Employees have a natural fear of making mistakes if the consequence is to be called out and embarrassed in public, or even faced with job loss. A leader who assumes the blame while passing the credit sends a strong message that mistakes are a part of life, and that mistakes are opportunity to learn and grow.
As an innovation leader, you want your employees to feel comfortable delivering bad news to you. You want them to own their mistakes and get help to fix them. By inspiring those beneath you, your employees will emulate your best traits, which will include assuming the blame for themselves.
When a project is late because an employee goofed on a schedule or failed to deliver a component, you want to know about it. Unless the employee reports his or her own mistake, it’s likely that you’ll never know the reason for the delay.
Setting a good example will help your organization stay ahead in the innovation race.
Researchers Fiona Lee, Christopher Peterson, and Larissa Tiedens put a number on leadership candor when they analyzed the annual financial reports of fourteen companies over the course of twenty years. In their report “Mea Culpa: Predicting Stock Prices From Organizational Attributions,” they looked at each CEO’s annual “letter to stockholders” to determine whether he or she showed evidence of either taking responsibility or blaming financial trouble on an external cause such as the economic environment. They gauged the level of personal responsibility by identifying key excuse phrases like “the dollar was particularly weak” or “it was one of the worst winters on record.”
Taking financial data into account, their research revealed those companies whose leaders took responsibility for poor performances were more resilient. They found the share value of these open-book companies improved by an average of 19 percent, while the companies of those leaders who blamed external factors improved by only 14 percent.
Not a big difference? In a billion-dollar company, a difference of five percent is $50 million. No matter who you are, that’s a lot!
Innovation leaders who take responsibility for their companies’ shortcomings send an important signal to all of their stakeholders, including investors. They’re saying that when they see a bad situation, they do everything in their power to remedy it. Meanwhile, those leaders who blame environment factors give the impression that they’re at the mercy of these same external factors and don’t have control over their organizations. Seen from that perspective, it’s easy to understand why investors get squeamish and run from companies—and their leaders—who don’t take responsibility for their failure to innovate and stay ahead of the pack.
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