Everyone is Interested in Intelligent Risk-Taking

What’s Going On: Everyone is Interested in Intelligent Risk-Taking!

by Nelson Soken, Ph.D

Why Now?

As 2018 draws to a close, I would like to share some thoughts on a trend that has emerged this year… an uptick in interest and demand for our Intelligent Risk-Taking and Creating a Culture for Risk and Innovation programs! Why the sudden interest? Organizations are recognizing that keeping competitive requires actively managing multiple options in parallel with improving speed and agility. The exponential rate at which data is generated, global economic uncertainty related to trade and tariffs, and how quickly decisions must be acted upon in an ever-changing global environment contribute to this complexity.

So how does one deal with this complexity, bordering on chaos? How does an organization create an environment where decisions can be made quickly to capitalize on opportunities (gains) while minimizing potential downside risks, analysis paralysis, and/or making decisions without adequate analysis? One option that companies are seeking as a remedy is more “intelligent” decision-making and risk-taking, and thus, a growing interest in these two programs. We focus on the required mindsets and skill-sets for intelligent risk-taking. These include:

An understanding of what intelligent risk-taking is and isn’t (e.g., intelligent risks, under-intelligent risks, and “the one that got away”—risks that should have been taken but were not)
Clarity about the organizational culture and context for risk-taking, including its operating principles, norms, values, and key risk arenas
Insight into one’s own approach and attitude toward risk-taking and that of others (both the rational and emotional aspects)
Management of an 8-step process for planning and implementing an intelligent risk through active management of the key factors, implications, consequences of different solution paths toward a desired future state (Envision, Choose, Assess, Adjust, Prepare, Commit, Act, Evaluate/Learn)
The use of processes and tools to manage those risks that are not easily quantifiable, as well as those that can be measured
Commitment to build and maintain organizational support for intelligent risk-taking.

Often, when working with organizations, we provide an analysis of an Organizational Risk Assessment Survey that provides a snapshot of how employees perceive their culture around risk-taking. It is a 9-item online questionnaire that takes about 5 minutes to complete. The survey breaks down organizational culture into specific components so that teams can create a plan of action to address specific areas that hinder or discourage intelligent risk-taking and amplify areas that encourage intelligent risk-taking.

Here are a few patterns we have seen recently emerge across organizations from different industries (healthcare, high technology, consumer), and across functions (finance, R&D, marketing, supply chain, product planning) that have used the Organizational Risk Assessment Survey and where we have conducted Intelligent Risk-Taking and Creating a Culture for Risk and Innovation programs in the past year.

Insights, Observations, and Trends

Response rate to the survey itself serves as an indicator of perception of risk in the organization. We have noticed an interesting phenomenon in which difficulty in getting participants to fill out the survey prior to a workshop tends to be associated with higher negative ratings indicating that the organization discourages intelligent risk-taking. Exploring lack of engagement is often a good first step to understanding the current organizational climate.
Perception of self and organizational culture prior to taking the survey and attending a workshop evolved after learning and experiencing the content. Participants remarked that they believed prior to the workshop that risk-taking was an overarching concept whereby an individual or organization was either a risk-taker or risk-averse when making decisions. After the interactive workshop, they understood risk-taking to be multi-faceted and that their understanding of the different components will make them more effective going forward. In addition, some individuals modified their perspective of themselves and the organization after more fully understanding what constitutes intelligent risk-taking. One leader stated that prior to the experience he perceived himself and the organization he led as willing to take risks, but he changed his mind after gaining some new insights from the workshop and worked to prepare a plan for behaving differently. Creating a culture for intelligent risk-taking and innovation requires a deeper appreciation and empathy for how each of us perceives risk-taking. This can lead to behaviors that result in better stakeholder engagement and outcomes.
Clearly articulating a vision that incorporates intelligent risk-taking and innovation, and reinforces its importance to the organization’s future success is critical for success. Leaders need to define in concrete terms what an intelligent risk is versus an under-intelligent risk and/or a risk that should have been taken. Ongoing communication and having leaders as role models promoting, supporting, and coaching those around them is a key differentiator. Survey results suggest that when people are not clear on what the vision is and/or lack concrete expectations, there tends to be a high percentage of ratings that are neither strongly positive nor strongly negative but rather middle-of-the road or passive ratings, implying that people are not clear on the organization’s strategy for risk and innovation. This provides an opportunity for leaders to drive organizational transformation by focusing on creating a vision and demonstrating it through leadership practices. Leaders need to change the lens by which risks are seen from one of fear and failure, to one of potential opportunities and rewards.
In general, there are consistent themes across many organizations in terms of certain organizational factors being perceived as barriers, rather than promoters, to intelligent risk-taking. These factors include:
- Organizational Boundaries and Structures: Organizations, particularly larger global, multi-business unit enterprises, struggle with communicating, coordinating, and collaborating across business units and functions due to organizational boundaries or “silos”. A common participant comment is, “ it would be helpful if there were more cross-functional interactions when it comes to risk-taking.” We often don’t spend enough time looking at risk-taking situations from a more holistic perspective. Thus, it could be the case that a risk has been assessed and optimized for one function without consideration of its impact on other functions. Encouraging collaboration and working cross-functionally is critical to reducing insular behavior.
- Development Process: In many organizations, participants felt that the development process did not promote risk-taking. There is a lack of understanding of the process or confusion about how to have an idea considered. In other cases, it was that the process focused on mitigating risk without considering the potential upside of taking an intelligent risk. One of the challenges of taking an intelligent risk in the development process is to clearly understand where there is flexibility for managing risks in the “3-legged stool” of time, quality, and cost. What options are available to achieve goals and what area should take priority? What factors can be adjusted in terms of time, quality, and cost? Where can the organization experiment with different options while setting specific loss limits of time, money, and resources? By asking these questions, organizations can try out different options and learn while limiting their losses.
- Rewards/Recognition/Support: A consistent response is that organizations do not promote risk-taking in terms of rewards, recognitions, and support. When assessing incentives, a common challenge is there are only rewards for positive outcomes. But unfortunately, intelligent risk-taking is defined as taking an action when the outcome is unknown and uncertain. The goal of intelligent risk-taking is to identify the key assumptions, implications, and consequences of the risk-taking action and actively manage it. Organizations need to do a better job of assessing what gets rewarded and to institute incentives for employees to take intelligent risks when the outcome is unclear and to reward the behavior of situationally assessing the risky action and executing on it regardless of the outcome. In fact, explicitly and visibly rewarding actions where the decision was appropriate at the time and with the available information, even though the desired outcome was not achieved, should be considered.

In closing, organizational challenges and opportunities will continue to present themselves in 2019. The speed at which the world moves and data is created will accelerate. For companies to thrive, they must learn to take intelligent risks, be more comfortable with the fact that at the time decisions are made they will not have all the data they would like; they should be ready to pivot in a different direction as they learn from their actions. The world is uncertain and unpredictable. Many of us look at this uncertainty and view it with fear. However, entrepreneurs, innovators, and those who succeed look at the uncertainty and see endless opportunities and upsides that can create new futures. The Intelligent Risk-Taking and Creating a Culture for Risk and Innovation programs provide organizations the mindsets, skill-sets, and a structured process that enables them to be bold in an “intelligent” way and to meet the challenges presented by an ever-changing global business landscape. No longer is standing still an option. Often, the worse action is inaction. Consider the quote from John F. Kennedy: “There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.” For additional information and/or if you have questions, please contact me at nsoken@barnesconti.com.

Nelson Soken, Ph.D, is CEO of N.H. Soken Consulting and Chief Innovation Strategist at Barnes & Conti

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