Why Organizations Must Admit Systemic Mistakes and Failures and Stand Up for their Employees ?

Employees are Also Important Stakeholders

Contemporary organizations have to be accountable to a diverse range of stakeholders including customers, investors, regulators, and social activists as well as the wider civil society. However, what are missing in this list are the employees who are as important as the other stakeholders.

Indeed, while it is fashionable for organizations to take care of their external customers, often they forget that their employees matter as well. After all, it is the employees who make things possible for organizations with their hard work and contributions apart from their skills and expertise.

In recent months, there have been spates of corporate scandals relating to violation of ethics wherein companies such as the German Automobile major, Volkswagen, have admitted to “cheating” in terms of manufacturing cars that are designed to report false emissions levels.

This is a clear case of systemic failure since in this case, the company as a whole had “systemized” this aspect of manufacturing cars that are “geared to beat” the emissions norms.

However, what transpired in reality was that instead of admitting to systemic failures, the company simply fired some employees for being responsible for the scandal.

This Does Not Mean that Employees are Shielded

Having said that, it is not the contention here that organizations must shield errant and deviant employees as well as not take action against the top management and the CEOs since these people are the ones with the overall responsibility.

Indeed, if organizations do not take action against the top management, then the overall impression is that they are callous and unresponsive to the needs of the people. Therefore, our view in this aspect is that organizations must separate systemic failures from individual cases of deviance and take action accordingly.

Moving Away from the Scapegoat Culture

Further, organizations must also ensure that whenever there are systemic failures, then they must first start from the top instead of searching for “scapegoats” in the rank and file employees. In addition, our view is that whenever systemic failures happen because of bad policies, then the entire top management must be replaced as well as the Board of Directors being held to account.

Thus, what we are advocating is a more humane and humanitarian approach whenever there are corporate scandals wherein the need to “look within” and indulge in some “soul searching” would serve their cause rather than continuing with “business as usual”.

Some Examples from the Real World

For instance, after the worst disaster in the history of corporates which is the Bhopal Gas Leak incident, the senior management was shielded whereas the internal inquiries blamed individual employees for the disaster.

Even three decades after the incident, there is yet to be any progress in terms of admitting systemic and organization wide negligence that lead to the disaster. Apart from this, there are numerous examples of how systemic failures are “covered up” and instead the blame game starts wherein individual employees are punished.

This can be seen in the way the Big Banks in the United States and Europe were left off with fines and “slaps on the wrist” rather than being asked to “clean up” their entire pervasive culture of wrongdoing.

Indeed, the fact that these banks continue to indulge in “risky behavior” even now means that no lessons have been learnt from the Economic Crisis of 2008. In addition, there is also the case of the Enron scandal where though the top management and the leadership were handed jail terms, there was not attempt to go after the “enablers” such as the rating agencies, the financial regulators, and the broader institutional investors all of whom had a role to play in causing its collapse.

An On Balance Assessment of Accountability and Learning from Failures

On the other hand, organizations sometimes have the task of ensuring that errant and deviant behavior is punished. For instance, in recent years, there have been increasing instances of cyber crime targeting big corporations. The examples of Target and HSBC reveal that such hacking leads to losses for all stakeholders.

Therefore, it is indeed the fact that these organizations did the right thing by overhauling their digital networks and investing in better security software apart from establishing negligence and holding the concerned employees accountable.

Thus, as can be seen from the points made so far, organizations have to “balance” the needs of the various stakeholders including employees and at the same time, also have to ensure that after each incident and disaster, they engage in some serious probes into the systemic factors that are responsible for such incidents.

Indeed, the fact that the organizations which strive to do this are the ones that “emerge stronger” after each setback means that the longevity of such organizations is guaranteed. After all, the “show has to go on” and this means that just as we tend to rejuvenate ourselves after each setback, organizations too must pick up the pieces and rebuild themselves after each scandal and ensure that they learn the lessons from them.

Conclusion: What Separates the Truly Great Companies from the Rest?

In concluding the article, it would be worthwhile to note that any organization is prone to slipping every now and then as the rapid pace of business means that they tend to overreach, tend to over-commit, and tend to get carried away in the pursuit of profits.

However, what distinguishes the really great companies from the rest of the pack is their ability to learn from systemic failures, hold the right people responsible, and not continue with business as usual after disasters and setbacks.


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