Q #243: How to manage risk during the current recession?

In this Q&A and in #242, I share some of the material that Geoff Colvin provides in The Upside of the Downturn: Ten Management Strategies to Prevail in the Recession and Thrive in the Aftermath. In the introductory chapter, he observes, “Performance in the Tour de France is a lot like performance in business and, for that matter, in virtually every realm: the worst, most difficult conditions bring out differences in competitors that were not previously apparent. Such conditions turn leaders suddenly into laggards and vice versa. They determine the winners and losers. Periods of extreme stress and challenge are reliably when dramatic competitive change takes place.” In this context, I remember the outrage expressed by golfers who played in a U.S. Open years ago. The rough was too high, the fairways were too narrow, the greens were too fast, etc. In response to the uproar, an office of the U.S.G.A. replied, “We’re not trying to embarrass the world’s greatest golfers. We’re trying to identify them.” That is what the “difficult conditions” to which Colvin refers do. Warren Bennis and Robert Thomas characterize them as a “crucible” from which some leaders emerge stronger, others do not.

In Chapter Eleven, Colson observes, “More important than structure is how companies actually behave with respect to risk. The enormously destructive power of this recession teaches five lessons that every company can apply for much better understanding and control of its risks.”

1. Turbocharge your imagination. “An important element of contemplating the unimaginable is knowing that it’s never just one event. It’s always a sequence that unfolds in unexpected ways.”

2. Build scenarios. Colvin acknowledges that the quality of scenarios reflects the knowledge and capabilities of those who formulate them. However, he identifies a number of thoroughly developed scenarios that are publicly available “and provide excellent launch points for your own thinking.”

3. Think in probabilities while realizing their limitations. Although thinking probabilistically about this recession “may not be a meaningful exercise. But evaluating the chances of events that are affected by the recession – such as changes in your company’s earnings, changes in prices of inputs, changes in behaviors of competitors or customers – is most definitely worth doing.”

4. Use the power of markets. “One reason that these [prediction] markets are so valuable to companies trying to manage risk is that the markets now set prices on a very wide array of possible events that may matter to your business.”

5. Create an organization and culture that adapts quickly to new realities. Given the difficulty (if not the impossibility) of imagining possible futures in an increasingly volatile and fast-changing world, “the key then becomes responding quickly and effectively to the bolt from the blue, and the number one impediment – incredible and yet obvious – is failing to accept that the trouble has happened.”

These five “lessons” are discussed in greater detail within Colvin’s lively narrative (Pages 137-144) and serve as an excellent transition to the remainder of the book during which he explains why this downturn offers unique opportunities for self-development and then, in the final chapter, how both companies and individuals can get ready “for the expansion to come – and, yes, for the recession after that.”

Comments? Please share them.

Q #242: Is there an upside to this downturn?

In this Q&A and in #243, I share some of the material that Geoff Colvin provides in The Upside of the Downturn: Ten Management Strategies to Prevail in the Recession and Thrive in the Aftermath. In the introductory chapter, he observes, “Performance in the Tour de France is a lot like performance in business and, for that matter, in virtually every realm: the worst, most difficult conditions bring out differences in competitors that were not previously apparent. Such conditions turn leaders suddenly into laggards and vice versa. They determine the winners and losers. Periods of extreme stress and challenge are reliably when dramatic competitive change takes place.” In this context, I remember the outrage expressed by golfers who played in a U.S. Open years ago. The rough was too high, the fairways were too narrow, the greens were too fast, etc. In response to the uproar, an office of the U.S.G.A. replied, “We’re not trying to embarrass the world’s greatest golfers. We’re trying to identify them.” That is what the “difficult conditions” to which Colvin refers do. Warren Bennis and Robert Thomas characterize them as a “crucible” from which some leaders emerge stronger, others do not.

Although Colvin acknowledges that the current economy “is to most people just a mess, a curse, a plague,” he is convinced that it also offers “a rare moment when we all face the greatest possible opportunity to make ourselves winners for a long time to come.” How so? He cites six “specific and hardheaded” reasons:

1. This downturn is worldwide, so your canvas of opportunity is huge. In fact, for most companies and individuals, the only limits will be self-imposed.

2. This downturn is severe and painful, “answering the prayers of every business leader who wants to make big changes in his or her organization.

3. This downturn is deep, meaning it’s affecting people’s most fundamental economic behaviors – spending, saving, borrowing, investing – in ways that may last for years.

4. This downturn is long, which means that many companies won’t survive it…The opportunity is to thrive into the new world of fewer competitors and an economy that’s growing again.”

5. This downturn is novel, so most managers have never experience anything like it and no one has an advantage in knowing how to manage for it.

6. This downturn will test you personally, creating opportunities for growth and leadership that you have not faced before.

These six reasons are discussed in greater detail (Pages 3-9) and are among the themes that Colvin carefully develops within his lively and informative narrative.

Comments? Please share them.

Q #241: What are some of the most common misconceptions about personality assessments?

Rich Thompson

In an article that appears in the August (2009) issue of Talent Management magazine, “How to Properly Use a Personality Assessment,” Rich Thompson observes:

“Despite, or perhaps because of, its insight and ubiquity, the Myers-Briggs Type Indicator instrument – the world’s most widely used personality assessment – is sometimes misused by individuals and organizations. Proper use of the instrument results in expanding vision and opportunity, while misuse can result in pigeonholing and exclusion.”

He then identifies six common misconceptions about personality assessments and then suggests what he believes to be the truth. For example:

Misconception #4: It measures personality traits.

The truth: Though the terms “trait” and “type” are often viewed as synonymous, they describe quite different theoretical concepts. Trait theory holds that behaviors – for example, sociability – are quantifiable, meaning they come in different levels, amounts or degrees that can be measured. The trait concept may be more quickly grasped, as Western cultures in particular teach us from an early age to evaluate the world and ourselves by measurement – How tall? How fast? How smart?

Type theory, on the other hand, holds that each individual naturally relies more on one preference than the other in four pairs of opposites – Introversion and Extraversion, Sensing and Intuition, Thinking and Feeling, and Judging and Perceiving. The Myers-Briggs instrument sorts for these preferences but does not measure them. The results reflect how clearly a person casts his or her vote for each preference. The instrument doesn’t measure “how much” or “how well,” as do most trait-based constructs, but instead indicates how clear one is about his or her preferences: slightly clear, moderately clear, very clear or not clear.

To read the complete article (when it is available online) and sign up for a free subscription to Talent Management magazine, please visit this Web site:

http://www.talentmgt.com/

Rich Thompson isSVP, Global Talent Management at Adecco management and consulting S.A.,
Zürich, Switzerland

Book Review: The Global Brain

The Global Brain: Your Roadmap for Innovating Faster and Smarter in a Networked World
Satish Nambisan and Mohanbir Sawhney
Wharton School Publishing (2007)

Nambisan and Sawhney focus on “the diverse set of external players that constitute the innovation network for the companies” discussed in this book such as P&G, IBM, Boeing, and Apple; and Network-centric innovation to describe “the underlying principles of collaborative innovation in such a context.” They add that a common theme n their research was their interest in the concept of distributed innovation. That is, “innovation initiatives that are spread across a diverse network of partners.” Their vehicle for exploration was the Kellogg Innovation Network (KIN), “a forum for senior innovation managers of large companies – affiliated with the Center for Research in Information and Technology that [Sawhney] directs at the Kellogg School of Management. The KIN is an excellent example of the power of the Global Brain in action.”

During the course of their narrative, they respond to questions such as these:

Why should companies seek innovation externally during a transition from being firm-centric and network-centric?

What are the core principles of network-centric innovation?

What are the four basic models and key elements of network-centric innovation?

How to develop a contingent framework that maps the context for innovation?

Which guidelines can help managers to evaluate the different types of opportunities that are most appropriate to their organization’s resources, capabilities, and strategies?

After completing their exploration of the Global Brain and “painting a picture of the landscape of network-centric innovation,” Nambisan and Sawhney urge their reader to chart her or his own organization’s “journey” to position it as a player in the same rich and diverse landscape. “We have a simple mantra for [achieving] this: Think BIG, Start SMALL, Scale FAST.”