At the End of the Day

Good management translates into good risk management

The most important function of an engineering firm is developing engineering design, right? Wrong. That’s a lesson that founders of ASFE/The Best People on Earth learned the hard way. Their firms were being sued so frequently that professional liability insurance (PLI) was unavailable to them from any conventional source. “Why are we being sued?” the founders asked. “We’re good at what we do.”

Wrong again.

In order to learn what the problem was, ASFE had to research the situation, something it did through extensive case history analysis. That analysis showed that the founders were not good at what they did. Yes, they were marvelous engineers, but they didn’t do that much engineering. They spent most of their time managing their firms, and they didn’t do it all that well.

ASFE’s mission today is developing high-level, high-quality risk management programs, services, and materials to help its member firms “prosper through professionalism.” But what is “risk management?” In reality, it’s just another way of saying “good management.”

A well-run machine
An engineering firm—or any engineering organization, for that matter—is a machine designed to achieve a certain result that makes its clients happy. Doing that leads to client satisfaction, profit (in private-sector organizations), and everything else an organization needs to sustain itself over time. The machine is composed of distinct elements, each one of which must operate well. Each element also needs to integrate properly with every other element for the organization to thrive. When the integration breaks down, or when any individual element breaks down, problems occur. When those problems get severe enough, a liability claim is likely. In order to manage the risk of such a problem occurring, one needs to manage the organization well, which is why good risk management is good management.

If you think I’m exaggerating this, select just about any element of a firm and see how it tends to integrate with most others. One example is selling, an activity most engineers liken to contracting smallpox. In a well-run firm, selling is an activity designed to complement a marketing plan which, in turn, is developed to complement the firm’s overall business plan. The marketing plan tells the firm where to fish; selling is the angling. To be effective, the marketing plan needs to consider other activities the firm is engaged in, as well as risk. The firm wants to focus its efforts on markets that are strong and growing, populated by good clients and client representatives who appreciate the high-quality services the firm can provide. Clients and client representatives like that seldom have reason to file a claim and, if such a reason materializes, clients and their representatives usually would like to “work it out” without acrimony and litigation. Clients and client representatives like that also tend to regard a firm as a “brand” and so are willing to work with it as it endeavors to bring new services or project-delivery methods on line.

So, how does one find such ideal clients and client representatives? It’s not that difficult, actually, providing you develop and implement a well-thought-through plan. Alternatively, if you have masochistic tendencies, you could make finding good clients inordinately difficult by applying the simple expedient of forgoing any kind of organized selling effort and just hoping for the best. Indeed, exactly that happens in many firms: The CEO gives one and all a pep talk, concluding with, “Now go out there and sell.” Translation: Our firm needs a new CEO.

HR has a hard job
In many firms, the person who leads the selling effort— the “sales manager”—usually has other duties. No matter. In well-run firms, the individual who takes on any duty is eminently qualified to do so. In other words, whoever bears the “sales manager” title should know what he or she is doing.

How does that happen? That’s an HR issue, of course: attracting and retaining the best person for the job. It’s also an HR requirement to attract and retain all the other people needed in the firm. And to attract and retain them, you have to reward them, with part of that reward being professional development.

Professional development is most commonly thought of as helping staff members advance their technical skills, but don’t forget that it’s at least as important to help develop and fine-tune management and leadership skills. As such, those in your firm charged with professional development need to understand how important professional development is and how critical it is that professional development doesn’t stop at technical skills. They also need to recognize how their work integrates with everything else the firm does—how each department, or service area, or whatever-you-want-to-call-it relies on the success of the other. So don’t concentrate just on developing sales skills; add in client relations skills, especially because the most successful forms of selling and loss prevention are relationship- based.

Of course, it takes more than just good relationships and good engineering to satisfy clients and client representatives. Among other things, clients sometimes need to receive their bills at a certain time using a certain format. Assuming you cannot dissuade the client because the client really has no alternative, can your bookkeeping department oblige, or do you hear something like, “No can do”? If you do, even after you explain the importance of bending over backward, “No can do” should translate to, “The people running our bookkeeping department need to be educated or replaced.”

What about your IT department? Clearly, the good folks there have to support the selling effort and, if your firm offers IT services to clients (as continually more do), the IT people also need to be involved in the selling effort. Clerical staff also may be involved, because people do judge books by their covers. And everyone needs to know about telephone and e-mail “friendliness and efficiency” skills, because communication is the cover of a personality “book,” and personalities are what comprise a firm.

And so it goes: No matter where you start in a firm, no matter which element you consider first, getting that element’s work done optimally will involve just about all other elements in the firm. Good management is aware of those interrelationships and the integration effort needed to make the interrelationships bear fruit. Good management also makes the integration occur, which is why managing well is the only way to manage risk.

This article originally appeared in the 12/01/2007 issue of Environmental Protection.

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