I loved the movies about the wild west of 19th century USA when I was a kid. A favourite line from the era was “Head ‘em off at the pass”. Meaning, the goodies (or baddies) needed to take a short cut cross country fast to get in front of the baddies (or goodies) to surprise them and “save the day”.
Key Risk Indicators (KRIs) can serve a similar purpose. Done well, they are an early indicator of things heading in the wrong direction, allowing sufficient time for an intervention to “save the day”. This is the essence of outstanding risk management programs. How do I know this? Because the ex-CEO of Telstra, David Thodey, told me so.
I was at a UNSW Business School seminar where David Thodey, then CEO of Telstra, was interviewed by Narelle Hooper, then Editor of AFR BOSS magazine, in front of about 400 people. Thodey was asked a question along these lines: ‘What is the greatest challenge in running an organisation the size of Telstra?’ (which then had over 45,000 employees). Thodey answered (in my words):
Getting information I need to know from the extremities of the organisation, to me, past all the information people are trying to tell me, that I don’t need to know, in time for me to do something about it!
When I work with organisations to identify KRIs I always start with KPIs. However, as I pointed out last week in Reading the tea leaves, most organisations don’t do KPIs well. Which makes it difficult to have good KRIs. So, the first step is identifying what really matters and how to measure that correctly. Once you have identified those measures you can identify their key drivers of uncertainty and determine how best to measure them correctly. These become your KRIs.
In general, when it comes to KPIs and KRIs, less is more and I tend to operate fairly high up in the organisation with KRIs and leave it as KPIs for lower down management. At least while the maturity of the organisation (when it comes to managing risk) is building.
To read more on KRIs you can download Chapter 9; Reading the Signals from my book Risky Business: How Successful Organisations Embrace Uncertainty. Better still, buy my book and gain access to free resources that are there to help organisations perform better, faster!
PS. I’m thrilled to say my book Risky Business hit the #1 Amazon Best Seller list recently in the Risk Management Category. If you have read it and think it’s worthy of a review, I would greatly appreciate your time in leaving one. You would make this risk nerd very, very happy. You can email it through to me HERE.