...Or so we are told at school. It would also seem, in my experience, that the difficulties children have in understanding that learning from one's mistakes is part of the overall learning and performance improvement process, continues into adulthood. There is nothing untoward about the predisposition to want to avoid failure. It is hard wired into humans following millions of years of evolution. You would have thought that we would have become more adept at looking at the underlying reasons behind mistakes so as to avoid them in the future.
To be fair, some industries have become better at doing this. Take the aviation industry where mistakes can cost lives and have devastating effects on the business as a whole as a result. It is usually the human element, often comprising a chain of small human errors, which leads to catastrophic disasters.
And therein lies part of the reason why financial services businesses do not seem as adept as these industries at learning from their mistakes. Firstly, the costs of getting it wrong do not have the immediate physical impact that planes crashing do. Secondly, financial services have become ever more complex and their interconnectedness has meant that the cause of macro-economic failures has become more difficult to identify.
However, underlying all this is financial services' Achilles' Heel – the celebration and reward of success to the exclusion of acknowledgement or understanding of failure. As ever, this attitude comes from the top. It is part of the wider debate about the culture fostered in financial institutions but goes beyond bankers not behaving in a reckless manner but looking at the reasons behind failure in routine, expected behaviours.
The most common ways mistakes or deficiencies are identified in financial services are; when a problem is identified in an annual review or through an internal compliance monitoring programme; the regulator finds it; or a client complaint means that the issue cannot be ignored. The latter event usually results in the event most businesses dread : notification to PII insurers and/or to the regulator. What rarely happens is what should happen – getting individuals to talk openly about mistakes or concerns. This should be the early warning mechanism in an institution which might head off a problem later down the line.
The reason why this happens infrequently is that acknowledging one's own mistakes (being genuine mistakes as opposed to deliberate rule breaking which can raise questions as to integrity) can have repercussions. Voicing concerns about others can lead to being marked out as a troublemaker.
Senior management needs to ensure that if employees are expected to talk about their own mistakes or air concerns about wider problems then it is safe to do so. Unfortunately this does not commonly occur, especially when the concerns are about corporate governance, the compliance function or resources more generally – an area for which senior management has more direct responsibility. The problem lies in the hierarchy gradient where those who have risen to the top have a seemingly unshakeable faith in their own abilities and those below them feel unable to speak truth unto power.
In the same way that senior management sets the tone at the top about the practices they don't expect to see they should also be encouraged to talk about occasions where something didn't work. It is a brave recruitment decision to hire a senior person who is prepared to talk about his or her own failures but maybe the next interview question should not be : "Tell me about your greatest achievement and your role in bringing it about" but "Tell me about a time when you took a wrong decision and how you and your organisation learned from it."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
