The British need to learn to love failure

Something we can learn from the Yanks.

Ben Bernanke, addressing Princeton graduates last month, made the following sage observation: "Nobody likes to fail but failure is an essential part of life and of learning. If your uniform isn't dirty, you haven't been in the game."

This quote struck an immediate resonance with me. The notion of embracing failure as part of a learning curve and a vital life tool, in both a personal and business sense, is one scarcely heard on the UK side of the pond. I suspect that Princeton graduates will have already been familiar with the "fail to succeed" doctrine espoused by Bernanke, as it is taught in so many US classrooms and colleges. However Bernanke's statement, to my mind, illuminated the gulf that exists between US and UK on the critical subject of failure.  

In the US, failure is not necessarily a pejorative term denoting categorical error and misjudgement. It is not seen as stumbling block along the path of career development, rather it is viewed - as much, if not more - as an enabler rather than disabler. Failure enables learning, it creates clarity and understanding. It is not to be encouraged per se, but failure should be recognised as a natural part of existence and as something from which positive lessons can be drawn.

Clearly when failure destabilises economies profoundly or leads to terrible accidents people should be rightly held accountable. However in the business world it is fair to say that in the US people embrace the opportunity to learn from mistakes and therefore do not fear failure in the same way as their UK counterparts, who are raised to fear failure over and above all else. This culture of fear leads to a dearth in creativity, for why should one dare to do something different if there is the prospect of failure?

The issue in part stems from schools, the understandably rigorous examination system and progresses through to highly competitive, grades-tested graduate fast stream programmes and other "first job"' employment initiatives that covet "straight-A" students.

Whilst this approach is in its conception meritocratic and laudable, grades and academic 'success' does not always tell the complete story. Indeed, it might mean that some of the best candidates never get past the first stage in any recruitment process.

This is because being a straight-A student does not mean that they are perfect but merely someone who has never done badly in a course – impressive in itself, but also perhaps indicating that they have never really been tested. If they have not been tested to the extent of receiving at least some weak grades, then they are either superhumanly gifted or, I would argue, that they missed out on how to cope with failure. How to cope with failure moulds character in a way that achieving constant 'success' never can. And constant success in business is never achievable in the long term.

A final thought from Woody Allen: "If you're not failing every now and again, it's a sign you're not doing anything very innovative." Innovation is a process of trial and error – with the latter part being equally as important as the former. Clearly this process must be channelled towards the overarching aim of achieving success, but fearing error means avoiding innovation. Learning from mistakes helps to build better businesses. Of course with failure, a little goes a long way!

Ben Bernanke. Photograph: Getty Images

Co-CEO of DLA Piper

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.