Intelligent risk-taking. How to make good risk decisions.

Whether it’s you as an individual employee, your department or your entire organization, your success is affected by your ability to take risks. In this sense, it’s important to understand the risk-taking profile of your company, your team and yourself. What you’re aiming for is intelligent risk-taking, which means having a process for making good risk decisions. If the risks you take are not intelligent, the consequences can have a negative impact on the trajectory of your career, your team’s project work, and even the entire company’s business success. Poor risk-taking is something you simply can’t afford to do. The trick is to foster a culture of intelligent risk-taking supported by systems that encourage it as well.

intelligent-risk-taking

In the most general sense, “risk-taking” involves exposing yourself to potential negative outcomes in order to take advantage of a perceived opportunity. Risk-taking is essentially acting in the face of uncertainty. One way to classify different risks is by whether they are positive or negative. Positive risks would include things like deciding to start a new relationship, pursuing further education, starting a new business or switching careers. Examples of negative risks would include things like unsafe sex, driving while intoxicated, or using illegal drugs. Notice how the negative risks involve some kind of immediate gratification with a high potential for harm while the positive risks involve a longer-term or delayed gratification.

People who tend to dwell on the worst-case scenario are much less likely to take risks. They may avoid those potential negative outcomes, but they’re also denying themselves potential positive outcomes. This is where the old saying nothing ventured, nothing gained, rings true.

Barriers to Intelligent Risk-Taking

What gets in the way of taking intelligent risks? Here are few of the most common barriers that come up in risk-taking profiles:

  • Fear: Whether it’s the fear of rejection, failure, embarrassment or even just criticism, fear prevents many people from taking intelligent risks. Courage can be thought of as acting in spite of your fear of potential negative outcomes.
  • Perfectionism: Nothing can kill taking an intelligent risk like perfectionism. If you get bogged down in trying to get every single little detail exactly right, opportunities will just sail right by you.
  • Procrastination: This can have a similar effect as perfectionism. It often rears its ugly head in the form of analysis paralysis. Many opportunities that come your way are time sensitive, which means you need to be decisive and act swiftly, but not rashly.
  • Irrationality: There are several different forms of irrationality that get in the way of intelligent risk-taking, but the most common include irrational needs for control, certainty, approval and “playing it safe.”
  • Co-Dependence: Relying on others to take all the risks or solve all your problems is just an avoidance technique that allows you to blame others when things don’t go well. Meanwhile, you’ll never receive the full benefits of intelligent risk-taking.

Do you see how these can apply not just to you as an individual, but to groups of people in the form of teams or even entire organizations? Understanding the anatomy of a risk and the barriers to risk-taking is the beginning of figuring out what systems will help you, your team and your company take intelligent risks that are more likely to get the results you’re looking for. Here are some specific steps that will help you and your company take intelligent risks:

  1. Problem/Outcome Identification: Clearly defining what needs to be addressed is essential, otherwise you may act on something that’s not directly related to the real issue. Then you must think through and describe the intended outcomes you want to see, as well as potential unintended and/or negative outcomes as well as what barriers stand in your way. There should also be a short-term/long-term aspect to this analysis.
  2. Taking Stock of the Past: It’s also important to learn from the past. Although you don’t want to be constrained by past experiences, you want to be aware of patterns (both positive and negative) that might affect what’s happening or being planned in the present.
  3. Action Plan and Timeframe: If you decide the risk is worth taking, come up with a plan to act on it that has a clear timeline for achieving the intended outcomes.
  4. Execute the Plan: Again, this is no time for hesitation, especially if the opportunity is time-sensitive. You’ve decided the risk is worth taking, so get moving.
  5. Evaluate the Results: This final part of the process is essential for learning what worked and what didn’t – valuable lessons that will help you or your company when it embarks on its next intelligent risk.

Nothing great was ever achieved without taking substantial risks. People who have achieved great things have also typically encountered several bumps of failure on the road to success. By understanding intelligent risk-taking and what gets in its way, your company’s workforce will be ready to take the kinds of intelligent risks that get results.

November 20, 2014   Updated :March 23, 2015   intelligent risk-taking, risk, risk-taking, talent management   

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