There’s something about my career that I’m not particularly proud of, normally don’t like to talk about, and have not written about. But confession is balm to the soul, they say, so here goes:

When I was a young executive, I had a stellar track record, climbing to the top of the ladder, all the way to the corner office of a national insurance company, then moving on to become a president at one of the nation’s largest bank holding companies. The epitome of success, I was confident that my future was so bright that I’d better wear shades to work every day.

While competent and confident, I didn’t like corporate life and decided to strike out on my own. I left the corporate world and immediately acquired three businesses. I was fully in charge now; no politics, meetings, memos, or CYA behavior. The freedom of being a business owner, being the one to make all the decisions and call all the shots, fit me like a well-tailored Italian suit. I was on top of the world.

That is, until one of the three businesses turned out to be a total and utter disaster by all definitions of the word “failure.” We had to take the company into bankruptcy to buy time for a restructuring and change of strategy. But it proved to be too late, and we decided to liquidate. How humiliating! My investors lost money, and I was forced to pay on a large personal loan guarantee. Suddenly, the freedom of being a business owner became a ball and chain.

This was not what I had expected, and I was unprepared for the range of emotions that hit me like crashing waves pounding cliffs in the North Atlantic. My first business was the Titanic! How would I ever recover?

In the midst of soul-searching, I realized I had two choices: to let the fear of this failure be my guide, or to tell myself that being a business owner involves accepting a certain amount of risk, so I should just put my boots back on and learn from the experience.

I chose the latter. My other two businesses had fairy-tale endings. One took off, expanded overseas, went public, and was sold for almost 100 times the amount I invested. The other company remained private and grew from about 15 employees to more than 200 before it sold to a Fortune 500, again for an extraordinary return on my investment. At that point, I had gained enough experience and humility (and the wisdom it brings) to realize that I could help other business owners who were facing failure, and that’s when I founded Manchester Companies to provide corporate renewal and investment banking services to small and middle-market companies. Looking back, I realize that if I had let that first failure paralyze me, I would not have had the courage to start my own business or be able to advise others facing failure.

My intention here is not to deliver a motivational speech or ask you to “get in touch with your center.” Rather, I just want to remind other business leaders that if you exhibit fear of failure, your employees are going to see it and have no confidence in you or your vision of the future, and you will lose your following. If you don’t have confidence, you simply can’t be a leader.

Desire for gain or fear of loss?

Psychologists tell us that our behavior is influenced by two primary motivations: a desire for gain or the fear of loss. The desire for gain is easy to identify. Business leaders are business leaders because we are all highly motivated by gain (e.g., return on investment, profit margin, and seven-figure compensation plans).

At the same time, I have often seen people running scared from banks, investors, boards, employees, and yes, even customers. This is the fear of failure, which is more difficult to identify because most people can’t admit it to themselves or anybody else. In many organizations, failures, even the smallest ones, are kept hidden and tucked away. No one wants to deliver bad news to the boss, right? We learn that one at an early age with our first bad report card.

Unfortunately, when a series of small failures combines with a corporate culture of rigidity and an obsession with meeting goals at all costs, tragic failures can result. One example is the space shuttle Columbia explosion in 2003, in which seven astronauts lost their lives. Analysis by a lot of smart people determined not only that the cause of the disaster was a piece of foam that hit the shuttle’s leading edge during launch (a risk known by NASA managers that had gone unresolved), but also due to the rigid culture and procedures within NASA that didn’t allow for responding to a failure.

Learning from failure

A certain fear of failure is healthy. It acts as a governor on your organization’s engine so we don’t put the pedal to the metal without a seatbelt or airbags, and don’t chase after any new opportunity that comes along. A little bit of fear leads us to take calculated risks.

However, if that fear begins to interfere, it can destroy a company. It becomes an infection that spreads into all decision-making. Instead of looking ahead with new ideas and confidence, fear of failure grows into a self-fulfilling prophecy.

There’s a difference between living in fear of failure and learning from failure. In my failed business, what bothered me most was that people lost their jobs. To this day, I still feel terrible about that. However, I learned a lot that I carried over into my corporate renewal consulting business, which has saved thousands of jobs over the past 25 years by helping clients remain afloat. And in the process of working side-by-side with business leaders facing the fear of losing everything, I would not have been as humble or credible if I hadn’t truly known what they were going through.

Effective business leaders must possess the courage to ’fess up to failures when they occur and to foster an environment that encourages people to speak up when something goes wrong. The organization’s ability to resolve big problems starts with the ability to learn from even small failures in very complex organizations, processes, and procedures. Psychologists also tell us that we can choose between eating well and sleeping well. I don’t agree with that. I think those who choose to learn from failure, rather than live in fear of it, do both!