When we bias organizational decisions to manage our personal risks, we're sometimes acting ethically — and sometimes not. What can we do to limit personal risk management?
ost of us believe that we make organizational decisions on the basis of organizational priorities alone. But it just ain't so — sometimes we take into account personal consequences, using organizational influence to limit negative consequences for our own careers, status and compensation.
Often this behavior is quite ethical. It's encouraged — even embedded into compensation structures. Our stock option plans and profit-sharing plans exploit the pressure of personal consequences by aligning personal and organizational interests. At least, that's the theory.
Lt. Col. John Paul Vann (second from right) briefs his colleagues in Vietnam. Col. Vann was an advocate of a strategy similar to what we now attribute to U.S. Gen. Petraeus in Iraq — enhanced dependence on small units, dispersed amongst the population, coupled with increasing reliance on forces drawn from that population. Col. Vann, who spent most of his years in Vietnam as a civilian, was known for his forthright assessments of the reality of the U.S. position, which he offered with relatively little regard for "personal risk management." As described by Neil Sheehan in his Pulitzer Prize winning history, , Col. Vann was asked at a 1967 meeting with Walt Rostow whether the United States would be over the worst of the war in six months. "Oh, hell no, Mr. Rostow," he said. "I'm a born optimist. I think we can hold out longer than that." Col. Vann was awarded the Presidential Medal of Freedom in 1972. Photo courtesy U.S. Library of Congress.
But sometimes decision makers use their influence to achieve effects that confirm their own personal self worth in less benign ways — sometimes for personal economic gain, as in the case of stock options and profit sharing, and sometimes for other reasons. Those other motives include personal risk management.
Personal risk management is the practice of using organizational influence to protect one's career, personal status or personal compensation. This behavior can occur even when organizational consequences are clearly negative. Here are three typical illustrations.
Aggressive project schedules and budgets
Project sponsors who advocate very tight project schedules and budgets might be doing so for personal advantage, when gaining commitments to those goals might reflect well on them. The failure to meet those goals might reflect badly also, but if the sponsor intends to be long-gone by then, that risk is mitigated.
To limit this behavior, limit project goals and shorten project schedules. Short schedules enhance the likelihood that aggressive sponsors will suffer the consequences of aggressive goals.
Padded estimates
Unrealistic project schedules and pathologically tight budgets are sometimes little more than career advancement tactics
Project managers sometimes "pad" cost or schedule estimates to protect against the personal performance penalties associated with budget or schedule overruns. Much padding behavior is anticipatory — it provides protection from sponsors who are overly aggressive about budget and schedule, and against externally imposed requirements volatility. But some padding is just "insurance."
To limit this behavior, monitor budget and schedule underruns. Investigate patterns to determine whether padding is being used for insurance.
Unrealistic promises to customers and investors
Account executives or enterprise executives who promise customers or investors aggressive performance might please the promise recipients, but the organizational cost can be unbearable. This behavior is most common at the ends of quota or fiscal periods, or near commission thresholds, or during time-limited "incentive" periods. It's all a consequence of using extrinsic rewards to enhance personal performance.
To limit this risk, avoid extrinsic rewards, or failing that, include in the calculation of personal incentives a negative effect for promises to customers or investors that are unsupported by prior organizational commitments, whether or not they're achievable or achieved.
Although most personal risk management strategies conflict with organizational goals, asking people to just stop doing it is usually futile, because they're caught in a system that demands it. To bring an end to personal risk management, we must change the systems that cause it. TopNext Issue
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ost of us believe that we make organizational decisions on the basis of organizational priorities alone. But it just ain't so — sometimes we take into account personal consequences, using organizational influence to limit negative consequences for our own careers, status and compensation.
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Next IssueAre your projects always (or almost always) late and over budget? Are your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around. Read 52 Tips for Leaders of Project-Oriented Organizations, filled with tips and techniques for organizational leaders. Order Now!
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Are you doing work you love? Are you less in love with the job? Bad boss, long commute, troubling ethical questions, hateful colleague? Read Go For It! Sometimes It's Easier If You Run to learn what we can do when we love the work but not the job. It helps you get moving again!
The key to managing virtual or global teams is creating a sense of team despite the obstacles of separation. Read my tips booklet, 303 Tips for Virtual and Global Teams, to learn how to make your virtual global team sing. Newly revised and updated for 2008 with 101 new tips! Check it out!
Are you managing a change effort that faces rampant cynicism, passive non-cooperation, or maybe even outright revolt? Read 101 Tips for Managing Change to learn how to plan and execute your change efforts to inspire real, passionate support. Check it out!
A Tip a Day arrives by email each business day. It's 20 to 30 words at most, and gives you a new perspective on the hassles and rewards of work life. Most tips also contain links to related articles. Free!
Do you ever wonder if all these meetings are really necessary? (They aren't) Or whether there isn't some better way to get this work done? (There is) Read 101 Tips for Effective Meetings to learn how to make meetings more productive — and more rare. Check it out!
