What's your approach to risk-taking as a leader? 🐝

Taking calculated risks means understanding key variables, planning incrementally and anticipating failure.

Taking calculated risks means understanding key variables, planning incrementally and anticipating failure.

How Often? How Serious?

What are the key variables? The simplest answer lives as a framework familiar to anyone who’s had to evaluate risk professionally. Risk is the product of frequency and impact. Intuitively we want to ask ourselves…
 

“How often might something bad happen? And just how bad would it be, if it did?”

Both of these variables can be very difficult to predict (particularly in the absence of historical data). That said, just decomposing our thinking this way can help us ask better questions about the risk of a given plan vs its potential rewards.

The rewards of taking risks are also really important to remember. You need to take risks as a leader because other people will even if you don’t. In that scenario, their risk-taking might pay off and it might not but, when it does, their teams and organizations will outperform yours. In other words, the market selects for competent risk-taking. This is why it’s such an important topic for leaders.

Trap Door Thinking

One key part of risk analysis lies in the understanding of ‘trap door’ decisions. These are decisions that, once made, are very difficult to reverse. Imagine nudging a boulder at the top of a hill. Once it’s halfway down the hill, it would be next-to-impossible to undo the nudge.

In many companies, hiring a manager is a good example of a decision with this kind of risk profile. Even if a ‘bad manager’ is exited after just a few months, the organizational damage can endure for years.

When presented with such situations, risk-fluent leaders find ways to introduce incrementality into their execution plans. They try to work out how to turn one, single, high-impact choice into a series of baby steps. By doing so, the cost of “wishing you hadn’t made choice X” is only as high as the total cost of one small step. You still have energy and time to pivot your thinking.

In fact, the move from unstoppable, single-choice-huge-impact thinking to something more nimble revolutionized software development in the 90s. Very few software teams use waterfall development any more. Instead they moved to systems like scrum, involving 2-week ‘sprints’. The community even celebrated the ability to pivot fast using this approach by calling it ‘agile development’.

In Pre-moriam

One of the culture norms that came out of the agile movement was the acceptance that most things fail (even if just a little bit). With failure being the norm, tools were created to anticipate failure as well as better-learn from it. Retrospectives (‘retros’) became a standard tool of high-performing teams who wanted to learn continuously and improve.

Since retros so often involved looking at things that killed productivity or delivery, they also became known as post-mortems. As soon as you have a ‘post-’ anything, somebody’s going to ask whether there’d be any value to a ‘pre-’ version of that thing.

A pre-mortem is a process that provides space at the beginning of a project to address its weak spots. Unlike a more formal risk analysis, the pre-mortem asks team members to draw on their expertise and intuition when it is most needed and potentially most valuable.

A pre-mortem should be done at the start of the project, with all essential team members present, and after the goals and plan have been laid out and understood. The practice begins with a basic inquiry: "What might go wrong?".

When we’ve driven teams to think laterally and creatively on this topic, we’ve found it helpful to use more evocative questions like…

“Imagine 1 month from now that this work has collapsed into a total fiasco - what went wrong?”

Presented with this challenge, the team reflects on their collective experience to identify any potential hazards (or elephants in the room). It's an opportunity to air concerns that might otherwise go unheard until it's too late. In a small group, a simple conversation may be sufficient. In a bigger group, you might use a silent brainstorm and some affinity mapping to pre-structure the conversation.

A pre-mortem is deceptively straightforward to perform. The forward momentum and energy at the start of a project are typically at their peak; these circumstances don’t naturally lend themselves to discussing failure but a team who makes space for a pre-mortem is a team that set themselves up for success.

If you'd like to explore your relationship and approach to risk taking as a leader, please grab a coaching introduction call.