Eight to Late

Sensemaking and Analytics for Organizations

Risk management and organizational anxiety

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In practice risk management is a rational, means-end based process: risks are identified, analysed and then “solved” (or mitigated).  Although these steps seem to be objective, each of them involves human perceptions, biases and interests. Where Jill sees an opportunity, Jack may see only risks.

Indeed, the problem of differences in stakeholder perceptions is broader than risk analysis. The recognition that such differences in world-views may be irreconcilable is what led Horst Rittel to coin the now well-known term, wicked problem.   These problems tend to be made up of complex interconnected and interdependent issues which makes them difficult to tackle using standard rational- analytical methods of problem solving.

Most high-stakes risks that organisations face have elements of wickedness – indeed any significant organisational change is fraught with risk. Murphy rules; things can go wrong, and they often do. The current paradigm of risk management, which focuses on analyzing and quantifying risks using rational methods, is not broad enough to account for the wicked aspects of risk.

I had been thinking about this for a while when I stumbled on a fascinating paper by Robin Holt entitled, Risk Management: The Talking Cure, which outlines a possible approach to analysing interconnected risks. In brief, Holt draws a parallel between psychoanalysis (as a means to tackle individual anxiety) and risk management (as a means to tackle organizational anxiety).  In this post, I present an extensive discussion and interpretation of Holt’s paper. Although more about the philosophy of risk management than its practice, I found the paper interesting, relevant and thought provoking. My hope is that some readers might find it so too.

Background

Holt begins by noting that modern life is characterized by uncertainty. Paradoxically, technological progress which should have increased our sense of control over our surroundings and lives has actually heightened our personal feelings of uncertainty. Moreover, this sense of uncertainty is not allayed by rational analysis. On the contrary, it may have even increased it by, for example, drawing our attention to risks that we may otherwise have remained unaware of. Risk thus becomes a lens through which we perceive the world. The danger is that this can paralyze.  As Holt puts it,

…risk becomes the only backdrop to perceiving the world and perception collapses into self-inhibition, thereby compounding uncertainty through inertia.

Most individuals know this through experience: most of us have at one time or another been frozen into inaction because of perceived risks.  We also “know” at a deep personal level that the standard responses to risk are inadequate because many of our worries tend to be inchoate and therefore can neither be coherently articulated nor analysed. In Holt’s words:

..People do not recognize [risk] from the perspective of a breakdown in their rational calculations alone, but because of threats to their forms of life – to the non-calculative way they see themselves and the world. [Mainstream risk analysis] remains caught in the thrall of its own ‘expert’ presumptions, denigrating the very lay knowledge and perceptions on the grounds that they cannot be codified and institutionally expressed.

Holt suggests that risk management should account for the “codified, uncodified and uncodifiable aspects of uncertainty from an organizational perspective.” This entails a mode of analysis that takes into account different, even conflicting, perspectives in a non-judgemental way. In essence, he suggests “talking it over” as a means to increase awareness of the contingent nature of risks rather than a means of definitively resolving them.

Shortcomings of risk analysis

The basic aim of risk analysis (as it is practiced) is to contain uncertainty within set bounds that are determined by an organisation’s risk appetite.  As mentioned earlier, this process begins by identifying and classifying risks. Once this is done, one determines the probability and impact of each risk. Then, based on priorities and resources available (again determined by the organisation’s risk appetite) one develops strategies to mitigate the risks that are significant from the organisation’s perspective.

However, the messiness of organizational life makes it difficult to see risk in such a clear-cut way. We may  pretend to be rational about it, but in reality we perceive it through the lens of our background, interests , experiences.  Based on these perceptions we rationalize our action (or inaction!) and simply get on with life. As Holt writes:

The concept [of risk] refers to…the mélange of experience, where managers accept contingencies without being overwhelmed to a point of complete passivity or confusion, Managers learn to recognize the differences between things, to acknowledge their and our limits. Only in this way can managers be said to make judgements, to be seen as being involved in something called the future.

Then, in a memorable line, he goes on to say:

The future, however, lasts a long time, so much so as to make its containment and prediction an often futile exercise.

Although one may well argue that this is not the case for many organizational risks, it is undeniable that certain mitigation strategies (for example, accepting risks that turn out to be significant later) may have significant consequences in the not-so-near future.

Advice from a politician-scholar

So how can one address the slippery aspects of risk – the things people sense intuitively, but find difficult to articulate?

Taking inspiration from Machiavelli, Holt suggests reframing risk management as a means to determine wise actions in the face of the contradictory forces of fortune and necessity.  As Holt puts it:

Necessity describes forces that are unbreachable but manageable by acceptance and containment—acts of God, tendencies of the species, and so on. In recognizing inevitability, [one can retain one’s] position, enhancing it only to the extent that others fail to recognize necessity. Far more influential, and often confused with necessity, is fortune. Fortune is elusive but approachable. Fortune is never to be relied upon: ‘The greatest good fortune is always least to be trusted’; the good is often kept underfoot and the ridiculous elevated, but it provides [one] with opportunity.

Wise actions involve resolve and cunning (which I interpret as political nous). This entails understanding that we do not have complete (or even partial) control over events that may occur in the future. The future is largely unknowable as are people’s true drives and motivations. Yet, despite this, managers must act.  This requires personal determination together with a deep understanding of the social and political aspects of one’s environment.

And a little later,

…risk management is not the clear conception of a problem coupled to modes of rankable resolutions, or a limited process, but a judgemental  analysis limited by the vicissitudes of budgets, programmes, personalities and contested priorities.

In short: risk management in practice tends to be a far way off from how it is portrayed in textbooks and the professional literature.

The wickedness of risk management

Most managers and those who work under their supervision have been schooled in the rational-scientific approach of problem solving. It is no surprise, therefore, that they use it to manage risks: they gather and analyse information about potential risks, formulate potential solutions (or mitigation strategies) and then implement the best one (according to predetermined criteria). However, this method works only for problems that are straightforward or tame, rather than wicked.

Many of the issues that risk managers are confronted with are wicked, messy or both.  Often though, such problems are treated as being tame.   Reducing a wicked or messy problem to one amenable to rational analysis invariably entails overlooking  the views of certain stakeholder groups or, worse, ignoring key  aspects of the problem.  This may work in the short term, but will only exacerbate the problem in the longer run. Holt illustrates this point as follows:

A primary danger in mistaking a mess for a tame problem is that it becomes even more difficult to deal with the mess. Blaming ‘operator error’ for a mishap on the production line and introducing added surveillance is an illustration of a mess being mistaken for a tame problem. An operator is easily isolated and identifiable, whereas a technological system or process is embedded, unwieldy and, initially, far more costly to alter. Blaming operators is politically expedient. It might also be because managers and administrators do not know how to think in terms of messes; they have not learned how to sort through complex socio-technical systems.

It is important to note that although many risk management practitioners recognize the essential wickedness of the issues they deal with, the practice of risk management is not quite up to the task of dealing with such matters.  One step towards doing this is to develop a shared (enterprise-wide) understanding of risks by soliciting input from diverse stakeholders groups, some of who may hold opposing views.

The skills required to do this are very different from the analytical techniques that are the focus of problem solving and decision making techniques that are taught in colleges and business schools.  Analysis is replaced by sensemaking – a collaborative process that harnesses the wisdom of a group to arrive at a collective understanding of a problem and thence a common  commitment to a course of action. This necessarily involves skills that do not appear in the lexicon of rational problem solving: negotiation, facilitation, rhetoric and those of the same ilk that are dismissed as being of no relevance by the scientifically oriented analyst.

In the end though, even this may not be enough: different stakeholders may perceive a given “risk” in have wildly different ways, so much so that no consensus can be reached.  The problem is that the current framework of risk management requires the analyst to perform an objective analysis of situation/problem, even in situations where this is not possible.

To get around this Holt suggests that it may be more useful to see risk management as a way to encounter problems rather than analyse or solve them.

What does this mean?

He sees this as a forum in which people can talk about the risks openly:

To enable organizational members to encounter problems, risk management’s repertoire of activity needs to engage their all too human components: belief, perception, enthusiasm and fear.

This gets to the root of the problem: risk matters because it increases anxiety and generally affects peoples’ sense of wellbeing. Given this, it is no surprise that Holt’s proposed solution draws on psychoanalysis.

The analogy between psychoanalysis and risk management

Any discussion of psychoanalysis –especially one that is intended for an audience that is largely schooled in rational/scientific methods of analysis – must begin with the acknowledgement that the claims of psychoanalysis cannot be tested. That is, since psychoanalysis speaks of unobservable “objects” such as the ego and the unconscious, any claims it makes about these concepts cannot be proven or falsified.

However  as Holt suggests, this is exactly what makes it a good fit for encountering (as opposed to  analyzing) risks. In his words:

It is precisely because psychoanalysis avoids an overarching claim to produce testable, watertight, universal theories that it is of relevance for risk management. By so avoiding universal theories and formulas, risk management can afford to deviate from pronouncements using mathematical formulas to cover the ‘immanent indeterminables’ manifest in human perception and awareness and systems integration.

His point is that there is a clear parallel between psychoanalysis and the individual, and risk management and the organisation:

We understand ourselves not according to a template but according to our own peculiar, beguiling histories. Metaphorically, risk management can make explicit a similar realization within and between organizations. The revealing of an unconscious world and its being in a constant state of tension between excess and stricture, between knowledge and ignorance, is emblematic of how organizational members encountering messes, wicked problems and wicked messes can be forced to think.

In brief, Holt suggests that what psychoanalysis does for the individual, risk management ought to do for the organisation.

Talking it over – the importance of conversations

A key element of psychoanalysis is the conversation between the analyst and patient. Through this process, the analyst attempts to get the patient to become aware of hidden fears and motivations. As Holt puts it,

Psychoanalysis occupies the point of rupture between conscious intention and unconscious desire — revealing repressed or overdetermined aspects of self-organization manifest in various expressions of anxiety, humour, and so on

And then, a little later,   he makes the connection to organisations:

The fact that organizations emerge from contingent, complex interdependencies between specific narrative histories suggests that risk management would be able to use similar conversations to psychoanalysis to investigate hidden motives, to examine…the possible reception of initiatives or strategies from the perspective of inherently divergent stakeholders, or to analyse the motives for and expectations of risk management itself. This fundamentally reorients the perspective of risk management from facing apparent uncertainties using technical assessment tools, to using conversations devoid of fixed formulas to encounter questioned identities, indeterminate destinies, multiple and conflicting aims and myriad anxieties.

Through conversations involving groups of stakeholders who have different risk perceptions,   one might be able to get a better understanding of a particular risk and hence, may be, design a more effective mitigation strategy.   More importantly, one may even realise that certain risks are not risks at all or others that seem straightforward have implications that would have remained hidden were it not for the conversation.

These collective conversations would take place in workshops…

…that tackle problems as wicked messes, avoid lowest-denominator consensus in favour of continued discovery of alternatives through conversation, and are instructed by metaphor rather than technical taxonomy, risk management is better able to appreciate the everyday ambivalence that fundamentally influences late-modern organizational activity. As such, risk management would be not merely a rationalization of uncertain experience but a structured and contested activity involving multiple stakeholders engaged in perpetual translation from within environments of operation and complexes of aims.

As a facilitator of such workshops, the risk analyst provokes stakeholders to think about their feelings and motivations that may be “out of bounds” in a standard risk analysis workshop.  Such a paradigm goes well beyond mainstream risk management because it addresses the risk-related anxieties and fears of individuals who are affected by it.

Conclusion

This brings me to the end of my not-so-short summary of Holt’s paper. Given the length of this post, I reckon I should keep my closing remarks short. So I’ll leave it here paraphrasing the last line of the paper, which summarises its main message:  risk management ought to be about developing an organizational capacity for overcoming risks, freed from the presumption of absolute control.

Written by K

February 5, 2018 at 11:21 pm

10 Responses

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  1. […] In practice risk management is a rational, means-end based process: risks are identified, analysed and then “solved” (or mitigated).  Although these steps seem to be objective, each of them involves human perceptions, biases and interests. Where Jill sees an opportunity, Jack may see only risks. Indeed, the problem of differences… Read more: Risk management and organizational anxiety […]

  2. Many thanks for the summary and interpretation, it’s good to keep in touch with these matters in retirement.

    bobcorrick

    February 7, 2018 at 3:40 am

  3. Thank you K,

    as always, a worthwhile and thought-provoking read.

    This ‘new’ angle has given me a lot to think about.

    Glyn Davies

    February 7, 2018 at 6:09 am

  4. Kailash, I’m not too impressed by Holt’s article and its discussion of psychoanalysis, but you have managed to spin straw into gold here. The parallel between psychoanalysis (which I would broaden from psychoanalysis to psychotherapy and counseling in general, encompassing the whole range of clinical approaches) and facilitated sensemaking in risk management was perhaps anticipated in my comment, almost two years ago, on your post “What is sensemaking?”, where I wrote: “I will also point out that the term problem formulation parallels the term case formulation, also known as clinical formulation, which is a widely used term for problem structuring in the clinical realm.”

    The cross-fertilization of concepts and methods can work both ways here: not only from problem formulation in psychotherapy and counseling to facilitated sensemaking in organizations, but also vice versa. Some clinicians are already using visual techniques similar to issue mapping (for example: Donald F. Dansereau, George W. Joe, & D. Dwayne (1993), “Node-link mapping: a visual representation strategy for enhancing drug abuse counseling”, Journal of Counseling Psychology, 40(4), 385–395; Rosemary Parkinson (2008), “The development of the sequential diagrammatic reformulation”, Reformulation: The Newsletter for the Association for Cognitive Analytic Therapy, 30, 33–37; Donald F. Dansereau & D. Dwayne Simpson (2009), “A picture is worth a thousand words: the case for graphic representations”, Professional Psychology: Research and Practice, 40(1), 104–110). But I think many clinicians working today could learn a lot from the kind of facilitated sensemaking in organizations that you teach. At the same time, one of the most important things that the risk analyst as sensemaking facilitator can learn from clinical case formulation is what you mentioned above: the importance of including “feelings and motivations that may be ‘out of bounds’ in a standard risk analysis workshop” within the issue map or within whatever other sensemaking process that is being used. The discovery of those feelings and motivations is called “discovery work” in coherence therapy (another theory and method of psychotherapy, like psychoanalysis), and would be considered part of case formulation.

    Nathan

    February 13, 2018 at 12:34 pm

    • Hi Nathan,

      Many thanks for your comment and the very interesting references. I was unaware of the use of visual mapping techniques in psychotherapy. A couple of insights I got from the papers:

      In the wrap-up to the first paper you mention, Dansereau et. al. state:

      The findings suggest that maps may facilitate psychological convergence between clients and counselors. According to this notion clients partially adopt healthy attitudes, perceptions, and behaviors exhibited by counselors (Strong et al., 1992). Mapping may be especially useful in supporting convergence between clients and counselors who differ dramatically in verbal abilities by providing a visual “bridge” for the exchange of information…

      I have seen something similar in organisational settings – the process of “getting people on the same page” also seems to help achieve a degree of “mental alignment.”

      And in their second paper (your last link):

      Observations of mapping-enhanced counseling sessions and discussions with counselors suggest that this technique may create a sense of collaboration by taking the direct focus off the client and putting it on a graphic representation of therapeutic issues.

      I think dialogue mapping (and other similar techniques) achieve their collaborative magic by doing exactly the same thing: i.e. taking the focus of individual stakeholders, thus enabling them to look at the bigger picture without having to continually feel like they have to justify their positions.

      Brilliant stuff! I’ll have to do some more reading on this.

      Thanks again.

      Regards,

      Kailash.

      K

      March 2, 2018 at 8:24 am

  5. There are some useful ideas in this. I will take issue with one bit of language and then offer a few thoughts that it has raised.

    The language I would change is that which refers to risk as something to be overcome. This confines attention to just one side of uncertainty. While it is true that many enterprises and projects are based on optimistic assumptions, so that things can only get worse than planned, in general, especially when looking at strategic planning, it is both worthwhile and more realistic to recognise that many uncertainties ambody potential for doing better than planned as well as for doing worse.

    The recourse to well ordered analysis in the face of complexity brings to mind Charles E. Lindblom who described two approaches to decision making in public administration in his 1959 paper ‘The Science of “Muddling Through”’. For extracts, a summary and full referece see http://broadleaf.com.au/resource-material/complexity-whats-new/

    Engaging stakeholders in sense making is clearly a worthwhile strategy when faced with complex systems, which is usually the case when dealing with multiple autonomous stakeholders. Workshops are invaluable but often limited by financial costs and practical difficulties of getting people together. Internet enabled based methods are worth exploring as they offer the ability to achieve large and a relatively low cost of engagement. Simple surveys and rating schemes are not appropriate for complex systems but the approach devised by David Snowden and implemented in the SenseMaker(R) software is applicable, by design.

    Finally, for now, if a challenging situation generates divergent views from separate stakeholders, decomposing the situation into constituent parts can be a way to scale the difficulty down, setting aside the less contentious elements and isolating the core source of disagreement.

    Steve Grey

    February 24, 2018 at 2:26 pm

    • Hi Steve,

      Many thanks for reading and taking the time to comment. Excellent pont about not looking at risks as necessarily having to be “overcome”; some may well have to be accepted. Moreover, as you say, a realistic approach would acknowledge the potential of things going wrong – something that we don’t do very well because of our in-built biases.

      Thanks a ton for the Lindblom reference. His point about complex decisions being made on the basis of values and actions rather than objectives really resonated. Decisions in such situations cannot be calculated, they are driven by ethics rather than data.

      Although I’m familiar with Snowden’s work, I have not used Sensemaker It seems quite involved and may be worth implementing only in very complex situations with stakes. That said, I find the complicated/complex distinction extremely useful (akin to the tame/wicked distinction) and often use the Cynefin framework as a starting point in problem structuring sessions.

      Absolutely agree with your point about decomposing problems to find common ground. This can be extremely useful when there are stakeholders with apparently intractable differences.

      Thanks again for taking the time to read and comment.

      Regards,

      Kailash.

      K

      March 2, 2018 at 8:25 am

  6. Contemporary risk discourse seems generally to have devolved into an organisational ritual, dependent upon a framing that presumes more certainty than there is in life and that analysis will get us everywhere. A pure analytical approach by McNamara produced the disaster of the Vietnam war, when field officers using a more ‘sensemaking’ approach produced the goods: David Hackworth’s “Steel My Soliders’ Hearts” exemplifies the approach.

    Similarly in organisations. We attempt to address ‘risk’ through meandering ‘workshops’ and other forums, but without a recognition that risks come and go, change, reconfigure and just pop up, a single risk effort is a delusion. A mature organisation needs to continually be aware of its business setting and factors that will promote or impede its plans and continually adjust what it does. A conversational approach may be just the thing. But its a continual set of deep and critical conversations. Thought by many people needs to come to the table.

    This summary thus points to a means of moving past the risk-by-numbers approach to a more mature and responsive conceptualisation of risk over time.

    David

    February 28, 2018 at 9:06 am

    • Hi David,

      Thanks for your comment. Yes, that’s what resonated for me in Holt’s article – the explicit acknowledgement that emotions play a role in how we perceive (and hence react to) risk…or any other organisational situation for that matter. Indeed, it is only through continual deep and critical conversations that one can get a grip on the ever-changing nature of organisational risk.

      Regards,

      Kailash.

      K

      March 2, 2018 at 8:26 am

  7. […] Risk Management and Organizational Anxiety […]


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