Fail the right way

March 16, 2011


Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better.”

Samuel Beckett – Worstword Ho
Irish playwright and Nobel Laureate

In a recent Working Knowledge, Carmen Nobel interviews Harvard Professor Shikhar Ghosh about Why Companies Fail – and How Their Founders Can Bounce Back.

Professor Ghosh describes three categories of “failure” for start-ups, and estimates the occurrences of each:

1. Liquidate all assets, investors lose most/all money: 30-40%
2. Not realizing the projected return:  70-80%
3. Falling short of initial projections: 90-95%

With “failure” this common, he urges executives to distinguish between business failure and personal failure.  It’s vital to not let the former, which can be a valuable learning experience, pressure you into the latter, which can become a career-damning ethical lapse:

A personal failure is one in which an individual does something that violates a fiduciary duty, commits a crime, or acts in a way that goes against the normal tenets of morality and fair play… Ironically, a personal failure often occurs because an entrepreneur is trying too hard to avoid an enterprise failure. Trying to keep the venture capitalists happy and the bankruptcy at bay, the founder or CEO will resort to illegal acts such as fraud, or to morally problematic acts such as blatant misrepresentation of the company’s capabilities or prospects when talking to customers or financiers.  And when you do that, you’re then on the slippery slope of taking an enterprise failure and making it a personal failure.

Professor Ghosh closes with an endorsement of Schumpeter’s gales of creative destruction:  “manage failure so that enterprises fail but people can still succeed…[and] build a society that can reinvent itself as the world changes.”

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