“If you make more when you are right than you are hurt when you are wrong, then you will benefit, in the long run, from volatility.” – Nassim Nicholas Taleb
Most people think volatility is harmful. Volatility, uncertainty and error lead to unpredictable outcomes. This can be a major cause of stress. But volatility will help you if you have options that allow you to profit from the upside without bearing a large cost from the downside. Options provide freedom of choice. You act on an option only if it benefits you.
Smart leaders spur their teams to generate options outside the comfort zone. They continuously fight fear to create a culture of safety in their teams and organizations. This frees people to experiment with different approaches, uncovering new options. They know that others have got their backs should things go wrong.
Safety is found not by avoiding volatility, but by learning how to thrive in a world that is quirky and unpredictable.
Organizations with a culture of psychological safety will benefit, in the long run, from volatility. Each time an unpredicted event occurs, the organization can respond by choosing the option from which it will benefit most in the new situation—growing stronger in the process.
Stress may be unpleasant but up to a point stress is good for us. Stressors provide vital information needed to improve. People and organizations learn what works and what doesn’t mainly through shocks and setbacks. I thought I was a pretty good sailor until I had to reef a sail singlehandedly in a storm! But I was a better sailor afterwards. Without the volatility of the storm, I never would have had the chance to develop my skills.
A highly-motivated, diverse team has inherent optionality. When one person is stuck, someone else will jump in with a different perspective or a new approach to get the team moving again.
Ways for teams to develop options include:
- Train more than one person for each skill so there is a backup resource for every task
- Recruit people with diverse backgrounds who will see (old) problems in new ways
- Consider multiple perspectives before every decision to ensure the needs of diverse stakeholders are met
- Distribute knowledge throughout the team to avoid bottlenecks where only one “expert” knows the answer
- Foster a feedback culture that encourages people to speak out with any concerns about the quality of the work or the welfare of the team
If options are so great (and cheap), why do we find it so hard to weave them into the fabric or our teams and organizations?
The answer became clear to me through my recent client work. Several times in the past few months, I have stood face-to-face with the enemy of personal and organizational growth—the three-headed beast known as FUD (fear, uncertainty and doubt).
When we are afraid, we ignore options and cling to the status quo. When decisions are fraught with uncertainty and doubt, the safest thing may be to do nothing. (Like poor Buridan’s donkey stuck halfway between two piles of hay, unable to decide which to eat first and thus starving to death.)
Sometimes, waiting is indeed the best choice. However, inaction should not be based on fear, uncertainty or doubt. The decision to intervene or not to intervene should be made after rational consideration of the risks of acting versus not acting. The most important question a leader needs to ask her team before acting is, “will implementing this option make us stronger in the long run?”
What’s to do?
Stir it up. When everyone on the team is quick to agree on what to do next, watch out! Chances are, people haven’t given the problem enough consideration. Encourage debate by taking a different perspective and examining the problem from another point of view.
Ask hypothetical questions. A good way to shift perspective is to ask questions such as “What would the customer say about this proposal?” Or “What consequences would event X have on this approach?”
Consider three alternatives. Most of the time, we decide for or against something. Should we implement the software or not? Do we move into the new market or not? Dualistic decisions miss opportunities to do things different! Before deciding yes or no on any issue, ask “what other alternatives exist to reach the goal?”
Create options through experiments. Experiments are little bets you make to secure big wins. Most breakthroughs occur only after a series of tinkering and experimenting. Each experiment gives you an option. If you like the result, adopt the approach. If you don’t like the result, try something else.
Dare to do nothing. Teams with options will grow stronger over time. As long as you have options, you need not rush into action. (False) urgency causes unnecessary anxiety and leads to poor outcomes. Consider the risks and costs of acting versus not acting before intervening.
Know when to hold ‘em and know when to fold ‘em. An option is useless unless you recognize the benefit and act on the option at the right time. When a junior team member asks a question that rattles the status quo and opens the door to new solutions, walk through the door!
Taleb, N. N. (2012). Antifragile: Things That Gain from Disorder. New York: Random House.