One of the most important things to keep in mind, wherever you work, is that the failure of an employee to speak up in a crucial moment cannot be seen. This is true whether that employee is on the front lines of customer service or sitting next to you in the executive board room. And because not offering an idea is an invisible act, it's hard to engage in real-time course correction. This means that psychologically safe workplaces have a powerful advantage in competitive industries.

Like Volkswagen, Wells Fargo's avoidable failure was not the result of one bad apple but of a system that demanded hitting targets so ambitious they could only be met by deceit. Employees operated in a culture of fear that brooked no dissent. Rather than manifesting interest in salespeople's experiences while executing the cross-selling strategy and using what was being learned in the field to shift or sharpen the company's strategy, managers sent a clear message: produce – or else.

Yet to view the customer-accounts fraud as the result of individually-corrupt salespeople does not square with the widespread nature of the behavior in the company, which points to a system set up to fail. Set up to fail by the pernicious combination of a top-down strategy and insufficient psychological safety to encourage sharing bad news up the hierarchy.

For example, meeting with senior executives in a large financial services firm in April

2020, I listened as they explained that the current business environment made failure temporarily “off-limits.” Understandably concerned about an economic climate increasingly challenged by a global pandemic, these business leaders wanted everything to go as well as possible. Generally speaking, they were sincere in their desire to learn from failure. But enthusiasm about failing was acceptable when times were good, they told me; now that the future looked uncertain, pursuing unerring success was more imperative than ever. These smart, well-intentioned people needed to rethink failure. First, they needed to appreciate the context. The need for fast learning from failure is most critical in times of uncertainty and upheaval, in part because failures are more likely! Second, while encouraging people to minimize basic and complex failures may help them focus, welcoming intelligent failures remains essential to progress in any industry. Third, they needed to recognize that the most likely outcome of their prohibition on failure wasn’t perfection but rather not hearing about the failures that do occur. When people don’t speak up about small failures—say, an accounting error—these can spiral into larger failures, such as massive banking losses.

Now consider what happens when senior executives, or parents, for that matter, state unequivocally that failure is off-limits, that only good results are acceptable. Failures don’t stop. They simply go underground. Unwittingly, the financial services executives I spoke with were at risk of inhibiting the transmission of bad news. That wasn’t their goal. Their goal was to encourage excellence. But it’s human nature to hide the truth when it’s clear that sharing it will bring punishment—or even just disapproval. Our fear of rejection presents the third barrier to practicing the science of failing well.