Innovation Excellence: Five Ways Organizations Lose When They Cover Up Innovation Failures

When executives are allowed to hide their innovation failures the entire organization suffers.  False expectations are set for the entire group of executives, innovation leaders see their careers scuttled, and every other employee fails to learn from the failure.  Without clear organizational expectations of documenting, sharing, and learning from our failures we will continue to see them covered up.  Left to our own devices we will naturally seek to avoid our failures and move into self-preservation mode.  In my work helping organizations to build strong innovation processes this is a common issue but it can be resolved.

Below is my published article from the Innovation Excellence Blog on the Five Ways Organizations Lose When They Cover Up Innovation Failures.

Innovation eXcellence Blog Post


Five Ways Organizations Lose When They Cover Up Innovation Failures

We may not want to admit it but attempting to cover up our failures is as American as baseball and apple pie. Our athletes (think Lance Armstrong and Alex Rodriguez), our politicians (think Eliot Spitzer and Anthony Weiner), and our business leaders (think Richard Fuld, Jr. of Lehman Brothers and Jeff Skilling of Enron) have all tried desperately to cover-up their failures in an attempt at self-preservation.

These are just a few examples but there could be volumes written on all of the failure cover-ups that splash the headlines on a daily basis.  Our failures embarrass us.  They hurt us emotionally and economically.  They can limit our careers, impact our compensation, or even get us fired

The irony with our fear of failure is that the organizations that able recognize how much harm failure cover-ups create in the long-run are incented to address their failures head on in the short-run.

When organizations are just starting out they will experience frequent failures as they try to innovate and build their operating model.  But as these organizations get bigger there’s a noticeable shift from risk taking to risk management.  The more new employees an organization hires the more likely it will be that not everyone will know or trust each other.  Eventually many of these organizations lean toward political bureaucracies where divisional infighting and self-preservation become the status quo.

This all sounds bad but it doesn’t need to be this way.  With determined leadership, teams or entire organizations can create an environment where smart risk taking is encouraged and innovation failures are tolerated but first they must understand how much harm the cover-ups are creating.

Concealed failures set the wrong standard for the entire organization

When executives are allowed to cover-up their failures it sets a precedent for every employee in the organization to learn from.  The message is clear in that is more important to protect your brand than to be open and honest about the outcomes.  This norm can quickly permeate throughout the organization.

A failure cover-up pushes out some of your most talented employees

When failed innovation initiatives get shutdown the project leader often struggles to stay with the organization.  Where failures are “punished” these leaders are frequently seen as a political liability to executives who would rather distance themselves from the failure.  President Kennedy said it best when responding to a reporter’s question on the Bay of Pigs, “victory has 100 fathers and defeat is an orphan.”

Severely punishing failures will influence other employees to reconsider their risk taking

Psychologist Albert Bandura coined the term “Social Learning Theory” over 30 years ago to describe how we all learn from one another’s actions and the resulting consequences.  Just like children on the playground we learn from watching each other in the workplace.  If we see others experience negative consequences that are disproportionate to the rewards we will adjust our behavior to take on less risk.  As this cycle repeats organizations are left with few people willing to lead the next risky innovation initiative.

Hidden innovation failures create false expectations for future success rates

When failures are covered up, few people within the organization have realistic expectations of how difficult innovation work really is.  They come to expect to find success more than they find failure when in fact the odds are reversed.  These false expectations will impact critical aspects of the organization, including: strategic planning, budgeting, and compensation.

Obscuring failures prevents the entire organization from learning from them

The most impactful consequence is that when only a handful of people know why an initiative really failed then only a few people can actually learn from it.  Soon enough others will try to replicate the project not knowing that it had been tried before.  Alternatively, the initiative might have been a great idea that just needed time or a few changes to become successful but without an understanding of the lessons learned it won’t likely be tried again.

Seeing the process of innovation as a system helps to highlight how shortsighted leaders are being when they cover up their innovation failures.  This system is comprised of processes: 1) action, 2) reaction, and 3) adjustment.  When we short circuit the failure and cut off the reaction feedback loop we are signaling expectations to our employees and we fail to learning from our mistakes.  In this scenario, organizations are unable to adjust their strategy to find success in the future because they don’t understand their failures along the way.

Covering-up failures may be in the individual’s short-term interest but it is never in the organization’s long-term interest.  One way that I personally tried to build a tolerance for innovation failure with a previous employer was by creating a series called the Failure Forums.  We gave innovation leaders the opportunity to share their stories and we gave the audience the opportunity to learn from these failures.  Each session was presented by the innovation leader and covered what was accomplished, what was learned, and what would they have done differently.  It may not have been revolutionary but it was evolutionary in trying to build a culture that tolerated innovation failures.

Food for thought:

  • How does your organization respond to innovation failures?
  • Does leadership allow for the cover-up of innovation failures?
  • Is there any internal mechanism for capturing and sharing the lessons learned from innovation failures?

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One reply to “Innovation Excellence: Five Ways Organizations Lose When They Cover Up Innovation Failures”

  1. Sara Kronenberg | Aug 9, 2013, 10:48 am

    Great post, I especially agree with the point that when something doesn’t work, others should be told so the mistake won’t be replicated. Failure to do that can cost R&D teams, as well as organizations, a lot of money and time!

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