Punishing Failure versus Punishing Lack of Failure

by Michael Haberman on October 30, 2012 · 19 comments


 

Do you punish people for acting and failing or for failing to act?

All modern employee engagement and reward literature encourages managers not to punish failure. The collective wisdom is that punishing failure will discourage risk-taking and stifle creativity. Depending on your business this could be damaging to your business. What about the opposite? What if we punished the lack of failure? How would that alter things? So let’s look at punishing failure versus punishing a lack of failure.

Prison for not making a prediction

The inspiration for this post came from the story of the Italian earthquake scientists who were sentenced to prison for NOT predicting an earth quake that killed hundreds of Italians. Stephen Dubner, writing for Freakonomics, asked the question What is wrong with punishing bad predictions? Dubner points out in his post that the scientists were not punished for making a bad prediction. Rather they were punished for not making a prediction. In essence they got sent to prison for not failing in making a bad prediction. He surmised that if they had made a prediction of a massive earthquake that turned out to be wrong they would not have suffered the same consequences of not making a prediction.

Failure in a business setting

Let me try to translate this to the work place with a social media example. The Chief Marketing Officer (CMO) in marketing sounds the alarm bell and says that social media advertising is the wave of the future for the company’s product line. They recommend the company spends $200,000 on converting and setting up social media. New people are hired to monitor Twitter and Facebook. And then nothing happens. No Tweets, no Likes. What are the likely consequences for this person?

Let’s reverse the situation now. In this half of the scenario the CMO says social media is all hype. “It is a fad that will wither on the vine.” So no investment is done in social media. Indeed they get HR to write a social media policy that forbids anyone using Twitter, Facebook or even LinkedIn while on company time. So no movement is made into using social media. However, a competitor starts marketing though social media and quickly becomes an industry leader supplanting the CMO’s company. What are the consequences for this person?

Which of these failures deserves to be “punished”, the one that failed by acting on something or the one who failed by not acting? Does it depend on the size of the failure in dollars or people impacted? If we acted like the Italian government we would punish the person that did not act. Many businesses might be more inclined to punish the first person.

How would you deal with this? My preference would be to punish the CMO who did nothing versus the CMO who made the incorrect prediction. But that is me. I would like some of you HR people and motivation specialists to weigh-in on this discussion.

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{ 18 comments… read them below or add one }

Paul Hebert October 30, 2012 at 8:24 am

I’m in the camp of punish non-action vs. action – however…. caveat:

There should have been a risk/reward discussion. In one case there is the risk of losing 200K doing the SM stuff – and (IMHO) a much bigger risk in doing nothing and losing a huge amount more by being knocked down a peg or two in total revenues.

I can totally understand the issue with not making a prediction that could cost lives vs. simply being an inconvenience for being wrong (and some money obviously.)

It is always about managing risk. The punishment should be for not managing risk – not really about the action/no action decision.

I’d punish either or both CMOs if they didn’t at least go through the risk/reward scenario first – both are culpable if they simply “decided” based on gut reaction and personal opinion.

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Michael Haberman October 30, 2012 at 9:15 am

Paul, thanks for your response. I had thought about the risk part of it but did not articulate it. You did a great job in putting that into the discussion. Thanks.

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Laura Schroeder October 30, 2012 at 11:39 am

I love this take! There’s a leadership philosophy that says you can’t be a real leader until you’ve learned through lots of mistakes. There’s definitely something to that!

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Michael Haberman October 30, 2012 at 12:36 pm

Thanks Laura for the comment. There does seem to be a tendency, at least in the literature, that failures are necessary for success.

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Dan Walter October 30, 2012 at 11:50 am

First, we have no idea what motivated the Italian scientists to avoid making a dire prediction. Was it fear of reprisal? A concern about upsetting the areas water supply and livelihood? An honest assessment that the risk was not very high (they did mention that there was a risk, they just said it was low). Was there some other WHY for their report?

The same can be said fr the CMO above. Why did the CMO decide on the “no social media” policy? Was it a lack of vision? Was it a company culture that thrived on “We’ve never done it that way”? Was it fear of a CEO who was close to retirement and against new-fangled things? Had the company been early adopters in the past and failed?

Nearly all great successes will give you long lists of failures that helped shaped their success. Nearly all failures will give you long lists of the “almosts” that might have made them successful.

The keys are having a culture, process and communication cycle that promote honest dialogue and give foundation to each major decision. The other is being a company that values curiosity as much as it values consistency. If the CMO had prohibited social media, while having a team continue to explore it, the company may have been able to frog leap their competitor with better strategy and tactics.

The answer is seldom black and white, but reward for action and non-action must be balanced with accountability for the same.

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Michael Haberman October 30, 2012 at 12:35 pm

Dan, thanks for this great analysis.Your statements about the importance of culture that is tied to honest dialogue are important ones.

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E. James (Jim) Brennan October 30, 2012 at 12:00 pm

You need a better example, but you are on the right track. Both parties in your example “acted” in some way: one said STOP and the other said GO. As long as each used the Best Available Data, why punish either for making the wrong decision? Personally, I’ve always said that the value of a bad decision lies in its cost… because you rarely learn anything from an inexpensive error.

For many decades, enterprises that made a big deal about their “Giraffe Awards” have done better, even (particularly!) when such publicized awards were granted to big losers. http://www.compensationcafe.com/2011/01/the-value-of-mistakes.html is a long article on the topic with an embedded link to a classic 10-minute John Cleese video on The Importance of Mistakes containing many quotes, ranging from Thomas Edison to Peter Drucker. It’s a “must-see!”

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Michael Haberman October 30, 2012 at 12:38 pm

Jim, yeah I struggled with my example a little bit. Your statement about cost is key. And thanks for the heads up on the Cleese video.

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Margaret O'Hanlon October 30, 2012 at 12:38 pm

I think the market punished these CMOs for their behavior and judgment. To understand the failure, each situation involves a strategic analysis of what drove these outcomes. So, for me, it’s not the outcomes that HR should be looking at in terms of the CMO’s performance, but the inputs to the decisions.

What does that say about HR’s role in addressing experimentation and failure? One thing it says to me is how much culture matters. If the culture of the companies led these leaders to do in-depth analysis of data, to invest wisely in insights and talk openly with others who would need to advance the decision, as Dan alluded to, then HR can help analyze the decision making process to see if the CMO was effective in his decision making process. Also the implementation process. Were there “failures” along the way?

Of course, this assumes that the culture and HR knows what an “effective” process would be — e.g. what would have created success. If that’s sort of cloudy, than HR can help gain insight by inviting in a third party to increase that knowledge.

If the culture does not encourage risk, deliberation and communication, then HR has a tougher job of turning the “failure” into a commitment to change.

Another thing is that we need to recognize how much business knowledge and experience should go into designing executive compensation. Given the business performance, the CMOs incentives should have clearly reflected the outcomes through lower awards in both cases. That is most definitively in HR’s hands.

The Italy example is a chilling one, since the culture of seismologists the world over is to announce earthquake precursors or early warnings — but not pronounce on the inevitability of earthquake events. An assessment of the “failure” should be based on the behaviors and judgments that led to their decision not to pronounce on the inevitability of the earthquake. But it is not about the earthquake itself or its outcomes.

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Michael Haberman October 30, 2012 at 1:36 pm

Thank you Margaret a wonderful analysis. Thank you for adding HR’s role in this discussion.

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Ann Bares October 30, 2012 at 1:28 pm

What a great topic and conversation, Mike – thanks for tee’ing it up here for us!

Love the points about the risk/rewards assessment, learning from mistakes, and the importance of culture and communication to effective decision making. A few additional thoughts to throw into the mix…

We often debate the complexity of measuring success. Do we focus on the right results? The right behaviors? The process and steps followed to get there? This conversation suggests that measuring failure is just as complex and nuanced – rarely if ever as black and white as some examples lead us to believe. We have to look at and try to understand failure with the same attention to context and circumstances.

Punishment is a loaded word. Few leaders or HR pros subscribe to punishment as a motivational tool. At the same time, the adult workplace is certainly one where there are negative consequences. These may range from withheld rewards to “withheld further employment”. All of this to say that we continue to be in the process of learning how to respond to failure and the chance of failure in order to avoid discouraging innovation and creation, yet appropriately manage and control for risk.

Which maybe gets us back to Paul’s thoughts and observations….

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Michael Haberman October 30, 2012 at 1:39 pm

Ann, a wonderful addition to the conversation in adding the point about the complexity of measuring failure. You are correct that punishment is a loaded word with many definitions. In the case of the Italian seismoligists punishment was the very real outcome. They are going to prison.

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Kris Dunn October 30, 2012 at 5:27 pm

Mike –

I think this comes down to hiring the right type of people. My gut tells me that you could set up a system where you punished people for not taking risks, which would yield activity, but not really of the quality you want. Many people in our organizations aren’t risk takers, but they don’t think in terms of adding value, innovating and driving true change either.

Hire better, and you’ll have more people who want to innovate and take risks. Those people should be motivated a variety of ways to take risks. The rest of the company? Meh. They should just keep the buses running on time – you really don’t want the average people taking risks – they’re not wired to think about the big win and evaluate it the way Paul describes above…

Thanks – KD

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Michael Haberman October 31, 2012 at 8:47 am

You are correct Kris that the hiring process is critical. If you have positions that require risk taking you need to be screening for that ability.

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Chuck Csizmar October 30, 2012 at 11:28 pm

An interesting question, Mike, and one I’ve not heard asked before. So first, kudos to you for raising the flag up the pole to see who salutes! For my two cents, I’d punish both the CMO decision and the CMO non-decision.

As you know, examples used to illustrate a point often have flaws or cracks in the logic, the closer you look. But if we don’t nitpick and go simply with the gist of your argument, the CMO comission and omission (did I spell that right?) were both mistakes made by a senior staff member, but the degree of punishment should be weighed heavier to the one who sat on the hands while the world moved on. The wrong decision was at least a planned reaction to events, though ultimately off target.

Leadership is – or should be – about making decisions. Sometimes you get it wrong, but if you don’t make a decision, likely you’ll always get it wrong.

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Michael Haberman October 31, 2012 at 8:45 am

Thanks Chuck. Glad I was able to provide some interest. You are right, leadership is about making decisions and exercising those decisions. How reasoned those decisions are is the big questions.

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Derek Irvine, Globoforce November 1, 2012 at 10:54 am

Mike, clearly a discussion starter! Great information added by very smart people already. I’d add my two cents that it depends on the situation and degree of the mistake? Were all proper conditions taken into consideration (and all opinions listened to, weighed and evaluated) or did the boss just “go with his gut?” Several months ago on Compensation Cafe I weighed in with three options for what to do when mistakes happen:
1) Ignore the mistake and hope it goes away
2) Discipline the perpetrator and take corrective action
3) Reward the mistake-maker

What’s the best reaction? Obviously, ignoring the mistake is never the answer. Options two and three, however, are both perfectly rational, reasonable, and right.

(The rest of the post is available here: http://www.compensationcafe.com/2012/02/you-made-a-mistake-great-work.html )

And many thanks, as always, for creating room for discussion and thought!

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Michael Haberman November 1, 2012 at 11:03 am

Derek:
Your addition to the discussion was a good one. You are correct that ignoring the mistake is never a good option, unfortunately it is an option often taken, until it occurs again. I love the discussion this has prompted.

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