Incresing Risktaking in Organisation

The most salient reason why individuals in organization don’t take sufficient or expected risk is they are much better of when not taking any risk. The root of that attitude comes from several biases, making people guilty and responsible for any failure as well as invoking punishment, than nobody likes.

Their name: hindsight bias and attribution error

Top managers (as well as everyone else) experience 100% clarity of hindsight. Events often seem inevitable after the fact, even though they might have been very hard to predict beforehand. The more time elapses, the more we think that we predicted, or could have predicted, the eventual outcome. Increased by the tendency to explain events in terms of people’s actions and traits rather than situational factors this two biases create a great risk for initiator of project or any risk-bearing step to be credible for any shortcoming.

To eliminate that kind of malpractice from a company I would suggest implementation of following policies and practices:

• All projects and initiatives must be documented and subject to formal decision making process with especial attention to assumptions, probabilities of different event, assessments of risk, separation of external influence and it’s likelihood by a group of managers. It’s to be done to separate problems of implementation and management mistakes.

• Initiators must not afflict penalties for bad outcome caused by exogenous factors as a part of corporate policy and culture.

• When assessing results focus must be on considering causes other than people, especially the people who are likely to be closest to the problem.

The cost of implementing procedures includes:

• Longer decision making process

• Education