Paradox of Risk


Paradox of Risk

Crisis is a defining moment.

by: Howard M. Guttman

Leadership Excellence

August 01, 2009

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Several news commentators have used the phrase paradox of thrift to describe consumer behavior during the current downturn. Rather than heading to the malls, consumers are running to banks to make deposits. The paradox: by conserving their assets until rainy days pass, they are prolonging the downpour.

There is a parallel phenomenon in the corporate word. Let’s call it the paradox of risk. In today’s slash-and-burn environment, people tend to head for the storm cellar to ride out events. They avoid risk, don’t press the envelope, hesitate to challenge peers or—heaven forbid—the leader. Better to play it safe. Stay in your comfort zone. There’s a pervasive sense of what-am-I-to-do powerlessness in an economic tsunami.

But it’s difficult to build a vibrant, successful organization on fear. The greater the risk aversion, the more likely you’ll remain in the storm cellar, and the more likely there won’t be much left when you emerge.

Powerful leadership is the best antidote to fear. During turmoil, high-performance leaders are “no fear” models. They think of themselves as warriors who ask themselves and those around them, “How do we exercise power over, rather than become victims of, circumstance?”

Case in Point

We are working with a senior leader who assumed the top position over a multi-billion-dollar division of a consumer goods company. The company, including this leader’s division, has been reorganized. He is a true warrior, and in these tough times he is not just paddling through the status quo. He is carefully considering what needs to change in his unit, treating it as a blank slate, and asking himself and members of his team: “If we were to improve operations, what would it look like? What will move the enterprise forward?”

This leader wants to be seen as a player. It is the best way to motivate his people to think innovatively and take risks. By showing up powerfully, he is encouraging his people to look at the status quo, confront the outstanding issues, and take charge.

Take Four Actions

If you want to avoid the paradox of risk, consider taking these four actions:

• Check your “stories.” Are you leading from a safety/fear mentality or from one with a bias for action? If the former, change your story to, “I’m expected to lead and add value. Let’s move forward.”

• Check your team’s “stories.” What preconceived notions are your team members—and those reporting to them—holding onto? If they’re hiding in the storm cellar, coach them to come out. And when they do, they need to see a world of opportunity. What will make them powerful is having a story that says, “I can go beyond these circumstances. I can be the master, not the victim, of the situation.”

• Make it safe to take risks. You don’t want to stroke someone for blowingup the family farm. But, if people take a sensible risk and fail, debriefing is better than berating.

• Create high-performance teams. This is the best way to extricate you from the risk paradox. It’s easier to be rational about taking risks when peers provide one another with feedback, hold one another accountable, and think beyond silos. Open discussion and the free flow of information mitigate risk.

Members of a high-performing team are as pivotal to success as the leader. As the going gets rough, use team members for support. For example, if a fear story creeps back into your think- ing, there’s no need to internalize your angst. Engage a colleague to move beyond it. And, if you can be doing more to help your organization, ask, “As your leader, am I adding maximum value? Where else can I contribute?”

Crisis is a defining moment for leaders. The media drumbeat of economic bad news gets louder. No doubt much of it is true. But you hold the key to the paradox of risk. You can either hunker down or take bold action.

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