Rewarding Failure: How Udacity Separates Truth From Nonsense

Andy Cook
March 7, 2018
Interview with Kathleen Mullaney

The leadership team at Udacity takes the idea of instilling a growth mindset based on experimentation quite literally. Co-founder Sebastian Thrun, for example, hands a bottle of wine from his personal wine cellar to anyone who tries out a good idea that fails. And Udacity’s “champagne fridge” opens not only to celebrate big launches but also to celebrate un-launches of products the team decides to sunset before they see the light of day.

In this episode of Org Uncharted, we talked to Kathleen Mullaney, VP of Careers and People Ops at the online education company Udacity, about how the company has implemented a culture of growth through failure and learning.

We discussed the details behind the process, actual applications and examples of rewarding failure to encourage growth, and an approach to getting naysayers onboard with a culture of failure and growth.

If you want to succeed in business or life, Kathleen advises, you must adopt an important growth-mindset motto:

“Screw up, don’t freak, and learn.”

In theory, it sounds good. But when it comes to practical application, can you really screw up without freaking out about it? Can you really afford to make mistakes in your business or work on the expectation that you’ll learn something new that may help you grow?

The answer is yes, but only if you take a strategic approach to this growth-learning by rewarding failure.

“Rewarding failure means reassuring people that they’re not going to be penalized for mistakes.”

Udacity’s unusual celebrations with wine and champagne highlighted above are only two tactics in a much larger plan that supports and nurtures a growth culture at the company. The team’s overall strategy for rewarding failure rests on three foundational principles that encourage experimentation and failure (through the right channels and with appropriate risk management) as a part of learning and growth:

  1. Show a culture that rewards failure. Simply telling your team that you applaud experimentation isn’t going to help build the level of trust needed for people to try and fail. Especially if, despite what you say, you reprimand failed attempts either verbally or through actions. To earn your team’s trust, you first need to demonstrate a culture that values learning from mistakes.
  2. Establish a common shared vocabulary around risk-taking. Not all risks will deliver great lessons. And some risks can simply be avoided through discussion of past experiences. By creating a common vocabulary around risk-taking, you create a mechanism that your team can use to explore new ideas fully before jumping in. What’s the protocol or ritual for your team to evaluate new opportunities?
  3. Recognize small improvements. The worst thing you can do is not experiment. The second-worst thing you can do is set up an experiment that puts your entire business in jeopardy. Experiments should be small and serve specific goals. If the experiment works, you can expand accordingly. If it fails, you can take the lesson and add it to your collection of “things learned” to keep building your growth trajectory.

Click play to listen to Kathleen’s insight and advice, and don’t forget to subscribe to Org Uncharted on your favorite podcast player for more insightful conversations with innovative business leaders of all walks and stripes.



Kathleen Mullaney00:00

There’s actually physical evidence of doing brain scans while people are learning things that shows that this is actually true. If you actually have this growth mindset, if you believe that when you make mistakes, you are learning and you’re growing, then you’re actually going to be able to achieve more.

Jay Acunzo 00:16

You’re listening to the show for people who empower other people to do their best work. I’m Jay Acunzo and this is Org Uncharted. Hello and welcome to the show that believes hopefully what you believe. We believe in putting the customer first, in making decisions from the bottom up and in fighting against top down leadership. This great show is brought to you by Tettra, makers of knowledge management and sharing software for modern fast growing teams. Tettra has collected all kinds of company culture decks on our show website, including Google, Spotify, Patreon, even NASA, so if you want to go behind the scenes with how other companies are creating great and thriving company cultures, visit and thank you to Tettra for that and for the show.

Jay Acunzo 01:22

My friends, people are so much more than nodes on an org chart. So let’s venture beyond the org chart to explore today’s theme, rewarding failure, what the actual heck? Ideas like rewarding failure or failing fast or launching, learning and iterating quickly, these have all proliferated around the business world for quite some time, most notably in recent years with books that proposed the scientific method of experimentation applied to business books like The Lean Startup and company mantras from massive world changing organizations that spawn millions of copycats and disciples like Facebook’s famous move fast and break things.

Jay Acunzo 02:06

The desire to encourage people to fail and to cultivate a culture of risk taking and experimentation has become arguably even more pervasive than discussions about how to succeed. Still, whenever an idea spreads this quickly and this far into every corner of the business world, it kind of becomes open to interpretation and it definitely becomes open to bastardization. So I’d argue that this phrase, rewarding failure, has wound up in the land of motivational posters. You could see a cat dangling from a tree telling you to hang in there, a crystal clear night sky reassuring you that even if you fail, you’ll land among the stars and of course a picture of Mark Zuckerberg in yet another gray hoodie pushing you to move fast and break stuff. So that brings us back to today’s theme, rewarding failure. What the heck does it actually mean?

Kathleen Mullaney03:04

One of the definitions I think aligns best with how I think about it at least. It was the screw up, don’t freak and learn.

Jay Acunzo 03:11

That’s Kathleen Mullaney, the VP of careers and people ops at the online education company, Udacity. What she means by screw up, don’t freak and learn, is that you have to have a growth mindset, a concept first described by Stanford researcher, Carol Dweck.

Kathleen Mullaney03:28

She analyzed how individuals learn and found that there is this paradigm of a growth mindset or a fixed mindset and basically it was actually able to prove that many people have a fixed mindset and that it’s more of this nature, you were born with a fixed intelligence and that there’s a cap to how much you can achieve or learn. When in reality we actually have growth … If you have a growth mindset, you actually believe that you’re capable of achieving more and as you make mistakes, you learn and you grow.

Jay Acunzo 03:59

Kathleen’s job depends on this idea of the growth mindset in others. First of all, there’s the business itself, Udacity, which helps working professionals continue their education and continue growing in their careers. Then there’s Kathleen’s dual jobs within Udacity. That’s right. She has two different and distinct roles. One external role with Udacity students and one internal role in people operations. The external role is for the company’s nearly 25,000 students. Kathleen heads up Udacity’s careers initiatives for those students.

Kathleen Mullaney04:34

Which is basically once you have a new technical skillset, what do you need to actually bridge that gap towards a promotion or a new job?

Jay Acunzo 04:40

The internal role in people ops is to oversee the department and collect and look at data and then provide services for Udacity’s many employees. Again, Kathleen’s job depends on the existence of this growth mindset in others. So naturally she has a really clear picture of what the heck rewarding failure actually means. But she is kind of an exception in that way because most of us in business have no idea. So I tweeted out a question which was like, what do you think rewarding failure means? I got, as you might expect, a lot of opinions because it’s business Twitter, but none of them seemed exactly the same. I mean, I wouldn’t say that anybody’s totally clear on a definition. So I just want to read you a few of them and maybe we can try to interpret them at the end because they got kind of ridiculous. So is that okay?

Kathleen Mullaney05:28

That’s great. I’m excited to hear the crowdsourced wisdom.

Jay Acunzo 05:31

Yes. So it started pretty mundane. So prioritizing learning over immediate results. I like that one. Right after that, looking at mistakes through the lens of asking how we can be better next time instead of panicking over the mistake. I like that one. This one, they got a little flowery too, don’t be afraid to cut bait. I think the way I interpreted that is it’s okay to stop doing something if it’s not working, but make that call fast.

Kathleen Mullaney05:58


Jay Acunzo 05:59

Yeah. Then it got just weird from here. So this is where it started to change. Reward active learning from taking good guesses. Okay. Then this gentleman followed it up by saying but still fire the person who deletes your whole database.

Kathleen Mullaney06:12

Oh, okay.

Jay Acunzo 06:13

This one is a hot take, that’s his words, not mine. He says this one’s a hot take, inexperienced people with a fake it till you make it approach. All right? But then he backed off a bit and he said if you screw up, don’t freak, learn. Then this one took the cake. This is my absolute favorite. He said order Filet-O-Fish equals fail. Realize the mistake as you pay. That’s fail fast. Eat it anyway, but never order it again. Reward failure. So I don’t know. I don’t know what you make of that one.

Kathleen Mullaney06:45

I was just gonna say, okay, I’m getting this. But then, yeah, that ended not where I thought it was going.

Jay Acunzo 06:52

So, okay. Needless to say, maybe we go with Kathleen’s definition instead. If you screw up, don’t freak, learn. In other words, embrace the growth mindset because by the way, it’s biology.

Kathleen Mullaney07:04

There’s actually a physical evidence of doing brain scans while people are learning things that shows that this is actually true. With all of this evidence over the last 10 plus years, it’s shown that if you actually have this growth mindset, if you believe that when you make mistakes, you are learning and you’re growing and then you are actually going to be able to achieve more and get higher results.

Jay Acunzo 07:27

I would also argue, I’d be curious if you agree with this or not, I would argue that it’s not just a startup thing.

Kathleen Mullaney07:32

Not at all. No, it’s a total business thing. I guess it was two years ago when Satya Nadella took over as CEO of Microsoft. You’ll see all these articles that came up about how he actually was trying to change the culture at Microsoft to becoming a culture of a growth mindset. The reason for that is that Microsoft, I think it’s well-known that they stagnated quite a bit and even though they’re a massive tech giant, they weren’t keeping up with the Joneses and they were not staying competitive and I think his thought was that in order to actually stay competitive, you need to adapt this learning mindset again in order to have more innovation and to grow and change as technology changes or actually to drive that change yourself.

Jay Acunzo 08:12

Right, right. You can do a little mental gymnastics for a second which is like it’s not that teams or individuals want to fail. That’s obviously not the goal. The goal is success.

Kathleen Mullaney08:21


Jay Acunzo 08:21

It’s just that in the quest to succeed, rewarding failure does something. I don’t know. What? In your opinion, what?

Kathleen Mullaney08:30

So the thing about rewarding failure is that people need to be comforted that they’re not going to be penalized for mistakes. The other example that you used or that somebody said on Twitter was you still need to fire the person who deletes the entire database, that’s almost like the worst situation to be in. You either can reward failure or you cannot. You shouldn’t be saying like, okay, some of this is … What’s okay failure? Of course there’s going to be classes of failure that should be probably more penalized. But I think the thing that we talk a lot about in business is that it should be smart failure. So if you’re taking a risk because it’s something that’s innovative, that can really drive the business forward, if you’re trying to do something good and it ended up and going a completely different route, then you should not be penalized for it. You should be rewarded for it.

Jay Acunzo 09:23

So what about that reward part of rewarding failure? I think we’d all get on board with the failure part, at least in theory. To stay competitive, you have to learn and grow and change as technology and really the customer all changes too. Or perhaps you want to drive that change yourself with your team. Regardless, once you paint failure as learning, it seems logical to embrace it. It’s that old adage that a mistake is only a mistake if you refuse to correct it and I get that in theory. But what about in practice? How do you make this a reality that people use in their work to do better work? I mean, what about the reward part of rewarding failure? Well, Kathleen and Udacity have one very specific approach they’ve tried and found works brilliantly for them. That is after a quick word from our sponsor.

Jay Acunzo 10:23

Org Uncharted is brought to you by Tettra, which makes knowledge management and sharing software for modern fast growing teams. It’s often called a Wiki platform and it’s a way for people to find the information they need to go on and do their job. Something crazy is happening in the world when it comes to our work and Tettra is looking at that and saying, “This is indeed crazy and needs to change.” Basically, more than ever before in our personal lives, we have instant access to the entire world’s information and we also have a voice we can self express to that entire world. So in seconds if we have a question, we can find an answer or we can connect with an individual who could help us and certainly we can share our voice with others. But then we go to work and these same tasks are frustrating or they’re complex or even impossible. So often we can’t find answers quickly.

Jay Acunzo 11:18

Barriers between us and our teammates make it hard to share and collaborate, processes that we can’t figure it out until we’ve been at the business for a while make it really slow to evolve and adapt to our new company. If we’re the leaders of these companies, then scaling the team and getting great results becomes really, really difficult. So Tettra believes that it’s time our work lives caught up to the rest of our lives. It’s time to stop searching for how to do our jobs and instead start maximizing our ability to do them well. If we’re leaders, it’s time that we empowered others to do their very best work. So if you want to see how Tettra could help empower your employees, check out their product. It’s at, that’s T-E-T-T-R-A, with two T’s. Now back to the show with a simple question that I asked to Kathleen. What do you do to reward failure? In other words, what about that reward part of this whole thing?

Kathleen Mullaney12:19

I think for us, we go through periods of being really innovative and then once something starts working, you want to just protect it and you don’t want to keep innovating. So our founder, Sebastian Thrun, he started this award where basically if you are … It’s basically to get people out of this comfort zone of not being risk takers. So you said, if you do something innovative, if you take a big risk then and it does not work out, don’t worry. Even though that doesn’t work out, you still win a bottle of wine from my personal wine cellar.

Jay Acunzo 12:57

Hey, not bad.

Kathleen Mullaney12:57

He has a very nice wine cellar. Yeah. So it’s really not a bad prize. But actually, it’s more of the celebration of that failure than anything else. It’s not really the wine. Actually plenty of people don’t even want the wine. They kind of accept the celebration from the team. Basically, what’s happened actually is really nice. From big failures to small failures, when we launch a product that completely flops. But that doesn’t quite break the company in terms of catastrophic level of it. But it’s something where, okay, we really thought that this would work out. We tried our best and it did not work out and that’s fine because half of all products are going to fail and that is actually expected, but we just need … We want to have as many at bats as we possibly can.

Jay Acunzo 13:44

Yeah. So how does the award actually work? Do you people apply or do you nominate? Walk me through the usual process and if you have any examples of recent award winners that will be great.

Kathleen Mullaney13:54

We keep it really simple. Actually, there’s no real process. It’s that if you do that is pretty terrible and you can usually figure this out, you basically just send an email saying, or maybe your manager or somebody else does it if you don’t want to send it yourself and it will say like, “Hey, this is what I was trying to do, this is what actually happened. I think it might be a contestant for getting a bottle of wine.” So I guess an example was taking the site down when we were trying to update our security certificates so they needed to get updated. This is an early example. It’s actually right after the awards started. One of our junior engineers saw that, this is not super risk taking but it was like, “Oh, the security certificates needed to be updated because they were going to expire within the next month.” He’s like, “Hey, I know how to do that. I can do it.” So he’s going to do something good for the company, get this out of the way, knock something out off the to-do list and took it on and was updating and took down the site because of some down the line change that he wasn’t aware of and-

Jay Acunzo 15:02


Kathleen Mullaney15:04

This is a fairly junior engineer. He’s fairly new to the company. You do not want this guy to then be totally fearful of taking risks or doing something that should be good for the company overall. So that was the first recipient of the award and saying like, “Hey, you were doing … Your intent was to do something good.” We also know that this engineer definitely learned from that situation. He was a great engineer for the company later down the line. But by celebrating that, the intent behind the change, then that meant that he’s going to be encouraged to continue to be looking ahead and look for opportunities to either innovate or to improve the site for our students and so that’s something that we want to make sure that we continue to encourage.

Jay Acunzo 15:51

There’s a story from Sara Blakely, the founder of Spanx and the first self-made female billionaire in America where she says that every night as a child, her father would ask her the same question, what did you fail at today? In her mind, this totally changed the definition of failure from not succeeding to not trying. The object became trying and if you didn’t try, that was failure. So she was all about constant self improvement and experimentation, a growth mindset. Udacity instills this growth mindset around their team with the failure award, a bottle of wine from the founder, but they don’t stop there.

Kathleen Mullaney16:31

I will say another kind of component to this failure award, it’s a little bit different, but we have a section of our refrigerator in the kitchen, the shared kitchen here that is just full of champagne and it says champagne for serious launches only. So you’re encouraged to open a bottle of champagne after you launch a new product. What’s great is that you can also open a bottle of champagne for the un-launch. So if you have to sunset a product because it did not work out, you also get to open up a bottle of champagne. So we know again you need to reward both launching new ideas but also taking down old ones.

Jay Acunzo 17:17

We are in uncharted territory now. So let’s dive even deeper into this idea of rewarding failure and take with us a few treasures back home, a few gems that we can use to execute in our own work. Two things we can take with us right away from Kathleen are number one, show the culture. Don’t just say it out loud. If you’re a leader, you have to exhibit the right behavior to prove that the culture of failure and learning actually exists. Number two, establish a common shared vocabulary around this notion of rewarding failure. So to illustrate these two points of showing the culture and sharing a vocabulary, I shared a story with Kathleen from my own experience as a leader. I worked for a very small startup. At the time, I think I was number 12 several years ago and we, the site kept crashing and we kept blaming this demon. We joked, for some reason the team came up with this idea, “It’s not the engineers, it’s not the product. There’s a demon running around breaking stuff.” I was like, “Oh, we could use this.” So the management team created these little coins and it was just like paper cutouts, like a circle of paper with a little cartoon demon that we found on Google images and it just said break stuff at the top. So I handed out two per person to my team and every month we’d have, I ran the content team, and every month we’d have like an editorial meeting and people could submit one of these coins and it was basically saying like, “Look, I have an idea. I don’t know if it’s going to work. I think it might be crazy, but if it doesn’t work, that’s cool. It’s this guy’s fault and here’s the idea.”

Jay Acunzo 18:57

All of a sudden people got really excited and started feeding off each other. It was such a simple thing. It’s not some all hands that we held or some giant new initiative or even a technology that we purchased. It was a paper cutout of a Google image and it totally not change the culture, but I think influenced the way people make decisions.

Kathleen Mullaney19:17

Yeah. I think that’s a really good example of showing that or demonstrating the culture [inaudible 00:19:24] than just telling the culture. You’re saying like, “Hey, this is a mechanism for us to encourage these conversations and these ideas and also give a common vocabulary and ritual around taking risks.”

Jay Acunzo 19:36

Those two practical things, again, are number one, find ways to show your team, don’t just tell them that you reward failure. Number two, establish a common shared vocabulary. But even still, even if we have those things, we as leaders might need to do some convincing in our organization, whether to get others on board with our approach to failure or perhaps to change the entire company culture as it applies to the growth mindset. In other words, the working world immediately around us might not even be open to doing the things we’ve heard about today. It might be hardened to change and it might be in protection mode. So if that’s your situation, you might benefit from knowing about something called the self determination theory.

Kathleen Mullaney20:20

Self determination theory, it’s a theory around motivation and understanding that if you have actually opportunities to further your learning and your understanding and to grow, you’re actually going to be more motivated and you’re actually going to produce better results, more than just protecting that particular sales goal or promotion opportunity, and that can actually accelerate both your happiness in your career but also your actual outcomes. I’ve found that one to be something that tends to be compelling for people because I think the carrot stick motivations of the past have been rapidly going out of style of across the board, not just in tech. This tends to be one where, again, it’s around learning and part of learning is making mistakes and not getting stuck in them. So that could be useful. I will say that it is really hard to get out of this pattern or take it out of this mindset that is so ingrained in everyone from how we’re raised and particularly in the US.

Jay Acunzo 21:25

Here’s the crazy thing. Or perhaps it’s the most logical thing of all when you consider that phrases like team and company and brand and department, they’re all just phrases that mean people. All of these things we’ve talked about with Kathleen, they can all help improve somebody’s life, not just work.

Kathleen Mullaney21:43

This actually applies across the board. It applies in your personal life. It applies in your relationships and in any physical activities that you do. I realized that I, personally, I had a fixed mindset about running for all things and I’ve been a runner my whole life and all of a sudden I realized, I was like, “Why do I think that I’m a slow distance runner? I could be a fast distance runner,” and all of a sudden I unblocked myself and started running faster. It was so silly. Again, it really is actually isn’t just about your workplace. So if you’re listening to this, then that it means that you’re probably … You do have a penchant for self improvement in some way, then you are … These are all things that you can apply in your personal life if it’s not an opportunity for you at work.

Jay Acunzo 22:27

The running example is such a perfect one. I feel like I ran cross country in high school and there’s so many things that you think of when you think of me as a runner, but they’re big things, you mentioned speed. I might mention distance or mile time, but there’s tiny things you can improve too. Were there some things that just by switching your mentality when it came to running, that you started to focus on that you didn’t notice before?

Kathleen Mullaney22:49

When I was running slow and longer distances and it’s not that slow but I was more like listening to music or podcasts or books or whatever and it was a very solo thing. Whereas when I realized, I was like, “Why can’t I run faster?” I started running more socially and also I started running faster and actually having a more meditative experience where I stopped listening to music. So it ended up being that kind of a different experience for me overall and allowed me to improve both relationships at work because I was actually running with coworkers and then also having some more personal time that was not filled with other noise and that led me to thinking more about, more deeply about certain topics in my life or just completely zoning out and really having a recharge opportunity.

Kathleen Mullaney23:35

So maybe it’s not the same kind of step, but for me it did have a really positive, longer term impact. I also use that as an example for me in my personal life now where I say, “Oh, I can’t do that.” I usually question myself more now because I believe like, “Hey, I used to think I couldn’t do X and I proved that wrong.”

Jay Acunzo 23:55

So if you want to reward failure in order to empower others to do their best work, some suggestions. First, find a way to show your team this mantra. Don’t just state it out loud, live it. To do so, second, use a shared vocabulary. How do you discuss it? What are the common words or the names of things like the failure award or that little red demon running around your product? Third, recognize that the goal will be small improvements, tiny experiments done with the right intent in order to add together a collection of small lessons over time. This is how you improve in a big way, whether at work or yes in life. Because in the end, if you embrace those three things, if you embrace the need to reward failure in others and in yourself, maybe, just maybe you’ll run a lot faster.

Jay Acunzo 24:50

We have ventured away from the confines of the traditional org chart and we dove deep into this week’s theme, but we can’t empower others without others first empowering us. It’s harder to learn from failure by yourself without others helping you along the way. So let’s hear now about the person or people that Kathleen would like to thank that helped her along the way, which intrepid explorer empowered her to do her best work and how.

Kathleen Mullaney25:17

Anytime I’m asked this question of who’s inspired you, who’s been a mentor, who has been your champion, I think at the same person. His name’s Andrew [Lookingbill 00:25:27]. He’s been my mentor, now a good friend. So I think the thing that I think of most and the thing that I’m most appreciative and I hope he knows it, here’s another chance for me to say it is, thank you for championing me, but even more, thank you for not letting me bullshit my way through work because being challenged to actually solve a problem and actually learning … He encouraged me to learn to code when I was at Google. By taking on these new skills and by pushing me to actually work hard to earn a spot at the table, I kind of found this framework that allowed me to reframe the world and think about growing the pie rather than trying to fight for a single slice of a fixer sized pie. That’s been probably the best served metaphor and an opportunity for me to grow myself and to coach others.

Jay Acunzo 26:23

Thank you so much to Kathleen Mullaney, vice president of careers and people ops at Udacity. You can follow her using the links in the show notes and definitely give her a shout out if you like this episode. Thank you again to Tettra that only for making this show possible, but for making our show website possible. The site is, and in addition to all of our episodes, it contains all kinds of company culture decks that you can browse. These are from companies like NASA, Netflix, Google, Spotify, Patreon, HubSpot, Buffer, and many more. So visit for that. This show is a production of Unthinkable Media, makers of refreshingly entertaining shows about work. I’m Jay Acunzo, founder of Unthinkable Mdia and on behalf of Tettra, thank you so much for listening to the show. I’ll talk to you next time on Org Uncharted.