Failure is so hot right now, and John Danner and Mark Coopersmith, lecturers at Berkeley’s Haas School of Business, recognize that failure is an untapped resource that can lead to faster growth, more innovation, and even employee engagement. “Some people look at failure as an isolated event or a potential management process,” Danner explained.

“We see failure itself as a strategic resource, on a par with the other resources businesses have available to them. Failure is the one resource everyone creates every day. When you look at it that way you suddenly begin to see its potential for telling you what you don’t know and how to position your next cycle of decisions. It also helps you avoid getting caught up in your own belief system at the expense of reality.” In their new book, The Other F Word they share seven steps effective leadership can take to tap into failure’s potential.

1. Respect the inevitability of failure

By fearing failure, effective leadership will miss out on the benefits it has. It’s not a matter of if you will fail, but when and how. “If you start out with the attitude that failure is not an option,” said Danner, “you blind yourself to issues that will come back and bite you.”

2. Prepare for the most damaging failures

Because failures are inevitable, it’s important to be prepared for the worst possible scenario. SWAT teams, hospitals, and nuclear facilities do this, and so should effective leaders. It’s important to know who will handle failure, who will decide that it really is a failure, and who will respond.

3. Recognize when failure is happening

It’s imperative to catch a failure as soon as it starts happening. However, sometimes it’s difficult to know if something is failing, instead of just taking a long time to take off the ground. The best way to start is with metrics, like falling sales, rising costs, or anything quantifiable to trigger a failure response. It’s good to have as many different viewpoints as possible, to see different angles or insights as to where you’re most vulnerable.

4. React to failure in the moment

Coopersmith offered a prime example of a company that handled failure well in the moment: “After alienating customers with the announcement that Netflix would spin off its DVD-by-mail business into a new company inexplicably named Qwikster – one of the most boneheaded product launches of 2011 – [CEO Reed] Hastings changed course and took it all back after only 23 days.” The most effective leaders “organize the troops, apologize if appropriate, and work on the goodwill they have to move on.”

5. Reflect on why you failed

This has nothing to do with assigning blame. Instead, it’s about figuring out how, where, why, and what you failed. “People look to how leaders handle the folks closely involved with a failure to find out whether the trial-and-error rhetoric really comes down to trial-and-error,” said Danner. “They watch closely to see how honestly and how fairly people are treated. This is something leaders sometimes squander in their recrimination stage.”

6. Rebound with confidence

After you’ve spent time reflecting on and learning from failure, move on with confidence. “Some organizations spend too long focusing on the failure,” Danner said. “You’ve got to get back in the game. You’ve just gone through a period of intense reflection. How are you going to use those lessons you’ve just learned?” After failure, you have more wisdom to tackle the next problem and find the next solution.

7. Don’t forget the failure

Coopersmith advises effective leaders and organizations to “create stories and relics of their failures, as a reminder that not every failure is fatal.” Danner added, “WD-40 is named that way because there was a WD-1 through WD-39. Each of those was a small failure.”

With this view of failure in mind, each failure can really be a small victory. Sure, some failures are bigger, more costly, or more embarrassing than others, but each offers a learning opportunity that effective leaders should take advantage of.

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