05 Aug 2016

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  • August 2016

This article was originally published on UNSW Business Think.

​​When Australian School of Business associate professor Gavin Schwarz and a colleague were invited into an organisation to help the firm implement major electronic data changes, the pair soon recognised that the desired change was never going to happen. The management team’s unbending attitude towards failure, or more accurately its complete lack of acceptance of failure as an option, smothered any chance of innovation, change or adaptability.

In the end, the organisation justified the lack of change and moved on to new projects, but from this experience Schwarz recognised an area of research that fitted into his specialty area of the behaviour of organisations as a group.

“My work focuses on organisational change and failure,” Schwarz says. “Organisations must adapt and change and recently I’ve looked at why organisations succeed or fail, or go through a period of inertia where they don’t change. I’ve looked deeply into the executive side of things and the decisions and choices that create that outcome. So, I’m a macro researcher but it does have to come back to people, to individuals.”

Much of Schwarz’s work has looked at senior management teams and their attitudes towards failure. How do executives orient themselves towards financial crisis failure, for instance, and how does that orientation shape the organisation’s sustainability or effectiveness? And how do senior managers react to crisis and failure? How does that reaction affect the organisation’s adaptability?

“The facilitation of large-scale change requires a recognition and acceptance of failure so that goals can be reframed into a new construct once the failure occurs. Learnings are taken from the failure, the positives are recognised and a new plan that includes these positives is put together.”

According to Schwarz, this planning for failure at the very beginning of a project is vital because statistically – in terms of business projects – we fail more often than we succeed. So to understand that this is likely and to have a plan to move onwards in a positive and progressive manner is enormously powerful.

“As humans, we’re built for success. We always expect success so we plan for it. But we need to begin to plan for failure,” he says. “Great strategists will do this – they work with failure and consider it a vital part of the process.”  

In a paper he’s writing on the topic, Schwarz runs with the industry-standard definition of failure – “an organisation’s inability to achieve expected performance goals, thresholds, or desired results”. “Key indicators of such failure include financial stress, revenue and value declines, imbalanced relative costs (costs as a percentage of revenues, costs relative to those of competing companies, and employee productivity relative to labour costs), high debt-ratio, and project failure,” Schwarz says.

Most interestingly, this definition presents a non-terminal view of failure, recognising that an organisation can fail for extended periods of time before it eventually recovers or continues declining.

Expecting Bumps in the Road

Lindsay McMillan, managing director of business consultancy Converge International, maintains that failure is a term that is alien to many of today’s high-speed businesses. That’s not to say the outcome is never recognised or planned for, but that the term itself is not palatable. Instead, negative or questionable outcomes are strategised around concepts such as “contingency planning”, “risk mitigation” and “risk management”.

“A good leadership group, when a change plan is being put into place, will say, ‘What are our contingencies if this original plan does not work?’ That’s a very healthy and important part of the process. But however you refer to it, in my experience the success or failure of a change program comes down to energy and buy-in,” McMillan says.

“When I walk into a business to help manage a change program, the first question I ask is: why do they want to change? If there is a good argument that is broadly understood and accepted within the organisation, then I’ll ask who has determined the need for change, who is championing that change and how much of the organisation has bought in to the reason for the change. There is always a group that resists change but there is also always a group that is very happy to follow great leadership,” he says.

“Often, at the end of a change program when the original goals have not been achieved and the mopping up process begins, it’s because the people at the top of the company have lost the energy for it. The challenges along the way, the distractions and, yes, the little failures, have worn them down. For such a program to be successful it needs a champion – a vibrant, inspirational person who does not lose energy. If this person exists then the program is far more likely to succeed.”

According to McMillan, the speed of business these days, the sheer pace of movement, change, progression and innovation, means businesses must plan for the inevitable bumps in the road. They must recognise that problems may occur, goals may not be met, and have a Plan B in place for when they do. The time it takes to reflect and figure out what went wrong is a luxury most organisations can ill afford, so they must have a positive attitude towards failure and simply see it as a launch point for their contingency plan.

The Failure Orientation

Schwarz is quick to point out that he is not encouraging failure or asking managers to celebrate it. His work is highlighting the fact that decision-makers, as they yearn for success, should infuse failure with a positive meaning, leading to the creation of a new failure orientation. Failure becomes something functional and normal, not something to be avoided, denied, or covered up. It allows executives to recognise and plan for failure situations by re-framing them in a positive light.

It becomes about redefining the original goals into alternatives. This enables a new definition of success and gives the failure a positive reason. Managers can think, “we failed that project, but it has become a successful failure as the outcomes have been redefined”.

Says Schwartz: “At a basic level, this means thinking about how you expect and engage with failure ahead of time, rather than reacting to it once it has happened. It’s about thinking of what it might take to change your own views of, reactions to and attitudes towards failure. It’s about the way the key players recognise the failure, accept [it] and then accommodate it.

“Sometimes success simply means surrounding yourself with people who have a different mindset to your own in order to create balance. If you know you are someone who rejects all failure, then you need to surround yourself with people in the opposite quadrant to balance that. If the executive team views failure in a positive light, as a stabilising force, as a legitimate aspect of organisational survival, then it is likely to positively influence the behaviour of the organisation as a whole.”​

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