Reducing Risk for Senior Leaders

Reducing Risk for Senior Leaders

New Zealand business (and society) has been rocked by several failed companies during the last few years. As a result more accountability is being required from directors for the governance and performance of their companies. This was highlighted by a landmark court case where Justice Paul Heath sent the directors of the failed Nathans Finance NZ Limited to jail. The Pike River Mine disaster also comes to mind. This scenario is unfortunately not limited to New Zealand.

“Turn your brains on” was the call by the judge in the high-profile case of Nathans Finance. Mark Cathro and Madeline Dawe from Lane Neave Lawyers mentioned in their May 2015 newsletter that this sentence came as a wake-up call to directors to observe and foster high ethical standards and to avoid group think. Daily management and performance is not only the role of managers and team leaders; senior management, and especially directors, should be in touch with the reality of their organisations.

A major obstacle for many senior leadership teams is to know what is really happening at the coalface. It is relatively easy to manipulate or hide data, to make things look better than they truly are, whether by people in the lower echelons of an organisation or those at more senior levels. It is not good enough for middle and senior managers to solely depend on mid-term reports or month-end figures conjured up for that two-hour meeting on the last Friday of the month!

Because of the unevenness (mura) in many reporting processes (working in batches of information instead of “one-piece-flow”), preparing these reports usually entail strain and stress as they are often done at the last moment (muri). Errors in reports (muda) are then highly likely. Disengaged staff might even deliberately tamper with data, painting a false picture of the state of affairs. This situation is putting directors, senior leadership teams and other stakeholders at risk.

In a non-lean organisation, the best-case scenario is where someone at least identifies these mistakes in reports, however, the responsible individual(s) are usually named, blamed, shamed and maimed. Not the way to build an effective, engaged team. No wonder Dr Deming concluded that about 94% of errors are due to bad systems and not the people in the system. Our people should be developed and cherished through the application of the KAIZEN™ approach to organisational excellence. This will ultimately strengthen the hands of directors and help them to become better custodians of their organisations.

The question is how to improve transparency throughout the ranks in the organisation. The application of visual management in critical performance measures can greatly assist in aligning top management, middle management and staff on the frontline. This can include uncomplicated team-based display boards showing the gaps between targeted and actual performance, making problems and inefficiencies visible and measurable. Subsequently, problems can be detected earlier and countermeasures implemented rapidly, thus reducing risk. However, it requires the senior leadership team and middle management to go to gemba to actually see and experience the people, processes, performance, and problems (see my previous post on “What is a good gemba walk?”).

The alignment of strategy and the subsequent visual monitoring of performance is a vital Lean aid in supporting directors and senior management in having more transparent and reliable information in their organisations. Due to this improved communication and shared understanding, the risks for an organisation, and its senior leaders in particular, are minimised.

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