THE PYRAMID OF RISK
Bigger risks are infrequent; organizations that use them as indicators of problems will only react when it's too late.
Instead, by measuring the basis of the pyramid, organizations can spot problems before they become catastrophes.
Thread (1/N)
2/ In the 30s, a researcher by the name of Heinrich studied workplace incidents and noticed that for each death, there are many injuries.
And for each injury, many near misses.
And for each near miss, many unsafe behaviors.
Hence the pyramid shape.
4/ The pyramid of risk is one of the most important concepts that a manager must know.
Here is why.
3/ Question: imagine that over the years, the numbers of yearly deaths in a company is as follows:
1
1
1
0
Can we say that over the years, the company got safer?
No, because the sample is too small.
Maybe it was just good luck, and next year there will be 2 deaths.
4/ Instead, imagine that over the years, the number of unsafe behaviors (eg. % of workers without protective equipment) is as follows:
35%
35%
15%
Can we say that the company got safer?
Probably yes, because the sample is bigger thus more stable.
Hence the following principle:
5/ Trends measured at the bottom of the pyramid are stabler and thus more informative.
Instead, when you measure the top of the pyramid, you don't know if you're measuring performance or luck.
6/ Another principle: if you measure the top of the pyramid to know when it's time to make some changes, you'll guarantee a catastrophe.
If you assume that until there's a death your company is safe, you will get a dead employee.
7/ By the way, this is the mistake our governments committed in February 2020. They measured the top of the pyramid (COVID deaths) to know whether their country had COVID.
As a result, they guaranteed that there would be a lot of COVID deaths. They guaranteed late reaction.
8/ Instead, organizations that measure the bottom of the pyramid get a shot at catching a problem when they still have time to react and prevent a catastrophe.
9/ Of course, great organizations do not only measure the bottom of the pyramid.
They measure the bottom AND the top. The latter is necessary to prevent detachment from reality and to ultimately hold people accountable.
Measuring the bottom is necessary but not sufficient.
10/ You can apply this principle to your daily life too.
(examples below)
11/ If you measure your weight (the top of the pyramid) to know when to exercise, you'll guarantee that you'll get overweight before you react.
If you measure your amount of exercise (the bottom of the pyramid), you will prevent health problems before they occur.
12/ Similarly, as an author, I do not only measure my book sales (the top of the pyramid) but also my writing habits and the quality of my writing (the bottom).
This way, I catch problems faster and I iterate more – making my skills compound much faster.
13/ Conclusion: measuring the bottom of the pyramid will let you discover problems before it's too late and will let you iterate much faster – both of which are great for the long term.
14/ The top of the pyramid = lagging indicators.
The bottom of the pyramid = leading indicators.
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