This month’s issue of the Harvard Business Review highlights some dramatic findings about business risk. New research from CEB (“Reducing Risk Management’s Organizational Drag”) highlights loss in market value caused by each type of risk over the last decade. The greatest area of risk based on impact to shareholder value? Strategy.
Far outpacing financial reporting, legal/compliance and operating issues as a cause, a whopping 86 percent of losses in market value came from strategic risks. And compounding the problem, 60 percent of corporate strategy officers said that decision-making in their companies “was too slow, in part because of an excessive focus on preventing risk.”
How can you as a business leader both decrease risk and speed up decision-making? CEB’s authors make some good points about rethinking corporate risk management programs, but in my experience with businesses the problem usually stems from something more fundamental. Lack of alignment around purpose.
As a business, your purpose drives your strategy, your strategy determines tactics, your tactics create results, which in turn informs strategy. Sounds simple, but without a clear purpose, and the alignment of all stakeholders with the strategy that flows from it, business will suffer.
Without understanding the larger purpose, each strategic decision is considered in a vacuum, debated by committee and usually based on the whim or preference of individual leaders (when usually the loudest wins). Without alignment within and across the organization, all decisions must travel up the organizational chart to be decided at the leadership level, slowing down reaction time and burdening leaders with an overwhelming workload.
With a compelling purpose and clearly articulated strategy, leaders can spend the time engaging and educating their team, defining roles in support of the purpose and strategy and empowering employees to make their own decisions in support of the purpose. When this happens at all levels, senior leadership is better able to focus on strategic issues that demand their attention, without being distracted by those that do not. And with alignment around purpose and strategy on the leadership team, decisions can be made faster because framework is clear, not subject to personal whim or endless debate.
If your senior most leaders were free to spend 86 percent of their time on strategic issues, how much risk could you avoid and how much reward might follow? Start with an alignment around purpose and strategy to find out.
This article may be reprinted when the copyright, link to article and author bio are included. ©2015 Storyforge, LLC. Please contact us for inquiries.
Haley Boehning is the Chief Change Officer at Storyforge. Building on 20+ years driving change for Fortune 500 clients, non-profits and start-ups, Haley has developed a pragmatic approach to change through storytelling, developing relevant, consistent and emotionally compelling messages and targeted communications strategies that help brand and culture triumph in times of great change.