Vanguard, BNY, Nuveen Urge Staff to Embrace Failure to ...

Vanguard, BNY, Nuveen Urge Staff to Embrace Failure to Spur Innovation

By Dervedia Thomas June 27, 2019

Asset managers like Vanguard, BNY Mellon and Nuveen are coaching staff get over their fear of failure in order to promote innovation at their firms. But getting employees to take risks that might not pay off can be a challenge at a time when a number of industry firms are cutting jobs.

To foster ingenuity, Vanguard Group is trying to embrace failures as much as they embrace success, said James Kearney, the company's head of global investment operations, during The Summit of Asset Management (TSAM) conference in New York on June 13.

"It's okay to fail," he said. "We think that's really where the innovation comes from. We have a bunch of ideas that just don't make it. There's stuff on the cutting room floor all over the place."

The challenge is getting employees to overcome their fear of failure, Kearney added.

"The hardest thing for us in this space was making sure people were comfortable raising their hands and saying that they failed because we had built an environment where you had to excel and had to succeed," he said. "To raise your hand, it was like, `Is that going to kill my career? Am I going to be the laughingstock? There goes my bonus,'-type of an orientation."

To overcome these fears, managers need to address the source of apprehension, such as layoffs, explains Amy Edmondson, a professor of leadership and management at the Harvard Business School.

"Make it discussable," she tells FundFire. "We don't get very far pretending it's not there. But many firms do that. They just don't talk about it, and they sort of hope that people won't have perverse reactions or behaviors, but they will."

When evaluating the outcome of projects, leaders need to focus on employees' intentions, according to Christine Gill, global head of asset manager and investor solutions at BNY Mellon.

"As our employees are intending to help clients, intending to improve the solutions that we offer or create efficiencies, not every decision or every action is going to be perfect, or deliver the results that are anticipated," she says. "We understand that, and our employees understand that some of these actions and initiatives will pay off, and others won't."

The most senior executives in an organization need to set the tone, Vijay Advani, CEO of Nuveen, tells FundFire.

"If you build an environment where you're overly critical, highly toxic, you're going to get individuals who are extremely risk averse and want to play safe," he says.

Leaders also have to reveal their own failures to make staffers more comfortable with theirs, Kearney said at the conference. He noted that he once misspelled an employee's name in a note that went out to 400 of their colleagues across the globe. Instead of brushing it off as a mistake, or apologizing to the staffer privately, Kearney sent another note to the 400 recipients to publicly acknowledge the error.

"You can always say, `[We] take risk'... but saying it and also being able to talk about it at town halls, or at lunch and learns, in staff meetings, saying, `Yes, we took the risk, we failed, we learned, we reinvented. If you don't talk about it ... you start generating a culture of being passive aggressive, which is exactly what you don't want."

One of the reasons managers don't celebrate failures is because they see them as mistakes, Edmondson explains.

"A mistake can in fact qualify as a failure, but not all failures are mistakes," she says. "Intelligent failures are the still undesired result of an experiment, a pilot ... that failed to achieve the result we had hoped for. Distinguishing thoughtfully among the kinds of failures ... makes it a little bit more palatable to get excited about rewarding and really celebrating and learning quickly from intelligent failures. That doesn't mean you punish mistakes. It means you do whatever you can to help people avoid making that same mistake in the future."

Overly rewarding success can also have negative repercussions, as staffers may just stick to the tasks that they're good at, Edmondson adds.

"People will be risk averse and won't engage in the smart experiments through which future innovations and future success comes," she says.

Firms also need to analyze successes in the same way they would failures, BNY's Gill adds. "We are really focused on performing postmortems of our projects, [even if] it is a super successful project and a clear success, because there's things to be learned from that," she says. To minimize the impact on clients, BNY Mellon has staff run their ideas past client advisory boards "We often do kind of a Shark Tank-type session, where we introduce some of the product concepts that we've developed to get their feedback very early on," Gill says, noting that the firm's recent partnership with BlackRock's Aladdin was born out of one of those sessions. Imagining different outcomes is also helpful, she says. "We call it future casting -- we think about, what if it is 2030? What do we think are some potential scenarios that could play out? What does this mean to our business, what does this mean to our clients? We really try to push it to very extreme scenarios," Gill says. "And when they actually do play out, not all of them will play out, then we're prepared to address them and we're not in a reactive mode."

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