Intolerance, leadership and risk-taking

Jan 24 2012 by Mark A Smith Print This Article

A student once asked me why managers sometimes make such bad choices. This is such a relevant and important question for business leaders today because the answer is a paradox. It would be simple to say that some are complacent with the status quo, some are poor decision makers, and others are trying to cover their assets, so-to-speak. But this isn't necessarily the whole truth.

In many cases, the answer lies beneath the surface within the culture of business in America today. Think about for just a moment. When a CEO makes a fairly significant mistake, the firm's performance drops below industry average, or stock price falls what happens? According to Kaplan and Minton of the University of Chicago (2008), shareholders will call for head of the CEO.

In the same study, from 1998 to 2005, the corporate lifespan of a CEO averaged less than seven years. Worse yet, other studies have shown that the once-coveted VP of Sales role last for an estimated 24 to 36 months. A short stint compared to the years of work it took to achieve such positions.

A short tenure is a result, but what is the actual problem? The problem lies with intolerance. Shareholders expect one thing: stock price to increase. When that doesn't happen corporate leaders often place immense pressure on other executive team members to make changes that directly affect stock price. Pillaging of employee ranks through downsizing, restructuring, and outsourcing initiatives are often the next courses of action. Worse yet, pile on enough pressure and things can get very creative: remember Enron?

The results are horrific. Short term employment of senior staff often leads to instability and turnover in middle ranks thereby pushing more problems down through the organizational chart. Managers become inclined to play it safe rather than make a decision with any amount of risk involved because it may be their last.

As a result, empowerment is stifled and the very creativity that fuels innovation and creativity is extinguished. Sustain this pattern of intolerance and pretty soon managers will forego their autonomy and look to policy to make their decisions for them. Finally, short-term, stock price-oriented decision making takes the place of long-term strategic thinking.

Employees at all levels of the organization must take calculated risks and make mistakes. Research is not only for academics and scientists, but for business practitioners as well. For progress and learning to take place, there will be failures along the way. Expecting perfection is unrealistic and unattainable.

Marketing guru Seth Godin made a great point that playing it safe and not taking a risk is probably the most dangerous thing you could do in today's rapidly changing and highly competitive business environment.

Remember, Dr. Silver's unpopular pressure-sensitive adhesive? Not many do (by that name), but when Art Fry repurposed it into a place holder for his church hymnal, the 3M Post-It Note was born. The color was even chosen by accident because the researchers in the lab next door had yellow scrap paper.

No one knows for sure if this was divine influence or creative thinking on Arty Fry's part. So use your guts, follow your intuition and take a risk. It's worth the rewards.


About The Author

Mark A Smith
Mark A Smith

Mark Smith is a management consultant and business professor for Corinthian Colleges, Inc. in Largo, FL.