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Mistakes Matter

In a single week’s time in January 2006, Ford announced that it will shed 30,000 people and 14 manufacturing plants by 2012; General Motors announced that it lost $8.5-billion in 2005.

In a single week’s time in January 2006, Ford announced that it will shed 30,000 people and 14 manufacturing plants by 2012; General Motors announced that it lost $8.5-billion in 2005. Which leads me to believe that a book that examines the accident at Three Mile Island and airplane crashes, among other disasters, may be more germane to managers at those two companies (to say nothing of the lengthy list of suppliers that are drowning in red ink) than one might think. As Robert E. Mittelstaedt, author of Will Your Next Mistake Be Fatal? (Wharton School Publishing; $25.95), points out, “While not as visible, I would argue that strategic and management blunders are likely to be more costly to a corporation and its stakeholders than almost any physical disaster.” But unlike meltdowns and crashes, management mistakes tend to be incremental not explosive, yet have no less a problematic outcome.

It should be noted that Mittlestaedt is not risk-averse. He writes, “if you don’t make some mistakes, you’re not trying hard enough. If you wait to make every move until it is completely safe with success assured, you will by definition be a follower with little to distinguish you in a market.” Yet there are two aspects to this: make the mistakes early, when they’re still comparatively inexpensive, and learn from them. In effect, the companies who don’t do either of those two things are those who find themselves at the edge of disaster.

Mittlestaedt argues that serious accidents aren’t the consequence of one thing but the result of a sequence of events: “in most cases it takes three, four, or five mistakes that must occur in sequence to create a serious failure.” It’s not the straw that breaks the camel’s back but the accumulated load. So Mittlestaedt has created the concept of “Managing Multiple Mistakes” in order to ameliorate the negative consequences.

While there are individuals involved in making mistakes, Mittlestaedt points out that there are some organizational or cultural aspects that make people prone to committing them. He lists the following:

  • Failure to believe information that you do not like
  • Failure to evaluate assumptions
  • Success that breeds arrogance and adversely affects decision-making
  • Frequent communications absence, failure, or misunderstanding (internal and external, including customers)
  • Failure to have and/or follow standard procedures
  • Cultures that suppress initiative, information, or action
  • Lack of understanding and respect for the laws of economics and cycles
  • Failure to evaluate past mistakes and learn from them.

Sound familiar?

Too often, there is a tendency not to want to admit to making a mistake or of having done something wrong. It either didn’t happen or if it did, somebody else did it. The problems facing Ford and GM are not the fault of foreign competitors or of money supplies; they are the consequences of actions taken and decisions made—or not—by a sequence of executives and managers. Had they had the chance to implement the ideas in Mittlestaedt’s book, chances are the announcements those two companies made in early 2006 would have been profoundly different.—GSV