โWelcome back, Practicing Leaders. Today, we'll be talking about how do you take risks? Like any trait, taking risks can be amplified to the point where there is a success accelerator or diminished to where it becomes a success inhibitor. So as an example here, if you decide you're not going to take any risks whatsoever, you may get yourself into a situation where you may stifle innovation.
When you think about taking risks, you also have to consider that there are several contributing factors to why somebody might be risk averse or not be willing to take risks. It can be through observation, personal experience, or even cultural or social norms. The one thing that's in common across all of those three things is that they're all learned behaviors.
Today, we'll talk about moving how comfortable someone is with taking risk from averse to tolerant. While risk aversion is a learned behavior and can be changed over time, it does take some patience and a willingness to practice. This is the Practicing Leader Podcast. I'm your host, Parul Bhargava, and let's discuss.
So, what is the difference between being risk averse and risk tolerant? Risk averse behaviors prioritize the preservation of existing resources, stability, or security over potential gains of any type of endeavor, any type of project or anything else. You're basically saying, you know what, all those other things that are possible, that are aspirational, Not worth it to how things are running today.
I want to keep things as a status quo and you push for maintaining the status quo as the primary priority. Well, risk tolerance or risk if something that is risk tolerant refers to making an informed decision based on an understanding of the risk. and their potential outcomes. And what we want to try to do is move folks from being risk averse, meaning afraid to make changes, to risk tolerant, willingness to take changes.
I also mentioned earlier that there are some contributing factors to how this behavior can be learned. It could be through personal experiences, it could be through observation, or it could be through social and cultural norms. Today I'll be focusing primarily on the observational piece and the Personal experience piece.
The culture and social norms I think is too complex a topic to go into. I'm just going to leave that one to the side and just focus on those behavioral characteristics. So when I talk about observation, this talks about did I see somebody else experience a consequence that, you know what, I don't want to feel that.
That's no good. I don't like that. That's an observational piece. And that's how a difference from personal experience work. Were you the recipient of that behavior? Were you the recipient of something, a negative consequence where you're like, oh, damn, they're talking to me. How did this happen? This is where, when we think about those 2 things, it's all about the behavior that the leader exhibits and what they do to be able to shape the culture of the organization and how they consider whether or not a risk is worth taking or not.
It's great to talk about these, you know, great theoretical concepts, but where's the real stuff? I can imagine you asking, what do I do to help my team become less risk averse? Now let's go ahead and jump into that now. Number one, you need to foster a culture of psychological safety. You need an environment where each and every team member feels safe to speak up, share their ideas, and express concerns without a fear of punishment or ridicule.
Those two last things I said there are the most important element of that entire sentence. You need to encourage open dialogue and assure every single team member that mistakes will be treated as learning opportunities rather than as failures. And this ties directly to Maslow's hierarchy of needs.
Number two, as a leader, you need to be able to provide clear objectives and guidelines. Defining clear goals and expectations and boundaries within a team will help them operate more efficiently. If you find yourself in a place where you've got duplication or you've got overlap of responsibilities, there's a high probability for friction and then competition.
And within a team, you do not want competition. That's not something that you necessarily want to have because what you'll end up with is trying to outmaneuver rather than how do you work together. And by providing clear objectives and providing clarity, you're helping mitigate uncertainty as well as providing a framework for how decisions are going to be made.
And making it easier for people to be able to tolerate taking risks and then individuals know what is expected of them. Number three, start small and celebrate progress. If somebody takes a risk, do whatever you can to start recognizing the risk that was taken and celebrate the progress that's been made.
Encourage the team to take the small incremental risks. And that way when there's low stakes at risk here, it becomes easier for people to be able to absorb that and be able to take that in for themselves. This is eventually what we'll do is build confidence as well as momentum in trying to have people become more risk tolerant, number four.
Encourage experimentation and learning. The thing you can do that will help people be more risk tolerant is every time that there's something that happens, focusing on what can be learned from that versus what went wrong with that. This will encourage the team to conduct small scale experiments, gather information, and then learn from the outcomes rather than being like, hey, I want to start this project.
Oh, no, it's not going well. How do I sweep this under the rug? How do I make sure that people don't find out I made this mistake? Taking that kind of approach where people are now trying to hide information goes directly against what you're looking for, is free flow of information between teams that are working together.
Five, of leading by example. You have to demonstrate your willingness to take calculated risks. Also share some of those experiences or learning experiences that you've had. Seeing a leader embrace those risks themselves. We'll help everyone be able to accept them as well. I had some really rough experiences and I'll tell you more about those later.
Number six, provide support and resources. This is where as a leader or your management team can provide guidance, mentorship, or even access to resources that can help a team be able to one, assess risks, but also then develop risk mitigation strategies. How do you be able to figure out how is this going to impact us?
What is the probability of it happening? And what are you going to do about it? And how are you going to mitigate those risks? That's the place we want to get to is where we're looking at risks objectively. So that way we can make a good business decision or a good business outcome at the other end, this kind of support system will help boost confidence for individuals to take risks because they will feel supported as they're doing it.
Next, measure and reward risk taking behavior. I'm not talking about going out there and going skydiving and saying, Hey, I'm going to take the most risky avenue for how something's going to be done. You want to reward informed behavior. And this is where you want to recognize and reward individuals and or teams who demonstrate a willingness to take a calculated risk, regardless of the outcome.
By acknowledging and incentivizing this type of behavior, You simply reinforce the desired cultural shift you are looking for. And finally, continually assess and adapt. You know what? Your strategy of how are you going to deal with this will have to change as you approach each and every different team, because every team is different.
Every organization is different. Learn from both successes and failures and then adapt your approach accordingly. You may find that, you know what, I need to do more experimentation and learning, or I may need to provide even clearer objectives, or they don't need as many resources this time. They're doing a great job with the stuff that they've got.
This is where you can encourage open feedback and adjust your guidance as needed. This way you can ensure a virtuous cycle of learning and improvement. Now how you approach this will differ when there's been a team in place for a while with existing management or one which is new to you. The things you're going to be observing will be identical between the two.
The things you're looking for will be the same in both cases. However, if you've been managing for a team for a while and they're risk averse, it might be time to look inwards and to check your own behavior or lack thereof against the steps we just outlined. And this goes for not just for you, but also for your management, because what will end up happening is you may not be exhibiting the behavior that is causing an issue, but someone else might be, and it may be trickling down.
I'm gonna give some personal examples. Did you or your managers react poorly to bad news being delivered to you? No one likes delivering bad news, no matter who it is. And this is often the bane of managing projects. If the person you're delivering the news to has a big pulsating vein in the middle of their forehead that pops out just before they raise their voice to you, your behavior might be contributing to your team being risk averse.
Do you or your managers make an example of a person who made an error and advertised it to the world to show how they made a mistake and you were the one to find it? The cost of being right in this situation is that you might be contributing to a team being more risk averse. And the last example is.
Do you or your managers ever shoot the messenger and talk about how the individual is to blame? versus an error happening in a business outcome. The cost of being dismissive of someone is that you might be contributing to your team being risk averse. These are all personal experiences that I've, I've gone through throughout my career.
And it's important to note that these are just some examples. There are a ton of behaviors people can exhibit to actually cause the outcome of risk averse behavior. And it's important to note that if others in your leadership. Exhibit these behaviors without consequence. It teaches this behavior is okay.
And in the extreme is required to get ahead in their career. And that's the thing where we run into an issue and where risk or reverse behavior comes into play is that now you've got a vicious cycle versus a virtuous cycle. People are repeating the behaviors over and over again, because they think that's the way they can get ahead because that's what their management does.
If I want to get what they got. I have to do what they do. If I need to repeat those behaviors, I'm going to start repeating those behaviors. And the unfortunate part is even if the behavior is not intentional or managers are not aware, it is irrelevant. The outcome is the outcome. In either case, a new or an existing team.
The outcome of being risk averse is a management journey where you need to be able to have everyone experience failure as a learning experience and where the consequences are measured. I'm talking about making informed decisions, which are reasonable for your business. The thing you also want to avoid is, if you reward firefighters, you get arsonists.
This is where you need to be able to have both metrics and countermetrics to see, are you doing the right things and are the right things happening, and are they happening the right way? Remember, changing risk averse behavior takes time and effort. By providing guidance and support, and being introspective as well as observant of your management team, You have a higher chance of being able to change your team from being risk averse to being risk tolerant.
If you have any questions about this podcast or any other, you can always feel free to go ahead and drop me a line. You can go ahead and give me a call at 206 651 4312 and leave a message. Or alternatively, you can send me an email at questions at ThePracticingLeader. com. I'll go ahead and weave it into whatever conversation we have in the next podcast and make sure that your question gets answered.
This has been the Practicing Leader Podcast. My name is Parul Bhargava and I'll talk to you next week.
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