Leadership and the myth of easy risk

The myth of easy risk in leadership

A great leader takes risks! If you don't take risks, you don't do great things! Be instinctive and don't get lost in detailed analyzes! Here is the example of three sentences that are the expression of the highest intellectual dishonesty perpetrated by self-styled leadership experts, who, when you have lost your job, or you have made someone else lose it, you will not know where. go and find.

Risk management is a key activity of the leader and represents a delicate and complex step, which deserves attention and study. Other than instinct. While it is true that a leader must leave his comfort zone to achieve new things and progress, it is also true that instinct cannot be the main reference for innovating. Taking risks is not a business that concerns only the leader, it also concerns the few or many people who work with him / her. It is a question of responsibility and fairness. Never be satisfied with evaluating the risk only according to the perception you have of it, it is a weak and dangerous indicator.

When in doubt, involve your team and discuss, remember that the sum of multiple perspectives brings you closer and closer to reality. I do not deny that intuition (which is something other than instinct) is an extraordinary and precious resource, but I believe that it must be used very carefully and sparingly. It is completely useless to mention the great insights that have electrocuted some entrepreneur in a garage, most of us will never have that opportunity and, anyway, this article is not for them. But, just to give you a sense of proportion, do you want an example of which industries are born from an intuition developed in a garage? Here they are:

1. Google
2. Apple
3. Microsoft
4. Amazon
5. Disney
6. Hewlett-Packard

They were not leaders in a company, but brave and brilliant entrepreneurs, who risked theirs to try something absolutely new and unprecedented. Today, if a leader with an idea developed in a garage shows up in one of these companies, without any planning and risk assessment, he would be dismissed badly. Trust me. But let's go back to the rational management of risk. Risk is the dimension within which certain decisions are made, and is directly related to the probability of damage being incurred. The most common equation that represents it is the following: danger * probability * consequence = risk. The individual items must be studied and defined by the team. For example, as regards the definition of danger or threat, it is good to list the main areas of business interest and define the type of danger by assigning a value from 0 to 5, depending on the initiative to be undertaken. Below I propose a list of the most relevant areas for a company:

1. Strategy
2. Compliance
3. Finance
4. Operation
5. Reputation

After assigning a value to the hazards divided by area, a percentage value is applied to the probability that the threat will materialize. If you do not have a statistical reference, which is very likely, you will debate with your team for the definition of a shared percentage. Then, the consequences are listed and given a score from 0 to 5. The final result will be the best possible estimate of the risk the company is undergoing. The exercise increases the level of trust in proportion and direct to the number of people involved in the process. It is obvious that not all decisions require an analytical risk assessment, nor do I intend to rule out the importance of intuition. But when in doubt, it is advisable to start with your team an analysis of the risk associated with a specific decision.

As Kahneman teaches, fast thinking (intuition) and slow thinking (rationality) depend on the amount of information. Therefore, it is always better to choose the level of analysis of a risk according to the importance of the decision, the time available and the amount of information available. In all cases in which you do not have the right amount of information and are pressed by the shortage of time available, you can legitimately resort to intuition, but only if you are forced to make a decision quickly. My advice is not to elect intuition as a privileged tool. In conclusion, mine is not an invitation to stand still or to give up one's role as leader.

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About the author

Giuseppe Ando is a C-Level & Executive Coach - Associate Partner at the acclaimed Marshall Goldsmith Stakeholder Centered Coaching. With a career that presides at the crux of the Venn diagram of Passion, Skills, and Experience, Giuseppe’s reputation as top executive coach has spanned decades. Among his many accolades, he is also recognized for his unique ability to understand and inspire those he coaches to excel professionally and personally while also delivering their organization’s desired results.