Rethinking failure

Imagine an organisation with ten job levels (ranked from entry to CEO). In the first year, there are 512 people at the lowest level who are all assigned to projects, half of which succeed and the other half fail in the first 18 months. The successful 256 are promoted to the next level and again assigned to projects with a 50/50 chance of success. The 128 whose projects succeed are again promoted. Following this pattern, by the ninth promotion, there are just two people at this level from the original group of 512. From these two, a final pair of projects and, assuming 18 months per projects, after 15 years one successful candidate is ready to be CEO!

Obviously, this mythical example is simplistic and no leader is chosen exclusively this way. But, there is no doubt that the delivery heroes who have a faultless history of success are at the front of the queue.

With so many rewards being given to those who can demonstrate a long sequence of successes, people have learned to make sure there are no black marks of failure against their name. Yet, we know that learning through a mixture of success and failure is the best way of giving future leaders the tools they need to deal with their most challenging roles.

Everyone wants to be recognised as being innovative and most people talk about the importance of failure in the innovation process. Learning, whether individual or organisational, comes from trial and error, it is an intrinsic part of being human. That’s why we do things over and over again at school until the sum of the failures sets us up for success.

Knowing that so many organisations are talking about a culture of failing quickly, it is always interesting to ask a room of professionals if they have ever been rewarded for failing. Almost no hands ever go up in the air. Rewards and actions go together and leads to the avoidance of assignments that risk failure. The downside of organisations being motivated in this way include inflated budgets, limited ambition and a lack of hard measures of success.

The impact on budgets comes from leaders choosing to pad their plans to make sure they under promise and over deliver. Without the tension of budget pressure, inevitably costs are higher than they need to be. That’s fine if what you’re doing is mission critical, such as building a spacecraft or life support system, but otherwise it doesn’t make good economic sense.

Similarly, in an environment that punishes failure, an ambitious scope is to be avoided at all costs. Certainly, it would be career limiting to take on a “moonshot”. Most organisations should avoid too many moonshots, but you want at least some of your teams aiming to reach for the stars and at least get to the Moon.

Finally, the best way to avoid missing a target is to make it soft rather than something measurable. The great thing about soft measures is that they are usually open to reinterpretation after the event. I believe that anything can be measured if you try hard enough. But, if you will be punished for these measures it isn’t surprising many choose to avoid any documented commitments.

The most ambitious of targets are best thought of as an experiment. By definition, experiments define a default hypothesis and an alternative. Failing to prove the alternative is an outcome in its own right. By not celebrating those projects (or experiments) that fail to prove the alternative, organisations keep on trialling the same idea. Institutional memory should not be the only way to recall that something has been tried before.

Search for “startup failure” online and you’ll see a myriad of events that bring speakers together to share what went wrong. Entrepreneurs are learning that there is often more to learn from the mistakes of others than from those that have been a success.

Search for “project failure” on any large enterprise intranet and you’ll be very unlikely to hear the confessions and learnings from any of the organisation’s leading executives. Why is it that entrepreneurs know the importance of learning from past mistakes while executives don’t see this as a priority?

A healthy organisation will seek a spread of risk and return across their portfolio of activities and projects. The greater the risk, the higher the return that should be expected.

For projects, such as technology implementation or engineering, a failure can range from missed deadlines to complete abandonment of the scope. When it comes to taking risk on implementation timeframes, the rate of overrun, and the impact of the overruns, should be less than the total savings through increasing the risk. While the benefit of risking a more aggressive scope should be greater than the loss due to the rework required to wind back to a more modest set of objectives.

Businesses that only ever punish failure encourage everyone to leave something in reserve, while the best organisations encourage everyone to stretch themselves and their teams with a transparent approach to taking appropriate risks. Business transformation is more than the sum of its parts and requires the right combination of ambition combined with continuous learning.