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“Recruit's Management Approach, Which Embraces Failure as a Stepping Stone To Success, Is the Most Farsighted and Rational Method in the World of Entrepreneurship”: Babson College Associate Professor Yasuhiro Yamakawa

An External Perspective on Recruit Group’s Management Style

From my perspective as a researcher and practitioner of entrepreneurship in the U.S., Recruit's management style of embracing failure as a stepping stone to success is both farsighted and rational, and will be of great help to the Group as it pursues its global strategy. In Japan, I hope that Recruit’s approach will be actively communicated and disseminated outside the company so that the country as a whole will become more tolerant of failure, especially at a time when the government is seeking to boost startups on a national level.

In a World Riddled with Uncertainty, the Key Is to Learn from Mistakes and Pivot Effectively

In February 2024, I served as an external judge for the 2023 High School Student Ring awards — Recruit's entrepreneurship education program for Japanese high school students. This program provides a rare opportunity for students to come up with their own plan for a new business and get feedback on it in a country with a lack of entrepreneurship*1.

At the award ceremony, I enjoyed spending time with all the students and felt energized by their enthusiasm. Whether they were project finalists up on the stage or in the audience, everyone was very energetic, and I sensed the future is bright and in good hands. While I’m sure there were students in the audience who were disappointed that they weren’t selected as finalists, I believe they also saw great value in having taken on the challenge of solving a social problem they identified on their own, and experienced failure through it.

I teach entrepreneurship at Babson College in the U.S. One of my classes is called “Foundations of Management and Entrepreneurship,” and all first-year students take it. They work in teams a dozen strong, and go through the entire startup process in a single year. They start by raising funds from the college, before founding, managing, running and finally closing the business through a robust accounting audit. They learn firsthand that there are so many things you don’t know unless you try. Failure is therefore inevitable, and how much you can learn from your setbacks is key.

Babson College Associate Professor Yasuhiro Yamakawa

Babson College Associate Professor Yasuhiro Yamakawa

Grading, factors such as business content, sales, profit, performance evaluation and exams are naturally taken into account, but special emphasis is placed on how much you’ve learned. The more new things you try and fail at, the more you can brag about what you’ve learned, the happier your teachers will be, and the higher your grades will be; what an incentive!

If everything goes smoothly, not much is learned, and the students likely receive lower marks. Even the nascent entrepreneurs who gather at Babson from around the world are not always confident enough to boldly tackle challenges and fail from day one. The well-designed incentive system that directly links the goal of achieving good grades to failure is in place to encourage students to test themselves and fail with confidence.

The world we used to live in was highly predictable and all you had to do was focus on analyzing data and generating ideas based on past trends. However, uncertainty has grown dramatically over the past few years, to the point where we can’t be sure that traditional cause-and-effect relationships and success equations will work, so we have to give it a try and see. At Babson, we teach the importance of predicting based on past trends (causation/predictive logic) as well as trying one thing and, even if it fails, how to effectively pivot from there (effectuation/CreActive logic).

*1 According to Babson College’s Entrepreneurship Monitor Reports, Japan has by far the lowest proportion of adults agreeing that they see good opportunities to start a business and to make a difference in the world.

Failure Is Inevitable, So I Strongly Favor Deko’s Idea That a Leader's Job Is to Regulate the Overall Impact of Failures

Studies have shown that when company leaders tell their employees to “never fail” in an attempt to prevent failure, it does not reduce the absolute number of failures. Instead, it reduces the number of reported failures.

Failure is an inevitable part of business. Therefore, it’s better to embrace failures, share them, and make the most of the learnings for a better future. However, even when leaders are very vocal in telling their employees that they welcome failures, employees are often anxious, saying, “Even if they say so, I know I’ll lose a chance to be promoted if I fail.”

Leaders often come to me to ask how they can create a culture of failure. If we apply the Babson’s example I mentioned earlier to a company, one answer would be a personnel evaluation system that encourages failure: the more quality failures you make, the higher you are evaluated and can take on more interesting work.

In the U.S. we refer to failure as the “token of pride”; “Have you ever failed?” is a staple question that investors always ask in a pitch and during subsequent due diligence. At Recruit, good-quality failures are considered a track record as a “proof of challenge”; Hisayuki “Deko” Idekoba, Recruit Group’s CEO, also embraces failure. He says in media interviews that his job is to “regulate the overall impact of failures.” This approach is both farsighted and rational in the world of entrepreneurship, and I share it to a great extent. I think it will prove to be a great advantage as Recruit Group pursues its global strategy.

In Japan, I believe a company with a strong brand like Recruit has a responsibility to actively promote this kind of thinking externally to permeate a greater tolerance for failure. Now is the perfect time, since the government has started supporting startups on a national level. The message from the top management of Recruit Group, whose corporate culture incorporates an entrepreneurial spirit and has actually created new businesses out of many failures, should resonate as reality, not just pretty words.

Yasuhiro Yamakawa

Associate Professor of Entrepreneurship at Babson College

Dr. Yasuhiro Yamakawa teaches entrepreneurship, failure studies, and business strategy at Babson College. He obtained his MBA in strategic management from the Peter F. Drucker Graduate School of Management, and completed his Ph.D. in entrepreneurship at the School of Management, University of Texas at Dallas. Prior to beginning his doctoral studies, Dr. Yamakawa worked in the utilities and telecommunications industries, where he engaged in several corporate ventures and entrepreneurial startups. He is an entrepreneurial and management consultant as well as a board member of a venture company and a cofounder and advisor of Venture Cafe Tokyo. He is also a member of the “J-Startup” Recommendation Committee, which is promoted by the Japanese Ministry of Economy, Trade and Industry (METI), and an expert member of the Entrepreneurship Education Committee of the Japanese Ministry of Education, Culture, Sports, Science and Technology (MEXT). He has written numerous academic papers on entrepreneurship.

May 28, 2024

This article is based on information available at the time of publication.