Effective Leadership: Is Failure An Option?

The amount of failure should be fluid as your business needs change

“I have not failed. I have just found 10,000 ways that won’t work.”

—Thomas Edison

I just spoke with a mid-level guy in a firm who is in charge of hedging. Let’s pretend he’s in the airline business (he’s not) and that his job is to protect the firm against increases in jet fuel prices. He agrees contractually to buy lots of fuel at today’s prices to prevent the airline from future price increases. If prices increase, he is a hero. If prices fall dramatically, the firm has “lost” substantial sums of money. If he is right 60% of the time, he is brilliant. However, that means that 40% of the time he is wrong.

On the day that fuel prices plummet is he a valued employee or the village idiot?

There are jobs where “failure” is not a good option. Heart surgery and running a nuclear power plant come to mind. But most of us don’t perform heart surgery or, like Homer Simpson, work as a nuclear safety inspector. 

Whether you’re a baseball player batting .350 or a fuel hedger succeeding 60% of the time you’re going to “lose” frequently. If that bothers you, you might talk to Homer and get some career advice. 

The activity of business can be categorized many different ways and some of that activity does not associate well with failure while some requires it. As a leader, it is important that you differentiate between the two. 

I’ve worked with companies that had a very predictable business model; where budgets and plans were a solid roadmap of the next 12 months. In this world variance of a negative variety is usually thought of as a performance problem. (C’mon, Homer! Get it right!!) 

I’ve worked with other companies—most often private, frequently technology or consumer-product based—that had high failure rates with many at-bats (e.g. new products). Failure in this environment is part of the success formula. “Fail fast, learn, and move on” is the mantra.

What is interesting is when these two mindsets meet, either an established company trying to grow in new ways or an entrepreneurial company trying to “act their age” as they mature. Neither is very easy. In fact, it feels and sounds like fingernails on a chalkboard. 

I used to fly airplanes and there were two different twin engine planes that I frequently flew that had controls in different configurations that could be deadly if you forgot which aircraft you were flying. Grab the wrong handles and rather than change the pitch of the propellers you cut off the fuel to the engines. Silence may be golden, but not in an aircraft! This required the ability to have both configurations memorized and the wherewithal to know which one to use when.

It is similarly dangerous to resort to one mindset when running an organization. If you are in the entrepreneurial camp, recognize that some activities and behaviors are best when consistent standards are applied. If you run that predictable company, you should realize that when you launch a new product or enable a new division that you must allow for and even reward failure. 

The amount of failure that you encourage or allow should be fluid as your business needs change. You’re a lot smarter than Homer. Slow the game down and think about what mindset your business requires at this moment.

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