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By Mark McCormack A visit to an Ivy League college to attend the graduation of his son bore an unexpected dividend for one of our agents. He was so taken by one of the speakers, a mathematics professor, that he approached him afterward about doing a book. It was an excellent example of maximizing the yield on one’s time, and I told him so.

“Yes, but there’s more,” he said. “Listen to how this professor grades his final exam.”

It seems that the professor had grown concerned several years ago by a tendency toward excessive caution displayed by students in his classes. Many of the students, even top ones, wouldn’t risk approaching a problem on the blackboard without a set solution in mind. “If they didn’t already know how it would turn out, they didn’t want to try,” he said.

“That certainly sounds familiar,” I said. The willingness to try is one of the basic requirements for doing business. The professor decided to conduct this own experiment in whetting his students’ appetites for taking intellectual risks. On the last portion of the final exam for his class, he gave a problem and announced that 10 percent of the grade would be based on failure.

When his students clamored for an explanation, he said, “I’m going to look at the quality of your imagination, your willingness to explore fresh approaches, whether or not your systematize your search — everything but whether you get the answer right. In fact, I’m not going to give any points for a correct answer.”

The grade that nobody expects

The professor smiled. “To succeed on this test, you must get an ‘A’ for failure.”

I found both the professor’s concerns and solution particularly apt. Businesses are in a state of dynamic tension, torn between safe decisions and the need to seek new opportunities. the eternal problem is how to inculcate the spirit of smart risk-taking. Too many executives want to wait for a sure thing to come along, because they know their advancement depends on hitting lots of bull’s-eyes. In the meantime, in order to avoid being assigned harder-to-hit objectives, they get very good at smothering initiatives in analysis. If that’s the kind of behavior your company rewards, then you have a problem.

A company that is staffed with risk-averse employees may run along quite well for a good period of time, but it’s like an ocean liner on a straight course for the North Pole: The sailing is smooth in the temperate zones but once you’re in iceberg territory, look out. The first bump you feel may be fatal. It could be a 10-year lag in research and development; it might be a competitor whose delivery costs substantially undercut your terms; it could be missed alliances with products and services.

No matter what it is, now you’ve got a big problem — two problems. One, you’ve missed the early warning signals and you’re in deep. Two, your executives aren’t experienced at navigating under difficult, tense, and uncertain circumstances. They’re only good at riding sure winners across the finish line.

How do you know if people at your company are playing it too safe? Without consulting anybody or any files, jot down a list of recent initiatives that have failed. If it’s a pretty short list, ask yourself why.

One reason may be that there simply aren’t many initiatives that get the green light. If you think this is the case, it’s time to consider an ” ‘A’ for Failure” program of your own. Require executives to submit a list of ventures they are prepared to back — along with a couple of ideas that show promise but have unpredictable outcomes.

Have you not heard about the failures because bad news in your company only trickles down, not up? If so, you have a communications problem. When a top executive doesn’t know what has been tried and what has failed, on whose watch it occurred, and why, he’s not learning anything that will help him make future decisions. The worst of this is that it robs you of the best yardstick by which to measure your employees. You don’t know who has weathered a crisis, who understands how employees react under pressure, and who will be able to recognize a similar situation when it arises in the future. In other words, you’ve “wasted” failure.

The trouble can be found within yourself

The trouble here may lie within yourself, or your circle of lieutenants. Perhaps your right- and left-hand men are doing too good a job of insulating you from your company’s vital signs. Ask yourself if perhaps you tend to “kill the messenger,” or punish failure reflexively, without bothering to know why and how it occurred. Whichever the case, appoint a time and place to regularly review failures, with the emphasis on learning. (One tip: When it’s someone’s turn to discuss his or her failure, make sure you publicly reward them with your approval.)

Check the expense account records of your sales, marketing, and technical teams. It may seem counterintuitive, but if they aren’t going out enough, or are seeing the same people too often, then how can they expect to stumble across new and unexpected information?

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