Four ways to look at risk.
- Risk with low probability and minimal damage
- Risk with high probability and minimal damage
- Risk with low probability and catastrophic damage
- Risk with high probability and catastrophic damage
Risk with low probability and minimal damage can be self-insured, meaning I am willing to accept the risk and endure the consequences.
Risk with high probability and minimal damage will depend on my threshold and tolerance for pain. Even a splinter in a finger can be annoying.
Risk with low probability and catastrophic damage creates mitigation behavior. I may be willing to accept the risk, but in the event the risk occurs, I want to mitigate the damage. I may seek outside protection, an insurance product. Insurance rates depend on low probability to calculate the premium.
Risk with high probability and catastrophic damage creates prevention behavior. To protect my best prevention behavior that inevitably fails, I may seek outside protection, an insurance policy. Insurance rates consider the high probability to calculate the premium and often, actively participate in the prevention behavior.
What risks come with your business model? How do you manage that risk?
The cherub faces in my leadership class looked up, all smiles, ready to take notes, write down all the answers.
“Why are you here?” I asked.
“Well, to listen and learn,” came a response from the back.
“Listening to me will not make you a more effective manager,” I replied. “What I have to say is only my understanding, for me.” I stopped. “So, how will you learn? Listening to me will not make you a more effective manager. Reading my blog will not make you a more effective manager. How will you learn?”
There was an uncomfortable silence. Sometimes silence does the heavy lifting.
“What you learn will only get started in this room. The real learning happens outside of this room, when you take the words and try them out in your own problems and decisions. My understanding means nothing (except to me). What is your understanding?
Victor was staring at the floor, head cupped in both hands. “What a stupid decision.” He was quiet. I was quiet. Silence can do a lot of heavy lifting.
Finally, he continued. “I want to involve my team in decision making. But when we take a vote, they often make the wrong decision. As their manager, I feel like a heel, going against their vote. But I don’t want to let them do something stupid and waste a bunch of time.” He lifted his head.
“Victor, first, do not let them vote. Between you and your boss, who is accountable for this decision?”
“Well, I am,” he said.
“If you are held accountable for the decision, then you have to make the decision. You can involve your team, ask them for input, but you are the manager, the decision is yours to make. Here is what this sounds like to your team.
“Hey, Team. As your manager, I have a decision to make. This is an important decision and will have an impact on every team member here. So, I want to you to help me consider all the angles. After I consider your input, I have to make this decision. When I do make this decision, I will need your support and your full efforts to make this happen. So, who has the first idea?
“Victor, understand, people will support a world they help to create, even if it is not totally their idea. You should involve them, but the decision is yours.”
From the Ask Tom mailbag
I am interviewing a lot of college hires that possess limited if any relevant work experience. While I am very comfortable interviewing candidates with experience, I find it very difficult to translate the Hiring Talent approach to those without any real experience in the field I am interviewing for. In some cases there is barely a internship to ask questions about.
They have work experience, they just didn’t get paid for it. Work is comprised of these two things –
- Making decisions
- Solving problems
Here is the sequence –
Look at the typical task assignments in the open role.
- Identify the Level of Work.
- Identify the critical role requirements, keying in on decision making and problem solving.
- Create questions based on the critical role requirements.
“Tell me about a time when” – this could be a student project, coursework, volunteer work, extracurricular activities, a hobby, a contest.
Let’s say the critical role requirement is to create and maintain work schedules for seven people on a project team where the duration of the project is thirty days.
- Tell me about a time when you had to maintain some sort of written schedule on a project?
- What was the project?
- What was the purpose of project?
- How long did the project last?
- What did you have to schedule (people, project elements)?
- How many elements (people, materials) did you have to schedule?
- What information did you have to gather before you entered elements into the schedule?
- After you created the initial schedule, did it ever change? How often?
- Before you changed the schedule, what information did you have to gather?
- Were your schedule changes ever challenged? How did you resolve the situation?
I am listening for decisions they made and problems they solved. And I don’t care if it was a pageant for the school choir or volunteer work at a hospital.
“What’s the Level of Work?” I asked.
Arianne puzzled her face. “We’re looking at two roles. One is a finish carpenter and the other is a machine operator. The carpenter is finishing wood products within one sixteenth of an inch. The machine operator is working to tolerances of four decimal places. I would say the machine operator role is a higher level of work, it’s more precise.”
“Is it a higher level?” I insisted.
Arianne paused, “I guess I am just thinking out loud. I don’t know.”
“As a manager, working with a team member, after you have provided work instructions, what is the most valuable thing to talk about?”
“Working through things that aren’t in the instructions,” Arianne was quick to respond. “Talking about the problems that might occur, and the decisions that might pop up.”
“And that’s how I measure the Level of Work. What are the problems to be solved and the decisions to be made? These require judgment on the part of the team member, and that’s where the complexity of the work is revealed. The machine operator may be working to four decimal places, but the machine is making the cuts according to a computer program. The finish carpenter, working to one-sixteenth of an inch is taking manual measurements and constantly using judgment. The likelihood of field adjustments and variance in materials is high.
“Working with my team, the most important discussion is -what decisions do you have to make in the course of your work. What problems do you have to solve?”