Losing Their Way

The recent troubles of global car manufacturer Toyota offer a real-world example of the need to reinvent enterprises with a focus toward enterprise risk management.  As Jack Bergstrand and I discussed in our recent webcast, companies today are relying on outdated management principles that emphasize specialization and limited communication across business units.  This contributes to greater risk and ultimately a diminished brand.  Here is what Forbes magazine reported this week about the management failures at Toyota.

President Akio Toyoda acknowledged in an opinion piece he wrote for The Washington Post last week the company had "failed to connect the dots" between the sticky pedals in Europe, surfacing as early as December 2008, and those in the U.S. that culminated in the massive recalls. The error in Europe was corrected, starting with the Aygo hatchback in August 2009, and those models were not included in the latest global recalls.

Making the exact same product again and again - what's known as "quality control" in manufacturing - isn't the same thing at all as ensuring safety, according to Steven McNeely, who oversees safety management systems at Jet Solutions, a Richardson, Texas-based carrier.  "Management's attention and oversight was focused on the business bottom line, and those metrics were quality measures. Management was not focused on safety risk assessment or risk management," he wrote in his essay, "Lessons Learned From Toyota."  Others say rigorous testing, managerial foresight and valuing customers are critical to the true Toyota Way, and the company has derailed from that path.

The greater size and complexity of today's corporations demand a new way of managing.  If you agree, visit www.WheelhouseAdvisors.com to learn more.

How to Reinvent Your Company Through Better Enterprise Risk Management

A recent article by Jack Bergstrand and John Wheeler in Directors & Boards Magazine discusses how companies can reinvent themselves through better enterprise risk management ("ERM").  The article provides a unique perspective by integrating the management principles of Peter Drucker with ERM.

Enterprise risk management is an important tool for sustainable competitive advantage. Like the market and the enterprise itself, successful enterprise risk management programs require holistic and systematic processes supported by the following factors:

1. Envision: Strategy linked to customer needs, with defined operational implications, and well-articulated enterprise guidelines for managing risks and opportunities.


2. Design: Formal risk mitigation and opportunity sensitivity analysis/monitoring/reporting.


3. Build: Enterprise-wide controls, processes and infrastructure.


4. Operate: Well-established personal roles and motivations for people to act in the best interests of their companies through proper incentives.

For companies to reinvent themselves, they can’t be viewed as the sum of their parts. The enterprise overall is the goose that lays the golden eggs. Similar to a brand, it needs to be holistic, integrated and relevant—and continuously adapt through successful and accelerated enterprise projects.

Jack and John provide greater insight on these concepts in an on-demand webcast hosted by Directors & Boards Magazine.  The webcast includes a lively question and answer session addressing concerns from the audience of board members and senior executives.  To access this free webcast, visit www.WheelhouseAdvisors.com.