Managing THE VALUE OF FAILURE

Several years ago, I called a large Canadian bank for a reference check on a man who had previously worked for them as a branch manager. They gave him a shining apprais al — he was a solid man, a hard worker, dependable, and with great public relations skills. I then asked them if they would hire the fellow back again, and was somewhat taken aback when they said no. The reason was that he had never made a mistake. He had seen to it that every creditor was so secured and so solid that the bank’s branch could never grow. It was sad to think that in his own mind, this man was a success while, in the eyes of others, he was a failure. And the source of his failure was his fear of making a mistake. Today, plenty of ink is expended in explaining how to manage a business successfully. But rarely is anything written on how to deal with failure when it occurs. Failure can happen to the best and brightest people, as well as to the incompetent. It can happen to the hard workers as well as to the lazy ones. It quite regularly happens to those companies and individuals who are the pioneers, because they are the ones who are taking the risks for all of us. For them, failure is just a stepping stone on the road to eventual success.

By being afraid of failure, as was the bank’s former branch manager, we become mediocre. Yet society teaches us, from the very earliest age, to fear failure. Parents push their children to excel in sports and school. In Japan, if an elementary school child receives poor grades in one report, his chance of eventually entering the best universities is jeopardized. As adults, we struggle to be recognized by our peers as successful. We try to convey a successful image through our possessions and lifestyle.

We are all driven to believe that success is winning and that failure holds little reward. Consequently, we have a built-in distrust of trying anything new and unproven. We fight any change that entails risk. In an age where everything is changing quickly and where companies and individuals must constantly adapt, the fear of failure can be a terrible enemy. Para doxically, the fear of failure usually results in failure itself. We can’t all be winners

We really shouldn’t fear failure as much as we do. Because we are a competitive society, there have to be losers as well as winners. We see failure all around us, even in good times. The rate of bankruptcies has never been higher, despite the booming economy. There have been major failures — the Challenger shuttle explosion, Texaco with the Pennzoil lawsuit, and leakage of nuclear radiation at Three Mile Island. Many of the largest and most prestigious corporations are struggling to remain as leaders, while new, previously unheard- of businesses are emerging as front-runners.

It is ironic that failure and achievement go hand in hand. Yet that is how our society works. The measure of success is de termined by the number of people who have accom plished the same thing. Successful people need those who have failed, and unsuccessful people need hope that someday they, too, will succeed.

An old proverb says that the strongest steel must go through the hottest fire. Even though we fear it, failure can produce positive benefits in the long run. Having once failed, people are forced to refocus their goals and re-evaluate the means they’ve been using to achieve their goals. We learn more through failure and, as a result of adversity, we grow stronger. During our past difficulties in the mining industry, I was amazed at how many laid-off executives, once they were over the trauma, said it was probably the best thing that ever happened to them. The reason is that they weren’t happy previously, but didn’t know how to get themselves off the treadmill.

The school of hard knocks has produced some of the brightest people. Some of the best managers are ones who have stumbled. In the future, they will run their new businesses better, having learned from their past mistakes. They will stick more closely to a solid business plan and refrain from overborrowing. The copper mining industry provides a good example of benefits emerging from adversity. After a crippling drop in copper prices, companies were forced to refocus their efforts. The result was improved efficiency. Now, these companies are benefiting not only from higher prices but also from the forced improvements that otherwise would not have occurred.

One of the great strengths of our economy is that businesses are offered some protection from failure and are provided with help in starting again. Bankruptcy laws provide a safety net from total and irreversible failure. Programs encouraging new business ventures (such as government assistance and venture capital schemes) provide a springboard for new opportunities. This protection encourages entrepreneurs to take risks and try new ideas.

We are living in an era of rapid change. The two hottest management books at the moment (The Renewal Factor by Robert Waterman and Thriving on Chaos by Tom Peters) are devoted to change. Successful companies must be constantly looking for opportunities presented by change. They must also constantly redesign their strategies and organizations. The fear of failure can sometimes cripple us, preventing us from making the most of opportunities presented and redesigning our businesses.

Most businesses have a strong fear of failure. As a result, they use elaborate management control systems and exhaustive planning to guard against making mistakes. Some controls are essential. Risk-taking can’t be allowed to run amok, but good new ideas require some mistakes to be made. The most creative people may come up with as many bad ideas; they may never discover the good ones. Creative individuals place little value in the structure and controls that ensure long-term success. Nevertheless, a balance needs to be struck between control and flexibility.

If senior management is overcautious, the stifling corporate atmosphere could potentially harm the company. Events are moving too fast for the planning processes of many companies. By the time a study is finished, it can be outdated. A rigid bureaucracy can work against the development and communication of new ideas and techniques that are critical to future success. As well, managers who are unwilling to take risks or who are intolerant of error encourage employees to hide mistakes rather than to address them.

The best managers aren’t afraid of failure. However, they make sure that the possibility of failing is kept to a minimum. They seek out as much information as possible before making business decisions and then take measured risks. They realize that information is their best weapon in business. The best managers also allow employees to make mistakes because it is by making mistakes that people learn and remember. Good managers lessen the risk of mistakes; they do this by encouraging people to admit their errors. The best managers follow these rules:

* They set an example by confiding in employees. People are provided with frank information. Managers aren’t afraid to admit their mistakes.

* They don’t come down hard on people who make mistakes. They take the opportunity to investigate how often a similar mistake is made and try to improve procedures to minimize future errors.

* They encourage managers to uncover and report on problems before small problems become disasters. They sometimes offer positive incentives for those who bring bad news.

* They ask challenging questions about where the business is headed, such as: what are the problems that we should be solving and why are they not being solved?

Some companies are participating in programs designed to shake em ployees out of their lethargy and encourage greater risk-taking. Fortune magazine recently reported on this “human potential” fad. Management- training courses are being offered to help employees overcome fears. For example, in one perhaps extreme program, employees launch themselves off a cliff by hanging on to a pulley that races down a zip line across the Pecos River. Whether these programs prove effective remains to be seen.

How we deal with failure is just as important as how we try to achieve success. Certainly failure is not something to strive for. But, if failure happens, it shouldn’t be thought of as an end; rather, it should be seen as a new beginning. William Stanley is director of national mine services at Coopers & Lybrand Consulting Services.