One of the central components of business success has, for many decades, been the effective management of risk. Another way of putting that is that organisations don’t really like uncertainty. They tend to like plans. And many, rather than managing risk, will avoid it. However, increased uncertainty – including that which comes from change – is part of our current reality, and it’s more likely to ramp up than to go away.
Leading into versus through uncertainty
I’m deliberately using leading into, rather than through, uncertainty because there is an implied conscious decision to step towards the uncertainty, rather than avoiding it or simply waiting to react. Leaders that are able to embrace a level of uncertainty are more likely to be able to maximise the opportunity that comes from stealing a march on the competition.
“We’re not making decisions for fear of making them.”
This is a quote from a recent conversation that I had with a member of a global executive team that sums up the challenge. Leading through uncertainty is not, in my view, mutually exclusive to leading into it, and it requires an ability to inspire trust through empathy and modelling shared values. However, what I want to share is a handy tool to help leaders and their teams to think about stepping into and embracing uncertainty.
How we experience risk
It’s entirely normal for us to experience anxiety in risky situations, and for that anxiety to limit our behaviour. Psychologist Michael Apter, in his book Danger: Our Quest for Excitement, describes how people can do things, like dangerous sports, and enjoy them when there are clear risks involved. Although not based on or particularly intended for to describe leadership, I’ve tried this out a few times and people seem to be able to easily get their heads around it. The Four Zones of Risk Experience
In the detachment zone we are simply passive bystanders, avoiding risk. Perhaps we don’t acknowledge the risk of doing nothing, or are in denial and “punt the decision into the long grass” (we’ve all heard some variation of that before).
In the safety zone, without concern for risk, we feel safe (no surprise there!). This may be because we have safety measures in place, through controls, or it may be that there is psychological safety – for example as a board we have explored every scenario and everyone has bought into the way forward. The safer we feel, the closer we can get to the line.
To step into the danger zone we need to feel confident. We can acknowledge the risks involved but are confident (collectively or individually) that we can handle them. It may be that we have clear mitigations or contingency plans in place; we’ve developed the right stills or capabilities.
In the trauma zone, quite simply, we’ve gone too far. The risks outweigh our ability to manage them and actual harm, for example human, financial or reputational, will happen (sooner or later). In other words, while we may be able to temporarily step into the trauma zone, it represents an unsustainable position. This could be caused by a failure to acknowledge or properly asses the risks, or inaccurate assessment of our ability to manage them (false confidence).
Why should this matter to leaders?
As there is a fundamental trade-off between risk and reward in business, by implication the greatest rewards are to be gained by confidently stepping up to the dangerous edge, but stopping short of the trauma zone. Also by implication, the ability to operate in the dangerous zone is likely to lead to an increase in capability, and therefore some movement, in actual performance terms, of the dangerous edge.
How do I move through the zones?
As a leader, therefore, there are a number of critical questions that you can ask of yourself and your team, to be able to lead into uncertainty:
- What difficult or risky decisions am I (are we) avoiding?
- What is stopping me (or us) from really engaging with the issue? Is that rational?
- What are the risks of not engaging with the issue appropriately?
- What steps can we take, or safety measures (psychological or other), can we put in place to allow us to move forward?
Once we have begun to move forward, what can we do to build:
- Our ability to monitor risks (requiring information, but also openness and honesty)?
- Our ability to quickly make appropriate decisions based on that monitoring (what if?, mitigation, contingency plans)?
- Our skills in the area concerned?
- The collective confidence in all stakeholders that they should join you down this path?
Perhaps you can think of additional or better questions to ask!