What is your propensity for risk?
I heard from a colleague of mine that a company a friend of his works for is working through their performance objectives for the year. After discussion with their managers, they were supposed to go into these companies performance management tools and transcribe their objectives into the tool, and then assign percentages to the objectives (almost like college grades – they would get 60% of their bonus if they accomplished Objective A, and 20% of their bonus if they accomplished Objective B. After completing their discussion with their manager, and armed with their agreed-upon objectives for the year, this person went into the tool, fully expecting to be able to complete the form online, enter their objectives, and assign a percentage to each objective, as determined in the meeting.
However, when they went into the tool, there was an already pre-filled out objective, and it was marked at a whopping 50% of their objectives, The employee added their other objectives and then proceeded to edit the percentages to what they had agreed upon by their manager. Unfortunately, the massive 50% objective was uneditable and immutable.
The employee had to use the remaining 50% and the portion across the objectives that he and his manager agreed upon. What was that 50% objective, occupying fully half of these employees objectives for the year, and completely unchangeable?
Risk. It was risk management. The entire objective, the objective which was to dominate this employees year (and as he later heard, all employees years at this company) was risk management. The aim is to manage any behaviors, projects, and decisions to minimize, and even better still, eliminate the risk for the company.
When I heard that, I thought, what a way to kill innovation.
Innovation IS risk, it requires risk, and without risk, how can you innovate? This company has just given the death knell to internal innovation. If the most critical metric in your employee’s objectives for the year is managing risk, how innovative do you think this company will be?
As I’ve said before, employees will do what they are incentivized to do. If you incentivize risk-taking and innovation, you get innovation, and likely breakthrough new technologies, products, and business models. If you incentivize playing it safe – then you will have an entire company of non-innovators.
Worse than that, you will have self-described whistleblowers taking down anything that might be deemed innovative, all in the name of risk management. If you don’t take risks, you don’t innovate. And if you don’t innovate, you eventually die, either by a thousand cuts of those smaller, more agile, more innovative companies, or other larger players that sense your timidity and move in for the kill.
Making risk avoidance (and let’s be honest, we can say “risk management” all we like, but we all know that it will morph into risk avoidance since no one is willing to die on that hill, especially if an innovations risk profile is unknown).
Risk avoidance is the opposite of innovation – change my mind.