With IC failure, there are different kinds that need to be looked at. My characters fail and fail often at a lot of things - they might have things they're good at, sure, but go ahead and put my hairdresser on a horse and see how badly that can go! Or drop my fighter into a social situation where he's expected to hold his own against nobility in the land of diplomacy and lifted pinkies. The list could go on.
There's fun in that conflict. There's fun in personal imperfection and plots designed around that kind of growth. Facilitating personal plots toward that end should always be encouraged as best as possible.
There isn't any fun in attempting to go for an IC rank against another person where the IC rank is determined via OOC means. You could view that as an IC failure where growth can occur - but, unless a person's bowed out of the race with grace to explore that growth or everyone's cool with whatever happens, there's going to be some OOC friction there.
I'd say it might be worth reviewing the IC ranks (or whatever, but this is the one thing where I find 'failure' to be unsatisfying) to see if there are better ways of navigating them - do they have to be held by PCs? Can they logically be on a rotating schedule? And, if the alternatives just aren't viable, then maybe front-loading things with: you can either get IC position or get this juicy plot hook/other position/some other tasty treat that appeals.
That just doesn't happen often in advance - and, typically, by the time the IC rank's been settled, the 'loser' isn't necessarily inclined to take the booby prize for failing.