Are You Ready To Confront The Brutal Facts Of Reality?

November - December 2008 Issue

by Diana Del Bel Belluz, M.A.Sc., P.Eng.

In the research for his book Good to Great, Jim Collins set out to answer the question ‘Can a good company become a great company, and if so, how?’ He began by identifying companies that showed a good-to-great pattern, i.e., they started out with 15-year cumulative stock returns at or below the general stock market, then experienced a transition point after which they had cumulative returns at least three times the market over the next 15 years. Collins picked 15 years because one can’t consistently outperform the market for 15 years based on luck alone.

He then compared the ‘great’ companies with two control groups. One control group was ‘direct comparisons’, i.e., companies in the same industry and with the same opportunities as the good-to-great companies but that did not make the transition to great performance. The other control group was the ‘unsustained comparisons’, i.e., companies that made a short-term shift from good to great but were unable to sustain it for 15 years.

Collins discovered several patterns that distinguished the good-to-great companies from the two comparison groups. Here is a selection of his findings that relate to the abilty to confront ‘the brutal facts of reality’, discussed in this month’s Feature Article. These insights are relevant for risk management leaders in corporate, government and not-for-profit organizations.

  • All the good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality. When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often becom self-evident.” “Even if all decisions do not become self-evident, one thing is certain: You absolutely cannot make a series of good decisions without first confronting the brutal facts.” To truly inform decision-making, risk managers must ensure that their discipline produces realistic assessments of the risks associated with each decision option.
  • A primary task of taking a company from good to great is to create a culture where people have a tremendous opportunity to be heard, and ultimately for the truth to be heard”. By providing a thorough assessment of the positive and negative potential outcomes of various decision options the risk discipline allows the full truth to be heard.
  • The good-to-great companies “continually refined the path to greatness with the brutal facts of reality.” By monitoring risk and performance indicators, the risk discipline provides the information to refine the path to strategic objectives.
  • Leadership does not begin with just vision. It begins with getting people to confront the brutal facts and to act on the implications.” By identifying the implications of risk to objectives, managers will be motivated to act on them.
  • Spending time and energy trying to motivate people is a waste of effort. … The key is not to de-motivate them. One of the primary ways to de-motivate people is to ignore the brutal facts of reality.” If risks are identified and then nothing is done about them, people will be loathe to participate in the risk management process.
  • Every good-to-great company faced significant adversity along the way to greatness. In every case, the management team responded to adversity with a powerful psychological duality that Collins calls the Stockdale Paradox*. “On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts.” Collins asserts this duality is the signature of greatness. The Stockdale Paradox isn’t just an organizational characteristic but also a personal one for risk managers.

*Click here to learn more about the Stockdale Paradox, a key psychology for leading from good to great.

Follow the links to:

  • Read this month's Feature Article - 4 Catalysts to Embed a Risk Managment Culture
  • Download a printable version of the entire November - December 2008 issue of the Risk Management Made Simple Advisory.
  • View the Article Index to access back issues of the Risk Management Made Simple Advisory.

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Diana's Pick

The Neuroscience of Enterprise Risk Management (written by Diana Del Bel Belluz of Risk Wise) expores findings from the field of neuroscience and shares practical tips on how to apply them to enhance individuals' risk management thinking and implement brain-friendly ERM practices in organizations.

The article was published by The Conference Board of Canada in the Autumn 2017 issue of the journal Risk Watch.