Chances Vs Calculated Risks
“So do ya feel lucky…Well? Do ya?”
The famous Clint Eastwood line kept running though my mind while I watched the blackjack dealer place the Ace of Spades on his Jack of Diamonds. “21-House Wins!” The exasperated player ran his fingers through his hair, threw back the remains of his drink and pushed himself away from the table. “Just not my lucky day!” he mumbled.
Oh, you thought I was playing Black Jack- nooo, I was strictly observing. It was quite fascinating, actually. Walking the floor of the Caesar’s Palace Casino certainly gave the illusion of success garnered from luck. All you had to do was take a chance and throw the dice, or pull a lever, and riches were yours to have.
What does this have to do with business?
Would you make an important decision based on a single throw of a pair of dice? Of course not! Yet business owners make important decisions regularly with a similar commitment. Taking a chance on a new hire with no more than a “shiny” first impression, or starting up a business with partners that are more convenient than sound, or investing in projects based on a trend.
“Do we expand our operations to include a new product line?” “Can we afford to hire that key person now, or should we wait?” “Should we wait and see what our competition does first?”
When faced with making decisions one of the greatest challenges many business owners face is recognizing the difference between taking a “Chance” and taking a “Calculated Risk.”
Taking a chance is a passive action; such as buying a lotto ticket or pulling a slot machine handle. The outcome is highly unpredictable; no strategy is involved.
On the other hand taking a calculated risk requires active participation. This is not a risk free scenario, but the hazards that exist, have been evaluated and taken into consideration before acting on a decision.
A third option business owner’s default to is avoiding the experience all together. So by virtue of opting out: no gain but, no loss. However, taking the safe road usually keeps businesses in a rut, which down the road can become a big risk resulting in devastation.
So how do you become good at making decisions that will guide your business to be successful?
By honing your skills at executing calculated risks.
4 Strategic Steps that make Calculated Risks
Pay major dividends for your business.
- Learn everything you can about the situation before you make a decision. Investigate all the potential gains and losses and decide on your risk tolerance with each decision. I may choose to buy a ticket on a show home for $100.00. The chance of my ticket being picked is not very high, but the money goes to a charity that I endorse. If I win, my money goes to a charity and I now own a home for $100.00!!! Huge reward. If my ticket isn’t selected the money goes to charity and I feel good. My tolerance to risk is low here because I am fine with either outcome. Apply this to any business situation. Hiring a person that you didn’t interview or perform a reference check on brings risk of incompetency and could negatively impact your team and your brand. These are high risks that can be minimized by gathering the facts and learning everything you can before deciding.
- Evaluate the facts that you acquire. How would the decision impact your business today? Down the road? How does this decision fit with your Mission Statement or Goals and Objectives? What are the Pros and Cons associated with each decision? What benefits would you miss out on if you passed on the decision and what would you gain if you acted on the decision?
- Advisors help to provide greater perspective, choose them wisely. Businesses that incorporate team decision processes generally evolve into leading organizations.
- Decide. Plain and simple, make the decision to act on your evaluation of the situation. Procrastinating runs the risk of missed opportunities. If you have gathered your facts, evaluated them thoroughly and received input from trusted members, then the only thing left to do is decide which option to execute.
Taking Calculated Risks requires you to be educated in order to silence any irrational fears. If it were simple everyone one would do it and success would be as readily available as the air we breathe. However, it takes a person willing to lead into uncharted territory to pursue the value of a calculated risk. So it is no coincidence that the four steps required to develop skills for executing Calculated Risks is in fact the acronym for LEAD.
If you want to benefit from your decisions you have to LEAD.
Until next week,
Looking for help leading your business to success? Please feel free to contact me and see how I can be of assistance.