Category Archives: OrgBio

Seven ARM Components

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This is an overview my thoughts on Risk Management.  Part I, “Guns, Telephone Books and Risk” discussed Risk Management as long lists of things that will never happen. Part II, “Anti-Fragile Risk Management” considered the concept of Anti-fragility in a risk management concept (ARM).  This included an overview of ISO 31000 – Risk Management.  The second blog also introduced the Seven ARMed Organization.  That is an organization that has mastered these risk mitigation components:

  1. Purpose: Why Does the Organization Exist, what are its objectives?
  2. People: Does the Organization have adeptness to achieve its objectives?
  3. Process & Plant: Do the People have the right Operational knowledge to operate the systems they are responsible for?
  4. Product: Does the organization have a product or service that the market/society wants?
  5. Planning: Does the organization know how to do Operational and Tactical Planning to sustain or enhance the above?
  6. Power: Does the organization have the material resources as well as the strategic and leadership capacity to Change the Above?
  7. Risk Tested: What identified risks can be used to test the above to ensure they are functioning?

No Ordinary Ordinality

The Seven Components of ARM can be managed and worked on in parallel but there is a method in the selection of the order they are presented.  If an organization does not have number 1 (objectives) at least started or well in hand component 2 (people) and onward becomes much more difficult.

Number 6 (governance) may surprise some people with its placement.  From a Risk Management perspective, Governance has little impact on day to day risks.  This is not to dismiss or discount it – but to put it into context that it has longer term or enduring impact as opposed to being a short term influence on risk management.  This concept is demonstrated in the following diagram.

Anti-Fragile Risk Management

No Business Gurus Were Harmed in the Making of this Blog

The first six components have been fodder for a whole flotsam of business books.  My focus will be to provide a high level explanation of why I included the component and answer the question why this component is important from a Risk Management perspective.

A Dive into the Pits of the Seven ARMs

The next series of blogs will consider each of the Seven ARMs in a bit more detail.  At a minimum I would like to consider:

  • The definition of each of the ARMs.
  • Its linkage (if at all) to ISO 31000.
  • Why is the ARM important?
  • Example of Risks and Mitigation particular to this ARM Component.

Managed Serendipity

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Don’t you hate it, you think you have a brilliant original thought and that darn Google shows you that numerous people have thought it before you!  Such is the case of one of my Phrankisms, ‘Managed Serendipity‘.  In this case, it is okay because through fortunate happenstance I can potentially work on a better definition.

Set of snow shoes coming off the trail on to ashphalt.
Off the snow track

Definition of Managed Serendipity

The ability to respond to and take advantage of an opportunity in the future.  The catch is that you don’t know what attributes will be called on by that opportunity or even if such a chance will occur in the future.  

As the name implies, there are two parts to the concept. Managed is what you can actively do to either generate opportunities or capitalize on them as they appear.  Serendipity is entirely beyond your control, it is fate, fortune, chance or God’s will.  You can only react to serendipity not control it.  This is not a new concept by any stretch.  Here are three examples:

  • In the fields of observation chance favors the prepared mind. (translated from Louis Pasteur from: Dans les champs de l’observation le hasard ne favorise que les esprits préparés); source: Wikiquote.
  • Optionality is the ability to switch from one course of action to another thus taking advantage of uncertainty and changing circumstances (adapted from ‘Antifragile
    Things That Gain From Disorder’, Nicholas Taleb).
  • Life is what happens to you while you’re busy making other plans.  Attributed to John Lennon but based on a Readers Digest quote from 1957 (courtesy Quote Investigator).

Examples of Managed Serendipity

The best way to foster Managed Serendipity is education.  Graduating from High School, College or an apprenticeship gives you more options then dropping out in Grade 10.  Beyond formal education, life choices and personal investments are part of Managed Serendipity.  This includes having at your disposal a wide variety of skills and experiences that initially seem only relevant in one narrow circumstance.

By way of an example, I did the lay up and editing for the 7th edition of the Waskahegan Trail Guide.  That experience gave me a much better appreciation for desktop publishing, layout and production of complex documents – skills that have tipped job interviews in my favour or allowed me to do more complex volunteer activities – such as blogging on Managed Serendipity (yeah)!

Limitations to Managed Serendipity

To start, one’s own health.  Being free of self-inflicted health limitations (e.g. excessive weight, poor physical conditioning, mental well-being, etc.) better positions you to seize an opportunity.  Certainly family circumstances can impact Managed Serendipity.  For example, caring for your young children limits your work opportunities – but also provides you with infinite joy and a core reason for your existence, a very fair trade off.  At the same time, being the primary care giver for an aged parent or spouse, shrinks your world (but such are the burdens borne with love).

Notwithstanding family restrictions, people fail to recognize an opportunity when it presents itself.  To this, I have four maxims I use in my life so as to recognize Managed Serendipity:

  1. Always answer the door when opportunity knocks.
  2. Remember opportunity typically knocks when you are in the bathtub.
  3. Never negotiate on the other party’s behalf.
  4. Manage to the downside.
  5. Pay yourself now for the future maybes.

Answer When Opportunity knocks

Opportunity is constantly knocking.  It may be something as obvious as a head hunter or less straightforward as your daughter’s soccer coach asking if you can edit a newsletter – and therefore learn new software.  At least hear what opportunity has to sell before closing the door and …

Opportunity Knocks When You are in the Bath

Opportunity seldom knocks when it is convenient for you.  Sometimes Managed Serendipity means leaving a good paying government job on Friday and boarding a plan on Sunday to fly to and work in Munich German for 18 months (hey it happens, trust me).  After hearing opportunity out, remember that timing is never convenient or circumstances are easy.  Of course you need to balance this against other personal circumstances (young children, aged parents, etc.).

Never negotiate on the other party’s behalf.

It is amazing how often there are circumstances in which a person will not propose an option in negotiations because they think the other party will reject it.  For example, you approach your employer and say, ‘hey, can I take a leave of absence and go work in Vienna for year?‘  Your problem ends in asking the question and starts upon hearing the response.  Their problem starts on hearing the question and ends formulating the response.  Don’t confuse your problems (asking) with their problems (responding).

You may have young children and a chance to work abroad appears.  DON’T forego this opportunity because traveling with a six year old is hard.  DO eliminate the opportunity if travelling with your precious child is unduly dangerous.

Life, Gravy Lumps and All

When presented with a situation, can you accept the worst case scenario?  Finding a new job, accepting rejection or perhaps receiving a ‘no’ answer?  If the answer is yes then you have managed to the downside. If you can live with worst case scenario then everything else is gravy. Sometimes the gravy is lumpy, perhaps separating … but heck, it is still GRAVY!

Pay Yourself Now for Future Maybes

Set yourself up for future possibilities by learning, learning and experiencing.  Take the opportunity to edit the kids soccer newsletter because in the future you may be building websites with that experience.  Learn that new language because you may visit or work there – or for someone you might meet in the classroom.  In other words, increase the chances the opportunity will come and knock at your door… but pay yourself while you are doing it.

A new thing learned may lead to something in the future – but probably it will not.  Therefore, enjoy what you are doing for its own merits in the here in now.  This is paying yourself first.  You can’t force the serendipity part –  you can only manage it.

Ying, Yang and the Border

Managed Serendipity is like the Asian concept of Ying and Yang.  They are complementary, distinct and inter-related.  To me the most interesting thing about Ying and Yang is not the two tadpole’esque features – it is border or interface between them.  As in any border, there is danger between safety/adventure or risk/opportunity.  

I wish I could say that seizing an opportunity is without risk but that is not the case.  An aging parent’s health may deteriorate with out your care, your young child may feel displaced between cultures and you may not have a job waiting for you upon your return – risks.  Of course you may also feel refreshed and a better care giver upon your return, your child is stronger working through cultural displacement and you landed an even better job – opportunities.

Ying-Yang courtesy of Wikipedia (used via creative commons).

As Stephen Covey talks about in ‘The 7 Habits of Highly Effective People; Powerful Lessons in Personal Change’: Nobody ever laid on their death-bed and wished they had spent more time at the office.  In parallel, no one ever laid peacefully in the death-bed content they stayed in the bath tub despite incessant knocking.

Can We Monetizing Government Services?

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On November 7, I attended a session put on by the Canadian Institute called “Government Connects“. All levels of government spoke about digital transformation of their services.  One of the speakers was the boss of all Alberta Public Servants, Marcia Nelson.  Marcia did a great job discussing what the Government of Alberta is doing in moving its services online.  Certainly Digital Government is the nirvana for most governments as they see cyberspace as being a cheaper, faster and more effective way to deliver more services to citizens.

The User as the Product

Marcia, and many of the speakers, talked about the expectations of citizens relative to their other digital experiences.  For example the ease to create a Facebook account, the functionality available via a GMail account or how a LinkedIn profile is now almost as important as a resume or a business card.  The question from Marcia, and others was ‘how can governments compete with these products?‘.

The other side of these services is a profit motive.  Facebook makes it easy to set up a profile so it can target you with advertisements. Gmail wants you as an email client so it can scan your email and target its advertisement.  LinkedIn wants you to buy a premium membership or at least get your eyeballs on its advertisements.  All of the above are examples of monetizing you as a user into becoming their product.  Assuming informed consent, there is nothing wrong with monetization.  It is an economic transaction in which a slice of your privacy is exchanged for some really good services (like watching cat videos on Facebook just saying).

The Digital Government Disadvantage

So where does government fit into this?  Firstly there is the challenge of resources.  A quick scan of the September 2016 quarterly results of Facebook shows they have about $10.6USD Billion in physical and intangible assets*.  Included in this number is $5.1USD Billion of network and computer software assets (physical) in addition to $1.7USD Billion in technologies and patents (intangible).  In other words, Facebook has excellent technical infrastructure to offer a premium product for free to users.  And if they don’t have a good product now, their $30.3USD Billion in current assets (e.g. cash, securities, etc.) can be used to buy that good product.

* Note, for those accounting weenies out there, an interesting item they have on their balance sheet is ‘Acquired users’.  I could not readily find a definition for this term but it appears that the users are really the Product!

Pity someone like the Government of Alberta (GoA).  A $50 billion a year organization in which an estimated 2.5%, over $1 billion, is spent annually on Information Management and Technology (IMT) (adapted from: GoA IMT Plan, 2016 – 2021, p. 4). From the GoA’s most recent financial statements, they have $4.4CAD Billion (about $3USD Billion) of computer assets – hey not bad – of which 78% of is fully depreciated (e.g. over 5 years old) – YIKES! (adapted from GoA 2015-16 Financial Statements, p. 63).

Beyond relying on old technology, the GoA has to do a lot more than Facebook.  While Facebook can focus on social media, the GoA needs to run registry systems (e.g. vital statistics, land titles or drivers licenses), health systems (e.g. immunization, medical records), education (K-12, student finance, apprenticeship certificates), business (collect taxes/royalties/fines) and human social functions (tracking children in foster care, seniors or homelessness).

The above is not a new story but it is worth repeating every now and then that governments do things that no one else wants to with a tiny fraction of the resources of private industry.  Governments must also build and run systems that have almost no tolerance for failure.

Risk and Skin in the Game

To the last point, risk, this is where government is at a further disadvantage.  The original investors in FaceBook backed a winner.  Those who put money in to Myspace, Friendster or DIGG did not fare so well (huh, never heard of some of these, check out the grave yard of failed social media infographic from the Search Engine Journal January 25, 2013).  Nicholas Taleb calls investors (win or lose) people with ‘Skin in the Game‘ from his book Anti-Fragile.  In contrast, public servants never have skin in the game.  We are always spending other people’s money and our fantastically worst case for abject failure is forced retirement or perhaps being fired – maybe.

In other words, governments have both an advantage and disadvantage around risk. The individuals involved do not have personal risk (advantage) but the organizations also lack the mind focusing benefit of the ‘terror of failure’ (disadvantage).

The Monetization Continuum and How Can Governments ‘Compete’

The reality is that Governments can’t and shouldn’t compete with the Facebook’s of the world.  Creating a bleeding edge user experience would be an inexcusable use of public funds and without the terror of failure would not likely be successful anyway.

But because thought exercises can lead to innovation, I am proposing the ‘Monetization Continuum‘ for governments; a government simply needs to pick a point on a line.  At one end (generally status quo) is ‘Mind and Accept the Gap‘ at the other is ‘Full Monetization‘ with other options falling between these two.  Definitions are provided below as well as way points but generally if you are Singapore you may be more comfortable having McDonald’s ads on your obesity website.  If you are at the other extreme – well this is where Minding the Gap comes in.

Monetization Continuum

End PointsDefinitionExamples
Mind and Accept the GapGovernments acknowledge that they will lag and explain why to their citizens. Periodically, governments leap-frog into a stronger position.Status Quo
MonetizeFund digital government through ad, premium memberships or sponsorship revenue.

 

Premium services could even be tax-deductible!

Faster border crossing via Nexus.

On the Subject of Not Likely

The reality is that governments will and should never monetize their services.  There is a slippery slope of what is reasonable and in good taste.  Governments have something that Facebook or Google does not have – the coercive powers of taxation and legislation. Perhaps governments does not need to build systems when they can force organizations operating in its jurisdictions to offer the services.  There is a long tradition of this in the telecommunications world, for example.  This would not be monetizing users as products, this would monetizing providers as servants for the public good.  Just a thought.

90 or 99 – That is the Strategic Question

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Nicolas Taleb would have us believe that strategic planning is ‘superstitious babble’ (see Anti-fragile strategic planning).  In contrast, Kaplan and Norton make strategic planning a cornerstone of the Balanced Scorecard.  The reality is probably in the middle.

This blog however considers the question, how much time should an organization spend on planning?  Successful or not, when do you cut your losses for a year or when do you think that you are not doing enough?

How Much Is Enough?

On the one hand, strategic planning can become its own self-sustaining cottage industry.  Endless meetings are held and navels are closely examined with little to show for it.  On the other hand, the organization is so tied up in operations and ‘crisis du jour‘ that they wake up and discover the world (and even their organization) has completely changed around them.

What rule of thumb or heuristic can be used to know that you are doing enough Strategic Planning without decorating cottages?  My proposed answer is somewhere between the 1.0% and 0.1%. Although a full order of magnitude separates these values, a range is important due to the volatility of an environment an organization finds itself in.  Governments are likely on the low-end (closer to 0.1%) and tech start-ups on the higher end (1.0%).

For more on the basis for these heuristics, take a read of ‘A Ruling on 80, 90 and 99‘ for my thoughts and a review of such things as Vilfredo Pareto’s legacy and internet lurkers. A recap from this blog is as follows:

  • Pareto: 20% of an organization’s actions account for 80% of its results.
  • 90 Rule: 1% of the operational decisions are enacted by 9% of the organization affecting the remaining 90%.
  • 99 Rule: 0.1% of the strategic decisions are enacted by 0.9% of the organization which impacts the remaining 99%.

Thus the 99 Rule provides a minimum amount of time for an organization to consider strategic questions while the 90 rule provides a maximum amount of time.

Who Does What and What to Do with Your Time?

Consider a fictional organization of 1,000 people.  This is a medium sized business, typical government Ministry or employees of a large town or a small city.  Assuming there is about 1,700 productive hours on average per year per employee (e.g. after vacation, training, sick time, etc. see below for my guesstimation on this) this means the organization in total has 1,700,000 hours to allocate.  How much of this precious resource should be spent doing strategic planning?

I am recommending no less than 1,700 hours and no more than 17,000 hours in total.  In total means involving all people in all aspects of the process.  Thus if there is a one hour planning meeting with 20 people in the room, that is 20 hours.  To prepare for this meeting, 3 people may have spent 2 full days each – another 3 x 2 x 8-hours or another 48 hours against the above budget.

Measuring what Matters

The point of completing these measurements is to answer four fundamental questions:

  1. Is the organization doing enough strategic planning relative to the environment?
  2. Is the organization doing too much planning?
  3. Are we getting value for the investment of resources?
  4. How do we get better at the activities to reduce this total?

Is the organization doing enough strategic planning relative to the environment?

What happens if you discover you are not doing enough?  For example your 1,000 person organization is only spending 100 hours per year doing planning.  You may be very good and efficient and if so bravo to you and your planning folks!  On the other hand, you may be missing opportunities, blind sided by challenges and mired in the current day’s crisis – in which case maybe a bit more effort is needed.

Is the organization doing too much planning?

The 1,000 person organization may also be in a Ground Hog Day’esque hell of constantly planning with not much to show for it.  Perhaps you have a full time planning unit of five people who host dozens of senior management sessions and the best they can is produce an anemic planning document that is quickly forgotten.  In this case, measuring the effort of consuming 10 to 20 thousand hours of efforts for nought can lead to better approaches to the effort.

Are we getting value for the investment of resources?

The above two examples demonstrate how a bit of measurement may help you decide that 100 hours is more than sufficient or 20,000 hours was money well spent.  The output of the planning process is… well a plan.  More importantly it is a culture of monitoring, planning and adapting to changing organizational and environmental circumstances.  Thus setting an input target of planning to measure the quality of the output and the impact of the outcomes can answer the question if the planning effort were resources well spent.

How do we get better at the activities to reduce this total?

The advantage of measuring, evaluating and reflecting on the planning efforts is to get better at.  Setting a target (be 1.0% or 0.1%) is the first step of this activity and measuring against this target is the next.

Good luck with your planning efforts and let me know how much time your organization spends on its planning initiatives.

* How much Time Do You Have?

How much time does an organization have per annum to do things?  The answer is … it depends.  Here are two typical organizations.  The first is a medium size enterprise that works an 8-hour day, offers 3-weeks vacation per year, in addition to sick days and training (e.g. for safety, regulatory compliance, etc.).  On the other hand is a Ministry that offers a 7.25-hour day, 5-weeks of vacation plus sick and training days.

Organization Medium Size Company Government Ministry
Hours/day (1) 8 hours 7.25 hours
Work days per year (2) 254  250
Work Hours per year 2,032 1,812.5
Avg Vacation days x work hours (3) 120
(3 weeks)		 181.25
(5 weeks)
Avg Sick Days/year x work hours (4) 60
(7.5 days)		 54
(7.5 days)
Avg Hours of Learning/year (5) 42 29
Total productive hours/employee 1,810 1,548.25
  1. Few professionals work an 8-hour day let alone a 7.25-hour one.  Nevertheless, everyone has non-productive time such as bathroom breaks, filling up on coffee, walking between buildings.  So I am leaving the actual average productive hours at 8 and 7.25 respectively.
  2. For a cool site in adding this calculation, see: www.workingdays.ca.  Note this includes 3 days of Christmas Closure.
  3. 10 days is the minimum number of vacation days required to be given to an employee.  The average is a surprisingly difficult number to find (at least to a casual searcher).  15 days is based on an Expedia 2015 survey.
  4. Reference Statistics Canada: Days lost per worker by reason, by provinces.
  5. Sources vary.  I have chosen the high value for the for-profit organization as they often have stringent regulatory requirements for health and safety training.  For government I have chosen a medium value.  Sources:

Other Thoughts on Strategic Planning