I spend a lot of time studying how companies and other organizations
work — their corporate culture, the efficacy and rationality
of their management, and the climate for innovation. One
of the quickest and best indicators I’ve found in diagnosing
organizations is to look at how they handle failures. The
best-run organizations understand that failure enables improvements
in everyday work and characterizes the creative process.
Dysfunctional companies create a climate of fear where failures
are stigmatized and hidden. There, mistakes are never examined,
creativity is stifled and progress is difficult.
Management should be based on facts, based on real evidence
of what works and what doesn’t. Assessing what works
necessarily requires observing and studying the failures
and mistakes that occur in any process. Sure, blunders are
painful and costly, but the best way to ensure they’ll
happen again is to leave them unacknowledged. The most succinct
and useful advice I know about how to handle failure comes
from medicine where the motto is “forgive and remember”:
forgive so that people are willing to talk about and admit
the errors, and remember so the same mistakes don’t
occur repeatedly.
Take the example researcher Amy Edmonson of the Harvard
Business School uncovered when she looked at the working
relationship between doctors and nurses and then looked at
how many medical errors they reported. She found that where
the relationships were good, far more errors came to light.
Where nurses feared “heads would roll,” far fewer
errors were reported. The crux is, if you want better performance
instead of the illusion of it, managers and employees must
tell each other about the problems they’ve discovered,
point out errors (theirs and those of others) and never stop
questioning what is done and how to do it better.
Airing mistakes gets results. The U.S. Civil Aviation System
is among the safest in the world and has become so in part
because of the accident and incident reporting system it
has used for years. The system permits pilots and others
to report anonymously to the FAA incidents such as near misses
and equipment problems that could potentially have been disastrous.
The reports are then investigated.
When it comes to creativity and innovation, failure is absolutely
essential. Rather than punishing failure, managers should
reward failure (and success, of course) and punish inaction.
I like how Thomas Watson, a founder and former CEO of IBM
put it, “If you want to succeed, double your failure
rate.”
One of the most consistently creative and innovative design
firms is IDEO, founded by mechanical engineering Professor
David Kelley. Part of their “secret” is that
they aren’t afraid of bad ideas. Brendan Boyle, founder
of IDEO’s toy design studio, even tracks his group’s
failure rate: In 1998 the unit produced about 4,000 ideas.
Of these 230 were thought promising enough to at least draw
or prototype, but only 12 ever became products for sale.
Different industries can survive different failure rates—venture
capitalists fail with between 70 to 90 percent of their investments—but
some failure rate is necessary for there to be any successes.
To create the right climate, look at the example of a large
publishing company I once worked with. This happened just
before I got there, but I was told the story by perhaps 20
members of senior management. The CEO wanted to push them
to innovate and take risks. A woman started a new magazine
that was a total flop— it looked great and had great
stories but no one bought it. What did he do? He brought
her up in front of the top 100 or so people, thanked her,
gave her bonus and promotion, and asked them to give her
a round of applause. How is that for creating a climate to
encourage risk taking?
Every bit of solid theory and evidence demonstrates that it
is impossible to generate a few good ideas without generating
a lot of bad ideas. Organizations that want to eliminate mistakes,
avoid dead ends and succeed most of the time will drive out
innovation. In the course of everyday operations, managers
who cannot tolerate mistakes simply won’t hear about
them and they will persist (with all their costs and inefficiencies)
in secret. The best way to handle failure is to acknowledge
it, to accept it, and then correct it.
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Strategic Priorities
