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The hidden peril of firing an employee for a single mistake

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Here’s the scenario: An employee at a large financial institution had made a significant mistake that could cost the company a considerable amount of money.

The act wasn’t a result of laziness or incompetence – the individual was a top performer. The crux of the issue is that the team member exceeded their authority in an attempt to solve a problem, which then inadvertently created an even bigger one.

What’s more is that the mistake was compounded by the fact that the team member tried to contain and fix the situation on their own instead of bringing it to the attention of their boss. All of these factors led to the company scrambling to redress the situation as well as give serious consideration to whether the employee should be let go.

As history and politics have proven time and again, the cover-up is often worse than the crime itself.

This was certainly true for Volkswagen during its engine emissions scandal. When employees realised that their new engine would not meet the required emissions standards and performance criteria, they decided to install software in over 11 million cars to defeat the emissions tests.

Part of the problem at Volkswagen was the climate of fear and avoid-failure-at-all-costs mentality that then CEO Martin Winterkorn had instilled in the culture of the organisation. Employees clearly felt more comfortable using their collective ingenuity to cover up the problem rather than bring the issues to light early on and work towards finding solutions.

The resulting damage to Volkswagen’s reputation and financial position from the cover-up far exceeded anything that would have come from exposing the failure at the outset.

Great leaders over the years – people who’ve had key people on their team make big and expensive mistakes – have consistently stated that their resounding position is that they were unwilling to fire a good employee over a single mistake.

In his insightful book, Principles, legendary hedge fund manager, Ray Dalio, writes at length about his views on mistakes. He believes that if employees are punished or fired for making mistakes, then they will naturally cover up their tracks, leading to potentially disastrous outcomes. The Volkswagen scenario is a case in point.

We all make mistakes. The question to ask yourself is whether you’ve created a culture in your organisation that encourages others to bring those mistakes to light before it’s too late.

This article was first published as part of Robert Glazer’s Friday Forward series.

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