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Will Your Next Mistake Be Fatal?
Robert E. Mittelstaedt, Jr.'s new book examines ways to avoid the mistakes that can
break your company.
In 1980, one year after the Three
Mile Island nuclear power plant
disaster, Robert E. Mittelstaedt,
Jr. served as a consultant to the
Nuclear Regulatory Commission.
In that capacity, he began thinking
more and more about the fact that
many physical accidents, such as the
partial core meltdown at TMI's Unit 2
plant, are caused by a whole chain of
mistakes, or sequence of errors, that go
unchecked for reasons usually related
to an institution's culture or the lack of
processes in place to deal with failure.
"Over time, I realized that the same
sequences of mistakes also occur in
businesses," says Mittelstaedt. "The
big difference is that with the failure of
physical systems—such as an airplane
crash or nuclear power plant malfunction—the immediate reaction is to
investigate the problem. Regulatory
agencies, not to mention the public,
step in to demand detailed analyses of
exactly what went wrong and how the
situation can be prevented from reoccurring.
But in business, if mistakes
are made and laws are not broken, you
rarely see any formal investigation. Even
when the companies themselves look
into what happened, they don't do it
in a structured and rigorous way. They
don't learn anything from the process."
Airline crashes or near-misses, says
Mittlestaedt, who is a pilot in his spare
time and the owner of a six-seater
Cessna Centurion, are "so well-documented
that you can see patterns behind
the errors, and you can also see
what the industry has done to dramatically
improve its safety record through
training, orientation, and the establishment
of procedures and structures. I
believe businesses can benefit from that
same approach."
This realization led Mittelstaedt,
former director of executive education
at Wharton and now dean of
the W.P. Carey School of Business at
Arizona State University, to write a
book titled, Will Your Next Mistake Be
Fatal? Avoiding the Chain of Mistakes
that Can Destroy Your Organization.
Recently released by Wharton School
Publishing, the book analyzes the common
factors that underlie major failures
ranging from disasters—like the sinking
of the Titanic in 1912, the crash
of Air Florida Flight 90 in 1982 and
the fiery destruction of the Columbia
space shuttle in 2003—to serious, but
not fatal, mistakes that occur in companies
across all industries. Mittelstaedt
dissects Coca Cola's "New Coke"
fiasco, Firestone's tire debacle, Intel's
mishandling of its Pentium chip recall,
American Express's failed blue card
Optima launch and Webvan's ill-fated
online grocery shopping experiment, in
addition to missteps at companies such
as Xerox, Motorola, Kodak, Enron and
McDonalds, to name a few. He talks
about Martha Stewart's decision to sell
stock apparently with inside information
(an initial mistake which then
mushroomed into several others) and he
takes readers through the whole chain
of events at Enron where a corporate
culture based on arrogance and contempt
for others eventually led to what
was then one of the biggest bankruptcies
in history.
The concept of Managing Multiple
Mistakes, Mittelstaedt writes, "is based
on the observation that nearly all serious
accidents, whether physical or
business, are the result of more than
one mistake. If we do not 'break the
chain' of mistakes early, the damage
that is done, and its cost, will go up
exponentially ... until the situation is
irreparable." The Watergate scandal, he
suggests, is perhaps one of the best illustrations
of failing to manage multiple
mistakes, "starting with the decision
to burglarize Democratic party offices
to obtain information that was of little
value." That mistake "was compounded
severely by subsequent attempts to
cover up" others, eventually leading to
more and more unbelievable fabrications
and finally, the resignation of the
President. Business mistakes, too, have
their own individual patterns and "sins
of both omission and commission,"
Mittelstaedt says, but most fall into the
broad areas of strategy, execution and
culture.
A recurring theme identified in
Will Your Next Mistake Be Fatal? is
the reluctance of many executives to
acknowledge their failures. "In an era
of shareholder litigation, admitting
publicly that you messed up can put the
company and shareholder value at risk,"
Mittelstaedt says. "Also, with the focus
always on performance, there is an attitude
of, 'Okay, we made a mistake. Let's
just straighten it out and get on with
what we are doing.' Managers don't
see any upside in analyzing and understanding
the mistake chain." He cites
a story in the business press earlier this
fall on Hewlett Packard's recent decision
to analyze why one of its divisions
had not performed well and what could
be learned from that experience. "It was
the first time I had seen an announcement
like that from a major company
saying it was going to investigate itself."
A Culture of Supremacy
The most disastrous sequence of business
errors that Mittelstaedt describes in
his book is the one that led to Enron's
collapse. "The chain of mistakes was
so long, and in many cases purposeful
in that [executives] were focused
on trying to beat the system and drive
up earnings," says Mittelstaedt, who
divides his book into mistakes that
caused economic damage to the company
but were not life-threatening,
and those that threatened the entire
viability of the firm. Enron was an
example of the latter, and it is part of
a chapter titled "Cultures that Create
'Accidents,'" which includes analyses of
what went wrong at American Medical
International, Ford and Firestone in addition
to Enron. "Culture is powerful,"
Mittelstaedt says, "but what creates success
may also kill you." The cultures of
companies can, especially in the early
stages, help organizations see market
trends before others, grow faster and
weather competitive threats. And yet
the same powerful force that binds an
organization together for success "can
also be a catalyst for, or even a cause of,
failure."
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