Failure and What You Can Learn from It

Failure makes better leaders. But no one goes looking for it, especially now. Seasoned CIOs offer lessons for avoiding failure or coping if it's beyond your control.

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For example, infrastructure upgrades often must be done regardless of the economy, to keep IT running smoothly, he says. In discussions with his peers and boards of directors, he multiplies the odds that something bad will occur by the consequences of the bad thing. Had he done that in 2002, he says, he might have determined that a six-year-old network infrastructure could buckle under growing network demands. Then he'd have known that medical records would be inaccessible, at the potential cost to patient lives. "No patients were harmed. But it was a wake-up call to show how dependent we all [are on] technology," he says.

With a mandate to cut expenses, some CIOs are investigating new technologies that promise cost savings. Cloud computing—consuming technology over the Web as a service from a vendor rather than running it in-house—may be untried for many applications, but the risk is worth the reward of cheaper IT, says Jerry Hodge, senior director for information services of small kitchen appliance distributor Hamilton Beach Brands.

Hodge is replacing Lotus Notes e-mail with Google's Gmail for 500 employees. He expects to save close to 60 percent of his current messaging costs over five years, he says. "We tend to be conservative and ask a lot of questions. We can't afford a mistake," he says. The projected savings, plus the fact that he can reassign some of his staff from managing e-mail to more creative and important jobs such as business intelligence, convinced him Gmail was a risk worth taking.

It's Not Always Your Fault

No matter how risk averse you are or how much experience you have dealing with adversity, you may still encounter failure beyond your control. The collapse of a company is the kind of failure that hurts—and teaches—on many levels.

Art Hall was vice president of customer care operations with NetBank, an Internet-only bank that went under because of the housing and liquidity crisis. At its launch in 1996, the startup raced ahead of stalwarts such as Bank of America and Wachovia to offer customers online access to checking, savings and other accounts. "People worked 60 to 70 hours a week, living the brand, believing in the company and cascading that passion to everyone else," says Hall, who is now a management consultant at Alvarez and Marsal.

But established banks caught on to the Web and NetBank stagnated. "No one anticipated, or admitted, that the average consumer wouldn't take everything out of a known branch and put it in a virtual bank," he says.

In May 2007, EverBank announced plans to acquire the NetBank, but the deal fizzled. ING bought the accounts of NetBank's 104,000 customers in September 2007, and NetBank filed for Chapter 11 bankruptcy protection a month later. It never emerged. Before NetBank, Hall had been laid off from First Data and he drew upon what he learned from that experience. He relieved pressure by talking with a mentor outside of NetBank, praying and resting more on weekends and advised coworkers to find their own ways to cope. Such outlets are important, he says, "so there's a forum to get out some of the emotions in a safe environment, and you're not walking around as a ticking time bomb." The lesson came home to Hall with the suicide of a colleague. "He took his life on his parents' front lawn," he says quietly. It happened as the final 10-week push began to close NetBank. "That was the darkest day."

Those who have experienced failure say that in the middle of it, events move fitfully and whatever learning there is may not be immediately clear.

Robert Fort is riding that roller coaster while he shuts down the remaining six Virgin Megastores in the United States. The music retailer was sold to a partnership of two New York-based real estate firms, including Related Companies, in late 2007. "We've known for over a year we were fighting for our survival," Fort says.

He and other officers kept employees informed of "the realities," he says, referring to the speculation that the music chain faced long odds. In March, when the partnership decided to close the U.S. stores, staff morale actually spiked temporarily, he says. "There's a strange emotional boost you get when things are made clear."

After a few days, though, spirits sank as people thought about medical plans and made severance calculations. Now, he says, judging from the Facebook and Twitter posts of employees, the mood has changed again. "We've noticed the story shifting away from bummer to nostalgia. There's a big demographic that grew up on CDs, and we're an iconic part of that."

CEO Simon Wright put Fort in charge of the internal, national wind-down. Fort expects to be out of a job by the fall. Next year, more lucrative tenants will begin moving into the former Megastores, including the massive space in New York's Times Square. Planning and executing the shut down while managing his emotions and those of his staff (now down to seven) is new territory.

As for his future, Fort has considered everything from taking the summer off to consulting to seeking another full-time CIO position. But it's hard to make a decision when there is so much work to be done.

He's a bit frustrated, too, because, he says, Virgin Mega-stores recorded record financials for the past two years. They added new technology in the stores, such as a real-time data warehouse and business intelligence system, sampling kiosks, and a converged voice and data network to differentiate from the competition.

But the sinking economy outpaced that good work. "I know that IT alone won't make a company," he says. "But we have a lot of pride."

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Copyright © 2009 IDG Communications, Inc.

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