From the February 2016 issue of Investment Advisor • Subscribe!

Failure Sucks: To Succeed, Embrace Success

Learn from your mistakes, but don't make failure a habit

The lessons learned from failing are a silver lining, not a goal to strive for. (Illustration: Dan Bejar/Theispot.com) The lessons learned from failing are a silver lining, not a goal to strive for. (Illustration: Dan Bejar/Theispot.com)

In his popular 2007 book, “Failing Forward: Turning Mistakes Into Stepping Stones for Success,” John Maxwell captured what has become a widespread business strategy: embracing failure. Here are some quotes from his book:

  • “Make failure a regular part of your life. If you’re not failing, you’re probably not really moving forward.”

  • “The more you fail, the more you learn. The more you learn, the better you get.”

  • “Fail early, fail often, but always fail forward.”

As you may have already figured out, I find this thinking to be horse-hockey. When applied to advisory businesses, it's dangerous horse-hockey. Despite the common “wisdom” that our failures lead to our success, in our business consulting work, we find that there's almost nothing good about failure, especially when it's compared to success.

In fact, the only thing we learn from our failures is what not to do, and we certainly don't build successful businesses around our failures. What we do learn from are our successes — our greatest lessons come from our successes. We build on them to create successful advisory businesses. You get to success because you succeed, not because you fail.

Consequently, rather than embrace them, our goal is to prevent failures for the following reasons, which you might think of as the costs of failure:

  • Time and money. Whatever time, effort and investment you put into a failed project (a new service, marketing strategy, branch office, employee, etc.) is time, effort and money that's gone forever. When we started working with independent advisory firms 15 years ago, their most pervasive problem was ridiculously high employee turnover. The cost of and time wasted in constantly recruiting and retraining new employees was undermining firm growth. We didn't have to be Malcolm Gladwell to figure that out. Once we solved employee failures, most firms became successful almost immediately.

  • Opportunity. While you’re wasting time, effort and money on projects and initiatives that don't pan out, you’re also not spending them on areas that would be more successful. I’m not saying that you can always be right about new ventures, but we have found that this “embracing and glorifying failure” attitude can lead to a mentality where firm owners just try any idea that happens to pop into their heads, as if there aren't any consequences if they don't work out.

  • Confidence. No matter how heartily business owners strive to “embrace failure,” we find that after a failed initiative or two, they almost always lose confidence in their business acumen. When that happens, they’ll start finding excuses for not trying any new projects and their business starts to stagnate.

  • Credibility. Almost as damaging as a firm owner losing confidence is when their employees lose confidence in them. The success of new advisory firms almost always depends entirely on its owner-advisor. But as firms grow, successful owners come to realize that their firms’ successes increasingly depend upon their employees. That means employees need to have confidence that the owner knows what he or she is doing. We find it doesn't take more than a couple of projects that don't work out to undermine employees’ enthusiasm and motivation for putting in the extra hours and effort required. This, of course, greatly reduces the chances of any future projects succeeding.

Now, I’m not suggesting that advisory firm owners shouldn't try new things or launch new initiatives — to grow, or grow faster, they usually have to. But I am saying that new projects shouldn't be taken lightly under the theory that failure doesn't matter or even is a good thing. It does and it isn't.

8 Steps to Success

We spend a lot of our time and effort working with owner-advisors to minimize the chances that their new ventures will result in failure. As a first step, we recommend that a clear, formal process for new projects be worked out in advance and applied to all new ideas:

  1. Slow down. In over 15 years of working with advisory firms, I have yet to see an opportunity that required immediate action. However, I have seen a lot of ideas that firm owners mistakenly felt they had to act on right away. Of the handful of ideas we couldn't talk them out of, not one was successful, so take a deep breath and stick to your process.

  2. Keep a notebook in which you write down new ideas, opportunities and problems that come up.

  3. Schedule regular management meetings (once a quarter is often enough; twice a year usually works fine, too) to discuss the ideas in the notebook with owners, partners and senior employees. Traditionally, implementing one new great idea and seeing it through is the most a small business can handle in one year.

  4. Clearly articulate the whole idea, along with the opportunity or problem it will address. Next, explain how the idea fits into the firm's overall vision and growth strategy. Then, carefully listen to all responses, pro and con.

  5. If the idea is deemed worthy of pursuing, determine what further information is required to reach a decision (more details, research, costs, timelines, consultants, conversation with outside advisors, etc.), assign responsibilities to gather that info and set another meeting to review it.

  6. Get input on the idea from all employees of the firm. Not only will this make everyone feel included in the decision, but employees often come up with some of the best ideas or enhancements to the initial idea.

  7. Review the new info in the next meeting and come to a decision about whether to pursue the idea.

  8. Create a detailed plan to implement the new idea including timelines, costs, people involved, their responsibilities, milestones for monitoring progress, goals and how success or failure will be determined.

Of course, even the most carefully thought out projects don't always work out. How a firm handles failures when they (hopefully rarely) occur, will also have a big impact on its ultimate success. While firm owners often want to pull the plug on new ventures at the first sign of trouble, we find that the above formal process helps them see the bigger picture and stick it out through the first signs of adversity, often by making minor adjustments.

The process also helps determine when a project's goals are not likely to be reached, and when further investment of time, effort and resources isn't warranted. In that case, it's important that the firm as a whole determine what can be learned from the experience. It's equally important to ensure that the learning process does not become a “blame game.”

The responsibility for maintaining the fairness of the learning process falls squarely on the firm owners. Their failure to do this will have a major impact on the success of future projects as well as on the success of their firm. At this point, owners will do well to assume as much of the responsibility or failure as they credibly can, and be hesitant to assign blame elsewhere. Even the appearance of unfairly blaming employees for major failures can have a disastrous effect on morale across the firm, while managers who personally accept blame can greatly increase employees’ feelings that everyone is in this together.

On the other side of the ledger, an owner's handling of a successful new venture can also lay the groundwork for future successes. Owners should be very reluctant to take much, if any, of the credit for successful ventures. Instead, they should focus on the contributions of everyone involved, and even the firm as a whole. This costs them nothing (or very little, even if bonuses are involved), while creating big-time incentive and motivation for employees to continue to work toward the success of the firm.

One final cautionary note: Don't cling to your successes. We find that firm owners who follow our process and get a successful project or two under their belts have a tendency to get a bit cocky and a bit lax about the process on their next venture. While we encourage advisors to build on their successes, we also caution them that things can — and do — change (the pace of change is doubling and tripling as we speak). You can't always base a project on what you learned from an old project, no matter how successful.

We encourage advisors to start at the beginning of the process for any new venture. Be careful about talking to other people about your failures; you can learn a whole lot more from talking to people about their successes. Knowing what not to do sometimes can keep you out of trouble. Knowing what to do creates success that you can build on.

--- Read "These Will Be Wall Street’s Most In-Demand Jobs Next Year" on ThinkAdvisor.

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