Executive perspectives on strategic error management

Abstract

We all know stories of CEOs supervising organizations in which grave errors occurred. Those errors challenged the organizations in their strategies, affected their resources, value, sustainable competitive advantage, and endangered their survival. In addition, for poorly managing strategic errors, those executives paid part of the price by losing their positions and reputations. As a result, executives and academics have begun to recognize that strategic error management is a critical feature of exercising the highest responsibility in an organization, and that it concerns individual behavior, organizational processes, culture, and relationships. Regardless of whether an organizational error occurs at the top or the bottom of the hierarchy, strategic error management refers to all actions that top executives of an organization undertake (or fail to) in order to disconnect latent errors from actual and potentially adverse consequences, repair the damage done, learn from the errors, and seize the potential new strategic opportunities emerging from the errors. The first step of effective strategic error management made by a top executive consists of identifying error signals as discrepancies-positive or negative-of clarifying the norm on which the judgment is based and asking for additional information. The acknowledgment of organizational errors is the next step, leading top executives to mentally and individually construct an organizational story that includes the error, and then share this story with others. Of particular importance for successful strategic error management is the relationship between the executive team and the board of directors. However, engaging the whole team requires a "we" culture instead of a leadership style based on an individual personification of power.