When it comes to leadership and decision-making, the art of balancing risk and safety is critical. The fundamental principle guiding this practice is to lean toward calculated risk while tempering the desire for safety. Today, we discuss how to do this and why it’s essential.
Leaning Toward Risk
“Leaning toward risk” in the leadership lexicon signifies a proclivity for embracing calculated risks and making decisions that involve a degree of uncertainty. Leaders who adopt this approach are characterized by their willingness to confront challenges, experiment with new strategies, and explore opportunities that may entail unpredictability or potential drawbacks.
The inherent benefit of embracing risk is that it opens the doors to innovation, change, and growth, enhancing an organization’s adaptability in a dynamic business landscape. True leaders understand that risk-taking is often a prerequisite for propelling their organizations forward, seizing competitive advantages, and effectively responding to evolving circumstances.
However, it is essential to clarify that this perspective does not endorse reckless gambling. The emphasis must be on strategic calculation. However, this also underscores the importance of leaders stepping outside their comfort zones to achieve long-term goals and drive progress.
Leaning Toward Safety
Some leaders are lulled into prioritizing stability, avoiding significant disruptions, and opting for strategies and choices that minimize potential negative consequences. These may sound good, but this “lean toward safety” has fundamental issues. While this approach may provide short-term stability, it is also likely to stifle innovation and hinder an organization’s capacity to adapt and grow in the long run.
In essence, this approach underscores a short-term mindset, which may preserve the status quo but can potentially hinder an organization’s prospects for long-term success. Leaders must be vision-focused and outcome-oriented. The dichotomy between leaning toward risk and safety can be framed as a choice between winning a battle or winning the war. Leaders play the long game.
Balancing Risk and Safety in Leadership
Leaders must be astute evaluators of each situation, determining the appropriate level of risk to take based on their organization’s goals, available resources, and risk tolerance. Effective leadership often necessitates the willingness to embrace calculated risks, but it remains a rare attribute among leaders. This is to say that most individuals are naturally inclined towards risk aversion and loss aversion. Hence, true leadership, which leans toward calculated risk, confers a strategic advantage upon those who embody it.
Leaning toward risk enables leaders to foster adaptability, foster innovation, and drive organizational progress. In contrast, a safety-first approach can lead to stagnation. The Adversity Nexus is a concept that underscores this relationship, revealing that risk aversion often leads to adversity while leaning toward risk facilitates the path to overcoming it.
Illustrative Examples
To illustrate the benefits of leaning toward risk and the perils of safety-leaning, consider the following examples:
Innovation and Market Leadership:
- Risk-Leaning Approach: A tech industry leader invests significantly in cutting-edge research and development, despite potential losses, to introduce groundbreaking products.
- Advantages: This approach can lead to market leadership, increased revenue, and a competitive edge.
- Risk of Safety-Leaning: Playing it safe with existing products may lead to stagnation and a loss of market share.
Talent Acquisition and Development:
- Risk-Leaning Approach: A leader promotes a high-potential but unproven employee to a key leadership role.
- Advantages: This decision can motivate employees, bring fresh ideas, and cultivate a loyal and engaged workforce.
- Risk of Safety-Leaning: Opting for a more experienced candidate may maintain the status quo but miss the opportunity for a high-performing, innovative leader.
Mergers and Acquisitions:
- Risk-Leaning Approach: A company merges with a smaller, innovative startup.
- Advantages: Access to new technology, markets, and talent can provide a significant competitive advantage.
- Risk of Safety-Leaning: Avoiding such acquisitions may protect current assets but limit the company’s growth potential.
Market Expansion:
- Risk-Leaning Approach: A retail business enters a new international market despite economic and cultural challenges.
- Advantages: This decision can lead to increased revenue streams and diversification, reducing dependence on a single market.
- Risk of Safety-Leaning: Staying in familiar markets might provide short-term stability but could lead to long-term stagnation.
In each of these examples, leaning toward risk empowers leaders to seize opportunities, maintain competitiveness, and adapt to evolving conditions. Nonetheless, it is essential to acknowledge the accompanying risks, including potential financial losses and employee resistance, among other potential challenges. The answer to the question of what we should do is likely summed up by a quote from Abraham Maslow, “You will either step forward into growth, or you will step back into safety.”
Striking the Right Balance
A balanced approach is critical. Leaders must navigate the fine line between calculated risk-taking and conservative decision-making. Nevertheless, the prevailing wisdom suggests that, based on an organization’s goals, resources, and risk tolerance, leaning toward calculated risk is often the superior course of action.
As stated, while embracing risk introduces an element of uncertainty, it typically paves the path to growth and success in both leadership and business. There are two pivotal questions to consider when facing a risky decision: “What if we do?” and “What if we don’t.” Creativity and strategic thinking are central to answering these questions. However, the answers are sure to guide leaders toward informed choices that drive their organizations forward and enable them to thrive in a dynamic business environment.
Author(s): Dr. David M Robertson
Board Insights | Open Source | ORCID iD
Published Online: 2023 Oct – All Rights Reserved.
APA Citation: Robertson, D. (2023, Oct 27). Balancing Risk and Safety. The Journal of Leaderology and Applied Leadership. https://jala.nlainfo.org/balancing-risk-and-safety/