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Error and crisis management March 1, 2013

High risk industries need error management

military plane maneuvers over Blackpool, UK
We will always make mistakes, regardless of our level of talent or proficiency and no matter how hard we try to avoid them. Therefore, we should better deal with them rather than pretend they didn’t occur.

And dealing with them means to analyze them, learn what went wrong, and see that it can be changed to prevent this mistake in the future. The same should happen in business, most importantly in high-risk industries. Yet when we look at commercial banking, an industry with huge risks as we all have learned, we see an atmosphere of competition for positions and promotions, in which errors have to be hidden at all costs. Still, banking is not the only industry where people have this attitude.

A survey carried out by ESMT European School of Management and Technology substantiated the embarrassment managers generally feel when encountering mistakes. Three hundred and sixty managers from different sectors were asked about how they deal with errors. The results revealed that 88 percent of them expressed a preference to only talk about errors in private, with just four percent willing to point out a mistake made by someone higher up the ranks. Furthermore, almost a third admitted to making mistakes, but assumed their errors were just never addressed. Nevertheless, they feared people might talk about them behind closed doors.

If we transfer these findings to high-risk industries, such as commercial banking, we see the problems this situation entails. If individuals talk only privately about the mistakes they and others made, it restricts the flow of vital information about the sources of these mistakes and produces a false sense of security. In the end it could lead to a loss of revenue for companies.

To install the error management required for a healthy business, executives would actually do well to learn from the aviation industry. After years of improving their airplanes and the flying skills of their pilots to reduce the number of accidents, the airlines had realized that they needed more, namely a system where people could openly talk about and constructively deal with the mistakes they made when flying. For the past 20 years, both commercial and military pilots have employed an active error management system known as Crew Resource Management (CRM). It means that pilots are officially encouraged to admit their mistakes without fear of sanction or damage to their reputation. Furthermore, captains and copilots openly check and cross-check each other’s actions when flying and discuss their decisions and actions in a debriefing after each flight.

These lessons from the airline industry would benefit the personnel of any organization. However, some need to establish it more urgently than others. Commercial banking would be one example. Last year’s case of the UBS trader who caused a loss of $2 billion is testament enough for calls for change within the industry. So perhaps rather than concentrating on the media-hyped culture of corporate greed, a re-evaluation of the way these institutions treat their people’s mistakes would lead to the intelligent behavior needed for corporate success.

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