The worst failures are those from which we fail to learn.
Most organizations put a premium on celebrating successes at the end of every year—we certainly do!
But we also believe that we have a great deal to learn from our failures, so we endeavor to share those failures and the lessons we’ve learned in hopes of avoiding those same mistakes in the future.
That said, this report was probably the most difficult Failure Report I’ve written.
As we sat as a team and discussed the various problems and failures of 2012, we found we had to differentiate between:
1. Chronic problems with no particular person or organization to blame
2. True failures that were not ours to bring into the light
3. Failures that fell directly under our responsibility and control
A draft of this report sat on my desktop for six months because I could not bring myself to actually publish what I had written. I was claiming failures, padding the report, for the sake of having something to publish. We had not actually learned anything from the “failures” listed because they were not under our control and we were actually powerless to effect any change on certain fronts due to local politics, partnerships, etc.
I was embarrassed to write the report that I actually believed in—the report that claimed one failure, one major lesson learned, and one plan to go forward.
The draft on my desktop didn’t require very much of me. It had all the appearances of vulnerability and “owning up,” but lacked any actionable lessons or plan for improvement, because they were not really our failures.
My team rightly told me that a Preemptive Love Failure Report should sting a little. It should not be perfunctory or feign responsibility while airing other people’s dirty laundry.
With that in mind, here is the report I should have written to end 2012.
Failure: Short-sightedness with regard to PLC’s working capital and the growth we undertook in 2012, resulting in an acute cash flow crisis.
Success followed by rapid growth is one of the most dangerous things that can happen to any organization. And when it happened to us in 2012, we were not as prepared as I thought we were to weather its storms!
I drastically underestimated the grant-making cycles of the Iraqi government versus the cash flow needs of programs with our international medical partners in the cities of Fallujah, Najaf, Nasiriyah, and Basra. By early fall, my failure to prepare for the cash flow requirements of our new growth had the two founding families of PLC draining our personal savings accounts, our children’s college funds, etc. to keep the organization afloat while we waited for the Iraqi government to release around $600,000 in funds to us.
Our previous experience had never given us reason to plan for more than a month or two delay in any given contract with the Iraqi government. But movement into much larger contracts in July 2012 temporarily depleted our cash reserves. I had not done my homework and we were caught by surprise.
The lessons are fairly obvious in retrospect! Good leadership requires assuming the best while planning for the worst.
Responses and Changes Undertaken:
1. Established a policy of signing contracts in USD rather than volatile local currencies.
2. Established a policy of not signing program contracts which do not provide reasonable operating margins.
3. Established a minimum working capital threshold.
4. Established lines of credit to support our continued impact and growth across the country.
5. Studied cash flow forecasting while working closely with PLC’s Financial Director to understand our vulnerabilities in advance of actual crises.
6. Increased PLC’s working capital through focusing more on the margins of our government contracts, restructuring our development efforts to distinguish between revenue and equity-like funders, and beginning feasibility research into other expansion opportunities that will support our mission and improve our capitalization.
It was a great year. As one wise advisor told me, “In a place like Iraq, just keeping your head above water and living to work toward your dream for another year is a significant accomplishment.”
But we don’t want to settle for good intentions. We want measurable impact. We want to develop leaders, and we are beginning to explore the possible merits of a diversified, “rising tide” approach to improving leadership, medical care, and peaceful partnerships across the country.
As a team, we have learned from this particular cash flow failure in 2012 and have implemented protocols and plans that have already made us healthier and better positioned for continued impact than at any other time in our history.
We don’t have every answer. And we certainly won’t figure it all out in 2013. But we are committed to a combination of proven practices and innovation; to minding the margins of every project we undertake while pressing forward and embracing entrepreneurial risk.
If you have any questions or concerns, please don’t hesitate to email me. I would love to hear from you.