I am taking a course in risk assessment, and I find it fascinating to look at how individuals perceive risk and how it affects their decision-making. Experts tell us that the severity of a potential risk and the probability of it occurring have a direct impact upon how we perceive that risk. An incident that could have grave consequences—such as the possibility of death or debilitating illness—has a high "dread" factor. Similarly, something that has a high chance of occurring produces more stress, anxiety or worry.
The interesting thing about how individuals assess risks is the number of inconsistencies. Some high probability risks do not cause a great deal of worry if they are familiar. For example, although many of us run a serious risk of back pain due to poor working posture, we may not give it any thought at all. Tell a co-worker to sit up straight and he or she will probably say something like “yes, I know I should be sitting better.” Often, it is not until that person experiences ongoing back pain that they will do something about their lax posture. Another example is the risks that go along with driving a car. The consequences of a crash can be catastrophic and the chance of injury is high, yet many people do not think twice about getting behind the wheel. Others experience anxiety over airplane travel even though the chance of being in a plane crash is much less than the chance of being in a car crash. The differentiating factor here is that most people feel more in control of their destiny behind the wheel of a car than in an airplane. We also tend to rationalize risky decisions if we get short-term benefit from an action; “oh, I know my doctor said I have high blood pressure and I have to exercise but I am too tired when I get home from work.”
So, what is the significance of all of this? These factors make me wonder about how the risk of job loss affects both employee performance and innovation within an organization. I think it is safe to say that threat of a job loss is a serious risk for most employees. Furthermore, in an effort to survive in tough economic circumstance, organizational leaders may inadvertently encourage cultures that limit risk-taking. In an environment with this level of risk, how likely are employees to be innovative?
Innovation is important, especially now. Carly Fiorina writes in Leadership Excellence about her early days at HP, “They were afraid that changing anything might mean destroying everything.” Yet, she brought change to the company even in the midst of that fear. In the same edition of the magazine, Warren Bennis addresses the topic of how to overcome fear head on.
It may take a deliberate effort to make sure innovation thrives in an organization. Training is one component, but, writes Leslie Stevens-Huffman “training employees to be innovative can be difficult -- and training alone won't cure organizational stagnation because the organizational culture must nurture creativity.” In other words, a culture that encourages risk taking supports innovation. In a Fortune interview, Richard Scheller, Genentech's head of research speaks about how to encourage innovation. One of his top three suggestions revolves around the encouraging “risk taking.”
It seems to me that we must first understand how employees perceive risk before we can take steps to encourage risk taking. If employees feel that the repercussions of making a mistake—even in the search of innovation—as too risky, then we have our work cut out for us.
References:
Bennis, Warren. “Express Yourself.” Leadership Excellence [www.leaderexcel.com]. October 2009. P. 15.
Fiorina, Carly. “Make Tough Choices.” Leadership Excellence [www.leaderexcel.com]. October 2009. P. 3.
Stevens-Huffman, Leslie. “Innovation to the Rescue.” Human Resource Executive Online [www.hreonline.com]. October 13, 2009.
Tkaczyk, Christopher. “Genentech: Encouraging innovation.” Fortune [http://money.cnn.com]. September 29, 2009.
