Episode 6: Conduct Risk Assessments: How to Balance Courage and Caution

Description

It’s often said that the biggest risk is not taking any risks. In this episode of Veteran Led, John Berry describes the delicate balance between taking a leap of faith, and stagnating when confronted with tough decisions. John will explain how stepping out of one’s comfort zone and embracing new challenges provides both soldiers and business the ability to cultivate resilience. By assessing risks, companies will learn how to operate in complex and challenging environments while maintaining safety and achieving objectives.

Transcript

Welcome fellow veterans. From the tip of the spear to in the rear with the gear, I went from active-duty Infantry to reserve-component logistician. I’m your host, CEO, entrepreneur, trial lawyer, and Lieutenant Colonel Retired, John Berry. The military lessons that I learned helped me grow an eight-figure business that has maintained consistent annual double-digit growth, landing on the Inc. 5000 list of fastest growing companies in America every year for the past seven years, and has allowed me to continue to serve America’s heroes.

Welcome to episode 6: Conduct Risk Assessments: Leaders Take Risks and Leaders Mitigate Risks.

Leaders take risks. But they do not take stupid risks. This was the first piece of advice I received as a brand-new second lieutenant. My father and I had driven cross country to Fort Benning, where my father went to the Infantry Officer’s Basic Course several decades prior. When we arrived, we went to eat at the officer’s club, we went to the bar. And sitting at the bar, was a full bird Special Forces colonel and my father struck up a conversation immediately because my father had defended members of the 5th Special Forces in Vietnam in a famous murder case, which my father later wrote a book about called, “Those Gallant Men: On Trial in Vietnam.”

And in fact, here’s a picture of them, just behind me. My father continued to talk to the colonel about all sorts of things Vietnam-related. And finally, he turned to the colonel and said, you know, “This is my son. He’s a brand-new infantry lieutenant. What’s the best piece of advice for him?” And the colonel said, “Look, leaders take risks. They don’t take stupid risks. What you need to understand is that when you are in charge of soldiers, there is a risk of action, and if you take action, you may get your men killed. But there is also the risk of inaction, that if you do nothing, you may suffer more deaths and more casualties. And you, as a leader, must decide. And you must understand that every action has risks.”

Well, shortly thereafter, I’m in, sitting in Building 4 in Fort Benning, learning about the DRAW, right? And I think it was called something different then, but the Deliberate Risk Assessment Worksheet, where we talked about risks, and then mitigation of risks. And it seems silly, at Fort Benning for the entire year I was there, every day there was a risk assessment sheet, and the weather was always a risk; it was always hot. Yeah, no kidding, right? That’s what we were always told to drink water, drink water, drink water, because they wanted to ensure that we mitigated that risk. And so, if you think about even the simplest training, like going to the firing range, there’s a chance that there will be a catastrophic injury, that someone gets shot in the face. So, we do certain things to mitigate that risk. We ensure that all commands are taken from the tower, we have lane safeties, you’re rodded on the range, you’re rodded off the range, and throughout the entire process, risk mitigation is built in so that the actual residual risk of running a range is much lower.

So how do we calculate risks in the civilian world? Well, there’s a famous story that I like, and it’s told by Keith J. Cunningham in his book, “The Road Less Stupid.” He talks about Warren Buffett in a golf game. Now, this is interesting because I’m from Omaha, so I’m a big fan of Warren Buffett. When Warren was playing, someone said, “Hey, Warren, I’ll bet you your $20 to my $20,000 that you can’t get a hole in one. And Buffett turns to the man and says, “No.” And the guy says, “Warren, are you kidding me? You’re worth billions of dollars. $20 is nothing to you.” And Warren Buffett turns to him and says, “Stupid in small decisions becomes stupid in big decisions.” I think that’s very important in any organization because the decisions you make and your approach to risk is part of your culture. And if you’re careless with the small decisions, your team may be careless with the big decisions. You as a leader, set the tone, set the culture and set the risk tolerance.

So, what about failure? Right? Because as leaders, a lot of times we’re scared to fail. And we know that in combat failure could be death. Failure could be a serious catastrophic injury. Failure is necessary for success. Now, not every opportunity is a bet the company opportunity. And when a lot of people talk about failure in business, they talk about entrepreneurs, but the truth is the biggest companies also embrace failure and embrace opportunities; they’re just smart enough not to bet the company on new ideas that may not work.

In 1985, Coca Cola introduced New Coke. It was a colossal failure. And within weeks, they were scrambling to get back to the original Coke, which is now called Coca Cola Classic. Similarly, McDonald’s spent over a hundred million dollars marketing the Arch Deluxe, which was also a colossal failure. Ford, in 1957, failed with the Ford Edsel and they invested something like $400 million, and the vehicle only lasted for three years before it went out of production. Keurig, the coffee machine that a lot of people have at home, they tried to make what was called Keurig Kold, a soda machine, absolute failure.

But the point is these huge failures, while they were very public, did not destroy the companies. And the leadership knew that, yes, we’re taking a risk here by trying something new, but we’re not going to bet the farm. We are going to mitigate this risk and ensure that we continue with our other products, and we ensure that we have a profitable product line before we try something new.

With smaller companies, especially those in the service industry, I’ve seen what we call the slam dunk case. There’s a solo practitioner out there who practices criminal defense law and one day in walks the career case, this potential client who has a case worth hundreds of millions of dollars, and there are several bad actors that need to be sued. And so, the inexperienced lawyer believes the potential client, believes in the case, but doesn’t have the experience to handle the case. And then it always ends up one of a few different ways. Either the lawyer didn’t understand that by taking the case on the contingency basis, they were probably going to bleed out of cash because they were going to be responsible for fronting all the expenses. Or worse, they lose the case and have to declare bankruptcy, or they commit malpractice.

The point is, that’s a huge risk. When you are a small company and in walks an opportunity that you’re not prepared to take, that’s a problem. Now, in this example, that practitioner could have referred that to a competent attorney or co-counseled, worked with another law firm, but instead chose to keep it all for himself and ended up destroying his business in the process, and his reputation.

The risk of failure is inherent in leadership. Inexperience increases the risk of failure, but that doesn’t mean that inexperience makes a risk unacceptable. At some point we all have to learn by doing, and if we can have mentors or peers that have been on the same journey, that can mitigate the risk. And keep in mind, the leader’s role in any organization is to keep the risk of learning low.

Of course, experience will not eliminate all risks, and even our most experienced leaders fail from time to time. The key is to overcome failure with progress. Just think about the fool with the master’s degree who walks into the new company and is given a leadership title simply because of the degree. We know how this generally turns out; without the technical expertise and without the experience, the fool is bound to fail. Sound familiar, right? It almost sounds like a new second lieutenant, but it’s a little bit different because we do a little bit better job of selecting our leaders before we put them in leadership positions. In the military, experience does not trump all. The true leader performs at or above the standard at all times, regardless of experience. The leader personifies professionalism. And professionalism mitigates risk.

Let’s talk a little about some of the cheap lessons that we’ve learned in the military. You probably remember basic training, or bootcamp, at some point, somebody walked on the grass or committed some similar infraction, right? And as soon as the drill sergeant saw that person walking on the grass, they dropped them and made them do flutter kicks. And if you were walking by or running by, you were lucky, right? But sometimes we’d be in a situation where the drill sergeant might see someone walk on the grass and then drop the entire platoon, right? Now we’re doing pushups and flutter kicks and then rolling over again and doing more pushups and more flutter kicks until we’re sick. And that was not a cheap lesson because the entire organization suffered because of one person’s mistake.

But that’s how it works in business. If someone screws up, usually the entire business pays for it. And you can say, well, yeah, but it’s the company’s profits. But those profits are generally what is going to build your organization into a better organization. And so, it hurts when someone screws up and the entire team pays. It’s better to learn that cheap lesson from when somebody else screws up, whether it’s a peer or even a mentor, but learn the lessons from those who have gone before you.

Look, the other issue you have to deal with is that the longer a problem goes unaddressed, the greater the risk that it will be an expensive lesson. In other words, if you have someone on your team with an integrity problem, if you don’t address that right away, it’s going to come back to bite you and bite you in bigger ways. Dangerous team members are a huge risk to your organization.

I get a lot of feedback from my peers who say, “Yeah, but I really need this person, I don’t have anyone to replace him.” And I say, “Well, wait a minute. Have you done the bus exercise?” They say, “Well, what’s the bus exercise?” I say, “Well, for all the key members of your team, if they got hit by a bus tomorrow, what would you do? How would you replace them? You should have a list of all their key tasks and responsibilities, and you should have a contingency plan that should something happen to them, you will know where to look right away to fill that gap.” And a lot of them say, “No, I didn’t think about that. And, uh, I don’t have that plan.” Okay, but you’re telling me about this toxic member of your team that is putting the team at risk. So, are you going to make a plan? Oh, yeah, I’ll get that done next week. Okay, well, this person needs to go today. So, here’s what I need you to do. Take out a piece of paper. If that person got hit by the bus today, what would be the top five most important things that you need to do to replace them? And then they’d write out the list and I’d say, “Okay, great. You need to do these five things to replace them.” “Yeah.” “Okay, Now, here’s what you’re going to do. You’re going to issue a warning order to your key leadership team right now to let them know that person is going to be terminated so they can start working on those five things and then you’re immediately going to go find this person and terminate them or have your HR team do it.

But the point is allowing that dangerous person to stay in the organization is only going to get worse with time. And as a leader, you have to mitigate that risk. There are toxic leaders. There are people that operate without integrity, and if you have them on your team and you tolerate that, it becomes part of your culture after time. And so, the sooner you can eliminate that threat, that risk, the better the team will be, and the better leader it will make you. Look, it’s tough, I get it, terminations can be tough, but you as a leader are in charge for that exact reason, to take the team to the next level, and if you can’t get rid of the risks that could destroy the organization, you’re not fit to lead the organization.

I remember at National Training Center, we were sitting around for an AAR, and for those of you that know, the National Training Center in Fort Irwin, California, is where, well, it’s report card time for the field grade officers, right? We do the exercise and then there’s an After Action Review. And I remember there was a brigadier general who was present and was disturbed that no one was speaking up during this After Action Review, that there wasn’t a lot of critique coming from within the unit. And of course, well, yeah, that’s always how we do it, right? We don’t want to appear disloyal to our chain of command. We don’t want to call somebody out. We can talk to them privately about it. We don’t want to do this in our AAR. We don’t want to do this when it’s report card time for the field grade officers.

This general said, “Look, it’s important if you know something to let the entire group here know, because a dime dropped is a dime well spent.” And what he meant by that was, look, it’s better that we have this discussion here in the training environment than someone dies in combat. And so, we are going to be open, honest, and we’re going to treat feedback as a gift. And that is one of my favorite sayings, and you’ll probably hear it a lot in this podcast, feedback is a gift. And the reason why that’s so important is feedback helps us mitigate risks. When we can see more of what’s going on in our environment, we are able to mitigate risks. Without feedback, we’re only seeing with our two eyes.

No matter how much you mitigate risk, bad things will happen. This is why there is insurance. As a leader, get insurance. Make sure your organization has insurance for those things that could be catastrophic, that could destroy your business. Now, I know we don’t want to pay insurance premiums, it seems silly that we would want to pay money for something that we hope doesn’t happen. But the reality is you will sleep a lot better at night knowing that you’re covered, but more importantly, as a leader, you have to have that extra layer of protection for your team. People on your team will make mistakes and this will protect you. You as a leader will make bad decisions. You will make mistakes, and this will protect you. So, as a leader, it is irresponsible not to have insurance within your organization.

The tactical pause, right? So, if you’re in a rapidly growing organization, from time to time, you’ll notice that you are running extremely hot and your team’s getting tired. And I would say that most important lesson I learned from Ranger School was, when you are tired and hungry, you make bad decisions. And if you’re not taking care of yourself, getting enough sleep, eating the right foods, and making sure that you’re recovering, you will make bad decisions. Take a knee. Drink water. Recover. When things are moving really fast and you think you might be losing your edge, it’s okay to take a knee and drink water. And in fact, that is going to mitigate risk sometimes more than anything because during that tactical pause, when you just have a moment to think, you’re going to get a little bit more clarity and probably see some of the stupid things you’ve been doing that you need to stop doing.

The value of risk. If you take a big risk, you may lose a lot of money. You may lose friends. You may lose your reputation. You may even lose your company. But the one thing that you will not lose by taking risks is the experience. And so, with risk comes experience and you can never lose the experience gained by the risk. And so there is much to be gained by taking risks. And you as a leader are charged with taking risks, not stupid risks, but risks to advance your organization.

After Action Review: Number one, leaders take risks. Number two, mitigate those risks through planning and training. Number three, budget for your risks.

Now let’s talk about the improves. Number one, make contingency plans. If you’re going to burn the ships, do it sparingly. Number two, buy insurance for everything that could destroy your organization. Number three, you never lose an experience.

Thank you for joining us today on Veteran Led, where we pursue our mission of promoting veteran leadership in business, strengthening the veteran community, and getting veterans all of the benefits that they earned. If you know a leader who should be on the Veteran Led podcast, report to our online community by searching @veteranled on your favorite social channels and posting in the comments. We want to hear how your military challenges prepared you to lead your industry or community, and we will let the world know. And of course, hit subscribe and join me next time on Veteran Led.