Leaders encourage risk taking, innovation

A team member goes into his CEO’s office to tell her about a huge mistake. He made a decision that he knew carried risk but he he had thought it through and felt he made the right decision. But, there were some unforeseen implications that cost the company a lot of money — so much money that he thought he would get fired for it.

Once the team member finished explaining the situation to the CEO there was an uncomfortable silence. Finally, she leaned forward in her chair. “Here it comes,” he thought, “I’m getting canned.”

“Well, I doubt that you’ll make that mistake again,” replied the boss.

“You mean you aren’t going to fire me?” replied the team member.

“Why would I fire you? I just spent all this money educating you.”

What an amazing experience this must have been for that team member. He’s never going to forget the mistake he made (and I’m sure he won’t make it again) and he knows that his boss still trusts him and wants him to take risks.

I’ve seen cultures that punish mistakes. They become stifled; they are characterized by witch hunts, blame shifting and cover-ups. If it goes further the culture just shuts down. No one makes mistakes, because no one takes risks. People start to play it by the book so they don’t get punished.

But life (and particularly business) is full of risks; no venture is truly risk-free. So how do you encourage risk-taking that leads to learning, while avoiding recklessness and folly? Here are three ways:

  1. Create “safe places” for risk taking, experimentation
    Where are some places in your organization where you could take more risk without triggering a big catastrophe? Could you put together a small team to work on improving a big problem you are having? Could you do some A/B testing in your marketing? Where are some places where changing small things could produce big results?
  2. Encourage calculated risks, validated learning
    When people want to try something risky they need to have a reason why. What is the outcome they are trying to achieve? Is the reward worth the risk? That’s a calculated risk. Now, is there a smaller risk they could take that would validate some of the assumptions they are making? For instance, if someone wants to change the company home page, could you first test headlines using Google Ad words to make sure the concept is well founded?
  3. Promote risk taking
    The ultimate way to create a more innovative culture is to promote people (by praising them publicly, as well as giving them more responsibility) who are willing to take calculated risks, regardless of the outcome.

Early in my career our company was headed to a trade show and we didn’t have any new products to show off. The sales team felt like our customers would be disappointed that we hadn’t done anything new. I championed a new product idea that we rushed from concept to ready-to-show in just 8 weeks in order to have something new at the show. Everyone in the company loved this new idea! Unfortunately, the customers didn’t. The product was a total flop. We rushed it to market without any market testing (though the marketing folks thought it would be a hit) and the customers hated it. But because we did it in such a short time frame, we really didn’t spend that much money on it. After the show, I was feeling badly about the project, and there was some feeling in the organization that it had been foolish for us to create this product. So when the company President stopped by my desk later that week to thank me for pulling that new product together so quickly, it made a huge difference for me. Just that short discussion really energized me to keep trying new things and taking risks.

That same boss would later tell me, “Making a mistake is OK, if you are making the same mistake more than once we have a problem.” It’s the leader’s job to create an environment where people take calculated risks and in that process they will make some mistakes. But the alternative is a slow, safe decline.

Do you encourage risk taking in your organization? 

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