Why The Best Leaders Stay Away From Stupid Risks

We tend to ascertain the belief that to be a great entrepreneur you must take extraordinary risks. For the most part, this is pretty accurate, as most successful business owners have had to make some sort of sacrifice along the way to establishing a strong company. However, while risks are often great learning experiences, some folks get lost in betting it all. Which, in turn, can mean losing it all.

While we could talk all day about how statistics, simulations, models, and a whole slew of other scientific terms can be used to assess smart risk, at the end of the day, taking a chance is a gut feeling. The difference, though, is knowing who that risk is going to benefit or hurt, and was it worth it to do. And for the best leaders, this process is a breeze, here’s why:

They Know How To Cover Their Bases

One trait that’s unanimous agreed upon by almost every great leader is forecasting and setting reasonable business expectations. These projections include anything from small risks, like weather’s potential impact on productivity, to larger risks, like what happens when an employee gets injured. Being a step ahead will not only help your company run better but could potentially save you tremendously over the long-term as well.

Most leaders know the risk and liability of cutting corners, and are hyper-aware of the potential costs associated with them. For example, not giving your employees proper OSHA training could lead to injury, and additionally, could be grounds for a lawsuit given that OSHA sets the standard for workplace safety. This type of procedure starts from the top-down, including having an executive board that participates in designing the proper safety and logistical protocols. Plus, as you dictate these functions to your staff, they’ll take on a sense accountability and transparency with each other regarding what’s expected in the workplace. These rules not only make the workplace safer, but also define the company’s culture.

What They Do Defines The Company’s Culture

A lot of companies love talking about how great their culture is so much that the phrase almost has lost its meaning. Great company culture is more than just free lunches or having a ping-pong table, but, rather, hosting a vision and mission that people can get behind and believe in. And for most firms, that starts with the decisions of their leader.

According to a study on leadership and culture conducted by Yafang Tsai of Chung Shan Medical University, when employees and leadership communicate frequently and effectively it can profoundly influence work behaviors and attitudes. And when it comes to making decisions, having your team back you can prevent brash decisions. Plus, by bringing them on to help in the process of making important company choices, they’ll feel more secure about the risks at hand, and how they might affect their potential employment.

As a survey by Good&Co notes, having what employees agree is a solid culture will increase productivity by 20%. Employees will be less worried about what’s happening, and will additionally feel a sense of belonging long-term. However, sometimes taking big risks is necessary, which comes down to how their leader hedges their bets.

They Hedge Their Bets

We tend to maintain a love of risk-taking, as long as the risks involve significant payoff. As Harvard Business Review notes in The Most Important Leadership Competencies, one factor that defines great leadership is creating a culture that supports risk-taking. However, identifying that risk is ultimately up to the leader at hand. It’s important to note that if you don’t get this right the first time, it could create a double standard of “They were able to do it, why can’t I?” which could hurt morale with your team. But overall, taking risks says that people care about your business, and that’s something not everyone can say.

Moving forward, assessing risk and reward is something that should be a collaborative effort that’s going to benefit everyone. It’s not enough to jeopardize the reputation of your company just because one employee thinks their sales pitch is the best ever. Instead, there should be a level of decorum in these processes, as it becomes a learning point for everyone. In the end, we all know you have to put up risk for reward, but as every great entrepreneur knows to ask: how much is this really worth?

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