Failure is a topic I’ve touched on several times in this newsletter—from how to build resilience so you’re better able to handle failure to why even cringeworthy failure makes us stronger.

But it’s one thing to get yourself to a place where you’re comfortable with failure and quite another to ensure your employees feel the same way. Yet if they don’t, they’re less likely to take the kinds of risks that can move teams and organizations into new, exciting territory.

To learn more about how to do this, I reached out to frequent newsletter contributor Harry Kraemer. He’s a clinical professor of leadership and an executive partner at private equity firm Madison Dearborn Partners. Today we’ll hear what he has to say about ensuring that your employees are comfortable with taking smart risks.

How to Genuinely Convey that It’s OK to Fail

In addition to his current work, Kraemer is the former CEO of the Fortune 500 healthcare firm Baxter International. His insights on the question of failure and risk draw on his time there—both before and after becoming CEO. Here’s what he had to say:

Kellogg Insight: What are the best ways to encourage employees to take risks? How can you convince them that failure really is OK?

Kraemer: When do individuals and companies learn the most? It’s when they fail. To the extent that you don’t take risks and never fail, it’s really hard to learn and get better.

What they taught me at Baxter was, yes it’s OK to fail as long as two things are happening: you really should be learning as a result of the failure. And they would say try to fail early. If you’re given $10 million for a project don’t wait until you’ve spent all $10 million before you decide that it won’t work. When you get to $2 million, you say, “I’ve learned enough to know this isn’t going to work so here’s 8 of the $10 million back.”

There was one occasion when a CEO told me that he was having trouble getting people to take risks and I said to him, “let me talk to the last three people who took a risk and let’s see what we can learn.” And he said, “those three people are no longer with the company.” Wait a minute. If people feel that by failing they’re going to lose their job then no one is going to take a risk.

How do we encourage people to take a risk? What I would do at Baxter, if I was in a room with 30 to 40 senior executives and one person had failed, I would say to that person, “you took a risk, you learned a lot and I’m going to promote you.” The other people around the room are going to take notice. It’s about demonstrating that encouraging people to take risks is more than just talk, there’s action.

TODAY’S LEADERSHIP TIP

“As you develop your branding, you move beyond the purely functional aspect of your product or service over to the psychological side. And that’s really important for building a long-term, sustainable brand.”

—Professor Neal Roese in Insight, on why entrepreneurs should ensure that branding doesn’t become an afterthought.