Every person has a different propensity regarding taking risks and the associated anxiety or excitement. You might be wholly risk-averse or get a thrill out of trying something out. Further, it is common to have a certain risk-aversion in some areas in your life and a completely different take in others. For example, I know founders who are extremely bullish with their company’s strategy but more bearish than Mother Russia when it comes to their household. No matter what your default inclination is, I’m sure we all can agree that taking the right sort of risks is a substantial part of effective leadership.
Reckless risks are akin to malpractice, and complete avoidance of risks could be the same. Because I see this repeatedly in my advisory work, I wanted to share some examples of typical risks that might not trigger the “I’m considering a risk” mindset or that are often mistreated. In doing that, I hope to help you prime your brain to notice risks more often and weigh them better so that you can achieve more growth and impact on your organization.
Should you embrace the bleeding edge tech that’s currently topping Hacker News? Use the same battle-hardened Java stack you’ve been using since 2006? What about front-end development, where frameworks seem to become legacy code every couple of years?
This is an example of a risk that many don’t evaluate properly. We have a lot of internal pressure to take on more risk than is often wise because the team is eager to try the new shiny stuff. Instead, assess the different advantages and disadvantages to make your tech decisions proactive. I’ve detailed my system here, and the most important lesson is to let go of tech for tech’s sake.
Hiring and staffing decisions, in general, are fraught with risks—what if you make the wrong decision and that person isn’t right for the job? What if we say “no” to this candidate and never find someone as good?
A very interesting subset of these decisions that I tackle weekly is the making of managers. Should you promote someone from the team to their first managerial role? Hire someone externally? What is the correct ratio of in-house/external managers? It is here where I see a lot of miscalculated risk-taking. You might believe in your people so much that you decide to give them their first shot at managing. That is great; you should take these potential-based risks from time to time.
But should you set yourself up in a position where, say, all three of your managers are first-timers? Statistically, there’s a non-trivial chance that one of those will realize they just don’t want to be managing after all. And to create proper managers out of them, you will have to invest the majority of your time in training, mentoring, and coaching them (or getting external help). Is that an investment you are able to make currently? Weigh the different options, and consider try-outs: You don’t have to become a manager from the get-go, and setups like lead roles and ownership of a significant feature might be a good test for both sides.
Creating Tech Capital
In The Tech Executive Operating System I described the concept of Tech Capital, as opposed to our obsession with tech debt. Making innovation a regular part of your team’s day-to-day work is inseparable from taking risks. After all, it can’t be genuine innovation if you are always guaranteed success. Investing in a three-day hackathon once a year might be a massive waste of time, whereas taking calculated risks regularly can create a bonanza for your entire company.
Are you guiding your team and setting the right principles for deciding where investments and experiments in tech capital are sensible? How should you weigh the urgency of the roadmap with the importance of creativity and novelty? How do you create a team that’s more than basic code apes? These might be the most important risks you take in your role, and because of that, I spent a whole chapter in TEOS about these concepts (which, BTW, you can get for free as it’s the book’s sample chapter, check out the form below).
Org Structure & Processes
Lastly, this is another area where I see undue risks being taken. Leaders who do not feel like they have enough agency to affect the roadmap (you need to move upstream, my friend) or who are bored with “tech strategy” work sometimes end up unleashing their creativity on their organization’s structure, processes, or both.
Should you have a flat organization with 40 engineers, one VP, and three power rangers? How about rotating squads every two sprints? I’m exaggerating, but trust me—only slightly.
These kinds of risks are misleading because you might feel like there’s not a lot of risk: Worst case scenario, you roll back and maybe piss a couple of people off. That’s not the case. I’ve seen such experiments cause long-term issues with a team’s culture. Moreover, you should never forget about missed opportunity cost. What might you have initiated had you put your focus elsewhere during this time? Not a lot of companies are renowned for ingenuity in their processes. If those processes cannot be accompanied by a frog leap in productivity, they are probably not worth the risk.
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