“If You Don’t Challenge How You Do Business, Someone Else Will”: Aaron McDaniel on Intelligent Risk-Taking

This exclusive interview with Aaron McDaniel was conducted by Tabish Ali of the Motivational Speakers Agency.

Recruiting younger workers, improving established processes and encouraging innovation without exposing a business to unnecessary risk are pressing concerns across construction and property. Aaron McDaniel has addressed each from inside large corporations, start-ups and investment businesses.

An executive coaching expert, Aaron became one of AT&T’s youngest regional vice presidents at 27 before founding several companies, including ventures later acquired. He also turned down offers for one of his businesses on Shark Tank and is now co-founder and managing partner of Velocity Capital Group, a multi-family real estate fund. Alongside teaching entrepreneurship at Berkeley Haas, he co-authored the Wall Street Journal bestseller Global Class, informed by hundreds of interviews with international executives.

In this interview with London Keynote Speakers Agency, Aaron discusses what younger employees expect from employers, how managers can remove barriers to better performance and why businesses need clear processes for testing new ideas. He also explains how intelligent risk-taking can help established companies adapt before competitors force the issue.

Question 1. How can employers meet the expectations of younger workers and retain them as their careers develop?

Aaron McDaniel: One of the big things is to focus on engagement. A number of studies show that when employees are learning new things, they are more engaged at work.

The other thing that’s particularly interesting, specifically with today’s generation of young employees, is being able to move between learning experiences, giving them exposure to different things that happen in your company and then transitioning to impact.

Early in employees’ careers, they want to learn as much. “I want an experience doing this, and I want an experience doing that.” Over time, there’s this transition where you want to, to use a sports analogy, put points on the board and make some kind of impact.

I remember in my own career, the first decade of my career I worked at AT&T, a very large global company. I had a lot of that initial exposure, experience and learning. But when it came time for me to have an impact on the business, there was so much bureaucracy and red tape involved that it was very hard for me to get things done.

In particular, I was focused on an education go-to-market at AT&T for elementary school kids: tablets with a lot of education content. I was given the task of building that go-to-market model, and I ended up signing letters of intent with 10 or 12 different major brands.

Twenty-two months into the contract negotiation with that first company, I decided to leave and work on other ventures. During that time, the company we were negotiating the contract with had launched two major products and been acquired by a bigger company. We couldn’t even get a contract signed.

Question 2. What processes and cultural conditions allow employees to test new ideas and improve how a business operates?

Aaron McDaniel: It’s about creating an environment where employees are given the opportunity to make things better, even if it’s some big leaps and changes, but also more evolutionary optimisation within their jobs.

A lot of times, employees are put in a position where they’re given certain responsibilities. There are certain tasks they have to do. They have to stay within that box. They’re not given the opportunity to test new ideas to see if they can make things better.

There’s an element of process that needs to be created, as well as an element of culture that needs to show that it’s acceptable to push, to do things new and to test out new ways of doing things.

One thing I talk about is this notion of intelligent risk-taking. Sometimes, when people talk about innovation, they think, “Okay, it’s about throwing a wrench in the way we’re doing things now and intentionally doing things differently for the sake of doing things differently, and ultimately taking a bunch of risk.”

I talk about giving opportunities for intelligent risk-taking. There’s a system in which they can say, “Okay, here’s an idea I have where I think we can do things better. Now let me test that in a low-stakes environment.”

You can then improve things when you show evidence that a new way of doing things is better.

I will give an example of something that every company loves to do, I say that sarcastically, every year, which is budgeting.

The way that most budgeting works is that you are given the budget, usually at the end of the previous year when the decisions are made. Then you get towards the end of that year and realise, “Oh no, I have money that I haven’t spent yet. I need to spend all of that money, otherwise I’m not going to be able to get as much money next year.”

Then there’s a big rush to spend things, probably not on the best things possible. Ultimately, you are rewarded for spending the money you were given so you can ask for more later, instead of creating systems to optimise that.

Companies can do something as simple as saying, “Okay, if you would like to ask for the same amount of money you have had before or more, you have to prove that you’re being more efficient with the money that you’ve been given this past year.”

Part of that is creating structures to allow for that to happen, like with budgeting, and creating the culture where people are allowed to test new things, optimise and do things better.

Question 3. Beyond setting goals and motivating employees, which responsibility of management is most often overlooked?

Aaron McDaniel: When it comes to management and leadership, a lot of focus is on vision, setting goals, and then motivation or empowerment.

One of the things that is often overlooked in my experience is this third pillar that’s missing and deserves a lot of focus: removing obstacles.

In my career, I have gone into different leadership positions in different functions, from customer service to marketing, operations, sales and strategy. I’ve worked in telecommunications, e-commerce, mobile technology, more new, nascent technologies, crowdfunding and other trends.

I’ve always been able to go into situations where I may have no idea what my employees are actually doing, but I focus on understanding how they’re doing their work now and the obstacles that are keeping them from doing their work better.

Eliminating those obstacles not only helps people perform better, but creates better morale because people realise, “Okay, my manager is there to help me do my job better.”

There are lots of different tactics you can use to do that. I learned one of them in a unionised call centre where everyone had to be on the phone all the time, with calls coming in.

In a union environment, there are certain dynamics you have to work with. Naturally, there are a lot of complaints because things aren’t necessarily the best work environment.

I implemented something in my team meetings that I called the venting session. I would sit and listen and ask people about the problems they were experiencing.

It was very important that I didn’t make excuses in response to the things they said. The only time I said anything was to clarify and make sure I understood what they said.

I remember the first time I did this in a team meeting, it took 45 minutes. I took what I learned and discovered certain decisions that I could make or things we could do to change things for the better.

I would also invariably learn that there were certain things that couldn’t be changed because of policy or otherwise. I would go back and report to the team the next week we had a meeting.

The response was amazing. They obviously did their jobs better when I removed some of those obstacles, but morale was also great because they realised their boss was there to help them do their jobs better.

As time went on, the venting sessions got shorter and shorter. I think three or four months in, when it came time for the venting session, everyone said, “No, we’re good. Things are great.”

That was from a very hostile first meeting all the way through. Occasionally, something would come up that I could help with. Sometimes I could change it and sometimes I couldn’t, but the effort I was making to remove those obstacles really helped the team’s performance.

Question 4. How can organisations distinguish intelligent risk-taking from change that creates unnecessary disruption?

Aaron McDaniel: What intelligent risk-taking means has a lot to do with innovation. Some people think, “Okay, innovation is about messing up the way we’re doing things now and sometimes needlessly making changes.”

You need to create a system to allow changes to happen. What I like to say is that if you are not willing to challenge the way you do business, someone else will.

One fact that I’d like to reference is the US example of the Standard & Poor’s 500, the S&P 500, the 500 largest companies. If you go back 20 years, more than half of the companies on the list 20 years ago are not on the list today.

What that means is that the companies that were the titans of things often are not designed, if they don’t have the process to allow for intelligent risk-taking, to continue to stay at that level.

A classic example would be Kodak, the photography company. They had developed a lot of the underlying technology for digital photography decades ago. But when it came time to use it, they said, “Well, we make our money right now in processing and selling film. If we do this digital photography thing, no one’s going to buy our film and no one’s going to pay us to process our film, so we’re not going to do that.”

Now, not only is Kodak not one of the biggest companies in the world, but they did not implement any of the technology that many other companies took, even though they had created it.

It’s important to create those systems and the mentality to say, “We need to take risks to challenge the way we do business, otherwise someone else will.”

Ultimately, you need to allow, with processes and this culture, to say, “Let’s test out ways to change things. Let’s have a process to prove when things work and they don’t work, and let’s reward people when they take intelligent risk-taking.”

The reason it’s important to reward the risk-taking as opposed to the results is because that mentality on a regular basis is what’s going to create success.

Often, in a team environment, when something goes wrong, the first thing you do is point fingers. “Oh, that wasn’t me. It was this person. They’re the one to blame.”

If you create this environment of intelligent risk-taking, it’s less about pointing fingers and more about collectively having this attitude that we’re going to constantly make things better.

It’s about rewarding that activity instead of just the end result.