W. Timothy Gallwey, The Inner Game of Work (New York: Random House Trade Paperbacks, 2001), pp. 4–14.
Christina Maslach and Michael P. Leiter, The Truth about Burnout (San Francisco: Jossey-Bass, 1997), pp. 14–16.
RESOURCES
Talent Assessment and Management
http://www.gallup.com/management /path.asp
http://www.hermangroup.com/alert /archive_12-31-2003.html
Managing the Business
http://www.osborne.com/products/0072226250/0072226250_ch01.pdf
http://www.strategicfutures.com
Sales Automation/Pipeline Management
http://www.aceleragroup.com/articles/Effective_pipeline_management.htm http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Computers/So ftware/Business_Applications/Sales_Force_Automation_SFA_/Makers/
Software Tools
http://www.cio.com/archive/031502/roboboss.html
http://www.aberdeen.com/ab_company/hottopics/reporttocs/PSA2001-TOC.pdf http://www.aberdeen.com/2001/research/11030013.asp
http://www.peoplesoft.com
Resource Management
315
NOTES
1. Quotable online
http://quotableonline.com/quotedisplay.php?lastName=Reynolds&firstName
=Joshua
2. Aberdeen Group, available from http://www.aberdeen.com/ab_company/hottopics
/sec/default.htm.
3. Curt Coffman and Gabriel Gonzalez-Molina, Follow This Path (New York: Warner Bools, 2002), pp. 40– 41.
4. Jason Averbook, telephone interview by the author, Thursday, January 22, 2004.
5. Michael P. Leiter, telephone interview by author where Leiter quoted excerpts from the book he coauthored with Dr. Maslach, The Truth about Burnout: How Organizations Cause Personal Stress and What to Do about It (San Francisco: Jossey-Bass, 1997), Thursday, January 8, 2004.
6. See note 5.
7. Ronald A. Gunn, telephone interview, Tuesday, January 20, 2004.
8. See note 7.
9. See note 4.
10. See note 7.
11. See note 4.
12. See note 4.
13. Jon C. Piot and John Baschab, The Executive’s Guide to Information Technology (New Jersey: John Wiley & Sons, 2003).
14. Gallup Organization, Gallup Management Journal (March 19, 2001), available from http://gmj.gallup.com/content /default.asp?ci=466.
15. Towers Perrin, Towers Perrin Talent Report 2001 (New York:Tower Perrin, 2004), p. 16.
16. See note 5.
17. Roger Herman and Joyce Gioia, The Herman Trend Alert (Greensboro, NC: Strategic Business Futurists, 2003), available from http://www.hermangroup
.com/alert /archive_12-31-2003.html.
18. See note 5.
19. W. Timothy Gallwey, Inner Game of Work (New York: Random House, 2000), pp. 3–18.
20. Gallup Organization, Gallup Management Journal (March 19, 2001), available from http://gmj.gallup.com/content /default.asp?ci=466.
21. See note 5.
22. Johann Von Goethe, Intrapreneurship Is the Corporate Solution (March 22, 2004), available from http://www.pfpweb.com/handouts.intrapreneurship.html.
14
Risk Management and
Quality Assurance
JOHN BASCHAB AND JON PIOT
When investors buy stocks, surgeons perform operations, engineers design bridges, entrepreneurs launch new businesses, astronauts explore the heavens, and politicians run for office, risk is their inescapable partner.Yet their actions reveal that risk . . . need not be feared: managing risk has become synonymous with challenge and opportunity.
—Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk 1
You want a valve that doesn’t leak and you try everything possible to develop one. But the real world provides you with a leaky valve.You have to determine how much leaking you can tolerate.
—Obituary of Arthur Rudolph, manager of the Marshall Space Flight
Center Saturn V program office2
For a senior executive operating a professional services firm, you might think the work day consists of a parade of golf outings and client lunches.
But it does not. In fact, in many firms, time is spent running from one firefight to the next. Your most important client just called to tell you that the project you have been working on is being cancelled because the sponsor is leaving to take another job. Human resources calls next—there is a sexual harassment claim. Finance calling: The euro-to-dollar conversion rate has changed, and the client wants to pay their invoice now, so our receivables will be adjusted. The delivery manager for a key project called: The project is over budget and behind schedule, and the client is demanding answers. IT
just called, and they have lost critical client data and billing records, and the backups have failed. What to do?
316
Risk Management and Quality Assurance
317
What all these scenarios have in common is that they can either be
avoided or mitigated through a proper risk management and quality assurance regimen. While it is impossible to entirely eliminate risk from any endeavor, even small efforts to identify, quantify, and manage risk and quality can pay large dividends to the professional services firm. Woe and ruin can rapidly strike the professional services firm that fails to address risk and quality issues.
Why This Topic Is Important
The risk and quality issues encountered by a professional services firm are generally “fixable” through enough scrambling and apologizing, but with a good risk management and quality assurance program, the time, expense, and effort required to fix a problem can be saved for more productive activities. Further, occasionally a professional services firm can receive a knock-out punch in the form of a major disaster. In many of these cases, a good risk management or quality assurance program can be the difference between continuing as a going concern and failing.
Risk management is a topic that receives relatively little attention in professional services firms, in part because firms most often focus their attention on sales and delivery activities. This is appropriate, given that those activities are the ones that drive revenue and deliver value to clients. However, a little effort spent on thinking through the attendant risks and quality requirements, and taking preemptive actions where possible to avoid them, can pay large dividends later. During our interviews for this book, a senior manager from a consulting firm observed, “ You can lose more business in one bad transaction with a client than you can sell in a year.”
Quality assurance is an equally important topic. Switching costs for clients of professional services firms are generally fairly low, and clients are only as satisfied as the result of the most recent engagement. It is common knowledge that selling business to existing clients is an order of magnitude easier than acquiring new ones and that dissatisfied clients can quickly ruin a service firm’s reputation. Good quality assurance measures can significantly reduce the likelihood of service delivery problems, or in the worst case, provide enough advance warning that the firm can quickly move to remediate the issues at the client and fix the problems.
Risk management and quality assurance are clearly important, even critical areas that the professional services firm must master. Unfortunately, effective execution requires a careful balancing act. Overmanagement of risk is paralyzing to an organization. Overly risk-averse managers will quickly be accused of being in the “sales prevention” department. On the other hand, partners who constantly sell risky, hard-to-deliver, difficult-to-scope business will quickly find themselves abandoned by terrified
318
Services Delivery: Taking Care of Business
professional staff and dubbed a “cowboy” by their peers. Clearly, this is a topic of critical importance to professional services firms, as well as a skill that is difficult to perfect.
Risk Management and Quality
Assurance Defined
Risk management is the process of identifying the various undesirable outcomes for the firm, estimating their cost and likelihood, and determining an approach for mitigating or eliminating the risks. It is focused on the full suite of potential problems that a firm may encounter, regardless of whether the firm controls them and regardless of their probability.
Quality assurance is a related, but different, discipline. Quality assurance is focused on ensuring, through process, policy, and training, the proper delivery of the end service to the client. It also addresses, secondarily, firm components related to delivery such as internal staff execution and sales. Because quality is delivery-oriented, and, therefore, easy to scope, estimate, and understand, it is usually better defined within a professional services firm and is embedded throughout the firm’s delivery process. Professional services firms without a reasonable quality assurance program are generally rapidly extinguished by the market, after creating a trail of bad work and unhappy clients. In fact, it is firms of this type that create the bad reputation that can, unfortunately, affect the reputation of firms of good standing. Failure to adhere to a reasonable set of quality controls is bad for the firm, the staff, clients, and the industry.
Risk Management: A Balancing Act
Risk management is challenging because it requires judgment in the face of uncertainty. A simplified model of risk management (see Exhibit 14.1) shows the effect of too little or too much risk in a professional services firm.
Too little risk results in the cessation of all economic activity. In the world of complete risk elimination, contracts and projects become too cumber-some, and decision making and client pursuits take too long. Too much risk can be equally debilitating; the firm is in constant firefighting mode and is torn apart by bad reputation and even litigation that ensues post poorly sold and executed work. Each firm must find the appropriate balance of risk and return, which will vary from decision to decision and project to project. This balancing act is challenging, and the decisions made ultimately depend on a host of variables.
Because each firm situation and each individual decision is unique, it is useful to develop the general skills needed to effectively balance risk and
Risk Management and Quality Assurance
319
Not enough risk
Too much risk
• Limited new business
• Dissatisfied clients
• Complicated contracts
• Over-promised projects
• Slow delivery
• Bad agreements
• Over-engineered services
• Lawsuits
• No growth
• Staff turnover
Good decision-making processes
balance risk and return.
Decision-making process revisions are based on
analysis of the process and not the outcomes.