Eugene Burke, chief science and analytics officer at CEB discusses the riskiest roles in business
Recent events in the financial, media and food industries are a stark reminder that people’s actions – what they do or fail to do – pose an organisational risk which can impact share prices, break laws and even catalyse industry reform. While many businesses are waking up to the need for broader understanding of the people they employ, most are at an early stage of comprehending how people’s behaviour impacts reputation and company performance.
So how can we define organisational risk? It is viewed as inadequate or failed internal processes, people and systems which results in consequential damage to a business and overall industry. So far, many businesses have focused on policies and procedures but are being left blind-sided by not assessing the people aspect of risk. While it cannot be eliminated, risk has both an upside and a downside and organisations need to be aware of their own appetite for risk so it can be managed in a constructive way.
CEB recently analysed over one million assessments from its SHL Talent Analytics database across 200 countries and territories in search of the riskiest roles. The research found that on average one in eight people globally pose a high level of behavioural risk to their organisation. Interestingly, only one in 15 executives pose a high risk while further down the organisation, one in seven team leaders and individual contributors are the riskiest employees.
Risk is a complex issue but there are steps companies can take to understand their risk at an individual, team and organisational level including the use of assessments to gain an objective view of people risk. To manage this, middle managers are a good place to start as they are the conduit of strategy from the board to the frontline and are also focused on ‘getting things done’.
The linchpin of the organisation
Middle managers have a critical role to play: they have to manage compliance and commitment from frontline staff whilst communicating decisions from leaders in a relevant way so frontliners feel motivated and entrusted. Organisations must ask themselves whether they have the right talent in place at the middle management level to deal with risk appropriately and deliver the board’s vision to the frontline. If they don’t, middle managers should be given training to improve communication, decision quality and teamwork to bring on board frontline staff and align them to the business’ values.
Empowering staff to voice concerns
Secondly, there are areas where managers could improve their approach to risk. At an organisation-wide level, they need to understand how risky the culture is. Enforcing ethical standards and having an effective channel by which frontliners feel comfortable communicating infractions is crucial too. This will help to boost compliance and commitment from frontliners when their views are being noticed. Often whistle-blowers are ignored but senior managers need to listen more to viewpoints across the business to pick up and act on vital clues that will help them manage risk more effectively.
Risk for reward
A business’ approach to risk will vary greatly by sector and even departments. Operational policies may reduce risk but they can also restrict the organisation's ability to adapt to change. Clearly, a R&D department will need greater freedoms than the health and safety officer on a food production line. However, few organisations have begun to look at their talent management programmes as a significant contributor to their risk management strategies but this is a missed opportunity as a healthy appetite for risk can encourage innovation and create the new ideas on which the future success of the company lies.
If we are to learn from the ‘toxic company cultures’ reported by the media, then organisations must better understand the psychology of their people and have an objective view of risk. The board’s role is to set and communicate its ethical standards and decide on its level of resilience and appetite for risk. A better balance must be struck between creating risk to seize on new opportunities whilst being sufficiently resilient to avert company crises.