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The Complete Guide to Creating A Culture of Risk-Taking

Culture of Risk
Company Culture

The Complete Guide to Creating A Culture of Risk-Taking

Evolution has taught humans to be risk averse. Consider a paleolithic gatherer passing a cave entrance while looking for food. She may have been curious, but something told her the cave could be dangerous, so she moved on. Later that day, a hunter came upon the cave and his curiosity got the best of him. He walked right into the den of a saber-toothed cat. Which one passed down their genes? Not the hunter — he became Ice Age Meow Mix©.

With those risk-averse genes, today we are cautious first. At work people are reluctant to take risks because they are afraid to fail, which might undermine their reputation and credibility. They fear losing their promotability or even their job. People need encouragement and motivation to take risks. Savvy leaders know that great achievements are the result of a spirit of adventure and willingness to take risks.

Culture of Risk: Promoting a “Boldly Go” Culture

To help inspire your own crew to emulate the crew of the USS Enterprise, you need a culture that promotes innovation and risk taking. This starts at the top. Leaders need to embrace a mindset that failure is not only acceptable, but also can be valuable. In The Other F Word, two professors from Berkeley’s Haas School of business argue that failure is, in fact, a strategic resource (Danner & Coopersmith, 2015). It can help you learn what you don’t know, and help you break out of limiting beliefs.

Willingness to challenge the status quo should become embedded in your culture and embraced by everyone from senior leadership to hourly associates. One way to get the message out is to create challenges as contests, with rewards for both the biggest successes and the most valuable learnings — usually from failure. The challenge may be to find a way to cut costs, improve customer service, or come up with a new product feature.

Part of your message should be that innovations should be well considered, with thought given to both the potential upside and downside. Encourage people to share their ideas with peers and managers, to get multiple points of view.

Culture of Risk: It’s Okay to Fail

According to Smithsonian magazine, Thomas Edison said, “I have not failed 10,000 times — I’ve successfully found 10,000 ways that will not work” (Hendry, 2013). It is essential to let people know that reasonable risks are welcome and will be supported. While a failure may be frustrating to you, avoid the temptation to blame or punish. In fact, you should celebrate mistakes and failures, just as you celebrate successes. When you celebrate mistakes, in a meeting or other communication, be sure to include what the company learned from them.

As my coauthor Kim Shepherd and I argue in Remote Work: Redesign Processes, Practices and Strategies to Engage a Remote Workforce, it’s important to distinguish between mistakes and errors. Honest mistakes happen despite someone’s best intentions and judgment, and often lead to valuable insights. Errors, however, show careless practices that typically violate correct procedures and have few positive consequences.

Affordable Loss

None of this is to say that your culture should promote a free-for-all approach. When someone has an idea and you give them the go-ahead, set limits around cost, time spent, length of project and other parameters. In fact, some people prefer a little guidance, and once they have that, their creativity can flourish. To the extent possible, encourage people to take risks that are small, inexpensive and quick, rather than big, expensive risks that get drawn out.

Risks should serve your company’s strategic vision. Keep in mind that it may take a while for a new venture to generate a return, so consider the peripheral benefits as well, such as how an ongoing venture supports your culture of risk-taking. It may also enhance your brand and your company’s reputation with customers and partners.

Don’t Insist on Perfection

Harriet Braiker, PhD, author of The Disease to Please and other books, argues that “Striving for excellence motivates you; striving for perfection is demoralizing” (2002). Encourage team members who are innovating to have an ongoing conversation about when good is good enough. You don’t want an innovation project to get bogged down as people make small tweaks. Once the innovation is implemented, you can make tweaks “in production.”

Support Through Thick and Thin

It’s one thing to say that you encourage risk-taking, but another to respond positively when failures happen. Employees may never watch a leader so closely as they do when that leader responds to failure. Don’t play the blame game and have your people’s backs when it comes to reporting the failure. Be sure to explore the what, why and how of the failure so you and your company can learn from it. Share the learnings and recognize those who were willing to innovate and take risks, despite failing.

A great example of a positive response to a mistake comes from Zappos, the online retailer. One of the company’s websites, 6pm.com, made a pricing mistake that cost the company $1.6 million (Engleman, 2010). Their pricing engine accidentally capped all prices at $49.95, although the site offers items that normally cost much more — in some cases, thousands of dollars more. However, Zappos leadership effectively shrugged their shoulders, said, “Oops — our bad,” and took the loss. The upside was a tremendous boost in company culture and customer relations.

Innovation is essential for any company to remain competitive, to grow and to thrive, and innovation is forged in a crucible of risk. Follow these suggestions to let your team know that calculated risks are encouraged, and that failure can be as valuable as success. A culture of risk-taking and adventure will help you build loyalty among your employees and attract strong talent.

References

Braiker, H (2002) The disease to please: Curing the people-pleasing syndrome. McGraw Hill, New York

Danner, J & Coopersmith, M (2015) The other “F” word: How Smart leaders, teams, and entrepreneurs put failure to work. Wiley, New York.

Engleman, E. (2010) Pricing mistake costs Zappos more than $1.6 million. Puget Sound Business Journal, 23 May. Available from: https://www.bizjournals.com/seattle/blog/techflash/2010/05/pricing_mistake_costs_zappos_more_than_16_million.html [last accessed April 22, 2022 Hendry, E R (2013) 7 epic fails brought to you by the genius mind of Thomas Edison. Available from: https://www.smithsonianmag.com/innovation/7-epic-fails-brought-to-you-by-the-genius-mind-of-thomas-edison-180947786 [last accessed April 21, 2022]

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