Taking Risks Helps Companies Reach Potential

Why is it so difficult to make a good concept like empowerment work? Why are decisions bogged down in analysis paralysis, or worse yet, not made at all?

Why do organizations that understand the need for leadership and a strategy based upon innovation end up following a safe, “me-too” strategy?

Risk taking, or rather a lack of it, is key to answering these questions.

We observe the fear of risk when equipment is purchased from the safe, established name, rather than from the leading-edge but relatively new company that makes a better product.

We see it when managers rigidly apply work rules, rather than managing with heart and seeking to accommodate employees when possible.

Fear of risk shows when decisions are passed upward, instead of being made by the employee with the primary responsibility to decide.

We have high hopes and big dreams for our organizations and ourselves. Yet we will never achieve our potential if we do not push our limits and take risks. In doing that, though, we must recognize that we will make mistakes. We will experience failure.

Unfortunately, too many organizations and individuals avoid the risk taking that is essential to achieve their hopes and dreams. Mistakes that come with learning and trying new things are feared. Employees in these companies do not like to take risks. In fact, by the behaviors and examples set, employees are taught not to take risks.

In fearing mistakes, many organizations have lost their foundation for risk taking. These organizations are missing the grass-roots courage necessary to support change and creativity.

Even companies that have prospered because of an innovative product or a creative marketing strategy can lose their ability to take risks. Their success can create caution. They start playing it safe.

Companies can start playing “not to lose.” We start hearing phrases like, “Let’s not ruin a good thing.”

A key question, then, is how can we strengthen our ability to take risks? Clearly, this process takes time, but here are a few ideas to encourage risk taking in your organization:

* Create an environment that supports risk taking. Mistakes should be viewed as assets for learning rather than as liabilities to avoid.

Employees should be encouraged to discuss, not bury, mistakes. For example, when an employee communicates a problem to a manager, consider thanking the employee for sharing the problem--rather than exhibiting irritation or focusing on blame.

And if employees are to believe that taking risks is important and mistakes are part of the process, senior management must model this behavior, sharing their mistakes and what they have learned. Ultimately, employees must feel secure in taking risks if they are to be taken.

* Inherent in decision making is uncertainty and risk taking. Expect employees to make decisions in matters for which they have assigned responsibilities.

Make a habit of commending employees for making a decision. Avoid second guessing, if not countermanding, an employee’s decision--even if the decision is not the one you would have made. Use care when requesting additional analysis.

When an employee asks for help, provide support and understanding, but do not take back delegated work or make the decision for your employee. Expecting and empowering employees to make decisions builds confidence and bolsters organizational risk taking.

* Create a learning environment with a positive view of change. Encourage discussion and communication.

Share successes and failures. Support coaching relationships between employees and managers and the development of mentors to expand and facilitate learning. Build awareness that the organization is deeply committed to increase risk taking and this is not just another management fad that can be ignored until it goes away. Reinforce the message that learning and change are critical ingredients for success.

* Incorporate risk taking, learning and a positive view of change in human-resources programs. Formal and informal employee performance discussions should include learning as a critical element, linking it to organizational and career objectives. Supplement informal training with formal classes, such as decision making, delegation, leadership, and imprudent versus reasonable risks.

* Understand that some employees will fear the unknown. Others will have difficulty breaking habits and will resist change. These factors must be addressed through formal and individual communication, participation and training, if the organization is to overcome resistance to change.

Managers must also be ready to counsel, if not protect against, those who might undermine risk taking.

Inherent in successful companies is a culture that supports risk taking, an environment where employees feel secure in taking risks and making mistakes. These companies understand that they must take risks if they are to innovate, rapidly recognize and seize opportunities and make adjustments quickly.

Successful companies take risks. Companies that play it safe fall behind or fail.

Let us learn the art of when to take risks.

Let us help each other with support and tolerance, so we can feel secure in taking risks.

Let us have the courage to take risks--and be able to achieve our dreams.

Gary Izumo is a professor in the Moorpark College Business Department and has managed his own consulting practice. He is a former McKinsey & Co. consultant and Practice Leader for the Strategic Management Consulting Practice of Price Waterhouse. You can e-mail him at gizumo@vcccd.cc.ca.us.