Stakeholders and Reputational Risk

trust-valueYour reputation and your organisation’s reputation are valuable assets. The willingness of others to trust you, their desire to work with you and virtually every other aspect of the relationship between you and your stakeholders is influenced by their perception of your reputation (see more on The value of trust).  But reputations are fragile: they can take a lifetime to build and seconds to lose. Some of the factors influencing them are:

  1. Reputation cannot be controlled: it exists in the minds of others so it can only be influenced, not managed directly.
  2. Reputation is earned: trust is based on consistent behaviour and performance.
  3. Reputation is not consistent: it depends on each stakeholder’s view. One organisation can have many different reputations, varying with each stakeholder.
  4. Reputation will vary: each stakeholder brings a different expectation of behaviour or performance and so will have a distinct perception of reputation.
  5. Reputation is relational: you have a reputation with someone for something. The key question is therefore: ‘with whom, for what?’
  6. Reputation is comparative: it is valued in comparison to what a particular stakeholder experiences or believes in relation to peers, performance and prejudice.
  7. Reputation is valuable: but the true value of reputation can only be appreciated once it is lost or damaged.

Estimating the ‘true value’ of your reputation is difficult and as a consequence decisions on how much to invest in enhancing and protecting your reputation becomes a value judgment rather than a calculation. Your reputation is created and threatened by both your actions and their consequences (intended or not).  Some actions and their effects on your reputation are predictable, others are less so and their consequences, good or bad are even less certain. This is true regardless of your intention; unexpected outcomes can easily cause unintended benefit or damage to your reputation.

Building a reputation requires hard work and consistency; the challenge is protecting your hard earned reputation against risks that can cause damage; and you never know for sure what will cause reputational damage until it is too late – many reputational risks are emergent.

Managing Reputational Risk in Organisations

Because an organisation’s reputation is not easy to value or protect, managing reputational risk is difficult! This is particularly true for larger organisations where thousands of different interactions between staff and stakeholders are occurring daily.

The first step in managing an organisation’s reputational risk is to understand the scope of possible damage, as well as potential sources and the degree of possible disruption. The consequence of a loss of reputation is always the withdrawing of stakeholder support:

  • In the private sector this is usually investor flight and share value decline; these can spiral out of control if confidence cannot be restored.
  • In the public sector this is typically withdrawal of government support to reflect declining confidence.
  • In the professional sector client confidence is vital for business sustainability; a loss of reputation means a loss of clients.

Each sector can point to scenarios where the impact of reputation damage can vary from mild to catastrophic; and whilst the consequences can be measured after the effect they are not always predictable in advance.  To overcome this problem, managing reputation risk for an organisation requires three steps:

  • Predict: All risk is future uncertainty, and an appropriate risk forecasting system to identify reputation risk is required – creative thinking is needed here! The outcomes from a reputational risk workshop will be specific to the organisation and the information must feed directly into the governance process if reputation risk is to be taken seriously (see more on The Functions of Governance).
  • Prepare: Reputation risk is a collective responsibility, not just the governing body’s. All management and operational staff must recognise the organisation’s reputation is important and take responsibility for protecting it in their interaction with stakeholders. The protection of reputation should also be a key element in the organisation’s disaster recovery plans.
  • Protect: A regular vulnerability review will reveal where reputation risk is greatest, and guide actions to prevent possible damage. Each vulnerability must be assessed objectively and actions taken to minimise exposure. Significant risks will need a ‘protection plan’ developed and then implemented and monitored.

Dealing with a Reputational Risk Event

When a risk event occurs, some standard elements needs to be part of the response for individuals and organisations alike. For reputation enhancing risk events, make sure you acknowledge the ‘good luck’ in an appropriately and take advantage of the opportunity in a suitably authentic way. Over-hyping an event will be seen as unauthentic and have a negative effect on reputation; but good news and good outcomes should be celebrated. Reputation threatening risk events need a more proactive approach

  • Step 1: Deal with the event itself. You will not protect your reputation by trying to hide the bad news or ignoring the issue.  Proactively work to solve the problem in a way that genuinely minimise harm for as many stakeholders as possible minimises the damage that has to be managed.
  • Step 2: Communicate. And keep communicating – organisations need to have a sufficiently senior person available quickly as the contact point and keep the ‘news’ coming. Rumours and creative reporting will always be worse then the fact and will grow to fill the void. All communication needs to be open, honest and as complete as possible at the time.  Where you ‘don’t know’ tell people what you are doing to find out. (see Integrity is the key to delivering bad news successfully).
  • Keep your promises and commitments. If this becomes impossible because of changing circumstances tell people as soon as you know, don’t wait for them to find out.
  • Follow up afterwards. Actions that show you really care after the event can go a long way towards repairing the damage to your reputation.

Summary

Reputation is ephemeral and a good reputation is difficult to create and maintain. Warren Buffet in his 2015 memo to his top management team in Berkshire Hathaway emphasised that their top priority must be to ‘zealously guard Berkshire’s reputation’. He also reminded his leadership team that ‘we can afford to lose money–even a lot of money. But we can’t afford to lose reputation–even a shred of reputation’ (discussed in Ethics, Culture, Rules and Governance). In the long run I would suggest this is true for every organisation and individual – your reputation is always in the minds of other people!

Why you need to attend PGCS 2016

CAPM Step outPGCS 2016 (Wed. 11th and Thur. 12th May – Canberra) is shaping up to be an important forum for the advancement of project management in Australia.  Every project manager is subject to governance by the organisation that work within and potentially wider scrutiny.  This means if you (or your division/section) are running significant projects sooner or later the auditors will be visiting!

Project surveillance is a key aspect of governance at every level and ‘audits’ are part of the landscape for working project managers (see more on project surveillance).  Proactive project managers on a successful career path know this, are prepared, and use the audit to enhance their reputation.  Furthermore, the good auditors like to help you and you project succeed.

Three of the world’s leading project auditors are part of the speaking line-up at PGCS 2016, Australia’s Tom Ioannou from ANAO, the UK’s Geraldine Barker, and the USA’s Lisa Wolf.  This concentration of expertise offers project manages, and their superiors a unique opportunity to understand the thinking of good auditors and to learn how to make your next project audit an outstanding success (and of course is you work in a PMO or similar, this is a unique opportunity to understand world-best-practice)!

Having the right skills and capabilities are critically important, and one of the key questions being asked at PGCS 2016 is; “Can ‘normal projects’ learn from major projects?”.

The UK and USA governments are demonstrating an enhanced ability to deliver successful major projects.  In the last decade, the UK in particular has a track record of successfully delivering complex major projects and programs, and we believe the lessons learned can be scaled to enhance the probability of success on projects of all sizes. Several of the people at the centre of project delivery excellence in the USA and UK are speaking at PGCS and will be networking with delegates over the two days.

So, if you want to hear ‘how-its-done’ from the experts and have the opportunity to discuss your project challenges PGCE 2016 offers a unique opportunity to develop your skills and knowledge – all you need to do is be there!  For more on PGCS 2016 and access to a library of previous years papers go to http://www.pgcs.org.au/.

New Articles posted to the Web #46

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence

The PM College of Scheduling Conference and Membership

The Project Management College of Scheduling is now officially open for business.   As you may already know, a group of us led by Jon Wickwire and Stu Ockman joined together to found the Project Management Institute College of Scheduling in early-2002.  A dozen years later, a new group (including me and many of the leaders of the former College) founded its successor, The Project Management College of Scheduling (PM-COS).   Subsequently, the PM-COS has completed the formalities necessary under USA law and is now officially open for business.

The role fulfilled by PM-COS is intended to be quite different to most member based organisations, focused on creating knowledge and capability in the scheduling profession.  As a member, you will:

  • Be a part of creating the centre of excellence for the advancement of scheduling and project controls throughout the world
  • Collaborate with other top schedule professionals, consultants and experts in identifying and instituting best practices on your projects
  • Help develop standards in all areas of scheduling including specifying, preparing, updating, software, claims, training and research
  • Provide education and training to promote accurate and ethical scheduling
  • Join in a dialog with software developers to foster implementations of new, innovative features in upcoming releases
  • Participate in mentoring the next generation of scheduling professionals

If sharing ideas and giving back to the profession get you excited and you’d like to be a part of our journey, why not Join Us now.  And, whether or not membership in the College is in your future, we’d love to have you with us at our annual conference, May 15th-18th in Chicago.

PM-COS16The Project Management College of Scheduling Annual International Conference, Scheduling the Future, will be held on the 15th to 18th May at the Hyatt Chicago Magnificent Mile.  This is a terrific opportunity to:

(1) share ideas,
(2) see old friends and make new ones and
(3) participate in this year’s premier planning and scheduling event.

We have a terrific technical program offering 14 Professional Development Units (PDU’s), with speakers and panel discussions planned to give everyone a chance to participate.  In addition, we have a social program with a Sunday night vendor reception, Monday night Gala Dinner and Tuesday night free for a night on the town.  We’re also planning a golf tournament Wednesday afternoon.

Don’t forget to check out the conference program, and drop by our website, http://www.pmcos.org/, to sign up now.  We’re offering a discount for PMCOS Members and another for early member-registration.  Finally, make your hotel reservations directly with the Hyatt Magnificent Mile at their website.  This may be the most important part since we’re visiting during peak season and the hotel has reserved a limited number of rooms for the conference.

We’ve got a lot planned, and you can help us make it a success!

Project Governance and Controls Symposium 2016.

miracle2We are only a few weeks out from PGCS 2016 and this year’s  Symposium is shaping up to be the best yet.  The Symposium will be held in its usual ADFA, Canberra venue on Wed. 11th and Thur. 12th May 2016.

Governing for performance was the key theme of the AICD’s Australian Governance Summit held in Sydney last month. But organisations cannot perform sustainably if they cannot govern and control their projects effectively.  Unfortunately as the Shergold Report has highlighted (consistent with the findings of many other surveys), most organisations struggle to achieve the full potential value from their projects and programs – literally $billions are wasted annually by poorly governed and controlled projects.

PGCS was created to focus on the gap between intention and delivery – and to help build Australia capability in the governance and management of projects by providing a forum for the exchange of ideas between international experts, leading Australian practitioners, the people responsible for governing projects within their organisations, and the people responsible for making the governance and controls systems work.

The 2016 program is on target to fulfil this ambitious objective 100%:

  • We have speakers from the UK National Audit Office and the Australian National Audit Office, both of who lead the push for improved performance in government projects.
  • Controls and surveillance of projects is well covered with both international and Australian experts. Lisa Wolf’s pre-symposium Masterclass ‘A Practical Guide to Project and Contract Surveillance’ is a sell out, fortunately Lisa is also one of our Keynote Speakers.
  • The needs and expectations of organisational governors is covered by among others, Ms. Jane Halton the Secretary of the Australian Department of Finance who will be outlining her perspectives on improving the performance of major projects.
  • AIPM, PMI, IPMA and ICCPM are all supporting the Symposium and providing high quality speakers.
  • We have our inaugural Academic Stream – this aspect of the Symposium will become increasingly important as we direct any surplus funds towards Australian based research into the governance and control of projects and programs.
  • And there’s more – click through to our program page to download the full event program.

Thanks to the ongoing support of our Platinum Sponsor, The University of New South Wales (UNSW), Canberra, the cost of the symposium, including 2 full days and our reception at the ADFA Offices Mess is only $990 (early bird available prior to the 25th April).

To make the learning opportunity provided by the Symposium available to more junior staff, we also have a unique 2-for-1 offer in place with a number of ‘supporting organisations’; each senior manager who registers can nominate a more junior staff member to attend the Symposium at no additional cost (We are always happy to extend this arrangement to new organisations).

PGCS is designed to be a very different type of event compared to the traditional, and well loved, annual conferences run by the major associations – we are very focused on accessing and creating knowledge focused on ‘governance and controls’ – as part of this process all of the available papers from previous years are also made available to attendees and others via our on-line library.

The open question is can you afford to miss this world class event?  For more information visit our website at: http://www.pgcs.org.au/

Note: Patrick Weaver is a member of the PGCS Organising Committee.

New Articles posted to the Web #45

BeaverWe have been busy beavers updating the PM Knowledge Index on our website with White Papers and Articles.   Some of the more interesting uploaded during the last couple of weeks include:

And we continue to tweet a free PMI style of exam question every day for PMP, CAPM and PMI-SP candidates: See today’s question and then click through for the answer and the Q&As from last week. You are welcome to download and use the information under our Creative Commons licence

Ethics and competition

EthicsThe report of The Senate Education and Employment References Committee report: A National Disgrace: The Exploitation of Temporary Work Visa Holders; released on the 17th March highlights a major National problem.

The report consolidates and affirms issues raised in some of our earlier posts including:

In a nutshell, the report confirms that large numbers of unethical employers are routinely exploiting 1000s of temporary visa holders to inflate their profits.  The report is worrying reading and hopefully will result in proactive government action to stamp out the worst of the excesses.   It’s in the government’s interest, many of the exploited visa holders in work are preventing an unemployed Australian from obtaining work; this is equally true in the unskilled categories and in skilled categories where skilled, older workers are frequently discriminated against.

What is more worrying, and the focus of this post is the ‘Coalition Senators’ total failure to understand business and competition.  One of the major areas of malfeasance with some of the worst exploitation of temporary workers is the Labour Hire business.  The committee recommendation #32 is that:

9.309 The committee recommends that a licensing regime for labour hire contractors be established with a requirement that a business can only use a licensed labour hire contractor to procure labour. There should be a public register of all labour hire contractors. Labour hire contractors must meet and be able to demonstrate compliance with all workplace, employment, tax, and superannuation laws in order to gain a license. In addition, labour hire contractors that use other labour hire contractors, including those located overseas, should be obliged to ensure that those subcontractors also hold a license.

In an annex to the main report, Coalition Senators state that they do not agree with this recommendation on the basis ‘it would punish those labour hire firms which are already complying with relevant laws’; and that the actions of a ‘minority of labour hire firms which are doing the wrong thing, in most cases, is already illegal’.

No one likes additional ‘red tape’ so superficially the Coalition Senators position is understandable.  What the Coalition Senators ignore is the effect the illegal activity is already having on the honest firms they purport to support!  The owners and operators of the dishonest firms using illegal and exploitative practices do not expect to get caught, and if they are caught expect the profits they make from their activities to significantly outweigh the penalties. Unethical is not synonymous with ‘stupid’ – the people making the decision to act illegally expect to make large profits. However, as a consequence of their illegal actions:

  • Honest labour hire firms cannot compete on price with the dishonest firms exploiting temporary workers and suffer as a consequence. The honest operators either make far less profit or go out of business.
  • The users of ‘hired labour’ from labour hire firms are also in competition and need to minimise input costs. They are incentivised to accept the low-cost offerings from the dishonest firms exploiting temporary workers and not to look too closely at their practices to compete within their market.  The alternative is to pay more for the workers and be at a competitive disadvantage to organisations that ‘turn a blind eye’ to the problem.

A licensing scheme will increase the cost of compliance for all of the businesses in the labour hire market, but if implemented properly, it will have the effect of largely eliminating the unfair competition created by the unethical exploitation of temporary workers.  Which will be hugely beneficial to those ‘honest’ businesses that are acting ethically and already fulfil their legal and moral obligations; both within the labour hire industry and the wider community.

The Coalition Senators do ‘support the prosecution of these illegal operations’ (as does everyone) the problems with implementing a clean up strategy focused on prosecutions alone are:

  1. The damage is done before the prosecution can take place.
  2. No prosecution stops illegal behaviour in the future. In an unlicensed regime the same unethical people can set up other businesses and carry on indefinitely through a series of ‘phoenix companies’.
  3. As suggested above, no criminal expects to get caught – deterrence is highly overrated.

Licences may not be ideal, but they do offer a practical way to support ethical behaviour that ‘prosecutions’ cannot. Good governance at every level is getting the balance between rules and flexibility right – the balance needs to support ethical behaviour without constricting innovation and growth. No one except the criminals benefits from the situation exposed in the Senate report that allows virtually unfettered unethical behaviour.

The art of ‘practical ethics’ is to develop systems that disadvantage unethical behaviour and encourage people to do the right thing. The combination of a beefed up ability to prosecute offenders and a licensing system that will make it difficult for unethical operators to remain in the labour hire business is the best way to drive the culture change needed in this industry, and in the businesses that rely on labour hire firms for their staffing needs.