We strive for success, but it could be argued that we must experience failure in order to achieve it. GISMA Business School President, Ivo Matser talks about failure within the Business School and for the MBA student.
How do we define ‘success’ in business?
‘Success’ is more than achieving goals and growth; success in business also implies that managers continu-ously prepare their business for the future and that they create windows of opportunities for achieving future goals. If managers see their business as a legacy, they’ll want to contribute to the expected value of their business – leaving it in a better way than they ‘found’ it.
Family businesses are good in this way as future generations will be the company’s continuity. Balancing short- term and long-term results is one of the main tasks of managers. Squeezing a company in order to increase its short-term results is very easy, but it kills future opportunities. On the other hand, focusing on the long term is no excuse for not achieving short-term results. Personally, I like the idea of ‘brand value’ and in my career as CEO of a number of organisations, I mostly found a way to agree with my board and shareholders on brand value which is a mix of financials, reputation, quality and future perspective.
What are the key components of success in business?
There are many ways of defining the key components of success. I opt for a management perspective, be-cause in MBA programmes we educate managers and because I am a practitioner. We could categorise components, or key indicators, in three areas:
2. Processes and systems
Results are increasingly becoming stakeholder orientated, thereby generating more than economic value for the owners. Stakeholders’ orientation means that we manage businesses and we feel responsible for their impact on society. For example, to see profitability in the context of sustainable developments in society. Achieving business goals without exploiting our planet or people, or even better, using sustaina-bility as business opportunities. We assess the results in financial and non-financial measures. Examples of the non-financials include customer satisfaction, corporate footprint and loyalty, to name just a few.
2. Processes and systems
The second category of indicators is related to processes and systems. For instance, in order to improve and innovate business models continuously in circular economies, companies in digitalised societies will use different business models than previously used. Underlying this requirement, ‘future-proof’ business models connected to new technologies are needed. Other processes are embedded in efficiency (econ-omising the business), impact (quality) and effective decision making. We can assess performances here in time dimensions (decisions, delivery and response) and flexibility dimensions (ability to change and cul-ture of change).
The third category is people. Here we see inspired and motivated people achieving high productivity, corporate responsiveness to external developments and agility. Leadership is a key enabler in this catego-ry. It is a critical success factor towards being innovative, open-minded and future orientated. The human factor is the most important. Performance measures in this category include: turnover (high turnover in-dicates that the organisation lacks learning, low turnover may indicate too much internal orientation), sick leave (high/short sick leave relates to motivation), internal career opportunities (motivation and in-novation), productivity (output per person).
Is failure a necessity?
Ideally yes, but not because people want to fail or because people should fail. Failure is not a goal. I would put it differently; failure is inevitable. Of utmost importance is the acceptance of failure as a prob-able outcome of an experiment, innovation or attempt at improvement. Without experimentation, inno-vation becomes improbable because you cannot validate future innovations with historical data. Many things are trial and error. Accepting failures and not being frightened (or embarrassed) to fail are equally important towards recognising failures, mistakes and misunderstandings at an early stage.
In so doing, loss of money is avoided because later-stage innovation failures are extremely costly. The so-called ‘license to fail’ offers a risk-reduction mechanism because it avoids the excessive costs of failure. The problem is that we do not share failures and we mostly only hear the success stories. But behind these successes are many failures. Many success stories are written in hindsight and do not tell the full story. Post-success stories mostly imply that people understand the market and that decision makers are able to develop reliable forecasts, which is impossible in reality. Success stories make people believe such naivety.
Failure does not form the curriculum in higher education
Somehow, we think that we can learn from success. We like to admire successful people because we want to be successful as well; people like success stories. As I mentioned before, many people believe in forecasts and plans and they fail to recognise that these are mere projections. Not meeting these projec-tions is failing and this is perceived as stupid. Schools want to teach smart things and not stupidity. More-over, the education system is based on the punishment of failures.
As children we all are supported to experiment. How many times did we fall down before we could walk? Yet as soon as we go to school and we start to consciously think, children and students are graded and punished for failures, contrary to encouraging trial and error. This does not mean that we should not as-sess people. Assessment could be more geared towards learning processes with a focus on what people can do rather than what they cannot do. This may sound soft but feeling responsible for developing what you can do (or your talents) means continuous improvement and not being afraid for challenges.
Business Schools must create an environment in which MBAs can thrive through failure
There are many ways to integrate failures or problems into programmes. Feeling safe with your peers is a condition to share and use failures.
It is imperative that MBA students bring their own failures into the classroom and that Schools invite suc-cessful people and ask them to share the dark sides to their success. Practicing behaviour is also im-portant. We can teach students how to lead a meeting but it is better to organise simulations in which they can practice and learn from their failures and mistakes. Again, feeling safe is crucial as is giving pro-fessional feedback.
Teaching about failure
You cannot teach how to behave as we need experiential learning - learning by doing and receiving feed-back.
Failures are important in MBA programmes, however, most programmes do not teach it. Instead, they let students experience their failures. Again, feedback is an important learning intervention in behaviour, often more powerful than teaching. I personally train people in giving and receiving feedback - this is a very important communication skill.
Leadership and being afraid to fail
How can you become a ‘real’ business leader if you are afraid to fail? Of course, there are many managers who are afraid to fail. My experience is that the more self-centred or egocentric they are, then the more they fear failure. Mostly, this is simply a reflection of their lack of self-confidence. This is commonplace in middle and mid-senior level, but not among top-level managers (albeit with exceptions). Business Schools can change this mindset and it is important for them to help people understand that failure is normal and a pathway to success.
How to handle failure
An MBA student can handle failure in his/her own business environment if the MBA is able to create a learning context. If you work in an environment where ‘management by fear’ is the business culture, it is quite naïve to start your own kind of safe environment to share and support experimentation. This will be an organisational development task of the MBA. What I do not see in many MBA programmes is the topic of how to manage upwards, including boards and shareholders.
Most MBA programmes only focus on managing downwards and how to manage horizontally. It is im-portant to learn how to manage and influence superiors or systems to create a learning environment with a supportive feedback system. Most MBA holders are not CEOs.
Strategies to learn from failure
Experiential learning with a twist, so that it is based on talents and the potential of people, can be useful. To fail on something that you cannot do will not work; this is frustrating and it will not bring significant improvements. Learning from failures and experiencing successes and failures in your personal develop-ment journey will work because these are based on your talents.
Strategies that emphasise failure
If people are not allowed to fail, this does not absolve them from failing. They will become very smart at hiding failures or just do the minimum demanded of them to reduce the probability of failures. This not only means that you are likely to spot failures late in the day, it can also negatively impact productivity and the speed of decision-making processes.
By contrast, openness, transparency, feedback, and cultivating a ‘safe environment’ helps avoid high losses because failures are noticed earlier. This also results in greater innovation, higher productivity and lower levels of sick leave.