By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc. In Middle School (grades 7,8 and 9 where I grew up) we were allowed to read anything we wanted for 20 minutes each morning. Anything. Of course, middle school kids will be middle school kids, and so for the first few weeks students tried to see how far they could take the read “anything” rule. Yes, there were reading materials that would not be appropriate for that age group, and yes there were comic books etc. However in a short period of time something funny happened; namely kids started reading “good” stuff, namely stuff that was educational, literate or just plain interesting and useful. Students actually looked forward to reading time, and anecdotal evidence indicates that they did a lot more reading at home – despite the popularity of Mork and Mindy (obscure reference for those of a certain age). I am willing to speculate however, that once we were forced to read in High School that our willingness to read – to read anything – went down dramatically. Left to their own choices, most reasonable people will make good choices, and they will make those good choices willingly. Forced to do something however and the task becomes harder to accomplish, and is only done grudgingly. Dr. Heidi Grant Halvorson, in her book Success: How We Can Reach Our Goals, http://www.amazon.com/Succeed-How-Can-Reach-Goals/dp/0452297710/ref=sr_1_2?s=..., talks about this phenomenon as tasks that we perform with an intrinsic motivation - tasks that we perform to please ourselves - versus tasks that we perform with an extrinsic motivation– tasks that we perform to please others, or because others force us to. The evidence is clear from numerous studies that developing an intrinsic motivation in students leads to much better results. At this point you may be asking what the heck this has to do with risk management. As an external consultant to several different types of institutions I see a similar effect all of the time when it comes to risk procedures. This is particularly true in financial institutions. Bankers often feel that the risk rules are needlessly rammed down their throats without them having any say. Basically this leads to resentment at best, and hostility towards the risk department and the risk rules in many cases. Bankers are forced to be extrinsically motivated, and the results are far from optimal. In times of crisis, certain risk rules may have to be followed. However in non-crisis situations a little bit of managerial skill on the part of the risk department may go a long way. If you allow reasonable employees to make their own choices, in time you will find that they will make very reasonable choices, and will do so willingly and to much greater effect. Perhaps risk managers should take a page from my Middle School Principal.
Partner, RSD Solutions Inc. In Middle School (grades 7,8 and 9 where I grew up) we were allowed to read anything we wanted for 20 minutes each morning. Anything. Of course, middle school kids will be middle school kids, and so for the first few weeks students tried to see how far they could take the read “anything” rule. Yes, there were reading materials that would not be appropriate for that age group, and yes there were comic books etc. However in a short period of time something funny happened; namely kids started reading “good” stuff, namely stuff that was educational, literate or just plain interesting and useful. Students actually looked forward to reading time, and anecdotal evidence indicates that they did a lot more reading at home – despite the popularity of Mork and Mindy (obscure reference for those of a certain age). I am willing to speculate however, that once we were forced to read in High School that our willingness to read – to read anything – went down dramatically. Left to their own choices, most reasonable people will make good choices, and they will make those good choices willingly. Forced to do something however and the task becomes harder to accomplish, and is only done grudgingly. Dr. Heidi Grant Halvorson, in her book Success: How We Can Reach Our Goals, http://www.amazon.com/Succeed-How-Can-Reach-Goals/dp/0452297710/ref=sr_1_2?s=..., talks about this phenomenon as tasks that we perform with an intrinsic motivation - tasks that we perform to please ourselves - versus tasks that we perform with an extrinsic motivation– tasks that we perform to please others, or because others force us to. The evidence is clear from numerous studies that developing an intrinsic motivation in students leads to much better results. At this point you may be asking what the heck this has to do with risk management. As an external consultant to several different types of institutions I see a similar effect all of the time when it comes to risk procedures. This is particularly true in financial institutions. Bankers often feel that the risk rules are needlessly rammed down their throats without them having any say. Basically this leads to resentment at best, and hostility towards the risk department and the risk rules in many cases. Bankers are forced to be extrinsically motivated, and the results are far from optimal. In times of crisis, certain risk rules may have to be followed. However in non-crisis situations a little bit of managerial skill on the part of the risk department may go a long way. If you allow reasonable employees to make their own choices, in time you will find that they will make very reasonable choices, and will do so willingly and to much greater effect. Perhaps risk managers should take a page from my Middle School Principal.
