Covey’s Seven Habits and Risk Management

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Stephen R. Covey’s The Seven Habits of Highly Effective People is one of the most popular personal development books ever published. First released in 1989, it has sold more than 15 million copies in the last quarter of a century. The Seven Habits is a powerful tool for self-help and personal development, and is well worth reading on that level. This review explains, however, how the Seven Habits also exemplify critical aspects of risk management. For anyone conversant with the map provided by the Seven Habits, risk management is recognizable terrain.

Risk management helps organizations become more aware of the threats and opportunities they face, so that they can increase organizational resilience and achieve their objectives. If we examine each of the Seven Habits, we see that personal effectiveness and risk management share much in common.

1. Be Proactive. In Covey’s view, a person (or organization) can approach the world in one of two ways. One can cower, avoid, and be impacted by the world. This is being reactive. Alternatively, one can inquire, focus, and seek continuously to change one’s circumstances for the better. This latter approach, “proactivity,” is the core of Covey’s seven habits.

Circle Diagram GraphicCovey suggests that readers view the world as including three concentric circles. The outer ring would include those issues as to which we have “no particular mental or emotional involvement.” Covey, at 81. An intermediate inner ring would constitute our “Circle of Concern” – the range of issues and relationships that we do care about. The inmost ring would differentiate those things we care about over which we “have no real control” from “others that we can do something about” – our critical Circle of Influence.

Covey emphasizes focusing efforts on the Circle of Influence. Covey, at 82-83. The issues that people and organization face can fall into one of three categories: “direct control (problems involving our own behavior); indirect control (problems involving other people’s behavior); or no control (problems we can do nothing about, such as our past or situational realities).  The proactive approach puts the first step in the solution of all three kinds of problems within our present Circle of Influence.” For “direct-control” problems, we work on habits. For “indirect-control” problems, we change our methods of influence. For “no-control” problems, we learn to accept.

These principles directly apply to risk management. Effective risk management includes aspects of governance and management. For risk management to produce results, leaders must commit to awareness and continuous process improvement.

In other words, leadership must commit to being proactive about their business. Leaders then must adopt a process that includes seven steps: identifying threats and opportunities, avoiding behaviors that are too risky, developing opportunities into new initiatives, mitigating threats, shifting some of the impact of threats to others, accepting the residual risks, and then learning through continuous reevaluation. Thus, an organization implements effective risk management by developing and honing virtuous habits (focusing on “direct-control” and “indirect control” problems). As those habits take effect, the organization accepts the results, but always provisionally, always seeking improvement.

2. Begin With The End In Mind. Covey’s second habit emphasizes that one cannot “achieve” without some guideposts for measurement. If we do not know where we are headed, we cannot determine whether we are making progress. For individuals, one should begin with “a personal mission statement or philosophy or creed. It focuses on what you want to be (character) and to do (contributions and achievements) and on the values of principles upon which being and doing are based.” Covey, at 106.

For organizations, effective risk management requires an organizational mission, values, and operational and strategic plans. Organizations cannot determine what is a threat or opportunity or the magnitude of any particular risk except by reference to what the organization intends to accomplish, the core benchmarks by which it judges its conduct, and its plans for achieving those objectives.

When an organization does center itself in this manner, it creates security in the same way an individual can in following Habit Two, by “knowing that, unlike other centers based on people or things which are subject to frequent and immediate change, correct principles do not change.  We can depend on them.” Covey, at 122.  An organization develops wisdom and guidance by having “correct maps,” that is, from understanding “the way things really are, have been, and will be. Correct maps enable us to clearly see where we want to go and how to get there.” Id., at 123. Organizations achieve power as a result of this clarity by being “self-aware, knowledgeable, [and] proactive.” Id., at 123.

3. Put First Things First. Covey’s third habit emphasizes prioritization: “What one thing could you do (you aren’t doing now) that if you did on a regular basis, would make a tremendous positive difference” in your personal and organizational life?” Covey, at 146. He suggests dividing issues into four quadrants: urgent and important (Quadrant I), not urgent but important (Quadrant II), urgent but not important (Quadrant III), and not urgent and not important (Quadrant IV). He urges readers to spend as little time as possible on Quadrants III and IV, and as much time as possible on Quadrant II. . “Effective people stay out of Quadrants III and IV because, urgent or not, they aren’t important. They also shrink Quadrant I down to size by spending more time in Quadrant II.” Id., at 153.

Covey's Four Quadrants graphicAgain, Habit Three is a core aspect of risk management. Organizations beginning risk management perform a risk inventory, to survey the host of threats and opportunities that may be presented. They then develop a risk register, which ranks these risks according to likelihood of occurrence, magnitude of impact, and speed of onset. That process identifies Quadrant I and Quadrant II issues – those that are urgent and important or important but not pressing.

Furthermore, the risk register emphasizes that both Quadrant I and Quadrant II require attention. An organization cannot focus only on what is urgent, but must take steps to address threats and opportunities that are mission-critical regardless of whether they cry out for immediate attention.

4. Think Win-Win. Covey’s fourth habit emphasizes mutual gains. “Win/Win is a frame of mind and heart that constantly seeks mutual benefit in all human interactions. Win/Win means that agreements or solutions are mutually beneficial, mutually satisfying. With a Win/Win solution, all parties feel good about the decision and feel committed to the action plan.”  Covey, at 207. Win/Win agreements clearly set forth desired results, guidelines for achieving those results, resources available, metrics of accountability, and consequences.

Effective risk management has the same premise. The organization seeks an open, learning mentality that emphasizes mutual gain through cooperation, rather than one-upsmanship and blame. A risk register assigns owners for threats and opportunities. Management may then direct resources to support specific mitigation steps or pilot projects for initiatives. The risk management process emphasizes feedback loops, guidelines, accountability, and consequences.

5. Seek First To Understand, Then To Be Understood. The fifth habit emphasizes the process of communication – first listening empathically, then clearly conveying what you in fact intend. Covey, at 235. Risk management again promotes this concept, pushing organizations to gather information from a variety of viewpoints, diagnose issues before immediately presuming what should be done, and develop clear processes to guide behavior going forward.

6. Synergize. Covey’s sixth principle presses individuals and organizations to focus on systems and catalyzing profound change. He uses the term synergy, which he describes as “the whole is greater than the sum of its parts. It means that the relationship which the parts have to each other is apart in and of itself. It is not only a part, but the most catalytic, the most empowering, the most unifying, and the most exciting part.” Covey, at 262. Synergy requires valuing differences and seeking alternative perspectives.

In the same way, effective risk management recognizes the limitations of each individual, but emphasizes that together, people can properly diagnose and effectively address challenges and growth opportunities.

7. Sharpen the Saw. Finally, Covey maintains that people and organizations should focus on personal and professional renewal. Those using risk management could not agree more. Organizations implementing risk management are taught to emphasize continuous process improvement, approach issues with beginners’ eyes, evaluate entire systems rather than concentrating solely on particular symptoms, and create learning environments in which organizations can foster personal and professional growth by emphasizing individual responsibility and opportunity for creating stronger, more resilient, more dynamic teams.

So Much More. The review above does not begin to give the Seven Habits the attention it deserves. Covey’s book has diagrams, additional detail, and explanatory examples that differentiate it from virtually all other self-help and business-development books. Understanding Covey’s Seven Habits, however, profoundly impacts the effectiveness of organizational risk management. For that reason alone, it has a place reserved on the bookshelf of anyone who aspires to transformative leadership.

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