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Reward success and failure. Punish only inaction.

Reward failure? 

That may be a difficult concept for an executive. And there are limits of course. We wouldn’t reward a failure to follow laws, or protect lives, or deliberate endangerment of the company or its people.

There are “good” failures.

But should we reward a research team that fails for the fourth time to find the solution to a nagging problem – on the way to a new product?  What if those failures are commonplace?   Where do we draw the line?  We know that Edison tried a thousand types of material before finding tungsten for the core of the light bulb.  If he had been a research employee reporting to you, at what point would you have pulled the plug on the project, or become disillusioned with the person?

Relate this to the culture of your company.

The culture of the company you grow is very much influenced by your actions in rewarding or punishing employees or whole departments. And the best companies seem to be those that are motivated from the top to push limits within reason to find better ways to do things, to create products, to expand the market.  The CEO must realize that most such efforts lead to a dead end or will fail outright.

Here’s (another) personal story…

[Email readers, continue here…]   I was once in the record business.  Speak about insanity. Only two percent of all records released broke even.  Of course, the major hits paid for thousands of misses.  In venture capital, the conventional wisdom is that one in

(Sometimes you miss the goal.)

ten investments will more than pay for the complete loss of half of those ten investments.  Yet investors reward the VC’s with a track record of one in ten, and record companies still churn out a reduced number of recordings, knowing that a great majority will fail to break even.

Let’s finish with a question for you?

So, where does the learned, best of breed CEO or manager step in to administer punishment?  As the headline infers, a visionary, proactive leader should not be able to stand by and condone inaction.  That is not only a waste of corporate assets, but the fixed overhead eaten by the inactive period keeps draining the cash and time resources of the corporation with nothing to show for it.  Wouldn’t you rather dissect the reasons for a failure and move forward, than have nothing to show for time and money spent in wasted fixed overhead?

  • Harley Kaufman

    Love the new graphics and……you look great in the hat.

  • Michael O'Daniel

    Whether it was an intentional pun or not, “pulled the plug on the project” [Edison’s attempts at a light bulb] is priceless.

  • Arthur Lipper

    The goal of management should be the correct assessment of the relative magnitude of the possible result projected for new ideas in the structuring rewards and penalties.

    If there is little or no risk to the enterprise, other than project cost, fine. However, if the risk out balances the reward and possibly jeopardizes the business a separation of responsible entries should be arranged. Only projects having far greater possible benefit to possible risk should be undertaken by an established business.

    Betting the shop is fine if the shop has little present value. Encouraging new projects must include magnitude of risk assessment. In new territory exploration the function of scouts differ from that of guides or leaders.

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