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  Winners 2002 McKinsey Awards  
  First-Place Winner

“The Failure-Tolerant Leader”
Richard Farson and Ralph Keyes
August 2002

Second-Place Winner

“The Competitive Advantage of Corporate Philanthropy”
Michael E. Porter and Mark R. Kramer
December 2002

The Harvard Business Review is pleased to announce that Richard Farson and Ralph Keyes are the first-place winners of the 2002 McKinsey Awards for their article, “The Failure-Tolerant Leader.” The second-place winners are Michael E. Porter and Mark R. Kramer for their article, “The Competitive Advantage of Corporate Philanthropy.” The annual awards recognize outstanding works published in the Harvard Business Review that are likely to have a major influence on managers worldwide.

Most companies have embraced – in the abstract, at least – the idea that failure is a prerequisite to innovation. Yet the reality is that most people are afraid to fail, and most business cultures reinforce that fear. What’s missing is enlightened leadership that helps employees overcome anxieties about taking risks. Richard Farson and Ralph Keyes find just such capabilities in “failure-tolerant leaders” – executives who through their words and actions create a culture of intelligent risk taking that leads to sustained innovation. Drawing from their research in business, politics, sports, and science, Farson and Keyes identify the common threads that failure-tolerant leaders share: They break down social and bureaucratic barriers and engage at a personal level with the people they lead. They are nonjudgmental and admit their own mistakes. And they try to root out destructive competitiveness. In short, failure-tolerant leaders give employees the green light to set out and explore, viewing mistakes as educational tools. And that, say Farson and Keyes, is the key to creating breakthrough products and processes.

Richard Farson is the cofounder and president of the Western Behavioral Sciences Institute, located in La Jolla, California. Ralph Keyes is the coauthor, with Farson, of the book Whoever Makes the Most Mistakes Wins: The Paradox of Innovation (Free Press, 2002).

Corporate philanthropy is in steady decline, both in real dollars and program effectiveness. In fact, most corporate charitable programs are so fragmented and unfocused that companies would be better off giving the money to shareholders and employees. But it doesn’t have to be that way, say Michael E. Porter and Mark R. Kramer. The authors outline a sweeping new approach to charitable giving that can create stronger payoffs for both companies and charities. With context-focused giving, companies dedicate charitable contributions to causes that influence their competitive context – the set of local conditions in which they do business. By aligning charity and strategy, corporations don’t only give money, they donate distinctive capabilities. And that can result in greater social good even as it strengthens a company’s competitive edge.

Michael E. Porter, a five-time McKinsey Award winner, is the Bishop William Lawrence University Professor at Harvard University. He is based at Harvard Business School in Boston. Mark R. Kramer is the managing director of the Foundation Strategy Group, a consulting firm in Boston, and cofounder, with Porter, of the Center for Effective Philanthropy, a nonprofit research organization also located in Boston.

The 2002 Panel of Judges

Michael Maccoby
The Maccoby Group
Washington, DC

Kevin Parke
Chief Investment Officer
MFS Investment Management

Michael C. Ruettgers
Executive Chairman
EMC Corporation
Hopkinton, Massachusetts

Paul A. Strassmann
Information Economics Press
New Canaan, Connecticut
National Defense University
Fort McNair
Washington, DC
U.S. Military Academy
West Point, New York

Hal R. Varian
School of Information Management and Systems
Haas School of Business
and Department of Economics
University of California at Berkeley
Berkeley, California

Egon Zehnder
Founder and Former Chairman
Egon Zehnder International
Zurich, Switzerland

  Since 1959, the McKinsey Foundation for Management Research has offered cash awards for the best articles published each year in the Harvard Business Review. The awards are judged by an independent panel of distinguished leaders in the business community.

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