MISTAKES, it is commonly believed, are a great educator when one is honest enough to admit them and is willing to learn from them.
Well, if last week's mistakes in the business world are anything to go by, we can look forward to a few inspirational master classes in how not to lose millions of pounds worth of contracts literally overnight.
Between PA Consulting, the multi-nat
ional company that lost the personal details of the entire UK prison population, and the American company responsible for the delays and mistakes in marking SATs papers in England, the total financial loss to their businesses boasts more zeroes than the deficit of a small South American country.
Home Secretary Jacqui Smith cancelled PA Consulting's three-year contract worth £1.5m and said that six other contracts with the Home Office worth £8.5m were under review. When you consider that this organisation has delivered contracts worth more than £240m in the past three years, the potential damage to its reputation by this blunder is significant.
So what did PA Consulting do in the face of this unmitigated disaster? Apologised unreservedly, blamed "human failure", then started throwing P45s around the office like confetti at a wedding. Did senior management fall on their collective sword? They did not.
Sacking the individual concerned was absolutely right (to pop a memory stick containing such valuable data in a desk drawer for the weekend is, to my mind, nothing short of gross negligence), but to fire the rest of the team too? For what?
What about the management of this global company? To lose millions of pounds worth of business virtually overnight – and then undoubtedly struggle to win new business on the back of the enormously negative publicity resulting from this crisis – should surely have an impact on those comfortably ensconced in their ivory towers. It appears not, just yet.
Consider also ETS Europe, which lost its £156m five-year contract to mark SATs exams after thousands of papers were not returned before the July deadline. Reluctant to admit they were at fault, bosses have blamed procrastination by the Qualifications and Curriculum Agency. The he said/she said, they did/didn't do petty bickering portrays those in charge as undoubtedly more juvenile than the poor school kids waiting for their results.
It really doesn't matter who is to blame, because the immediate impact goes beyond the contract loss and the £50m ETS claims to be out of pocket, and reaches into the lives of thousands of 11- and 14-year-olds who still don't have their results and, it has been revealed, may never receive them.
And it is this that brings us to the very part of the mistake-making process that deeply worries me.
I'd like to know what happens at the end of the line, to the people affected by colossal business mistakes, to the other employees of these businesses? When the impact of the financial losses kicks in and swingeing cost-cutting exercises are employed to try to stabilise the balance sheet, improve cash flow, and stay afloat, who actually suffers? It's usually the employees – or the customers – who, hitherto, did little or nothing wrong.
Let's be realistic, people make mistakes in business all the time. Some are small and can be easily resolved and learned from. But just as often there are huge financial errors; sometimes the mistakes are admitted, sometimes not, but in most cases there is a knock-on effect that is rarely reported and even more rarely worried about.
Historically, when it all goes pear-shaped, the reverberations still felt generations down the line can be even more significant than first appearances.
In 1626, natives traded their handmade trinkets for a 23 square mile plot of land called New Amsterdam. We know it today as Manhattan and it's valued at $1 trillion. Imagine just for a second they had decided it wasn't such a good deal after all, that actually they'd rather just hang on to the real estate to graze their cattle. Clearly the city that never sleeps would be vastly different today.
Bungled monetary policy by bankers in the 1920s and Thirties, which caused chronic deflation and world wide destabilisation, could still be having an effect on our economy today, if you believe Nobel Prize winner Robert Mundell, who believes that significant errors in judgment all those years ago resulted in the Great Depression, the rise of the Nazis and even the Second World War.
More recently there's Enron, the energy company that created offshore entities to hide huge financial losses. Key execs are now doing jail time for fraud and insider trading, but the fallout from the $78bn losses extends much further, to the thousands of employees who relied on Enron shares for their retirements. They received nothing.
I believe there's a wider moral issue here that's about more than just holding your hands in the air and admitting it's a fair cop. Saying sorry, fixing the immediate problem and promising never to make the same mistake again is just the tiniest part of the process, the first step.
Is it possible to put it right? To ensure that employees and their families don't suffer as a direct result of your errors? To shelter your customers, their businesses and their families from the fallout? Surely ethics in business would bestow an obligation on owners and senior executives to make the necessary reparation, protect jobs and honour service delivery promises.
I agree wholeheartedly with Akio Morita, the co-founder of Sony, who said: "It's management's risk and management's responsibility. Employees are not guilty; why should they suffer?"
