Risky Business

HR has a reputation for being “risk-averse”.  It’s a reputation the profession often deserves, with  “no” frequently being the standard response to a managerial request, usually followed by 57 reasons why it can’t be done. (If you doubt this, take a look at some of the HR debates on LinkedIn, where it sometimes seems there’s a competition to be most negative about an idea).

But since any business (whether for profit or not) operates on a degree of risk or uncertainty, why is it that HR can’t operate in the same way? We talk a lot about “learning from failure” but frequently don’t practice what we preach.

Of course, no-one is suggesting that HR people should act like the banks in the run up to the financial crisis, taking foolhardy and dangerous chances that are unlikely to come off. But a calculated approach to risk recognises that there are times when doing something different is the right option.

So, how do you know when and how to take a risk? Sometimes, it’s simply the benefit of experience, but if you want to start taking a more calculated approach then one way is to test out your idea using the Palchinsky Principles, developed by a Russian Engineer and popularised by Tim Harford in his book “Adapt”.

In a nutshell, these are:

  • Actively seek out new ideas and ways of doing things (and expect that some of them will fail)
  • Try them out on a scale where failure is survivable
  • Get feedback and learn from your mistakes.

In many respects there’s nothing radical about the first and the third. But it’s the second one that can help turn you from risk-averse to a calculated risk taker. Use pilot projects, try things on a small scale at first, or make changes that can easily be unravelled if they don’t achieve the desired results. Ask yourself, in the manner of Dr Pepper: “what’s the worst that could happen?” – but don’t use this as an excuse not to do something, rather as a way of gauging how to test it.


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