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Do harsher penalties improve results?

A big danger for every organisation is that mistakes are handled badly. Learning is crucial for any organisation that wants to adapt and making mistakes is the best way to learn. But that requires a supportive culture.

Little is learned in a blame culture. The world is changing and if a business does not adapt, it can be the cause of the long-term downfall of a business. One of the best analysis of learning versus non-learning organisations is by journalist, author and broadcaster Mathew Syed in his 2015 book Black Box Thinking. He compares the culture of the civil aviation industry with the culture of the healthcare industry.

The aviation industry has developed an anti-blame culture from the outset, where mistakes – unfortunately sometimes with terrible consequences – are not penalised but analysed in forensic detail by specialists with a range of expertise. Even more relevant is that the errors, especially the root causes, are shared extensively with the whole industry - competitors included – and become learning moments. The hierarchy in the cockpit, for example, has been replaced by procedures in which all crew members can give their input, which means that information can be collected quickly in critical situations.

Mistakes are a goldmine

Errors made in the past are scheduled in flight simulations for trainee pilots. This practice has resulted is an almost miraculous reduction of disasters and near-disasters. In fact, there were no fatal airline crashes in 2017 for the major airlines. The culture of the medical world is at the other end of the spectrum. Mistakes are categorised as bad luck in order to avoid lawsuits.

A hierarchy where Dear Leader still dominates and where errors are hardly shared, creates a culture in which mistakes are repeated again and again.

To err once is human, to repeat madness

In the medical world, a hierarchical culture still dominates and mistakes are hardly ever shared. Of course there are plenty of exceptions, but generally speaking is this unfortunately the reality, regardless of healthcare professionals’ expertise and passion to help people. The result of this culture is a preventable death rate that does not decrease. For example, in 2013 alone 400,000 patients died in the US due to avoidable medical errors. These errors are the third largest cause of death after heart disease and cancer.

The moral of the story is that mistakes are human and are not a signal of stupidity. Making the same mistake for a second time, however, is folly. A company or an industry can become safer by embracing mistakes and viewing them as valuable learning processes. But fear of mistakes, for example due to repercussions, can prevent that learning process. In that case, errors are not only repeated twice but a thousand times.

Pathé

Earlier this year, cyber crooks targeted the entertainment company Pathé. Using 'phishing' and other techniques they got the Group CEO’s email address electronic signature and used it to instruct the CEO of Pathé Netherland Dertje Meijer and her FD telling them to transfer money to an account in Dubai.

To cut a long story short, the group lost €20 million. Why this fraud happened is for another time, but we should focus on its consequences: the dismissal of the two top people. Is this a step towards creating a safer organisation?

It is clear that the two dismissed acted in good faith and did no wrong morally speaking. The dismissals were then motivated by incompetence. But were they incompetent in their roles? Should they have been better trained to be able to identify this sophisticated form of internet crime? Possibly this partially applies to the FD. But blaming the fraud entirely on two people is a step too far. Investigations into the event indicate that the culprits were part of a very professional gang.

Signal operation

If the Dutch CEO and FD two were not immoral or incompetent, what is the use of this dual dismissal? Does it really make people and the company stronger and more alert? Rather, it signals that failure will have serious repercussions instead of being used as a way to learn and improve.

What the company learns is that making mistakes is disastrous for your career. That if you make mistakes - and nobody knows about them - you had better keep silent instead of discussing them and using them to make your business stronger.

This behaviour implies that you are a loser if you make mistakes, instead of being a learning individual in a learning organisation. An individual will learn less and the adaptivity of the organisation will decline. Like a human being, an organisation like this will lose the ability to adapt to changes and survive future adversity.

Although I cannot judge the details, I feel that there are no legitimate reasons for dismissing both the CEO and CFO, which is disturbing for their risk culture. The very act of dismissal was also exaggerated, according to the judge, given the professionalism of the fraudsters.

The top people in question have not been left with much; the trust is broken. But for Pathé NL and the Group, the situation is far graver. An anxious organisation with fewer learning opportunities is left behind.