Risk-Taking and Organizational #Leadership

 

 

 

 

Risk-taking may be at least part of the explanation why women hold fewer CEO positions than do men. According to the Pathfinder Career System assessment, risk-taking is a discriminating trait for CEOs, setting apart average from high performing CEOs.  Interestingly, risk-taking is not a key behavioural trait or a discriminating trait for VPs and Director/Managers. Pathfinder has been tested for over 35 years on over 80,000 individuals from around the world, and is based on more than 20 rigourously tested measurement tools.

A recent article in the Economic Journal by Alison Booth and Patrick Nolan, suggests that generally women tend to be more risk-averse than do men. However, it appears from their article, that risk-aversion is at least partly associated with culture.

In a controlled experiment the researchers studied high school students, using coeducational schools and all-girl schools, as well as coeducational groups and all girl groups. They asked the students to choose between a sure thing and “high stakes lottery”.  They found that girls in a single sex school or group were experienced higher risk-taking than girls in a coeducational school, and experienced the same level of risk-taking as boys in either coeducational or same-sex schools. Even the composition of the groups mattered, “girls are more likely to select risky outcomes when assigned to all girl groups” (p. F73)

The authors speculate that the all-girls environment reduces the expectations of stereotypical gender norms, so girls more freely approach risk-taking.

Is this a case of solving the risk-taking issue, and we get more women in political and business leadership? I suspect not. There are other key behavioural traits, such as competitiveness and the use of power that distinguish CEOs from VPs and Director/Managers. Women are generally lower on competitiveness and use of power than men. Additionally, lifestyle priorities tend to be career-oriented for CEOs and VPs while family-oriented for Director/Managers. Again, women have a tendency to be more family-oriented. It may well be that all of these differences are driven by cultural norms, and they may change over time. But I’m not holding my breath.

 

Source: Booth, A. L., & Nolen, P. (2012). Gender differences in risk behaviour: does nurture matter? Economic Journal, 122(558), F56–F78. doi:10.1111/j.1468-0297.2011.02480.x

 

Leadership Lessons from Buzz Lightyear

Recently our leadership class discussed the leadership of teams. After debriefing a learning exercise, we started talking about the importance of consistent responses to inappropriate behaviour.

Which started me thinking about a recent experience I had with my two and a half-year old niece. I was sitting in her living room (okay, her mom and dad’s living room, but that’s just a technicality), when she grabbed her Buzz Lightyear doll and put him on the wall facing the corner. She then walked away to the other side of the room, turning her back to Buzz. When her dad started to talk to Buzz, she “shushed” him.  Apparently we weren’t supposed to talk to Buzz. She waited an appropriate 30 seconds and then went and got Buzz.  She then made Buzz apologize to Woody for hitting him.  She then hugged Buzz and told him that Woody forgave him.  My darling niece had just perfectly role modeled a time-out. Which suggests that she might have experienced a fair number of time-outs in her short career in day-care.

So what does this story illustrate? That consistency matters. My niece knows exactly what to expect when she misbehaves. And she knows that every time she misbehaves this is what will happen. She has extensively stress-tested this assumption, much to her parents’ dismay.  This predictability helps her manage her own behaviour.  She knows what is acceptable and what is not, and she knows the consequences of misbehaving. She also knows that every time she misbehaves that she will receive a time-out.

Leaders need to adopt the same approach.  1) State your behavioural expectations; 2) State the consequences of not meeting expectations; 3) Role model those expectations; 4) Provide punishment or rewards as needed, the same way every time the behaviour occurs. 5) Provide forgiveness and reinforce the correct behaviour.

Child Psychologists tell us that consistency is an important factor in managing behaviour, because it provides a child with a sense of certainty, safety and security. As leaders, we should all strive to provide that sense of certainty and safety for our employees. If they know what to do, and know the consequences of not doing it, there should be no surprises as to the outcome.

Are you consistent? Do you have consistent, clearly articulated expectations? Do you consistently reward and punish based on those expectations? Do you let some of your favourite employees slide sometimes? Are your expectations consistent for everyone?  Members of your organization will take their cues from you. Good leaders provide an environment that is fair and consistent. The things I learned from Buzz Lightyear.

Red Rubber Boots: Getting Unstuck

Have you ever felt stuck? Felt like a deer in the headlights, unable to move? Most of us have experienced this at some point in our lives. But how do we deal with “stuckness” as a leader?

When I was about three years old my mom used to send me out to play in the back yard in my red rubber boots. Why rubber boots? We had just moved into a newly built house that had not yet been landscaped.

One particular spring day, when the back yard was a sea of mud, I was happily squelching around in my red rubber boots when my mom called me in for lunch. I started for the house, and in my first step my foot sunk in the mud right to the top of my boot. I tried to lift my leg. No good, stuck. I tugged at the top of the boot. No good, still stuck. No matter what I tried, I was still stuck. So I stood there, helpless.

My mom stuck her head out the door, calling out to me “come inside”.

“I can’t”, I responded.

“Of course you can” she said.

“I can’t, I’m stuck”, I wailed.

“Well pull your boot out” she said

“I tried that, and I can’t get my boot out of the mud”

“So just take your foot out of the boot and come into the house”.

“I can’t.”

She looked at me, “Why not?”

“Cause I’ll get my socks dirty, and you’ll get mad at me!”

When I get stuck, I often become my three-year old self.  When I don’t know what to do, I get stuck. I try the “old faithful” solutions.  If they don’t work, I stay stuck. I follow the rules. I stay stuck.

Getting unstuck is often about just trying something, anything. Getting some momentum to pull yourself out of the mud. Sometimes getting unstuck is about breaking of your own rules. It’s about being okay with getting your socks dirty (even if mom will get mad at you).  Sometimes it is about realizing that you are stuck because you are on a muddy road and you should take the paved path. Getting stuck is a signal that something needs to change. You just need to recognize it.

Decision-Making: Confirmation Bias

In my last post, I wrote about critical thinking, decision-making and evidence. We can improve our decision-making if we evaluate the quality of our evidence. But…what how do we select our evidence? Therein lies another decision-making trap.

A recent article in The Atlantic Monthly illuminates this trap brilliantly. We all seek out information that confirms our existing beliefs and values and discount evidence that disconfirms these beliefs and values.  We all have these implicit underlying assumptions, driven by our beliefs and values. The problem with these assumptions is that they are implicit, or taken for granted. This is known in the academic literature as confirmation bias.

So how do you fight confirmation bias? You can’t, at least at an individual level. You can, however, work with others to manage confirmation bias.   Assign someone to be Devil’s Advocate, whose job is to dig up disconfirming evidence. Ensure that you have someone not related to the decision evaluate the quality of evidence presented for multiple alternatives.  Gather together a group of independent raters.  Withhold your judgement or preferences from the group to avoid contaminating their evaluations. Provide them with a clear criteria for the decision, then have them independently evaluate each alternative based on your criteria. (Of course, you can’t rig the game by providing biased criteria). Compare the independent assessments to your own. Is there consensus among the independent raters? Is their assessment different from yours?

Every last one of us can fall victim to confirmation bias. We often are unaware of the underlying assumptions and beliefs that are driving our decision-making process. And, even when we are aware of these beliefs, it is difficult to suspend them in a decision-making situation. The only way to fight confirmation bias is to engage with others, and to be open to the idea that we might be wrong. Thinking is indeed Hard Work.