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Michael Useem

Michael Useem is a professor of management and the director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania.
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The art of risk management

Question: Air traffic controllers are caught napping, holes blow open in jetliners, planes bump into each other on a busy runway--and suddenly the Federal Aviation Administration finds itself the object of national criticism and derision. Agency officials were apparently aware of the potential problems but did not consider them urgent until they were exposed. How can leaders better identify the handful of incipient problems that genuinely requiring immediate attention and create enough urgency around them to overcome internal conflicts and bureaucratic inertia?

From leadership experience and academic research, I believe that the art of risk management requires that leaders take at least three pre-emptive actions:

1. Create strong methods for reading “weak signals.”  Some signs imply nothing, but others–ranging from subprime mortgages to thin aircraft cracks–presage far more dangerous developments. 

2. Guard against the natural tendency for subordinates to report good news and pass over incipient problems.  As one manager observed when he rose high up the hierarchy, his jokes became funnier and the news became better.  

3. Recurrently remind everybody of the organization’s ultimate values, including safety, service and survival.  That way, all should appreciate that cat-napping on the job is fundamentally at odds with the enterprise’s mission and thus one’s first obligations. 

None of these steps is natural, but all can be created by a vigilant leadership committed to creating effective risk management before it is needed.  

View all panel responses to the discussion Wake-up call for the FAA?

Michael Useem  | Apr 21, 2011 10:36 AM

 
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