Friday, January 30, 2009

How Leaders Take Risks - Part I

Couragej0438847 As mentioned in yesterday's blog, Professor Kathleen Reardon, from the University of Southern California, interviewed more than 200 leaders who acted courageously. She discovered that the heart of courage in organizations is risk calculation. Professor Reardon's studies show that individuals who become extraordinary business leaders make bold moves that have been thought through carefully. They take calculated risks by implementing a six-step decision-making methodology described below. This blog will share specific examples on the first three steps.

1. Clarify Goals.

2. Evaluate Goal Importance.

3. Build Support.

4. Weigh the Risks and Benefits.

5. Select the Right Time.

6. Develop Contingency Plans.

1. Clarify Goals. When you're considering a risky situation, the first questions you should ask yourself are: What do I hope to achieve realistically? What will success in this scenario look like? How will it help others and me?

I was recently coaching an executive who was distraught that one of his colleagues, Greg might be fired. He felt that the CEO was acting on false information. My coaching client was considering talking to the CEO about the situation. When I asked him what success would look like and how it would serve others, he began to realize he needed to hear from his colleagues and do a little soul searching before he decided what to do. In a follow-up conversation, he told me that his colleagues had information about Greg’s performance that he did not have. Furthermore, he revealed that a little soul searching confirmed that rushing in to rescue others had been a pattern all his life, probably due to alcoholism in his family. He realized that although “saving” others was perceived as altruistic, he knew that it was at times, self-serving and at times, dysfunctional.

2. Evaluate Goal Importance. Do you know people who always speak up in opposition, regardless of the issue? They are the Chicken Little's of the world, running around telling us that the sky is falling all the time. These individuals do not consider the value of the goal. How important is it? If nothing is done or said, who might be hurt?

Professor Reardon points out that it is often helpful to assign importance at three levels. On the lowest level are issues that you don't feel strongly about, although you may have a preference regarding the outcome. On the second level are issues that you feel strongly about, but don't involve core values. The third level she calls “spear-in-the-sand” issues because you feel strongly about them and they involve values worth fighting for.

3. Build Support. Hollywood loves to embrace the individual hero. Spiderman, Superman, Ironman, and Wonderwoman are all here to save the day. But in organizations, successful risk-taking requires support. When I was conducting research at UCSD medical center in the early 80s, we used a method for calculating blood volumes of the heart that was "validated" at UCSD by one of our cardiology colleagues. One night in the laboratory, I observed great variation in blood volumes from the same patient. Over the next several weeks, I confirmed my initial observations -- that technique for calculating blood volumes, "validated" by researchers at UCSD, did not work. Before presenting this data to the director of our lab, I shared the information with a few of my trusted colleagues in one-on-one confidential conversations. I asked their opinion regarding the data, our laboratory techniques, and biological variability. By the end of these conversations, it was clear to me that the technique did not work and that these colleagues supported my conclusions. I then took the data to my boss, who then arranged for us to present the data in front of the entire cardiology department. The presentation went well because I minimized my risk - the risk of contradicting our own cardiologists - by building support. We then published our findings that refuted the earlier work. (2) What type of support do you need before you take risks?

These are the first three keys commanding leaders take when calculating risks. Which ones do you need to work on?

Keep eXpanding,


1. Kathleen Reardon; Courage as a Skill, Harvard Business Review, January 2007, 58 -- 64.

2. David G. Jensen and colleagues; Individual Variability of Radionuclide Ventriculograpy In Stable Coronary Artery Disease Patients over One Year, Cardiology, 71, 1984, 255 -- 265.

1 comment:

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