Employee Thinking Styles and Risk Perception

So far, in our blog post series about how employees’ thinking styles affect job performance, we have described Intrinsic Thinkers as innovative, poor listeners who love change and Extrinsic Thinkers as strong listeners who solve problems in collaboration with others and who tend to be change resistant. We have also referred to performance evaluation examples to show how an understanding of these thinking style differences can be used to reduce employee turnover rates.

In today’s blog post, I’m going to describe differences between these two types of thinkers in terms of risk perception. I discovered that this motivational factor played an important role in talent retention when I compared employees’ performance appraisal data with their performance profiles.

How does Risk Perception affect employee performance?

What this study revealed was that risk perception is extremely relevant and yet almost totally overlooked when it comes to placing employees in roles where they can be effective. Once again, we see a major limitation of the personality test and a major advantage of using the performance profile questionnaire. Personality tests measure only behavioral traits as seen through the eyes of friends and associates whereas performance profiling predicts role-specific performance ratings as seen through the eyes of employees’ managers. Because of this difference, a wide variety of other factors such as risk perception, related to both employee performance and potential for long-term employment have been discovered.

An individual’s perception of risk has a great deal of impact on the types of roles where employees can succeed and therefore remain well motivated and, as a consequence, on the effectiveness of employee retention programs.

So, what is Risk Perception?

It turns out that when individuals are given details of situations containing different types of risk, opinions as to how risky these situations are can vary widely. It also turns out that the way in which people rate risks is correlated with their style of thinking.

• Intrinsic Thinkers like taking risks and generally rate risks as being less risky
• Extrinsic Thinkers avoid risk taking and typically rate risks as being more risky

For example, I have a colleague who has piloted his balloon over the Alps single handed seven times. Objectively, this is a risky thing to do but when I ask him if he thinks he is taking a risk he says no because he is experienced, knows his balloon well and always checks the weather before setting out…go figure!

On the other hand, I have another friend who is the CEO of a medium sized business functioning in a mature market. When I ask him if he takes a lot of risks, he says he takes them all the time. However, when I ask his colleagues if he is a risk taker they all say ‘definitely not!’

So, why is this?

To answer this question, we have to compare how these two styles of thinking function in problem-solving situations. As I have discussed previously, Intrinsic Thinkers can typically solve problems without reference to other people whereas Extrinsic Thinkers solve problems in collaboration with others. Because of this, problem solving places Extrinsic Thinkers in a situation where they are dependent on other people. Additionally, their method of solving problems typically takes longer to arrive at solutions.

When you compare the results of their problem-solving endeavors, it turns out that Intrinsic Thinkers perform better in fast-moving situations of change and Extrinsic Thinkers obtain better results in situations where solutions can have significant longer-term impacts and where time is available for a more considered and deliberative approach. You will remember that in my previous blog posts, I discussed the fact that Intrinsic Thinkers tend to be change oriented whereas Extrinsic Thinkers are typically change resistant. What we have found through the deployment of Talent Chaser is that this is because the Intrinsic Thinker’s style of thinking functions more easily in situations of change.

How does this influence Risk Perception?

To answer this question, we need to keep in mind that risk arises when we are faced with new types of situations where things might go wrong. Situations containing risks therefore give rise to both problems and change. In fact, risk generally arises out of changing circumstances and because the Intrinsic Thinker’s style of thinking is suited to this, problem solving gives Intrinsic Thinkers the opportunity to do something that they can do well. To an Intrinsic Thinker therefore risk is less risky and they want (are motivated in) roles that have risk associated with them whereas to an Extrinsic Thinker, risk is more risky and they want roles that have less risk associated with them.

How does Risk Perception impact employee turnover rates?

Here, we need to recall the motivational rule that we all like doing things we can do well and its corollary, we don’t like doing things we can’t do well.

It turns out that because most managers and HR professionals are unfamiliar with the concept of risk perception, employees are frequently placed in roles where the demands of the role don’t match their need for risk. Placing Intrinsic Thinkers in roles without risk or placing Extrinsic Thinkers in roles with risk are decisions that result in de-motivated employees who are more likely to leave the organization. The creation of any effective employee retention strategy requires therefore that proper attention be given to risk perception.

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