We live in a culture that applauds success but is reticent about or glosses over failure; we don’t like to talk about it, and in the world of work it is virtually taboo. Try inviting managers and experts to talk about the success of their business, their project or their approach and they will beat a path to your door. Ask them what they got wrong or – when they still had jobs – why they were getting it wrong, and guess the answer you’d get.

Why on reflection isn’t that so surprising? Everyone wants to succeed. Everyone wants to feel good about succeeding. It is a bit like the western approach to death. You mustn’t mention it, you mustn’t discuss it, it is rather impolite. Yet one day it too will affect everyone, and understanding your own mortality is surely a matter of vital importance.

Failure happens. Failure is frequent. Understanding failure is important. ‘Failure is success if you learn from it,’ says Malcolm Forbes, US billionaire founder of Forbes magazine.

People’s understandable reluctance to own up to failure may explain why it is so often not properly acknowledged in businesses and in organisations, and why so many managers deny its significance. Judged solely by the relative frequency and the importance of both success and failure in businesses, this is surely odd.

‘Failure is not an option’, astronaut Gene Kranz’s famous phrase, has attained almost mythic status. But Gene was talking about a very specific enterprise, the US Space programme, where a mission failure would be, and in the case of Challenger was, catastrophic. Hence the need to mark out a huge gap between failure and success.

More than that, never to acknowledge you have failed may prevent you from recognising how to be truly successful. Jake Burton, owner and founder of Burton Snowboards, said that if his business hadn’t almost failed, it wouldn’t be the billion-dollar company it became, ‘My success is the result of a long series of mistakes.’ There’s more. According to Reid Hoffman, the very successful founder of LinkedIn, failure needs to be dealt with head on and quickly, ‘There’s a mantra in the Valley which is “fail fast”. … Tackle the most hard problem that’s confronting your business because you will need to know whether you can get through it.’ But why stop there? Even if you haven’t failed you can still learn from others’ mistakes, and from your own. According to Jeff Joerres, CEO of ManpowerGroup, ‘If you’re not making a mistake a week, you’re not learning.’

What failure looks like

I was asked to look at an organisation which was acknowledged to have gone into deep failure but was now recovering. I interviewed many people who had experienced the organisation in the run-up to and during that failure and here are some of their random comments:

Bashing my head against a brick wall – chat was useless – inhibited – did not walk the floor – morale was low – ‘I say, you do’ approach – manager ‘a bit of a dinosaur’ – closed shop, hush hush, never got to hear what was going on – show run by a cabal – working in silos – people decidedly pissed off – ideas suggested were pooh poohed – in a cocoon.

Difficulties were hidden – no safeguard in terms of spending money – rabbit pulled out of the hat on finances – breaking even, then suddenly overspent – brokerage no longer possible, suddenly exposed – bought equipment and facilities we could not afford – met the targets regardless of cost – developed services beyond our capacity – very risky plan – no challenge of the assumptions – the figures were misleading.

Got out while the going was good – chose to give the Board only certain information – no challenge – Board were rabbits in the headlights – FD scapegoat – CEO resigned – Chairman asked to leave – lack of control main reason for the problems – we hit rock bottom.

If you understand failure, you can understand how things go wrong, and why things don’t work. If you understand this, you can start to work out ways of avoiding failure. By understanding failure, you can understand how to move on to achieve genuine, deeply rooted, enduring success.

And the word ‘success’ is also rather ambiguous. It usually means an end point, winning the race and coming first. Less often – but from the point of view of this book, much more interestingly – it includes the process of achieving the win: the effort and the preparation. Even more rarely, and even more interestingly here, it also includes a sense of being successful, of sustained achievement. The core of this book is an attempt to locate and describe what creates this successfulness, and because success is such an ambiguous term, others are used which are more precise and clear.

You need to look at success and failure together. Separating them leads us to make another big mistake. People often assume that what they learn from success and how they manage success are different from what they learn from failure and how they manage failure. Because the two are reverse sides of the same coin, the opposite is true. Dealing with failure, anticipating it and getting out of it require exceptional management skills – but not unusual ones.

There are two related but also erroneous perceptions:

• firstly, that a failing organisation is different, as if it had leprosy, when in fact the right analogy is with a commonplace curable illness; and
• secondly, that the skills needed to turn things around are different from those needed to keep an organisation on the right track and continuously getting better. Absolutely wrong. They’re the same but more strongly etched and more dramatic.

So when does failure occur? It occurs when those in charge fail to ensure that perception and reality are working together in formulating and pursuing business goals, fail to observe the warning signs that things are not as they seem or should be, fail to monitor and review how things are really going against the crucial measures, and so fail to take early corrective action. An example from a very unexpected quarter, legendarily efficient and prudent Switzerland, is a good place to show all this.

What went on in Leukerbad is a classic example of failure. But it’s not just Leukerbad. It happens everywhere, as I will show throughout this chapter with examples from sport, politics, industry, banking, healthcare, the media and more.

The omnipresence of failure

Failure isn’t rare, it isn’t that unusual. It’s everywhere, in all corners of the working world. Four varied examples will be enough to show this.

• At the end of the 1990s, Leeds United, one of England’s most famous football clubs, was challenging Manchester United and Arsenal, reaching the semi-finals of the European Champions League, the world’s premier club competition, when those two very famous clubs didn’t. It seemed to be on an unstoppable upward curve. However, it faltered and because the success had been built by overstretching the base resource too far, things went wrong quickly and in a multiple way. Financial problems surfaced and the best players had to be sold. This affected performance, deepening financial problems. More excellent players were sold, making performance even worse, and the depth of the financial problems was revealed as having deteriorated further. Down and down they went, and in May 2007 Leeds were relegated from the second level of English football, and declared themselves bankrupt during the last game of the season. At that time, they were still paying part of the wages of one or more top players whom they had been forced to sell to other clubs years earlier at knock-down prices and on onerous terms. When they filed for bankruptcy in June 2007 with debts of £35 million, they offered to pay their creditors 1p for every pound owed.
• The European consortium-manufactured A380 Airbus was a highly ambitious, high-profile and prestige project, aiming to create the world’s biggest passenger airliner, and to push American firm Boeing from its position as the world’s leading aeroplane manufacturer by outpacing Boeing’s Dreamliner. It went dramatically wrong. The A380 was delivered very late and over budget, precipitating enormous losses and reputational damage. The company had tried to do too much, too soon, and underestimated the complexity of its task and the costs. The A380 problem highlights the fact that major projects have a life, autonomy, complexity and duration that make them resemble actual permanent organisations. Sadly, but importantly, they also resemble organisations in their capacity to go wrong and hurtle into full-blown failure.
• The abject failure of G4S to provide adequate security for the London Olympics, and even worse its failure to realise or acknowledge this till just before the Games began, has had a devastating effect on its reputation, costing it many millions and many future contracts, and leading to the resignation of key senior staff.
• In October 2012 it came to light that the billion-pound tender for the running of the UK’s West Coast railway line had been bungled, with an as yet unknown final cost to the taxpayer, but already thought to be in excess of £40 million. Mistakes were made, not realised and/or not acknowledged. The actual quality and the assessed quality of each of the tenders were not the same, as they should have been.

For all the organisations people work in, failure is indeed possible. Sometimes it is even probable – according to some estimates, the failure rate for new products is as high as 90%. In certain instances, failure may be inevitable. It can come in many shapes and sizes, but always with very serious consequences.

Measuring success and failure

Managerial success and failure are typically seen as right and wrong opposites. This is quite misleading and draws us away from key insights we need to manage well. Success is an end point, but management doesn’t have an end point. It needs to do what it does well and keep on doing what it does well, achieving particular end points and milestones but not seeing them as the be-all and end-all. It is a common mistake to see particular targets as ‘it’. They are not. They are milestones on the road.

It’s as if all our doctors and all our medical knowledge were lined up to ensure that we all became super-specimens and won an Olympic gold medal. Not only would that be impossible, because there are not enough Olympic medals to go round, but it would also not be an enduring achievement. Once one stands down from the podium, the effort and experience are over, whereas real life goes on.

When people define success as a clearly understood end point and then go on to describe the qualities of excellence or perfection which will ensure that it is achieved, they are making a fundamental error. Success cannot be pinned down to one thing. Excellence in one context may be mediocrity in another and downright under-performance in a third. Perfection in achieving one goal may mean completely missing the target on another one or even on a variant of the original goal.

People measure success differently depending on what is currently most important to them (and who they are) and also differently at different times. So five key questions to ask are:

1. Who (i.e. which people and/or groups) are measuring the success? Is it the user, the customer directly, or is it someone who speaks for them or interprets for them, such as a doctor? Is it the overall paymaster, the regulator, the public, the media?
2. How are they measuring it? Direct experience? Second-hand reports? Predictable inspections? Mystery shoppers? Using statistics or complaints?
3. What are their expectations? Do they focus on the outcome? (Does it work? Does it make me feel better?) Is cost most important, assuming the outcome is fine? Do they consider quantity over quality? Variety? Speed, access, waiting and queuing?
4. What weight should you put on their measurements individually and/or altogether? Do you share their views yourself? If not, you must be really careful. You must then decide what to do about them, whether and if so how to try to do better in their eyes, and at what cost. This leads to the fifth question which is closely related to this one but not the same. Ask and answer the two questions separately.
5. How important are their judgements? Are they something to note or are they crucial? Will they knock you over if you ignore them? Can they alter the context in which you do business?

John Maynard Keynes once said that if you want to pick the winner of a contest, you shouldn’t try to pick the person who you think is the best (cook, singer, etc.). You should try and pick the one you believe the judges will think the best. In other words, if you want success, you should seek to understand what will maximise your chances of it.

In line with Keynes’ comment but contrary to popular misconception, business failure doesn’t necessarily entail the failure of everything, or even of those elements that in the broadest context might be seen as the most important. To put it more positively, management is about mixing and matching, reviewing and often compromising. This means it’s about continuously recalibrating: I thought this was the 100 metres. I now realise it’s the shot putt. Here are six very varied examples which show that the measure of success isn’t necessarily obvious or straightforward, that it needs proper analysis, and that it varies:

• A few years ago when Marks & Spencer ran into serious trouble it was still selling premium-quality clothing and food. But it was not doing what its customers, its investors or the stock market expected of it, which was to be clearly ahead of its rivals as a marque of choice: superior in quality and totally reliable. Customers therefore began to vote with their feet and drift towards competitors, and the company’s profits fell. Under the leadership of Stuart Rose it turned itself around and became thriving and healthy because he tackled the source of the problem and met the crucial expectations of its stakeholders.
• Success for the Pakistan cricket team is different from success for the Irish cricket team. Cricket is the sport in Pakistan; in Ireland it hardly figures. If Pakistan beats Ireland at cricket, it is no big deal, but if it loses, as it did in the 2007 World Cup in Jamaica, this is a disaster and represents a complete failure. Conversely, if Ireland had lost to Pakistan in Jamaica then it would not have been a failure or a disaster because it would have been expected and predictable. When Ireland won, it was a great triumph because the team was exceeding reasonable expectations. If the Irish cricket team was judged on whether it could beat Pakistan routinely, then we would be consigning it to permanent failure, which is neither necessary nor helpful, nor indeed true. In fact the Irish team was quickly knocked out of the competition. But no matter: in Ireland, it was still a triumph.
• Britain’s lone ski jumper in the Calgary Winter Olympics was Eddie Edwards, known worldwide as Eddie the Eagle. He finished last in the Olympic ski jump, by a long way. But he did finish the twelfth best in the world and he had had no support and the most incredible obstacles to overcome. Failure or success?
• The measurement issue emerges very clearly in politics. Was Bill Clinton almost impeached because his policies and actions to safeguard America abroad and to improve it at home were wrong? No, this was a measurement based on rules of conduct, which no one would have expected to prove critical when he was elected.
• Kerala is a southern Indian state with a 30 million population. In India many people have to beg and live on virtually nothing. A substantial minority of the population, higher among women, still cannot read: and basic healthcare is not available to many. Although Kerala is in resource terms fairly typical, there is virtually no begging, there is universal literacy and a healthcare system that reaches and covers everyone. It does not have the lavishness or all the facilities of a full-blown western system, but it certainly looks like success on any reasonable metric of what Kerala could be asked to achieve.
• The USA spends 16–17% of its gargantuan GDP on healthcare, but 20% of the population does not have basic healthcare insurance, so they cannot get all the treatment they need, unless they are able to find money they don’t have. There are no waiting lists, or at least there are apparently none. The USA has state-provided health insurance coverage for the over 65s – Medicare – but if you are 60 or 61 with inadequate or no insurance and a hip problem, what can you do? Create your own waiting list and wait 4 or 5 years until you are entitled to Medicare. Cancer treatment is very good – if you can afford it. Paying for it bankrupts nearly 20% of cancer patients and their families. Is that success?

What I have tried to show in this section is that if your business or your organisation is to succeed, you and it cannot have a rigid, fixed idea of success in advance. Success in a particular role, task or endeavour depends on the current circumstances, varies with time and typically depends on the changing views of others. That doesn’t mean you shouldn’t start with the best idea you can of what your goal of success looks like – you should. It does mean you should test it and recalibrate it using the aids I have set out and bearing in mind the sort of examples I have given. That way you will set out on the right road.

Misrepresenting success and failure

Now look at another aspect. Not telling the truth about what you are doing and your real achievements will almost inevitably ultimately lead to failure. I will show how and why in the next chapter. Here are four graphic and varied examples:

• In recent years, there have been many allegations and some convictions relating to cheating and match fixing in sport. It wasn’t a success when Ben Johnson won the 100 m at the Seoul Olympics only to be discovered to have been taking drugs, because what we thought was happening and what was actually happening were different. In cricket, some offences led to criminal charges, conviction and jail. Lance Armstrong’s unprecedented string of victories in the Tour de France weren’t successes as they were drug supported, in a sport where it now appears that drug taking was rife. In such cases, the failure extends well beyond the individual and casts a shadow over the whole sport. This sort of failure is very infectious.
• The UK government had to make an announcement about transport which reflected badly on it and its policies. The idea was to get it out without anyone noticing it was that bad. One advisor, Jo Moore, suggested that one day would be a good day on which to bury bad news. The email in which she suggested this became public knowledge within a couple of days and created an absolute furore. The reason was that the day in question was 11 September 2001, the day on which two passenger jets were flown into New York’s Twin Towers causing their demolition and the deaths of nearly 3,000 people. Within a fairly short time, the reaction to the memo led to Ms Moore’s resignation, followed a little later by that of the Secretary of State. The chief press officer left the department, as did the Permanent Secretary, Sir Richard Mottram, the top senior official there. His comment on hearing what had happened was: ‘We’re all ****ed, I’m ****ed, you’re ****ed, the whole department’s ****ed. It’s been the biggest cock-up ever and we’re all completely ****ed.’
• The phone hacking scandal in the UK has led to the demise of the News of the World newspaper, severely damaged the reputation of the titan News International Corporation and many key figures currently or previously within it, has led to a string of prosecutions and has extended to other papers and media corporations. Its impact will probably change the face of media reporting in the light of the Leveson Inquiry recommendations. Once again we can see that an offence is bad, but concealment is much worse, if, as is likely, maybe inevitably, the concealment is unmasked.
• During the writing of this book, more examples of the failure I’m identifying came to light and continue to come to light in the worlds of banking and finance than in any other. Many focused on the convulsions of the credit crunch of late 2008, but many did not: Barings Bank, Bear Stearns, Royal Bank of Scotland, Société Générale, UBS, Barclays. Some are about being caught out by events, but others are about breaking rules, deception and dishonesty: examples include LIBOR manipulation by banks, and banks illegally harbouring drug and other money, and failing to give a true and fair account of clients’ finances.

What I am saying in this section is that, at the end of the day, success and failure are real things based on real achievements or the lack of them. In the previous section I showed that you must understand what they are. In this one I have tried to show that understanding them isn’t enough. You must respect, accept and follow them. If you don’t, if you try to give the impression that you are doing what you should, but actually aren’t, then sooner or later you will come a cropper – and a big one. So don’t go down this road. It is the road to ruin.

The infectiousness of failure

Both from personal experience, coming into ‘failing’ organisations which I have then had to manage, and also going round others in trouble or hearing from those who work in them, a frequent refrain is: ‘It’s nothing to do with us. We’re doing a perfectly good job, as dedicated, competent professionals. This is just about management games and silly rules.’

These people are wrong. It’s a defence mechanism, it’s a delusion, and it’s an illusion. If an organisation is failing on the measures that are at that point in time regarded as key by those who are in a position to judge, then it is indeed failing. If nothing is done about that then, irrespective of all those other good things going on which may be at the very core of the organisation’s purpose, its failure will deepen.

Just as some Manchester United players might still be great players when the club is seen to be failing, so it can be with, for example, hospital doctors. When I became CEO of the Royal United Hospital in Bath, we were undoubtedly the poorest-performing hospital in England, with patients waiting much longer for treatment than anywhere else. Doctors pointed out to me that the hospital had the lowest patient death rate of any general hospital in the country and that you were 20% less likely to die there than in an average general hospital, let alone a less safe one. This was an absolutely tremendous testament to the staff and one of the pillars upon which we built the recovery of the hospital, but it did not alter the fact that it was failing.

The staff – even key staff – who make the comment that it’s nothing to do with them, are not facing up to reality. What is true is that it isn’t their fault. But they do get demoralised, they retreat into their corners, they are well aware of the measures that are being used. Partly because they separate themselves from the other world of the organisation and hide in their corners and partly because this other world of the organisation is not functioning or is collapsing, many of the things that underpin their practice, their work and their outcomes begin to degrade. Inevitably and inexorably, people’s work, people’s commitment and people’s output also start to decline and degrade.

So, in this section I have tried to show that, although the causes and the measures of failure are typically restricted and specific, its effects are not. They spread and spread, corroding the morale, the workings and the effectiveness of an organisation, until something is done to begin to put it right, to start on the road to recovery.

To sum up …

Failure is out there waiting for everyone. It is an everyday fact and an everyday reality. In order to be successful, you must avoid being surprised by it and caught out by it. If you are prepared for the possibility and, sooner or later, the likelihood of failure coming, and work out exactly what the measures of success and failure are, you will be able to take steps to avoid it.

So, ensure you have got a grip on how success is judged, which means how it is measured:

• Don’t assume you know what the critical measures of success are for you, in this situation, here and now. Test your starting assumptions in the way I have described in the chapter. That way you will get to the actual measures of success.
• Look hard and see who has the right, the legitimacy, the need, the power, the influence or the will to create the measures, what they are saying, what they are doing and what their behaviour is. This will reveal what the measures are.
• Don’t just rely on your own judgement. Find out what others whose insight you respect (and who are sympathetic to your desire to work this out) think are the measures of success and compare them with yours. With a little constructive toing and froing, you should quickly get a high degree of consensus between their and your views. Then you can be fairly sure you’re right.
• Be alert to the fact that you’ve identified what the measures are, here and now. Tomorrow and somewhere else they will be subtly, perhaps radically, different. Keep your antennae up all the time, watching out for this potential change.

My aim is to help you to know clearly what the measures of success are and who is judging them. If you do, then not only have you got the best chance of satisfying them, you may be able to start a positive dialogue to alter the measures and the judgements so that they make better sense – and work more to your and your business’s benefit.

In the next chapter I will bring all this much closer to home.