The Art of Dealing with Failures in Organisations
In the year 1958, Mao Zedong launched the campaign Great Leap Forward. The central aim of the campaign was to finance industrialization by introducing radical & controversial changes to agriculture. Collective farming was at the core of this ideology. The orders came down from the top and the results were communicated from the ground to the Politburo.
Agriculture had become Govt’s business now, and the Govt was eager to show great results. Everyone in the administration were eager to please. The initiative was a failure due to a myriad of reasons. Despite dwindling figures, local officials, in an attempt to escape the wrath of their superiors fabricated numbers, announcing a dramatic increase in grain harvest. The numbers were inflated at every level in the chain of command.
Based on these figures, the government pledged assistance, aid and export orders, assuming that enough grain remained for domestic demand. As a result of this unavailability of food, an estimated 45 million Chinese died of hunger in the worst famine the world has ever seen. While collective farming was a bad idea to start with, the administrative hierarchy could have salvaged the situation simply by speaking truth.
Unfortunately, plenty of organizations around the world operate in a similar manner. Leaders in the middle of the hierarchy actively avoid sending bad news to the top automatically, since it implies either bad planning on part of the senior management or bad execution on part of the middle management. Either scenario is infuriating for their bosses and entails negative consequences. Hence, there’s a tendency to suppress bad news or brush it under the rug.
How to fix this?
Alan Mullaly, the former CEO of Ford Motors, turned around such a toxic culture or ethical fading and brought the company back to profitability through a cultural change. After taking over from Bill Ford, his first question to senior leaders was ‘Tell me — where are we going wrong?’ He requested everyone to give him color-coded weekly reports with green for good, yellow for moderate and red for bad.
Since a culture of distrust was then prevalent, he barely saw any reds. Each executive, for the fear of losing his job, was presenting reds as greens. But through conversations, Alan built the trust, pointing out that if all was green, why the company was still losing money. Gradually, senior leaders shared the real figures and armed with the right information, Alan turned the situation around.
Time and again, I see that even in the companies that are managed by smart leaders, there is a great aversion to bringing the bad news to the leader. Without the knowledge of these issues, the leader is deceived into believing that all is well when it is not the case. This deprives the organisation from being able to address the issue in its infancy with the inevitable result of this snowballing into a major issue. But there are ways to change this and inculcate a culture of trust that encourages speaking truth to power:
Set the tone from the top: It is imperative that the top leader sets the tone for the rest of the leadership. They have to recognize, acknowledge and communicate authentically that failure is part of life. This sends a signal to the rest of the team to implement more ideas without the backlash of punishment.
Creating a culture of tolerance: Even the largest businesses are susceptible to externalities; there will always be variables outside the business outside our control. When the leader learns to separate bad results from bad planning/execution, we will stop punishing people for bad results. Although we shouldn’t necessarily have an appetite for bad news, we should have the strength to digest it.
Get unbiased data: The good thing about data is that it tells the truth. Unfortunately, when data is tortured long enough, it confesses to anything. When dealing with tangible, measurable aspects of business, it is best to first choose parameters to be evaluated and get an unbiased opinion on the same, perhaps through vetting. Changes in metrics should be subjected to third party vetting too.
Anticipate failures: Keeping in mind the reality, organizations must adopt a pragmatic approach to classify every attempt based on the chances of failure into very low, low, high or very high. The leaders throughout the hierarchy must monitor data, especially as one reaches the execution stage to retain/modify the classification category. Prior information reduces the frustration and disappointment of failures when they inevitably occur.
Keep the metrics simple: Unless you are building rockets, ships to launch satellites, or the quantum world of nuclear physics, keep your metrics very simple. The glamour of intellect and jargon often seduces managers (especially the product guys with fancy degrees) to unnecessarily complicate things. But it is the essential duty of the leader to simplify it. Simplifying is easier said than done.
Don’t ever forget the big picture: Organizations are larger than a single product/project. Although it is all too easy to get consumed with the results or pull the levers to feel like you are in control; organizations, by definition, have an indefinite existence. Minor setbacks and slips have to be contained, but they are annoyances at best. Failure provides an opportunity to identify honest leaders, teaching them humility and optimism. If they learn to visualize the organization outliving them, they will go on to be great leaders.
It is easy to get sucked into the adrenaline of high growth, valuations, launches, and expansion plans. Sustainable organizations design products that add value and build robust systems to safeguard against tragedies. Both only happen through a culture of positivity and the will to endure through failure.