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Why do this at all, you may ask? Well consider that the next step after finding your million dollar blind spots is to move to increase opportunities, and revenues, and decrease risks, or costs.  When you accomplish those results, life becomes a lot more fun and less stressful.

Your next thought may be how to get started doing this on a very limited budget. After all, the lower the budget, the more likely your organization will approve it.

Consider 3 tests others will apply afterwards on how well you found those blind spots.

1. Major blind spots can both have good upsides and bad downsides.
2. Some major blind spots are clearly unexpected and defensible.
3. Some are easy to see using hindsight, as the world is now prone to do.

Now that practice applying that test.

A colleague sent met an article Black swans busting IT budgets describing one out of 6 big Information Technology projects running 200% over budget, which were blamed upon unforeseeable black swan events.

Most of you would classify that article as meeting two of the prior points. That seems to be a bad downside and they seem easy to see using hindsight. Few of you would accept the second comment being met with the survey statements that the overruns are either unexpected or defensible. Most would tend to do a post project review and focus on leadership, project management and communication aspects where the project did well and where lessons could be learned from shortfalls. Accepting a black swan statement sweeps such a review process under the table.

Remember the earlier statement about the goal of this article is to get you started finding those major blind spots on a limited budget. The budget for this starter level process will primarily be leadership time, strategically invested, using the process in the next paragraph.

Before you decide how to classify efforts to evaluate your organizations abilities on this point, apply the following 3 questions to your ERM, contingency planning or strategic update processes:

1. When does the claim about blind spots become more of an excuse than a defensible statement?
2. What are the impacts and costs from failing to address such puffery?
3. What is the monetary risk threshold that must be crossed before anyone should care?

This inexpensive process starts decisions on several key elements of enterprise risk management for your organizational risk management assessment. You got started, created numbers to apply to risk elements, and created a monetary risk threshold.

Shared courtesy of ezine articles

As part of a discussion on Million Dollar Blind Spots in difference functional areas, DIRK BAXTER, PhD, SPHR Senior Talent Strategist of www.leadershipfutures.com was gracious enough to provide this link to share ‘Black swans’ busting IT budgets . http://www.bbc.co.uk/news/technology-14677143

Some of you may be amazed to learn “One in six big IT projects go over-budget by an average of 200%, according to new research. Researchers said that rare but high-impact problems, dubbed “black swans”, were often to blame.”

Personally this supposed black swan Million Dollar Blind Spot seems to scream out for the need for independent outside experts to shine lights that internal resources seem hesitant to express.

Sometimes that overrun can be hidden.  Think about Knight Capital and the loss encountered from their trading snafu.

The last major IT project I led had to choice except to come in on budget. If we could not show saving enough money by the end of the year to pay for the next year, the conversion shut down and we went hungry. Therefore, that IT project which I led for a Fortune 500 pilot came in on budget.

Please tell us your IT project success or horror story.

Think for a minute and consider to what extent you are fooling yourself by managing to a number—instead of consistently making the best decisions for long-term equity growth.

Unfortunately, too many leaders of both public and private companies publicly target specific numerical targets for net income. Once stated, those targets often take on an air of obligation.

So why is this an issue?

Well, in the zeal to consistently reach numerical goals, the organization begins to fall for the temptation to stretch some quarters to reach targets and even to slow down—even hitting the brakes—rather than bringing in too much income above the target number in another quarter.

The result: in their ever increasing focus on attaining short-term numbers, leaders can lose focus on making the best long-term decisions to build value.

Month end, quarter end, and fiscal year end activities can become hostage to this teeter-totter process of getting just enough income—yet not too much income—in the current period. Sort of like Goldilocks tasting the 3 bears’ porridge!

Having been part of year end deal closing crunches, I can assure you that inordinate amounts of time, money, and focus are required to get deals closed in the desired period.

Carried too far, companies then hold ‘fire sales’ to ensure getting the last few sales needed for those target revenues, which results in customers quickly learning to hold off on purchases until the regular desperate overture is made at period end—all to hit the sacred numerical targets. This ends up reducing margins (as well as creating a spiraling impact) as the company continues to try to make upcoming period results.

So, what kind of tone, from the top down, does this obsession with exactly hitting stated numerical results convey throughout the organization?

When you combine this corrosive environment with stress and pressure from the non-economic energies required to reach those targets, ask yourself, “How much does that detract from corporate responsibility to shareholders to consistently build value within risk tolerances and resources available?”

At what point does this corrosive environment create a situation where the organization drinks its own Kool-Aid?  Yes, it begins when the organization starts losing track of real balance sheet and operating information needed to make the best decisions.  The closer to customer facing activities this incorrect data reaches, the more likely it creates operational inefficiencies.

As a result, the company owner, leadership team, or staff will likely run afoul by having to manage wasted energy needed to hit those numbers, rather than building equity and long-term wealth.

What’s your next step to avoid these hidden fiscal dangers?  Below are 3 options to help keep you on track:

1.  Target a numerical range, not an exact amount.

2.  Change or adapt incentive programs to emphasize consistently reaching longer-term goals and objectives.

3.  Change the tone from the top to emphasize doing things right, rather than managing income.

Reflect on the reality this short-term income-oriented behavior runs deeply enough that you require a fresh set of eyes to see where you are. Then, as you begin to eliminate non-economic activities, everyone can come out a winner!