Empowering People to Remedy Risk
By Sonia Alvarez-Robinson, Director, and Kevin Alas, Associate, PwC, People & Change Practice
Far too often we have read the headlines: An iconic brand or major institution’s reputation is tarnished in the wake of some sort of scandal. In some cases, this results from people blatantly doing the wrong thing; in others, it is simply an instance of people failing to do the right thing. However, the one common thread in all of these episodes is this: They could have been prevented by strong leaders who exhibit the right behaviors, regular communication, effective training, and consistent accountability.
The interaction between talent and risk often takes a back seat to more pressing and obvious business needs, only to spring to attention in times of crisis. Effective business leaders recognize that the risk and talent functions both precede the word, “management,” for a reason. Talent management and risk management can and should be closely related and mutually enabling. When both aremanaged properly and in alignment, talent can flourish as a powerful antidote to reputational, financial, environmental, and cultural perils.
By embracing the leading people practices described here, your organization can galvanize talent, restrict risk, and secure sustainable growth.
1. Leadership and culture: Set the tone at the top
Leadership beats at the heart of the organization, establishing the culture and setting the tone for the entity and employees. The behaviors, attitudes, and expectations of those who have the power to influence others shape the reality for everyone in the organization—whether leadership recognizes and embraces this reality or not.
Leaders must consciously and effectively infuse the culture with a sense of risk management’s centrality. What leaders communicate says a lot about the organization’s risk culture. Consistent messages about risk and its role in enterprise success are crucial. But lip service is not enough. Leaders also must remain visible champions of risk management behavior, both talking the talk and walking the walk, demonstrating the cultural expectation that risk management is an organizational priority.
Risk resistant: Leading cultural practices
- Leaders communicate plainly the risk management behaviors they want and expect employees to follow.
- Leaders exhibit total buy-in of every risk management behavior they preach, boosting employee buy-in.
- Leadership is consistently visible to employees, enabling them to see leadership practicing proper risk management behaviors.
- Leaders are open, accessible, and responsive, and take immediate action to address any risk issues they become aware of.
2. Workforce and succession planning: Business continuity
If you don’t have the right talent with the right skills in the right roles at the right time, your organization can be vulnerable to a variety of risks. Yet many employers, falling short in the fundamentals of people strategy, find themselves also falling short in meeting other crucial business goals.
Staffing and skill gaps don’t have to be a fact of life. You can forecast potential shortages and develop strategies for avoiding them by remaining abreast of workforce demographics and trends; identifying pivotal positions; recognizing current and future workforce needs and departmental strengths and weaknesses; embracing diversity; and weighing employee feedback.
Skill gaps erode continuity and increase risk exposure. Advanced planning can enable you to avoid leadership and pivotal talent gaps and maintain the right headcount for the positions that have a direct bearing on risk management capabilities.
Risk resistant: Leading planning practices
- Analyze your workforce to assess effective staffing needs and anticipate future needs in pivotal roles and potential risk management areas.
- Integrate workforce and succession planning into business continuity planning.
- Plan for and facilitate transitions in risk management leadership positions.
3. Recruitment and hiring: Look broadly, choose wisely
Attracting and selecting people with the right skills in the right positions can be a persistent challenge: Some 66 percent of CEOscite a lack of the right skills as their biggest talent challenge (14th Annual Global CEO Survey, PwC, 2011). With budgets and talent tight, many leaders wonder how they can overcome gaps in talent, skills, and risk without pushing the boundaries of budgetary constraints.
A risk-conscious recruiting approach can provide opportunities to shape the organization in ways that support personal, professional, and enterprise growth while keeping risk at bay.
Risk resistant: Leading recruitment and engagement practices
- Describe your culture clearly as you aim to attract the right-fit talent.
- Use references and background checks to identify patterns of behavior that might indicate candidates’ risk management background.
- Assess candidates’ awareness of and sensitivity to risk, incorporating probative risk management questions into the decision-making process to identify potential hires whose risk management values reflect those of your organization.
- Design onboarding programs that emphasize expectations that employees will be held accountable for identifying and communicating about risks.
4. Learning and development: Build employee skill, knowledge, and trust
Most organizations want to encourage a culture that values learning and risk savvy, but not all understand how that’s best accomplished. Not only do employees need to be aware of the potential risks the organization can face, they also must develop critical thinking skills for assessing risk in real time throughout their careers. Many risk situations are not black and white; rather, they are found in what many consider shades of gray. However, with the right learning and development agenda, employees can see that these situations are often not as gray as they think.
Our approach to learning, the 70:20:10 model, is based on the knowledge that people learn primarily from on-the-job experiences, with 70 percent of development self-directed amid day-to-day activities, 20 percent through coaching and mentoring, and only 10 percent through instructor-led training. It’s a model that enables learning to occur in multiple places and with multiple learner groups. For organizations with a geographically distributed workforce or varying access to learning delivery methods, a combination of these approaches is critical.
Risk resistant: Leading learning and development practices
- Align training and development with the organization’s long-term goals and priority risk areas.
- Strengthen employee learning through robust training and development opportunities that use multiple vehicles, such as classroom training, coaching, simulations, project-based learning, rotations, and on-the-job opportunities.
- Consider risk management learning as a key organizational requirement.
5. Knowledge management and collaboration: Value and share knowledge
Narrow thinking; stingy communications; and short-sighted, disorganized knowledge-retention efforts can breed risky business. In reality, people often share knowledge in ways that are most convenient and immediate—within their own areas.
Lack of cross-functional, enterprise-wide knowledge sharing can lead to risk management gaps that won’t become obvious until they become urgent. Core to risk management is exchanging knowledge in ways that take into account business outcomes and the needs of individual business units, departments, or functions. A culture that values knowledge as an asset, knowledge sharing as a crucial performance enabler, and responsibility as an enterprise-wide priority can prevent and bridge knowledge-based risks.
Risk resistant: Leading knowledge management practices
- Embed knowledge sharing as a core performance-related behavior, where expectations for sharing and collaborating are understood and rewarded.
- Build a knowledge-retention strategy that’s modeled and routinely supported by senior leadership.
- Use techniques such as narrative and storytelling to facilitate knowledge transfer in creative and engaging ways.
6. Performance management: Build a high-performance culture
Appropriate feedback, support, and incentives encourage employees to practice desired, risk-sensitive organizational behaviors. Effective, ongoing, and constructive guidance provides workers with performance signposts that can bolster solid performance and reduce the likelihood of risk.
Risk-based thinking should permeate the organization’s performance management apparatus. It should be evident in ongoing feedback, meaningful metrics, and promotion determinations. Managers and supervisors are well placed to detect and address performance issues that present organizational risks by establishing risk-related performance goals and metrics; creating coaching systems that enable employees to talk about risk potential; and giving employees guidance from a trusted source.
Risk resistant: Leading performance management practices
- Incorporate risk management evaluation as part of the annual review and promotion process.
- Develop a coaching system that provides frequent feedback about each employee’s risk behaviors and habits.
- Create integrated metrics that link risk management performance to compensation and advancement opportunities.
- Evaluate often, not just annually, assessing the likelihood of risk events.
- Sustain positive risk behaviors through proper recognition and rewards that are more than monetary, leveraging insight from what motivates people within the organizational culture.
Manage Talent and Risk as One
All it takes is one: one misstep to expose your organization to tremendous risk, or one astute and well-trained employee to recognize this risk behavior and move quickly to minimize its impact.
Talent and risk management functions should be fully integrated with your organizational goals and objectives. Personally and professionally, your employees represent resources that can build and sustain risk management or become a part of the greater challenge, placing organizational integrity and brand in harm’s way. HR, working side by side with financial, operational, technology, and other business leaders responsible for managing risk, can offer the best defense against current and future risk challenges.
HR leaders should understand the business risks across the enterprise, framing the people strategy to get out in front of risks before they reach a crisis pitch. You must consistently be at the table during risk planning and help the business identify and mitigate any people-oriented risks.
© 2012 PwC. All rights reserved. “PwC” and “PwC US” refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Sonia Alvarez-Robinson is a director with PwC’s People & Change practice. With more than 20 years of experience, she is sought by clients nationally to manage the people side of change, particularly for large system transformation projects. Alvarez-Robinson has extensive experience as an organizational effectiveness professional with specialization in cultural transformation and integration, managing change, improving performance, competency and skill assessment, communication and collaboration, business process redesign, policy development, and diversity and inclusion.
Kevin Alas is an experienced associate with PwC’s People and Change practice.