Chaos doesn’t stimulate Innovation

The word “chaos” is bandied about in tech startups, and increasingly in social enterprise and impact investment, as if it were an emblem of approval. I don’t get it. Chaos describes a lack of process and order. While this may leave plenty of room for innovators to do their thing, it isn’t synonymous with creating an organizational culture of innovation by any means.

 We live in an uncertain world and I think this is part of why “chaotic organization culture” has become acceptable and expected. We can’t eliminate uncertainty – hence the emergence of risk management and risk governance, both of which rely heavily on precedent, probabilities, scenario planning and performance monitoring. The willingness to look uncertainty in the face and consider the possible implications are how we move from chaos to productivity. When we do this, we can keep creativity and innovation in the mix by building an environment in which these characteristics are encouraged and thrive.

 To create this resilient and empowering environment, we structure meetings and ensure that everyone speaks and is comfortable speaking out. We draw on people’s strengths and encourage them to grow professionally. When we make mistakes — which we all do — we own up to them ASAP and take corrective or adaptive measures calmly and without throwing anyone under the bus. If you screw up on my watch, the failure is mine as a manager as much as it is yours. Let’s just deal with the problem, learn from the experience and move on.

 Claiming that chaos is the natural order of things is a cop out. It’s like watching a superstorm approach your home and throwing your hands in the air saying “It’s too big and unpredictable for me to do anything. Forget getting water, canned food and flashlights, that won’t help”. Really? Big and unpredictable, yes, but passive response reduces your chance of surviving and thriving. My preparations in the days before superstorm Sandy went unneeded, but you can be certain I’ll be ready again next time. Not just with food and water, but with a disaster escape plan. How large might the damage area be? How far would I need to go to find shelter, food, water, power? Who could I stay with at those distances? Can I get there? Will my 4×4 drive be enough to navigate downed trees, damaged roads, etc? If I can’t evacuate by car, what’s my next best travel plan?

 In business and in my personal life, I tend to be calm when disaster strikes. I may not like the options available to me, but I know what they are and I’m ready to act. In a chaos culture, disaster (or garden variety adversity) catches us unprepared. We gnash our teeth, we flounder and we respond fast and impulsively or not at all. Sometimes that works despite the melodrama, sometimes it doesn’t. If you’re an adrenalin junkie, you may even enjoy the melodrama, but are you optimizing anything in this scenario?

 Goldman Sachs was — for a change — a literal beacon of good risk management and governance after superstorm Sandy. NYU Hospital, on the other hand, shows what precedent, complacency and blind compliance with regulations will get you. Granted, once slammed, NYU came through with flying colors and no loss of life. It just shouldn’t have happened.

Let me insert a side note here on voluntary versus involuntary chaos and risk governance. Voluntary chaos is a startup, or any other entity, that can’t be bothered to think through policies, processes and systems growth. Involuntary chaos involves natural disasters, but also not-for-profit and social enterprises that are underfunded given the magnitude of their mission and correspondingly short on management and staff talent to move the organization from hand-to-mouth to sustainability.

The Boards of tech startups are encouraged to look at the potential sustainability and resilience of their portfolio companies in the context of risk management and risk governance. As the saying goes, forewarned is forearmed.

The Boards of non-profits and social enterprises are encouraged to remember that employees are their human capital. Nurture them, organize them properly and your return on capital (human and financial) goes up. In addition, investing in business planning, including exploring those wild card “Black Swan” contingency scenarios, is critical to achieving your organization’s mission. It’s not all about keeping expenses low, it’s about having the right kinds of expenses.

 People are assets. We want them to perform. At the same time, they are human beings who deserve to be treated equitably and with dignity. An empowering and well-managed culture of innovation is the way to create value. Defaulting to chaos may create the occasional big winner, but it also contributes to tremendous failure with high human and financial cost. As a society, we can and must do better.

 Lauren A. Burnhill – @LaurenOPV

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