Is speed the biggest risk?
Reaction times at McLaren Honda can mean the difference between winning and losing. This also applies to business. How can risk be managed in this fast paced environment without compromising on quality?
Formula 1TM is a business that’s driven by time. The product has to be faster than everybody else’s and our ability to develop the product has to be faster than everybody else’s. So we’re in a development competition, an exploitation competition and a product competition all at the same time. In a digital age, those insights that enable us to develop the car or develop the organization come at us with incredible speed: we have to be ready to take those decisions.
To get managers in an organization to work in near real time and with the blizzard of data in a digital environment your organization has to work really quickly.
What we don’t want is managers who are paralyzed because in reality there is never enough time, there is never certain data, there is rarely a deterministic outcome of a particular situation —but the real world is going to move, and it’s going to move at that pace.
The speed of change can be a barrier to proper risk management and risk mitigation – Jane Caskey
Speed is a theme that weaves its way through legal risk as well. We see constant and fast-paced change to the legal risk landscape - stakeholders now react and respond immediately to risk issues, the speed with which the regulators engage has also increased, and the use of social media means that coverage and communication about a client’s problems happen almost instantaneously and in multiple media outlets and geographies. For our clients, given the significance and concern about reputational risk, how quickly one can respond to the risk effectively, is a key determinant of how successfully one will manage and limit that risk.
The speed of change can be a barrier to proper risk management and risk mitigation. If a client has developed an analysis of risk but is not keeping up the speed with which the risk landscape is changing, then the client is no longer in tune with the current risks, and that creates a significant vulnerability. There are organizations that are fully aware of the evolving risks around them, and they own them and are able to prioritize the key risks facing their business. There are other organizations who, to their detriment, do not appreciate how much change is happening and the speed of that change.
How do you break out of the silos?
Risk is not something that one person can manage alone. It has to be a team effort. At McLaren Honda it’s all about teamwork and breaking down barriers.
We see silo-based culture break out every now and then and we take steps to address this (silo-bashing is what we refer to it as). We invent instruments to deal with it. We hold performance reviews on those boundaries where you know that organizational friction or conflict of agendas can arise. Then it’s up to the general management to put in place the necessary steps and administration to cause those sensitive issues to be teased out—but not so much that the weight of process becomes burdensome, because that would slow the organization down.
Making sure that the organization is balanced across the whole is really important. No one set of functional objectives should become a primary focus.
To be successful as a strategy team we have to be good at ensuring that silo-based thinking and operating doesn’t exist.
Our core task is to align the objectives within the race team to achieve our optimum result. To do that we’re like the centre hub pulling in all the different facets of the race team. For example, if we go to a specific race, or we’re aligning performance to certain race objectives, or preparing to qualify, we bring in the drivers, the different engineering groups, all the elements that make up the decision-making process and we coordinate the information flow between the groups.
Our core task is to align the objectives within the race team to achieve our optimum result – Mark Barnett
We have witnessed silo-based thinking and operating and we have seen the limiting effect that it has. We have also seen the flip side - where we break apart silo-based thinking and do a more holistic analysis of our clients’ business — and that actually does give rise to different considerations and a more strategic, helpful, and relevant analysis of our clients’ risk.
In our own world of professional services firms, while we need to have various industry focused teams and subject matter experts, we must ensure that they do not operate in a vacuum or without being connected to the other teams and the overall strategic goals. We have to be vigilant to make sure that we don’t fall into silo thinking. Otherwise, you fail to capture some of the most relevant interactions: how risks play off other risks, how risks are relevant across different practice areas, geographies, and across business units.
I don’t believe, in a modern organization, that it’s possible to work at the pace of global competition unless you are decentralised – Jonathan Neale
I don’t believe, in a modern organization, that it’s possible to work at the pace of global competition unless you are decentralized. I’m not talking about abdication of responsibility, but certainly where we try to take a decision at the point of most knowledge, that point of most knowledge will vary depending on what the scenario is. When you’re in a real time specialist environment, there’s no central group that’s going to take all of those decisions at the pace at which the business needs to roll. So our high performance organization culture is about trying to take a decision at the point of most knowledge when it needs to be made. This requires careful selection and development of leaders and great communication of priorities and context. Real time decision making requires that the overarching aims are really clear.