A good question to ask is: If this person were not already at the organization, would I recommend that another team hire him or her knowing what I know? Sarah, the employee who struggled with operating independently, was not somebody who I could see being successful anywhere within the company.

She was right. If Albert were to get a rude shock next month, he’d have three possible explanations for what happened, none of which are good.

1. The review isn’t fair. If things really were so dire, why hasn’t this come up until now? This must be a mistake.

2. The review is fair, but my manager was negligent and didn’t realize I was underperforming until the end of the half.

3. The review is fair, but my manager wasn’t honest in sharing feedback with me along the way, so I didn’t have a chance to improve.

I was at risk of falling into bucket three. Luckily, I still had time to put the lesson into action. The sooner that Albert internalized he was not meeting expectations, the quicker he could potentially turn things around, and the smoother our future performance conversations would go.

Often a failed project is a critical step in getting to success. Once or twice a year, at our product meetings, I ask all of our managers to complete a simple form outlining their bets from the last few years, divided into three categories: bets that went well, bets that didn’t go well, and open bets. Then we break up into smaller groups and discuss the items in each category and what we’ve learned from each bet. This exercise reminds everyone that they are expected to implement bold ideas and that, as part of the process, some risks won’t pay off. They see that making bets is not a question of individuals’ successes and failures but rather a learning process that, in total, catapults the business forward. It also helps newer people get used to admitting publicly that they screwed up on a bunch of stuff—as we all do.

2. DON’T MAKE A BIG DEAL ABOUT IT

If you make a big deal about a bet that didn’t work out, you’ll shut down all future risk-taking. People will learn that you preach but don’t practice dispersed decision-making… Reed’s reaction is the only type of leadership response that encourages innovative thinking. When a bet fails, the manager must be careful to express interest in the takeaways but no condemnation. Everyone in that room left with two major messages in mind. First, if you take a bet and it fails, Reed will ask you what you learned. Second, if you try out something big and it doesn’t work out, nobody will scream—and you won’t lose your job.

3. ASK HER TO “SUNSHINE” THE FAILURE

If you make a bet and it fails, it’s important to speak openly and frequently about what happened. If you’re the boss, make it clear you expect all failed bets to be detailed out in the open… It’s critical that your employees are continually hearing about the failed bets of others, so that they are encouraged to take bets (that of course might fail) themselves. You can’t have a culture of innovation if you don’t have this. At Netflix, we try to shine a bright light on every failed bet. We encourage employees to write open memos explaining candidly what happened, followed by a description of the lessons learned.

Instead I reminded myself of what I often tell leaders throughout Netflix:

When one of your people does something dumb don’t blame them. Instead ask yourself what context you failed to set. Are you articulate and inspiring enough in expressing your goals and strategy? Have you clearly explained all the assumptions and risks that will help your team to make good decisions? Are you and your employees highly aligned on vision and objectives?

Practices for Learning from Failure

To Avoid

Don’t Say

Try

Skipping the analysis

I'll try harder next time.

Thinking carefully about what went wrong and what factors might have caused it.

Superficial analysis

It didn’t work. I'll just try something else

Analyzing what the different causes of the failure suggest about what to try next.

Self-serving analysis

I was right, but someone or something else messed it up.

Digging in to understand—

and accept—your own

contribution (small or large)

to the failure.