Calculated Risk

Are You Risk Averse? That's Why You're Going Nowhere.

I had a great session with one of my favorite clients the other day. We covered an area on making decisions and I brought up a way I teach people to think about their careers and owners to think about their businesses. There are three ways to make decisions in business:

  1. Sure Things - These are the easy decisions we make that take little or no thought. They're easy to quantify, foresee, and usually called 'no-brainers'.
  2. Calculated Risk - A little more work is involved here — we need to weigh many options and outcomes. Many things are measured and tracked along the way to ensure that we don't fall flat on our face. This is the biggest slice of the pie - from easy risk calculation to highly complex analysis.
  3. Hail Mary's - Not so much a blind throw into the end zone, but there is the reality that this is a decision into the unknown. You can just measure so much and have to rely on gut feel in your industry or marketplace.

Successful executives and business owners tap into all three decision states frequently. If I had to hazard a guess, the typical business/executive builds their decision base with 20-30% Sure Thing, 60-70% Calculated Risk, and 10-20% Hail Mary.

Many things in business were Hail Mary's — the iPhone, Tesla, Amazon, etc. Most startups are highly analyzed calculated risks but they start out as a Hail Mary — 'let's try it' or 'it can't hurt' are frequently mentioned. Venturing into unknown territories where you're not comfortable is not only healthy, but required for many businesses to grow and mature.

Opening up a second location, hiring your first employee, pitching that premier client, spending big bucks on your website/SEO/PPC are just a few areas where we tend to feel quite nervous when we're pushing the envelope. You should feel anxiety in your gut when you make these decisions. That's why they're Hail Mary's — you're throwing it as far as you can subtly hoping for someone to catch it.

Sometimes we make Hail Mary decisions when our back is against the wall — and sometimes it's too late. It's better to regularly make Hail Mary decisions 2-3 times a year to stretch your company, yourself, and your people.