BUT, thinking of my impending trip did provide some inspiration for a little treatise on performance, risk and compliance from the perspective of a guitar maker of average skill. Since most business processes are performed by people with average levels of skill and experience, I thought this might be an interesting parallel, and, as I thought about it more, it stimulated some interesting thoughts. Well, at least, they interested me!
For those interested in design or instruments, this is what I made last time, inspired by the classic Paul Reed Smith (PRS) . . .
. . . . and this time, I plan to build something inspired by the Fender Jaguar, comme ci . . .
But back to my theme of the 'Six Strings'. I'm sure you are absorbing the reference by now . . .
- E, COMPLIANCE - I inhabit a world, much like many of you, where this has become a dirty word over the past ten years. A lot of effort, procedure and bureaucracy for what, exactly? However, when I consider my experience in building my first guitar, adherence to rules and policies was very important. There were safety rules and policies related to machinery designed for woodworking that could take the hand off the unwary. There were 'rules' related to the design and building of the guitar itself, which I readily admit I did not fully understand. The more experience you developed the more you saw the reason for these rules. The 'professor' who led the working group of 8 budding luthiers spent most of his time inspecting our progress and offering advice and guidance where we deviated from expectations. In the business world, automated inspection aka Continuous Monitoring is becoming the norm for assuring compliance. But is that the end of the argeggio?
- A, RISK - The business world is generally broadening its sights from pure compliance to more comprehensive risk management, hence the increase in interest in and adoption of methodologies such as Enterprise Risk Management (ERM). However, the topic of risk management still seems arcane to many, except when splashed across the headlines in a banking context. My guitar making experience led me to an insight which is very relevant in business. We all KNOW what risks are, but we don't REALLY UNDERSTAND or FEEL them until we have observed them and felt their impact. There are some specific guidelines in honing a semi-acoustic guitar body, for example. However, it is only when we all saw (and heard) the 'exploding guitar' did we really understand what these policies meant and how critical they really were. My observation in business is that many risks are perceived as academic and not 'real' enough. Big risk events are usually the result of an aggregation of many smaller variant 'molecular' events or transactions in our business. These can be automatically inspected or monitored and there is a growing realisation that this approach can save us a lot of pain. Leading organizations have extended from automated compliance monitoring to embrace risk monitoring as well.
- D, REPUTATION - The guitar making 'professor' spent a lot of time inspecting and monitoring for the evidence of these risk events occuring during our work. In conversation with him I realised, however, that his primary interest was not really in the perfect construction of our individual guitars, but in his own reputation as a top quality luthier and guitar making instructor. One dodgy guitar making story could damage his business far more substantially than the revenue from that one participant. In business I see a growing focus on the impact of major risks being reputational more than financial, operational or even strategic. There is a lesson here. The impact of a risk event may have a small direct financial impact but a much larger reputational impact which usually hits customer confidence and shareholder value the hardest. Risks that can impact reputation are moving to the centre of the continuous monitoring radar!
- G, PERFORMANCE - When I talk about business performance I refer to efficiency, speed, value-creation and effectiveness. True performance also incorporates risk in that these positive outcomes need to be optimised in a 'balanced risk' manner. Business is all about the pursuit of risk, but it is an effective balance that drives true performance. Ultimately, in the guitar building experience, we had 21 days to produce the finished article. Try to run too fast and the result is zero, or in fact negative when you take into account the fees for the course. Thinking through performance barriers when considering risk is a powerful analytical technique. Often, they are symbiotically connected, and in a very positive way! CFOs are now realising that the pursuit of world class finance is a business as usual process relying on continuous improvement. Continuous improvement requires rapid and effective diagnosis on process variations. Continuous monitoring provides the data on these exceptions.
- B, CROSS TRAINING - One tactic for addressing risk AND improving performance is to use the athlete's recipe for performance improvement, variation. By exposing management at all levels to the demands of different roles and perspectives, a better appreciation is gained all round for the genuine impact of risk across a process or organization AND more common sense tends to be applied to challenges and opportunities. As both guitar makers and guitar players, the eight 'crew' in our workshop developed a very strong 'continuous improvement' loop. Risk specialists tasked with engaging in some performance improvement objectives (and vice-versa) develop a stronger all round capability. Change your perspective and the problem looks different.
- E, INDEPENDENT THOUGHT - On a similar theme, we need to balance received wisdom with experiences and observations from our own perspective and not be afraid to ask the dumb questions. In the world of risk and performance monitoring, there are constant assertions about 'processes', 'controls', 'policies', 'systems' and 'standards' that ensure that certain things don't happen. Be very wary of such claims. After several years in this world of automated Continuous Monitoring, I have yet to see any example where reality consistently reflects policy, irrespective of the enormity of the systems and process investment. There is always an opportunity to improve by driving out the variations and exceptions, but you have to find them first and the devil is in the detail !
Now if those 6 strings can't stretch to an F# Demolished, I don't know what will !
If you are interested to learn more about the first guitar making experience, you can see it all here http://guitarra-adventura.blogspot.co.uk/2010/08/day-1.html
For those who want to see the pain and progress closer to 'real-time', the new blog, Part Deux, will be live from Monday 20th September 2012 at http://guitarra-part2.blogspot.co.uk/
Thanks for reading, and enjoy the rest of summer . .
Dan
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