Tweet

Risk: Making the leap

Written by: Dianne Crampton

Article Overview: As a collaborative team value, the ability to take calculated and well-reasoned risks is a foundation for building an effective organization with the capacity to learn about itself, to expand and grow. When fear is present, however, growth and forward momentum stagnate. This article looks at organizational behaviors and practices that both encourage and discourage an employee's willingness to take appropriate and well-reasoned risk. Risk is the fifth of six values that build collaboration in groups. Without risk being t6olerated at the cultural level, many organizations penalize people for thinking.

Risk: Making the leap

Imagine yourself standing on a platform 75 feet above the ground. There is no safety net and in front of you a trapeze bar swings toward you. It’s time to leap. Do you?

- Or -

Imagine yourself reviewing your organization’s performance indicators. Your company is not doing well. Something needs to change. You have to relinquish some of your control and listen to what your employees and customers are telling you. Can they speak candidly about what is on their minds?

Both scenarios require risk.

Risk is a potential exposure to loss or injury. It creates fear of the unknown.

On the downside, fear of risk results in stagnation. This is because if people are penalized for calculated risk-taking, they become fearful of new ideas. On the upside, risk is the fuel behind change and implementing new ideas.

As a collaborative team value, the ability to take calculated and well-reasoned risks is a foundation for building an effective organization with the capacity to learn about itself, to expand and grow.

Peter Kline and Bernard Saunders, in their book, Ten Steps to a Learning Organization (1993, Great Ocean Publishers, Inc.) write about the paradigm shift that was occurring in the 1990’s and is still occurring today as the Industrial Age gives way to the Information Age. For many organizational leaders, making the shift feels like leaping to catch a trapeze. So many hesitate because they believe they will be left dangling in the air.

For one reason, with this shift a higher percentage of workers are required to make decisions on their own without management intervention. Instead of being passive extensions of production lines, their involvement and commitment is required. Accountability is expected and training in problem solving and decision making skill development is required. Many leaders resist letting go of control because they have not spent time and resources to train their employees. They are still stuck in the Industrial Age mindset, even though statistics show that a well informed leader, operating on their own information in new territory will make the correct decision less than 50% of the time. In today’s marketplace, these are not bankable odds.

For another reason, the new hope for North American businesses is their ability to draw the fullest amount of creativity and innovation from their employees. In order to do that, organizations have to supply their people with the necessary systems and tools. Kline and Saunders insist that progress towards a learning organization has to be an organizational transformation. This requires frame-breaking change where mistakes happen.

Therefore, organizations that fail to look at errors as just another step toward success lose a valuable market edge. They are not as responsive to external change -- such as the declining housing market or market competition -- as more innovative organizations.

As a result, when employees and customers are asked for their opinions, fear and denial often surface. Fear of accountability, of speaking out, of change and denial of those fears lead to paralysis and bureaucracy. Therefore, organizational fear has to be confronted on all levels from the custodian to the CEO. And, fear is directly correlated with the ability to risk.

Therefore, what behaviors damage the collaborative core value risk?

• Retaliation against people who make thoughtful decisions that result in a mistake
• Failure to clarify goals, procedures and expectations
• Criticism
• Fear of failure
• Perfectionism and over-analysis


What behaviors build risk?

• Performance feedback and coaching
• Establishing accountability and commitment at all levels of the organization
• Debriefing completed projects and developing improvement processes
• Recognizing honest mistakes are learning tools

Moderate risk-taking is a learnable skill as long as fear and threat of retaliation are absent. More importantly, risk-taking is an organizational attitude that is modeled throughout the organization, especially at the top.

Without risk being tolerated at the cultural level, many organizations penalize people for thinking. Likewise they fail to put into place the safety net that allows their organizations to make the leap. A good safety net requires structure, nurturing, minimum critical feedback and maximum constructive coaching, and encouragement for well-reasoned risk.

Related Articles
  Smart Women Take the Leap
  Win More Sales Using An Effective Sales Approach that Includes Small Steps and Giant Leaps
  3 Simple Steps To Taking a Quantum Leap in Your Biz
  What does it take to lead?
  Making a Promise to Your Business

Article Tags: collaboration, collaborative team, effective organization, fear, forward momentum, leadership, leap, organizational behaviors, paradigm shift, risk risk, team building, team culture, willingness



Related Forum Posts
Re: What is your biggest challenge? Today? - [quote="mbrand2222":31caod33]When I first decided to become an "entrepreneur" I had a really hard time with the concept that I was no longer going to have a steady paycheck unless I got busy and earned one myself. That sense of security is what I think keeps people from going out on their own. I bet there are tons of great ideas out there but the people who have them are too insecure to take the leap and try to bring them to fruition. I feel for them but I say, "Go ahead and take the leap if you have someone that will help you when you fall. You never know until you try.".[/quote:31caod33] Hi Mary, So how did you eventually force/motivate yourself to take the "leap of faith"?
Re: What is your biggest challenge? Today? - When I first decided to become an "entrepreneur" I had a really hard time with the concept that I was no longer going to have a steady paycheck unless I got busy and earned one myself. That sense of security is what I think keeps people from going out on their own. I bet there are tons of great ideas out there but the people who have them are too insecure to take the leap and try to bring them to fruition. I feel for them but I say, "Go ahead and take the leap if you have someone that will help you when you fall. You never know until you try.".
Making Money in 2011 - Hello forum members! As we draw closer to the new year I thought it would be appropriate to change the title of our forum category "Making Money in 2010" to "Making Money in 2011" - I'm looking forward to some interesting discussions and wish everyone a prosperous New Year!
How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!
Show the Benefits - Offer a free test drive of the Product or Service with a Money Back Guarantee - Take the Risk out. This will help them make the decision but you have to work with them to realize it by explicitly state the benefits they are receiving.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

A Guide to Franchise Financing

How To Become A Member of the Paparazzi

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.