Attitude to Risk

The attitude to risk within a company highly influences the daily behavior of all employees in terms of decision making processes. Managers drive this behavior with their attitude to mistakes. There are two ways to handle the fact that someone made a mistake: Either I deprive him of something he has or would have become, which is a type of punishment, or I reflect on the fact that this was a mistake, look for reasons why this might have happened and focus on ways how this can be avoided in the future. While the first way of punishment is a short-term approach that might avoid the same mistake in the future but that is highly demotivating, the second approach shows the characteristics of a growth mindset. Employees who always receive some kind of punishment for their mistakes will navigate themselves into a role where they are afraid to make mistakes and where they simply stick to the basics, knowing they are safe in their actions from any kind of punishment through management. This also leads to employees pointing out mistakes from coworkers to avert concern about their own actions which not only creates a toxic working environment, but also leads to high levels of stress and decreased performance. The second way not only teaches employees a healthy attitude towards mistakes, but makes them reflect on their own actions while feeling comfortable and confident to keep innovating their approaches to daily problem solving activities. Thus, this creates a pleasant working environment, where people are more open to help each other, where they can reach their full potential and where overall performance improves. The first response to mistakes with punishment makes employees risk averse and sticking to the basics of their roles, while the second response encourages risk-taking in the corporate environment.

Risk-taking should be generally encouraged because this entrepreneurial spirit sparks innovation and change; two things that are essential in the fast-paced, ever-changing business environment of today. On the other hand, taking risks is not encouraged in every position and/or industry. An accountant or a biomedical researcher for example should be conservative and risk averse to be successful. An investment banker on the other hand has to show a certain level of risk taking, to achieve the desired return on investment. Generally, one can say that risk taking is essential in business, but the favorable way is to engage in activities with decreased levels of risk.

Therefore, users of the Beacon Dashboard, specifically managers, should define the desired level for the “Attitude to Risk” on their division, team or individual level. High values above 70 imply an environment, where risk-taking is highly encouraged, whereas low values (below 30) represent an environment where employees are afraid to make mistakes and therefore act completely risk-averse.