How Managers Make Mistakes and Why Firms Fail

leader in waterThis is an economic time that is separating true leaders from managers. One of the clear distinctions is how the two groups deal with mistakes. Managers are trained and conditioned to maintain the status quo and eliminate mistakes at almost any cost. On the other hand, leaders drive innovation and understand that mistakes are a part of the process. The times demand that companies pursue true innovation – not just incremental improvements – and leaders are necessary to drive that innovation.

Real innovation requires experimentation and experimentation results in mistakes. Managers are trained to avoid mistakes, and minimize (hide?) them when they occur. Leaders understand that mistakes are a part of the innovation process and are to be expected and embraced. That puts leaders in a much better posture to lead change and innovation.

ManagerManagers may try to innovate, but it lies outside their traditional capabilities. Managers usually need clear definitions and complete control over critical factors. They are uncomfortable with small mistakes; much less those usually involved with typical innovation efforts. Managers are the defenders of the status quo. Any significant change makes them uncomfortable and defensive.

Innovation is the lifeblood of companies today. New services, products, and relationships are critical for ongoing growth and profitability. Without innovation, offerings become commoditized, shrinking margins and decaying overall sales. Managers are poorly positioned to offset these trends.

Leaders are critical to the process and make a huge difference. They are able to encourage creative mistakes on the path to innovation. They understand that the reaction to mistakes can be used to drive trust, motivation, and innovation throughout the organization. Leaders use this dynamic to build successful and enthusiastic organizations.

FollowersCompanies fail because they substitute management for leadership. Many companies fail to clearly differentiate between the two. The environment demands change. Change demands leaders. Leaders disrupt the status quo. Disrupting the status quo is critical for companies to survive and thrive.

Find and feed your true leaders. They will drive change and make the future much brighter for your organization!



1 Response to “How Managers Make Mistakes and Why Firms Fail”

  1. 1 labmgt1
    November 16, 2009 at 4:42 pm

    Buckley, I agree with your analysis, but would like to add another dimension to it. Andrew Grove, in his book, Only the Paranoid Survive, talked about “inflection points”. They are basically events that take place at lower to mid-level decision-making that either make or break a firm. Why companies fail can be traced back to a decision making process that breaks down, the further down the chain of command.

    I come from a clinical psych. background so am trained to listen carefully. As an Executive Coach, I’ve tried to hone that skill even further. I have come to the conclusion that the use of Emotionally Intelligent skill sets that reach all the way to the bottom of the org. chart is essential to the success of a company in today’s ecomony. Studies have shown that a leader with good EI skills, will be effective in motivating and moving a firm forward. Grove pointed out that because the heads of R&D and Production didn’t like each other, Intel nearly lost the race with Sony for the Pentium 4 chip.

    Emotions play a huge role in determining “how” a manager makes mistakes and “why” firms fail. Failure to listen carefully to the underlying emotions and resistance to change will often lead to sabatoge and serious problems. John Kotter in his book “the heart of change”, focus’ on 8 steps for successful change. I would try to simplify it to four basic emotions, Glad, Sad, Mad and Scared. It’s up to the leadership (at all levels) to work with those emotions, because if they don’t – mistakes (no matter how they are planned for) will in fact sink the ship!

    Something to think about! Mike T.

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