The Small BIG: Small Changes That Spark Big Influence (22 page)

A
certain kind of awe is due to the turnaround artist who can turn bad into good—lemons into lemonade, straw into gold. Such accomplishments are especially impressive when the bad is some form of failure that gets transformed into consequent success. Note that the operative term here is
consequent
. We’re not referring to the
subsequent
success occasionally brought about by perseverance, belligerence, or an attitude of “try, try, and try again.” Rather we are talking about faults that become game-winners
precisely
because they were faulty.

There are a number of ways to make previous errors bear fruit. Some, such as reengineering a business model, eliminating system bugs, and finding new ways to navigate around unforeseen barriers, will require a substantial investment in time and resources. This is big stuff and often it will be crucial. But small things are important too. Surprisingly one of the easier ways to snatch victory from the jaws of defeat doesn’t even require you to think about your past mistakes. Instead the advice is to make a small shift and think about the mistakes that
others
have made instead.

Charlie Munger is both brilliant and wise—attributes that yield big payouts. It is because of those conjoined traits that he is Warren Buffett’s business partner and most trusted adviser within the investment firm of Berkshire Hathaway, which, since its inception in 1964, has been successful at levels never before seen in that industry. Mr. Munger was once asked to describe the steps he takes to ensure that any choice he makes is likely to be a sound one.

He replied simply, “I review my inanities list.”

Mr. Munger keeps a file of foolishness…filled with the flops and the fatal fumbles that brought them forth. Rather than following the conventional wisdom of identifying and imitating the shrewd decisions that have led to business successes, as chronicled in such bestsellers as
Good to Great, In Search of Excellence,
and
Made to Last
, he chooses to spend his time identifying and avoiding the inane decisions that have led to others’ business blunders.

So why might an activity that on the surface appears relatively small make for a potentially big difference—not just for Mr. Munger’s and Berkshire Hathaway’s decisions, but for yours as well?

One reason is that large-scale achievements can rarely be attributed to any lone factor. The foundation of great success is normally constructed of numerous well-crafted and interlaced components. So, it would be difficult indeed to duplicate them all in your business efforts or to specify the decisive one. But that’s not the case with mistakes. A single mistake—whether caused by a lack of essential knowledge, an overblown belief in one’s abilities, or a naïve set of economic expectations—can bring everything crumbling down. Therefore it makes sense to not only develop your own “inanities list,” stocked with the business missteps and mishaps of others, but you should consult that list whenever important choices and decisions arise. Of course it goes without saying that listing the struts of business triumphs will be potentially helpful too, but any entry on the list won’t have nearly the potential game-changing impact.

There is a second reason that supports the construction of your own inanities list. Even though we have been brainwashed to believe that positive information is always better than negative information, that’s simply not true. In fact, after an extensive review of relevant research, respected scholar Roy Baumeister and his colleagues concluded that people “attend to, learn from, and use negative information far more than positive information.”

But that’s not all: Downside information is also more memorable and is typically given more weight in decision making. Accordingly, if you want to create an inventory of items that is likely to grab you and your team’s attention, be easy to learn from, linger longer in memory, and offer instructive advice that spurs you to real action, you would be advised to construct a list that looks more like Charlie Munger’s and less like the best practices you are most proud of.

There is a third benefit to listing and then learning from others’ worst practices. Because your list will be comprised of the gaffes that someone else has made, it will be much easier to recognize them for the clunkers that they are. If they were your own mistakes, you would have to fight—often unsuccessfully—the inclination to convince yourself that they weren’t mistakes at all, but instead simply instances of bad luck or unfortunate timing outside of your control. But the outward-directed character of others’ prior lapses in judgment avoids that ego-defending bias and offers up a highly effective teaching tool for your own benefit. It’s a benefit that can be extended to team members, too. That is, the astute leader can point to the mistakes of others rather than of teammates to steer their future behavior and sidestep the resentment that sometimes comes from direct criticism of one’s colleagues.

By the way, the potential upsides of listing others’ previous downsides aren’t limited to the business environment. Educators need not be shy in highlighting errors made by former students when constructing a “things to avoid” list for current students. A doctor, keen to ensure that a patient avoids situations in which a current medical condition could be exacerbated, would be advised to allude to a previous patient or two who made such a mistake and regretted it. A personal trainer could point a new client to prior mistakes made by others when using exercise equipment as a way of ensuring that they avoid the same errors and get the best out of their training regimen.

Jim Collins is the impressively gifted author of bestselling business books such as
Good to Great
and
Built to Last
that describe what others have done right to achieve significant commercial success. He’s convinced that access to this kind of information will help you achieve success as well. Charlie Munger is at least as renowned for his own intellectual gifts and financial savvy. Yet he recommends creating, and regularly consulting, a list populated not by instances of what others have done right but by instances of what they’ve done wrong.

Is there a way to reconcile these seemingly opposing recommendations from two great business minds? There may well be. It’s noteworthy that one of Collins’s more recent pieces of advice, contained in his book
How the Mighty Fall
, spotlights the major reasons that businesses fail—for example, denial of risk, unwarranted haste, and lack of intellectual discipline. We’d wager that vivid occurrences of each of those reasons exist on Charlie Munger’s inanities list. It appears, then, that both men are saying something similar after all—
one small thing that leads to right moves in business is to have ready access to a catalog of others’ wrong moves
. The first key step is to create one, refer to it frequently, and use it systematically when making important choices. It’s a small thing that could make a big difference.

Of course failure to adopt this
SMALL
BIG would be to ignore consistent research findings and sage advice regarding the value of documented errors…that in itself could be a mistake worthy of your list.

I
n the last chapter, we covered what is known about ways you can benefit from the past mistakes of others. The topic of this chapter concerns what is known about ways you can benefit from your
own
past mistakes.

Lifespan researchers have concluded that a history of setbacks, losses, or hardships—if they are handled constructively—gives people not downbeat, damaged, tentative personalities but upbeat, healthy, confident ones. But does the same apply to your professional development, too? Put another way, could a shift in context so that your business takes steps to actively manage—rather than banish—mistakes and setbacks lead to big differences in its overall success and profitability?

Emerging evidence from something called Error Management Training (EMT) suggests that it well might. Of course the critical component of the process lies in the “if handled constructively” stipulation for success. When previous missteps are handled constructively, two major payoffs emerge. Not only will they act as good guides for future improvement, but they can even provide good opportunities for your future influence attempts, too.

Traditional training approaches are typically designed to guide trainees through a learning environment that is based on examples of success and where the elimination of slipups is emphasized and desirable. These conventional methods seem reasonable because errors can disrupt workflow, be time-consuming to fix, and frustrate the trainee as well as their trainer. They might even erode the confidence of both in that trainee’s abilities. However when organizational scientists Nina Keith and Michael Frese examined the results of 24 separate studies, they found the Error Management model, despite running wholly counter to the traditional error-avoidance approach to training, to be far superior.

There are two necessary components to EMT. The first involves urging trainees to actively undertake “to be learned” tasks in order to encounter mistakes and therefore recognize where and how they occur. The second component involves instruction in how best to react, psychologically, once an error is made. One especially important instruction concerns how the trainer provides feedback to trainees. Small changes in the way feedback is d
elivere
d—for example, by using phrases such as “Errors are a natural part of the learning process”; “The more errors you make, the more you learn”; and “Errors teach you what you are still able to learn”—are crucial and can make a big difference, because without them mistakes are more likely to be experienced as defeats rather than as guideposts to success. Given the importance of this orientation to successful corporate cultures, it’s no wonder that IDEO, one of the world’s most innovative companies, has a motto of “Fail often in order to succeed sooner.”

But what happens when the goal ceases to be about training optimally for job responsibilities and instead becomes how to execute those responsibilities optimally on the job? Under those circumstances, the first component of Error Management Training—to look for chances to fumble the ball—is far from a winning game plan when dealing with real customers, coworkers, and superiors. However, the second component—thinking of and responding to missteps as learning opportunities—still provides a professional advantage. The advice here is, rather than playing the role of being an error hunter, position yourself in the role of an error opportunist. The error opportunist looks to cash in on any unintended stumble by learning from it in the recognition that both the individual and the organization can profit in the long run—profits that can, according to statistics cited by Professor Frese, turn out to be pretty handsome indeed. Compared to companies with a weak error management culture,
those with a strong error management culture are four times more likely to be among the most profitable companies in their industry.

It turns out that managers who take the necessary steps to foster a working environment of error opportunism rather than error hunting can benefit in other ways, too. A while ago a colleague of ours, Brian Ahern, sent us an article from a sales magazine describing the shock that the COO of a global hotel chain got after reviewing the results of the very costly “Seamless Customer Experience” program his company had put into place. It wasn’t the guests who had a seamless stay who reported the highest satisfaction ratings and future loyalty—rather, it was those who experienced a service stumble that was
immediately put right
by the hotel staff. There are several ways to understand why this occurs. For example, it may be that, after guests know that the organization can efficiently fix mistakes, they become more confident that the same will be true in any future dealings, leaving them with more favorable feelings toward the organization overall. We don’t doubt this possibility, but we have a hunch that another factor is at work too. The remedy may well be perceived by guests as “special assistance,” as something the hotel has gone out of its way to provide. By virtue of the rule for reciprocation, the hotel then becomes deserving of something special in return in the form of superior ratings and loyalty.

At a business conference, one of us overheard support for this reciprocity-based explanation when the general manager of the conference resort hotel related an incident that had occurred that very day. A guest had wanted to play tennis with her two young children, but the two child-size racquets the resort maintained were already in use. So, the general manager had a staffer drive immediately to a local sporting goods store, purchase another pair, and deliver them to his guest within 20 minutes of her request. Afterward, the mother stopped by the general manager’s office and said, “I’ve just booked our entire extended family into this resort for the Fourth of July weekend because of what you did for me.”

Isn’t it interesting that had the resort stocked those additional two children’s racquets from the outset—in order to ensure its guests a “seamless experience”—their availability would not have been viewed as a notable gift or service that warranted special gratitude and subsequent loyalty in return? In fact, the racquets may have hardly registered as a blip on Mom’s resort-experience screen.

What’s the implication for you? Is it a good idea to manufacture thin spots in the ice for clients or coworkers to fall through so you can be there to extricate them? Not at all. That would ultimately lead to the perception that dealing with you often requires some form of rescue. Much preferred is the simple recognition that people’s expectations are perhaps too high and modern business is too complex to be rendered error-free; honest mistakes will occur. The key is to recognize that directing resources (attention, training systems, staff, budgets) toward the utopian goal of preventing all such glitches is likely to be less effective (and much more expensive) than directing resources to the goal of resolving our mistakes and problems quickly and to high levels of satisfaction.

By no means does all this imply that quality control is unimportant. But it’s a fool’s errand to chase performance perfection, because—besides the reality that everyone’s fallibly human after all—“perfection” means so many different things to different people that it can’t feasibly be arranged for ahead of time. Error correction, on the other hand, can be customized to the aggrieved person’s view of what will constitute a satisfactory, and satisfying, outcome.

It seems that it is the unique customizability of the
reaction
to an error that provides it with the potential to be experienced as a personalized gift or service, placing the giver in a heightened position of influence, paradoxically, due to their gaffe.

In short,
problem-free
may not be as good in business as
problem-freed.