Leaders must focus on risk, says honorary degree recipient

Eileen Mercier, who has spent much of her 40-year career as a senior female professional director, urged future business leaders and corporate executives to consider risk management and their own reputations as key attributes of leadership.

Mercier, who first crossed the York convocation stage in 1977 to receive an MBA, was the recipient of an honorary doctor of laws degree Friday during the Spring Convocation ceremony for graduands of the Schulich School of Business.

Left: Eileen Mercier

Risk management is a hot topic these days around the boardroom table, said Mercier, especially in light of the recent financial crisis and the British Petroleum (BP) disaster in the Gulf of Mexico. "Both offer examples of boards and management not recognizing or properly quantifying risks, which have later turned out to be either fatal or seriously wounding to their stakeholders," she said.

Key to these risks is human error, she said. "If we have learned anything from the recent financial crisis and the BP disaster in the Gulf of Mexico, it is that models alone are insufficient to make decisions that will save you," she said. "Wise judgment has not been layered on top of these models often enough and we are now suffering the consequences."

She recalled how as a teenager learning to sew, her father would tell her to measure twice and cut once. That lesson, she said, had become a mantra during her career as a director for many of Canada’s largest and most powerful corporations.

"All of my career, I have been trying to help companies avoid the fatal error," said Mercier. "No matter how many training modules you have, courses, demonstrations, manuals, checks and balances, someone will not follow the rules, will not apply common sense and disaster will ensue. The trick is figuring out what the magnitude of the disaster will be and the size of the follow-on effect and minimizing the probability of occurrence.

"Leadership in this context," she said, "is the act of creating and maintaining a culture within an organization that examines every action in light of these probabilities, fosters an environment of no blame for genuine mistakes and near misses, and performs root-cause problem solving to ensure that the same mistake is not repeated. This is not simple!"

Young, old, experienced and inexperienced, no one likes to be told how to do things. "Employees must be involved in the design of these activities and implicated in their maintenance. This principle is as true for financial services as it is for oil drilling or manufacturing. You cannot have risk management without it."

In every examination of the root cause of a corporate problem she had been involved in, said Mercier, human error, or a series of highly improbable small errors that when taken together brought disaster, were at the heart of the problem.

"They are usually borne of a culture that ignored and minimized these small occurrences and did not examine the risk associated with the accumulative effect," she said. "How misguided it is to do these things in the name of profit. As BP now knows to its horror, profit can evaporate in an instant and mean nothing. Leadership of this type can be practised at any level within a corporation and only involves taking the time to think ‘What if we are wrong?’"

The other element of leadership, said Mercier, relates to establishing and maintaining one’s reputation. In the final analysis, it is really all any of us has to leave to our children. "Don’t let anyone else manage it and don’t lend it to any company or individual that you do not trust. There is an old saying about not doing anything or being a part of anything that you would not want to see on the front page of the Toronto Star and that is certainly true," she said.

Often times, when there is a nagging problem or when employees must resort to whistle-blowing, it is too late, said Mercier. She told graduands to never forget the power of doing the right thing and leading by example.

"Choose your company, co-workers and your friends wisely and well, as your reputation must be your first, last and most important consideration," she said.

Mercier has distinguished herself with an exceptional career in business for more than 36 years. Among the first women in Canada to build a career in corporate governance, she has made a significant impact in her field through her work with over 28 corporate, public, academic and charitable organizations, and has displayed an exemplary track record of volunteerism and philanthropy.

Mercier sits on the board of a number of not-for-profit corporations and is a past recipient of the Schulich School of Business Award for Outstanding Public Contribution. An honorary governor of York University, she currently serves on Schulich’s Dean’s Advisory Council. Her support for the University extends beyond the area of governance: she has also championed York’s interdisciplinary mandate through her establishment of the Ernest C. Mercier Lecture in Entrepreneurial Science.

York’s 2010 Spring Convocation ceremonies are streamed live – and then archived – on the Internet. You can view Mercier’s convocation address here.