- Mistakes made by a CEO can harm not only an organisation but also the CEO’s job security. Therefore many CEOs don’t admit errors when they happen
- However, this risks leaders not learning from these errors, and organisations not changing their practices
- New research from emlyon business school shows that leaders who collectivise errors are more likely to keep their jobs, as well as make amends for these errors
Leaders make errors – they are human at the end of the day. Unfortunately, an error at the top level can be costly for both the organisation and for them personally.
Many people in leadership positions often refuse to publicly acknowledge they have made an error of judgment or a mistake, as doing so risks their position of power.
Take politics for example: leaders may not admit an error for fear of loss to their party’s power. In sport, it’s the managers’ heads that are on the chopping block if they admit wrongdoing. Similarly, in business, if a CEO publicly admits a bad investment, for instance, they will be the one who pays for it.
Yet, it can be even more dangerous to the wider organisation if a CEO refuses to acknowledge company errors. It means they risk not learning from their errors, which could be more costly long-term.
A costly trade off
When there is a trade-off between admitting an error in order to learn from it versus potentially losing their job for admitting to said error, how can CEOs navigate it so that they keep their power and improve the organisation?
New research from Vincent Giolito, Professor of Strategy and Organisation, and Damon Golsorkhi, Professor of Strategic Management at emlyon business school, looks into how leaders can admit these errors, but frame them so that they can be used as a learning curve, not a sackable offence.
The researchers conducted 21 in-depth interviews with CEOs and board chairs leading 900,000 people in large financial firms in Europe.
The researchers interviewed the CEOs and board chairs on strategic errors in the organisation, how they were approached by senior management, as well as the dialect and narrative behind the communication of these errors to all stakeholders.
Changing the narrative
Interestingly, the researchers found that there are some techniques CEOs can use to frame these mistakes, to ensure they keep their jobs, but also to make changes in their organisation. When there is this clear trade-off between admitting a mistake and potentially losing power and control in the organisation, CEOS must use their communication skills to create a safe space for themselves in the organisation and frame these errors effectively.
When discussing key errors with severe economic and/or reputational consequences for the firms and important strategy changes, many CEOs stated that there was a process followed on how these errors are communicated:
- The CEO will acknowledge and diagnose the error.
- Dramatise it to put it into context for stakeholders.
- Showcase the solution and how they are capitalising on this error to make changes.
“It is important that CEOs understand how to frame these issues, otherwise organisations will never move forward, and will simply keep replacing CEOs every time there’s an error,” says Vincent Giolito.
Tactics for CEOs
There still is, however, a lack of job security for many CEOs who do follow this path and admit these errors. There is therefore a number of tactics that CEOs use when communicating this path to their stakeholders, in order to keep them on their side.
- Collectivise
Firstly, the researchers say that it is important to collectivise the issue, using terms like ‘we’, or ‘us’ when discussing the mistake and how to change to it. This means there is less blame placed on one person – usually the CEO.
- Temporalise
Secondly, the researchers use the term, ‘temporalise’, which refers to CEOs showing that the error generates from the organisation not adapting or changing quick enough, and how there is a simple solution to solving the errors – adapting to today’s world quicker.
- Generalise
Thirdly, the researchers say that CEOS should generalise the issue, showcasing how all firms in the industry are making the same mistakes – it’s not a firm-level error, but one that many companies are also facing.
- Isolate
Finally, CEOs should isolate the issue, and show that the error is an isolated incident and a rare one, not to happen again.
The researchers say that this study can serve as an inspiration for top executives on how to frame and proactively manage the errors in the organisation, acknowledging them but also learning from them in an effective way.
Organisations should develop a narrative approach for errors and failures in order to maintain the CEO’s credibility, job security and power.
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