Damien Grant: Hold yourself to account

We are often told to learn from our mistakes but most of us find this difficult to do.

In business we tend to repeat our mistakes because we fail to accept personal responsibility for what went wrong and, worse, many mistakes go unnoticed.

I am often called on to help in a business turn-around and the first thing I do is ask the manager or owner why the business is in trouble.

The answer is not important, what I am looking for is self-awareness by the key personnel in the business of their own failings. Without it, the business is doomed.

I bring to this a rich history of business and personal failure. Some were failings of personal judgment, some of a lack of management skill and others sheer wanton stupidity, so I feel well-qualified.

Most business leaders who fail blame others, or some external factor, excusing themselves of culpability. This self-belief allows them to ignore their character flaws and try again, usually with a similar outcome. To recover from a setback it is important to know what it was we did wrong and what we need to change if we want our next venture to succeed.

More troublesome, however, is the business leader who has succeeded for the wrong reasons.

Two systematic biases come into play here. The first is our tendency to discount near misses and the second is an unwillingness to examine the causes of success.

A decision with a 95 per cent chance of a $1000 gain and a 5 per cent chance of a $1 million loss is stupid, yet most managers who take this gamble will be rewarded with each thousand-dollar win and begin to believe in their own flawed wisdom.

After the Challenger Space Shuttle disaster, Nasa found these types of decisions were endemic in the shuttle programme. A series of near-misses were ignored. When a foolish risk was taken and disaster narrowly averted, the manager was seen, retrospectively, as courageous.

It is common for chance to prevent a poor decision ending in disaster. Failing to have fire insurance can look like a good decision each day you do not have a fire. When this happens, the process leading to the flawed decisions can be reinforced.

We have witnessed many property developers accumulate assets, and debt, gaining temporary success in a rising market. Older and wiser property entrepreneurs such as Sir Robert Jones, who has survived near-misses of his own, appear better placed to create and accumulate wealth.

The current management thinking rewards good work, not good performance. Focusing on the decisions made, and not their outcomes, can remove the bias towards poor decisions and near-misses. Small business owners need to remember we often only have ourselves to hold us to account.

damien@waterstone.co.nz