7 Dangers of Risk Aversion in Leadership You Need to Know
And how to embrace risk for the success of the team
We have all had those in positions of leadership who seemed to spend more time looking up than looking down. A manager who spends more time concerned with his own progression can have a devastating effect on the team he is meant to be leading.
This is made even worse when those in leadership roles lack the ability, knowledge or competence to even deliver their role effectively. It is almost bearable if such people know their stuff and deliver, even though they are self-serving. Not liking someone you work for can be partially mitigated if they are effective.
The real danger comes from a boss who is not only self-interested but also lacking in competence. It is a potently dangerous combination for any organization, and in my experience of 14 years in the British Army, it leads to the pathogenic approach of Risk Aversion. This article will discuss the Risks of Risk Aversion in leadership, and how such an approach can undermine an entire organization.
Have you had a risk-averse boss? If so, I am sure the following 7 negative effects will resonate with you.
What is Risk Aversion?
To my mind, it is the desire to reduce any possible threat to the status quo. It is often the product, as I have stated, of a lack of credibility, confidence, and capability of those who are required to make decisions.
The threat of being ‘found out’ that they are lacking in any of the above areas generates a void of creativity, innovation and, most importantly, effective leadership.
The team and the organization suffer, while they keep the ship making steady, albeit slowing, progress. For those individuals who are career-focused, they often step off the deck just as the impact of their approach starts the inexorable descent of the vessel, while the crew remains trapped on board.
A risk-averse superior is no leader. They are managers of their own interests and stifle progress at the expense of their team. Some of the main impacts risk aversion can have, in my experience, are as follows:
- Innovation. Stick to the rules, play it safe, keep within the policy. A risk-averse approach will stifle innovation and improvement. If people have the freedom to innovate, they can stimulate change, they can develop efficiencies — they can make things better. Preventing the team from tinkering on the margins of how you do business will generate inertia of thought and leave any organization left behind. A leader must give their team the space to innovate — ultimate success is built by a sequence of triumphant failures.
- Development. Most people know how to the job they are employed to do, If they do not know it when they start, in a matter of months they will have the skills to do it as required. With no tolerance of risk, no chances taken on people to step up, to do something slightly beyond their established skillset, there is no chance for them to grow. Choosing the same person or team for the same sort of tasks prevents employees developing, learning, and benefiting the organization more broadly. A leader fails if his team depart only as competent and skilled as when they arrived.
- Empowerment. The British Army uses the concept of ‘Mission Command’ to deliver operational success. This is based around the premise of ensuring that every soldier at every rank understands the objective- the one thing they know is what the desired endstate is. This is the fundamental nature of empowerment. A risk-averse leader will direct what, exactly how, and monitor progress in intricate detail. An effective leader will set the destination, give his team the tools they need, and empower them to get there in the most effective way possible. The cumulative impact of accepting such risk is immensely powerful in terms of generating productivity, maintaining morale, and developing the team. A leader who empowers and nurtures their team will always find success, even when the task fails.
- Trust. A leader who is risk-averse generates culture and ethos of distrust. If subordinates have every action checked, and checked again, enjoying no confidence that they are capable and able professionals, the trust will soon disappear. This becomes endemic in the organization and generates a toxic culture. Trust must be given to be earned and must be reciprocal. A leader who fails to trust his team will never be trusted to lead them.
- Confidence. Risk aversion undermines the confidence of subordinates. Leaders who unreasonably control and scrutinize every action will invariably find something they would have done differently. This generates a ‘death of a thousand cuts’ in the workforce. People lose faith in their own ability to get things right, and once confidence is lost it takes a significant considered investment to rebuild it. A leader who inspires confidence in their people will ensure they surpass all expectations of attainment.
- Morale. A risk-averse culture, with no confidence in the team, no faith in the ability to work effectively, and generating unnecessary scrutiny and fear of reprimand with every action will dampen even the highest spirits. Morale is decimated by the culture risk aversion creates. Any leader can build success in any team, regardless of his ability, if he truly appreciates the importance of morale and invests heavily in its maintenance.
- Productivity. In any team a lack of innovation, development, and trust, with undermined confidence, low morale, and no empowerment, productivity will undoubtedly be affected. For any output based organization, risk aversion will create endemic, institutional problems. Accordingly, an empowered, learning, trusted team will have the confidence and the skill set to innovate. The root cause of productivity issues can invariably be attributed to poor leadership, and risk aversion is a key ingredient.
Risk Aversion in Leadership carries significant risks for any organization. A leap of faith for a leader when dealing with their team is fundamental to ensuring success and generating a culture of mutual support, motivation, efficiency, and improvement.
Taking risks must be considered, calculated, and insight-driven — recklessness is, of course, quite a different matter and should be avoided. However, the boss who has their eye on the next promotion alone with no tolerance for failure is no leader. A leader must have the confidence to take the chances when they appear, assume responsibility for when things fail, actively learn when they do, and share every success with the team.
Written By Now Man
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