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Fiona Lee
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Let Them Fail: Encourage Employees to Experiment

8/4/2004 --

Companies that support workers who try new things–even if they make mistakes–are rewarded with innovative ideas.

ANN ARBOR, Mich. – Rewarding employees who repeatedly try new things and fail actually leads to greater innovation and bigger long-term successes, a new University of Michigan Business School study shows.

Innovation is a kind of Holy Grail for management but when organizations are inconsistent in their support for experimentation or scrutinize workers too closely, they actually inhibit innovation, according to the study in the latest issue of the journal Organization Science.

"To survive, organizations need to experiment constantly with new ideas and not get stuck doing the same old routine," says Fiona Lee, associate professor of management and organizations at the Michigan Business School. "We've been looking at why some people experiment and others don't. We find that when managers send mixed messages, people get scared and actually stop trying out new ideas."

Members of organizations who fear that their mistakes and failures will be held against them lack "psychological safety" and become fearful of taking risks or experimenting, Lee says. And yet innovation, she adds, is at least partially based on accumulated failure, with crucial developments from the light bulb to vaccines being developed only after years of constant trial-and-error experimentation.

Individuals who constantly improvise, tinker and experiment are able to adapt quickly in fast-paced industries where new ideas and inventions are constantly in demand, Lee says.

But her research of several organizations found that supportive coaching can enable risk-taking while close and constant evaluation designed to expose failures actually inhibits creativity, making people reluctant to admit mistakes and less likely to experiment or take risks. This is true even when top management explicitly encourages people to experiment.

Lee studied a major hospital system as it implemented new technology. Even though the organization encouraged experimentation with new technologies, people were hesitant to experiment when reward systems penalized failures. Inconsistent messages–on one hand telling people to experiment, but on the other hand punishing them when they made mistakes–sent mixed signals and made people more rigid, more risk-averse and less likely to try out new ideas.

Lee describes a similar pattern at Bank of America, which in 2000 established 24 laboratory branches designed to experiment with new product and service ideas. However, management did not adjust reward systems so that people were not penalized for failures. As a result, most employees in the branches were reluctant to experiment until the reward systems were realigned to fit with the goals espousing experimentation.

Telling people to experiment but monitoring and punishing their mistakes when they do so lowers psychological safety and increases fear, creating discouraging conditions, she says.



For more information, contact:
Bernie DeGroat
Phone: (734) 936-1015 or 647-1847
E-mail: bernied@umich.edu