Leadership Memo 2023-11
Do you want to be able to respond and adapt to this fast-changing and increasingly complex world, instead of just reacting and always worried that you made a wrong decision? Then you need a culture of learning and open-mindedness. And the pre-requisite of a learning and open-minded culture is a safe and trusting environment.
For the past 2 months, we’ve been talking about building a safe and trusting environment where people feel free to admit mistakes and they don’t hide failures to protect themselves. (Click the links if you’d like to review what was discussed.)
However, not all failures are the same. And not all failures are useful from a learning perspective. That’s what we’re going to focus on today.
According to Dr. Amy Edmondson, professor of leadership and management at Harvard Business School, there are 3 types of failures: basic, complex, and intelligent.
Basic failures have known contexts and single causes. Yup. These are the stupid ones that we make because of inattention, carelessness, or any number of human moments of just basically screwing up. The causes can be readily identified and solutions developed. These don’t teach you much other than perhaps next time you should make a checklist, double-check the instructions, or pay attention!
Complex failures are the scariest. They are the ones when small and often unnoticed events intersect to create system meltdowns. So, make sure you catch the small failures early because these become the early warning signs for potentially catastrophic failures later on.
Then there are intelligent failures. According to Dr. Sim Sitkin, professor of leadership and ethics at Duke Business School, (see his article “Learning through failure: The strategy of small losses,”) intelligent failures are crucial to the process of organizational learning and sense-making. They show you where your assumptions are wrong and where future investment would be wasted. They can help you identify those among your team with the courage to persevere and creatively change direction instead of charging blindly ahead. Intelligent failures are about the only way in which an organization can reset its expectations for the future in any meaningful way.
Here are the criteria for intelligent failures:
- They are carefully planned, so when things go wrong, you know why.
- Underlying assumptions are explicitly declared.
- They are genuinely uncertain, so the outcome cannot be known ahead of time.
- They are modest in scale so that a catastrophe does not result.
- They can be tested at specific checkpoints, identified in advance, since planned results may not be equivalent to outcomes.
- They are managed quickly so that not too much time elapses between outcome and interpretation.
- Something about what is learned is familiar enough to inform other parts of the business.
We’ll dive more into intelligent failures next time.
So, what do you think of failures? Are they intolerable? Do you seek to keep them hidden? Comment below and let me know.
Latest happenings:
IIs your current budgeting process flexible enough to adapt to this forever changing world? Join us next week as Nevine White, a finance executive, talks to us about Agile Bottom Line: The Spreadsheet Stories. Come learn how she transformed traditional budgeting into a dynamic, agile management system, driving remarkable success for her company. Don’t miss this opportunity to gain valuable insights into finance agility and how it kick starts a company-wide transformation. RSVP now!
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