Playing safe vs risk-taking - the dilemma for leaders

Risks are necessary to make changes in anything you do. In business there will always be decisions with potential for gain or loss, with uncertainty built in.

While in theory there no point in taking risks that don't pay off, there are hundreds of things that need risk taking for improved results.

Innovation is a big one

Innovation is when you look for new ways of doing things, building things or perhaps new ideas being realised as a product. This needs breaking new ground and so there are risks involved.

People and companies unwilling to take risks will become stagnant with no ability to innovate or change. In the eternally changing world we live in today, innovation is necessary to lead people towards growth. It enables change and opens opportunities that were impossible to see before the change occurred.

Don't get information paralysis

People fear making that initial decision, thinking that it may be wrong. They need to evaluate and attempt to consider all possible options without making a decision. There is always more information available and it is easy to get stuck in information paralysis where you do nothing and just continually analyse the possibilities.

A leader needs to have confidence that an early decision can make things progress faster, even if that decision is wrong or needs to be changed later on.

The risks can still be minimised by having options, alternate paths and a reasonable level of consideration, but the decision needs to be made and a leader must have confidence in it to lead others towards that path as well. It's not possible to have all the information necessary to make decision. To beat time and have the edge, make the decision when 'enough' information is available.

Prudent vs biased risk taking

Comfort zones are everything from an individual's daily routine to their lifestyle, to their work environment and habits or roles in their life and job. All of these things that are repetitive and lasting become comfortable and only the new things in life really make things change over time.

A decision made under risky circumstances can be sounder when the decision maker is circumspect and prudent. But he or she has to know which risks to pursue and which to abandon or modify. In most work-related situations, probabilities are less precise and more subjective. They're coloured by a person's past experience, organisational culture and propensity for risk taking.

It's important to understand one's risk taking patterns, one's perceptions rooted in personal and professional history, and the degree to which cultural injunctions encourage or deter prudent risk taking. To what degree do employees think your organisation supports prudent risk taking? Some companies routinely question each proposal, whether marketing, production, or engineering, by asking, "has the issue of risk been addressed?"

Institutionalise risk taking to grow the business

Some employees succeed every time and when leaders want success. But 100 percent success suggests that the employee doesn't take any risks to improve the business, be creative or continually look to change for better returns.

Leaders want their team members to stick their neck out far enough to take some reasonable risks to grow.

Willingness to take risks also means the willingness to step outside your comfort zone. One who is too afraid to step outside his comfort zone will also be afraid to take the risks that are often needed as a leader. Playing safe takes you nowhere with the level of competition you encounter.

If you want to support risk taking, you will have to raise your tolerance threshold for when your staff or team members may miss the mark. Instead of blaming them, ask them what they learned from their 'failure' and make sure you communicate to them that you realise that falling short of expectations is inevitable from time-to-time. When employees feel vulnerable, that's likely to fuel their risk avoidance.

Some companies institutionalise risk-taking in their performance review process. Such actions assure that risk-taking will be embedded in a company's culture. Most importantly, organisations need, by word and deed, to encourage employees' innovation, reward their creativity and not punish occasional failure.