What's the Real Cost of Failure?

Depending on who you speak to, you get a very different picture or definition of what failure is. Some people ban the word from their companies, stating that nothing is a failure. They think everything is an opportunity. Some leaders talk about failures as simply not achieving the optimum result that a team strived for. Others label a failure as a death sentence, the mark of your demise in the company.

It's important to ask your leader what their definition and their take on failure is. Because that's where you find out what the cost of failing is. On a company scale, you can possibly measure a failure in terms of an absolute number. In those terms, a failure can cost the company $50,000 or $50 million. It can cost you a loss in market share of 4.5%, it can cost you a slowdown in units sold for the next quarter or it can cost you an additional three months in product development costs.

That's easy.

On a personal scale however, failures take on a different meaning. It stops being measured in dollars and cents. If you're lucky, the cost of failure is time. If you're not so lucky, the cost of failure can be public ridicule. It all depends on how your leader or your company perceives failure.

1. Failure Can Cost You Morale and Spirit

This one's simple. If you're in an organisation where your manager doesn't scream at you for trying something different, berate you for getting something wrong and penalise you for breaking something - you're in a supportive environment. An environment where mistakes are tolerated, net product is expected to be positive and you're trusted.

In such an environment, failure can be personal. While it's accepted, it's still something that can get a team down. Because when you trust people and give them all the freedom in the world and it doesn't work out - it's no one's fault but theirs. It takes a hit on their morale and their spirit - and that's the cost.

It's easily overcome. A few days, some motivation, a quick win, getting back on your horse - and the team overcomes it. They learn and they move on. Not expensive.

2. Failure Can Cost You Ridicule

Certain managers aren't so lenient, some bosses not so open-minded, certain leadership styles built purely on a culture of results. In these situations - the message is on the wall. If you fail, that's on you. If you fail, that's the end of you. Getting back into the picture is going to take more than just a small win. These are high performance, high risk and high reward environments - where people are used to winning.

If you fail, you're sidelined. You're labeled weak, and word spreads about how you're just not up to the mark and how you failed. There's no mass e-mail sent out, but word spreads, your manager eyes you with disdain and you know that you better produce something exceptional quick. The cost here, is reputation within the company and ridicule within the organisation, and it's a high cost.

3. Failure Can Cost You Future Support

Certain managers keep a eye on track records. What did a specific employee do last, and how well did they do it? What's their failure rate? If they were given a task to accomplish, what's the likelihood of it getting done on time? These managers often charge employees future support for failing.

If something you tried didn't work out the last time and you pitch a new idea, instead of viewing you through the lens of someone that's just learnt how not to do something, you're viewed at someone that doesn't get it right. The scale of your past successes aren't taken into consideration as much as your number of failures are. And these managers and this leadership style is dangerous.

It makes people cover up. It makes them lie. It makes team managers cover up failures from their CEOs in order to continue to receive funding or time or people. It's a pretty high cost, and causes a lot of deception in the organisation.

4. Failure Can Cost You People

This is one of the most expensive costs of failure. A failure is sometimes less about the result and more about how well it's managed within the company. If a huge deal is made about the failure, if people are berated for the failure, fingers are pointed and statements like, "This is going to set the company back so much!" - thrown around, teams start to feel invalidated. They feel useless.

And they begin to leave.

This has an avalanche effect on the culture in the organisation. If people see that failures are so heavily blamed on individuals and they're held accountable for them at gunpoint, that fosters a culture of playing it safe and not taking risks. It causes a slowdown in innovation, people begin to strive for the minimal acceptable requirement rather than taking a risk and striving for excellence.

How companies, leaders and teams perceive failure is a direct indicator of what the cost of failure is going to be. It's also an incredibly strong indicator of the company's appetite for risk, rate of innovation, affinity for change as well as their appetite for disruption. An organisation that doesn't have an appetite for failure cannot call itself an entrepreneurial and innovative organisation without lying about it.

Leaders that don't take failure well and offer support when things aren't going well will never be able to introduce and foster a culture of experimentation.

So when someone tells you that they have a culture of experimentation, ask them what they think about failure and see if it syncs up. If a company sells themselves as innovative and disruptive, ask them if you're allowed to fail five times out of six.

Because at the end of the day, the way you deal with failure defines how successful you're going to be.