Strategy of Intelligent Failure

“If your organization can adopt the concept of intelligent failure, it will become more agile, better at risk taking, and more adept at organizational learning”

(Rita McGrath, Failing by design. HBR (2011):89.4, 76-83)

Because of fear of failure and lack of know-how, many parents create the outcomes in their children that they are actually trying to prevent!

For example, in the name of not wanting their children to develop a sense of entitlement, parents don’t speak about money nor intentionally prepare their children for the opportunities and responsibilities of wealth. As a result, the rising generation is not equipped to successfully steward their eventual inheritance, and instead of being ready for the wealth transition, they have a wealth windfall experience (similar to a lottery winner). Or, to prevent heirs from misusing the grantor’s wealth, estate plans are over engineered resulting in perpetuating the parent- child dynamic from the grave via the new parent(s) – the trustee(s). Another classic example of creating an unintended outcome parents are trying to prevent goes something like this…”It is important that our children develop a strong work ethic.” Yet, the parents fund all the children’s needs and most if not all their wants, well into their 20s and sometimes into their 30s. Then wonder why their children don’t have a job or stick with a job especially when the job causes inconvenience in their lives.

When we work with our client-families, we encourage them to adapt the value of failing fast, or what Rita McGrath refers to as intelligent failure. Instead of trying to avoid failure, it is part of a proactive strategy to help family members flourish. In short, intelligent failure provides valuable insights to what is needed to grow, enhances learning, and contributes to what we believe to be one of the most vital attributes necessary in preparing the rising generation, this is, individual and family resilience.

The strategy of intelligent failure is a creative and ongoing process, however, here are a few examples of how the strategy of intelligent failure can apply to the scenarios referenced above:

  1. The Deafening Silence – “We don’t want entitled children so we don’t talk about our
Solution: Instead of thinking either we let our children know the details of our net worth or keep total silence, we offer a process to have the family wealth conversation. For example, don’t start with the details of your net worth, instead discuss the opportunities and responsibilities of wealth or the purpose of your assets. Intentionally take a chance and share more information about your wealth each step along the way, and see how they respond while there is time to intelligently learn from any failure that may occur so you can course correct.
  2. Governing from the Grave – “I don’t trust my heirs to make the decisions necessary to successfully steward our
Solution: Write a letter of wishes (we help our clients prepare this document) and attach this to your estate plan so your heirs via the trustees have a better understanding of your hopes, dreams, and feelings about their well-being via your financial assets and, intentionally take a chance and transition a smaller portion of your assets to them while they are younger and see how they respond while there is time to intelligently learn from any failure that may occur so you can course correct.
  3. Needs versus Wants – “We want our children to have a strong work ethic.”
Solution: I commonly say to my clients, “Do you love your children enough NOT to give them everything you can?” Clearly determine what are the true needs of your children and use their wants as an opportunity to teach values and develop the work ethic in your children. There is no replacement for having your children work to earn money to purchase their wants. Intentionally take a chance and say no to requests that are truly based on wants (nice-to-haves, however, not necessary) and don’t bail them out when they get in a financial pickle, and see how they respond while there is time to intelligently learn from any failure that may occur so you can course correct.