Tag: Risk

US Army Leadership Risk Assessment

Stop Gambling in Business Start Taking Risks

Reason 3 of ‘15 Top Reasons You’re Managing Not Leading‘ explains the importance of taking risks. Not only do you need to take risks for your business to be successful but you need to encourage your team to take risks too. A business that doesn’t take risks can become stagnant and very quickly lose to competitors in the market.

However before you can comfortably start taking risks you need to understand how to do it properly. This post will explain the differences between taking a risk and a gamble so that you don’t get caught out!

In the military it’s only by taking risks that we can gain the advantage over the enemy. But at what cost? It’s my job to make sure i’ve weighed up the cost vs reward. My boss says that he’ll always encourage us to take risks so long as we can justify our reasons. This should be the same in your team. As a leader you’re responsible not only for achieving results, but responsible for any consequences.

Don’t You Dare Take A Gamble – You’re Better Than That!

As a leader I never tolerate gambling and neither should you. Anyone can gamble, it requires no skill, no knowledge, no experience, only luck. Well you’re not a leader because you’re lucky, you’ve got to where you are because you have all the traits listed above.

Are you really going to rely on luck to get you to where you need to go?

Let’s consider 2 examples of a gamble. The first will be based on a business scenario and the second on my military experience . Later on in this post i’ll come back to these scenarios and explore how you could take a risk rather than a gamble.

Example 1: Investing in a new employee

Business has been going ok recently but as the leader you feel you’d benefit from a new member of staff. You’re not sure if the extra member of staff will increase your team’s productivity enough to pay their salary. But you ‘might as well take the risk’. This isn’t taking a risk, this is a gamble!

Example 2: Clearing an enemy village

I’ve been given the mission to clear (remove) the enemy from a village they’re known to have occupied. In this village there are 3 large buildings but the enemy are only using one of them as their headquarters. Now due to the size of the buildings i’ll need to use my whole team even to clear just 1 building.

The only additional complication is that if I attack the wrong building I will lose the element of surprise and would give the enemy a chance to prepare to defend their position. I need to catch them off guard!

If I were a leader that took gambles I can relax. No planning required! I’ll pick 1 of the 3 buildings and cross my fingers.

This is a gamble!

How to Take Risks

Assessing risk is a calculated way of considering the threats or opportunities presented by doing something. When you take a risk you consider the benefits, the consequences and the likelihood of it going either way. In the military we like to turn the complicated process of considering risks into a simple formula.

Leadership Take Risks Don't Gamble

You assign a numeric value to the consequence of something happening and to the likelihood of it happening. You can use any variety of values but I tend to prefer to use values such as those listed below.

 

 

 

 

 

It’s important to remember that a consequence can either be an extreme positive or negative – this works for both threats and opportunities! Once you’ve decided the values put them in to the formula (multiply them by one another) and you’ll have a value.

To keep things simple you could also use the table below.

Once you have your final ‘Risk Value’ you can use it to compare certain courses of action.

What To Do With The Risk

There are several things you can do once you’ve identified the risk which are listed below.

  • Tolerate – You may decide that the risk is tolerable and whilst you’ve noted it you will do nothing specific about it.
  • Treat – You may decide that the risk is too high and therefore put in mitigating measures to try and change the likelihood or consequences of something happening.
  • Transfer – If you feel that the risk is ‘above your pay scale’ then transfer it up. Ask someone senior to you to consider the risk. They can then decide to tolerate, treat, transfer or terminate the risk.
  • Terminate – If you decide the risk is too great then you can simply get rid of it. An example of this would be if you identified that a particular supplier is likely to miss a payment with you and the consequence of this is high, you could just find a new supplier.

In the military we use the final risk value to determine at what level that risk can be tolerated. For example to take an extreme risk (value 20-25) would need signing off at a very high level. More frequently however the severity of the risk will determine what ‘treating’ factors need to be introduced to limit either the consequence or likelihood of something taking place.

It’s important to frequently reconsider your risk assessment too! Circumstances can change which could alter your final risk value.

In a world that is changing quickly, the only strategy that is guaranteed to fail is not taking risks – Mark Zuckerberg

Let’s consider the examples from earlier and use this formula to assess the risk.

Example 1: Investing in a new employee

When considering employing a new team member there are a series of opportunities and threats presented by the option. When doing the risk assessment you find that the consequence of the employee doing well or badly is large as you only have a few employees in total. You also decide, based on your interview, that you feel the likelihood of your employee performing poorly is moderate. This has given you a total risk value which you could compare to other candidates. It also gives you the opportunity to:

  • Tolerate the risk (hope for the best – but at least it’s been recognised).
  • Treat the risk (assign a mentor to reduce the likelihood of poor performance).
  • Terminate the risk (don’t employ the candidate).

Example 2: Clearing an enemy village

In this instance I would try to gather as much information as possible about the enemy and about the village. By doing this i’m potentially decreasing the likelihood of me picking the wrong building. The point with this is that i’ve done everything I can to reduce the chance of me picking the wrong building. At that point I must then decide whether to tolerate the ‘residual risk’ or terminate the operation.

Have Your Say

I’m curious to know at what level you let your team or employees take risks? Is it encouraged? Is even the lowest subordinate free to take risks? And does it work for you? Let me know in Your Thoughts or comment below and as always i’ll reply and may even elaborate on your thought in a future post.

-The Military CEO

5 Reasons You Need To Make Mistakes To Be Successful

Leadership is all about setting examples, developing yourself and those around you. Dealing with the insecurities we have is one of the most important steps when leading people around us. Once you have learnt to accept that people make mistakes and that making one doesn’t undermine your competency then you can really start to succeed as an individual and within a team.

One thing is certain in business. You and everyone around you will make mistakes.

-Richard Branson

This article will outline 5 reasons you need to make mistakes to be successful!

1. Creating an innovative and honest environment

When you make a mistake don’t try and cover it up, don’t even just deal with it, announce it! When those around you can see that messing up isn’t going to cost them their pride, or worse their job, people will start to be honest with their mistakes. Honest team members not only leads to better what we call in the Army damage limitation but people won’t be as afraid to push themselves.

Previously when i’ve allowed people to take risks without the fear of reprisal i’ve been astounded with the results my team have produced. For a business to succeed it needs a team of thinkers, not robots!

2. Everyone else can learn from your mistakes

Lets say a mistake costs you a deadline, a client or a load of money. Try and see that mistake as an opportunity to get everyone together, explain the mistake and work out a way to prevent it happening again. This could save your business a lot of money and associates a positive outcome from an otherwise negative action.

After every mission in the British Army we have something called an After Action Review (AAR). These present opportunities for the whole team to learn what worked well and what didn’t. The findings should always be recorded and slowly your business will develop a set of procedures referred to in the Army as doctrine.

If mistakes are made, learn from it and move on.

If mistakes are made, learn from it and move on.

3. Failure fuels your ambition

Who was the last millionaire you’ve heard of that hasn’t had hiccups along the way? You’ll be hard pushed to find a successful person who hasn’t suffered knock backs and that’s for a very good reason. We all know what failure feels like, it sucks, so nothing is a better motivation than that disappointment. When you’ve been close to the precipice of failure you know what it looks like and suddenly realise how much you’re going to try to avoid it.

4. A leader needs to be a people person

For people to respect you and subsequently want to be lead by you, you need to be human. To an employee the CEO can be some godly figure not subject to the ordinary laws of life. Don’t start to believe it! When (not if) you make a mistake and you admit it, you humble yourself. Being humble allows those around you to perceive your human nature. Subsequently you’ve just allowed your team members to aspire to be in a position such as yours. Employee success is the key to business success. I’ll soon be releasing a post explaining why you shouldn’t fear ambitious employees, they’re not coming for your job!

5. No one got rich without taking risks

Whether you’re thinking about expanding the business, adopting a new strategy or pursuing a niche in the market you’re taking a risk. But in every case there is the potential for great rewards.

It’s important to distinguish between a risk and a gamble. A risk is a calculated decision informed by sound predictions, a gamble can be made without any information. In the Army we judge risk by the probability of something happening vs the consequence of it happening.

Ultimately however without taking risks you’ll just continue to tread water until you become irrelevant. Once you have come to terms with the fact you might make a mistake if you take a risk, and be comfortable with failure, you can start to take more risks.

Have your say

When was the last time you saw a boss or colleague make a mistake and it be dealt with in a way that you thought was either detrimental or positive to the team cohesion? Let us know in the comments below or on Your Thoughts – as always i’ll try and reply and may even elaborate on your story in a further article.

-The Military CEO

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