A great organisational culture is the product of past successes, but is no guarantee of future glories in a changing world. The risk culture is the elusive barrier to future success. Balancing the two is fundamental to long term survival and building resilient value for stakeholders.
Organisations are being told to “manage” their risk culture. This sounds fine in theory, but when it comes to taking action, very few organisations are even able to make a start, let alone manage their risk culture for greater long term success. Here we set out a path for balancing the weight of yesterday with the needs of tomorrow by:
- Providing clarity over the issue;
- Identifying the need to manage a finely-balanced tension;
- Providing an approach to measurement;
- Illustrating the benefits of doing so; and
- Setting out how we work with management to effect change.
A problem of definition
The problem is that organisations simply do not know what their risk culture is, how to measure it or how to effect change over it. This is because up until now neither practitioners nor academics have made much headway in defining the difference between the culture of an organisation and the risk culture.
In our view the difference is simple:
- The Organisational Culture is about the “here-and-now”; how does an organisation manage issues that arise? How does it go about fire-fighting, or dealing with issues that crop up on a day to day basis? The Organisational Culture is an accretion of all of the activities, actions, beliefs and attitudes that have built up over a long period of years, and in the case of many organisations over decades, often with different legacy cultures, geographies and market sectors.
- The Risk Culture on the other hand is about how an organisation deals with its multiple “tomorrows”; how does the organisation deal with issues that have not yet arisen but which might arise in the future, either in the near term or the longer term?
A problem of imbalance
While most organisations focus on their Organisational Culture, few even pay so much as lip-service to their Risk Culture. Consequently the inherent control bias based on yesterday’s experience prevents changes needed to face up to tomorrow’s changed reality. Organisations that have a dominant Organisational Culture tend to be bad at addressing the future, change initiatives fail, and the future is always a big surprise.
On the other hand, organisations that have a dominant Risk Culture fail on control issues, tend to see operations go awry, and are constantly fire-fighting. There is little doubt that large, well-established organisations tend to have a very dominant Organisational Culture where people “know how things are done around here”. This represents a major tension: today versus tomorrow.
Managing this tension is at the heart of improving organisational resilience, an ability to face up to the future and driving change through an organisation.
How to manage this finely-balanced tension
As a very first step, managing this tension entirely depends on measuring the culture. But most measurement of culture is carried out by inference, either by means of:
- Subjective questionnaires which fail to identify systemic issues that are built into the organisation; or
- Senior level interviews, where the interviewees already know the “correct” answer, and therefore provide it.
At best, the analyst is able to infer conclusions from the surveys and interviews. But they are rarely dealing with “facts”.
In contrast, our approach is to look at fact-based data about “conversations in risk”: what we call the artefacts of the culture. We measure who is talking to about whom, about what, how often and the effectiveness of the conversation.
Using Risk Conversations is a bit like running a CT Scan: it can identify many critical issues in the soft tissues that cannot be seen by the naked eye, and which any senior management team should want to know about.
Examples of issues that we identify include:
- Values: Significant deviations from the board espoused values and in particular how far the underlying values diverge from the espoused values of the organisation.
- Silos: Especially where an organisation is facing complexity in its dealings internally or externally and whether silos or subcultures dominate in certain areas of the organisation.
- Layering: Layered management reporting prevents new issues being spotted on a timely basis for example whether risks get stuck either at gatekeepers, or at too low a level of the organisation.
- Short-termism: Extrapolation from past behaviours is not necessarily good enough for dealing with new futures.
- Control v Risk: Control (or risk control) management instead of risk management and in particular the comparative vibrancy of the conversations about the “here-and-now” and about “tomorrow”.
- Obstruction: Individually obstructive nodes can be very dangerous.
- Black holes: Sometimes it is difficult to discern any volume of conversations about critical risks because of a culture of not reporting upwards.
- Real risks: understanding which risks people really discuss, rather than those that are simply listed on a central risk register.
We have developed a cloud-based technology-enabled solution that places information about your culture and risk culture at your fingertips. It can be used for regular reporting or for a one-off health scan. This approach will challenge urban myths about the state of your culture. But the technology-enabled solution is only the beginning. By far the most important element of our approach is the recognition that some subcultures in an organisation will block new initiatives which might be seen as intrusive and therefore potentially challenge the status quo.
Working with a team of highly experienced consultants, many with vast experience of working in a variety of sectors, we adopt a consultative approach to developing a full understanding of the range of cultures in complex organisations. Working collaboratively with management we will identify units within the organisation where we can run pilots which form the basis for rolling the programme out to more reluctant units and departments. We will demonstrate that we are not seeking to be senior management’s “spy in the cab” but rather we are providing useful information to those units as well that underpins better management of the unit through a clearer understanding of the competing needs of the “here-and-now” and “multiple tomorrows”.
Effectively we build consensus around the need for better information about the culture which breaks down resistance amongst competing subcultures.
For further information, contact Richard Anderson here.