9 hallmarks of successful risk / planning processes

I came across this article recently, on the hallmarks of a successful organization-wide level of risk management regime. It notes that the signs of successful enterprise risk management (ERM) are:

1) Board-level commitment to ERM as a critical framework for successful decision making and driving value

2) Dedicated risk executive in a senior-level position, driving and facilitating the ERM process

3) ERM culture that encourages full engagement and accountability at all levels of the organization

4) Engagement of stakeholders in risk management strategy development and policy setting

5) Transparency of risk communication

6) Integration of financial and operational risk information into decision making

7) Use of sophisticated quantification methods to understand risk and demonstrate added value through risk management

8) Identification of new and emerging risks using internal data as well as information from external providers

9) A move from focusing on risk avoidance and mitigation to leveraging risk and risk management options that extract value


This got me to thinking about how tied together risk and planning really are, since I'd say that with just a bit of editing you could make this into a list of the 9 hallmarks of a successful planning regime:

1) Senior-management level commitment to results-based planning as a critical framework for successful decision making and driving value

2) Dedicated executive in a senior-level position, driving and facilitating the planning, reporting and performance measurement process

3) A planning and reporting culture that encourages full engagement and accountability at all levels of the organization

4) Engagement of stakeholders in strategic and operational level work plans, and the identification of appropriate performance measures

5) Transparency of communication

6) Integration of financial and operational information into decision making through integration into planning

7) Use of sophisticated quantification methods to understand and demonstrate added value

8) Identification of new and emerging activities / objectives using internal data as well as information from external providers

9) A move from focusing on short-term activity planning to broader definitions of results and objectives that extract value for stakeholders

ER + PI + Target = Performance Story

How many people would be willing to take a final exam after reading only one chapter of the course textbook? Hopefully no one. So why do so many people only focus on one chapter of their performance story?

My experience has always been that most program managers feel their job is done once they've defined what their Expected Results (ER) are. Occassionaly, I come across a program manager that also takes an interest in which Performance Indicators (PI) are used to measure progress against those results. But it's very rare that I find someone who finishes their performance story by also identifying appropriate targets.

Here's an example of how the three chapters fit together into a story.

Say you're a program manager responsible for delivering a program that treats drinking water on reserves. Your performance story might look something like this:

Expected Result: Clean and safe drinking water for the residents of the Little Buffalo Reserve.
Performance Indicator: Number of boil water advisories.

If you end your performance story there, you get misleading data. While there's no doubt that boil water advisories are directly related to clean and safe drinking water, you have to ask what your target is.

The way it reads right now, someone might be lead to think that the more boil water advisories, the better job you're doing. But would you want to define your success by the number of times you communicate your failure in providing safe drinking water? Probably not. It's better to have no boil water advisories at all because you've put enough checks and balances in place to ensure safe and clean drinking water 100% of the time.

So, your performance story would be better if it read:

Expected Result: Clean and safe drinking water for the residents of the Little Buffalo Reserve.
Performance Indicator: Number of boil water advisories.
Target: Zero boil water advisories for 2010.

That's a performance story that makes sense.

Read more about developing Key Performance Indicators.

Break out the spandex and big hair - it's time to define your key performance indicators

It's hard to believe that the big hair behind such classics as Jump and Panama could be the basis for a lesson in performance measurement. But Van Halen, and David Lee Roth, are just that.

You've probably heard the story about Van Halen insisting that there be no brown M&Ms backstage. But what you may not have known is that it wasn't (just) the band acting like rock & roll divas; it was actually an ingenious performance indicator.

David Lee Roth explained the clause in the band's rider in his auto-biography:

Van Halen was the first band to take huge productions into tertiary, third-level markets.

We’d pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors — whether it was the girders couldn’t support the weight, or the flooring would sink in, or the doors weren’t big enough to move the gear through. [...] So, when I would walk backstage, if I saw a brown M&M in that bowl . . . well, line-check the entire production.

Guaranteed you’re going to arrive at a technical error. They didn’t read the contract. Guaranteed you’d run into a problem.

Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening.

So next time you're trying to explain to a group of managers that you don't need to know the number of emails they sent last week, you only want performance data that gives an indication of the state of affairs -- try tossing on Hot For Teacher, and challenging them to find the brown M&Ms in their own programs.

Read more about Van Halen and the brown M&Ms. Check out Dan & Chip Heath's book: Made To Stick!

http://www.fastcompany.com/magazine/143/made-to-stick-the-telltale-brown-mampm.html