Why fail? Because when we fail, we learn. When we talked about failure at last month’s EVPA conference in Paris we had a lively response.
The session was led by Nicole Etchart, Co-founder and CEO, NESsT, Deirdre Mortell, CEO, Social Innovation Fund Ireland, Caroline Mason, CEO, Esmée Fairbairn Foundation with Chris Carnie, Director, Factary acting as coordinator.
The back-story was EVPA’s 2014 report, Learning From Failures In Venture Philanthropy And Social Investment, by Lisa Hehenberger and Priscilla Boiardi.
The report identifies three types of risk:
a. Organisational risk
• Challenges related to the internal organisation of the VPO:
b. Strategic risk
• Misalignments in the investment strategy of the VPO:
c. Execution risk
• Failures in the implementation of the investment process:
The report suggests we should learn to fail intelligently:
1. Admit failures are possible
2. Detect failures
3. Analyse failures
4. Learn from failures
Deirdre Mortell told of a three-year, €750,000 investment in a youth unemployment project where there had been changes in CEO and in portfolio manager, and while traffic on the project’s website suggested interest in the project, real impact was missing. At the point when the investment would be renewed, the board had said ‘No.’ Deirdre learned that a small investment in a portfolio of large investments was not going to get the attention it needed; that handovers between portfolio managers could be handled better; and that a cry for help from a portfolio manager had to be heeded.
Nicole Etchart described a talent programme which failed because the leader could not delegate, did not trust others, lacked focus and, did not want to grow the programme. She learned from this failure to focus more on Due Diligence and on the selection and pairing of leaders. It is difficult to change the views of a leader with a fixed mind-set, she said.
Caroline Mason said that, until recently, Esmée Fairbairn Foundation lacked information on where they were doing well, and where they were not. They introduced a rating system and are now measuring their own performance, and the sustainability of investee organisations. Caroline presented three case studies, including an organisation that had developed a translation service that was not part of their core business, and which failed.
We asked delegates to talk about a failure honestly, and to try to answer two questions:
• How would you have detected this failure earlier?
• How would you help others to learn from this failure?
The detailed results are available as a PDF here. A short summary of what was discussed is below.
Amongst Execution Risks we heard from a delegate who ‘fell in love with the entrepreneur’ (we think this was platonic, not romantic…) and had been blinded to her or his failings. Another delegate had experienced failure when their stakeholders did not understand or buy into their programme; stronger partnerships with stakeholders and clearer strategies might have helped prevent that.
Many delegates mentioned the importance of earlier, thorough Due Diligence as a means of avoiding failures in execution. ‘Due Diligence’ covered a range of failures, from the lack of market research, to ‘looking for specific skills and characteristics’ in entrepreneurs. Due Diligence should ‘go two levels deeper into the organisation’, not just deal with the charming CEO. A separation of powers was also suggested – separating execution, project management, and sales.
Failure, for one delegate, had resulted from different objectives within the management team. For another it was ‘not really knowing your investee on a personal level’, and for others, there had been a ‘leadership crisis’ in the investee. One delegate described a project that failed as the result of corruption. Key learnings were to ‘trust your instincts and investigate your doubts,’ to have ‘in-depth conversations’, ‘shorter reporting lines and clarity from the beginning of a relationship’.
Understanding, communication and ‘critical questioning by outsiders’ were all solutions to failures caused by strategic risk. Projects failed because of ‘over-ambitious growth plans’ or ‘too many partners without an agreed vision. ‘Don’t fall in love with ideas’ warned one delegate describing a project where systems were not in place despite the reassurances of the ‘amazing entrepreneur.’
The key lessons from this workshop were that failures are often linked to problems in Due Diligence, lack of alignment, communication and understanding, within investee or investor organisations, as well as between investor-investee. Amazing, hypnotic entrepreneurs can also be a cause of failure. To avoid failure we should focus on learning from stakeholders, investees, investors, on in-depth communication with stakeholders, and especially early communication, and on setting expectation levels from the start.
At EVPA we all learned. From failure.
Chris Carnie is a consultant, researcher in philanthropy and founder of www.factary.com. He is the author of How Philanthropy is Changing in Europe, published (January 2017) by Policy Press http://policypress.co.uk/how-p...
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