Failure Can be A Great Teacher ... or Not

While many of my clients are thriving in this downturn, I frequently meet with companies who are only about two or three hiring mistakes from the ash heap.   In a small company, 2 or 3 key hires can often mean the difference between a turnaround or a disaster.  

So who do we look for in a high-stakes, bet-the-company, key hire?  We look for someone who thrives in a downturn.  Someone who is at their best when times are worst.  Someone who inspires others to do better, someone who can move forward when the path forward in unclear and the information is imperfect.  Someone willing to make big bets, rally the troops, and charge forward, admitting mistakes and adjusting course as new information emerges.  Someone willing to engage.  So what does their resume look like?  It does not necessarily look like a relentless march from success to success – some people “fail up” taking one easy assignment after another, never risking anything big, never failing outright.  I prefer people who have taken risks, and learned from their mistakes.

For leading in tough times, I think failure can be a better teacher than success.  In an article in Fortune,  search executive Les Berglass agrees, suggesting that you may not want to hire someone with an unblemished record of success at top firms.   In times like these, you want someone who struggled through turbulence and difficulty.  Here are a few choice quotes from the article:

By avoiding candidates at struggling companies, we eliminate those who possess the most valuable skill sets for today: The ability to navigate through corporate crises. 

Anyone who has led a company through a difficult period walks away with management lessons that a “winning” leader has yet to learn.

Important as persistent sales and cost management may be to a business, the seed of growth is innovation. Inevitably, the term “innovation” inspires images of Apple, which, despite this horrid economy, continues to sell iPhones like it’s a boom time. Lest we forget that Apple’s genius CEO and founder, Steve Jobs, was thrown out in 1985 when the company hit a sales slump.

I wholehearted agree with Les about innovation, but sadly, I think most people do not learn that much from failure.  Very few people can fail without blaming others, or blaming circumstances.   And when you blame, you cannot learn.

In fact, a recent article in the New York Times “Try Try Again, or Maybe Not”  pointed this out in painful and painstaking detail.  A team at Harvard Business School  looked at several thousand venture-capital-backed companies from 1986 – 2003. 

“The data are absolutely clear,” says professor Paul A. Gompers,  “Does failure breed new knowledge or experience that can be leveraged into performance the second time around?”  Umm, no.

“We found there is no benefit in terms of performance.”

Successful entrepreneurs were more likely to succeed in their second venture, while people who tried and failed were no more likely to succeed the second time around than they were in their first attempt. 

It seems that among thousands of venture-backed CEOs, only success was a teacher.  Those are pretty long odds for those trying to make the case that failure is a better teacher.  My opinion is that it’s really more about the student than the teacher.

So rather than ask whether failure or success is a better teacher, instead ask this question about the student:  Does someone “own” their mistakes and talk about lessons learned?  Does your bet-the-company key hire have the confidence, tempered with humility, to  drive results in a turbulent, uncertain market, when the odds are against them?  Have they succeeded in a difficult market like the one we are all in right now?  Can they admit mistakes and failure and adjust course?   Because when you are hiring someone, and their only experience was succeeding – but in a different environment than the one you have – you are taking a bigger risk than if you hired a rookie.  With a rookie at least you are not going to have to fight  their false confidence.