Let’s say you spied a rather large trophy on the mantle of a house you were visiting.  On its plaque read “Heroic Failure.” Where would you think it came from? I’d first guess a peewee sport, maybe an example of the unassailable over-affirmation of the weakling child who never caught the ball but was, you know, a great sport. But “failure” would probably be too condemning a word for an insecure and untalented child athlete. Next you guess that it’s just a jeering office trophy, given by colleagues as an inside joke, a representation of office camaraderie more than whatever actual story inspired it. Or maybe it’s from the family’s trip to Costa Rica, where dad thought he could ride one of the giants after his hour-long surf lesson, and was utterly submerged on camera; “Heroic failure!” the voice behind the video camera says. The trophy has serious laugh-value for the family. Is that it?

No, that’s not it. The truth is, you are in the house of someone who is on leadership at an insanely competitive advertising agency known as Grey New York, and you knew this all along, but you thought it odd that “failure” would be written anywhere in a 72nd St. Brownstone such as this, with a family as sleekly-dressed as this, with drapes such as these. Sheesh! You ask her about the trophy on the mantle, and she tells you personally what’s about to be posted in the Wall Street Journal in just a few short days. It goes a little something like this:

People are all about failure these days, she tells you. You laugh. She doesn’t. It turns out, she tell you, that people are inspired to be creative and take risks if they feel the freedom to fail. If it’s okay to fail, you can actually do the job you were hired to do in the security of knowing that it’s not going to affect your standing. Your position is not threatened. In fact, one company, she has been told, tells their staff they haven’t done anything important for the company until they have made a colossal error. Until. Not, if you make a mistake, it’s okay, it develops perseverance–no, it’s as if failing is a conduit to a rejuvenated creativity. When I fail, I succeed. When I die, I live. Hm…

This has obvious implications for workers, but it also bodes well for the management. Suddenly, there’s a lot more transparency. Mistakes were always there, now they aren’t hidden. Judgment is cast aside (in this regard at least), fostering a more communicative work environment.

Now, this isn’t a free ride – we are not in the realm of the Gospel, exactly. It’s still, “Fail in…so that…,” i.e. there’s an implicit tinge of conditionality that doesn’t exist in Gospel-talk. This methodology has productivity very much in mind, so it is contingent upon an outcome; but it is still a moving glimpse of what a little bit of honesty and freedom can do for workers (and human beings) who are in the grip of their fear of failure:

Amid worries that we are becoming less innovative, some companies are rewarding employees for their mistakes or questionable risks. The tactic is rooted in research showing that innovations are often accompanied by a high rate of failure.

“Failure, and how companies deal with failure, is a very big part of innovation,” says Judy Estrin of Menlo Park, Calif., a founder of seven high-tech companies and author of a book on innovation. Failures caused by sloppiness or laziness are bad. But “if employees try something that was worth trying and fail, and if they are open about it, and if they learn from that failure, that is a good thing.”

Grey’s Mr. Myhren recently started handing out the “Heroic Failure” award because he was worried that fast growth at the agency, a unit of WPP‘s Grey Group in New York, was making employees “a little more conservative, maybe a little slower,” he says. Creator of E*Trade’s talking-baby ads, Grey New York has more than doubled to 900 employees since 2008.

“I thought rewarding a little risk-taking was potentially an answer,” Mr. Myhren says. The award is for ideas that are “edgier or riskier, or new and totally unproven,” he says.

Mr. Myhren acknowledges that Ms. Zolten’s prank could have gotten his eight-member team “kicked out of the room and told never to come back.” He adds, “There was enough chaos in the room that we weren’t sure whether it was a good or bad thing.” Nevertheless, he calls the idea “absolutely brilliant” and deserving of the garish two-foot-tall “Heroic Failure” trophy. Regardless of how it turns out, he says, “we’re proud that we had that idea.”

Many people succeed at producing innovations because they churn out a very large number of ideas, both good and bad, says Dean Keith Simonton, a psychology professor at the University of California, Davis. “The most successful people tend to be those with the most failures,” says Dr. Simonton, author of more than 500 studies and articles and 12 books on creativity and innovation.

Extracting lessons from foul-ups is the focal point of Michael Alter’s “Best New Mistake” awards at SurePayroll, a payroll-services company in Glenview, Ill. Only people who are trying to do a good job, make a mistake and learn from it are eligible for the $400 annual cash award.

To test new functions of SurePayroll’s systems in 2009, project manager Kate Vick created a fake company with imaginary employees. She flagged the data as a “test” before processing it, and the trial run went smoothly.

But Ms. Vick failed to foresee that the system would automatically report the fake employees to a state payroll-tax agency as if they were new hires at an actual company. A few days later, she was stunned by a phone call from an Illinois official asking her to confirm that her “company,” named “Product Kate Test,” had just hired someone named “Salaried Employee One” with a phone number of 555-555-5555. For a painful 15 minutes, “he went through my entire list of fake employees and wouldn’t let me interrupt,” she says. The official eventually hung up after she explained and apologized. But he made the issue seem so serious that “I felt like a very small human being,” she says.

When Ms. Vick confessed to her boss, Steve Kania, he had a laugh at the official’s “FBI-esque seriousness” about “completely ridiculous data,” says Mr. Kania, a vice president, product management. They now train others to avoid using hypothetical new hires during tests.

Mr. Alter describes the fallout as “paying tuition. As opposed to saying, ‘You screwed up,’ or, ‘You messed up,’ we say, ‘Let’s talk about what we learned.’ That drives a lot of innovation,” he says.

A Display of Push Pins at the Wieden + Kennedy Marketing Firm in Portland, Oregon

Employers use a variety of tactics to foster innovation. Grey New York blocks off a “no meeting zone” every Thursday morning, to allow employees sustained time for work on creative projects. Procter & Gamble Co. has set up a division for innovation, called FutureWorks.

Some add game or nap rooms, expansive art-filled atriums, hiking trails or private meditation rooms with music and adjustable lighting.

Intuitive Surgical, a Sunnyvale, Calif., maker of surgical robots, limits work teams to five members “like jazz bands,” says Gary Guthart, president and chief executive. Team members tend to share ideas easily, respond quickly to problems and hold each other accountable, he says.

However, all innovative companies tend to be alike in certain ways, Ms. Estrin says. They encourage coworkers to trust each other, comment on each other’s work and take criticism in stride. Also, managers encourage intelligent risk-taking, tolerate failure and insist that employees share information openly.

At the 150-employee Consumer Electronics Association, an Arlington, Va., trade group, Gary Shapiro, president and chief executive, tries to make it safe to fail by talking openly about screw-ups. In his eight-page manifesto called “Gary’s Guidelines,” writes Mr. Shapiro, co-author of a book on innovation: “Mistakes are OK—hiding them is not.”