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Why Great Leaders Are More Risk Averse Than You Think

October 7, 2014
Borderless Leadership

Are you a risk taker? It may not be such a good thing.

McDonald’s founder Ray Kroc once said, “If you’re not a risk taker, you should get the hell out of business.” With respect to Mr. Kroc, having this mentality will harm your ability to lead your company when you get to a certain point. When deciding to become an entrepreneur rather than taking the corporate route, you have to be a risk taker. Entrepreneurs have an uphill battle to be successful, and making the decision to take on that risk takes a great deal of courage.

After you make the decision to do a startup is when you should stop making huge gambles. Why? Because great leaders are ones who look to mitigate risk for their company not increase it. Gambles that could ruin your business may be necessary in the early stages, but you should move away from them as soon as possible.

Here are ways great leaders mitigate risk for their companies.

1. They Cut Expenses

The image of the daredevil CEO is one that we all have seen in the movies. The visionary who bets it all on an idea and becomes an overnight success. Then all of a sudden, the company is living the dream. Huge offices, amazing cafeteria, and overpaid employees. In reality, most great CEOs actually are very frugal. This doesn’t just apply to their business but also their personal lives as well.

Cash flow will always be the timeline for how long your company has. Every time you save a dollar, you increase that timeline. There are times when it is going to take money to push an initiative, or situations when it makes sense to increase certain expenses. But great leaders don’t make those decisions often. In fact, they say no more than they say yes to expensive gambles.

As a leader, you should push your team to innovate more with less. When team members ask you for more money, push them to find a solution without using more capital. You’ll find that when people have no choice, they come up with amazing solutions. True creativity is when people create solutions with given constraints. Having a company mentality that more money is needed for every solution is detrimental and will cause your team to waste funds. As the leader, always push to do more with less, and you’ll get the most out of your teammates.

2. They shoot bullets not cannon balls

In “Great By Choice”, Jim Collins talks about how great startup founders shoot bullets not cannon balls. This means that they take small risks, instead of putting their company all on the line. It’s never a good long-term strategy to take huge risks that could end your company. Instead, as a leader you should look to take tiny risks to validate an idea before diving all in. That way, by the time you need to fire a cannon ball, you’ve mitigated as much risk as possible. The startups you hear about that become billion dollar companies overnight are far and few. Most companies gradually build up. They take small planned gambles, and continue to keep learning. By starting small, as they build up they learn how the company achieved success. Ultimately this gives them them a better foundation to build the business on.

3. They Recruit A Great Team And Delegate

Risk averse leaders know their job is to keep the company in business. That means focusing on the greatest threats, and letting your team do the rest. Great leaders recruit amazing team members who don’t need much management. Then they focus on the greatest risks of the company. It doesn’t make sense for you to try to do every task yourself, because you won’t be able to focus on attacking the greatest threats. Instead, build a team that can essentially run without you. Then, focus a majority of your time on what will keep the team operating together as long as possible. Many times, this is raising capital, recruiting, or closing sales. By always looking to solve the greatest threats of your business, you build a stable company that can last the long haul.

By Aj Agrawal

Source: INC

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