Risk is a part of living…it is also the precursor to reward. Like turtles and giraffes, we can’t get anywhere without sticking our necks out. But as I learned during my Navy career, the inevitability of risk doesn’t sanction recklessness. Learning to take the right risks in the right way is paramount to survival and success.
I have had the good fortune of working with over a 1,000 companies over the last 10 years. Each engagement provides me with a living laboratory to observe and learn why some companies succeed and why some fail. In good times or bad, the primary driver of a company’s success depends upon having the right people willing to take the right risks. The worse the economy, the better the people must be, especially at the top.
In tough economic times, organizations and individuals tend to become more risk-averse. There are many things to be concerned about; for organizations, it is primarily the uncertainty caused by global economic markets, and for individuals, it is their ability to remain gainfully employed. Both of these concerns feed a mindset of caution and status quo. Yet, it is exactly this mindset that may perpetuate the downward spiral. Tough times require nerves of steel and a vision to see beyond the current valley. It is the time when winners start climbing the next mountain of success.
Good leaders always calculate the odds and minimize the risk by having backups in place. Above all, they never take a risk that doesn’t offer a worthwhile reward. How do you calculate your odds of succeeding in down times? By gaining a thorough understanding of the risk you’re running and an equally thorough understanding of what you’ll do if something goes wrong.
Arguably, the biggest risk of all may be decisions by your leaders that create a climate in which your people are afraid to take any risks. That happened in the military in the early 1990s, when a budget-balancing plan started by the first President Bush and carried out by President Clinton reduced the armed forces from 2.1 million men and women to just 1.2 million on active duty.
Shrinking the services was painful. There were selection boards to figure out who had to be retired early and how not to let people re-enlist. In practice, it meant that any officer who had even one small blemish on his record was chosen for early retirement. That led to a risk-averse atmosphere. People didn’t want to rock the boat and risk ending their careers. Rather than take any initiatives, they would lie low in the weeds and let other people get black marks.
It was a terrible signal to send. We stopped trying new things, and as a result, we lost our cutting edge in preparing for future threats. We paid for that, I’m convinced, on 9/11, and then we had to play catch-up.
I see this happening again in many organizations. I know with such uncertainty out there, it’s easier to focus on cutting costs. But the truly great organizations and leaders not only find opportunities, they do so in tough times. Be that kind of leader.
