Fear is good – continuing the Kaplan conversation

Fear is Good

Remember the Gordon Gecko character in Oliver Stone’s landmark “Wall Street”? His credo was “Greed is Good”.
I want to offer that “Fear is Good”. Fear has helped us surviving as humans, and fear – or its relevant equivalent – can make a survival difference for organizations as well, if we get it to function correctly.

Fear is an important survival mechanisms

It’s how we as humans got here, where we are today, on top of the food chain. Let’s be clear, we did not get to be where we are by being heroic and standing up to a hunting lion or tiger as a small ape-like being. That would have gotten us eaten.

On the contrary, our entire human system has been geared towards survival, avoiding the fast(er) predators with sharp teeth on the savannah. What guided us then is still guiding us now, even though most of us have moved away from the savannah. These are our evolutionary retained, succesfull reactions, which through the mechanism of evolution were programmed into our very being. The most important part of our brain involved in those reactions is the amygdala, one of the older parts of our brain.

The amygdala has recently been put in a bad light as it is often blamed for preventing us from exhibiting risk taking behaviour. And risk taking behaviour is often linked to innovation. So, according to some great thinkers, amongst which Steven Pressfield, this built-in reaction prevents us from achieving greatness. That’s the result from hunderds of thousands of years keeping our heads lower than the surrounding tall grass.

Now, in cases where the amygdala fails to function properly, imagination appears disfunctional and fear is often notably absent. But that feat is what prevents us from getting killed. Hence, this part of our brains is a very effective risk management engine, continuously identifying, assessing, prioritizing and treating risk. And it errs on the side of caution. And it never needed reading ISO 31000 or COSO-ERM. Risk averse behavior has evolved and has aided us our survival.

The fear dynamic

Fear uses our imagination and our emotions, and emotions are, at least partly, governed by the amygdala. Fear provides our imagination with cues as to possible consequences of certain risks. We can visualize them, but we in case of strong emotional links to fear experiences, we do more, we “live” them.

The link between emotion, fear and risk aversion is often very hard and very confrontational. Hence the intensely emotional reactions to 9-11, or to the recent bus accident in Sienne, Switserland, in which 22 children lost their lives. It’s a combination of proximity and direct relevance for us which creates a deeply emotional reaction, leading to fear. To illustrate, I know quite a few people who no longer felt safe in tall buildings. I also did not feel happy about putting my own children on a bus days after the Sienne accident.

The possible consequences of this imagined risk manifest themselves in imagined pain or loss which in turn leads to an overall activation of all key survival systems and the related de-prioritization of all other activities. Again, this is not a considered reaction. No, it’s an automatic, intuitive reaction, powered mainly by the amygdala but rationalized ex post by our brain on the basis of fear. It’s not perfect risk management either, as you get the tendency to prioritize the recent and close risks to the more distant risks in time and space. But that’s a subject for another post.

Organizations lack brains and imagination

All of this puts us in a bit of a hard place. Organizations do not have brains, so they don’t have an amygdala. In addition, they don’t have imagination. So pretty much all requirements for effective risk management are not present in organizations. Hence organizations have no inherently present systems for risk identification, assessment, prioritization and treatment.
Organizations exhibit no fear. But is that entirely true?

Organizations have lots of brains and imagination

While organizations themselves have no brains, nor imagination, they are made up of – and actually by – people. Lots of people bring lots of brains and imagination to organizations. They also bring lots of fear. But this is not enough to make organizations act like good risk managing environments. What is required is the deep identification, a deep link between the individuals and the organization. And that, exactly that, is what we are moving away from. And that’s a problem.

Long term self preservation

Let’s look at mechanisms of basic self-preservation and their scope. Our survival reflex extends beyond our own body, our own life. It also extends to our children and to our children’s children. After all, they are a genetic mix of ourselves and our significant other. Our genes literally live on in our children. Self-protection and structural preservation of our (genetic) heritage result in risk averse behavior.

This is all good, but there is no (longer) such self-identification with the organizations we work for. Rather, people tend to treat work more and more as an obligation, and no longer own, care for and manage the risks inherent in their responsibilities. Because of this lack of identification, fear does not enter into consideration when executing a responsibility. And that is problematic.

I’m wondering whether an important part of this disassociation with the employer has not been the latest result of the permanent reengineering and down-sizing or right-sizing drive of the ’90s and early ’00s.

Fewer and fewer people are willing to truly commit to the organizations they work for. Because their organizations do not commit to them.

The parent-child relationship between employer and employee is broken

The parent-child relationship is not a wrong way of illustrating the employer-employee relationship. Employees often come to an organization with the full engagement and commitment to really make a difference. Some organizations allow and even support that. A beautiful example is this welcome message new Apple employees get on their first day.

However, more and more organizations, due to free rider behaviour of some shareholders and some members of management fail to honor that commitment of their collaborators. Which leads to loss of engagement, loss of identification and loss of true risk management capability.

Organizational fear lives with those accountable

Because, and this is essential to understand, any fear reaction exhibited by an organization is the manifestation of a risk averse reaction by its accountable collaborators. Hence, any lack thereof means there is no risk averse reaction by its accountable collaborators.

The accountable collaborators may have lost their link, their identification with the organization. They may no longer consider themselves accountable. Worse, they may start to exhibit free rider behavior themselves, often a corruption and fraud indicator or precursor. Rather than protecting the organization from exposure, they may point it on a road to higher and higher exposures which result in big upside risks for themselves and long term, almost certain downside risks for the rest of the organization.

So what’s next

I hope I’ve gotten everyone depressed enough.
The key question then is, is it worth considering risk management in organizations? I believe it is, I believe it is essential for long term survival, but I believe it will require a significant adaptation to traditional organizational structures.
I don’t think it needs to be the end of large corporations, but it will require a decentralization of power and management structures to make organizations more nimble and, let’s face it, more personal. People need to be able to identify with their organization to be able to exhibit good and relevant risk responses. So how do we do that? That’s fodder for another blog post.