If the past seven months have shown us anything, it is that life is full of surprises and we shouldn’t get stuck in our ways.
Those who run commercial businesses, nonprofits, not to mention governmental entities, need to remember that the unexpected happens from time to time. Remember Donald Rumsfeld? Not the most likeable of men. But he did try to get us tuned into thinking about various kinds of risk. You will recall that he talked after 9/11 about “known knowns,” the “unknown knowns” and “the unknown unknowns.”
For business leaders, the known knowns include legal, reputational and expense risk, which can stem from such things as building faulty products, failing to deliver on time, allowing expenses to run wild, failing to listen to customers and treating employees poorly.
The known unknowns include changes of corporate control, changes in legislation or regulation, antitrust lawsuits, cybersecurity breaches, weather/climate change and severe economic downturns.
But there are also unknown unknowns, like Covid-19. This risk was listed along with countless other risks in a few of those end-of-year forecasts about what to expect (or watch out for) in the New Year, but it failed to get much attention.
More than 225,000 people have died in our country from Covid-19 — more than from any other infection since the great influenza pandemic of 1918-19. Hospitals and clinics have staggered under the impact. Governments at every level were largely unprepared, as were schools and businesses. Those with dependence on physical supply chains were in a world of hurt. Even service companies were challenged to ensure that remote workers would have reliable connectivity at their houses and apartments.
Regardless of the nature of one’s business, it’s important to be able to cope with interruptions, irrespective of the cause. Power outages, snow and ice storms, fires, floods, terrorist attacks, sabotage and infections that can morph into pandemics — all must be taken into account. There is no infinitesimal risk that is not worth considering, if only for a moment.
It’s also important to connect with your workforce. Good communications are critical the larger any organization grows. Our military understands this, which is why it typically fares much better than civilian government or business.
One factor that Rumsfeld didn’t mention in his analysis of risk was culture — whether it was strong and resilient or not. Culture is what enables you to respond, not just to the known unknowns but to the unknown unknowns. It is what you have when plans fail.
Mike Tyson, the great heavyweight boxing champion, put it differently but made a similar point: “Everyone has a plan until they get punched in the nose.”
What Tyson was referring to was the importance of discipline and preparation. Strategy can go right out the window once the ground shifts. All the assumptions you relied on may be wrong. What you have left is your training, reflexes, will, attitude, sense of mission. In a word: culture.
Culture is what enables you to pick yourself up off the mat after you are hit.
Effective leaders have to be focused on more than the competitiveness of their products, the effectiveness of their distribution channels and the size of their balance sheet. They have to have a sense of the big picture — the powerful forces that can rock our world. They can only get this by listening, reading, thinking and consulting with others. This applies to boards as well as management.
It’s not enough that the senior management team has a risk management program in place. Such a program should have oversight. Board members are equipped to provide it, because they have experience outside of the entity and presumably know how best to respond to environmental, social and governance (ESG) criteria.
Leadership requires keeping an eye on the horizon, on what has not yet arrived but might. For instance, during the Civil War, General Grant had his men get down on the ground and listen to the iron railroad tracks that carried sounds and movements of enemy troops and equipment otherwise impossible to hear. Those who would lead must listen to the rails. Only in this way can they pick up on the almost inaudible sounds of the future and prepare.
Paul Forte is CEO of FedPoint, which is based in Newington.