Is risk taking something that should be rewarded in an organization? If so, what kind of risk taking should be encouraged? What if the outcomes are negative? Should our response as managers be any different from what it might have been if things had worked out?
In the parable of the talents, found in Mathew 25 and Luke 19, there seems to be an underlying expectation that good management involves some level of risk.
Matthew 25:24-26 (New International Version, ©2011)
24 “Then the man who had received one bag of gold came. ‘Master,’ he said, ‘I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. 25 So I was afraid and went out and hid your gold in the ground. See, here is what belongs to you.’
26 “His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed?
In this passage the servant is reprimanded for what seems to be a kind of ‘fear motivated conservatism.’ He has quite literally missed the opportunity to realize the potential of the resources entrusted to him because of wrong judgment about his master’s character. He seems to have been paralyzed by his fear about the consequences of failure.
We know that the stewardship that our Lord refers to in this passage was not strictly a material stewardship. However, I do think it gives us instructive principles that are extremely relevant to discussion going on in management circles today.
Cultures of innovation and adaptability, we find, flow directly from leadership. Tied to the willingness of responsible team members to engage in risky decisions and actions are the perceived consequences for those actions. These potential consequences are communicated explicitly and implied by the character of leaders in the organization.
In the April issue of Harvard Business Review Rita Gunther McGrath of Columbia Business School records how one UK-based global retailer has actually formalized rules for acceptable failure. These include:
-It’s riskier to do nothing-or to conduct further analysis-than to act and fail
-The cost is contained
-We’ve defined what success would look like-and the opportunity is significant
Certainly no member of an organization should take on risks without authorization and a clear mandate from investors and other stake holders. Clearly no member of an organization should take unethical risks. However, in a volatile commercial environment that is characterized by change, managed risk is not only praiseworthy, it should be considered mandatory.
John Beck, CPS Faculty & Organizational Management Major Professor