One thing we are not prepared for in life, nor is this topic generally taught in most academic institutions, is how to deal with failure. Maxwell (2000) points out that people in school are trained for success and as a result, most of us have an unrealistic perception of what failure looks like, let alone how to deal with it. The truth is, we should also receive training for failure as this a far more common occurrence (Maxwell, 2000). In fact, taking into consideration that 1% of the population holds all the wealth, we can say that poverty is more prevalent than wealth and disappointment transpires far more often than not. Just ask all the teams that did not make it to the Super Bowl or any of the athletes that have ever competed at the Olympic Games who did not walk away with a medal. Given these statistics, it makes sense that the odds are in favor of our failing more often than not. When you think about it, that’s a pretty grim perspective. However, acknowledging this element can be helpful to leaders in a business arena. For instance, one survey from professionals that help companies in trouble, pointed out that components like inadequate leadership and poor planning are two of many reasons why some companies fail. This is valuable information that can help key decision makers create more effective strategies.
To address the first reason for business failures – the inadequate leadership factor, key decision makers must first understand what the magical component is that makes one person stand out from others. In other words, to address poor leadership issues, one must first comprehend the components that differentiate an average person from a top performer. Coulter (2010) points out, for instance, that effective leaders develop strategies that will: (a) move the company forward, (b) maintain the company’s position in the marketplace, or (c) reverse an organization’s shortcomings to lead them to successful outcomes (Coulter, 2010).
But why are some leaders effective while others fall short? Celebrated soccer player Kyle Rote is quoted to have said that there are many roads to success, but that the path to failure is a person’s inability to look beyond those failures. In other words, the difference between an average performer and a top performer is how they perceive failure in addition to how they deal with it. For example, a person that has the ability to learn from their failures is more likely to achieve successful outcomes, than one who allows failure to deter them from moving forward or making another attempt.
A leader that is a high achiever tends to view negative outcomes differently. This is the kind of leader that will approach a challenge as an opportunity to learn and grow rather than blame mistakes on someone or something else. A leader that blames others is missing an important opportunity to discover a new strategy and is more likely to repeat their mistakes. In addition, an inadequate leader most likely does not expect to fail again, once they resolve an issue. As a result, if and when it occurs again they are not prepared. Therefore, a strategy for company owners and shareholders would be to recruit top performers in leadership positions that possess some of following characteristics: (a) individuals that take responsibility for errors and shortcomings rather than blaming it elsewhere, (b) they learn from their mistakes, (c) they understand that failure is part of the process that leads to progress, (d) they challenge outdated assumptions, (e) they are not afraid of risks, and most important, (f) they persevere (Maxwell, 2000). These components can help key decision makers engage in better leadership choices to reduce chances of errors that can occur from inadequate leadership issues.
Another reason why businesses fail is because of poor planning. However, upon closer examination, we will also discover that businesses do not only fail because of poor planning, failure also occurs because the plans were not executed to their fullest potential. Carroll and Mui (2008) revealed, for instance, that corporate America has spent hundreds of billions of dollars producing epic business failures. In fact, many executives in top management positions cringe at the word failure. As a result they rarely learn from failed outcomes and in most cases, focus the blame elsewhere. Take for example the mortgage and loan crisis of 2008 that repeated earlier financial crises. This is a strong indicator that business institutions continue to repeat the same or similar errors. The statistics are quite sobering in fact because they reveal that since 1981, 423 US companies with assets of more than $500 million filed for bankruptcy. In addition, their combined assets at the time totaled more than – are you ready for this – $1.5 trillion! Their combined annual revenue was almost $830 billion; and in fact, some of these corporations filed bankruptcy multiple times! This tells us that companies are not even learning from other companies’ mistakes (Carroll & Mui, 2008).
So what is the reason for all these burnouts? Carroll and Mui suggest the culprit is poor execution of strategic plans. For instance, in a battlefield, most leaders reveal that a battle plan rarely survives first contact. This is because they can only engage in so much planning before just moving forward. Executives could stand to learn from this fact. Planning and execution are significant, but what is equally if not more important, is creating a plan with good strategic actions that will produce effective results.
Take for example the famous incident that occurred at the Charge of the Light Brigade, the British Cavalry so named because they were optimized for fast mobility. The English troops were led by Lord Cardigan against Russian soldiers in October of 1854 during the Battle of Balaclava. According to reports, faulty intelligence affected the orders given to the cavalry that contributed to the disastrous decision to charge the Russians who were equipped with a considerable amount of artillery in the Crimean War. The British executed their strategy as planned, however, because the strategic move was based on false data, their campaign was ineffective. Once the charge was set in motion, there was no way to avoid the disaster they encountered and as Alfred Lord Tennyson wrote in his famous poem, the soldiers walked into the valley of death. In other words, their failure did not result from poor planning, it resulted because of incorrect information that was used to devise the plans. This is how inaccurate information can result in disastrous outcomes. In fact, in a business context, Carroll and Mui further postulate that 46% of company failures can be avoided if leaders are more aware of the pitfalls they may face. Other failures can also be avoided if companies are able to detect the warning signs.
My ebook, The Value of Strategic Management, just released on audiobook, provides insights to effective leadership skills and examines strategies that top performers implement to manage an organization more efficiently. In short, the best strategy leaders can use to avoid failures that result from poor planning is to understand that poor planning can result from a lack of accurate data in the construction and execution of the strategic planning process. Although we acknowledge that there are many factors that can contribute to a business failing to achieve their desired outcomes, the key lies in a firm’s abilities to not only acknowledge their mistakes, but take responsibility and accountability for them and use their experience with failure as an opportunity to learn and avoid repeating the same patterns thereafter.
“There is only one thing that makes a dream impossible to achieve: the fear of failure.” – Paulo Coelho
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Carroll, P., & Mui, C. (2008). Billion dollar lessons. New York, NY: Penguin Group.
Coulter, M. (2010). Strategic management in action (5th ed.). Upper Saddle River, NJ: Pearson Education, Inc.
Maxwell, J. (2000). Failing forward. Nashville, TN: Thomas Nelson, Inc.