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Culture of discipline.

I've been spending long hours in my ear commuting for work engagements recently and to make time pass more enjoyably I've started listening to audio books. One that I gladly revisited recently was "Good to Great" recorded by the book's author, Jim Collins.

Collins, also author of "Built to Last," is a former Stanford University professor who researches management strategies and practices almost to a molecular level, aiming to extract telling clues of what truly generates success within great organizations. I highly recommend the read, so I'll try not to detail the book too much so as to not to spoil it.

A prevailing theme throughout the book, and maybe even the essence of the book, was "discipline." "Great" in contrast to just "good" companies have both an entrepreneurial spirit and a sense of discipline, Collins said, and when you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great results.

He suggests that without an innate sense of discipline, things begin to break down as a company grows. There needs to be a lasting system--a framework that assigns responsibility but also gives enough latitude for individual decisionmaking freedom. The confines of the system must be well understood, so that individuals can act freely but within that system.

A culture of discipline is not about bureaucracy. "The purpose of bureaucracy is to compensate for incompetence and lack of discipline," Collins said. A culture of discipline is about having naturally disciplined people, who engage in disciplined thought and who then take disciplined action. All actions must fanatically adhere to a simple, extremely clear conceptualization of the business you are in. One must be willing to stop doing things that are not central to the business and "confront the brutal facts" about business realities.

While listening, I could not help but make continued connections to enterprise risk management (ERM), a decision-making discipline that addresses variation from organizational goals. ERM commits to ensuring profitability and success by making decisions on actions or investment with disciplined thought. Collins notes that the lack of this discipline in nearly all the studied organizations was found to be a key factor in their eventual demise.

An added rationale for injecting a thought framework, like ERM, into our businesses is because we are human. People are naturally optimistic and like to focus on fun rewards. We don't enjoy thinking about potential downsides.

When betting $100 on black or red at the roulette table in Las Vegas, we envision the joy of doubling our money and spending the money on some wonderful new gadget or dinner. We don't enjoy thinking of the gut-wrenching feeling of seeing the money swiped away by the dealer after we lose. So we try to block it out in the spirit of not being a party-pooper. We seek rewards but too often fearfully and nervously. So, we humans need to discipline ourselves by imagining and accounting for potential downsides.

In the end, such discipline is a good thing and it can actually make the decision-making feeling and experience so much more pleasurable. It dispels nervousness and fear and enables action that can lead to success.

JOANNA MAKOMASKI, the former risk manager for an energy delivery company, is a specialist in innovative enterprise risk management methods and implementation techniques with V3 Advisory Group. She can be reached at riskletters@lrp.com.
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Title Annotation:RISK MANAGEMENT
Author:Makomaski, Joanna
Publication:Risk & Insurance
Date:Oct 1, 2010
Words:563
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