How Malta’s CEOs can cope with (and learn from) failure

The importance of learning from failure is so widely accepted today that CEOs reading this can be forgiven for questioning why an article on the subject is even necessary. Yet, for all its prevalence in the management realm, evidence consistently shows that learning from failure is difficult to master in practice.

Apart from the emotional contamination associated with any failure, and even when a positive organisational culture exists that treats failure as an opportunity to improve, it is never easy to identify and apply the lessons learned. Most CEOs are too busy to involve themselves in the logistics of how failures are managed on a day-to-day basis – except for major failings that warrant their immediate intervention – but the role of the CEO in guiding the ‘learning from failure effort’ should not be underestimated and will be our focus here.

As a practical example of how learning processes are rarely straightforward, in their book entitled Corporate Governance Matters, two leading Stanford professors[i] provided a case study that succinctly demonstrates this challenge.

The authors presented an example of how senior executives in a fast-food chain applied the wrong lessons. From experience and past failures, the executives in the chain had ‘learned’ that customer satisfaction was an important driver of profitability and they ‘knew’ that low employee turnover was in turn a key driver of satisfaction – so they used employee turnover as a KPI and as a result, allocated significant resources to keeping that figure low. But, when they later received detailed performance results for restaurants across the chain, they found that some outlets with high employee turnover were amongst the most profitable and others with a lower turnover had poor profitability.

Detailed statistical analysis of the results later showed that it was specifically turnover amongst restaurant managers and not overall employees that made the difference to customer satisfaction, and therefore to profitability. This ordinary example captures the challenge for any organisation: even when open to learning from past mistakes, it remains problematic to ensure that the right lessons are learned and then applied.

For the remainder of this article, I would like to focus on three components of learning from genuine failures that a CEO should be cognisant of: emotional, cultural, and procedural. I chose that phrase ‘genuine failures’ intentionally.

In addressing this topic, let me emphasise something at the outset: not all failures are equal. When a setback results from someone being too lazy, or nonchalant about a given task; if they simply could not be bothered about the outcome, or intentionally went against established policy or acceptable norms, then that should be met with a zero-tolerance response. But when individual or collective failures occur even though people did their best, that presents an opportunity that must be capitalised upon.

Emotional components

As individuals, when we succeed at something, this raises our morale and self-esteem and there is clear evidence linking this to increased dopamine levels in the brain, which explains the feel-good factor associated with success. Failures have the opposite effect and trigger negative feelings.

As a result, there are a multitude of normal human emotions associated with failure, and these frequently hinder the ability for individuals to cope with setbacks, never mind learn from them. These emotions range from varying levels of fear of failure to concepts such as self-handicapping, or an unwillingness to even acknowledge failures when they do arise. These emotional considerations are not hard to understand in principle, but in my experience, they are rarely adequately addressed within organisations to facilitate meaningful learning from failure.

Think of what we are expecting our people to do as part of any learning from failure model. To really learn the lessons requires individuals and teams to dwell upon that failure, rehash and dissect it endlessly, share their inner thoughts on it, and indeed accept individual or collective culpability where necessary. This is counterintuitive for most people, and is often the first hurdle at which any learning from failure effort stalls. Common human reactions to failure include denial, blame-shifting, excuse-making, or even attempting to hide the failure. Yet, we somehow expect these normal emotional contaminants to magically disappear just because we say it is okay to fail. The reality is that we are all emotionally contaminated by failure, to some degree at least, and we initially find it hard to respond positively.

A second emotional contaminant that is rarely discussed when focusing on learning from failure is self-handicapping. This concept has been well researched in recent decades and ‘self-handicapping’ is described as “an action or choice which prevents a person from being responsible for failure.”[ii] In other words, we do or say something that will help us justify a setback of some kind to save face or protect our self-esteem. And there are two types of self-handicapping.

• The first is known as behavioural self-handicapping, and this is where we make a task harder for ourselves to protect our self-esteem in case we fail. In essence, we place barriers in our way, or set ourselves up for failure. One example of this can be when we define totally unrealistic personal or work-related goals – we raise the bar so high that we can later console ourselves by saying that it was simply too ambitious in the first place.

• The second form is called claimed self-handicapping, and it is where we contrive an obstacle to our performance. For example, if I have not been involved in the budgeting process for my area and dislike the targets set, I will continuously remind people throughout the period that the targets were unachievable in the first place – I lay the ground for failure in advance.

Self-handicapping is of course a complex area, and the above represents but a snapshot of what is involved; however, research indicates that everyone self-handicaps to some degree, and it is to be found in all walks of life. Sometimes excuses are valid, so not all excuse-making is self-handicapping, it is more a question of frequency and intent, but the concept must be factored in when seeking to learn from failure.

As a CEO, it is not your responsibility to manage the everyday emotional needs of employees, but if there is to be an effective learning from failure approach applied within the business, then the emotional component must be understood and accounted for. Often such ‘pink and fluffy’ concerns are deemed best left to the HR team, but there are some practical actions that CEOs can take to reduce negativity and increase the potential for learning from failure.

Cultural components

A critical action for any CEO is to ensure that the right culture exists, one that genuinely views failure as an opportunity for growth. Few would argue against this premise, but perceptions and reality frequently collide when it comes to the prevailing culture. The culture a CEO perceives to exist in the organisation may not always match the reality on the ground; there may well be negative approaches adopted by those further down the chain of command when faced with failure. I am not suggesting that CEOs should celebrate failure, but at the very least they should constantly reposition it as a fact of life and potentially a valuable step on the road to success.

Another important action for CEOs is to model the failure behaviour they wish others to mirror. This means leading by example and holding their hands up for the failures that happen on their watch. But this is not something you witness very often, because CEOs are as susceptible to the same emotional triggers as anyone else. That said, we are beginning to see a change in this, from both political and business leaders.

Last November, Twitter CEO Jack Dorsey stepped forward to say, “we made a total mistake with the New York Post, we corrected that within 24 hours,” in relation to locking the newspaper out of its Twitter account. Angela Merkel recently continued the trend when she publicly stated, “we must try to slow down the third wave of the pandemic. Nevertheless, it was a mistake,” she admitted before adding “at the end of the day, I carry the last responsibility.” Not to be outdone, French President Emmanuel Macron has also admitted failures in the country’s vaccination campaign when he said, “we weren’t fast enough, strong enough on it.”

But these examples of publicly acknowledging shortcomings remain the exception rather than the rule, and are frequently couched as ‘we’ rather than ‘I’. As CEO, the single greatest contribution you can make is to destigmatise failure by openly admitting your own.

Procedural components

The final piece of the puzzle in adopting any learning from failure model is to create analysis and review procedures that facilitate it. To my mind, this third component is the easiest part, if the emotional and cultural contexts have been adequately addressed. Naturally, responsibility for the implementation of such procedures lies further with the broader management team, but CEOs can add value here by helping their subordinates to avoid some common pitfalls associated with any analysis or decision-making process.

The first is groupthink, which was initially defined by Yale psychologist Irving Janis as occurring “when a group makes faulty decisions because group pressures lead to a deterioration of mental efficiency, reality testing, and moral judgment’.[iii]

The issue of groupthink has been widely discussed ever since Janis’s work, and it is now an accepted phenomenon. In seeking to learn from failure, it is vital that the analysis and review procedures adopted within your business are not, internationally or otherwise, overly controlled by the most dominant characters – and that includes you. Reflect upon some pertinent questions here:

• Are there defined procedures for learning from failure, particularly for larger problems, that go beyond the basic debrief or cursory review?
• Does the process involve a diverse group of people from across the business (with varied expertise and experience), or is it just the same select few every time?
• Are unfiltered views sought and expressed on the failing in question?
• For analysis of major failures, is outside expertise enlisted?
• What role do you play as CEO in the process? Might you exert too much/too little influence on how the learning is defined? Does your presence, even unwittingly, stifle analysis rather than encourage it? Not many people like to admit their failings in front of the ‘big boss’.

The answers to such questions can help you to identify flaws in the current approach and advise your people how to minimise the propensity for groupthink.

Ultimately, learning from failure will require remedial decisions to be taken and then implemented. The final area I think CEOs should focus on in seeking to optimise the learning from failure effort is on how decisions are currently taken within the business. This issue has relevance beyond the narrow confines of this subject, and is worthy of consideration. In his important book Why Decisions Fail,[iv] Paul Nutt highlighted just how problematic decision-making is within organisations. He reported on a study of nearly 400 business decisions made by senior managers in medium to large organisations which resulted in the alarming statistic that half the decisions made were not up to scratch because “either they were not able to withstand the uncertainty, conflict, or change common in the work environment, or they could not elicit the buy-in necessary to make them stick.” This is a serious indictment of managerial decision-making and is mirrored in other studies too, so it is not an isolated finding.

Poor decision-making is therefore both the root cause of many failures and an impediment to learning from them: potentially a vicious circle. As CEO, you can help enhance the effectiveness of learning from failure by guiding your people on how to make better decisions.

In conclusion, I would like to summarise three priority takeaways for CEOs from this article:

1. Whilst a desire to learn from failure is commendable, unless the emotional, cultural, and procedural components are continuously aligned in your organisation then it is not possible to truly learn from failure. In fact, it is a route map to repeating the same mistakes.

2. Every CEO, no matter how experienced, should examine their own relationship with, and responses to, failure. Ask yourself how successful you have been to date at leading by example in this regard? When was the last time you openly acknowledged your own failure?

3. Perhaps the greatest impact you can have as CEO in building an effective learning from failure model is to continuously challenge the status quo. One practical way of doing so is to pinpoint the last major failure that occurred in your business and track what has happened since. The next time you meet with your senior team, ask the following questions in relation to that failure:

• What analysis and review procedures were adopted in response to the failure?
• What specific lessons were learned from that failure? How were those lessons arrived at? By whom?
• What changes have resulted from those lessons?
• What improvements have occurred since applying the lessons?
• What data supports those assertions?

If you do not receive clear and coherent responses to such questions, your current approach to learning from failure is failing. Time for a rethink. 

I will leave the final say on this subject to Samuel Beckett, words I think have never been more relevant than in these troubled times:

Ever tried.

Ever failed.

No matter.

Try Again.

Fail again.

Fail better.

I would love to hear your thoughts on this article and to continue the conversation, so please feel free to contact me directly at [email protected]

[i] Larcker and Tayan, Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (1st edition, Pearson Prentice Hall Pearson Education, Inc., Upper Saddle River, New Jersey 2011).

[ii] Kolditz and Arkin, “An Impression Management Interpretation of the Self-Handicapping Strategy” (1982) 43(3) Journal of Personality and Social Psychology, pp. 492–502.

[iii] Janis, Groupthink: Psychological Studies of Policy Decisions and Fiascos (Houghton Mifflin 1983).

[iv] Nutt, Why Decisions Fail: Avoiding the Blunders and Traps That Lead To Debacles, (Berrett-Koehler 2002). Reprinted with permission of the publisher. © 2002 by Paul C. Nutt, Berrett-Koehler Publishers, Inc., San Francisco, CA. All rights reserved.

Reflections from business leaders