How risk taking should be actively pursued by organizations, changing the attitudes of their employees.
Researcher: Pedro Neves
“Here lies a company that died risk free”. This is the epitaph of many companies, according to Donald Keough, former president of Coca Cola. A recent article by Nova SBE Professor Pedro Neves, investigates how risk taking should be actively pursued by organizations, changing the attitudes of their employees.
Risk taking involves actions with an uncertain outcome, but potential high returns. As global competition has increased, many organizations have responded by asking managers and their staff to innovate products and services that offer greater opportunities for profit, but at an increased danger of financial loss if such initiatives fail.
Risk-taking can be helpful
Because risk taking, when used prudently, can be helpful to both new and well-established organizations, understanding the factors that shape its occurrence in employees has both theoretical and practical importance. Employee risk taking represents a willingness to withstand uncertainty and mistakes as one explores new ideas, advocates unconventional or unpopular positions, or tackles extremely challenging problems without obvious solutions, in order to increase the likelihood of accomplishment. In this article, Pedro Neves and Robert Eisenberger, sought to examine whether employees’ perception that the organization values their contribution and cares about their well-being, is positively related trust in the organization to respond benevolently to failure, and therefore promote risk taking behavior on behalf of the organization.
The study sample comprised 346 employee-supervisor dyads from a variety of organizations operating in Portugal, beyond the constraints and specificities of a particular organization or industry. The authors found that as employees’ perceived organizational support increase, so did their trust that the organization would be benevolent in case of failure, with consequences for risk taking. Additionally, Pedro Neves and Robert Eisenberger found that supervisors significantly contribute to their employees’ sense making process, as a relevant source of information concerning the work environment. That is, employees use their supervisor’s attitudes toward the organization as guidelines for their own attitudes and behaviors. When supervisors believed the organization was trustworthy in situations with a high likelihood of failure, employees’ perceived organizational support had a stronger relationship with risk taking, via increased trust in the organization.
Ways to encourage risk-taking
Overall, these results have several implications:
1. When employees see their organizations as highly supportive, they feel safer (as they trust the organization more) and thus engage more frequently in initiatives that encompass risks.
2. Leaders play a key role in modeling risk related behaviors in subordinates, by lending legitimacy to the acceptance or avoidance of risks.
3. Therefore, organizations should make an effort to: a) increase perceived organizational support through such means as support from managers, fairness and generous human resources practices; b) provide supervisors with similar socio-emotional resources, as their influence affects how their subordinates interpret their work environment.
While the degree of optimal risk may vary substantially by job type and organization, making it a “conditional good”, this research shows how organizations may help promote employee risk taking on its behalf.
This article is based on:
Neves, Pedro and Robert Eisenberger. 2014. "Perceived Organizational Support and Risk Taking." Journal of Managerial Psychology, 29(2), 5-5.
Know more about Pedro Neves, Assistant Professor at Nova SBE.