One man’s risk taker is another one’s high performer, but you need to balance teams to create effective, sustainable success, says Geoff Trickey.
The City was divided about Bob Diamond, the new CEO at Barclays, and so were the politicians and the media. For some he is the apotheosis of the dangerously reckless bankers who have recently taken the world of finance to the very brink, and all global prosperity with it. For this faction his sins are beyond redemption; pension funds have been decimated, reserves dissipated, national debt exponentiated, futures blighted and retirements ruined. Even the gallows would be too good for him. According to The Independent, he ought to have been branded ‘the most dangerous man in Britain’.
To others, Bob is the acceptable, nay essential, face of enterprise. He is the swash-buckling adventurer that is needed to kick some ass, wake up the sleeping dragons of enterprise and to get the banks out of hock and into a beautiful future in the black. He will get done what needs to be done and, if he makes himself another £M50 in the process, good luck to him – he will have deserved it.
Bob certainly has an interesting history of involvement in big risk deals. Clearly, as his current stack of chips indicate, he has been successful so far. But to what extent has this been due to exceptional judgement and timing, and to what extent pure luck – being unable to get his doomed bet down before the call of ‘Rien ne vas plus’, or being that shadowy figure beyond the stark light of the poker table who just couldn’t get into the game?
In short, is he really reckless, or are his decisions measured and carefully considered? Does he read the runes, weigh the consequences and make breathtakingly accurate predictions or, does he see only the red mist of feverish excitement resulting from an addiction to risk fuelled by ready access to other people’s money?
Hold on a minute though; aren’t these questions that could be asked of any manager or leader? Well, O.K., perhaps in more moderate terms, but couldn’t they? A person’s willingness to take risks and the way they deal with risks that are thrust upon them will be characteristic for each individual and will mark them out from their peers. In fact this debate really affects us all. How safety conscious are YOU? How wary, impulsive, cautious, adventurous, calculated, prudent…..? Whether we are alarmingly reckless, frustratingly risk averse or somewhere in between, we all have a characteristic disposition towards risk and our nearest and dearest will certainly know it. Maybe it is our subconscious awareness of this personal relevance and the ubiquitous nature of these issues that arouses such passionate views about Bob and the Barclays headline?
The backdrop for the Diamond story is the unprecedented financial crisis and a series of incredible events involving toxic debt, Frankenstein bonds, rogue traders and a shift in public awareness that transformed the stereotype of a banker from Captain Mainwaring of Dad’s Army to Gordon Gekko of Wall Street, complete with the “greed is good” catch phrase. But, funnily enough, it’s usually the system, the legislation, the regulation – anything but the individual involved – that gets the blame. The real surprise is that it has taken so long to recognise the role of the human risk factor.
We are only now beginning to get to grips with these crucial individual differences in a way that demystifies them and forewarns us of their likely behavioural consequences. Research now tells us that our appetite for risk is part of our nature and that our Risk Type draws something from each of the major themes of personality.
Appetite for risk can be assessed. The Risk-Type Compass is an assessment process based on these findings and on psychometric principles of measurement.
It allocates people to one of eight distinctive Risk Types. Of course we don’t know Bob Diamond’s Risk Type but if, for example, we knew whether his risk taking was more planned and deliberated than impulsive and head-strong, or if we knew that he was well tuned to the nature of the risk rather than blithely oblivious to it, or if we knew that his risk taking had grown out of experience rather than being hard wired into an impetuous nature, it might just make the difference whether we join the lynch party or the adoring fans.
According to Geoff Trickey, managing director of Psychological Consultancy Limited, an individual’s Risk Type can be the secret of their success or the catalyst of their own (or, as recent events have shown), their organisation’s downfall. Yet organisations have neglected to assess the risk profiles of the managers they appoint, even though, for any business, risk is a key ingredient for business success or failure. While a person’s immediate attitude towards risk can flex and change, their underlying personality remains consistent. When things get tough and they are under serious pressure – or when heady success leads to hubris and feelings of invulnerability – judgement will be replaced by instinct and they will revert to type. Organisations need high risk takers and they need the balance of the more cautious Risk Types too. They need to recognise this aspect of human risk exposure and to evaluate how individual managers, potential leaders and CEOs will cope with risk in today’s challenging environment. Sustainable success comes when people are selected for roles that are best suited to their Risk Type.
Geoff Trickey is Managing Director, Psychological Consultancy (PCL)