What’s Right With Being Wrong

When the slips of paper that marked Art Fry’s choir hymnal fell to the church floor, the Minnesota Mining & Manufacturing Co. scientist had an epiphany of sorts.

Maybe the rejected batch of glue his colleague had developed would work well enough to hold his bookmarks in place without damaging the pages. And perhaps other people needed the same sort of removable paper markers. Fry’s semi-divine inspiration turned his colleague’s laboratory blunder into one of 3M’s best-selling inventions of all time: Post-it Notes.

The well-chronicled tale also has provided a valuable lesson for other companies over the last two decades: Don’t hide your mistakes, embrace them. But as popular a concept as corporate risk-taking has become, analysts say few managers have managed to do more than spout the usual platitudes about “thinking outside the box.” Most still sharply punish failure, which does little to motivate employees to come up with new and better ways of doing things.

“People will only take risks if the rewards for succeeding are greater than the punishments for failure,” said organizational change expert David A. Nadler, chairman of New York-based Delta Consulting Group. The real sanctions, he said, should not be placed upon those who take prudent risks and fail, but those who try to cover up their mistakes.

“You should create heroes out of people who have had failures but have learned from them,” Nadler said. That means giving out awards, recognition or such financial rewards as stock options to people who take unique risks.

He calls these public examples “productive failures” because they can help workers across an entire organization understand the company’s processes and hone their judgment.

Still, consultants say most managers don’t take this enlightened view of blunders. Most believe stiff punishment prevents employee screw-ups and saves the company money in the long run.

One angry engineering manager at a large microelectronics firm wanted to make a design team that developed a flawed product wear T-shirts that said, “I f----- up,” recalled Michael F. Spratt, a mergers and acquisitions partner with Coopers & Lybrand. Although the manager was eventually talked out of the reprimand, Spratt said the executive was nevertheless astonished that anyone thought his idea was inappropriate.

“I think a lot of companies will attempt to create a culture that embraces entrepreneurship because it sounds good,” Spratt said. “They will embed it in their values statement, but when you examine the behavior in the organization, you get a different story.”

In fact, he said, many will hire bright, innovative people but then tie their hands when it comes to streamlining processes in the company. The reason? Analysts say most CEOs are more concerned with preserving the company’s quarterly earnings and stock price in the short term than encouraging innovation that would benefit the company in the long run.

But experts say not all experimentation has to cut into the bottom line. Most companies, they say, could take a tip from big manufacturers such as 3M and Corning Inc., which promote corporate risk-taking within well-defined boundaries.

Corning contains its research and development costs by using a formal product-development process. The five-step system requires researchers to complete questionnaires at each level, starting with idea definition and then moving up to such stages as feasibility and practicality. A new project can’t move ahead unless all the hurdles on each level are passed, said Corning co-President John W. Loose. This bureaucratic process might appear to be burdensome and stifle creativity, but Loose said it just tells managers when to ax a program or how much money to allocate for it.

“It gets us to stop projects either sooner or later,” Loose said. And, he adds, it keeps emotions from clouding judgments about when to pull the plug. Corning’s optical fiber, used in telecommunications, spent about 15 years in the first two levels before eventually making its way to market.

Because risk-taking is monitored by this protocol, Loose said, innovators don’t have to look over their shoulders every day. Researchers don’t get punished when a project doesn’t pan out and managers don’t get in trouble for green-lighting additional work.

“I can’t remember us penalizing anyone for making a mistake,” Loose said. After all, the company’s most familiar product, Corning Ware, was created by accident when an employee left glass in the oven too long and it crystallized, creating glass ceramic.

Indeed, for most companies, embracing mistakes pays higher dividends than punishing failure, said William Coyne, senior vice president of research and development at 3M.

“Mistakes will be made, but if a person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it is dictatorial and undertakes to tell those under its authority exactly how they must do their job,” Coyne said in a 1996 speech on innovation.

Overly critical management, he said, is destructive and kills initiative, an ingredient he believes is necessary for most companies to stay competitive in the global economy.

Sir Francis Bacon said it this way, in his 1625 essay on innovation, “He that will not apply new remedies must expect new evils.” More than 3 1/2 centuries later, 3M nurtures innovation by allowing its technical employees to spend 15% of their time on new projects. And these employees can obtain grants of up to $50,000 to pay for prototypes or testing ideas--essentially to market a new product.

The company’s long-standing emphasis on new ideas also mandates that 30% of its annual sales come from products introduced in the last four years.

How can employees tell if their company is as serious about innovation as these companies are? Experts say look at executives’ actions. Do managers in the organization take risks? Who gets promoted and why?

Although innovation at most companies isn’t quite on the scale of 3M’s, analysts say most firms benefit from workers’ suggestions about how to improve a product or get it to customers faster and cheaper.

But experts caution that employees should do a little homework before they begin lobbing their ideas at bosses.

“When you get an idea, try to define where [in the company] it would be workable,” said Gerald Nadler, president of the Center for Breakthrough Thinking. “Ask what you are trying to accomplish there. Maybe you are trying to put something good in a system that shouldn’t exist at all.”

Nadler, no relation to David Nadler, cites the example of a manufacturing department head who wanted to automate the loading docks at his company’s distribution centers to improve the accuracy and speed of product delivery.

The idea he pitched carried a price tag of $1.5 million. It was quickly shot down. Why? The hefty cost gave executives the idea that maybe they shouldn’t be warehousing the company’s products at all. Months later, they decided to begin shipping directly to dealers.

“It’s just a matter of asking the right questions,” Nadler said. “Only about 8% of the population intuitively think to ask these things.”