Mistakes matter: Accepting errors can raise your firm’s performance

Making mistakes and learning from them is integral to human culture. It’s what has made us successful as a species.

The story of human development is one of repeatedly trying to do something new, making mistakes and then – crucially – trying to improve. And history has given us countless quotes from the great and good on the creative potential unleashed by making mistakes.

For example: “All men make mistakes, but only wise men learn from their mistakes”, an insight attributed to Winston Churchill.

Almost all successful and ground-breaking innovations – from the lightbulb through to the iPad – have a backstory of errors that came before them

“A life spent making mistakes is not only more honourable but more useful than a life spent doing nothing,” said George Bernard Shaw, while fellow Irish writer James Joyce described mistakes as “the portals of discovery”.

Prolific American inventor Thomas Edison, regarded as the father of modern innovation, is quoted as saying: “I have not failed, I’ve just found 10,000 ways that don’t work.”

The message from these is consistent: Learn from your mistakes. It’s something we’re told many times at a young age.

But how many of us actually take that through to adulthood and apply that to our working lives?

Mistakes in childhood are often viewed as charming – something one might post a photo of on Facebook. They are a part of growing up.

But in many areas of the business world, mistakes – let’s call them errors – are often seen as something to be feared or shameful. A costly black mark on someone’s career, or reflecting a lack of competence.

Phobia of errors

Penicillin, one of the most important medical innovations ever, was discovered by mistake

Indeed the negative consequences of errors – for example, the nuclear accident at Chernobyl or the loss of the space shuttle Challenger – tend to gather the most attention.

Perhaps this emphasis on the negative and a consequent widespread phobia of errors is the reason why many firms focus exclusively on a policy of error prevention.

In fact, almost all successful and ground-breaking innovations – from the light bulb through to the iPad – have a backstory of errors that came before them.

Penicillin, one of the most important medical discoveries of the 20th century, was developed as a result of a mistake in the lab – just one example of the positive effect of errors.

Indeed as well as learning from our mistakes, we should, in fact, welcome them. Several academic studies have shown that firms learn more of business value from negative outcomes than positive ones.

See also
Six steps to effective error management

Rather than focus solely on eradicating errors, the lesson for firms is to embed within their culture ways to reduce the negative consequences of errors and enhance the positive – a process we call error management.

First, let us define what an error is. In our case we’ll define errors more specifically as “action errors”. That is errors that are unintended deviations from plans or goals, as well as incorrect actions resulting from lack of knowledge.

In 1492, for example, explorer Christopher Columbus departed from the Spanish port of Palos with the intention of sailing west – a mission he achieved. From a higher perspective though his famous voyage can be categorised as an error because his objective had been to find a short route to India – something he rather spectacularly failed to do.

Christopher Columbus making the biggest mistake of his life

Errors are also different from inefficiencies – which achieve their goals, albeit with wasteful detours; and violations – which are an intentional breaking of rules.

Error management culture

My research over a number of years has focused on the impact of errors, and specifically of varying degrees of error management culture on firm performance. We have avoided the directly studying the impact on safety and disaster avoidance – although it is plain that these may also benefit from error management.

A series of studies of medium-sized firms in Europe have shown that firms with a systematic approach to error management embedded in their organisation perform better.

Indeed our findings show that on average firms we categorised as having high error management culture see approximately a 20 per cent higher return on their assets than those who do not.

Error management
  • Accept that errors will happen
  • Accept errors as inevitable when you introduce something new
  • Know how to recognise and deal with errors quickly
  • Communicate about errors and use them as a learning opportunity
  • Use errors as a chance to innovate
  • Employ effective error recovery procedures

This is not to say, of course, that firms who make more mistakes will be more profitable. Rather that firms with a proactive and open approach to managing errors are likely to handle them better, be more innovative and more productive.

A prerequisite to enhancing and emphasising this positive effect of errors is an acceptance that errors will happen and can never be completely eradicated.

This does not imply, we should stress, that errors should not be taken seriously, nor that error prevention is unimportant.

For managers this undoubtedly involves walking a fine line, but it does mean there are strong business benefits to accepting that errors will occur, and approaching them in a pragmatic, open and constructive way.

Let’s take the example of organisational culture demonstrated by this quote from a manager of a firm in one of our studies with low error management:

“I don’t want to discuss errors at length… I indicated this shouldn’t happen again and that was the end of it.”

This approach emphasises all of the negative aspects of errors and none of the positives.

Learn how to maximise the positive effects of errors

By allowing no room for discussion there is no room for learning. Errors are seen as inherently bad and there is no incentive for the firm’s employees to try anything new.

By emphasising the negative, the only real incentive is for staff to try to cover up any errors – an outcome that not only negates any opportunity for learning but which also opens the way to further inefficiencies like simply repeating the same error further down the line.

It also makes delays in recognising an error more likely, increasing its potential impact and cost.

This implicit “blame” centred approach risks even more negative outcomes because no process is initiated to control or contain the damage.

On top of this it is important not to overlook the emotional aspect – if errors are perceived as inherently negative or even catastrophic, then the individual’s mindset will overshadow a rational approach to resolving the error in question.

This can lead to what we call error cascades – a succession of spin-off errors, potentially even worse than the first, that sees one relatively small error quickly snowball into something much larger and harder to manage.

In one particularly dramatic example, investigations have shown that a cascade of errors of this kind was what ultimately led to the disaster at the Chernobyl nuclear plant in 1986 in the then Soviet Union.

In contrast then, consider this approach from a manager of a firm with high error management:

“I try to create an open atmosphere and tell people they should inform me if they have made a mistake, so that we can do something about it. We try to be open and discuss errors because we believe that is the only way to control damage.”

This position shows a culture that takes errors seriously, but that is open, accepting and non-judgmental about them once they have occurred.

It allows errors to be quickly identified, analysed and recovered from, as well as providing an environment in which they can be discussed and learnings extracted.

This approach also works to minimise the negative impacts and costs of errors – when an error happens, the firm knows how to deal with it.

Moreover, firms following this approach can lay the groundwork for coming up with more and more radical innovations.

These would be impossible without making errors because the innovation process implies entering a new and therefore unknown environment.

Having a practice of error management in tandem with error prevention helps firms and individuals deal with unexpected events, show more initiative and behave more proactively.

Mistakes can lay the groundwork for coming up with more and more radical innovations

All of these are critical factors in improving productivity and profitability.

I have heard of one American consultancy, for example, that throws a party whenever a project fails, explicitly creating a social situation in which an informal but insightful dialogue about errors can naturally occur.

That option might be a step too far for many companies.

Nonetheless, firms that orientate themselves constructively towards errors tend to be the rare exception rather than the rule.

For most firms the potential for error management culture to provide them with a competitive edge has not been fully realised.

  • Author Profile

    Professor Michael Frese is head of the Department of Management & Organisation at NUS Business School, and a professor at the Institute of Strategic Personnel Management and Institute of Corporate Development (ICD) at Leuphana University of Lueneburg, Germany. His research spans a wide range of topics within organizational behavior and work psychology. Click here for a full profile.

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