First a quote: “The biggest risk a person can take is to do nothing.” – Robert Kiyosaki
Hello and happy Monday.
Several years ago, I had the good fortune of facilitating a “risk management” workshop for a national defense contractor. The curious thing about that workshop were the objectives.
Through interviews, organizational surveys, and their own analysis, the senior leadership team had determined their organization had become too risk adverse. They believed their culture of risk avoidance was causing them to miss opportunities with new products and services. They were being outpaced and outflanked by their competitors.
Please let me repeat; they believed they had become too risk adverse as an organization! While they knew risk management as a cultural value, and in many cases a customer requirement was critical for a myriad of reasons, they also needed to balance risk management with the rewards of speed and a stronger propensity for action.
The primary objective of that leadership development workshop was to help the senior leadership team shape a more risk-tolerant culture. To use a common buzzword, they needed to encourage and reward increased levels of organizational agility.
Agility of all kinds is one of the most sought-after qualities in the business environment today. The world now demands all of us to be more agile. In workshops in which I have been involved in recent months, we have explored the topics of business agility, organizational agility, strategic agility, and leadership agility.
I find it interesting, both as an executive coach and as a workshop facilitator, that leaders tend to be “hard-wired” to be either risk adverse on one end of a continuum or excessively risk tolerant. A person’s tolerance for risk seems to be connected to many determinant factors including their personality, organizational position and responsibilities, education, and experience.
Also curious is how adamant many of us can be about the “correctness” of our perspectives when it comes to data and risk analysis versus a bias for action. When faced with critical decisions, some will argue for more analysis and increased levels of risk mitigation while others will campaign for the “need for speed” and the reduction of what they see as paralysis by analysis.
In these debates, we often miss the fact that both perspectives have merit and tend to be complimentary to each other even though they seem to be at opposite extremes.
“The biggest risk is not taking any risk. In a fast-changing world the only strategy that is guaranteed to fail is not taking risks.” – Mark Zuckerberg
One of the questions that almost always comes up in these discussions is, how much analysis and data collection is required for a given business decision? I have always appreciated former General Colin Powell’s advice on this topic. He called it his 40-70 theory. The concept in brief:
Part I: “Use the formula P = 40 to 70, in which P stands for the probability of success and the numbers indicate the percentage of information acquired.”
Part II: “Once the information is in the 40 to 70 range, go with your gut.”
He then explained, “Don’t take action if the information you possess gives you less than a 40 percent chance of being right, but don’t wait until you have enough facts to be 100 percent sure, because by then it is almost always too late. Today, excessive delays in the name of information-gathering breeds ‘analysis paralysis.’ Procrastination for the sake of reducing risk… increases risk!”
In addition to Colin Powell’s advice, I offer the following thoughts:
- Not all risks are the same. Not every decision or action requires the same level of due diligence. Don’t waste time and resources on actions with minimal downside risks. Go fast when and where possible.
- Assess the consequences of failure and success. Use a balanced approach and determine the range of possible consequences, both positive and negative. Beware of exaggerations on either extreme.
- The cost of perfection is very high. Not every plan or action needs to be perfect. For example: discuss and determine when an 80% solution might be adequate or when getting to a 90% solution merits the extra investment of time and resources.
- Chalk the field of play for your team. Help associates know and understand the parameters of the decisions and actions that are theirs to make, and those where approval is needed.
- Reduce unnecessary fear. Employees who fear the repercussions of failure can easily become paralyzed. When failure happens, encourage learning, not retribution.
- Reward and share success stories. Be sure to share stories of successful risk-taking.
Have you been procrastinating an important decision or action? Maybe now is the time for action.
How will you live, love, or lead, differently, or better, this week?
“Expanding Your Capacity for Success”
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- “Take risks: if you win, you will be happy; if you lose, you will be wise.” – Swami Vivekananda
- “A ship in harbor is safe, but that is not what ships are built for.” John A. Shedd
- “Analysis can tell us what is required, but it cannot make us act.” – Mary Frances Berry
- “Analysis paralysis occurs when you overthink and underwork.” – Orrin Woodward
- “If you are not willing to risk the unusual, you will have to settle for the ordinary.” Jim Rohn
- “The greatest hazard in life is to risk nothing.” – William Arthur Ward
- “You can measure opportunity with the same yardstick that measures the risk involved. They go together.” – Earl Nightingale
- “Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing.” – Denis Waitley
- “The risk of a wrong decision is preferable to the terror of indecision.” – Maimonides
- “The analysis of data will not by itself produce new ideas.” – Edward De Bono
- “You’ve heard the saying, ‘Analysis creates paralysis.’ You can’t be 100 percent sure of anything.” – Mark Burnett