Risk Culture and Health Care Leadership

We’ve all had a roller coaster ride through financial uncertainty as a result of the recent housing and market collapses. As a result, we are much more attuned to thinking about risk – at least to financial risk. But as healthcare leaders, we face a risk that is not on its face financial on a daily basis. In their May 12 article, What’s Your Company’s Risk Culture? posted on BusinessWeek.com, John Michael Farrell and Angela Hoon – both at KPMG’s Enterprise Risk Management Services – explore corporate risk culture in a way that is relevant for healthcare leaders and their organizations as well. It’s worth reading and considering in the context of your own leadership experience.

It’s the Risk Culture, Stupid

The authors explain the term “risk culture” as: “…the system of values and behaviors present throughout an organization that shapes risk decisions. Risk culture influences the decisions of management and employees, even if they are not consciously weighing risks and benefits… A company’s risk culture is a critical element that can ensure that “doing the right thing” wins over “doing whatever it takes.””

This definition requires thinking about organizational risk in a context well beyond the strictly quantifiable financial risk we associate with specific transactions or activities that are subject to monetary profit and loss – and to include (in the case of healthcare organizations) everything from personnel management risk to clinical risk to project risk to compliance risk. It also broadens the range of leaders and leadership behaviors that must contribute to effective risk reduction. The organization’s risk culture is what determines how people behave in the absence of clear rules or guidelines in a specific situation.

Do As I Say Not As I…

Farrell and Hoon are quick to point out that a fundamental tenet of risk reduction is consistency in both message and action at the top and middle leadership positions. It’s insufficient to have risk awareness at the senior executive level – there must be communication and consistency about the risk that permeates middle management’s messaging and behaviors in order to be credible to all staff.

And it’s simply not OK to preach risk avoidance but practice it only when convenient or under low-stress conditions – abandoning risk awareness when the heat is turned up. Such as when the ED get busy or when budget pressures are high or when staffing is thin due to call-outs. What you do as a senior or mid-level leader under stress will communicate how people respond to you will behave when the pressure is on them. And their risky behavior may amplify your vulnerability as an accountable leader.

Alignment of Risk and Reward

When we think of risk and reward, it’s usually in the context of investment where more risk yields more reward. In management situations, it’s often the opposite -, especially in health care operations. When managers take on greater risk (in hiring or delegating responsibility) or clinicians and their support staff are pushed to take more risk (work longer hours, see too many patients, function with fewer or less well trained resources, extend provider scopes of practice, use outdated systems, etc.) that greater exposure predictably leads to poor outcomes or compliance violations.

In our organization’s reward comes from taking less, rather than more risk. If the culture overvalues short-term measures of productivity, efficiency, or expediency at the expense of sound risk avoidance practices it’s only a matter of time before an untoward event will occur. As a leader you are responsible for sending unambiguous messages about the degree of flexibility you will tolerate in risk management – even under extraordinary conditions.

Beyond the Obvious

The authors encourage leaders to broadly consider how risk is positioned within, and beyond, the organization to ensure the desired risk culture is optimally established and communicated. This includes paying close attention to how expectations about risk management are communicated; determining how risk expectations for vendors are to be managed; and developing approaches to evaluating risk-taking attitudes in prospective employees and partners.

In the end, Farrell and Hoon remind us that leaders have a significant influence on, and responsibility for, determining the organization’s risk culture: “Once leadership starts on the right path–and stays on it–the organization will slowly but surely follow.” It’s up to you, healthcare leaders.