“In America, anyone can become president. That’s one of the risks you take.” – Adlai Stevenson
Bob Dole, in presenting his proposed budget cuts, supposedly said, “I’m not betting the farm. I’m betting the country!”
Who wrote this? Dole isn’t betting the country, nor should he. We’re in pretty good shape in these parts, bucko, and you only bet the country if it’s on the verge of collapse. Otherwise the downside risk vastly outweighs the upside gain.
I’m not going to debate budgets, deficits, or tax policy, tempting as that may be. Form your own opinion and vote accordingly. Election-year nonsense sounds pretty similar to management nonsense, though, and management nonsense is my stock and trade.
Ever hear an executive talk about betting the company on a new strategy? I have. I figured it was a bunch of hooey intended to energize the troops, so I ignored it. Betting the company only makes sense for companies in untenable situations.
Any number of executives also say they want to encourage risk-taking among their employees. Encouraging risk is faddish right now, but unless your corporate leadership is sincere in wanting you to bet some of the corporate coffers, you can usually ignore this as just more ManagementSpeak.
How can you tell? Here are some telltale signs:
1. The capital spending approval process. Who approves it? What does it get approved for? And most significantly, does your company impose a fixed annual limit, or just a rough guideline?
Capital, if you’re not familiar with the concept, is money companies invest, as opposed to operating expenses, which are costs of doing business. When companies impose a fixed capital spending limit they’re far more likely to allocate that money to safe, cost-reducing investments than on riskier, revenue-enhancing ones. Companies looking to enhance revenue won’t let a pre-set budget limit get in the way of profits.
Companies that are tight with capital rarely encourage real risk-taking. It’s too … well, risky.
2. Non-managerial employees have no spending authority. Here’s a great message: we want you to take risks, but we don’t trust you with a twenty-five buck spending decision.
One of the great moments of my management career was when I delegated the whole budgeting process to each work team reporting to me. I was free! The scary part: the team was far tighter with a buck than I ever was, and they complained every time I sent out a purchase order without asking them first.
3. People have to “take responsibility for their decisions.” Well of course they should, and yes, people who do dumb things should be help accountable for having done them – if those actions really were dumb, irresponsible, or otherwise wrong-headed.
The phrase in question too-often ends up as a euphemism for fixing blame and punishing failure. Want to eliminate risk in your organization? Find someone who stuck his or her neck out and give them a poor performance appraisal because, with perfect 20/20 hindsight, you can see they made the wrong call.
Word will get around.
4. Promotions go to people who “get along well with others.” You want to promote risk-taking in your organization? Then promote risk-takers, so they have more influence over your organization.
Don’t make the mistake of promoting people just because they take risks. You don’t want gamblers running your company. Promote them for the character and judgment they’ve shown by taking a risk and being right (but don’t punish them for being wrong, unless it’s clear they made an avoidable mistake).
Remember the second rule of management, “Form follows function”? Here’s a perfect example. If you want to encourage risk-taking in your organization (and don’t gripe about your company leadership until you’re sure your own house is in order) make sure your social systems reinforce and reward it.
People will take risks if their expected reward from success greatly exceeds their personal risk from failure. As my grandmother used to say, “Actions speak louder than words.”
How come my grandmother was so much smarter than so many corporate executives?