1) Risk Assessment
What is the opportunity you are considering?
What are the potential risks related to pursing this opportunity?
The point of this exercise isn't to convince you that there is no risk or nothing to fear. Rather than pretend we can simply will ourselves into a positive outcome, we want to ensure that we are following best practices by identifying risks prior to making decisions.
2) The Risk Formula
A simple tool for calculating risk is to start with the end. The risk formula starts by calculating the worst case scenario for the opportunity than an organization or individual is considering. Can you picture it?
If we go down this path, what could (and probably will) go wrong?
If everything went wrong and we completely failed, what would that look like?
Could we survive the worst possible outcome?
3) The Classic Pro's and Con's
Sometimes those tools that are tried and true are considered such because they work. Referring back to our risk formula, if we cannot survive the worst possible outcome we will have to ask ourselves honestly if pursuing our opportunity is worth the reward.
Does the potential reward (which isn't guaranteed) outweigh the potential losses?
Are the risks low enough that we can offset our losses as we pursue our opportunities?
Are we in a position that we can afford to move (or not to move)?
Failure to launch can be just as traumatic to our long term growth as launching only to fail. As we have noted previously, some of our most creative solutions and our life long lessons are born from failures along the way that have caused us to adapt.
4) Failure to Plan is Planning to Fail
We have considered the worst case scenarios, and we believe we can survive them.
We have analyzed our opportunities and believe that we must make a move on them.
The risk is identified, the fear of failure has been addressed and not it's time to prepare to move forward. Smart operations are not oblivious to risk nor do they sweep their fears (or reservations) under the rug, they make them visible and work for progress without allowing fear to deter them from the goal.
Much is made of risk, but fear of failure and/or fear of success may be the biggest underlying obstacles to personal as well as professional growth. The homework has been done, the map has been laid out to the best of everyone's abilities, and so it is time to get the wheels of opportunity moving.
Action may lead to unexpected forks in the road but inaction will only lead to the eventually demise of having a fork stuck in your operation. Adaptation should be valued over deterioration.
Risk Management Best Practices in Business
Risk management should be a process in the decision leading to opportunity identification, growth mapping and the celebration of a job well done.
Risk management is essential because growth is essential and there is no growth without some level of risk.
Risk management does not stop the engine, it guides the vehicle safely through the obstacle course of growth and vision.
IZ Ventures - business coaching & consulting. We don’t just consult - we help you Connect, Collaborate & Conquer.
Structure your team for success with the right view of span of control, interactions and direct reports.
When an organization grows beyond the one-person operator delivering goods and/or services out of their garage, the process of building systems for success becomes essential to long term health. What works as a small company has to evolve as the company grows or the organization will outgrow the preceding systems. As an organization grows, adapts, changes and evolves, one question every leader and organizational system must answer is how many direct reports any given person in a position of leadership should have. At the end of the day this question has no right answer given that each organization is unique and each manager has a different threshold for efficacy. Let’s take a look at some of the metrics, discussions and insights related to the topic of finding the right number of direct reports.
Gauging interactions (energy output)
How do you measure efficacy when assessing the right number of direct reports? Business Insider took a peek at the number of reports of Tim Cook, the COO made CEO of Apple, who was believed to have upwards of 17 direct reports. Hal Gregersen, Ph.D., the executive director of the MIT Leadership Center states, “It's a question of how many people a leader can have a constructive conversation with when everyone is in the same room (Lebowitz, 2015).” Time is a limited resource that every manager only has so much of and trust is the greatest asset in developing employee engagement in an organization, the question is not how thin can a leader stretch themselves but how effective they can be in leading the members of their team whether directly or indirectly.
Business journals and many persons in a position of leadership (PIAPOL) site Japanese management philosophy and regard 6-7 direct reports as the maximum number that a leader can effectively manage. In his own defense, Tim Cook emailed a response to Business Insider countering that, “"If you have smart people, a strong organizational culture, and a well-defined and articulated strategy that everyone understands, you can [have] numerous direct reports because your job isn't to tell people what to do.” Whether those analyzing a leader from within the organization or from the outside agree with the direction and decisions that they make, at the end of the day they will rise or fall based upon how they approach their leadership responsibilities.
Measuring span of control
So much of this discussion on the optimum number of direct reports is opinion based, one metric cited by Schaffer Consulting remarks that span of control is something which can be measured in this discussion, “When a manager goes from four to five subordinates, his potential interactions with them increase from 44 to 100 over a given period; and going from seven to eight subordinates raises the total interactions from 490 to 1,080 (Inc.).” This is a classic business concept that continues to be of relevance and value to organizations such as the United States Air Force in their goal of focusing missional clarity. Size of the organization obviously comes into play and the overall structure of a team must be crafted to support it’s necessary functions as well as it’s growth goals.
As for the ethereal question "What is the right span of control for a manager," a consultant Jamie Flinchbaugh blogged, "Some factors to consider are: The narrower the span of control, the more coaching at the point of activity can be done; the broader the span of control, the more the entire process can be encompassed within fewer decision makers and more aligned decisions (The Build Network, 2014).” This is a simplified means of looking at the bigger picture, but a leader must analyze the position they are in with regards to the development of their organizational structure to determine where their immediate efforts are most valuable. Does the leader need to be directly involved in the training of key share holders in the building process or do they need to take a few steps back from the process to empower those on their leadership team to take ownership for their areas of responsibility.
Avoiding top heavy management
If the number of direct reports is too low, because the team has built multiple layers of upper and middle management to insulate those in positions of executive leadership there is a potential for disconnect. When an organization becomes slow and top heavy by way of structure, there are too many layers to weave through in order to accomplish anything in a timely or mission centered manner. As far back as 1989, Jack Welch, the CEO credited with turning GE around, was an advocate against the six direct report rule for many of these reasons. In an interview with Harvard Business Review, the management guru shared his candid thoughts on the matter, “We took out management layers. Remember the theory that a manager should have no more than 6 or 7 direct reports? I say the right number is closer to 10 or 15. This way you have no choice but to let people flex their muscles, let them grow and mature. The leader can focus only on the big important issues, not on minutiae (Tichy & Charan, 1989).”
Systems should be built to support the people in the field who are making the products and/or delivering the services that make up the core functions of the organizations value interaction with the market. The question of the right number of direct reports is not a matter of ego nor strictly of science, but rather is a key discussion that will evolve with the needs of the organization in a manner that is unique to that team. Mike Myatt, Forbes contributor and chairman of N2 Growth, shares, “Where many leaders become disoriented is by confusing platform with people, and position with responsibility. Here’s the thing – it’s not about the platform, it’s about the people. Without the people there is no platform, and ultimately nothing to lead. It’s not about you (the leader), but what you can create and influence through those you lead (Myatt, 2012).” Rather than looking for the perfect number of direct reports, a leader should ask how many people they can effectively support to keep the vision and mission of the organization moving forward with relationship to the team’s values.
Clarity. Consistency. Accountability.
Lebowitz, S. (July 8, 2015) Apple CEO Tim Cook now has 17 direct reports – and that’s probably too many. Business Insider. Retrieved from http://www.businessinsider.com/apple-ceo-tim-cook-has-too-many-direct-reports-2015-7
The Build Network (April 3, 2014) Wait, how many reports direct reports did you say you have? Inc. Magazine. Retrieved from https://www.inc.com/the-build-network/direct-report-challenges.html
Tichy,N., Charan, R. (October 1989) Speed, simplicity, self-confidence: An interview with Jack Welch. Harvard Business Review. Retrieved from https://hbr.org/1989/09/speed-simplicity-self-confidence-an-interview-with-jack-welch
Myatt, M. (November 5, 2012) Span of control – 5 things every leader should know. Forbes. Retrieved from https://www.forbes.com/sites/mikemyatt/2012/11/05/span-of-control-5-things-every-leader-should-know/#7f921b0328c8
Sarai Johnson is an entrepreneur in the non profit space and has founded a company Lean Nonprofit, LLC. She uses her unique skills and experience to help non-profits generate revenue, develop sustainable business models, create and launch social enterprises, and maximize the social good nonprofits can create. Just because an organization is operating in a non-profit or not-for-profit model that doesn't mean that they shouldn't incorporate best practices from strong organizations that operate in the for-profit sector. Sarai is proponent and resource for organizations helping nonprofit and government agencies of all sizes to utilize lean and project management principles. We are grateful to mother, entrepreneur, author and consultant Sarai Johnson for taking time out of her schedule to share her story with us.
IZ Ventures: When you started your studies in general ministry, what was your original professional pursuit?
Sarai Johnson: When I went to college, I thought I would be a pastor. I had known from a young age that I was “called” to something, and as a kid who grew up in an Evangelical world, pastoral ministry was the only thing I knew to do - besides being a missionary, and while I wanted desperately to travel, I had a really strong knowing that I would only want to do that if I could offer some kind of practical skill or information for people. I’ve never been one for converting people just because.
When I was a junior in college, I had a moment when I realized very clearly that I didn’t want to work in a church. I finished the degree course, because at that point, it would have taken a lot more time and money to change my degree. I have found the education I got was just right, though! I learned how to do public speaking well, how to be an executive manager, how to provide guidance and coaching to people, and gave me the time and space I needed to find my own philosophies about life, politics, and spirituality.
Was Allan Brothers your first "adult" job? What did you learn from your time working in the food service industry?
I think my first “adult” job was probably a different coffee shop I worked at for a few years. I was a manager there, and it was during a tough time for the shop and for the owners. I worked in the coffee industry for the better part of a decade and I learned a lot about how to manage and motivate people, how to conduct smart planning to reduce waste and increase profits, and how to keep customers happy and coming back. I also learned a lot of skills I carried into my professional career later, especially when my former nonprofit employer developed a regional food hub. I took that food service experience and applied it to social good in a really innovative and interesting way.
What was the primer for you to pursue further education and public administration at UO?
I spent my whole life until about three years ago aggressively pursuing every promotion and career advancement I could get. I was always on this upward course. I found I was at a place in my nonprofit career where I really needed and wanted to grow quickly so I could serve my employer at the time even better, and so I could help navigate with the organization as we had a big Executive Director transition. Public Administration was a degree that was in high demand in the nonprofit and public sectors, where I imagined I would spend my career.
Many steer away from non profit organizations but you entered NEDCO and worked your way up the ladder, what were some of the key lessons you learned working with them?
Oh man. I could fill a book with this (oh wait! I have! And with a bunch more to come! See books by Sarai HERE)...I learned a ridiculous amount of work and career-specific things - like how to not only climb the ladder to advance, but also how to build my own opportunities, and build my position as I went. I was able to create a lot of new programs and get a lot of new funding, and as I did, my position grew with the organization. I asked for what I wanted, and I got it, most of the time. I had the power to change things, and make them better for myself and my colleagues, and I was rewarded for that. I also learned that making yourself indispensable is a terrible idea (may have learned that the hard way), and that working yourself out of a job when you’re a leader is the best way to grow the organization and the opportunity for others.
Having worked in both for profit and non profit organizations, what are some of the lessons these structures can learn from each other?
For profit and nonprofit organizations have a lot of similarities. Some things, business does well. Businesses tend to be more focused on metrics (it’s easy for them - how many people are buying our stuff, buying it again, and how much money are we making). Nonprofits have a harder time with that, because what they measure is harder to quantify. It can be done - in fact, it MUST be done.
Nonprofits incidentally generate a lot of waste because of this limited focus on measures. For profits, on the other hand, could learn to think of the social good and be more aware of public policy issues as they affect everybody in the country. Nonprofits track this more closely because they depend on public support so much. Businesses have the opportunity to learn from nonprofits on this front, and the world would be better off if they did this.
At what point did you decide to pull the trigger and launch out on your own as Lean Nonprofit?
Full disclosure, I was in a pretty challenging position by the time I left my former organization. I was exhausted, burned out, and frustrated. My boss and I had some very toxic dynamics between us (we both contributed to it, and we both learned from it), and I had thought about leaving for at least 18 months before I finally did.
A year before I left, I started working on building a consulting practice, learned about how to be a consultant, and how to run a business of my own (it helped that I was a business advisor at my old employer!), and laid the groundwork. I decided to leave on a day when whole slew of things happened that made me suddenly realize I was burning with rage and needed to get out of there. I did, however, also still love the organization, and wanted to support them as best I could.
My boss asked me to take something back on that I had (finally!) delegated, and I said, “I’d be happy to do that for you as a consultant.” Then, I wrote her up a proposal, and they signed on to work with me in a different capacity. It was epic. (Read more on the story behind this turn of events - Why I Quit My Nonprofit Career)
What was harder than you thought and simpler than you thought about starting your own business?
It was harder than I thought to have the energy to do anything at first. Like I said, I was deeply burned out, and that made it really hard for me to get to work on booking new clients and all the things you have to do to have a viable business. I was lucky to have a retainer for about a year with my former employer. It was hard finding my footing after that, and it got harder when I realized nonprofits weren’t my favorite people to work with. Pivoting isn’t easy.
It was simple to me to create products and services and sell them. I focused online first, and then did a lot more local and national consulting in person. I found what I liked and didn’t like to provide, and adjusted my offerings accordingly.
Lean Nonprofit is not just about the financial aspects of making your dollars stretch, what are some of the keys to long term success that you work with organizations to achieve?
Lean is more about continuous improvement and reducing waste than it is about operating on a small budget. What I focus on with nonprofits is developing a culture of continuous improvement that supports people who work in the organization to try things in a thoughtful way, make decisions about how the things they try work (or don’t work), and measure and report on their results. I develop processes and systems that allow them to map their work, take accountability and assign responsibility effectively, and always make their way toward getting more impactfull mission results.
Now that you have been in business for a while you are expanding and collaborating further, what do you see as some of the keys to conducting business as a business without losing the heart of your values?
As a person, I can’t function outside of my values. Nothing is more important to me than doing what I think matters most - working with people for greater freedom, liberation, and self-determination. I suppose the key is to know why you are doing what you’re doing, and stay true to that. Sure, making money is important to me. I gotta eat, just like the next guy, but it isn’t the only thing that drives me. I could just as easily get by with a temp job doing data entry (and I have when business was slow! - read more about this in Mundane Gratitude), so I know I don’t have to do things that don’t serve me or my clients well. I find it pretty easy to let clients go when their values don’t match mine, or when they do things I find unethical or compromised. That’s something I’ve practiced a lot over the years, and I find it serves me well in business.
If you are looking for more resources regarding management, leadership, and transition coaching you can connect with Sarai through her website or on LinkedIn. If your goal is to improve your organization through lean priciples you can find tools through the Lean Nonprofit, LLC website.
Today we need to talk about how we treat out employees when training or discipline is necessary. Our helpful Kids As Managers team helps us run through a few scenarios. When discipline is conducted in relationship to values (more), the process can be a positive engagement tool that develops future leaders.
The DYOJO is the Do Your Job Dojo. In The DYOJO we want to help each other develop intentionally.