riskspeak

riskmanagement

Scandal in fantasy sports underscores the importance of internal process and controls

Details of the scandal engulfing the online fantasy sports company DraftKings should be common knowledge by now – A DraftKings employee admitted to the early release of data not generally available to the public and won US$350,000 on a rival site, FanDuel.

The comparisons to insider trading quickly – and logically – followed.

Questions abound that why a major player in the largely unregulated, multibillion-dollar (US$3.7B annually) fantasy sports industry didn’t have stronger controls in place to restrict access to protected information or ban its employees from participating in fantasy games elsewhere.

Without the structure and processes, the mess was totally predictable and only a matter of time. While DraftKings and FanDuel announced permanent bans on employees participating in fantasy leagues within days of the scandal breaking, the damage had already been done to their brands and reputations:

  • ESPN initially announced it would end DraftKings’ sponsorship and later said it would stop its ads.
  • The New York attorney general’s office announced an investigation
  • A Kentucky man is seeking class-action status that accuses DraftKings and FanDuel of negligence, fraud, and false advertising.

The lesson from this latest corporate blunder should be crystal clear: A well-designed system of internal controls is fundamental to reducing business risks.

Should DraftKings executives be accountable for not anticipating such problems? Considering the industry is largely unregulated, has seen remarkably rapid growth, and handles huge sums of capital on a weekly basis, the answer is an unequivocal “yes.”

While DraftKings is not currently publicly traded, it is a textbook example of how limited or poorly designed internal controls can quickly be overwhelmed by the pressures of rapid business success. One of the criticisms of mandatory internal process and controls regime is that start-ups lack the resources to support them. But without such an investment, organizations are at greater risk of making much costlier mistakes in the future.

It’s all about the old expression, “Pay me now, or pay me later.”

Advertisements

One step toward letting yourself lead: Let go! – Renee Charney, Ph.D. Candidate

One step toward letting yourself lead: Let go!

I asked her a question that encouraged her to step back and reflect a bit:  “What do you want?” She thought about it for a minute and then answered: “I want my team to do what I want them to do!”

Now we really had something to explore.

Many times new leaders (and, at times, seasoned leaders, as well) get securely attached to their own ways of performing a job; their way is the right way because, as their personal experience demonstrates, it’s been those very skills and techniques that got them into the position they now hold; it’s because they did a great job.

But here’s where leaders might get derailed. If they hold fast to what they know best, their expertise, they squander the opportunity to truly lead.

Rooke and Torbert (2005) suggest that great leaders are not differentiated by their personality or management style, but rather their “action logics”—how they react (or act) when they step (or are pulled) out of their comfort zone. People, according to the model, fall into one of seven of these action logics, which include such groupings as achievers, experts, diplomats, strategists, and individualists.When we allow ourselves to step back, reflect, consider others’ perspectives or ways of doing a task, we ourselves grow to be more inclusive and relational in our leadership capacity. And, by doing so, we can also transform how our organization develops across teams by modeling the same behaviors and, by extension, enriching the environment for others to also develop.

Rooke and Torbert (2005) further suggest that most of our working population rests within the action logic stage of “expert”—actually 38% of the working population—someone who may be well-suited as an individual contributor due to his or her technical expertise and, possibly, less suited to be the developmental leader needed to grow others.

Here’s the opportunity.

When leaders are willing to practice new habits of letting go, and allow their team members to try new things (and, perhaps, perform tasks that might not map directly to what they would have done), amazing and wonderful things happen – for both the leader and the team.  In Rooke and Torbert’s (2005) “action logic” language, this behavior demonstrates a later stage of development called the “achiever” stage (30% of the population), which occurs when a leader expands her capacity to focus on team development and team goals, rather than on personal expertise and personal goals. As you might imagine, as adults expand their capacity to let go, step back, and enable others to take more responsibility, make more independent decisions, and deepen their capacity to “lead in place” (Wergin, 2007), this leadership growing pattern becomes more challenging; leaders must be able to enter into the unknown and trust others’ capacity to lead. This leadership development process enables teams the opportunity to step up and take the lead on projects, and to learn from both their successes and mistakes. The leader, in turn, gets to learn new ways of doing tasks and, by extension of the willingness to let go, deepens the loyalty and trust across the team.

My client decided to give it a try to let go and see what would happen. She decided to let herself lead. What she noticed was enlightening!  Her relationships with her team members became richer, their creativity soared, and they began to make decisions independently. She then gained more time to work on her own tasks, thinking and planning strategically (and was able to answer her emails in time to get home to her family at a reasonable hour). She grew as a leader and gained the respect of upper management as her team achieved results that exceeded expectations.

A simple shift of thinking can make all the difference as we commit to growing ourselves as leaders and to growing our teams. Letting go of what we know andletting ourselves lead can be that simple shift. What possibilities to let go might you see within your leadership life?

New Managers Need a Philosophy About How They’ll Lead – Carol A. Walker 

Being promoted to manager is a good sign you’ve been successful to date — however,  the road from this point forward gets trickier to navigate. Your job is no longer just about getting the work done. You’re more likely now to find yourself juggling conflicting demands, delivering difficult messages, and addressing performance problems. While there is no guidebook of straightforward answers to your new challenges, having a clear philosophy can provide a firm foundation from which to.

With respect to your career, a philosophy is simply a cohesive way of thinking about your role. Very few people take the time to establish one. Most managers live in a reactive mode, responding to issues based on gut feelings, past experiences, and examples set by others. The success or failure of this approach is often determined by your temperament (some people are naturally more gifted managers than others) and the caliber of your role models—two factors largely out of your control. Whether you’ve been lucky in these areas or not, having a core philosophy can help guide you through the day-to-day and the job’s tougher moments.

The idea of “servant leadership” is a great place for new managers to start. Robert Greenleaf coined the term 35 years ago, but the concept is still vital and empowering. Granted, “servant” doesn’t sound nearly as powerful as “boss,” but it has the potential to deliver far more of what most of us are really after: influence.  The reason is simple. When you have a servant mentality, it’s not about you. Removing self-interest and personal glory from your motivation on the job is the single most important thing you can do to inspire trust. When you focus first on the success of your organization and your team, it comes through clearly. You ask more questions, listen more carefully, and actively value others’ needs and contributions. The result is more thoughtful, balanced decisions. People who become known for inclusiveness and smart decisions tend to develop influence far more consistently than those who believe they have all the answers.

Servant leadership is most powerful when applied to managing employees. The first step in embracing this mindset is to stop thinking that your employees work for you. Instead, hold onto the idea that they work for the organization and for themselves. Your role as servant is to facilitate the relationship between each employee and the organization. Ask yourself, “What will it take for this employee to be successful in this relationship?” And, “What does the organization need to provide in order to hold up its end of the bargain?” When these questions drive your thinking, you advance both parties’ interests. (The same principles apply to managing products, supply chains, and customer relationships, but we’ll keep our focus on employees here.)

Does servant leadership prohibit telling people what to do or correcting their behavior? On the contrary, it means that you must do these things to facilitate an individual’s success within the organization. The key is that your mind is in “servant mode” when you perform the daily tasks of management.

For instance, assigning work should be a thoughtful process that balances business goals with an individual’s interest, skills, and development needs. Not every routine task has to be so thoroughly considered. But whenever significant assignments are made, putting them into context maximizes their impact. An employee who understands why she has been asked to do something is far more likely to assume true ownership for the assignment. When she owns it, you become more guide than director. You ask how you can support her and how she would like to report progress rather than tell her these things. An employee who believes her boss understands her strengths, values her input, and encourages her growth is likely to stick around for the long-term.

Clearly, the servant approach to assigning tasks requires more thought and preparation than simply dishing them out. It takes time. But remember that you are actually multitasking—you are making sure the work gets done while simultaneously strengthening the individual’s relationship with the organization.

Adopting the servant philosophy should also make it easier to provide corrective feedback. You are merely a facilitator, and facilitators aren’t angry, frustrated, or resentful when they deliver feedback, because it isn’t about them—it’s about the relationship between the two other parties. For that reason, exercising the servant frame of mind makes development conversations feel less personal. You aren’t disappointed in your employee’s actions; you are simply explaining how they get in the way of what he’s trying to accomplish for himself and the organization. When your only agenda is setting someone else up for success, your words tend to be received more openly. True upset happens when either party’s interests are allowed to suffer over time without intervention. It must be the manager’s primary concern to balance those interests.

By definition, developing a reputation takes time. However, when you are consistent with the servant approach, people know what to expect from you and trust ensues. Trust, combined with the smart, inclusive decision-making discussed earlier is a surefire way of gaining influence.

We’ve just scratched the surface of the many challenges that you will confront as a first-time manager. There is simply no way to anticipate them all. But a core servant leadership philosophy will provide critical guideposts to help you manage in real time. Whatever your temperament, a serving mindset will keep you out of the reactive and self-protective patterns that can impede your success. Servant leadership may not appeal to those who are attracted to a more traditional idea of power, but it should be the choice of those interested in influence and results.