As the global economy begins to stabilize, business leaders everywhere are revisiting the issue of risk. The “Great Recession” of 2007 – 2009 taught us that the world financial system tolerated too much risk, and there is now a strong temptation to play it safe. However, if companies become too cautious, opportunities are undoubtedly lost, as risk, innovation and creativity are the natural lubricants of a modern market economy. As we move into the recovery, what is the right level of risk to take, and how can we learn from our past mistakes? Perhaps the central task of the modern manager is to make decisions under conditions of ambiguity and uncertainty, and the study of personality at the individual, team and corporate level can give companies a much better understanding of their “risk profile.”
For example, I was recently working with Tim, the President of the Wholesale division of a nationally-known consumer products company. Tim’s Predictive Index profile indicated that he was extremely independent, self-confident, decisive and venturesome, with a natural resistance to authority and a desire to take risks and to do things his own way. Each of Tim’s four direct-reports also had these personality traits in abundance. As a senior executive team, this group knew that it had a strong bias toward risk, and that it had to work to put processes and systems in place to mitigate that bias. To that end, they have recently added a new team member with a very different personality profile, characterized by caution, attention to detail, and doing things “by the book.” This new team member has skillfully “pushed back” on his fellow senior executives when they have wanted to take large risks, such as dramatically cutting prices to capture market share, by asking a series of pointed questions about the upsides and downsides of the team’s proposed actions. This ability to draw upon different talents, perspectives, and personalities helps this team to grow their company’s business in a prudent and disciplined manner.