How do we capitalise on failure in a workplace context?

I know the feeling of failure. It has a harsh sting to it. A feeling of horror and shame that you’ve let others and yourself down. I’ve felt this even though I’ve known that we live in an era where failure is accepted as an inevitable result of trying to innovate. However, after licking your wounds, you learn more from your mistakes than from your accomplishments. I've learned that failure isn't synonymous with losing, and I think everyone at large can benefit with every failure.

I discuss the virtue of failure and draw from the business literature to conclude with 7 strategies I recommend to help you capitalise on failure in the work context.

Internal and external factors

Approximately 80-90% of new businesses eventually fail (Knott & Posen, 2005). Research on failure of businesses tend to attribute failure to either deterministic or voluntarist factors. Deterministic factors are external variables that management has little or no control over, such as a sudden change in government policy, a fall in demand for an industry product or service, or a radical innovation that becomes a ‘competence destroyer.’ Voluntarist factors are the decisions and actions made by management that are ineffective in response to external variables. Voluntarist factors can include rigid commitment to existing strategies and routines, poor lines of communication, ignoring advice and feedback, or intolerance to disagreements (McGovern, 2007).

Creative destruction

Knott and Posen (2005) argued that entrepreneurs who make decisions to fulfil unmet needs or satisfy old needs in new ways creates a process called creative destruction which displaces less effective incumbents or forces incumbents to match the innovative ideas. In other words, new ideas and competition within and across businesses could dislocate inefficient practices and establish a culture of innovation. Knott and Posen (2005) concluded that even if the new entrepreneur fails to continue business (e.g., due to other incumbents responding effectively to the new competition/entrepreneur), he or she has at least stimulated creative destruction in an environment or industry that needed a ‘shake up.’ In this view failure can be beneficial.

Straightjackets

In a review of learning from failure and success Baumard and Starbuck (2005) found that lessons drawn from success gradually turn into ‘straightjackets’ or standard operating procedures that are initially aimed to create efficiency but actually prevent adaptation and innovation in response to external changes. They argued that learning from repeated periods of success makes future failure very likely. Long periods of success foster inattention, insularity, strategic inertia, and extreme process orientation. For instance, a fixed focus on core competence, which initially fosters success, subsequently makes a business more specialised and inflexible.

Fear and avoidance

People do not freely and openly discuss their mistakes (Nutt, 1999). This avoidance makes it challenging for businesses to capitalise on failure and learn from mistakes. Interventions that lower employee anxiety and foster positive appraisals related to failure may have promising outcomes. Such interventions may include creating a work environment that fosters growth rather than punishments related to failures, a focus on learning from small failures that require incremental change rather than a focus on large failures that required greater changes, retain stakeholders of failed projects so the business does not lose the knowledge of lessons learnt, and creating an environment where identifying innovative solutions to failed projects is fostered and rewarded (Baumard & Starbuck, 2005; Jenkins, Wiklund, & Brundin, 2014).

Some people thrive from failures

Jenkins et al. (2014) argued that a reason why some individuals thrive and grow from failures and others do not is because of how they appraise their experience. According to the appraisal theory an individual is likely to have a negative emotional reaction to failure if they appraise it as stressful and harmful. In contrast, failure interpreted as a nonthreatening or positive experience is likely to result in a positive or neutral emotional reaction. These interpretations are mediated by how strong personal goals and self-identity are attached to the failure. The stronger the attachment the stronger the emotional reaction. Experience plays a large part in the appraisal of stressful events and emotional reactions to failure. Jenkins et al (2014) found that individuals who experience multiple failures are psychologically stronger and have a more positive attitude toward failure. This could be due to positive appraisals of their response and recovery from past failures and perception of their ability to cope with future failures.

Psychological capital

Psychologically strong individuals have psychological capital, which includes hope, optimism, self-efficacy and resilience (Luthans, Avolio, Avey, & Norman, 2007). Hope is the perception that one’s goals can be met (Snyder et al., 1996), optimism is a positive explanatory style about succeeding in the future (Luthans et al., 2007), self-efficacy is an individual’s belief in their ability to achieve a specific outcome (Bandura, 1977), and resilience is the ability to bounce back to normal functioning after experiencing hardship or failure (Richardson, 2002).

Psychological capital can be developed by persevering through challenges and learning from these experiences (Jenkins et al., 2014; Luthans et al., 2007). A business can capitalise on individual psychological capital by fostering an environment where experienced and psychologically robust employees openly discuss their failures and mentor less experienced individuals through challenging experiences. This psychological capital could assist with increasing the stress management in individuals, which could then result in better performance and better decision making.

What’s the best decision making tactic?

In a study of 356 decisions made in medium to large businesses revealed that failures can be traced to managers who limit the search for alternatives and use power to impose their own solutions (Nutt, 1999). Nutt (1999) argued that managers fear the appearance of failure when businesses reward only success. The study found that the most successful but least frequently used tactic in the search for direction and implementation of decisions was ‘intervention’, which was observed in just 7% of cases. The ‘intervention’ tactic requires a manager to identify and analyse performance gaps, discuss with stakeholders the ideas that could work, show how comparable businesses have overcome similar problems, and provide feedback on trials that show how performance can be improved. However, Nutt (1999) found that managers are hesitant to use the ‘intervention’ tactic because it consumes their time and does not provide a quick solution. One of the fastest decision making methods is the tactic of  ‘edicts’. The ‘edicts’ tactic is when managers use their power to issue a directive that announces a decision. This is done without consulting stakeholders and commonly communicated via a memorandum. Nutt (1999) observed edicts in 40% of cases and found it had the highest failure rate because people resist the appearance of being forced to comply.

How to capitalise on failure

In order to continue evolving and gain the competitive advantage a business needs to innovate. Failure is an inevitable result of trying to innovate and it must be embraced and learned from rather than avoided. Rewarding only success and creating a climate where discussing mistakes are avoided breads less resilient individuals and increases the use of poor decision making tactics. A business could benefit from embracing failure through the following recommendations:

1. Foster creative destruction by embracing failure as a learning process.

2. Create a work environment that fosters growth rather than punishments related failures.

3. Focus on learning from small failures that require incremental change rather than a focus on large failures that required greater changes.

4. Retain stakeholders of failed projects so the business does not lose the knowledge of lessons learnt.

5. Create an environment where identifying innovative solutions to failed projects is fostered and rewarded.

6. Capitalise on individual psychological capital by fostering an environment where experienced and psychologically robust members openly discuss their failures and mentor less experienced individuals through challenging experiences.

7. Learn from ineffective decision making tactics and implement ones that establish direction with less resistance from individuals.

References

Bandura, A. (1977). Self-efficacy: Toward a unifying theory of behavioural change. Psychological Review, 84, 191-215.

Baumard, P., & Starbuck, W. H. (2005). Learning from failures: Why it may not happen. Long Range Planning, 38, 281-298.

Jenkins, A. N., Wiklund, J., & Brundin, E. (2014). Individual responses to firm failure: Appraisals, grief, and influence of prior failure experience. Journal of Business Venturing, 29, 17-33.

Knott, A. M. & Posen, H. E. (2005). Is failure good? Strategic Management Journal, 26, 617-641.

Luthans, F., Avolio, B. J., Avey, J. B., & Norman, S. M. (2007). Positive psychological capital of resiliency: Measurement and relationship with performance and satisfaction. Personnel Psychology, 60, 541-572.

McGovern, T. (2007). Why do successful companies fail? A case study of the decline of Dunlop. Business History, 49, 886-907.

Nutt, P. C. (1999). Surprising but true: Half the decisions in organisations fail. Academy of Management Executive, 13, 75-90.

Richardson, G. E. (2002). The metatheory of resilience and resiliency. Journal of Clinical Psychology, 58, 307-321.

Snyder, C. R., Sympson, S. C., Ybasco, F. C., Borders, T. F., Babyak, M. A., & Higgins, R. L. (1996). Development and validation of the State Hope Scale. Journal of Personality and Social Psychology, 70, 321-335.