How blind are we to our riskiness?
Gabrielle Ramsay Smith assesses personnel risk across the oil and gas industry
Who are most valued and rewarded in the energy industry: the ‘safe pair of hands’ – compliant, vigilant and cautious, diligently going about their work within the corporate framework; or the ‘mover and shaker’- challenging, confident and sometimes reckless, reaching new heights, challenging the norm and bending the rules?
Isn’t it the ‘movers and shakers’ who get noticed and elevate, seemingly effortlessly, through the hierarchy and pay scales, travelling the globe in business or first class, winning accolades to acknowledge their contribution to the industry?
And perhaps that’s right, after all don’t movers and shakers take greater risks with their career, exposing themselves to criticism and a harder downfall? As Richard Branson once said: ‘You don’t learn to walk by following rules. You learn by doing and by falling over’.
But surely, in the oil and gas industry we also need to notice the people who follow the rules diligently and get upset with others when they don’t. We need to reward people who are vigilant and cautious and take their time to solve problems and make decisions. We need to encourage and support people to be able to stand their ground when normally they wouldn’t and provide them with a framework where they are comfortable to challenge authority because lives depend on their ‘safe pair of hands’.
The problem is, we don’t know for sure who is a ‘mover and shaker’ and who is a ‘safe pair of hands’, or to what extent and in what circumstances they will take risks. What we do know, through 40 years of research, is that we are all somewhere on the spectrum between the two.
Everyone adds their own unique value, but also poses their unique risk to the business when they use their discretion. People throughout the oil and gas industry are encouraged and influenced to use their initiative, make judgements and take a certain amount of risks as this is the way people ‘get on’ in business. We set a framework within which they can exercise their discretion by having policies, processes and procedures.
Through the myriad of rules, regulations and processes that exist within the oil and gas industry, we aim to achieve competitive advantage whilst ensuring our business is not exposed to financial, safety and reputational damage. But humans are creative, competitive and unpredictable with different approaches to solving problems, making decisions and following rules, and they take risks daily that they don’t even know they’re taking which are exacerbated when they are under stress and can cause them to do things that seem completely out of character.
Use of discretion depends on: individual risk tolerance; risk appetite; characteristics; the business climate; and, on the situation they are in. Each decision that a person makes has an impact on the business, either positively or negatively. In risk terms we need to start thinking of people risks as ‘speculative risks’ – a bit like putting a bet on a horse to win.
We are all too familiar with the high profile headlines of the Deepwater Horizon accident, which highlight that the decisions people make at work can cause a significant problem to business. But there are many stories that don’t hit the headlines that cost the industry dearly somewhere in the world everyday impacting on their productivity and profitability, which could easily be avoided.
So how do businesses go about ensuring that the risks their people take daily lead to success and not failure? How do we ensure that we don’t get a phone call in the middle of the night, the one that makes our heart thump, our hands shake and fills us with dread?
Due to the many complex circumstances we face at work each day, we cannot completely programme people or push them down a scripted pipeline, or have a process and procedure for every eventuality. What we can do, however, is create freedom with responsibility and ensure that discretion is exercised intelligently. Incremental gains can easily be achieved by understanding the exercise of discretion together with the predispositions of individuals and teams, in order to plan and manage the genius and chaos that comes from opportunities and crisis.
The first step is to identify what type of risk takers exist in your organisation, where they are in your business and understand the potential impact they have, both positively and negatively. Without this detail of information, you cannot manage people risks or put measures in place, therefore, you cannot accurately plan.
Due to the sometimes perilous nature of the business, the oil and gas industry lives with the unpredictable, dealing with the unexpected which doesn’t make sense and is fraught with risk.
For example, on a personal level, most people have a ‘gut feel’ for the amount of money in their bank account, but they wouldn’t commit to a large monthly payment that stretches them, without first understanding their financial position in detail. And so if decisions are made on ‘gut feel’ alone, they becomes an unforeseen risk. The FORTUNE Knowledge Group, in collaboration with gyro, carried out a survey on emotion in business decision-making in June 2014. The sample included 720 senior executives of which 62 per cent believe that it’s often necessary or even preferable to rely on ‘gut feelings’. By understanding the basis of ones ‘gut feel’ a choice can be made as to whether it is necessary to gather more data to reach the right decision.
The second step is to understand the effects of the various different risk profiles, identify the potential risks that they create and deal with them. We all have risks we’ll tolerate and risks we just won’t. For example, workaholics wouldn’t risk their career, but they’ll certainly risk their leisure time. You might risk your health, but never your finances.
And our risk profiles interact with each other and have a knock-on effect with others, like a kaleidoscope.
For example, if your risk profile is different from mine, I might not listen to you at all. If it’s the same we might accelerate each other’s riskiness, or ignore the things we don’t think are important. If you’re my boss, I might think that your priorities are more important than my oil and gas safety training.
Things that others might think of as risky, others will take in their stride, because they’ve been trained, or have experienced it before or have systems in place to reduce risk. Risky behaviour is based on how much danger an individual can tolerate and what they see is the prize of taking that risk. Pre-empting potential problems caused by our tangle of risk profiles, allows us to put systems in place to prevent them from happening.
The third step is to look at team risk profiles to see where the strongest influence is and address the impact with regards to the company goals and team objectives. Companies across the industry will have different risk attitudes.
But what about the board of directors or the senior management team, what type of risk takers are they and what messages do they give collectively? We need a healthy tension of risky behaviour and an environment where constructive dialogue can take place to make the correct decisions for the business otherwise the company will tip one way or the other, with risky businesses spiralling out of control and risk-averse businesses standing still.
Understanding team risk taking highlights the strengths and gaps so that you can decide if you need to obtain an alternative view before reaching a decision.
Once these three steps have been achieved, businesses will be able decide what type of risk takers they will hire in the future and how teams will be formed to best meet the objectives. They will be able to put a framework in place to empower individuals and teams to intelligently exercise discretion that is no longer fraught with danger, providing a language and methodology for reducing conflict and tension whilst increasing interaction.
People will develop their own internal coach using internal dialogue to self-organise and self-manage, interacting with others for incremental change. Authority is not challenged, but a collaborative mind-set is created giving permission through understanding and awareness of working together in a recognised and rewarded way. Rules and training can be designed taking into account the risk psychology of the person it’s imposed on and how they’ll respond to it.
And not least, space and acceptance is created for the ‘safe pair of hands’, not so they compete with the ‘movers and shakers’ but so that they too can feel equally valued for contributing to business success, enhancing our industry and protecting our lives!
Ramsay Smith
Gabrielle Ramsay-Smith is a partner at Ramsay Smith Consulting. Ramsay Smith has worked internationally in the oil and gas industry for over 40 years. Ramsay Smith creates sustainable solutions for the challenges of risky businesses. ‘Our D-risk approach provides answers to the problems that people blindly cause and corrects the performance shortcomings that unwittingly put businesses and employees at risk’.
For further information please visit:
ramsaysmith.co.uk
Issue 125 October 2015