Why bosses must take time to learn from failure

It is a common tendency to put a positive spin on mess-ups, from tech founders who laud “failing fast” to the popular podcast How to Fail by author and journalist Elizabeth Day that “celebrates the things that haven’t gone right”.

The theory is that failure provides an opportunity to recalibrate and come back stronger. This type of thinking is important. It stops people from assigning their self-worth to something that didn’t work out and enables them to be better, smarter and tougher next time.

But not everyone takes the chance to learn from things going wrong.

Often there is a desire to move on quickly from something that did not work out. Ego, embarrassment or a lack of curiosity can get in the way. One FTSE 100 executive said their former employer repeatedly made compliance errors that had been identified five years earlier. They were reluctant to put in place processes to stop them happening again for fear of judgment from their board and shareholders.

Pension auto-enrolment is a welcome development – but workers should ensure they aren’t missing a better option

---

Shameless comebacks show we are in the age of chutzpah

---

‘Whenever I can save time by spending money, I usually do and I never regret it’

---

Boards and executive teams can also be so focused on battling short-term crises or setting out a longer-term strategy that they fail to spend adequate time finding out the specifics of what is going, or has gone, wrong.

Sometimes moving on quickly is fine – for personal failures that were unavoidable or mess-ups that had trivial repercussions. Clipping your car door against a lamp-post, for instance, or accidentally sending a message intended for your friend to the person you were gossiping about. (Although even these could be costly.)

[ An Irishwoman working for a Japanese company in France: ‘I wouldn’t be anywhere else’ ]

But in a business or political context, it is important to assess what went awry. Not only is this important for learning and testing hypotheses, but it is vital to prevent those that had fatal consequences – such as the Deepwater Horizon oil spill or the Boeing 737 Max crashes, for example – from being repeated.

“The overwhelming desire is to move forward to the next success,” said Amy Edmondson, a leadership and management professor at Harvard Business School, whose new book Right Kind of Wrong is published next month and examines how to fail well. “But it is worth the time to do the work and see what needs to change to prevent that failure happening again.”

An admission of failure is the first step to analysing, unemotionally, how something went wrong and how to improve.

Ultimately, the aim for businesses is to set up processes to make them more resilient. Learning from cybersecurity breaches is a classic example. US retailer Target in 2013 suffered from a severe attack where the financial and personal information of as many as 110 million of its customers was stolen. It cost the company more than €350 million. Since then, it has taken steps to strengthen security across its network – including enhanced monitoring. It has not suffered another attack like the one in 2013, although cyber resilience requires constant improvement to security infrastructure.

Martin Reeves, chair of Boston Consulting Group’s BCG Henderson Institute, said there should be a mechanism for learning from both success and failure in a crisis. Empirical evidence should be gathered to understand competitive performance, how well a company absorbed the initial shock of the crisis and how it recovered. The analysis should include how individual teams fared, what drove their performance and why their decisions were right or wrong.

It is also a time to understand which organisational structures proved a help or hindrance and which capabilities were absent within an organisation and at a competitor’s. Just as the US military developed an after-action review, Reeves said, this process can help embed learning from a period of acute stress.

He noted that few companies had systematically institutionalised what they had learned from their Covid-19 experience.

[ The inconvenient truth about personal productivity ]

Edmondson noted that, in any assessment, it is vital executives do not get caught up in a blame game. This distracts from understanding what went wrong and puts too much focus on personalities. While it is important to spot the individuals involved in repeated failures, the goal should be about getting smarter not settling scores.

“We have a natural aversion to confronting failure,” she said, adding that a postmortem should be primarily an information-gathering exercise. “Treat it as the data it is. Look at this data dispassionately and use this to learn.”

One way to improve resilience, according to Reeves, is to ensure systems are tested and broken in small ways to avoid “sudden catastrophic failure”.

Even if a previous preventable failure did not have tragic consequences, understanding the mechanics – which processes did not work, where did communications break down, which teams did not function as they should have – is essential to making sure the same thing, or something worse, does not happen again. – Copyright The Financial Times Limited 2023