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The current credit situation has seen our politicians and financial leaders on the tv and in the news on a daily basis. The one thing that connects each and every opinion is that none of them ever admit to making a mistake, to doing anything whatsoever wrong. It’s cringeworthy. Even if they are caught on camera making the mistake, such as Gordon Brown declaring the end of boom and bust, they still try to wriggle out of it. Is it any wonder that so few people have any faith in our politicians (this Home Office survey here pins the figure at around 25%).
So when is a good time to admit your mistakes?
Clearly it takes a degree of bravery and humility to admit ones mistakes, perhaps why so few do it, but is it beneficial to do so? Apparently yes. I read a piece of research by Fiona Lee, a social scientist, this morning that compared company’s that blame failures on internal issues came out ahead, both in terms of public perception and profitability than those that blamed external factors. Ms Lee gave participants two annual reports, the first of which blamed a drop in earnings on strategic decisions the company had made and gave an explanation into them. The second report blamed the external economic environment for the poor results (sound familiar Msrs Brown and Darling?).
Pretty much without fail the participants found report A to be favourable, largely because it appeared that the problems the company faced were both known and concquerable by the company themselves. Company B by contrast seemed to be at the whim of externalities.
Where things get interesting however is when Ms Lee then goes back over hundreds of annual reports from years past. They collected statements from 14 companies over 21 years. Those like company A had higher share prices a year later than those company B’s.
If it’s so right, why do so few do it?
As mentioned at the beginning of this piece, it takes a brave person to admit their mistakes. It’s far more common to try and divert blame to others than take it on the chin ourselves. This research should provide ample evidence to support owning up, and if more were needed think about the trustworthyness of our politicians and consider whether you’d be happy to be lumped in with them. If you make a mistake, own up to it and put in place a plan to rectify the situation.