How to incentivize risk taking right out of your organization
I recently heard a leader say, “We’re looking to promote people who are good at making decisions and who are right more often than not.”
I’ve heard that sentiment shared before. It sounds awfully good until you start thinking through the implications of that last part within a larger organization.
Remember that when it comes to promotion, your people will watch what you say and what you do. The very second you make a statement like the above, your people will all ask themselves, “What can I work on where I have a chance of being right more often than not?”
The answer: initiatives where there is predictability. In other words, they will work on optimization.
Now, don’t get me wrong, optimizations for a business that is scaling or at scale are a powerful thing. In scaling mode, there’s lots of low hanging fruit. At scale, you have scale! A 0.5% improvement on a large enough number is a big number!
But if all of your people are working on optimizations, you’ve just put a countdown timer on your business.
There is a general truism in investing that I think translates to many other realms as well: the greater the upside you seek, the greater the risk you have be willing to take on. For example: VCs take on a lot of risk to chase 10-100x returns; PEs take on much less risk to chase 3-5x returns.
Where do your bigger innovations come from when people feel a (Read more...)