One of the areas which has received considerable attention in the compliance world over the past six months is that of assessment. Today, we would like to focus on a smaller facet of assessment which we considered when reading a recent article in the Harvard Business Review, entitled “Failing By Design” by Columbia Business School Professor Rita Gunther McGrath. Professor McGrath’s article focuses on trials in the business world to experiment on how companies can learn from errors. She advocates that with a properly managed system, companies can learn through failure. She cites to the term of “intelligent failure” which she believes can help companies evolve.

This idea of learning from failure struck me as a useful lesson in how a company might test the effectiveness of the components of its compliance system. One area that would seem to be ripe for testing is to set up a test for reporting a compliance violation or incident, either through a company’s hotline or other reporting mechanism. McGrath advocates four principles of intelligent failure.