This article provides a way to think about difficult problems and alternative strategies for coping with them. It has implications for enterprise risk management, operational risk management, and auditing and the distinctions among the three.

1. ENTERPRISE RISK MANAGEMENT
Tame Problems & Wicked Messes:
Choosing Between Management and
Leadership Solutions
by David Hancock
T
his article provides a way to think about difficult problems
and alternative strategies for coping with them. It has
implications for enterprise risk management, operational
risk management, and auditing and the distinctions among the three.
T
o feel brave in this new successful outcomes in the future. mulate a solution, and finally
world of enterprise risk Managers will need to be on a first- implement the solution (see Figure
management, bankers name basis with such concepts as 1). Do not mistake tame for
need the correct methods to pro- change management; high-performance simple—some of these problems are
duce the right solutions. This arti- teams; motivation, emotional, behav- extremely difficult to solve. Over
cle spans nearly 35 years of con- ioral attributes; and the learning the years IT systems have carried
cepts, first by introducing tame organization. out the processes faster and faster,
and wicked problems, which pre- until today’s systems achieve
miered in 1973, and also messes, Problem Solving results in real time. However, there
introduced in 1970. The author In the past, financial institu- are still times when we fail and fail
then uses a matrix approach to a tions have tended to solve prob- pretty dramatically.
fourth type of problem—the lems through analytical methods, Because of this we have
wicked mess—introduced in 1996. breaking things down into parts, recognised that things have
Audit and risk management fixing components, and assessing become more complicated. We are
functions won’t be able to meet the the probability of known increasingly faced with problems
requirements for enterprise risk sequences of failures leading to an of organised complexity, clusters
management (ERM) as demanded accident or loss. In the new world, of interrelated or interdependent
by the draft COSO1 report without this type of problem is labelled as a problems, or systems of problems.
some changes to their mind set. tame problem and tame problems Problems that cannot be solved in
While this may not come as a sur- tend to enjoy consensus. relative isolation from one another
prise to most, we might be curious Everybody pretty much agrees to form messes. We sort out messes
to know why. It’s because current why something needs to be done through systems methods and
systems can’t deliver an under- and the right way to go about doing modelling, focusing on processes,
standing of socio/economic and it. To solve a tame problem, we and interdisciplinary approaches.
political complexities, which will develop systems that gather all the Rather than simply breaking
increasingly be key to delivering data, we then analyze that data, for- things down into parts and fixing
© 2004 by RMA. David Hancock is executive director of the Halcrow Group Ltd. UK-based Halcrow provides planning, design, and
management services for infrastructure development worldwide. With interests in transportation, water, and property, the company has
commissions in over 70 countries from a network of more than 60 offices.
38 The RMA Journal July/August 2004

2. Wicked Problems & Messes
Figure 1 problems are termed as “diver-
Traditional Wisdom for Solving Complex Problems. The "Waterfall" gent” as opposed to “convergent”
problems. A convergent problem
Gather data
promises a solution. The more it
is studied, the more various
Analyze data answers sooner or later converge.
Problem
Tame problems are convergent by
Solution
Formulate solution definition. Messes are convergent
if we agree on what overlaps, on
appropriate strategies, and on the
Implement solution
kind of climate we wish to main-
0 20 40 60 80 100 tain. A divergent problem does
Time Since Beginning of Session not promise a solution. The more
it is studied, the more people of
integrity and intellect inevitably
components, we examine patterns This may be because we don’t
come to different solutions. As
of interactions among parts. We have enough time, because it is
with messes, there are very real
organize ourselves to sort out physically impossible, or because
dangers in solving the wrong
messes through such things as we don’t know how. The greater
problem. Mistaking or misrepre-
cross-functional groups, redundancy, the degree of interactive complex-
senting wicked problems for
and learning organizations. Simply ity, the less our capacity to pre-
messes, let alone tame problems,
building more freeways doesn’t vent surprises; and the greater the
almost inevitably leads one to
solve vehicle congestion. A pri- degree of coupling, the less our
conclude that those with different
mary danger in mistaking a mess capacity to cure surprises.
answers lack integrity, intellect, or
for a tame problem is that it Therefore, the greater the degree
both. The great danger is that
becomes even more difficult to of interactive complexity and cou-
such conclusions undermine trust,
deal with the evolving mess. pling, the greater the likelihood
and trust is a fundamental strate-
However, problems persist that a system is an accident wait-
gy for collectively coping with
because managers continue to ing to happen—what he terms a
wicked problems. If wicked prob-
believe that there are such things normal accident. In such systems,
lems are becoming more common
as unilateral causation and inde- “operator errors” merely serve as
in our modern era, and there is
pendent and dependent variables. triggers. Strategies and risk man-
compelling evidence they are, we
Charles Perrow in his book agement techniques for dealing
face a strategic choice. We can
Normal Accidents elaborates on with messes are therefore quite
continue to misrepresent them as
some of the problems inherent in different from those appropriate
messes or tame problems, hoping
messes. First, interactive complexity for tame problems. Thus, increas-
they will not degenerate. On the
is the measure of the degree to ing our capacity to prevent unan-
other hand, we can acknowledge
which we cannot foresee all the ticipated interactions among com -
wicked problems for what they
ways things can go wrong. This ponents entails simplifying sys-
are and try to stabilize them as
may be because there are just too tems; increasing our capacity to
conditions. This is not going to be
many interactions to keep track cure them entails decoupling
easy, because wicked problems
of. More likely, it is because our major components (e.g., build in
offend our sense of logic and our
various theories are simply not up longer times to respond).
common beliefs even more than
to the task of modelling socio- All this is fairly straightfor-
messes. In our modern times, it is
technical interactions. Second, ward and fine as long as most of
pretty hard to accept that a prob-
coupling is a measure of the degree us share an overriding social theo-
lem has no solution. This seems
to which we cannot stop an ry or overriding social ethic. If we
tantamount to giving up. Given
impending disaster once it starts. don’t, we face wickedness. Wicked
that many people care about or
39

3. Wicked Problems & Messes
have something at stake in how munication and trust among differ- with wicked messes? The strate-
the problem is resolved, the ent camps is not enough; people gic issue is whether we choose to
process of solving a wicked prob- still are likely to focus on symp- allow wicked messes to degener-
lem is fundamentally social, and toms rather than deeper causes ate into chaos, whether we choose
solving a wicked problem is fun- and to pursue low-leverage to stabilize them as conditions, or,
damentally a social process. changes. Conversely, even if deep- more radically, whether we choose
Much work has been done on er understanding of the systemic to try to dissolve them together.
behavioral complexity and dynamic forces at play is achieved, such From the risk perspective,
complexity . What confuses real understanding will be viewed with real listening and dialogue are
decision making is that the two suspicion by the different, compet- essential to mapping the bound-
coexist and interact in what we ing interests and mental models. aries and learning to recognize the
call wicked messes (see Figure 2). patterns of those interactions,
The fact that behavioral prob- Solutions which are the crux of sorting out
lems cannot be solved in isolation The main thrust to the reso- wicked messes. Real listening is
from one another makes it even lution of these types of problems also essential in establishing trust,
more difficult to deal with people’s is stakeholder participation and and trust is the sine qua non of
differing assumptions and values: “satisfying.” This is because effectively working together. More
people who think differently must wicked problem resolving pro- significant, mistrust is the dark
learn about and create a common duces no single optimum solution heart of wicked messes. The
reality—one that none of them ini- but has many alternative satisfac- strategic principles for establishing
tially understands adequately. tory solutions. Therefore the pro- trust is grounded in the realization
Systems of interlinked problems duction of that solution must be that our commonalities are far
interact with the misunderstand- “boxed” or “bounded” either by more significant and profound
ings, divergent assumptions, and time or financial constraints to than our differences. In sum, these
polarized beliefs of different avoid it going on ad infinitum. strategic principles are essential to
groups of people. Improving com- So how do we propose to deal sorting out wicked messes togeth-
er. More significant, in our increas-
Figure 2 ingly complex and interdependent
times, these principles guide us to
Matrix showing the Four Types of Problems
live in ways that help us dissolve
what is problematic.
Wicked Wicked Mess What does this mean for the
world of finance and internal
High audit? Let us first look at the con-
cepts of management and leader-
ship. It is key to draw a distinc-
Behavioral tion between management and
Complexity
leadership. For our purposes, let’s
Tame Mess use John Kotter’s definitions. 2
Here management is about coping
Low with complexity, and its practices
and procedures are largely a
response to the emergence of
large organisations and complex
projects. Leadership, by contrast, is
Low High about coping with change. These
different functions—coping with
Dynamic Systems Complexity
complexity and coping with
40 The RMA Journal July/August 2004

4. Wicked Problems & Messes
Figure 3 that there appears to
be an increased
Boston Matrix with Suggested Leadership and Management Skills Overlaid
reliance on the use of
systems emphasizing
Wicked Wicked Mess an interconnectivity of
Solution events. As we move
High predominantly farther toward the top
through of the matrix, there
leadership seems to be an
Behavioral increased reliance on
Complexity
social-science type
Tame Mess solutions, where peo-
Solution ple do not necessarily
Low predominantly behave as “soft sys-
through tems”; rather, their
management behavior is dominated
by belief systems
based on their emo-
Low High tions and feelings. If
we then apply our two
Dynamic Systems Complexity types of risk assess-
ment (quantitative and
change—shape the characteristic based—needs and emotions— qualitative) and overlay
activities of management and requiring more influence than them on the matrix we produce
leadership. Each system of action power to ensure their resolution. the diagram as shown in Figure 4.
involves deciding what needs to Trust and relationships must be We can observe that for the
be done, creating networks of developed, indicating a high bottom sectors, where scientific-
people and relationships that can degree of behavioral complexity. based solutions are dominant,
accomplish an agenda, and then This allows us to segment the quantitative risk data is reliable in
trying to ensure that those people matrix into two, where leadership the assessment of risk. Our
actually do the job. But each qualities dominate solutions in assumption is that there is an opti-
accomplishes these tasks in differ- the upper half and management mum solution and therefore an
ent ways. Therefore, how can we qualities the lower (see Figure 3). underlying number that we will
choose when we require the skills How can this model help us converge toward. Thus, by gener-
of leadership to dominate against with our understanding of risk ating more and more data, we will
those of management on a project and risk management? In the past, move closer to the underlying
to obtain a successful outcome? I there has been a considerable dif- “truth.” However, as we move up
propose that we use the matrix. If ference of opinion between the toward the behavioral sector, there
we look at the activities required use and legitimacy at various is no underlying single solution.
in more detail to see the attributes times of qualitative and quantita- The solution will now depend on
exhibited by the two principals, it tive risk assessment. If we accept the feelings and ideologies of the
may indicate the type of problems the preceding classification of people concerned in the assess-
best solved by those skills. types of problem as shown by ment. Here by the use of quanti-
Let’s revisit Figure 2 and look Figure 2 and then analyze how tative data to inform facilitated
at the characteristics required to risk analysis may be applied to opportunity—risk workshops,
address some of these issues. help us with each type of prob- qualitative results will ‘reveal’
Those required to achieve change lem, we can see that as we move those underlying beleifs which
are predominantly behaviorally farther to the right of the matrix will lead to satisfactory solutions.
41

5. Wicked Problems & Messes
Figure 4 To the observant
reader it is apparent
Boston Matrix with Suggested Risk Assessment Processes Overlaid
that as we move to the
upper right quadrant,
Wicked Wicked Mess
some of the skills for
Solution is solving problems in this
High social/political/ area fall outside the
ethical/moral/ realms of what we
Increasing reliance on behavioral
qualitative assessment presently consider as
Behavioral
Complexity traditional risk manage-
ment. Rather, these
Tame Mess issues are resolved
Solution using a variety of tech-
Low is niques such as scenario
scientific planning, political fore-
Increasing reliance on casting, and environ-
quantitative assessment mental scanning—tools
more commonly used
Low High by the sociologists and
Dynamic Systems Complexity economists. If we are to
become successful in
the move to ERM,
Here therefore it is critically this matrix to aid in choice of the
important to involve all stakehold- risk management techniques asso- then we need to understand the
ers who can influence the success ciated with the type of problem. limitations of our capabilities or
embrace these new skills to help
of the project and to attempt to The key to the solution of
limit your boundaries to the case wicked messes lies in the people us succeed.
in hand as otherwise the group and the use of discussion and We fail more often because we solve the
will grow beyond the limits of forums to explore these problems wrong problem than because we get the
acheiving a workable solution. and understand the limitations of wrong solution to the right problem.
The most difficult part of this the solution. Accurate reporting of —Russell Ackoff, 1974 Ë
role for both auditors and risk “near misses” and the use of facili-
Contact Hancock by e-mail at
managers will be recognising the tated workshops to identify root HancockD@halcrow.com.
type of problem they are facing. causes can aid this process. How-
To help the reader to achieve this ever, there must be an open culture Notes
I have used the classification of with an attitude of “no blame.” It 1 COSO is the Committee of Sponsoring
Tame, Messes, Wicked Problems also requires the pursuit of designs Organizations of the Treadway Commission. The
National Commission was jointly sponsored by
and Wicked Messes. This has that limit system coupling and com- the five major financial professional associations
proved useful in ensuring the use plexity where possible. in the U.S.—the American Accounting
Association, the American Institute of Certified
of the correct tools to deal with The move to enterprise risk Public Accountants, the Financial Executives
problems based on their level of management will require future Institute, the Institute of Internal Auditors, and the
National Association of Accountants (now the
system and behavioural complexi- audit and risk managers to live Institute of Management Accountants). Currently,
ty in social sciences. We have also “comfortably” in all areas of the the COSO Chairman is John Flaherty, chairman,
retired vice president, and general auditor for
used the matrix to understand the matrix and to become familiar PepsiCo Inc.
www.coso.org—
dominant behaviours required to with and apply the tools and tech-
deliver outcomes when using niques as dictated by their govern- 2 John P. Kotter, considered an expert on leader-
ship at the Harvard Business School, wrote
managers or leaders and finally I ing laws. Successful problem solv- Leading Change, which outlined an actionable,
have attempted to overlay the ing means finding the right solu- eight-step process for implementing successful
transformations.
concepts of risk management on tion to the right problem.
42 The RMA Journal July/August 2004