Author: Mark Beiderwieden
Published: 02 SEP 2020
Introduction
Eight business executives from the Tokyo Round Table were enjoying lunch when suddenly everyone’s devices began vibrating with the familiar emergency tone. We simultaneously grabbed for our phones…. it was Yurekuru, the popular earthquake warning app in Japan.
„It’s only a level 3 out near the Chiba Prefecture“ was echoed by several members, so we calmly resumed our business discussions, trusting in the prediction accuracy. The earthquake warning lead time is a maximum of 4-7 seconds, but enough time at least to brace yourself, turn off a gas stove, or whatever.
At least it‘s a warning!
The Importance of Warning Systems
The warning systems that influence our daily lives (which we sometimes take for granted) are based on past experiences and are our educated attempt to protect ourselves from crisis reoccurrence in the future. We’ve learned to respect these warnings and take them seriously. Look at some of the obvious examples:
- Building codes require smoke detection devices to warn us of potential fire.
- Monthly sirens are tested in many cities that will warn the population of an imminent danger or catastrophic event.
- Even the U.S. stock market has established „circuit breakers“ to warn trading institutions of a pending market crash and create a short „time out“ to manage further crises.
Warnings are literally all around us.
Reflecting on Organizational Early-Warning Systems
Take a moment to reflect:
What early-warning systems does your organization have in place and how effective are they?
In the Direct Selling industry, many experiences have been made over the years which, in turn, have evolved and developed into industry standards, KPIs, codes of ethics, and rules of conduct, etc., that establish quality levels and provide needed warning signals to guide business decisions.
Yet, despite this experience, sometimes warning signals are not reacted to, allowing crises to escalate or repeat themselves, and even create issues for the entire industry.
Common Factors for Missing Warning Signals
We need not scratch our heads in bewilderment as we search for the elusive reason. Here are some of the most common factors which can cause us to miss warning signals even when risk assessment procedures are in place:
- Pressure to achieve target and competitive pressure to expand.
- Inexperienced market leadership, non-aligned executive incentives, overly dominant field leadership who overlook enterprise guidelines and rules.
- Underdeveloped processes or biased decision-making.
- Lack of local market knowledge during new market expansion that requires adapting approaches and processes across borders (Caution to those that think the EU operates with one aligned legislation – far from it!).
- Finally, when sales are increasing, often fewer questions are asked. Did the celebration over current growth success drown out warning signals?
Optimizing Risk Management
Investing time in reviewing how one can optimize risk management to account for the potential weaknesses above can pay huge dividends. In many cases, strengthening the discipline and consistency of the review processes is necessary; risk assessment should be a regular fluid process rather than an “ad hoc” approach. But a careful balance is needed to avoid slowing down the business with overly ponderous processes or mandating excessive remediation actions.
In that sense, we can learn from Yurekuru; not all quake warnings require a dive under the kitchen table or a change to the building code. (Goods in stores fall off shelves starting with quake level 5 or 6.) Minor incidents are normal in our business and are prudently dealt with in employee and field communications and training.
Remember please: The best Yurekuru app is meaningless if the user doesn’t react. Without conviction and readiness to heed the warning, the best processes and rules catalogues are only superficial tools for PR purposes.
In fact, processes and rules which failed to perform as intended should a case go before a court can and will shift responsibility and liability squarely on the company and its representatives.
Sharing Best Practices for the Good of the Industry
We all must implement systems checks and balances and processes that learn from the past and provide early warnings to decision-makers. However, it is not necessary to recreate the wheel. The experience exists within companies across markets, and our various associations provide formats to openly exchange experiences for the good of the industry.
In my opinion, strong policies and practices should not be considered intellectual property or a USP.
It should be common professional practice to share these experiences and practices, especially with newcomers, for the long-term good of the industry. Some may initially balk at the idea of sharing best practices with competitors, but Direct Selling is unique in that we stand more to gain by sharing such practices than we have to lose.
For those of you who’ve dealt with crisis-like issues in the past, you’ll agree there was indeed always a warning. Ask yourself if sufficient time has been spent ensuring your organization has both processes and culture of accountability to effectively identify and act upon such warnings.
