Is Baldrige Taking Intelligent Risks?

 

Posted by Harry Hertz, the Baldrige Cheermudgeon

 

In my most recent Insights column I talked about the 2011 Criteria for Performance Excellence introduction of the concept of intelligent risk. I offered that an operational Risk balance definition of an intelligent risk might be “an opportunity where the potential gain outweighs the harm or loss that could impact the organization’s sustainability if the opportunity is not explored.”

So, you might ask, does the Baldrige Program take intelligent risks? Like any other organization, I believe we must to sustain ourselves. This year, we started an Executive Fellows Program, a one-year fellowship for senior executives to become more familiar with Baldrige concepts and Baldrige role model organizations and their practices. The new program has required a very significant effort on the part of our staff and our dedicated volunteers. The resources had to come from efficiencies elsewhere in the Program, without the use of additional funds. Will the Fellows Program affect sustainability long-term? It is too early to say, but we will be monitoring the impact of the program among large organizations previously not significantly engaged with Baldrige.

To find resources for new programs the Baldrige Program is committed to leaning existing processes and is also developing a strategy map to better focus our efforts and look at our business model. We are also using technology to help us be more efficient and effective. We are increasing training and development materials available through our web site and this past year introduced BOSS, the Baldrige On-line Scorebook Solution, to help our volunteer workforce save time and improve quality in their application reviews. We are using social media to broadcast our message, witness Blogrige as an example.

Do you believe intelligent risk is a requirement for sustainability? How are your organizations preparing for the future and taking intelligent risks? I would like to hear your thoughts!

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About Barbara Fischer

NIST Baldrige
This entry was posted in Baldrige Criteria, Baldrige Director, Baldrige Examiners, Strategic Planning and tagged , . Bookmark the permalink.

9 Responses to Is Baldrige Taking Intelligent Risks?

  1. bryan zak says:

    Yes, intelligent risk is a requirement for sustainability. Example: I was in Seward, Alaska last night attending a community-wide Economic forum which brought together individuals from government, non-profits, education, and businesses (quad-helix). The disucssion focused on how by networking the community could create a collective economic development plan for the community and how they in so doing could work together to break down somme of the restrictive berriers to success. By the way, I shared with the facilitator who was from the University of Alaska how I feel the common thread for communicating is the baldrige criteria. In summary, I feel across the nation we are seeing more communities spend resources through intelligent risk taking to find ways to achieve long-term sustainability. By the way, the scenary in Seward is breathtaking any time of year.

  2. Dave Fountaine says:

    I think your comment about Intelligent Risk properly defines this new addition to the criteria. I work with 20 GM automobile dealerships in NY. As we prepared for 2010 and now prepare for 2011, I always ask them if they expected to increase sales and the answer has always been yes. I then asked them what they planned on doing differently than the year before to achieve a sales increase and I usually received a blank stare. I then ask them how they expected inmproved performance without doing anything differently – where is the risk? Other times some dealers will spend a significant amount of money for a large newspaper ad, radio campaign or direct mail campaign. Risk is involved due to the thousands of dollars that may be involved in the event. Yet when I ask them what reasoning they used to select this particular event to try, there was often not much intelligence behind the decision. While taking risks to improve performance is important, there also must be a significant intelligence effort to assess the risk verse reward. In my previous life as a military officer, we would take risks when developing military plans, but they were always based on the best intelligence available. Organizational perfornmance excellence requires this same type of effort.

  3. Jerryshao says:

    Is there any difference between your ‘intelligent risk’and optimum-decision making risk ?As a process-consultant , I have met many decision-making problems of out customers,one of the problems is there lack of a proper process or procedure to make a decision,so their development will definitely be impacted. SO I think ,the ‘intelligent risk’ will only be solved or prevented by a proper and perfect decision-making process among the enterprises.

  4. Craig Pascal says:

    Intelligent risk is the backbone of the American construction industry. Regardless of the method of obtaining a contract, a construction contractor must make an intelligent assessment of the risk to determine his/her final pricing structure to secure a contract. A multitude of successes and failures abound in this industry but almost all failures are born in the lack of intelligent risk taking.

  5. Walter Eschmann says:

    Is there a difference between intelligent risk and contract risk? My understanding of risk when quoting on a particular job stems from the ability to forecast all the variables and price them into a cost for the project. Intelligent risk would seem to be a bit different. My interpretation of this risk is the cost of not practicing continuous improvement by looking at solutions in the market place that have proven their worth that could help the bottom line in the future, and not necessarily be priced into any one individual project. This would seem to be the case for intelligent risk. As in the case of Baldrige,it may be hard to price the use of this program into any one cost item to a specific project, but realize value from the investment over company wide activities.

  6. Barry Johnson says:

    I have read, but not personally observed, that the concept “intelligent risk” goes beyond strategic risk management approaches to include addressing risk taking by employees during the execution of strategy and plans and in daily operational decision making. This approach “deploys” the concept of “intelligent risk” beyond the analysis process. It is usually structured to align with the organization’s culture. Relatively risk adverse organizations set decision making boundaries (“thou shalt not”) much like the deployment of ethical standards. Relatively risk tolerant organizations (or subunits) specify what “risky” actions or analyses are expected or acceptable. In this context, intelligent risk has a lot to do with how an organization deploys an “innovative” culture to “spread” strategic risk management to the place where most risk are assumed, but rarely systematized. There have been several examples in recent years of one employee incurred LARGE losses because they took very risky actions without guidance. The very young arbitrageur in France(?) that last several Billion dollars in speculative investments comes to mind. This is a much more common occurrence than reported. Thus the need to consider the deployment of intelligent risk taking to the “usual suspects” – leadership system. Employees, suppliers, partners, collaborators, and, most importantly, the governance system, which usually has a fiduciary responsibility in its charter and/or by laws to ensure that risks in the organizational environment are considered.

  7. Walter Eschmann says:

    As an example of intelligent risk as opposed to contract risk, I support my argument with an excerpt from an article posted in the National Journal by Bruce Stokes, “AK Steel, for example, isn’t merely surviving; it’s flourishing. With more than 1,300 employees, it is Butler County’s largest industrial employer. The company specializes in producing electrical steel (used in power transmission and distribution) and exports half of that. AK Steel is in the midst of a $135 million capital-expansion program, replacing three 1960s-era furnaces with a single, technologically advanced furnace. This will increase the plant’s production capacity by 40 percent while improving productivity and quality. It will also give AK Steel the flexibility to make various steels, depending on customer demand.” The upgrade cost is not specific to one contract to build a specific building, rather, it will allow AK Steel to make the company competitive across the spectrum of contracts for electrical steel. This is similar to what Baldrige is attempting to accomplish by funding the Fellows program,(my opinion) to provide the information to industry leaders who can use the techniques available in the program to support improvements to their organizations.

  8. Harry Hertz says:

    Thanks to everyone for your thoughtful comments on intelligent risk. While I believe all of you are reflecting aspects of taking appropriate risks at all levels of an organization, only some are dealing with intelligent risk as viewed in the Baldrige context. From the Baldrige perspective, we are dealing specifically with strategic moves to generate long-term sustainability through thinking outside the current box, taking bold, but calculated risks. All of this done while exercising proper resource stewardship, so that the risk is intelligent and not a potential source of significant harm.

  9. Kevin Engle says:

    Please forgive that I have not followed this thread until now. Our organization, a 25-bed Critical Access Hospital in southeast Iowa has taken major intelligent risk over the years…though I must admit I am new to the organization. Two examples are as follows: First, in 2000 we decided to establish a fully integrated electronic medical record (EMR), which required extensive investment in IT. Though funds had to be squeezed from various sources to make this happen, I must say that they finally began the implementation phase in 2004 and we will fully meet the CMS requirements for “meaningful use” in early 2011. That means that we have a fully integrated EMR and be among only about 5% of hospitals in the U.S. We have also listed on the Top 100 most wired hospitals four years running. When many of hospitals have AR days at 70-100, we are consistently below 50. The second “intelligent risk” that we have taken is the Balridge journey. Though we see this taking about ten years and a tremendous amount of time, resources, and energy, it far outweighs the risk of not hardwiring quality into our culture.

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