• James Walton

Managing the Risks of Your Decisions

It's the burden of leadership to make decisions with incomplete information where the outcomes are uncertain and the stakes are high.

If you aspire to leadership, you'll need to get comfortable navigating the consequences and probabilities of potential scenarios.

Another mental model that's guided my behavior is to think in terms of upside and downside.

For instance:

  • Driving: the upside of speeding is arriving at your destination a few moments quicker. The downside is an encounter with highway patrol, or worse, an accident. Given that the rates of injury and fines increase significantly at speed in excess of 20 miles over the legal limit, it rarely becomes worth it to drive that fast.

  • Investing: if the upside of an investment is 100x, and the downside is that it goes to 0, then determine the maximum loss you care to experience without materially harming yourself or your relationships and risk no more than that. (A particular risk for those who trade stock options is theoretical unlimited losses.) For most people, going to the moon isn't worth the ulcers that ride requires.

  • Managing: the upside of pressing your team for results by commandeering weekends and demanding an "all hands on deck" approach results is short-term outputs that can prove very valuable. But the downside of that same approach, if used consistently, is burnout, lack of engagement and turnover. Over time, these behaviors more than cancel out the gains they seek to realize.

Not every situation can be solved this way. But every situation can be assisted by asking the questions: what's the downside of this decision? What's the likelihood and severity of that downside?

 

At Trellis Group, we believe chaos is the enemy of the small business. It's our mission to partner with small business owners and their teams to develop the managerial practices and processes to crush chaos. If you feel overwhelmed and need a proven system to focus on the next best thing, we can help. Companies who work with us see revenues go up, anxiety go down, and work becomes a force multiplier for good in the lives of your people. Reach out to discover how the Trellis Group can help you crush chaos.

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