Want Innovation? Create a Culture that Allows Reasonable Failure

Imagine this: you’re an interviewer at a software company.  The candidate sitting in front of you aced the programming questions, breezed through the architecture situation, and even got you to enjoy watching them work – they even made you laugh a few times with some apt jokes.  Then it’s their turn, and they start with a single question: “What’s your work culture like?

Most interviewers would immediately talk about the foosball table in the break room and how you have a summer party every year.  But that’s not culture.

Culture isn’t break room amenities, events and nametags. It’s what happens next when an intern tells a VP that they think the VP’s decision was wrong. Culture is what happens to an engineer’s day when their hard drive fails. Culture is what happens next when an employee seems to be having difficulties concentrating at work.

Try evaluating the culture where you work by observing what happens next when there is a disagreement, obstacle or failure.  Does the VP immediately pull a power play and send the intern to the proverbial dungeon, or do they listen to the merit of the objection, and either acknowledge the validity of the intern’s idea or take the time to explain with facts why the existing decision was chosen over the objection?  Does the engineer with the failed hard drive spend the day chasing signatures to request a new hard drive, and then wait a week for IT to deliver it, or are they immediately cleared to go to the nearest store and buy one?  Is the employee who has trouble concentrating reported to their boss’ boss, or does someone reach out to see how they might help? Are they going through a divorce, undersupported in their current task, or even feel like they are disallowed from doing meaningful work?

Let’s take a look at one important aspect for a successful culture: the ability to reasonably fail.

Ability to Reasonably Fail

Everyone you work with is human. Everyone will make a mistake—probably a lot of them. And every company you’ve heard of and look up to works with humans and failures. How your company responds to failures is critically important.

First, let’s define what is and isn’t a reasonable failure.  Stealing money, knowingly breaking the law, and conscious dishonesty are not reasonable failures.  A reasonable failure is when something didn’t go as expected or hoped, but the company can and will recover, and has maintained its morals.  Unreasonable failures are when an employee has acted immorally, against their own better judgement, or purposely done ill to the company or others.

Most failures, then, are actually reasonable.  Too often otherwise reasonable failures are treated like they are not reasonable—and therefore unacceptable.

The Cost of Not Allowing Reasonable Failures

From failure, we learn. Innovation often comes as a result of failure. When dealing with changing and even complex environments, industries, technology and customer needs, it’s rare we “get it right” the first time. Demanding we get it right the first time limits the likelihood we’ll learn from the experience—learning which usually results in growth and innovation. Resisting reasonable failure will cost you.


The first casualty of overly punishing reasonable failures is morale.  Teams become divided as the safety of the individuals is threatened, and collaboration declines. Studies have found that work pressure can trigger the fight-or-flight response—making us feel that we are in a life or death situation.  Coming into work becomes exhausting.  Soon, your best employees start leaving.

Retention isn’t the only impact of declining morale.  The research firm Great Place to Work found that organizations with happy employees have 3x the revenue growth compared to companies that don’t.  Employee safety is important to your bottom line.

Delivery speed

Delivery speed suffers as employees spend more and more time trying to politically cover themselves or distance themselves from failures than building value for the customer.  Employees will be less proactive in addressing problems, since taking any unsanctioned action means that they are absorbing the risk if the action is deemed a failure.

Decision making

Similar to delivery speed, the speed at which decisions are made slows down.  Quite often bureaucracy is a response to failure.  Someone bought something they shouldn’t have, so now all purchases have to have two signatures.  That one failure has now slowed every subsequent purchase.  So, next week when buying an external tool will help deliver the product faster, your team is chasing signatures instead of results.

This happens not just with purchases, but all types of decisions.  Consider if all architecture questions must go through committee.  The team wants to put in a time box for two hours to brush up on Angular, but that has to be approved by the engineering VP.

The Standish Group reported that the primary cause of software project failures is how long it takes to make decisions, or decision latency.  The more barriers you put up to future decisions, the higher your decision latency and the more likely you are to truly fail.

Lost innovation

Innovation requires creative thinking, which requires safety.  Innovation should sound like “what if we…” or “could we try….”  If the effort of asking permission is too great and requires the possibility of backlash for a failure, employees stop asking the questions that lead to new discoveries.  If you aren’t allowed to fail, you can only ask questions to which you already know the answers.  You won’t be able to progress beyond what you already know.

Customer experience

Simon Sinek, an author and expert on leadership, tells of an experience boarding a plane where someone was treated horribly by a gate attendant.  When he asked why she was treating them like that, she responded, “Sir, if I don’t follow the rules, I could get in trouble or lose my job.”

Simon goes on to say that her mistreatment of customers was because she didn’t feel safe and didn’t trust her leaders.  A fear of failure for your employees will translate to an inability to properly serve your customers.  A pleasant customer experience often relies on an employee being able to make decisions.  Some of those will fail, cost more than expected, or have other repercussions.  But most will reward customers and build trust and loyalty.

How to Improve

What can you do to encourage more flexibility around failure for learning?

Start with Leadership

Punishment for failure is often a top-down interaction, so leadership plays a key role in establishing the culture of how failures are handled.  So, when there is a failure on your team or in your area of responsibility, you should first ask if the failure seems unreasonable.  How you address the situation will set the tone for how everyone around you treats failures.

Next, as a leader you should accept that there may be information you don’t possess, therefore enter the situation with a learning mindset.

It can be helpful for leadership to formally define what type of culture they want to foster, including how failures will be addressed.  They can also define examples of things that are reasonable and unreasonable failures.

Look at the Impact

Looking at the impact of a failure can help put it in context.  Some failures may even be desirable.  Children learn by trial and error.  Companies can do the same.

One way of looking at the impact of failures is the decisions that preceded them.  These decisions can be put into two groups: one-way doors and two-way doors.  One-way doors are like walking through Ikea.  You can enter, but you have to go through the entire store to be able to get back out.  Two-way doors are like Walmart: you can walk in, go down one aisle, then turn around and walk out the same way you came in.

In business, a one-way door is a decision that is hard to back out of.  This could be entering a partnership or taking the company public.  A two-way door is a decision that is easily reversible or recoverable, like changing the time of the daily scrum or creating a prototype.

Businesses can run into trouble when they treat two-way doors like one-way doors.  When a one-way door is encountered, the problem must be well researched, thought out, evaluated, and the resulting decision signed off on by all applicable parties.  When you reach a two-way door, however, run through the door as fast as possible and see what is on the other side.  Don’t use the one-way door strategy for a two-way door problem. There’s no reason for extensive cost analysis or research with a two-way door.  Just go through and see what you find out.

Many decisions in business are two-way doors, and understanding that can help the company to understand that a “failure” may have been the fastest way to learn the answer to a question.  Questions represent risk, so learning quickly is in fact valuable, if it helps mitigate a risk.

See Failures as Opportunities to Improve

Healthy cultures don’t just tolerate reasonable failures, they expect them.  Companies should do their best to create cultures that seek solutions, not blame.  Seek learning, not bureaucracy.

Did a server failure take down a system?  Then what was learned about how to make the entire system more robust?

Did a defect cause an outage?  How do we create a system to detect defects? More importantly, how do we prevent defects in the first place? If an unforeseeable defect entered the system, you may be tempted to add bureaucracy that doesn’t have any benefit trying to prevent it.

There should also be a defined learning process when there is a failure.  Not learning from the failure makes any failure unreasonable, because it will be repeated. Regularly inspect failures and make immediate adaptations. At the very least, every sprint a scrum team should plan to execute an improvement opportunity identified in a previous sprint retrospective.

You can even celebrate failures.  Some companies will even have an “oops trophy”, and people can nominate themselves (not others) to receive it.  This creates a culture where failures are talked about and learned from, instead of hidden.  This open discussion helps everyone learn from others’ experiences.

There can also be structures for encouraging running through those two-way doors.  Hack days and time for employee projects can encourage wonderful innovation.  These are often ignored because of a fear of failure – “what if we don’t get results that are worth the time spent?” That is an example of a “what if” question that stifles innovation rather than inspires it.

No Fear Culture

Avoid the fearful “what if” questions. Continually ask the status-quo-challenging “what if” questions. Culture is important because it governs how work actually gets done.  Creating an environment that is conducive to learning over punishing failures helps companies create safety, innovation, and manage risks.

Don’t hesitate to ask the tough questions. Don’t be afraid to not know the answers at first. Don’t stop learning by trying new things. We want to help you take the first steps at enabling a culture of reasonable failure. Contact us today.


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