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Communication

If you have been faithfully following this riveting and enthralling series of articles on one of the driest subjects on earth, you would know that we concluded the second article with the queries:

• How can we create an organization and a culture that promotes the best-portfolio reward system?
• How do we encourage employees to take an objective view of their project?
• How do we discourage the firefighting mindset that requires big bags of cash when threats "blow up" instead of making relatively small investments when the threats "show up"

I have previously alluded to the fact that changes in the organization and culture require changes in the reward system.  The reward system, however, is just the salient issue in a relatively long list of impediments to positive change.  Other less potent but equally diabolical considerations include:

• Language (see below)
• Inability to implement (we know what to do but can't make it happen)
• Internal competition (enough said)
• Value bias (we prefer to optimize the base case)
• Desired ignorance (just don't want to see the dark side)
• Lack of monetization (can't or won't convert risk into impact on value)
• Ignoring "soft" risks (ignoring, political, cultural, etc. type risks)
• Lack of challenge (I won't hurt you if you don't hurt me)
• Lax accountability (we just don't want to accept responsibility)
• Deterministic mindset (just give me THE number!)
• Pressure from "the Street" (it's all about the next quarter)
• Failure to recognize/exploit unconventional relationships
• Pressure to sanction projects (political impetus to sanction projects)
• It's nobody's job (I'm not responsible)
• Pushing responsibility to lower levels (someone below me will handle it)

These short PMI Newsletter articles preclude addressing all of these items (although they are addressed in detail in my latest book - see references at the end of this article).  However, I would be remiss in my duties if I did not at least address the second most insidious issue - that of language.

OK, I can hear you ("Ahhhh,, when is this guy going to get to the juicy technical stuff!!?").  While technical understanding and capability are critical to success, such prowess pales in importance relative to an in-depth understanding of organizational and cultural aspects.  See the second and third referenced books at the end of this article to gain a better understanding of technical aspects.  So, while it is my desire to launch into a technical tirade, there are some more seemingly (but not actually) mundane issues to address - not the least of which is language.

To change a culture - that is, to address the three questions at the top of this article - the ability to communicate is paramount.  Use of common terms and definitions are at the core of communication.  It is folly to attempt to implement an organization-wide metamorphosis without first creating a common language.  I can't relate how many times I have noted problems of significant magnitude that were directly the result of miscommunication and misunderstanding.

In the first of this series of articles, I defined the term "risk" as:
    A pertinent event for which there is a textual description
This event (risk) can have a positive (opportunity) or negative (threat) impact on the value of a project and is probable in nature.  This definition, however, likely will contrast or even conflict with a colloquial definition embraced by denizens of an enclave of the corporation.  For example, some folks might adhere to the concept that "risk" is the product of probability and impact.  There can be as many definitions of the term "risk" (and of other terms) as groups surveyed.  

I have found it folly to attempt to change the way people define risk in their area.  For members of the various corporate cul-de-sacs, the definition they prefer makes sense for their business.  However, it is still true that because we need to address risk in a holistic way - that is, consider the legal, environmental, technical, commercial, financial, engineering, logistical, security, etc., aspects - it is essential that all of the pertinent disciplines be able to effectively communicate.  Just as important is consistent "vertical" communication to higher ranks in the organization.

What to do?  Because of my German heritage, in high school and college I decided that studying the German language would be a good idea (the jury is still out).  In those studies and in a later visit to Germany, I came to realize that there exist many significantly different dialects.  To facilitate country-wide communication, newspapers and the like utilize a common "dialect" referred to as "high German."  I decided that this means of creating a common language would be most effective in risk communication.

So, rather than attempt to change the way each area views and defines risk, I decided that I would promote a common definition of risk (and other terms).  That is, when communicating between factions or communicating "up the chain," corporate employees would utilize the common definitions.  In that way, regardless of the language used in any area of the corporation, communiqués issued for consumption outside that area would be clear.  This works.

While coming to consensus regarding the definition of the term "risk" is critical, so is agreement on a plethora of other terms and concepts.  For example, prior to the implementation of the holistic and early-in-project-life risk-identification process, the term "mitigate" typically referred to what should be done when (after) a threat materialized (When the wheel comes off the car, what do we do about that?).  When the early-risk-identification process is used, however, the definition of "mitigate" changes to mean what can be done now to try to ensure that the threat never materializes (I have identified the wheel coming off as a risk.  What can I do now, before the car trip, to try to ensure that the wheel does not come off the car?).  Responses to these two views of mitigation are, obviously, necessarily very different.  The first is termed "firefighting" which is relatively expensive and disruptive and is to be discouraged.  The second is proactive, but is hard to "sell" to organizations because it requires them to spend money now on something that might or might not ever happen.

Alignment should be reached on myriad critical terms and definitions.  You will need to address the use of the terms "probability" (the likelihood that an event will happen even once) vs. the seemingly interchangeable term "frequency" (the number of times something has happened in the past, or, is forecast to happen in the future), the difference between a "risk" and a "hazard," and a host of other terms and concepts.  I can't stress enough the importance of alignment - both "horizontal" and "vertical" - regarding language.  Given the holistic approach advocated (considering law, security, commercial, financial, technical, engineering, logistical, etc. aspects), I also can't stress enough how elusive alignment can be.

So, in this article I have addressed one salient aspect related to the query:
How can we create an organization and a culture that promotes the best-portfolio reward system?
In the next article, we will together explore some practical steps you can take to address the other two questions with which I closed article #2 and opened this article.  In the meantime, work on that language!

By:  Glenn R. Koller

References:
Koller, G.R., Modern Corporate Risk Management - A Blueprint for Positive Change and Effectiveness, J. Ross Publishing, Ft. Lauderdale, FL, 2007.

Koller, G. R., Risk Assessment and Decision Making in Business and Industry, A Practical Guide:  2nd Edition, Chapman & Hall/CRC Press, Boca Raton, FL, 2005.

Koller, G. R., Risk Modeling for Determining Value and Decision Making, Chapman & Hall/CRC Press, Boca Raton, FL, 2000.