Some like to define leaders into two categories: those who take risks and those who don’t. The risk takers create an environment that values “out of the box” thinking and creative problem solving. Sure, they make mistakes, but they actively learn from mistakes and apply the lessons learned to new situations.
Those who don’t take risks work in a risk-adverse comfort zone and display and encourage a style of leadership that is conservative. They have a low tolerance for ambiguity, or are known for “analysis-paralysis,” that is, never having enough information to make a decision.
Hmm, it’s not hard to tell which style of leadership is more appealing. Yet, after the economic collapse of 2008, even those risk-takers took a step back and didn’t want to make any choices that jeopardize the company.
If you’re focusing more on what there is to lose instead of gain when taking a risk, you’re missing the bigger picture. Risk taking isn’t just about making a controversial move, but rather taking action to get you and the company closer to its goals.
There was an interesting study by finance professors at the University of Oregon and the University of Notre Dame that linked personal and corporate risk taking. The researchers studied CEO’s who possess private pilot’s licenses, which served as their proxy for personal risk-taking, and found those CEO’s are associated with riskier firms. However, according to their research, it seems these CEO’s tend to be effective leaders.
But it’s not just about leaders coming up with the ideas on their own. Leaders create the strategic initiatives of their organizations. When a good idea is brought forward, do you recognize it, support it, and put it to work? When it comes down to it, effective leaders are bold thinkers and take calculated risks. This quality goes a long way toward motivating your colleagues to accomplish the innovative changes you have envisioned.
Even if you have no desire to get a pilot’s license, you should be conscious of risk taking. Here are some tips on how to do so:
- Take a look at your style to determine how risk averse you are. What is your level of tolerance for ambiguity? What prevents you from taking risks? A personal preference or personality type inventory will give you some clues.
- Garner support from your manager and others. Seek permission to make mistakes. With their help, determine what constitutes acceptable risks. Risk where you have support.
- Take risks in stages; set risk milestones. Break down risks to manage them more effectively. Minimize the costs of failure.
- Challenge your team members to find ways of improving business and work processes. Use various forums (e.g., team meetings, private conversations, performance plans) to stimulate and reinforce the need to make continuous improvements.
- When considering a change, think of it as a risk that needs to be assessed and planned for. As with any risk, assess the risk of doing it and not doing it.