Return on Failure

 
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Failures happen, even to business legends like Jack Welch, who admits that he made some whoppers. In the running for biggest failure is surely the acquisition of Kidder Peabody by General Electric (GE).

In 1986, GE spent $600 million to buy an 80 percent interest in Kidder Peabody. More investment followed and by 1990 GE owned all of Kidder Peabody.

Alas, the companies had very different values and cultures. After trying to make it work for four more years, GE liquidated Kidder Peabody, selling most of it to Paine Webber and taking a big loss. That was big, but it wasn't Welch's most spectacular failure.

For that we have to turn back the clock to 1963. Welch was 28 and he'd been with GE for three years. His job was running a pilot plant in Pittsfield. MA. Things went fine until he blew up the plant. Literally. The explosion blew the roof off the building.

The next day, Welch and his boss had to drive down to Bridgeport CT to explain things to a corporate group executive named Charlie Reed. Welch says that Reed took "an almost Socratic approach" that was, he says, "all intellect, no emotion or anger."

That was Welch's most important lesson from the plant explosion. When people make mistakes, he says, "It's time for encouragement and confidence building." And it's time to learn from what happened.

The immediate and obvious Return on Failure (ROF) is learning. That happens best in a dispassionate atmosphere. But it's not the only way to generate ROF.

At Nucor they believe that about half their investments in new ideas and technologies will fail to yield useful results. But every plant keeps the equipment that was tried and rejected so Nucor's people can learn from things that didn't work and maybe get an idea about how to make it work in a different situation.

The first step in maximizing ROF is to learn as much as you can from what you did and the results you got. But that's not enough. You have to turn that learning into better performance.

Jack Welch credits what he learned from the failed acquisition of Kidder Peabody for helping him avoid other, possibly disastrous, acquisitions. It's a good bet that the Kidder Peabody lesson helped GE avoid the trendy acquisition of high tech start-ups with vastly different cultures.

That's the second step in maximizing ROF. Turn your learning into changed behavior. Without that, ROF is just an intellectual exercise.

Boss's Bottom Line

Maximize Return on Failure by learning what went wrong and turning that learning into future success.

Thanks for the Inspiration

Thanks to Whitney Johnson whose post, "What do you tell a team that has failed?" started me down the trail of thought that resulted in this post.

Wally's Working Supervisor's Support Kit is a collection of information and tools to help working supervisors do a better job. It's based on what Wally's learned in over twenty years of supervisory skills training. Click here to check it out.

 

 

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Comments

  • 11/25/2012 10:08 PM Xiaoteng Ma wrote:
    Great post, Wally. I think that too many people are afraid of failure, when in fact they don't see the actual benefits of it. I think that we learn more from our failures than our successes. Thanks for sharing.
    Reply to this
    1. 11/26/2012 8:54 AM Wally Bock wrote:

      Thanks for the kind words and joining the conversation. I don't know if we learn more from our failures than our successes, but I'm sure that we learn the most if we don't leave learning to chance.


      Reply to this
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