The last few years have forced all of us to assess risk differently, and in ways we had never done before. We suddenly faced risks associated with activities that had previously been mundane: going to the office, taking a holiday, sending children to school. Now we’ve readjusted our lens so that nearly all aspects of life are seen as a series of tradeoffs between staying safe and living our lives. That is exceptionally clear in the business context, where decision-makers everywhere are forced to navigate multiple evolving landscapes. The markets are wobbly and inflation is high. There is a war raging and a pandemic that is, at best, still smoldering. Employees are more mobile and have higher expectations than ever before: not necessarily a bad thing, but a new one for organisations to reckon with. Business leaders could understandably find this the worst time to take chances. That might not be the right take.
Uncertainty is the right time for risks: organisations should take chances now.
The simple answer to why organisations should take chances is: why not? But that isn’t as flippant as it sounds. The reality is that the current business climate is so filled with uncertainty that it’s almost a fool’s errand to try to plan for a predictable future. Now is a time to lean into the uncertainty and discover opportunities. Obviously, none of us are going back to the 2019 business environment. So, most of what we know about employee recruitment and retention is inapplicable. On the other hand, new opportunities have emerged: consumers are more online than ever before and increased remote working has expanded the available workforce. Ways of competing for talent are also evolving — whereas employee benefits were once limited to financial offerings like retirement contributions or more paid time off, now potential hires also care about a company mission that reflects their own value. A recent US survey found that 40 percent of workers interviewed would likely quit their job if their organisation took a stand on a political issue they do not agree with. There is an opportunity for companies to take a hard look at their mission and culture and see if it aligns with the principles of the talent they seek.
History points to taking chances during uncertainty. This Harvard Business Review article reminds us that the banker Nathan Rothschild said fortunes are made when cannonballs fall in the harbour, not when violins play in the ballroom. The unpredictable environment we’re in allows for greater opportunity, not less. It was reported in Investment Monitor that McKinsey & Company studied 2000 companies from 2007 to 2017, and the companies that fared best during the 2008 financial crisis were those that invested in more innovation during that period. The instinct during that period was to cut costs. But in fact, those organisations that found new business models or different geographies during that period emerged ahead after the crisis.
CEOs struggle to take risks when times are unpredictable. While the information above is useful, from the perspective of a CEO, it isn’t easy to embrace in real time. But the stakes are high. The same Investment Monitor article pointed out that the outperformers that continued to invest during the 2008 recession delivered excess returns to shareholders of about eight percent while their peers were near zero percent. But at the beginning of the pandemic, in April 2020, only 23 percent of CEOs said innovation was their number one priority, compared to 53 percent pre-COVID-19. To be fair, the early months of the pandemic felt like a free fall, and it made sense for most organisations to simply try to get their arms around a world in crisis. But my guess is those that were able to quickly change to a mindset of innovation — whether investment in new products and geographies, or simply keeping their employees working in new ways that ensured their safety — are now emerging better positioned than most.
Uncertainty is the one sure thing. Organisations that take chances are prepared for what comes next.
Executives at global organisations may feel that risk-taking on a large scale is impossible. Those leading smaller companies may feel they haven’t got the cash necessary to try new strategies. Neither limitation is really accurate. Larger companies should theoretically have a bigger balance sheet, better positioning them to take big bets. On the other hand, smaller organisations can leverage their lack of overhead and redistribute cash to new opportunities. Either way, the point is to pull ahead of your competitors by being positioned in a way that you can enter the race at full speed. You want to be able to hit the gas as soon as recovery begins. Don’t wait until the recovery to get ready.
In terms of my background and expertise, I have spent my entire career working as a trusted advisor to senior leaders wanting to improve the effectiveness of themselves, their teams, and their companies. Prior to starting my own consulting firm, I led the global executive assessment and development team for Cisco. Earlier in my career, I held leadership roles with RHR International, PepsiCo, Ashridge Executive Education, Hult International Business School, and the Central European University, Budapest, Hungary.