I was thinking about risk heatmaps the other day and how organizations use different labels. Some stick with the tried and true: High, Medium, and Low. Oftentimes an interesting label is added: severe, important, serious, OMG, Armageddon, and then the highest, PCI. Intrinsically, these labels do little to communicate the relative risk. Research has indicated that not only do different people perceive the same label differently, this also holds true when they are told the underlying scale to which the label correlates. What struck me the other night, however, was something less academic: how similar this was to drink cup sizes.

I won’t do it justice here, but countless people have ranted about how there’s no such thing as a medium anymore and everything starts as a large and goes from there. I can’t tell you how many times I’ve been “corrected” while ordering a medium that it’s now called the large and so on. Seriously, I just want the middle option; I don’t care what it’s called. Starbucks has its own labels that eschew the common parlance, which has spawned its own backlash (I still won’t say “Tall” even if my life depended on it). Nevertheless, why do these labels even matter?

Well, to start, it expedites the ordering process. If we had to sit and wonder whether we wanted 32 or 18 ounces, we’d have a whole other imbroglio to rant over. Labels also enable those who control the labeling to manipulate the understanding of the labels. Perhaps you may recall several years ago the “helpful” starburst signs on the menu board informing you that the super-sized drink was the “best value”? Tactics like this make it easier for us to substitute our good decision making for the comforting messaging of the labels.

It’s because of this that I think the use of scales in the heatmap is so critical. Douglas Hubbard has outlined many of the reasons why an ordinal scale fails to communicate well, and I won’t recount them here, but ordinal scales do help facilitate some decision making under certain circumstances. The obligation of the heatmap-maker is to ensure that the appropriate interval or ratio scale is included along with the label. Something that says “Medium risk” and corresponds to “1 to 10 times a year” on the x-axis and “$100K to $1M” on the y-axis communicates the situation far better than just “Grande” I mean “Venti”…I mean Medium (Shoot!). Of course, once it’s well known throughout your organization “how much” and “how often” we are talking about when discussing a risk scenario, then the label “Medium” helps to facilitate executive decision making and allows risk issues to be compared and contrasted.

If you’ve ever been disappointed after ordering the “large” soda and being handed a cup that is clearly a “medium” you will understand the importance of the reference scales. What you and the restaurant thought was clearly being communicated (size of the drink cup) was based upon assumptions that the two parties did not share. Since there was no forum for communicating these expectations ahead of time, it left one party (you) dissatisfied with your purchase. Of course, the other lesson here is that if you spend time changing the scales (and do so frequently) then it makes it difficult for the organization to follow along because they still think “large” is the biggest cup you have. This will happen when you have staff moving between organizations (either intra- or inter-) where one person used to know what “severe” meant, but now that means Venti…I mean Medium (Shoot!). Adjusting to this change can only happen after the scales are communicated and used in reference to the labels. If the new staff cannot adapt to the new use of these labels, it means they are managing risk from their own calculus and not that of the organization’s, and that can be a dangerous thing. Remember, the only risk tolerance that matters is the organization for which you are managing risk. Your own thoughts on the matter should be filtered through that reality.

Well, that was exhausting. I’m off to find some “extra” strength aspirin…or maybe just some “regular” strength…