Canadian Government Executive - Volume 21

September 2015 //

Canadian Government Executive /

can be repurposed as data-driven risk

indicators. For example, the risks around

retention of employees can be assessed by

measuring the average age of employees,

employee turnover, the percentage of em-

ployees eligible for retirement within two

years, etc. The risk of failing to attract the

right employees can be assessed by mea-

suring vacancy rates and the percentage of

positions with acting assignments. These

data-driven risk indicators are by-products

of the HR system and can be calculated

not only for the organization as a whole,

but also for any subset of the organization.

They provide quantitative support for pro-

fessional judgement normally used to as-

sess HR risk.

Data-driven indicators can measure the

volume, variability/change and complex-

ity of the HR environment (see table 1).

Increases in variability and complexity

can signal emerging or increasing levels of

risks that need to be assessed to determine

the impact on strategic initiatives.

The Integrated Approach

Departments should work toward the de-

velopment of a scorecard in which PM and

ERM are integrated. KPIs can identify cur-

rent under-performing aspects of the orga-

nization while KRIs provide early warning

signs of emerging performance problems.

Therefore, the scorecard serves a dual pur-

pose: it defines the current state of orga-

nizational performance and anticipates its

potential future state.

Such integration must occur early in

the strategic planning process. During the

strategic planning process, senior manag-

ers propose goals for the coming years. An

ERM review would ensure that risks have

been considered and aligned to these

goals. The associated risk events would

also be analyzed and mitigation strategies

put in place, recognizing the organiza-

tion’s risk tolerance and risk appetite.

Once objectives are finalized, perfor-

mance and risk indicators can be defined.

Continual review of these indicators us-

ing the “dual” scorecard would ensure

that any changes consider both the cur-

rent and expected future state perfor-

mance, along with the overall risk profile

for these initiatives. Thus, ERM would

feed the strategic planning process and

the establishment of performance indi-

cators; it would also be intricately con-

nected to the ongoing management pro-

cess as these performance indicators are

reviewed and organizational activities

modified accordingly.

A dynamic process of PM and ERM in-

tegration is required. As noted in Figure

1, the range of uncertainty increases with

time, threatening the successful execution

of departmental strategies. Therefore, a

regular review of the strategies and as-

sociated risk indicators and performance

measures is required. This review can be

initiated on a schedule basis, or if a trigger

point is activated because a performance

indicator has hit a certain threshold.

Conclusions

Currently, while both PM and ERM are

linked to the achievement of strategic

objectives, performance scorecards only

provide performance monitoring capabil-

ity. They do not identify and assess the

impact of emerging or changing levels

of risk. Likewise, ERM, with its focus on

risk identification and management, is

not linked to performance measurement.

As a result, the processes are conducted

independently. An integrated approach

ensures that PM and ERM are seen as

complementary activities that, together,

enable organizational success.

Public Safety is making strides in this

area. Currently, risk and opportunities

are re-assessed by the risk owners dur-

ing in-year review activities. The planned

next step is to establish quarterly reviews

which will support the continuous im-

provement of governance tools; and the

longer term goal is to gather performance

measures that will inform decision-mak-

ing on a more regular basis.

A well-designed scorecard with inte-

grated ERM and PM systems continually

provides information that allows manage-

ment to understand whether key strate-

gic objectives are being met, to identify

emerging or changing levels of risk, and

to adjust strategies to take advantage of

shifts in the environment.

avid

oderre

is the Public Servant

in Residence at the Telfer School of

Management, University of Ottawa.

regory

ichards

is currently the

Professor of Performance Management

at the Telfer School of Management

and has consulted widely with private

and public sector organizations in both

the US and Canada.

Management

Figure 1:

Initial Strategies

Revised Strategies

Trigger Points

KPIs

KRIs

Time

KPIs

KRIs

KPIs

KRIs

Trigger Points