Want a healthy company? Reward failure.

See here, from today's Wall Street Journal.  Organizations that give people room to mess up and (this is the important part) learn from their mistakes will do better than ones with incentives that encourage either (1) hiding mistakes or (2) avoiding risk.

I have always learned more from mistakes than from successes.  My dad's a chemist, and he always cautioned me to question results that agreed with my hypotheses.  We don't tend to examine our successes.  We should, but we don't, because we like the results.  But we should also examine our failures to figure out (if we can) what happened.

And it's not just giving people room to mess up that matters.  It's rewarding those mistakes publicly because the people who made them were trying to do something good and have learned something from the effort.