Q. I’m on a task force to consider a major new venture for our company. It means risking significant capital, and we could use some guidelines for the options to decide if this risk is worth the investment. Can you advise us? —Eleanor M.

A. Risk-taking is part of life; we can’t grow ourselves—or a business—if we don’t take risks. (Even the turtle doesn’t make progress until he sticks out his neck. With each risk, we have to move outside our comfort zone, and that naturally makes people—and companies—uneasy. One of the best authorities on risk-taking that I’ve discovered is Herbert S. Kindler, Ph.D. His book, Risk Taking for Decision Makers (Crisp Publications) can be a great guidebook for you. He begins with three guidelines for taking risks:

• Sometimes you’ll fail.

A store buyer once bought $50,000 worth of new-style swimsuits. They didn’t sell well. When his boss asked

what he learned from the experience he said, “You mean you’re not going

to fire me?” The boss said, “That wouldn’t be smart; we’ve just

invested $50,000 in training you.”

• Change the odds if the risk is too great.

If you have major doubts about a risk you’re considering, change the odds. Get more facts; build more control into the outcome; balance the risk with an outcome you can count on; spread out the consequences if you fail.

• If you can’t handle the loss, don’t take the risk

Problem gamblers never learn this lesson. For example, if you know you’ll suffer major consequences by buying a stock and it fails, don’t buy the stock.

Define Your Objectives.

Once you’ve decided to go ahead, clarify your objectives: drop, replace, or add to, an existing product or service.

Evaluate Your Options.

For each option, project the probability of success for a “safe” decision (you’re more sure of the outcome) or a “risky” decision (you’ll have more variations in the outcome you expect.) Put a dollar figure on each outcome, and multiply each by your estimate of the probability of success. For example, if you expect an outcome of 50,000, and the probability of that happening is 80 percent, multiply the $50,000 by .80. This means you can project a value of $40,000 for that option.

Plan Your Strategy.

Will this venture be step-by-step actions along a path you’ve taken before? If so, develop alternative options that you can implement step-by-step. If your venture is a totally new way of doing things, you’ll need to create new steps, new actions, and you might consider hiring an outside consultant—someone with no cultural or organizational biases—to help you develop the steps.

Choose a Decision Process.

You generally have four ways to make a decision, and you must choose which one(s) will work best for this venture:

One person has sole decision-making responsibility.

Two or more people share their views, and decide with consensus.

Negotiating—two or more parties bargain with offers and counter-offers.

Formula—

two or more parties agree to decide by an objective method (vote, lottery, formula (like expected outcome; force-field; paired comparisons, weighted voting, etc.)

Improve the Reward/Risk Ratio

For each decision, consider four factors: How long it will take; what it will cost; how reliable the outcome; how important the outcome. Applying these factors

to each option should give you even more information about the best choice.

For reliability, ask if you’ve consulted multiple opinions from a variety of sources.

Has there been any bias involved? Has anyone tried to make the process smoother, by presenting only the good news? Did anyone in power censor or intimidate from presenting any bad viewpoints?

For relevance, ask, “How much do we stand to lose with each option; what’s the likelihood of a loss? If there’s a loss, how can we lessen its impact?”

Finally, intervene at any stage to influence the outcome; share the risk with others to limit the maximum loss, and build in safeguards to limit any loss (like automatic shutdowns when a certain limit is reached.

Overcome Any Barriers

For each option, identify the barriers that could stop or harm the process. For example:

Barrier 1: Ignoring the moral consequences of your decision. You can overcome this by clarifying the values of the stakeholders for each option: profit; safety; recognition; promotion; status—whatever.

Barrier 2: Feeling pressured. You can overcome this by re-interpreting the facts (we’re not dropping a favorite product; we’re developing one customers will like ever better.) You can also help people release any anger or resentment for the options, and get outside support or resources (like hiring more people to handle the changeover) to help ease the pressure.

Barrier 3: Failing to access available information. Overcome this by encouraging people to express differing or negative viewpoints safely.