Criteria defined by Charles Schwab

Adapted from It's not the BIG and eats the SMALL... it's the FAST that eats the SLOW, J. Jennings and L. Haughton

Charles Schwab is a world's leading financial services firm. The company revolutionized the way stocks are bought and sold.

David Pottruck, a former CEO of Charles Schwab, says: "The idea that failure is okay is ridiculous. I am not going to go around the company and reward someone for failing. But here at Schwab we differentiate between noble failure and stupid failure."


Noble Failure

Charles Schwab has a set of criteria for defining noble failure.

Noble failure occurs when:

  • you have a good plan and know what you're doing, you've thought everything through carefully, and have implemented with sufficient management discipline, that if you look back in review, you'd conclude it was thoughtfully done

  • you have a reasonable contingency plan to deal with any initial failure and the contingency plan must have been implemented

  • you need to debrief yourself and ask what you can learn from the experience that will lead your company to be smarter next time.

Institutionalizing Celebration of Noble Failure

Charles Schwab journals their failures and lessons they've learned. They maintain also a display of failed innovation and created a videotape for employee orientation. "When celebration of noble failure becomes institutionalized, people within the organization are more willing to reassess earlier decisions" and take corrective measures.

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