How to Bounce Back From Setbacks

The road to success is rarely a straight line. Here are three profiles in resilience: people and companies that succeeded by conquering failure.

Mike Espy is no stranger to success — even when it has meant overcoming long odds. As a teenager in rural Mississippi, he was one of two student-body presidents of the first racially integrated class in his high school. He served for six years in Congress — the state's first black member since Reconstruction. Under Bill Clinton, he was named U.S. Secretary of Agriculture, becoming both a Washington celebrity and a committed government reformer.

And then disaster struck. In 1994, reports surfaced that Espy, now 47, had flown on corporate jets owned by companies that his department regulated and had accepted gifts, such as tickets to sports events, from those companies. Next came word that Espy's then girlfriend had accepted a scholarship from Tyson Foods, another company that the Agriculture Department regulated. These disclosures did more than raise eyebrows. They prompted the White House — and an independent counsel — to question Espy's ability to do his job.

Espy resigned from the Clinton cabinet humbled and depressed. He figured that the independent counsel's investigation would last six months — tops. "I wanted to move on with my life," he says. In the end, the investigation lasted four years, produced a 39-count indictment, and generated the sort of public scrutiny and private humiliation that only a Washington scandal can create. And it forced Mike Espy to confront a question that would determine the trajectory of the rest of his professional life: How do I bounce back from this devastating setback?

The road to long-term success is seldom a straight line, for companies or for individual leaders. New products get launched with great fanfare — and then disappear from sight. Companies make big bets on a strategy — only to discover that the playing field has shifted once again. All-too-human executives use poor judgment or permit just one ethical lapse — and find their reputations tarnished forever. There is no success without the occasional failure. Yet the mythology we've created about business rarely allows us to recognize that obvious fact. Successful leaders, we've come to believe, never make a bad call. They never reach a dumb decision. They never, under pressure, choose to do something that they later regret.

"In America, failure is considered a disruption in progress," says Scott A. Sandage, a history professor at Carnegie Mellon University who teaches a course on success and failure. "Even as the understanding of economic challenges increases, there's an intensification of shame around failure."

Andrew Shatté, 38, vice president of research and product development at Adaptiv Learning Systems — a firm that teaches executives how to be more resilient — agrees: "It's easy to become flustered by setbacks, because most of us believe that our companies and careers should keep advancing. Successful people learn how to gain control of situations that are out of their control, retool themselves, and rebound quickly from disaster."

Here are in-depth profiles of people and companies that have managed to bounce back from setbacks. Warning: The experiences are not pretty, the emotions are deep, and the victories are sometimes less than decisive. But these stories are candid and authentic, the lessons powerful and useful. So read on, be grateful that you've probably never faced setbacks quite this severe — and consider yourself better prepared to face whatever difficult circumstances you might encounter in the future.

Mike Espy: The (Long) Road Back

One of Mike Espy's trademarks is that he writes a note to himself every day to set out his goals. Once he resigned from his U.S. Cabinet post, his goals were no longer set for him. He suddenly had to determine his own future, and his list making became more extensive. He was shocked by the vitriol in Washington and by his own poor judgment. "I considered myself legally and ethically innocent," he declares as he sits in his Jackson, Mississippi law office. "I didn't give favors to any companies. I focused on policy, not on politics. And I thought the administration would support me. But I took too much for granted. My judgment was faulty in many ways."

Facing the folks back home was nerve-racking. Espy still winces a little as he recalls a homecoming game at his daughter's high school. At the time, she was a sophomore and a member of the homecoming court. He dreaded having to escort her across the school's football field so that she could join her court. "I wanted to take myself off the radar screen," says Espy. But while lying low was a strategy for short-term survival, it wasn't a strategy for change. "I had no job or income prospects," he says. "I couldn't be a lobbyist. I couldn't be an attorney. I was disgraced. It was the worst year of my life." The daily notes to himself became a list of obligations: how to pay the mortgage, how to provide child support.

Meanwhile, as weeks turned into months, Espy realized that the road back would be much longer than he'd ever imagined. "I didn't have control of the process surrounding me, so I had to take control of my life," he says. He found a mentor in Tony Coelho, the onetime congressional leader who'd had his share of setbacks. Coelho met with Espy in the winter of 1995 for what would be a memorable lunch. Coelho drew a pie chart and divided it into six slices. "You start with a vision of what you will look like when you're at your ultimate state, and you fill in the pieces with what it will take to get you there," Espy recalls Coelho saying. One half of Espy's pie represented different aspects of himself that he had to rehabilitate. First slice: finances. Coelho suggested scheduling enough speaking engagements to bring in a good income. Second slice: mental outlook. To take Espy's mind off his troubles, Coelho suggested that he teach at a local college. Third slice: reputation. Getting involved in a well-known charity would improve Espy's image and his esteem. He joined Feed the Children as a consultant (he became a board member in 1999) and worked with the antihunger organization's international offices to use donations more efficiently.

Espy tried to resurface in the public eye, but he discovered that he couldn't. He scouted for legal jobs in Washington, DC but received no offers. He returned to Jackson and took a job at a 20-person law firm. There was no pomp, no army of staff. "I kept my door shut a lot, my head down, and my focus on myself," he recalls. "But I had to generate income for the firm. They wouldn't let me wallow in self-pity." Then, in 1997, he was officially indicted.

Espy's reaction was to get tougher — and to be tougher on himself, rather than blaming others. When he learned that Independent Counsel Donald Smaltz did 100 push-ups a day, he worked toward doing 200 a day. He also perfected his tae kwon do technique (he has a black belt). After learning that the independent counsel had given everyone on his staff a watch with Espy's name engraved on it as a holiday gift, Espy decided to take the high road, instead of firing back. He struggled with his attitude so he wouldn't sound bitter. And in his public statements, he was careful not to blame his predicament on race or politics alone.

Espy also decided to take the long road to vindication, rather than the easy road to a quick settlement. He refused three plea offers. "I could have gotten out early on a misdemeanor charge and run up only $100,000 in legal bills," he says with his arms folded, eyes cast down. "But how do you put a price on your good name?" In 1998, after testimony from a parade of witnesses — including fellow cabinet officers, former friends, and an artist who gave Espy a painting for his office — Espy was exonerated. Nine counts were dismissed, and a jury acquitted Espy of the remaining 30 counts. A Washington Post article detailing the road to his acquittal is framed on a wall at his law firm. Tucked inside the frame is one of the watches with Espy's name on it that Smaltz gave to his staff.

But the acquittal didn't allow Espy simply to return to the career path he'd been on before the scandal. Bouncing back from a setback often means taking a different road. Although Mississippi residents said in a poll that they'd welcome him as lieutenant governor, Espy is more than a little gun-shy about returning to public life. He's now with Mississippi's largest law firm, working hard to perfect his litigation techniques. He may never return to a career in politics, but he has escaped from the scandal that threatened to destroy him. "It's not about the test," he says. "It's about how you pass the test."

Michael Dowd: Don't Walk Away From a Fight

Peeking out from the teetering piles of paperwork on Michael Dowd's desk are pink slips — the good kind, the ones that receptionists use for phone messages. One is from a mother who has called Dowd about representing her son in a landmark abuse case against the Archdiocese of New York. One is from writer Peter Maas, whom Dowd represented in connection with Maas's book about mafia hitman Sammy "the Bull" Gravano. But Dowd ignores the slips, as well as his ringing phone, to consult with a lawyer who has walked in with a question. Then Dowd glances at the breathtaking vista of lower Manhattan. He is at the peak of his game. His caseload represents some of the most high-profile lawsuits in New York this past year. It's hard to imagine that Dowd didn't — couldn't — practice law for four years.

In the 1980s, Michael Dowd, now 58, made a name for himself defending women who had attacked or killed their abusive spouses. Dowd pioneered legal defenses that won his clients seemingly impossible acquittals. Courtroom sketches from one watershed case hang above his desk. But while his work set precedents, it didn't pay the bills. So when Dowd was offered a partnership in a side business collecting on overdue parking tickets, he took it. He ended up getting much more than he had bargained for.

In 1982, the political lords of Queens came knocking, asking for 5% of the fines that the business collected from parking violators. Dowd felt trapped. He didn't think saying no was an option. Not only would he lose the business, he thought, but he might endanger his life as well. So he started paying. But less than two years later, torn up about the arrangement, he decided to stop. "I felt tremendously guilty about my failure to have courage," he says. "I should have said no from day one and borne whatever loss I would have suffered and whatever hardship I would have endured."

Then, in early 1986, he took an even more dramatic step. He decided to blow the whistle on the kickback deals. He went to the U.S. Attorney's office, which at the time was headed by a crusading prosecutor named Rudolph Giuliani. The next morning, Dowd's name was in the papers, and camera crews surrounded his home. He had misjudged how he would appear in the public eye. Instead of being lauded as a whistle-blower, he was impugned as a criminal. "I was stunned by the accusation that I was a crook," he says.

Talk about a setback. A onetime lapse in judgment was haunting his livelihood and his professional status. Dowd couldn't convince people that his actions were right. But he wasn't going to walk away from a fight. He had to go on with his life. Two days after the media frenzy, he walked into the Queens courthouse to select a jury for his next trial. He knew the selection would be difficult because people might recognize him from the media reports. "In that situation, you're making choices, and it seemed worse to run or to hide," he says. "The absolute key is to maintain your self-respect and dignity. Without that, you're lost. And you're sending a message to other people that you're lost. It's a terrible message that people seize upon."

He picked a jury and successfully tried the case. After a lull in his caseload, he found new corporate clients, took on more battered-women's cases, and rebuilt his practice. Then, in 1990, he discovered that he was being investigated by the Grievance Committee for the Second and Eleventh Judicial Districts for his involvement in the parking-violations scandal. The committee charged Dowd with professional misconduct for the kickbacks and for not reporting immediately that the Queens borough president, who was also a lawyer, was involved in unethical conduct. Judges, prominent lawyers, and Giuliani testified on Dowd's behalf. But in August of that year, he was suspended for five years (ultimately, the suspension lasted only four years). "I didn't think it could happen," he says. "It was mind-numbing. You're not capable of absorbing the enormity of it. It was catastrophic financially. I was already close to filing for bankruptcy. And it was painful, because I had no idea what I was going to do. I didn't know how to define myself."

The test for Dowd was how to survive the suspension. In struggling to define himself, he learned that he was more than just his job — a realization that too few people ever reach. "Changing your belief about the role of your job or the trajectory of your career can be liberating," says Andrew Shatté of Adaptiv Learning Systems, "if you see the benefit in doing other work, rather than the loss."

Dowd decided that even though he had to walk away from law, he wouldn't walk away from a cause. He wanted to continue as an advocate for battered women. During the suspension, then Governor Mario Cuomo appointed Dowd to New York State's Office of Domestic Violence. Dowd also spearheaded the Battered Women's Justice Center at Pace University School of Law (now the Pace Women's Justice Center), a place where lawyers and judges can get training and then take on women's cases pro bono.

But then came a pivotal moment for this new mind-set. Three professors objected to the plan, stating that Dowd was a negative influence on students because of his missteps in the parking-ticket business. Dowd was incensed and considered not creating the center. "But the objective of creating something unique and doing something valuable was bigger than my pride," he says. Once again, he didn't walk away from a fight. He did start the center, and it still runs today, with a full-time staff. "He sees past a single event in a person's life and doesn't let people get defined by their mistakes," says Julie Blackman, a social psychologist who has worked with many of Dowd's clients. In effect, his work with the center's clients turned out to be his rebound as well. Dowd reapplied to the bar early and was readmitted in 1994. He has since built a healthy solo practice defending battered women and white-collar criminals.

Dowd sets down his glasses and considers how others autopsy his past. "If my obituary is worth more than a paragraph, I doubt I can avoid some mention of that whole event," he says. "We all have crises. If we're lucky, they don't become public."

Ciena: It's Always Risky Business

How do you hang on to your best people — and keep the faith of your directors and investors — when you take a business risk that doesn't pan out? You take on even more risk and be clear with everyone that part of winning big in business is reckoning honestly with the potential for setbacks and reversals.

That's the lesson that Steve Chaddick, 49, senior vice president of systems and technology at Ciena Corp., learned from a wild two-year ride at one of the new economy's highest-flying companies. Ciena was one of the first companies to stake a claim in the optical-networking sector. Chaddick's team was first to market with what is now a critical technology: dense wave division multiplexing (DWDM). Carriers such as Sprint and WorldCom quickly became converts to the technology, which essentially increases bandwidth-transmission capacity across fiber-optic cables. In 1997, Ciena enjoyed the best-performing IPO of the year, more than doubling its share price. Meanwhile, senior executives snared a merger deal with Tellabs, an old-line telecommunications carrier in the Chicago area. Chaddick was on the merger team that spent more than four months shuttling back and forth between Chicago and Ciena's Maryland headquarters to sort out details and cultural matches with Tellabs.

But literally minutes before the two companies' shareholders were scheduled to vote on the merger, AT&T (without testing the products) decided not to close an expected contract to use Ciena's more-advanced DWDM offerings. Ciena's stock price collapsed, from more than $55 to barely more than $31. The company's business was fine: It was on track to make its revenue estimates, even without the AT&T contract. Regardless, three weeks later, Tellabs called Ciena to say that the merger was off. The stock price plunged again — this time to $8. "We were stunned and angry about the situation," Chaddick says.

Faced with such a difficult situation, lots of public companies would have retreated — cutting costs, scaling back their ambitions. But Chaddick and the leaders of Ciena harnessed their anger to take on an even bigger target: building a full-scale optical network themselves. As a result, not a single engineer left Chaddick's team. Then Ciena took another risk. It decided to acquire two companies that had the customers and the technology that Ciena needed in order to grow. By early 1999, Ciena had acquired Lightera Networks and Omnia Communications to create a full-service optical network with an optical-switching system. "People thought we were nuts," Chaddick says. "My philosophy is, 'Don't be afraid to think big.' "

To be sure, rebounding from a disaster does not mean mistake-proofing your company. It means acknowledging that there will be more setbacks in the future. Case in point: the Omnia acquisition. One of Omnia's technologies promised to help the company move its increased bandwidth closer not just to businesses but also to homes. But the architecture was flawed. So Chaddick and his team shelved the technology. "Most business cultures aren't capable of accepting error," Chaddick says. "We teach from the top down that sometimes, we will be wrong."

But Chaddick and his colleagues have been right far more often than they have been wrong. Ciena is now winning contracts from customers like Qwest Communications International. Two years ago, Ciena was in the DWDM market. Today, it's in four markets. Its customers have nearly tripled in number since 1998. And its stock price (adjusted for a split) has been higher than $300 per share. "This has been an impressive revival from the dead," says Paul Silverstein, senior communications and networking analyst at Robertson Stephens. "The fact that they were a cohesive group helped a lot."

Chaddick doesn't think of Ciena's staggering comeback as a revival from the dead — he views it as a sensible way to respond to a business challenge. "There are only two ways to act," he says. "Make bold moves, knowing that some will work and some won't. Or make no moves, which guarantees that you'll be an also-ran."

Rekha Balu (rbalu@fastcompany.com) is a Fast Company senior writer. We're still waiting for her first big setback.

Sidebar: Resilience Rules

Andrew Shatté and his colleagues at Adaptiv Learning Systems, a consulting firm based in King of Prussia, Pennsylvania, teach people at such companies as Ford and Nortel Networks how to stay resilient in the face of adversity. It's an important skill for leaders to have at any time, but in a period of challenge and change, it is especially crucial. Here are some of the principles that they teach.

1. Explain yourself. Dealing effectively with a problem or a setback starts with how you explain it — to yourself and to those around you. "Too many people learn negative or helpless ways of thinking," Shatté says. "But they can unlearn them and adopt more resilient ways of thinking. Once you're aware of your explanatory style, listen for a pattern. Ask yourself why this happened, and listen to what you say." Some people tend to explain setbacks as temporary, while others view them as permanent. Do you tend to cast blame on others, or do you explain everything as your fault? Each style needs to be offset with logic and perspective.

2. Don't overreact. "In most rough situations, people tend to describe what went wrong in terms of 'always' and 'everything,' " Shatté says. For instance, when a boss criticizes part of a presentation, or report, many people say to themselves, "My reports are always bad," or, "I bet I'm one step away from getting canned." Shatté and his colleagues teach people to counter those standard overreactions with a more accurate evaluation. Most of the time, things aren't as bleak as we make them out to be.

3. Act fast, but don't rush to judgment. It's important to be honest when you run into a setback — but it's also important to be sure you understand what's really going on. Adaptiv worked with a European company that was selling whiskey in a country that preferred vodka. The country also had an active black market. Whiskey sales had hit the skids. The company's executives blamed the sales team. Everyone knew there was a problem, and everyone rushed to judgment about the cause. The real problem, it turns out, involved the sales force's lack of training. Armed with the proper analysis, both sides worked the problem.

4. Keep it in perspective. Ask yourself: What's the worst thing that can happen? What's the best outcome that we can hope for? And then keep pressing yourself about the accuracy of those scenarios. "People most need to work on being accurate and candid about what has happened," Shatté says. "Then they can take strides to remedy the situation."

Contact Andrew Shatté by email (ajshatte@adaptivlearning.com).

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