Risk-taking versus recklessness

Leaders are realizing that maintaining the status quo is no longer a sustainable strategy. Many are pondering the question of how to create a culture of people who are more willing to take risks. However, as soon as that desire is expressed, it is almost always qualified. What if this new out of control workforce takes down the business? As long as this qualifier exists, there won’t be many risk-taking organizations. Such concerns come from a flawed view risk and people.

Risk is an inherent and necessary force in any business. Without it there would be no innovation, little progress, and few opportunities. Risk is simply the uncertainty involved in doing an activity. Managing risk is understanding the nature of that uncertainty, the range of possible outcomes, and the implications of each outcome. It also involves assessing the degree to which the organization can handle the negative outcomes (and deciding whether or not to take the action). Finally, managing risk requires that steps are taken to buffer or reduce any potentially negative outcome.

Risk is different from recklessness. Recklessness occurs when the potential outcomes are not considered nor are the proper steps taken to minimize exposure to those problems. Recklessness is about doing things without thinking them through.

Leaders’ fears of organizational demise at the hands of a newly minted “risk taking” culture are often fears of a reckless culture. It’s important to understand the difference.

Leaders who believe that their people will act recklessly if given more latitude don’t trust their workforce. It shouldn’t follow naturally that just because someone can do something he or she will do it indiscriminately (and will do it with disregard for the well-being of the organization). One senior executive said that front-line employees shouldn’t be taught how to think critically or innovate. Her concern was that they would stop listening to their supervisors and just question things all day long. She didn’t trust her people’s judgment to know when to apply their new tools.

If you can’t trust your people with new tools, you probably don’t trust them with their current tools either.

Ritz Carlton’s reputation for high quality service is built on a culture that trusts and empowers its people to make decisions (and take risks). Every employee is empowered to use his or her own judgment to spend up to $2,000 on each guest each day (http://www.baldrige.com/criteria_workforce/world-class-employee-orientation/). Given the number of customers who pass through the Ritz Carlton hotels each day this could quickly bankrupt the company. Yet, it has had the opposite effect. Ritz Carlton’s employees use this policy judiciously along with their other customer service tools. It’s a risk, but their training programs, reward systems, and leadership ensure that their people do not act recklessly.

My son is in the process of learning to drive. Allowing anyone who has never driven a car to get behind the wheel is a risk. Although I have some concerns, my first thought isn’t that he is going to drive off a cliff or cause a major pile-up on the highway. We are taking a risk, but we (and he) are not being reckless. We are careful about the situations in which we let him drive. As his skills and confidence improve, we’ll give him more opportunities. Second, we talk with him about good and bad driving habits. Third, we try our best to model appropriate driving behavior. While none of this guarantees that he won’t have an accident, it does minimize the risks associated with his learning to drive. We also know that he is a responsible kid and we trust him. This doesn’t mean he won’t make mistakes. It does give us confidence that we can handle those mistakes and that they will not be due to reckless behavior.

Having a culture of people who take risks is not a bad thing so long as those people are not reckless. As a leader your job is to give your people the knowledge, tools, and motivation to differentiate the two.

If your first thought is that allowing your people to take risks will lead to chaos and destruction, then either you have the wrong people or they have the wrong leader.

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Brad Kolar is the President of Kolar Associates, a leadership consulting and workforce productivity consulting firm. He can be reached at brad.kolar@kolarassociates.com.