Small Mistakes and Large Failures

It is argued that managers are principally employed or engaged for the primary role of making decisions. Decisions made by managers should be considerate of both the short-run and the long-run ambitions of the organization. When there is a conflict between the two time scopes of decisions, it follows that there will be adverse consequences in the future of the organization. As such, it is true that “small mistakes are the stepping stones to large failures.”  Minute mistakes that are committed presently, might have minimal effects in the current period (short-run) but when such mistakes accumulate, they have a magnified effect in the future as alluded by Samuelson and Marks (2012). Instead, as explained by Cannon and Edmondson (2005), organizations should learn to fail intelligently.

Consider a manager I had the opportunity to work with in the past in a small company. He made a small but critical error during the negotiation for a lease contract for some equipment. He overlooked the clause on insurance of the equipment by the leaser. As such, he went for lower premiums not recognizing that such premiums did not cover for the insurance of the equipment. When the equipment arrived, he did not take out an insurance policy for the equipment. That is mistake number two. When disaster struck and the equipment broke down later in the operational stage of the equipment, it was on the company to fork out the entire sum for repairing the equipment. The effect of the mistakes was carried on to the income statement where such an expense eroded huge part of the profit margins. The company’s cash flow was seriously affected to a level of defaulting on financial obligations of the company when they fell due. This led to a huge backlash with the creditors of the company creating bad blood and distrust. In the long run, the company cannot be trusted with its obligations which makes it harder for the company to get financing.

References

Cannon, M. D., & Edmondson, A. C. (2005). Failing to learn and learning to fail (intelligently): How great organizations put failure to work to innovate and improve. Long range planning, 38(3), 299-319.

Samuelson, W. F., & Marks, S. G. (2012). Managerial economics. John Wiley & Sons.