Rising Cost of Errors

In these opening remarks, we would also like to allude to the viral impact of failed decisions in today’s information-rich and interconnected environment. Corporate errors are instantly visible in a world of global communication and are increasingly less pardonable. Consumers, advocates, activists, and citizens at large get information at their fingertips almost instantly, which in turn can have serious repercussions for organizational survival. For example, a quick Google search for “Toyota brake problems” generated about 4 million links on the web, while the search for “BP oil spill” generated 387 million links.⁵ Before the Deepwater Horizon rig exploded and sank on April 20, 2010, BP was Britain’s biggest company with a stock market value of 122 billion pound sterling, and by June 10, 2010, the oil spill wiped out 47%, or roughly 50 billion pound sterling, of its value. And this may not completely reflect the erosion of customer goodwill, loss of human lives, cleanup effort costs, and countless payments and retributions that may follow. While the exact cause of the spill is still unknown, someone somewhere perhaps made a decision that eroded half the value of the company in a matter of days.

While the consequences of the BP oil disaster are somewhat immediate, the erosion of a firm’s equity in the marketplace, in many cases, could be slow and silent. Consumers vent on the web and on social media sites, and the epidemic can travel rapidly to other current and potential consumers. According to a study published by Forrester Research and Intelliseek in 2006, recommendations from other consumers, through consumer-generated media, were the most trusted form of advertising vis-à-vis other popular sources of advertising. More than 4 in 5 respondents claimed trusting the recommendations that other consumers made on various products and services. And then there are numerous case studies of consumers venting their frustration on the web, which went viral in a matter of hours. All it takes for such information to be created and widespread is an unpleasant moment of truth, or one wrong decision made by an individual employee. In reality though, some of it is unavoidable—a chain is only as strong as the weakest link. And that weakest link could be a bad decision made with good intent—an employee who thought he was being helpful to the customer but was perceived otherwise or somebody somewhere refusing to accede to a seemingly unjustified customer demand that then blew out of proportion.

The purpose of the subsequent chapters in this book is not to propose a method to avoid all such errors. An error-free organizational performance is perhaps not a realistic or attainable goal. Further, sometimes the criticality of a quick decision leads to an expedited decision-making process where little time might be available to gather and process the necessary information. However, where possible, managers and frontline workers should tap into vast amounts of data that are available to them to provide justification and validation for their decisions. Decisions based on beliefs and without forethought rather than empirical validation would continue to adversely affect organizations and erode their value. We propose that decision makers can do much better than this!