Robert S. Kaplan, the co-creator of the Balanced Scorecard management system and a professor at Harvard Business School, and Anette Mikes, assistant professor at Harvard Business School, have published some research on how companies might reconsider how they manage threats. There is much here for schools to learn from, and, I would argue, to adapt to school environments. I say that because I believe that we haven't learned as much from the financial crisis as we should have.
Yes, we responded (well, adequately, or poorly), but my question is this: have schools learned to put into place some form of risk management system that draws on the strength and talents of all groups across the school (boards, school leadership, faculty, and staff)?
In their HBR article, "Managing Risks: A New Framework," Kaplan and Mikes provide a helpful chart on the Three Categories of Risk: preventable risks, strategy risks, and external risks. Preventable risks, arising from within a school (I'm going to use "school" instead of "organization" or "company"), are monitored and controlled through mission statemetns, values, rules and boundaries. Strategy risks and external risks, to the contrary, "require distinct processes that encourage [school leaders] to openly discuss risks and find ways to reduce the likelihood of risk events or mitigate their consequences" (55).
For purposes of this post, I'd like to focus on the third category, external risks, or what we might term "uncontrollable risks." These risks "lie outside the [school's] control; [schools] should focus on identifying them, assessing their potential impact, and figuring out how to best mitigate their effects should they occur" (56).
Most of these risks require approaches that we're not used to dealing with, "either because their probability of occurrence is very low or because [school administrative leaders] find it difficult to envision them during their normal strategy processes." Kaplan and Mikes identify several sources of uncontrollable risks:
(1) Natural and economic disasters with immediate impact. "These risks are predicatable in a general way, although their timing is usually not (i.e., a large earthquake will hit someday in California, but there is no telling exactly where or when). [...] Examples include natural disasters such as the 2010 Icelandic volcano eruption that closed European airspace for a week and economic disasters such as the bursting of a major asset price bubble. When these risks occur, their effects are typically drastic and immediate [...]."
(2) Geopolitical and environmental changes with long-term impact. "These include political shifts such as major policy changes [...]; long-term environmental changes such as global warming; and depletion of critical natural resources such as fresh water."
(3) Competitive risks with medium-term impact. "These include the emergence of disruptive technologies (such as the internet, smartphones, and bar codes) and radical strategic moves by industry players (such as the entry of Amazon into book retailing and Apple into the mobile phone and consumer electronics industries)."
You may be thinking that these sources don't really apply to schools, but they do impact us because they tend to impact our tuition-paying families--specifically, they may impact whether our families will be able to (or want to) continue paying tuition. Knowing that we are reliant on tuition dollars to run our schools, shouldn't we be concerned about uncontrollable risks and give some thought to how we might react, should such a risk event occur?
It might be easy for most readers to say, "Well, that's really the purview of the board, not the administration." On the one hand, yes, I do agree that it is the board's business, but I submit that it's equally the business of school leadership (HOS + senior administrative team). What's more, I would consider involving key faculty linchpins (probably not the full faculty) in some form of risk management framework, as their "weight" is important in the faculty world. Often, these linchpins can be better conduits to full faculties than can administrators; at least, they may have excellent ideas on how to communicate certain information, etc. What's more, they tend to have long tenure at a given school, meaning that they bring the additional benefit of institutional memory; such memory can be applied to a risk management scenario. This perspective is especially helpful if an administrative team (and/or Head) has a comparatively shorter tenure at the school.
As you can see, risk management is a somewhat complex issue in independent schools. This concept also represents one of those "uncomfortable intersections" of "are we a school or are we a business?" In this case, the answer is clearly "both." As a term, "risk management" sounds exclusively corporate, but, in reality, educators deal in risk management all the time--we just don't label it as such. We have elaborate systems of progress reports, interim reports, grade-level meetings, and so forth. Why? To mitigate the risk of student failure. One could argue, I think, that schools are in the business of risk mitigation.
I would welcome comments from readers regarding the major external risks you see for independent schools. They may correspond to the three points mentioned above, or they may be different altogether. Additionally, how might schools better mitigate such risks?
I will publish all comments, so please check back to see what has been written!