For several years, I had the happy experience of being lead by a CEO that believed in individual accountability, Mark Bertolini. He believed in each person taking on the goals of the company and helping us drive forward.
One thing he insisted on was reasonable risk-taking, by everyone! But that’s a little tricky when you’re talking about thousands of individuals who all decided what reasonable risk meant. It wasn’t well defined, which is a risk in and of itself. But through context and experiments, I believe I understand what he intended. And, it has become a natural approach that I take every day.
What reasonable risk-taking is NOT
Taking risk to prove you can:
Growing up in Texas, I have seen my share of ways that people prove their grit. The most common seems to be the test of eating a hot pepper. Our family doesn’t go crazy with this, but there have been many hot pepper eating contests to see who is the bravest. This usually occurs with the children of the family, or the grown men. I haven’t quite figured out that connection yet. Either way, it’s all about proving you will do it, even when afraid.
In business (and usually in life), you should never take risk simply to prove that you have the guts to do so.
Ignoring the risks:
To ignore or pretend that a risk does not exist isn’t reasonable. In fact, in most decisions we make, there will be some form of risk. Life is made of risks and you ignore the risks at your own peril.
Making decisions in isolation:
Another badge of honor that some leaders wear is that they can make decisions without input from anyone else. While there are times that such action is required, most times it is more reasonable to get the information and insights that are available before making a decision.
What reasonable risk-taking IS
Including risk mitigation:
When taking a reasonable risk, you go into the decision with your eye wide open. You consider the risks associated with the decision and weight out the potential benefits and risks. But you don’t stop there! For each risk you have identified, you decide two things:
1) If the worst does happen, is it acceptable? If I loose that money, is it okay? If I invest that time and nothing comes of it, then what?
2) Is there anything I can do to avoid the risk? Even if you can’t avoid it, can you lessen it? Having a strong mitigation plan that helps lessen or remove the risk will help in the decision making process and in your success.
Fact find before deciding:
There are some leadership approaches that contradict this statement, but I firmly believe that the best leader is one who will seek out and consider all available facts before making a decision. To decide without looking at available facts would be like buying clothes without looking at the size first. It just isn’t necessary.
Information needed for a decision can come in different forms from spreadsheets filled with data to a hunch built over years of experience. Consider it all before deciding.
This doesn’t have to take months either. It could be a matter of minutes or hours to get the full picture needed for a decision. Just be sure you have looked before you leap.
Aligning with goals:
Reasonable risk taking requires that you consider your goals. If you take this risk and it pays off, will it help achieve the goal?
This might seem like an obvious criteria, but it goes back to having a reason beyond proving yourself as a risk taker. Risks only make sense when the potential payout helps achieve your goals.
Taking action:
Risk taking does require action. Very quickly, consider the available data, weigh out the pros and cons, plot a mitigation strategy and then go for it!
It has been my experience that reasonable risk-taking is very rewarding. Not just for me, but for the company.
How do you decide which risks are worth taking?