If you’ve ever wondered whether your business is taking enough risk, you’re in good company. Most organizations struggle with their relationship to risk—when to take it, how much to take, and how to inspire healthy risk-taking in their leaders. Because most bursts of business growth and transformation require some degree of risk-taking, companies lose much of their upside potential when their leaders play it too safe.
Senior leaders often lament the lack of breakthrough ideas and bold initiatives from their leadership teams. The good news is institutional courage can be cultivated by giving leaders a 4-step process for thinking about and taking risk.
Plan For Risk; Leave Room For Failure
A certain amount of risk should be a regular part of your leadership platform, and senior leadership can set the dial so that leaders are motivated, not threatened, by risk.
For example, focus 85 percent of your company’s efforts on activities that support steady growth, and devote the other 15 percent to reaching beyond your comfort zone. Or set leadership goals so that leaders can achieve 85 percent of their goals by doing things well within their expertise and the other 15 percent of their goals reaching for those things that may be just beyond their fingertips. Performance expectations for achieving that 15 percent can include tangible and intangible rewards. When you build courageous acts of risk into leaders’ goals, it has to be okay for them to fail, provided the focus is on “learning.” Incentives should be positive, not punitive, and should include tangible (bonuses, titles, etc.) and intangible (a seat at the innovation table to champion new ideas, empowerment to get the right resources and make independent decisions, etc.) rewards.
Know the Bulldogs, the Devil’s Advocates, and the Big Thinkers
In order to translate a big idea into a bold move, encourage leaders to get out of their silos and engage a broad network of perspectives. Maybe it will take someone with a wide-angle lens on the marketplace, a bulldog who knows every crack and crevice in every wall of the organization, or a devil’s advocate to challenge assumptions. Leaders also benefit from looking outside their organizations for fresh perspective. For example, imagine what a healthcare executive might learn from Zappos about galvanizing a workforce around customer service.
Risk is also managed and driven best by leaders with the know-how to paint a vision, tell a story and then get people excited about that story. As contrary as it might sound, this means you may have to pick between leaders who have the right mindset or the right skills…mindset wins almost every time. You want to identify and reward leaders with the hunger, drive and political capital to pull of those big ideas.
Know When to Step on the Gas—and the Brakes
Many leaders underestimate their power to set the pace of high-risk experiments, assuming external forces are in control. But leaders are not the victims of pace; they are the drivers. As such, they need be familiar with the levers to speed up or slow down. These levers most often come in the form of organizational readiness, the team’s bandwidth, and the results to date. But don’t underestimate the power that comes with listening closely to the marketplace. What are you hearing, what is your data showing you and are you getting the traction you expected? Take two to three months to see a pattern and then give yourself the space to shift direction quickly (weeks not months) when you need to change pace.
Leaders’ ability to change the pace is imperative to managing risk. The real world is happening all around them, and leaders must be willing to re-examine the risks and pivot accordingly.
Don’t Be Afraid to Pull the Plug
It’s important to keep your eye on the ROI. Not just at the beginning, but throughout a project or program. Most often, leadership concerns itself almost soley with the execution of a strategy. Meaningful data certainly helps leaders make clear-eyed decisions through monthly, quarterly, or semi-annual business reviews, and can serve as proof points to stop doing things that aren’t working.
But what’s missing is a look beyond the vital signs to gain a true understanding of the underlying business case. Perhaps the project is healthy, but market indicators suggest it’s the wrong solution at the wrong time. Or the project is in the red, but teams are trying to throw the benefits overboard just to check the boxes and get something done. Either way, a check in on, not just the execution metrics, but the foundational business case of the risk is essential for understanding whether you should move forward or call it a day.
In the end, companies don’t get breakthrough results by playing small ball. By putting structure around risk and learning from the strikeouts as well as the grand slams, your leaders will be the better, and the bolder, for it.
