InformationWeek
Defining The Business Value Of Technology
January 31, 2000
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The Law Of Corporate Failure
A company is doomed to failure if it punishes people more for their mistakes than it rewards them for their successes
We had just come from a meeting at which Ron Stagweg, our newly minted executive VP of domestic operations, had made bouillabaisse of one of his business managers.
Frank Venburth is a rising star in the company--or at least he was until recently. In the two years he has been in charge of his business unit, he has improved its morale and increased its profit significantly. He is a hard-driving individual who is also sympathetic to the problems faced by his troops. It's a wonderful combination in a leader and difficult to achieve, but Frank manages to make it happen. So when we were invited to hear Frank's latest idea to increase sales, Karen and I were excited. She, because the company can use some more growth; me, because it was about using the Internet in a way new to us.
Within three minutes of the opening slide, before Frank could fully explain his concept, Ron interrupted to ask about costs and the risks of changing the way we do business. And so it went for an agonizing hour and a half. Frank was finally released from custody with orders to answer several dozen questions, three-quarters of which were meaningless but will provide Ron with multiple reasons to delay making a decision--assuming, of course, that Frank even has the stomach for resubmitting what seemed to Karen and me to be an excellent initiative.
Afterward, Karen and I sat in the cafeteria, sipping the brew that passes for coffee and shaking our heads at an opportunity the company will ignore. Karen looked at me and sighed, "OK, Herb, you win. You nailed it when you said that we promote executives primarily for not making mistakes ("The Unbelievable Promotion"). Ron certainly fits that mold. He is going to kill a good idea because he's afraid of the flak he might receive if it doesn't work. Even if Frank resubmits it, which I doubt he will, he knows that he won't get much credit for it."
Maybe Karen and I are wrong about the value of Frank's proposal. Perhaps Ron is putting Frank through the wringer because he thinks the new Internet proposal is flaky, and maybe Ron is correct. One thing is clear, however: Frank will not want to subject himself to another session with Ron unless he is absolutely, positively sure that the idea he is bringing forth is unassailable. And therein lies the problem. If a person gets blasted for his or her ideas, the smart move is to avoid bringing them up. Or maybe Frank likes to have ideas and will transfer his loyalty to another company that welcomes fresh thinking. Then we lose a good person, and one of our competitors gains one.
I took another sip of coffee, and it became increasingly clear to me: Enterprises that promote people primarily for not making mistakes encourage their own demise. A company must take prudent risks to fulfill its potential. Why should employees stick their necks out if they can reap more benefit by playing it safe? I smiled wanly as I followed that line of reasoning to its logical conclusion--another law of human behavior to add to my collection, which I shall call The Law of Corporate Failure: A company is doomed to failure if it punishes people more for their mistakes than it rewards them for their successes.
"Karen," I said, "we may be unhappy about Ron, and we may both think the company is losing its innovative spirit, but take heart--we are on the cusp of a great sociological discovery. Let me explain ... "
Herbert W. Lovelace shares his experiences (changing most names, including his own, to protect the guilty) as CIO of a multibillion-dollar international company. Send him E-mail at lovelace@home.com, and read his online column, "Ask The Secret CIO", where he will provide real--and sometimes whimsical--answers to your questions.
Note to readers: I am planning to put my InformationWeek columns into a book, with some additional commentary on the events and people about whom I write. If readers would like to be updated on this event, please drop me an E-mail with the word "book" as the subject line.
aren Lovell, our VP of planning, was depressed. I was sullen. If you're depressed, you frequently depress others. If you're sullen, people just ignore you. I view sullen as a more socially considerate mood.
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