AIRASIA founder Tan Sri Tony Fernandes once tried wanted to save millions by not investing in belt loaders to help load baggage on and off his new Airbus planes, but instead, have the ground crew manually move the bags.
In one of his “walk the ground” rounds, he tried lifting the baggage with his staff and almost injured himself. Realising that his earlier decision was a mistake, he quickly reversed ithis decision and admitted to his management team that he could have caused his people injuries and damaged staff morale.
The message is clear: learn from your mistakes. It’s something we’ve been told many times since young. But, in many areas of the business world, making mistakes or errors are often seen as something to be feared or shameful — a costly black mark on someone’s career, or a reflection of incompetence.
Indeed, the negative consequences of errors, for example, the meltdown at the Fukushima Daiichi nuclear power plant, tend to gather the most attention. Perhaps this emphasis on the negative is why many firms focus exclusively on a policy of error prevention.
In fact, almost all successful and groundbreaking innovations — from the lightbulb through to the Post-It note stickers — have a backstory of errors that came before them.
Rather than focus solely on eradicating errors, the lesson for firms is to embed within their operating culture, ways to reduce the negative consequences of errors and enhance the positive — a process we call error management.
First, let’s define what an error is. In our case, we define errors as “action errors”. That is, errors that are unintended deviations from plans or goals, as well as incorrect actions resulting from lack of knowledge.
We found that firms with a systematic approach to error management inculcated in their organisation consistently perform better. On average, firms categorised as having high error management culture enjoy approximately a 20 per cent higher return on their assets than those who do not.
This is not to say, of course, that firms who make more mistakes will be more profitable. Rather, firms with a proactive and open approach to managing errors are likely to handle them better, be more innovative and more productive.
To enhance and emphasise this positive effect of errors, it is important to accept that errors will happen and can never be completely eradicated. This does not imply 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.
In companies with low error management, there is little room for discussion and, hence, no room for learning. Errors are seen as inherently bad and there is no incentive for the firm’s employees to try anything new.
The only real incentive is for staff to try to cover up errors — an outcome that not only blocks opportunity for learning, but which also opens the way to further inefficiencies, like simply repeating the same error further down the line.
This can lead to error cascades — a succession of spin-off errors, potentially even worse than the first, that sees one relatively small error quickly snowball into something larger and harder to manage.
In contrast, a firm with high error management has a culture that takes errors seriously, but 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 learning extracted.
Moreover, firms following this approach can lay the groundwork for coming up with 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.
By adopting a constructive approach towards errors, the organisation has the potential to emerge even stronger in the future.
The writer is professor of management and organisation at the National University of Singapore (NUS) Business School