As a thought leader, author, educator, and change leadership practitioner, I write a weekly article that benefits leaders who want to improve their organizations significantly.
We are nearing the end of a list of eighteen essential elements I have found necessary to lead an organization through a thriving cultural transformation. We began with the need to instill accountability and shared the importance of a heavy plan-light do approach last week. Our element of attention this week is the need to take calculated risks where the results can be organizational competitiveness, growth, and innovation.
Between calculated risk and reckless decision-making lies the dividing line between profit and loss. - Charles Duhigg
Duhigg shares a critical distinction regarding risk-taking. A company will not be in business long if it takes a reckless approach to risk. Instead, an organization must define the relevant factors and determine the likelihood of success through diligent homework. Developing a culture of intelligent risk-taking includes establishing boundaries that guide the company toward favorable outcomes that collectively enhance organizational capabilities. While there will be occasional failures, better framed as learning opportunities, the collective impact of an intelligent approach to risk can lead the firm to higher levels of profitability.
In our ever more competitive business environment, the organizations that fail to take their performance to the next level risk becoming obsolete. Leaders who embrace and develop a robust culture of calculated risk-taking across the workforce increase the potential positive impact of the company. These benefits include:
• Adaptation – Embracing a mindset that embraces calculated risk-taking allows the company to quickly pivot in the ever-changing business environment that becomes increasingly difficult to navigate.
• Competitive Advantage – Organizations that enhance their ability to efficiently and effectively assess a process that results in intelligent risk will have an advantage over the other companies in their industry sector.
• Growth – Companies that develop a culture that can attain significant breakthroughs in new product or service offerings can lead to the addition of new customers and the retention of its existing consumer base.
• Learning and Development – The most significant professional growth occurs when employees push the envelope of their knowledge and skills beyond their existing performance.
• Innovation – Organizational breakthroughs and improvements occur when there is a proactive willingness to experiment with processes, products, and strategies, allowing the company to outpace its competitors.
The leadership of successful companies understands the benefits of taking calculated risks to improve their organizations continually.
When leaders understand the value of becoming an organization that enhances its ability to take calculated risks, they should assess the current situation. Aspects of an ability to embrace and succeed at taking intelligent risks include:
• Communication – The leaders must continually share a clear and transparent message regarding what it means to take intelligent risks, a defined process to assess them, the expectations of their employees, and the individual and organizational benefits that can result.
• Continuous Learning – There must be a commitment of resources that follows a Plan-Do-Check-Act (PDCA) process that provides ongoing organizational knowledge and capability improvement.
• Cultivate a Risk-Tolerant Culture – If the organization has been risk-averse, there will be a need to foster a culture where employees feel comfortable taking risks through creativity, open communication, and sharing new ideas.
• Empower Decision-Makers – They will need to establish individual and team authority regarding the level and type of risk they can take at the various layers of the hierarchy and across the organization.
• Legal and Ethical Considerations – The organization must develop the guidelines members of the workforce can use to ensure that the decisions to take risks align with the company's mission, vision, and values.
• Reward and Recognition – Individuals and teams that embrace and succeed at intelligent risk-taking should receive meaningful intrinsic and extrinsic benefits.
• Risk Assessment – The existence of data and expert input can increase the likelihood of success through robust risk assessment processes to analyze the potential risks and assess their potential impact.
• Risk Mitigation – Strategies should be put in place to mitigate adverse outcomes and include contingency plans and risk management techniques to be put in place to reduce the impact of failures when they do occur.
• Set Clear Goals and Metrics – There is a need to set up objective measures that measure the overall impact of risk-taking initiatives and respond as necessary when issues or concerns arise.
• Small Steps and Pilots – A prudent approach is to begin with small-scale initiatives related to intelligent risk through lesser-risk programs, learn from the experiences, and increase the scale as overall success becomes the norm.
Visionary leaders will adopt a proactive and well-executed approach to integrating higher levels of calculated risk-taking into their organizations. Doing so can be essential to their organization's success while minimizing potential negative consequences.
Taking calculated risks can lead to high-level success in organizational competitiveness, growth, and innovation. The leadership of successful companies understands the benefits of taking calculated risks to improve their organizations continually. Visionary leaders will adopt a proactive and well-executed approach to integrating higher levels of calculated risk-taking into their organizations.
Leaders interested in leading an initiative to develop a more robust culture of calculated risk should do a current state assessment. The above-bulleted items can receive a score from 0-10, with zero being no evidence and ten being robust implementation or adoption. Then, use the results to develop a plan to increase the organization's ability to take intelligent risks.
I am fortunate to have mentors who instilled a calculated mindset and willingness to embrace them as a learning opportunity. It has given me more significant personal success than I would otherwise have reached without their support.
Next week's blog will shift to the essential element of listening effectively to the voice of the customer, which is integral to becoming a humanist manufacturing organization.
To learn more about our work or read more blog posts, visit emmanuelstratgicsustainability.com.
I encourage you to read my book Humanist Manufacturing: A Humanitarian Approach to Excellence in High-Impact Plant Operations. The paperback and eBook versions are now available at Amazon and many other booksellers. You can also view the Humanist Manufacturing Book Launch to gain additional insight into the Humanist Manufacturing framework.
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