People Strategies: Risk taking depends on comfort zones, analysis

You are attending a conference at a resort in the Ozark mountains. At a welcome party near the pool, you decide to try a dive. As you climb the ladder, you realize that the board is higher than you've ever jumped from, much less dived. There is a long line of people waiting impatiently behind you. Your friends and colleagues, including company managers, are gathered around the pool. They have noticed your hesitation.

You are now at the top of the ladder, ready to step on the board.

Give a group of people this scenario and watch how differently they respond. One person does a swan dive; another faces the embarrassment of climbing back down the ladder; another jumps feet first holding his nose; and another would never have started the climb without checking the height first.

The same situation; many different reactions. What this means in a business context is that employees may react to risk according to their personal comfort instead of considering the best business decision.

Prior to the 1997 breakup of AT&T, many of its employees were trained to take more successful risks. The company's goals were to gain greater marketplace reach and achieve higher customer satisfaction by driving decision-making to lower levels. The closer to the customer a decision could be made the better, and with making decisions comes risk.

After AT&T employees were trained in a business workshop titled "Risk and Empowerment," they were observed thinking through risks rather than avoiding them.

More decisions were made and with greater confidence, and overall, employees were better prepared to execute company strategies.

Two strong components of the workshop included risk comfort zones and analyzing risks.

Risk comfort zones

Risk comfort zones are types of risks that we each react to differently.

Social involving the strengthening or threatening of relationships. Technical employees are frequently seen as taking fewer social risks than those in more people-oriented fields.

Employees uncomfortable with social risks tend to have a tough time managing people.

Physical involving endangerment of the body's well being.

Employees who work in the field sometimes have to visit customer locations that are dangerous. If they are averse to physical risks, they will more likely avoid these customers and dissatisfaction soon follows. Driving long or difficult distances counts as a physical risk.

Financial involving possible monetary loss or gain.

The ability and preparedness of managers and executives to take successful risks when budgeting and forecasting can make or break a company's short-term and long-term future.

Ethical involving values. American chief executive officers have apparently taken quite a few unsuccessful ethical risks. To minimize inappropriate ethical risks, companies should consider their standards carefully and guide the ethics of their employees and any other representatives, including contractors, value-added resellers and distributors.

Intellectualinvolving advocating or challenging ideas.

The most successful salespeople are adept at taking intellectual risks. They must be able to challenge a customer's current situation and convince them to change in their favor.

Emotionalinvolving positive or negative feelings. Ever been on a team? Working with a group of people towards a common goal can result in getting to know each other pretty well.

Team members choose to get close or not, depending on their comfort with emotional risks.

Pause here and think about the types of risks you take at work. Now overlay your comfort with taking risks in that area. Are you naturally compatible with your job? Do you need to learn how to take more successful risks?

Successful risk-taking

To make the sound decisions required for successful risk-taking, AT&T employees learned how to analyze risks by considering the potential losses and benefits of taking a specific risk by examining:

Time Will the loss or benefit be temporary, or will it continue to be a loss or benefit over time?;

Tangibility Is the loss or benefit concrete and easy to define? Or is it more abstract and difficult to describe?; and

Quantity/qualityCan the loss or benefit be measured in terms of amount? Or is it a matter of quality or depth of loss?

Consider the probability of each loss and benefit.

Are the benefits more likely to occur than the losses? Intuition is knowledge gained without conscious rational thought or learning. What does your intuition tell you about this risk action?

The workshop closed with two adages and so will this column: Never risk more than you can afford to lose. Never risk a lot for a little.