How Managers Can Bound Uncertainty

Heraclitus wrote, “The only constant in life is change.” For some change is existing, full of opportunity. For others, change means risk and the potential for loss. As a manager it’s important that you manage this risk for your employees. Since you can’t eliminate risk completely, what you can do is bound it. The higher up you are, the further you can see. That generally holds for the corporate ladder, as well. As a manager, you typically have more information than the team you manage. Even if you all got the exact same announcement about upcoming changes at the same time, your prior experiences, things you learned from peers, or in emails or meetings at your level, which your subordinates don’t have access to, gives you some better insight, even if only marginally. Second, it’s important to consider <a href="https://www.investopedia.com/terms/l/loss-psychology.asp" rel="noopener ugc nofollow" target="_blank">loss aversion</a>. This experimentally proven model from behavioral economics says that the pain someone feels from losing $100 is greater than the happiness from gaining $100. That means even seeming equally balanced risk (equal upside and downside) is perceived as more negative. So, when employees hear “change” and have little or no context to know how good or how bad, the two outcomes might seem equal in size, even if only because both are big unknowns. Unfortunately, the downside risk will be perceived as relatively worse. As a manager, or even a CEO, you can’t know all the possible outcomes. Macroeconomic changes, competitors, changes in the market, and other events can impact even the best laid plans. Still, many of these outcomes are tail risk-or relatively improbable events. The best you can do is focus on the likely range of possibilities. <a href="https://medium.com/@markaherschberg/how-managers-can-bound-uncertainty-2b620ccd988e">Read More</a>