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AGA Published by the National Institute for Staff and Organizational Development
?n™ With support from the W. K. Kellogg Foundation and Sid W. Richardson Foundation

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HOW TO TAKE LINE MANAGEMENT RISKS: PUSH THEM DOWNWARD

One common feature of training courses on entrepreneurialism, creative management, or innovative prob-
lem solving is an emphasis on risk-taking. It is easy to demonstrate from history that the status quo can be
deadly. We can invoke buggy whip, iron lung, or slide rule manufacturers, and thus argue that the organization
seeking renewal needs to venture into new territory where the outcome can never be certain; that is, it needs to
take risks.

Without risks, the theory goes, there can be no dramatic progress.

Further evidence of the generality of this phenomenon—progress through risks—comes from the research
on innovative people; they are indeed risk-takers, they stand out from the pack in being willing to try something
new, and they are resilient in the face of failure.

Along with this economic and social science evidence, we have the collective wisdom_of well-w: pro-
verbs: | ;

NOUGLAS ‘COLLEGE

ARCHIVES |

Nothing ventured, nothing gained.
Faint heart never won fair lady.
Behold the turtle; he makes progress only when he sticks his neck out.

 

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However, as with so many other good theories, putting a risk-taking approach into practice produces a sig-
nificant quandary, which is: If you take big enough risks often enough, sooner or later you will fail, and the
consequent fallout may be painful, humiliating, disastrous, perhaps even lethal.

Risk-taking can be particularly dangerous within an organization that has a low tolerance for failure, which,
in the perception of most of the people within them, includes most large corporations and government agencies.
If the organization cannot tolerate failure, then taking risks is stupid, especially as virtually all organizations do
tolerate mediocrity. For the short run, mediocrity is much safer than innovativeness. Nothing ventured, noth-
ing lost.

Let me suggest a way of looking at risk-taking that makes sense in a management environment, a strategy
that can produce the benefits of risk-taking without risking a whacking disaster. a

For purposes of illustration, let me use an example from your own financial life. Get a number in your
head that represents the amount of money that you can personally afford to lose on some new imaginative
investment—a hot stock tip,’ or leasing supermarket shopping carts, or some such—where the loss would neither
affect your standard of living by creating a vacuum in your monthly cash flow, nor lower your sense of self-
esteem by making you feel incompetent.

The number might be $50, $500, or $5000, or $50,000, though it has been my experience that even people
who can afford to lose $50,000 feel stupid doing so—which may tell you more about my acquaintances than it
does about the psychology of high rollers.

Anyway, get a dollar amount in your head that you could afford to lose without disastrous results.

Now here is the quandary. That number is so modest relative to your life style that winning that amount
is not going to make much of a positive difference in your life any more than losing it would make a negative
difference. If you can afford to lose it, then winning by doubling it, even tripling or quadrupling it, is not going
to greatly affect your life style or self-esteem either.

The quandary is that winning the risks that you can afford to take is not sufficient to produce much excite-
ment in your life or by extension, in your organization.

However, let’s consider what would happen if you would delegate that amount of risk downward. Let
one of your children, perhaps a teenager interested in the stock market or in old coins, invest that amount of
money in a project while you provide the protective umbrella.

If they win that amount, it will be a really big deal for them, expanding their resources notably and build-
_ ing their self-esteem. With a success or two of that magnitude behind them, they can then ratchet themselves

 

, Community College Leadership Program, The University of Texas at Austin, EDB 348, Austin, Texas 78712