Are your leaders risk takers?

January 16, 2013 | By | 1 Comment

In a recent Australian Financial Review article I spoke of three attributes shared by high potential leaders (see: Executives at the peak of their game).  These included mental agility, emotional stability and quick, but well-considered, decision-making.  Andrew Cornell’s widely read article explored why some ‘alpha’ executives pursue highly challenging and often risky activities outside of work … for example, the corporate executive turned weekend rally driver.

Are your leaders risk takers?This apparent paradox has been a topical issue for Boards, CEOs and headhunters for many years.  After all, an executive’s appetite for risk can mean the difference between business success and failure.  The rise and fall of Nathan Tinkler or the UBS rogue trading scandal are two very public examples of excessive risk appetite.  But what defines the line between those who take the risk, and get the reward, versus those who overreach and do themselves and others damage?

Our appetite for risk is driven by a neurobiological approach-avoidance motivational system.  Put simply, we have a ‘hard-wired’ preference to either pursue rewards or avoid threats.  Some people with their ‘eye on the prize’ become blind to all other distractions.  For others, self-preservation leads to ‘playing it safe’ in unfamiliar settings.  People with strong preferences either way demonstrate overly impulsive or restrained behaviours, respectively.  Such strong preferences also result in heightened emotions, from the nausea and anxiety in preparing for the challenge to the adrenaline and excitement as the prize looms near.

These innate drivers of human behaviour and emotions are as relevant in the office as they are on the race track.  However, each environment provides different risks and rewards.  It’s not hard to distinguish the exhilaration from the boredom when comparing parachuting with a typical team meeting.  No wonder many executives with a strong approach orientation are attracted to the excitement most challenging activities provide.  So, are these executives wanton risk takers?  The answer depends on their capacity to keep their desires and emotions in check.

Self-regulation holds the key to executive success.  One’s ability to remain open to different perspectives while remaining focused on their goals requires a high level of mental agility.  By this I mean the capacity to mentally process contradictory or ambiguous reward and threat information while under pressure.  To varying degrees we are all limited in our capacity to do this.  And our emotional reactions further tax our scarce cognitive resources.  Those with poor self-regulation often make ill-considered, rash decisions that are coloured by strong emotions (both positive and negative).  These hasty decisions lead to impulsive, risk-taking behaviour.  However, excessive self-regulation can lead to delayed decision-making and procrastination.  High potential leaders are skilled at switching their attention between various mental tasks, while maintaining an even composure and a balanced approach to risk and reward.

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Comments (1)

  1. Owen Gill

    Thanks Michael – yes, I read the AFR piece. A cogent statement, for a general audience, of the qualities that make a difference, OG

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