Archive for category Innovation

Innovation is Risky! D’oh!

I love all of this talk about innovation because it always leads to discussing risk. I just watched Rita Gunter McGrath a professor at Columbia Business School talk about strategy and innovation in highly uncertain environments at DigitalNow: Association Leadership in a Digital Age. DigitalNow offered a free live stream option for its general sessions.

Dr. McGrath summarizes her view of complexity in her DigitalNow bio:

Complex organizations are far more difficult to manage than merely complicated ones. It’s harder to predict what will happen, because complex systems interact in unexpected ways. It’s harder to make sense of things, because the degree of complexity may lie beyond our cognitive limits.

My ears perked up when she talked about managing risk (or trying to manage uncertainty). She challenged our use of prediction when the world is unpredictable. Every decision has unintended consequences that may lead to failure or unexpected outcomes. But McGrath encourages us to from these “intelligent failures” to improve our decisions.

My favorite subject was Dr. McGrath discussion of resource trade-offs suggesting that redundancy and stockpiled resources are our friend. As the business continuity professionals and Dr. McGrath says: “Time is your friend before a disaster and your enemy afterward.” She followed with “we also over-invest in prevention and under-invest in resilience.” From a risk management perspective I couldn’t agree more. So many associations only focus on preventing a loss from occurring but don’t consider how to respond to the actual event. For example, most associations lack risk management plans for succession, business continuity/disaster recovery, and crisis management and communication. This DigitalNow tweet sums it up (Follow the discussion on Twitter #diginow12)

We all agree that innovation is risky but we don’t do much to manage the risks other than trying to avoid it. If we do nothing we can avoid the risks of innovation. But social media shows us that the greater risk is to do nothing. If associations continue to maintain things as they are we lose our relevance and meaning to the point where we may ultimately die.

The appropriate use of various risk management techniques increases our chances for success. As we evaluate our options we both control or reduce the risks and maximize the opportunities. Our decision may be wrong but with proper planning and analysis we experience an “intelligent failure” instead of a catastrophe.

Risk control techniques let us avoid, prevent or reduce the loss. Building redundancy into our systems and processes (especially information technology) reduces the size of the loss. Back-up of electronic data and software provide redundancy while the use of hosted sites and the cloud segregate your loss exposures (a loss at your office doesn’t affect the hosted sites) and enable a rapid recovery.

So I’ll continue to beat the drum for associations to incorporate risk management into its daily operations and innovative efforts. The identification, analysis and mitigation of risks are crucial to your success and growth as an organization. Risk management is not a separate activity done by a committee but integral to all of your operations, strategic and tactical. Risk management has evolved into an enterprise-wide activity. As Dr. McGrath said associations are complex organizations requiring new management systems and methods. Incorporating enterprise risk management (ERM) in your association helps you with this new complexity.

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Policies and Strategies

We all write policies, lots of them. It’s one of the services I provide to my clients. But what purpose do policies serve? Should they serve? Do your current policies meet these purposes?

My hypothesis is we have too many documents called “policies” that are really procedures, rules and guidelines, not policies. For example, personnel manuals contain “employee policies” but most are rules (with a few guidelines) such as office hours, leave/time off, electronic communications, workplace environment, and benefits. Even your social media policy isn’t a policy but guidelines on how employees should behave while online.

Many “policies” are written as a knee-jerk reaction to an incident such as a dress code because someone wore inappropriate attire to work. An employee spends too much time on personal phone calls so we write a “policy” to restrict personal use of office equipment. As many associations still struggle with social media, under the guise of a policy, they implement rules to restrict access to social sites during office hours and limit employees’ participation during non-work time.

Policy

So what is a policy? A policy documents an association’s guiding principle(s) on a specific subject or issue. A well-written policy is aspirational and supports our various strategies (see discussion below). Policies are the “what” we plan to do to meet our vision, mission and corporate culture. Through policies we clarify who and what we want to be as an organization.

A Guide for the Development of Policies and Procedures in Ontario’s Community Literacy Agencies states:

Essentially, policies are the guidelines, intentions and plans for WHAT an organization proposes to do while procedures are an outline for HOW these wishes and intentions are to be carried out. (p. 9)

Policies help people make better decisions; offer guidance on how the organization wants us to behave. Well-written, strategic policies enable the decision to be intuitive to the employee, member or volunteer as a reflection of the association’s mission and reason for being.

One challenge in drafting policies is that the document needs to be flexible but written clearly enough to be applied to unanticipated circumstances. No policy can take into account or address all of the possible situations the decision maker might encounter but offers insight into how to solve the problem.

Rules and Procedures

Most, if not all, policies need to be supported by rules, procedures and guidelines which document how we will carry out the “wishes and intentions” of the policy. For example, a personnel policy may say that all employees are valued human beings, to be treated with respect. From this premise of respect an association then develops its personnel rules, procedures, guidelines and benefits. Any tasks related to a policy should be standardized, such as finance and accounting procedures. There are also regulations and compliance requirements that have to be addressed via procedures, rules and guidelines.

Strategy

We can’t discuss policies without considering their strategic role. Strategy comes from the Greek word “strategia” meaning “office of general, command, generalship” reflecting its military roots. The business world adopted this military concept using it as a plan of action designed to achieve a vision. Through strategies associations determine where it wants to go and what it wants to accomplish as an organization. Association strategies include marketing, social media, membership, finance, fundraising, human resources, advocacy and so on. Policies develop and evolve from these strategies.

In game theory, strategy refers to one of the options that a player can choose. That is, every player in a non-cooperative game (chess) has a set of possible strategies, and must choose one of the choices. Therefore strategy setting involves evaluating numerous options and choosing one that best meets your vision and mission.

Think Before You Write

The association industry continues to discuss the future of associations. Some believe the social revolution has made associations unneeded, superfluous. Others think that association must undergo a massive shift with a new business model. And some believe associations are just as vital today as years ago. The best aspect of this discussion is that associations are questioning their existence and purpose.

I believe that most associations (and businesses including mine) are fuzzy on what they want to be, why they exist and how they make the world a better place. This lack of focus lets us try a little bit of everything – try to be all things to all people.

Policy writing when done strategically helps an association clarify who and what it is (or wants to be) for its members and other stakeholders. We often establish rules and procedures often under the guise of being a policy without asking why. What do we want to do to be a better association? How will this strategy and subsequent policies make us better? When you answer these questions you can write a strategic policy that will serve you well.

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Risk Management as Change Agent: Adopting a Culture of Risk

By Leslie White on August 2, 2011

During the CommPartners’ Learning Socially: Associations at the Crossroads Seminar, Susan Robertson, CAE executive vice president of ASAE and president of ASAE Foundation, mentioned a speech by Barry C. Melancon, CPA, chief executive officer, American Institutes of CPAs about risk. Association TRENDS selected Mr. Melancon, as its 2011 Association Executive of the Year. According to Association TRENDS Melancon said that “association executives ‘have an obligation to drive our individual associations forward,’ noting that this cannot happen without taking risks, finding an appropriate balance, and communicating effectively.” You can view his speech here (risk discussion begins around 16:00).

My heart warms when an association executive talks about risk especially one that practices good risk management. Melancon shared his view that an association’s board and key volunteers need to be willing to take risks. The association leaders have to recognize that not every effort will be successful or get the results expected. When an association tries something new and gets unexpected results it is not “failure” but rather an opportunity to learn and move forward.

Innovation and Risk
I’ve written about Innovation and Risk before that an association has to take risks to be creative but be smart about the risks it takes. Risk involves uncertainty; we don’t know the outcomes of our efforts. A lot of us are uncomfortable with uncertainty we still hold the illusion of control. We don’t know if that new service, program, membership model will have the results we want (or expect)? As Jamie Notter tweeted during the seminar

Jamie was talking about social media but the statement holds true for other activities. Some associations are still offering the same arguments against social media – what if someone says something bad about? An employee or member misbehaves? In my first guest post for SocialFish, The Hidden Risks of Social Media: It’s Not What You Think, I declared the greatest social media risk is not being an active participant. If you use social media you are aware negative comments and can respond accordingly. Therefore,
The greatest threat to an association’s survival is to not take any risks; not trying something new or moving forward.

Or another way to say it is failure to take risks leads to failure. Albert Einstein defined insanity as doing the same thing over and over again expecting different results. If you don’t change what you are doing the results won’t change either. The downward spiral will continue until your association becomes completely obsolete and out of business.

Risk Management as Change Agent
So how do we get out of this insanity loop? How do we start taking some risks? A risk averse association isn’t going to change simply by a board or CEO edict; this requires a cultural change. Change doesn’t come quickly to many people or associations but the practice of risk management provides techniques to facilitate change and address people’s fears.

Risk management is about learning to deal with uncertainty; not knowing how people will receive a new initiative or when something bad may happen such as an auto accident, office fire, employee injury, or anything else that goes wrong. You first need to know how your management team and board feel about risk – their appetite for risk, tolerance for uncertainty. If risk averse, you have a bigger challenge to get them comfortable with risk and uncertainty.

Photo: Renaissancechambara

Another way risk management is a change agent is by putting risks into perspective. Our first reaction to an idea is its too risky but after evaluating the potential outcomes we realize it is not so bad. The risk may be acceptable or can be mitigated effectively. A part of implementation is to set up the metrics to measure the impact of the change. Through the metrics you find if the results are what you expected or if you need to change some aspect of the project.

Remember everything has its risks but each decision also has the possibility of reward. The new membership model, chapter re-organization, or volunteer management tools may be successful, even exceed expectations. But you won’t know until you do something. Push through the fear and inertia by managing risks. You’ll be amazed at the results.

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Innovation and Risk

Innovation requires risk taking. Taking risks requires informed, fact-based decision-making.


This is my favorite risk management quote although I don’t know the author but credit my friend, David Mair for sharing it. People are always talking about innovation and association leaders are striving to design the association of the future. I’m not creative enough to answer that question but I do have some thoughts on the innovation process.

The problem with innovation is you don’t know the outcome until you try something. Your results will fall somewhere between total failure and complete success. Although we talk about the need for failure (fail fast, fail often) no one likes to fail particularly when your boss or board are watching. However as Sir Winston Churchill said, “Success is the ability to go from failure to failure without losing your enthusiasm.” We need to try many things to figure out what works best.

It is risky to be innovative, to change things up but using risk management techniques may make these risks, well, manageable. Risk management is a way to deal with uncertainty – the possibility that a future event will affect the organization. The event’s effect can be positive, negative or neutral. The risk may be a show stopper or can be easily managed to make the new idea successful. The dilemma is knowing how to tell the difference; to decide which risks are manageable. Many people think risk management is the school of “no” but it can make an idea even better. How? During the planning and design process if you assess the risks you can take steps to improve your chances for success. Unfortunately, most people don’t analyze and manage the risks early enough in the process.

Several years ago while helping a client decide whether to develop a captive insurance program, some senior managers shared a new initiative. The new program was a radical departure from their normal operations and a stretch for their mission. They were going to collect and sort used clothing to sell to another party (no retail sites). The idea was close to the implementation before anyone thought to identify and evaluate the risks associated with this new venture. I offered a short list of the risks I saw and the insurance implications (encouraging them to talk to their insurance agent). During our brief discussion the client recognized the need for a risk assessment. I thought the idea was a little crazy (too far from their mission) but the risks were manageable with the right resources committed to the project. I wasn’t involved in any further discussions of this initiative but the organization never pursued it. I like to think my little intervention helped improve their decision-making.

Since innovation is all about risk taking:

  • How do you decide which risks to take?
  • What is the risk appetite of your association?
  • How much risk will your senior management and/or board tolerate?
  • Does your risk tolerance and appetite vary by program/service/department?
  • Have you ever asked these questions?

Establishing a risk management policy or strategy is a great place to start as you tackle innovation within your association. Let me know how you do with this task.

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