In the world of strategic projects, cost overruns and schedule delays are par for the course.
By some estimates, over 80% of all technology projects are delivered beyond budget and timeline (see Google results for “IT project failure rate”). The act of planning and forecasting is certainly partially to blame. Forecasting is always a tricky business, and the added political pressures of the typical corporate environment add to the complexity. Increasingly-sophisticated project management tools are designed to improve forecasting abilities, minimize risks and improve schedule/budget adherence. Additional rigor and upfront analysis will improve our odds of success, from project selection to implementation. Detailed financial analysis and projections will enable objective investment decisions through net present value (NPV) calculations. Gone are the days of financing the executives’ pet projects. Future state roadmaps and multi-generational plans will provide a logical order to what would otherwise be chaos. Project plans, level 0 – 5 estimates, program management offices, status reports, risk and issue logs, design authorities, and dependency tracking will serve as insulation against possible failures. Like missionaries bringing the good word to a group of savages, the modern discipline of project management represents salvation, modernity and progress. Sadly, the results don’t match the rhetoric.
Many organizations have simply resigned themselves to mediocrity as the cost of doing business. The missed expectations, cost overruns and schedule delays are dealt with through a magical substance known as “contingency.” Still, there have been honest attempts to explain the near-universal phenomenon. The standard case study points to a lack of control, lack of clear vision, lack of sound business case, etc. The culprit is always the same, the lack of vigor and discipline, or in a few cases, the ineffective application of strong project management principles. The solution? You guessed it, more of the same.
One may be excused for asking the obvious question. With all of the case studies, consultants and common knowledge of the solution, why does the problem persist? The resultant explanations fall painfully short for reasons that will be discussed below. There is a common root cause in all cases. There is a “prime villain” that is responsible, but it is not a lack of discipline. It is not a lack of motivation or rigor that plagues attempts to transform. The root of the problem is a lack of tolerance for failure. In an effort to insulate themselves from failure, many organizations ensured it as their fate.
Antifragile: Thriving on Pressure
Some things break or degrade under pressure. These things can be described as fragile. Other things withstand pressure and do not break or degrade, which are often referred to as robust or resilient. Although these two concepts are generally deemed to be opposites, there is a third category that improves with pressure. These things are the true opposite of fragile; they are antifragile. This is the thesis advanced, in much more eloquent and convincing words, in Antifragile, by Nassim Taleb. The antifragile concept applies to living organisms as well as to organizations and institutions. It is easy to see how the human body improves with certain pressures (e.g. exercise to improve muscles, sickness as immunity, etc.), but can the same really be said for organizations? In short, yes, and attempts to prevent failures often creates fragility. Many institutions, organizations and systems may be successful minimizing the occurrence of small downturns only to increase the likelihood of a large collapse. This framework can be used to describe the weakening of the immune system without exposure to bacteria as well as the collapse of the banking sector in 2008.
As discussed previously, the purpose of a rigorous project management methodology is to improve the odds of success and minimize the possibility of failure. But have the odds of success increased? Has increased sophistication and rigor led to gains in scope/cost/timeline/quality? Or, have we merely avoided/masked over small failures today in favor of large problems in the future? Certainly the 80% of “failed” projects stand as compelling support of such a position. Even if we are to buy that the track record of strategic change projects is fair game for criticism, is it reasonable to assume that those same methods are directly responsible for said track record? In answering this question, a brief examination of why failure is critical to change, an understanding of how conventional thinking increases the severity and impact of failures, as well as an exploration of how organizations can embrace failure without distorting incentives will be helpful.
Learning to Love Failure
The need for failure is as important an organizational concept as it is an individual one. Few, if any, stories of great innovation or accomplishment are devoid of failure. Those with the audacity to dream of something better must come to terms with the fact that progress is not linear. There will be fits and starts and a few ruffled feathers along the way. How many tales of greatness consist of the hero following all orders, moving from A-B-C in sequence and eventually having greatness delivered on a silver platter. It does not happen. Greatness, progress and innovation are violent by nature. The economist, Joseph Schumpeter, said it best when he referred to the entrepreneurial process as “creative destruction.” The process of creating the new will destroy the old. What is lost in this tale of triumph is that the old does not merely step aside like an elder statesmen being put out to pasture. The old is a tyrant, a mean and nasty dictator grasping onto power by any means necessary. Winning the war will involve losing a few battles.
Many have pointed to the ability of successful entrepreneurs to define failures as mere non-successes (see Entrepreneurs Are Made Not Born by Lloyd E. Shefsky). This is an important shield against the fear, doubt and uncertainty that will be heaped on by society. Fear of failure is what prevents the vast majority of us from recognizing our full potential. The use of violent metaphor above has more than symbolic appeal. A very simple, but helpful view of fear divides fear into two categories. The first is fear of physical harm (violence, pain, death, etc.). This is at the center of many rational and irrational fears. It is fear of physical harm that triggers the fight or flight mechanism in a dangerous situation. The second is the fear of emotional harm (e.g. embarrassment, harassment, mental stress, etc.). Not to diminish emotional harm as the effects can be as, if not more, crippling that physical harm, but it is in this category of harm that the perceptions or perceived perceptions of society play a considerable role. If time in the house breeds insanity (see Henry David Thoreau), what of time in society? How many men have yet to reach their potential in dancing due to concern for what others might think? Is it more embarrassing to move through an agility ladder on a football field than the steps of the foxtrot? Movement is movement; society draws the difference. Is the lion embarrassed by chasing the gazelle if other lions are watching? How many of us shy away from languages for fear of sounding foolish when struggling with foreign words? If we approached language as a child with no fear of embarrassment, but rather with the singular focus of being understood, how many of us would count ourselves as polyglots? Fear of failure is a fear of society – the reaction of our friends, families and colleagues. Rather than risk failure, we would rather not try.
For most of us, the consequences of failure are exclusively of the emotional variety. Missing a deadline at work will not result in a beating. Presenting an idea on a new way of doing things does not require you to prove it in the arena. We are painfully insulated from physical harm, but the concept still applies. How many hardened warriors developed in the absence of physical pressure? It is no wonder that the peacetime general looks with envy on the battle-tested private. Getting through a tough challenge does not make us worse, it makes us better.
In David & Goliath, Malcom Gladwell provides a powerful example of this concept in the story of the German bombing of the British civilian population in World War II. Prior to the start of the bombing campaign, British politicians and military leaders feared the devastating effects of such an action on the psyche of the British people. When the bombs started to fall, people reacted predictably. They reacted in fear and took cover. As the bombing continued, and the initial shock abated, an interesting change occurred. People went back to life as usual. Multiple accounts tell of bombs falling close to markets, with no panic and little reaction from the shoppers. The near misses did not decimate the population’s resolve, but rather strengthened it. People came to terms with their fear and were better for it.
The progress of individuals, teams and organizations demands failure. To never fail is to never try. To see failures for what they truly are, non-successes, is vital. When a child mispronounces a word, we do not label the attempt a failure. We say he or she has not gotten it yet. Success is inevitable. We also recognize that the child who attempts to repeat everything he/she has heard will master language much faster. There will be many failures along the way, but it is in these failures that corrections can be identified and applied.
Why Do Companies Hate Failure?
With all of the benefits of failure described above, why do organizations try so desperately to insulate themselves from failure? More importantly, do (claimed) successes in this endeavor represent actual reduction in failures, or have small losses been avoided at the cost of large ones? A lack of exposure to germs may prevent sickness in the short term, but it will leave the body weak and vulnerable in the long term. This is an apt metaphor for conventional approaches to transformation and change.
Rather than debate the words used by companies to understand their approach to failure, an examination of the conventional practices will yield far better clues as to the reality of the situation. As discussed in The Anti-Strategy Revolution, companies have grown increasingly enamored with strategy as a solution to business challenges since the 1970s. This has involved increasingly-sophisticated tools of analysis and planning to improve efficiency. Although lineage of strategy traces back to accounting as opposed to scientific management as is commonly misattributed, the efforts of Frederick Taylor have played a defining role in shaping the language and practice of project management (see The World’s Newest Profession, by Christopher McKenna). Despite the poor track record of the forecasters and planners, they continue to serve as the go-to set of tools for well-intentioned executives.
Even if one acknowledges the challenges of strategy and planning, is it fair to say that this represents an intolerance of failure? Is it possible that both ideas are compatible? At least as practiced by the typical organization, the short answer is no. As discussed previously, the objective of planning is to reduce and minimize failures. By any objective measure, the strategist/planner must be judged by his ability to forecast and account for the future. Forecast may be a strong word, conjuring up images of crystal balls and tarot cards, but the effect is the same. A failure on behalf of the forecaster is a variance in forecasted and actual results. The ability to forecast is notoriously difficult. Whether it is in financial markets, call arrival patterns or the pace of technological change, the track record is similar. Rather than rehash all of the reasons why forecasts are folly (unless significant “gaming” is involved), the arguments in favor of the market versus planned economy by such writers as Mises, Hayek and Rothbard do far more justice to the topic than these short words. Although belief in the market economy is not a requirement for entry into the corporate world, there is some irony in those who acknowledge the power of spontaneous order (see Hayek) in organizing economic activity, but then turn to scientific management to organize corporate activity. At least the disciples of Taylorism took their proposals to their logical extremes, eventually advising socialists in the creation of 5-year plans (see Henry Gantt, inventor of the Gantt chart).
Rather than beat a dead horse on the fallacies of planning, additional discussion into the ways in which organizations are intolerant of failure is a more beneficial use of energy. Plans are supposed to improve confidence, and more confidence should be the result of an increased likelihood of success. But this is not the case. What has happened?
Strategy and planning creates a financial incentive against failure. This may sound like sound portfolio management 101, but there is a distortion at work in the application of this principle. The act of strategy comes at a cost. It can be a very real cost when expensive consultants are brought in to assist. Often, consultants are used to provide a sanity check or to justify a foregone conclusion. Very rare (and valuable) indeed is the consultant who is willing to risk future billings by offending the executive footing the bill. With executive buy-in, consultant support, and upfront costs incurred with the promise of future benefit, it is very difficult to stop an initiative.
This inertia continues even in the face of changing circumstances. The conventional business case paints a picture of benefits as a “hockey stick,” benefits are negative in the early years as the project is delivered, but eventually in the 3-5 year time horizon, the benefits start to stack up and become increasingly positive. We have all seen this movie. The use of net present value may be a very helpful tool in assessing the value of interest-paying government bonds, but the benefits associated with the typical transformation initiative are not nearly as predictable.
While the efforts to project future benefits are notoriously bad, many well-intentioned executive have been convinced that the windfall of benefit is just around the corner, only to continue to throw good money after bad. As projects are delayed and the costs mount, the business case is rarely revisited. The executive sponsor, with some skin in the game will feel pressure to represent the project in the most favorable light. More cunning executives will spread out the responsibility to ensure that everyone is responsible and no single person takes the blame. Small cracks in the façade will be covered up or ignored for fear of casting doubt on the initiative. Status tracking and risk/issue management will become less about managing the project, and more about managing perceptions. This is not without cause of course, as the executive knows that his peers will be only too ready to pounce should one of his/her initiatives fail. The culture created is one of loss aversion as opposed to success pursuit (see Dare to be Great).
Why Embracing Failure Does Not Promote Failure
The obvious challenge to any advocate of failure is how organizations ever move beyond failure? If everyone accepts failure as tolerable, will this create a sort of moral hazard? If there are no consequences to failure, what is to keep people motivated to create successes? Although these arguments are made on the basis of a distortion of what has been advanced in the above writing, these are worth addressing directly.
There is a distinction that has been made on failures in the discussion above. Embrace of small, early failures is desirable. These failures are important and allow for course corrections at a point when things are recoverable. Failures of the large and late variety are quite a different animal. Most often, these failures are the result of masking over, or refusing to address small failures early on. Small failures are welcomed in that they help to avoid large ones. Large failures, particularly those that result from deferring complexity and risks should not be tolerated. Executives playing the heavy hand may believe that they are motivating employees in the pursuit of perfection, but they are actually providing motivation to cover up and delay.
Although the possibility that a tolerance for failure may cause the needle to swing too far in the other direction (providing an incentive to fail rather than a means to avoid large failures), is very slim, the culture fostered by “management” will offset any potential issue. By praising, promoting, highlighting and paying for success, the incentive to fail is easily overridden. By nipping finger-pointing, risk aversion, lack of commitment in the bud, social pressure can be constructed to positive effect. Finally, individuals within the organization play a big role. The right people have a healthy amount of intrinsic motivation. They play to win even when the game is rigged. Fostering an environment of success will only enable them to go further.