Volatility and uncertainty have become a constant reality in the business environment. With the disruptions posed by economic risks, executive turnover, mass layoffs, climate change, reputational risks and even war, boards are paying more attention to CEOs’ risk behavior as a measure of a company’s ability to both withstand these challenges and manage the current environment, all while continuing to transform and create future value.
Of course, strategic risk taking must be a core capability of a successful leader. But there is a very broad scope around how we define risk. Strategic shifts are necessary if you truly want to transform, grow and accelerate value creation. However, the process of determining the level of risk, the utilization of data to support those decisions, and an organization’s pivot capability as it manages through implementation are essential factors in achieving success.
Companies that can make smart bets in ways that build value will have a competitive advantage. Therefore, it is critical to note that with all these uncertainties and disruptions facing businesses, the ability to take strategic risks is more important than ever. This raises important questions. What embodies calculated risk? And why is the ability to manage risk becoming a vital leadership skill for current and future executives?
I’m a huge believer that risk-taking and boldness are the essence of transformation. In an environment like today, if you’re not evolving, innovating and adjusting to changes in consumer behavior, technological advancements and the power of a data-driven culture, you’ll be left behind.
Mindy Grossman, Consello Partner
and former CEO, WW International
The idea of risk doesn’t just happen at the institutional level – it’s also something we practice at a personal level. For me, it became a reality when I chose not to go to law school and pursue a career in fashion, when I went to Nike to transform their global apparel business, when I chose to lead the transformation and turnaround of Home Shopping Network (HSNi) and when I partnered with Oprah to transform the Weight Watchers business and brand.
The ability to make acute pivots is crucial. Because if you’re not willing to disrupt yourself, ultimately, you’ll be disrupted.
This clarity was essential when I was CEO of HSNi, as we launched our new strategy, dramatically transforming the entire business model from a purely “sell” mentality to a focus on the future of editorial, programmed commerce and content.
The Need to Empower Women Forward and Upward
What do women in the C-suite and boardroom have to do with companies’ risk profiles? For starters, having women in leadership roles results in better business outcomes. Many recent studies point to the positive impact women bring to management: a McKinsey “Women Matter: Time to Accelerate” study found that companies with women on their management team had 48% higher earnings and 1.7x stock price growth over the previous two years.1 And a Harvard Business Review study concluded that having women on a company board, because of diverse skillsets and perspectives at the table, led to “better acquisition and investment decisions and in less aggressive risk-taking.”2
We might wonder what the mechanism is that leads to these outcomes; a lot of it comes down to the leadership qualities that are having the most positive impacts on businesses today. Traits that were once associated with weakness are now critical elements of inspired leadership – and these are traits that have historically been associated with women.
Vulnerability, empathy, trust and authenticity are superpowers that are now expected of leaders (and qualities that leaders like Oprah Winfrey exhibit in modern environments).3 When it comes to managing risk, we’ve seen that empathy, particularly, is a driver of innovation because it creates an environment that enables smart risks. When people feel secure and valued, they are more comfortable taking bold risks and are more honest when they face challenges. And when leaders are vulnerable and empathetic, they build trust, loyalty and a collaborative environment. That dynamic means colleagues can learn, iterate and improve. It also means risks are taken with a deep understanding of the company’s strategy because communication, engagement and transparency (also traits that are often labeled as “female”) can serve to galvanize the organization on the vision for the future. Given the radical reappraisal of the business world in the last few years, it’s important to be clear on what we value, the value of our time and the value of our impact – and that clarity must extend throughout the organization. This clarity was essential when I was CEO of HSNi, as we launched our new strategy, dramatically transforming the entire business model from a purely “sell” mentality to a focus on the future of editorial, programmed commerce and content. It was my role to communicate this new vision transparently up and down the organization and to reinforce the significant impact that it would have on engagement, customer retention and business acceleration.
With companies struggling to maintain talented women in their ranks, business leaders must future-proof their talent pipelines that enable women to get to the boardroom or C-suite and ultimately help support these better outcomes. That means, If you want to build an enduring culture while attracting, retaining and developing talent, you also need to embrace diversity and build a culture of belonging, co-elevation and allyship. It also can’t just be about women coming together to create opportunities for women (though that’s an important part of it). Women need strong male allies across the organization too.
“If companies don’t take action, they risk losing not only their current women leaders but also the next generation of women leaders. Young women are even more ambitious and place a higher premium on working in an equitable, supportive and inclusive workplace. They’re watching senior women leave for better opportunities, and they’re prepared to do the same.” – McKinsey 4
Talent is talent, and we won’t have great innovation if we don’t foster it. That idea extends to women entrepreneurs as well. We must be equitable if we’re going to have the future of business innovation we’re striving for. The legacy of hierarchical, “clubby” funding has to evolve. We must look at venture portfolios and identify where there isn’t diversity in the same way we do in the business arena.
When we can foster this talent, we empower women to be at their best – and that means bringing their best self to work. For a long time, women were encouraged to leave parts of themselves at the door when they came to work, but I believe that we need to bring our whole, authentic selves into any environment. And now we are seeing how these authentic voices of women bring beneficial outcomes when it comes to risk –when companies need them most.
Diversity – A Value Accelerator
The discussion of women in management leads to the benefit of all diversity throughout the organization. You will not drive long-term or even short-term value if you don’t embrace diversity as a business imperative for future success.
Diversity powers the transformation that companies need to become better risk-takers. In 2004, Frans Johansson published The Medici Effect, an academic study that created a powerful conversation around the thesis that diversity drives innovation. Diversity takes many forms, including race, gender, age, life stage, ethnicity, personal and professional experiences, identity and more. When you get a diverse group of people around the table, you’ll have conversations that might result in what I call “productive discomfort” at times, but it will ensure that the outcome will be alignment and clarity around critical decision making.
That’s one thing we found at Nike when we saw the need to focus on all aspects of diversity and inclusion within the organization in a time before ESG existed in name. I had the opportunity to establish the company’s first women’s leadership council and saw the impact it had on future leadership, retention and allyship. We saw that there is power in understanding the great impact of diversity of thought and ideas. Obsessive curiosity means that no matter what company we’re in, we need to stay connected and be able to listen to and surround ourselves with all the elements of diversity in a mutually respectful way.
It’s not enough to simply have a diverse team. Every voice needs to be heard as an asset within the company to accelerate change in alignment with the vision. Diverse teams create success altogether and through allyship. Mentorship at every level also helps to make others successful and ensures co-elevation.
As leaders, we must remain cognizant of how people are feeling and get regular temperature checks to make sure the environment we are leading is an empathetic, transparent one that fosters strategic risk taking. We also must lead from the front with acute self-awareness and vulnerability, sharing our own stories, creating a safe space and giving others permission to be vulnerable – which leads to more confidence to take risks. Vulnerability also enables people to feel comfortable in owning their mistakes so they can grow (and so the organization can become more responsive).
Of course, a lack of diversity (or, worse, an outright rejection of it) is a significant liability. We recognize how everything is a reflection of us as leaders, our brands and our integrity. That reality makes the need for diversity in C-suites and boards even more paramount.
Part of empowering diverse teams is eliminating behavior that runs counter to an inclusive culture. No matter how smart or talented someone may be, we have to have an extreme rejection of toxicity in the workplace because people won’t want to work there. And you haven’t created anything if you’re losing people due to a toxic environment.
Business leaders can’t see into the future, so they must make calculated risks that align with their business priorities. Part of why having women in leadership roles is so important now is because of the intense uncertainty businesses are currently facing. There’s no magic wand to define which risks to take at any given time. That’s why it’s important to have a clear, long-term strategy with the flexibility to constantly pivot because there will be new information and data available every day that may change your actions.
When I was a CEO, I woke up in the morning and was immediately informed on every aspect of what was happening globally. What could potentially impact or disrupt our business? Are there new political threats or even war? Are there competitive threats? Is climate change affecting the supply chain? Or, as we saw last year, are all these disruptions happening at once? We have to be able to absorb and manage all that information as leaders in our environments. It’s our responsibility to galvanize and communicate our vision for the future throughout our organization so these external disruptions don’t derail our strategy.
For example, when I was at Weight Watchers in the first days of the pandemic, we didn’t want to leave members without support in what was becoming a more and more uncertain environment. We galvanized the entire organization from Product, to Tech, to HR, to Operations and successfully shifted our 30,000 workshops across 13 countries to be virtual in just six days. Our commitment to empathy and care, as well as the strategic investments we had made in technology and innovation was why the organization was able to execute and have both human and business impact for the future.
This experience was just one example of leading in a time of crisis while steadily communicating the future vision and path to achieve that vision – even while managing moments of extreme disruption.
Business leaders are constantly in a cycle of resetting, reevaluating and readjusting. We are thinking every day about how we can be disrupted and how we can disrupt ourselves. Fortunately, if we figure out how to disrupt ourselves before our competitors or outside forces do, it means we can embrace uncertainty rather than fear it. That mindset includes always expecting the unexpected, rethinking who our competition is and conducting constant and radical reappraisal, testing and iteration.
As we embrace uncertainty, we have to develop capabilities around how we use data to turn insights into action (with speed) when it comes to analyzing risks. That process means we can use innovation for impact by setting measurable and actionable goals toward a winning outcome.
The timing of this discussion is apropos. After consecutive years of pivot (2020), perseverance (2021) and purpose (2022), the theme of 2023 should be prioritization as the world shakes out from an intense period of disruption.
Expansive Vision, Radical Focus
Taking strategic risks means simultaneously being able to pivot deliberately while staying focused on the ultimate outcome. In other words, you must have an expansive vision and radical focus to successfully transform.
In practice, that posture means having agility, self-awareness and the ability to see around corners. Leaders must be comfortable admitting when they have to pivot while never losing sight of the ultimate outcome.
Because of this hypervigilance, leaders must also practice ultimate discretion and be diligent around the risks they are willing to take. In other words, know what to say ‘NO’ to before you decide what to say ‘YES’ to. I learned a lot in 2008 as CEO of HSNi when I spun out of IAC and took the company public two weeks before the Lehman Brothers bankruptcy. As a first-time public company CEO, I was dealing with an economic crisis, working with a newly formed board, making hard decisions on what NOT to do, and simultaneously being extremely diligent and strategic on protecting our efforts around technology investment, innovation and culture. That was essential to our ability to have HSNi continue on our growth and transformation strategy and actually allowed us to accelerate our trajectory. Taking risks in this type of environment is not just about operating the business. It is also about managing culture and creating an environment where people are positive and have belief in the future. I consider myself a self-professed “resilient optimist” and spent a great deal of my time communicating to the organization why we were focused on the “risky” things, how we were using internal and external data to inform our decision making, taking the right level of risk and making the investments – it was an exercise in hard decisions with a focus on innovation and strategic investment. With what everyone has lived through in the last few years, the ability to think of how you keep transforming is very important. Rigid structures are a thing of the past and quick thinking informed by data is a new requirement.
Uncertainty can be anathema to progress if you’re not managing appropriately. You must bring clarity of vision and have the support of your board for that vision. Organizations that can pivot readily and utilize data to inform decision-making can be more successful when taking risks.
The Ultimate Outcome
There is always a certain amount of risk in business, but it has to be aligned with the balance of growth, profitability and long-term value creation.
The lessons of risk also emphasize the need to marry culture and strategy. Business leaders and their boards must have a shared vision. They must commit to making others successful. To carry out that vision, they must surround themselves with a talented and diverse team. Who business leaders choose to work with is a reflection of their leadership, their brand, and ultimately their integrity.
The businesses that will have a competitive advantage in the next decade will be the ones that know when to take risks and the scope and scale of those risks. That means companies with visionary leadership, a true commitment to diversity, alignment across all constituencies and both a data-driven and innovative culture, will have an edge. And when they bring these elements together in the right way these businesses will have the ultimate outcome – outsized performance and sustainable success.
Desvaux, G., Devillard, S., Zelicourt, A. de, Kossoff, C., Labaye, E., & Sancier-Sultan, S. Women matter: Ten Years of insights on gender diversity. McKinsey & Company. (2017, October 4). Retrieved from https://www.mckinsey.com/featured-insights/gender-equality/women-matter-ten-years-of-insights-on-gender-diversity
Chen, J., Leung, W.S., Song, W. & Goergen, M. Research: When women are on boards, male CEOS are less overconfident. Harvard Business Review. (2021, September 17). Retrieved from https://hbr.org/2019/09/research-when-women-are-on-boards-male-ceos-are-less-overconfident
Ignatius, A. & Koehn, N. Real leaders: Oprah Winfrey and the power of empathy. Harvard Business Review. (2020, April 8). Retrieved from https://hbr.org/podcast/2020/03/real-leaders-oprah-winfrey-and-the-power-of-empathy
McKinsey & Company. Women in the workplace 2022. (2022, October 18). Retrieved from https://www.mckinsey.com/featured-insights/diversity-and-inclusion/women-in-the-workplace
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