003 teaches us that the larger game never ends; that there is no single optimal answer for all time. There’s no trick to winning either, but rather a way to see what others are currently missing or choosing to ignore, use that to your advantage, and also obtain insight into building a better strategy from it. A lot of people are still missing that point.

Public Service Announcement: This post is not all about baseball nor the ins and outs (no pun intended) of winning baseball divisions. Rather, it asks: Why should HR people still care about the Moneyball story, especially since 1) it has almost been played to death the last six years, and 2) it seems there’s all this proof that it didn’t work.

People still debate the “correctness” of Moneyball. They point out that the stars of the book, the Oakland A’s, didn’t win their division and the Yankees, with the largest payroll, won everything. Even many who agreed with the way in which the A’s had utilized measures that other teams ignored are now observing that it is no longer a competitive advantage since the other teams with larger payrolls were adopting those very measures. Many readers took away from the book that it was just a trick and once the trick had been exposed, the advantage was lost, so what was the point?

The point was that it wasn’t about coming up with a trick. That’s the narrow view. Moneyball told a story about how an organization that had a constrained payroll was forced to rethink the strategy for winning the most games. Rethinking your strategy is the point. That this story took particular twists and turns just made it unexpected, concrete, credible (to some), and in some parts, even emotional (i.e. “sticky”). It should come as no surprise that the specific steps, measures and outcomes didn’t maintain an advantage or last. The fact that your steps and measures don’t produce the same results they used to does not necessarily mean you throw them out, especially to revert back to previously discredited measures.

That is itself another takeaway; competition never rests and you must keep searching for the next thing that will help you win. One very good way to keep winning is to focus, as Peter Bregman writes, on playing the game you can win. Malcolm Gladwell recently wrote a piece for the New Yorker about this very kind of thinking. In “How David Beats Goliath,” Gladwell gets into David’s thinking:

In the Biblical story of David and Goliath, David initially put on a coat of mail and a brass helmet and girded himself with a sword: he prepared to wage a conventional battle of swords against Goliath. But then he stopped. “I cannot walk in these, for I am unused to it,” he said (in Robert Alter’s translation), and picked up those five smooth stones.

In other words, David figured he wasn’t going to win playing by the other guy’s rules, so instead he focused on something less conventional. Conventional wisdom at the time was that you fought brute force with brute force: sword against sword, armor against armor. Nobody thought any other route had a chance, so why bother? It’s not about playing a one-time only trick either; it’s about confronting the harsh reality of a situation and choosing the option that gives you the best chance.

There are people still applying the real lessons of Moneyball (and many other books that came before and have followed) and are finding/rediscovering insights into how to win, how to play the game they can win, or even change the game so they win. Kris Dunn and Tom Davenport show how basketball teams are benefiting from focusing on measures that better reflect the overall benefit to the team when a player is on the court vs. individual measures. This would seem to have some application in business as well. But again, this isn’t all about finding a trick that nobody else has discovered yet. Sure, it’s great when the competition is still looking in the wrong places while you trounce them, but you also want to use this information to get better understanding and insight into how your business and the marketplace, and the pieces that comprise them, actually operate and interact. That is what will really help you continue to win going forward.

Photo by hawkexpress

Networking made easy

As you might recall I made a personal goal this year to do a better job networking. 

As I do, I have been working on this a lot in a very deliberate and focused way.  Sometimes it’s been great, other times marginal, but I have made progress. 

I know that I’m not alone in struggling with the part of me that likes substance over flash.

I have never been one to have a lot of casual friends.  I guess you could say I’m an acquired taste.  I become more interesting and useful when people know me well, at first glance I’m either just too much or not very interesting. 

I also really enjoy the kind of trust and collaboration that comes from a close relationship, so surface and casual relationships seem a luxury that I don’t have time for (read I’m too lazy to bother).

In my quest to find a way to network that would work for me, I got some great help from Patty’s workshop.  I was very happy to see that she put this down in a blog for others who struggle in a similar fashion.  So for those of you who would prefer to hide in your office instead of going to a networking event I strongly suggest you read this Authentic Networking post.   I promise it will give you a whole new perspective on the idea of networking.

The key message can be found here:

Instead of thinking about networking success in terms of the number of people you meet at networking events, or getting big numbers on LinkedIn or twitter, think about Authentic Networking as making real connections with people that you would actually like to meet. 

Bingo! 

No longer am I stressed to meet a lot of people.  Instead I’m targeting getting to know better people who interest me.  After I accomplish that, I’ll move on to finding new people who interest me and lather-rinse-repeat. 

As a bonus, I have really been enjoying this goal.  Who knew?

2 Years of Meg’s “BUTTs, ANDs, and ORs”

Two years ago today, Meg published her first post launching both TalentedApps and her wacky self into the blogosphere.  Since then, Meg has written a whopping 124 posts, outpacing her goal of 1 post a week (by 20, for those of you keeping score at home).  Through these posts, Meg has challenged us all to think differently, to think bigger, and to take more risks – all in an effort to improve ourselves and the workplace around us.

In honor of Meg’s achievement, we have collected our favorite Meg blogging moments.  We encourage you to vote on your favorites or add some to the list!

1. Meg isn’t afraid to share her unique strengths and personality quirks with us. We’ve learned much about her including her hard-wired desire to get moving.

2. Meg brings out her inner (or is it outer?) “used car salesman” skills to garner votes and launch us into the top FOT competition spot.

3. Meg shares successes and misses.  It takes guts and we learn much from both.

4. Meg went full bore into the world of Social Media.  In this frank twitter auto-biography, Meg explains the whys and hows of getting sucked into the social media obsession.

5. Meg has a knack for putting things into perspective; here, she rants on what users really want versus what buyers are getting for them.  She is also tops at finding a good use for an adorable baby picture.

6. My personal favorite:  Meg pulls suck-age gems from her husband’s peripheral HR experience to teach us all some lessons on the limitations of software.

7. And finally, the crowd pleaser.  Once you get past Meg’s wacky sense of humor, you realize, “wow” she’s got some real substance here.  Substance in her mind … not her butt, people.

What’s your favorite?  Do share!

TalentedApps Turns Two!

It’s been two years today since Meg, Mark, and Amy began this blog. While the first year was about us finding our voice and building up our readership, this second year has been a bit more about us drilling deeper into the areas that we see as key in organizations achieving strategic impact from their talent.

This second year also found us building relationships with the rest of the HR, Talent, and Enterprise blogging community. That has been personally rewarding for each of us as well as a terrific way to help get our thinking to a broader audience. We are honored to be part of such an incredibly gifted group of contributors committed to the improvement of this craft.

Our mission continues to be to help create change by improving the awareness and knowledge of our community, in an entertaining and informative way, of how to better achieve your goals through talent. Our thanks go out to our readership, friends, colleagues, and family for their support. We look forward to the upcoming years working together on this mission.

Graphic by Vivian Wong

The New HR Carnival is here!

Ben Eubanks has done a terrific job of collecting and assembling a brand new set of HR blog posts covering a wide range of topics. To top it off, he also enlisted the help of Allen Robinson in the creation of an official HR Carnival logo!

Here’s a excellent opportunity for you to sample a variety of ideas, thinking, and opinions from a diverse set of excellent minds. It will save you time as well as help you discover a blog you might not have known about before.

Be sure to check out the carnival! In addition, take on Ben’s challenge and share what you’ve found with others!

What is a reasonable time to competence?

Without a doubt acquiring a new skill is hard.  It takes time, practice and a willingness to fail.  I do not want to suggest that you should only attempt those things that you already know or do well.  That is just silly.

You should challenge yourself every day to try new things and learn new skills, just remember that some skills might not be within reach for you.    You might gain a basic level of competence after a lot of hard work but for some things you will never be outstanding.

This is a universal truth [always remember you are unique, just like everyone else].

So what happens when you are not gaining a job critical competency?  When you find yourself unable to get to an appropriate level of competence in a reasonable amount of time (as evidenced by lackluster performance feedback)  you should probably take a step back and regroup moment.

I’d like to say again, that if you do not have a good job fit you will not be top Talent.

Putting it another way, when you have a bad job fit you are probably getting labeled as a “poor performer”.  If you find yourself in a second performance discussion where the topic is does not meet expectations* I think it’s time to take a serious look at the question of job fit.

Instead of going down the mental path of inadequacy and low self esteem, take a moment and find your strengths (you can get help doing this for approx $14, well worth the investment) and then have a hard look at your job.  Is the job you are doing playing to your strengths (I’m going to take a wild guess that there might be a mismatch)?

Now comes the brave part.

Instead of just having yet another discussion with your boss about your lack of competence, do the adult thing and work with her to see if there is a better way to define your job to play to your strengths.

If this is not possible, you probably need to start thinking about getting a different role somewhere else.

If you don’t take action, you are probably going to live forever in the bottom left box of the Talent 9-box, and I promise you that is not the zip code in which you want to reside.

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*Also be on the look out for does not meet feedback hidden under a meets expectations rating, this happens more than I care to acknowledge.

Asking for help

These last two weeks I’ve been asking for a lot of help.  I thought it might be a good idea to give some tips on the subject, for those of you who might find the process troubling or intimidating.

Here are a few tips I’ve learned that can increase the probability of getting the help you need to succeed.

1. Getting help is a bit of a numbers game.  Be willing to ask for help early and often.  Recognize that people do not often say “no” they just fail to come through.   This is part of the process and is nothing to be discouraged about.  It is also nothing to hold against people.  Best to assume that they would help you if they could and that their lack of help reflects upon the fact that you might have asked the wrong thing to the wrong person.
2. Target your requests.  Do not ask a large group as your only strategy.  This *might* work but it probably won’t.  Better to split up what you need and distribute it out as specific requests to one or two people at a time.  Make the request specific and direct to an individual and they are much more likely to know what you need from them and are often more able to help you.
3. It works the best when you ask people to do something they are good at.  This will mean it doesn’t require a lot from them, and it gives you a large benefit.  This is another example of leveraging strengths.
4. Be thankful.  When you get help remember to let people know you are grateful and that they made a difference in your life.
5. Be helpful yourself. Giving back helping others with things that you know and are good at, is the best way to have people wanting to help you when you need it most.

The interesting thing about helping others is that it reflects well upon you and it makes you feel good.  On the other hand, getting help from others also feels really great.

So for everyone who has helped me get this TED application completed (and you know who you are) I am so very grateful. Please do allow me to return the favor when you need access to one of my strengths, it’s the least I can do.

What a Treat! The Leadership Carnival is here!

Consider all the goodies you get from Dan’s Great Leadership blog regularly and then multiply that by 30.  That’s a full bag of candy!  Consider taking the day off just to eat read these treats …

including our own post referring back to Dan’s  Talent Management Challenge … oh my, I think I’ve gone into a sugar coma!