The Importance Of, As A Company, Admitting To Your Mistakes

Posted on Mar 25 2014 - 10:28am by Editorial Staff

Real World

“The willingness to accept responsibility for one’s own life is the source from which self-respect springs.” – Joan Didion

If we have good teachers and good parents, we learn early on that everybody makes mistakes – but that it’s how we handle them afterward that really counts. Admitting you’re wrong, saying your sorry and working to make sure it never happens again are the cornerstones of handling the stumbles and mishaps that are inevitably going to plague your journey through life. Unfortunately, many people grow up to become entrepreneurs who forget that these lessons apply to businesses as well as people.

Trust Is Everything

Just as with our human relationships, business relationships are based on trust. More than even price, trust between customer and businesses – as well as between business leaders and their employees – is the first pillar in retention and loyalty. Quality goods or services at a good price brings in first-time customers. Trust – and a sense of fairness and equity – is the primary ingredient in the journey toward customer loyalty. The 80/20 quotient – the concept that many businesses get 80 percent of their business from 20 percent of their clients – is built on trust.

Mistakes as an Opportunity

Just as in personal relationships, mistakes present an opportunity to cement trust into a business partnership. When a business makes a mistake – from a Fortune 500 financial firm undervaluing a startup company to a local pizza shop messing up a delivery order – they are presented with a unique opportunity to show their character. In every business, errors are made – and far too many business leaders follow the natural instinct to shift blame, deflect responsibility and sweep the problem under the rug. For those who accept culpability, however, and make an effort to make things right, their efforts will not go unnoticed.

Real World Example

Peter Briger, CEO of Fortress Investment Group, articulated this point in a recent article regarding an investing error and its aftermath. “‘It was clearly a mistake,’ says Briger of the Dreier investment. Although the Fortress credit group did a significant amount of due diligence (‘the process is a good process,’ he says), ‘we made a bad judgment.’ Still, Fortress managed to recover 70 cents of every dollar it lent to Dreier – more than any other hedge fund creditor – because it had structured protections into the original investment and aggressively pursued its claims. ‘We haven’t tried to brush [the situation] under the rug,’ says Briger. ‘We care a lot about getting that money back.'”

Mistakes and Employee-Employer Relationships

According to one report, there is a huge disparity in how businesses perceive their ability to admit and fix mistakes than actually exists in reality. Although three-quarters of business leaders say they encourage employees to learn from their mistakes, fewer than half of employees – about 46 percent – report getting that kind of guidance. The same 75 percent say they routinely admit to their own shortcomings, yet a tiny 16 percent of employees report that their bosses actually admit when they’re wrong.

The most common reason cited by owners or managers for failing to admit their mistakes was a fear of looking weak or incompetent. Yet employees report the admission of mistakes by a leader as one of the driving forces behind their willingness to engage.

“Not an ‘I’m Sorry’ Society”

According to an article directed at human resources experts, leadership expert, CEO of Highland Consulting Group Inc. and creator of the AskRoxi.com website, Roxi Hewertson stated, “When I say ‘I’m sorry’ as a leader, it ups the credibility all around me because people believe [I’m] being humble” and, yes, human. “The problem is,” she says, “we’re just not an ‘I’m sorry’ society. People just don’t think about it. Managers and leaders just don’t have skills around it.”

Misinterpretation

In an article about improving upon mistakes, a business writer points out that businesses often mistake the psychology of customers. Presuming that customers may be intolerant or not understanding when mistakes are inevitably made, he points out that many business owners instead try to pretend the mistakes didn’t happen or shift blame to someone else. Denying mistakes, however, only magnifies the customers’ ire and internal sense that the business is incompetent or its leaders dishonest.

The Five Steps

The writer does a good job of articulating the five basic steps to dealing with business mistakes. These should already be self evident through basic common sense, but missing just one of them can topple the whole damage control operation.

First, admit that something went wrong and that it was your fault. Second, do your best to figure out how it happened. Third, concentrate on what procedural error took place instead of blaming the person behind the procedural error. Fourth, record the intricacies of what happened instead of presuming you’ll remember what went wrong. Finally, put a system in place to prevent a repeat of the original catastrophe.

Mistakes are a part of life – and business. The natural inclination of both people and companies is to pretend it didn’t happen or blame someone else. The reality, however, is that mistakes represent an opportunity: an opportunity to display humility, an opportunity to show your human side and an opportunity to show strength of character. By admitting that a mistake was made, and made by you, you show customers and employees alike that you’re a person who takes responsibility and isn’t afraid to say “I’m sorry.” This breeds loyalty and respect – in business and in life.

About the Author
Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.