Dealing with risk is a situation that is fraught with emotion. Depending on one’s style, confronting risk can produce feelings of fear or of eager anticipation. Or both.
The Story: Rick
The firm is consistently ranked as number 1, 2, or 3 in almost all of the businesses in which it participates. Yet Rick’s area ranked number 12, and that was in a good year. This deal would move them ahead by several steps and take them closer to the top tier. After months of hard work, Rick’s team was ready to present the deal to management. It was a fairly complex arrangement, but Rick felt confident that he knew what risks they would face. He had suitable contingency plans and believed that the worst-case scenario would be to break even. The upside potential was enormous in terms of revenue but was more important in terms of the markets the deal would open up for the firm.
The final presentation before sign-off went extremely well. The questions were probing and serious, but Rick and his team handled all of them. They listened to the questions, understood the concerns and politics behind them, and addressed the underlying issues.
At the end of the team’s presentation, the chief operating officer (COO) of the unit, stood up, shook his head, and said, “This was a great effort, folks. But it’s not in the firm’s interests to proceed in this direction. I’m not faulting your work, mind you, but I can’t allow us to take on this type of risk. It’s not a fit with where we want to take the business.”
There may have been more, but Rick wasn’t listening; nor was anyone else on the team. They were blown away, not only by the decision itself but by the quickness of it. “How the hell could he have thought about it?” one team member wondered later. “There’s no way he was ever going to do this. We were set up, big time!”
The Emotionally Intelligent Manager Analysis
“It’s not a fit. . . . ” How many business decisions have been made with those words as a justification? In this case, that justification was based on fear, perhaps exaggerated fear about risk.
Upper management had a zero tolerance policy for failure in this business; someone was fired when any deal, no matter what the reason, did not pan out as expected. And this is in a business in which reasonable risks must be taken in order to remain a player. In other lines of business the firm participated in, losing money was accepted as part of the cost of growing the firm and achieving market share.
Why was Rick’s management so fiercely opposed to taking on risk? The story of this emotion begins in the late 1980s, when (or so the story goes) a rogue trader lost $300 million for the firm. Ever since that incident, management has been wary of getting into this particular business in a major way. The painful memory of the loss lingers on, many years after the fact, and it paralyzes the group. Rick believed that it was an unreasonable fear. He believed that the nature of his deals were different from the area of the business victimized by those big losses of decades ago.
A Plan for the Emotionally Intelligent Manager
Rick identified the fear of the top management team, and he knew what he was up against. Exhibit 13.5 illustrates what happens when the COO is afraid. The fear must be addressed, but it might also be in Rick’s interest if the emotions delineated in Exhibit 13.6 were created in the COO and team, with the described impact on their thinking and decision making.
Once the COO and his team are in an accepting state, they will likely be more open to other ideas. They are feeling less threatened and defensive and don’t perceive Rick and his plans as threats.
With the openness that comes from a feeling of acceptance, Rick can begin over a period of time to raise issues and ideas and plans for general discussion. Although this can be done in a highly manipulative fashion, if Rick is really good at generating these feelings, he will also establish a good deal of emotional empathy for senior management, to feel what they feel and then to share, or at least understand, their perspective.
Ideally, Rick’s perspective will change as well, as he will come to incorporate some of management’s views and feelings. His team will generate deals and present them in such a way that they are more in line with the needs of the firm, as opposed to just being great deals from their own perspective.
If all goes well, we might expect that senior management’s feelings and Rick’s team’s feelings will be similar and that the emotional intelligence work will result in the feeling of happiness—perhaps even joy. Joy, in turn, says to everyone: “That was great, let’s do it again!”
The Outcome and Lessons Learned
After several more meetings in which Rick highlighted the relative safety of the deal, the COO tentatively approved a scaled-back version in which the firm would play a minor role. Rick seized the opportunity, despite his disappointment, figuring that being a minor player was better than not playing at all.
A few months later, though, when firmwide revenue did not meet analysts’ expectations, Rick was told to cut his staff back by 20 percent. That was easy, since several people on his team had already read the writing on the wall and were actively engaged in a job search. Five staff people agreed to leave the firm, with a decent severance package. At the same time, the deal flow survived, as did the group as a whole, benefiting the individuals, the team, the clients, and the firm.
The fearful mood of the leadership team was not based on current events; it was a left-over mood from a financial disaster in the firm’s ancestral past. Fear-motivated decision making, as rationalseeming as it appeared, was neither rational nor emotionally intelligent. When Rick identified this mood and its cause, he could address the root cause of the decision-making impasse. He didn’t ignore the data of these feelings but incorporated the data into his proposal and discussion.
It’s important to recognize that you simply don’t have a choice when it comes to dealing with feelings. Emotions are woven into our everyday lives as managers, employees, customers, and leaders. This emotional world can be a difficult environment in which to manage, but its very complexity makes it an exciting and rewarding challenge to face.
The Emotional Blueprint doesn’t provide you with handy answers to life’s complex questions. Don’t look for it to give you quick recipes for emotional situations. Instead, leverage this analytical tool to help you view your role differently and to give you the insight you need to do the right thing.