Fast Company

Risky Business?

One of my favorite stories about a desperate person taking a desperate chance and succeeding is when, in 1973, Fred Smith, founder & CEO of FedEx, did not have enough money to make the company payroll. Smith flew to Las Vegas, played blackjack, won $27,000.00, wired it back to the home office and, as they say, the rest is history.

While I’m not advocating anyone bet the farm (or the company) on a roll of the dice in Vegas, I am suggesting now is the time to be taking reasonable risks in the business. Risk is a fundamental part of business and now, while others are still hunkering down, with that deer-in-the-head lights look, hoping things are going to return to “normal” (which ain’t goin’ happen), Managers should be assessing their operation, their company and their industry to determine where the opportunities for growth and value are. And there are opportunities! While a robust and growing economy will support nearly all companies, good and bad, a retrenching economy has no tolerance for a poorly run company. That means acquisitions of material, equipment, people and entire companies are available at a fraction of what they would have cost 12 months ago. Yet many Managers are reluctant to take a risk in this economy because they fail to recognize the difference between Rewarded and Unrewarded Risk:

Ø Rewarded Risk is all about the potential opportunities for creating value for the company. While Rewarded Risk probably has some downside (it is still risk), the potential upside is clearly and objectively much greater.

Ø Unrewarded Risk is all downside. Unrewarded Risk provides little, if any, opportunity to create value, and provides a huge probability it will destroy value.

Once a Manager understands the difference between Rewarded and Unrewarded Risks there is no excuse for not taking Rewarded Risk. In fact, researchers at the University of British Columbia found that Managers who took greater risks are more successful. And yet according to William Gurstelle, author of Absinthe & Flamethrowers, only one third of all Managers are likely to take risks. The other two-thirds are either to timid to take a risk and miss out on opportunities to improve their operation and increase value for the company or are reckless or desperate (i.e. Fred Smith) and take Unrewarded Risks that damage the company.

To become a successful risk taker, Managers need to practice risk taking and develop these traits:

Ø Be a realist who is also an optimistic.

Ø Be realistic in the assessments of success and failure.

Ø Be confident in the ability to deal with potential consequences.

Ø Allow for the possibility of losses but not be overwhelmed by them.

Ø Do not allow the possibility of losses to alter the decision-making process.

Ø Be able to see the Big Picture even in the midst of a crisis.

Ø Be able to make decisions with limited information.

The Bottom Line: In the WorkQuake™ of the Knowledge Economy the measure of good risk taking is whether the value of the company increases as a consequence of a manager’s risk taking. If it does, what are you waiting for?

Question: When was the last time you took a Rewarded Risk or encouraged someone else to do so?

Go to www.trainingeverydayleaders.com for more information about how to be a better Decision Maker/Risk Taker in the Time of the WorkQuake™.

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1 Comments

  • Loraine Antrim

    The messages delivered about managers taking risks are excellent. Well worth the read, but I think the word "risk" itself needs a makeover. We misunderstand its meaning more than understand it. Risk in business has a very different connotation than risk in a social or personal sense.
    --
    Loraine Antrim, Co-founding Partner
    Core Ideas Communication
    "We Create Smartmouths®"