Supercharging Your Risk-Takers

hut v2The people in most organizations span the spectrum of risk inclination. Talented leaders adapt their management methods based on an individual team member’s risk inclination and tolerance.

There is some interesting new research that gives insights into how to better motivate the people you lead who happen to be more risk inclined. The research was conducted in the small African country of Lesotho. The country suffers by a devastatingly high level of AIDS cases among its populace. The study focused on more risk inclined people on the premise that they would be more inclined to engage in risky behaviors that could lead to AIDS infection. Their risk inclination was determined based on how they approached games of chance that were orchestrated by the researchers.

The research showed that the risk-inclined participants were more likely to change their behavior when they were offered a chance to win a large reward as opposed to a smaller but certain reward.

One group was given a monetary reward if they met certain criteria. A second group was given a ticket in a drawing in which four people in their village would win twenty five times as much as the first group. Obviously, this meant that only four people in the second group received a reward and most did not.

What was the result? People in the second group that had only a chance at a reward were 21.4% more likely to adopt the desired behaviors than the people in the group who received a certain but smaller reward. That is powerful when you consider that most of the people in the second group received no reward.

So, what does this tell you about how to better motivate some of your team? Well, first identify the parts of your organization that are dominated by people who are more comfortable taking risks. To advance the idea, let’s assume your sales people fit this description. Sales professionals often have higher risk inclination than some people in other roles.

The research tells us that risk-takers are more responsive to a chance at a larger reward than a certainty of a smaller reward. So, let’s say you are structuring a sales contest. As with most such efforts, performance beyond a certain threshold yields a reward. Often the size of the reward increases as results increase.

Here is the insight from the research. In addition to the financial incentives you would usually offer add an opportunity for some of team members who exceed the performance threshold to be entered into a drawing for a significant prize, bonus or trip. The research suggests you will get significantly more performance. Why? Risk-takers like taking risks and appear to be excited by the opportunity to receive a larger though uncertain reward. It is a bit of the gambler’s mindset.

Please note that we are not suggesting that the drawing for a single reward be your only incentive. That could actually be demotivating with time. We are suggesting instead that the drawing opportunity be an additional incentive.

Give it us a try and let us know what results you get.

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More information on the research is available at: http://www.npr.org/sections/goatsandsoda/2015/05/12/406105602/what-might-make-young-people-practice-safe-sex-lottery-tickets

 

 

Risk Protection = More Caution. Really?

snowboarder on the steep v2, cropped v2There is an interesting study published in the journal Injury Prevention on behavior change among skiers and snowboarders when they wear a helmet.

What would you guess?

> Option A:  Would you think that a person who wears a helmet would think they are better protected from injury and be more risk inclined?

> Option B:  Or would you think their decision to wear a helmet suggests they are more safety conscious and less risk inclined?

If you guessed Option B, you are correct.  The study tells us that helmeted skiers and snowboarders appear to ski or snowboard more safely.snowboard helmets

So, what does this tell us about human nature and intelligent risk-taking in an organizational setting?  The logical conclusion is that the better you prepare for the risk or initiative you are pursuing, the more comfortable you will be going forward.

The lesson:  prepare well before getting started.  One thing you can do is utilize the six steps of intelligent risk-taking presented in my books The Power of Risk (Maxwell Press), Business Lessons from the Edge (McGraw-Hill) and The First-Time Manager (AMACOM).

The second lesson:  Preparing well and proceeding intelligently is not likely to make you more risk-inclined and more prone to lapse into poor decisions.

Both good outcomes.

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The study was conducted by researchers at San Diego State University.  The full paper on the study is available on the National Center for Biotechnology Information (NCBI) website at:  http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2598370/pdf/173.pdf.  (The NCBI is part of the U.S. National Institutes of Health.)

Are Some People Born Risk-Takers?

tight_rope_walkerI have said many times in books, articles and speeches that there is no ideal level of risk inclination – no perfect Risk Quotient (RQ). The risk adverse can make a vital contribution by being more cautious and deliberative. The risk inclined can help others overcome uncertainties and provide a valuable bias for action.

But it is reasonable to wonder to what extent a person’s RQ is determined by genetics as opposed to by life experiences – the old nature versus nurture discussion.

You may have heard about the “risk-taking gene.” This is the research that indicates that a certain variation on the DRD4 gene correlates to a greater inclination to pursue risky activities and seek higher levels of physical stimulation.

Now there is more research that indicates that certain physiological traits influence our risk inclination. Researchers at University College London, the University of Sydney, the University of Pennsylvania, New York University and Yale University have determined that the density of the cells in one part of our brain influences our comfort level with financial risks. The thicker our right posterior parietal cortex the more we can tolerate financial risk. If it is thinner, the opposite is true.

Is this interesting? Yes. Is this important? Only somewhat.

The important point is that we all have different innate RQs. They can change significantly due to life experiences and our current situation. But research is showing that we are born with physical elements that influence our personal relationship with risk-taking.

How does this impact you? The next time you are at a loss to understand how someone sees the exact same facts and circumstances so differently than you, remember that some of the difference may be due to how you both were created. That may make it easier to deal constructively with the variance.
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More on this topic is available at: http://online.wsj.com/articles/so-you-think-youre-a-risk-taker-1414207254

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