Christmas was days away, and a year-end work crunch at Cole Taylor Bank had just begun to wind down. Jean Schmidt, the bank's director of human resources and business planning, had hit all her deadlines. Only a single loose thread, a request that came directly from the bank's president, remained to be tied up: bonuses to the bank's top executives totaled a figure higher than the amount of money in the bonus pool. He called Schmidt and asked that she round down all bonus payments by a few thousand dollars each. "But," he told her, "it needs to be done so that the decreases remain invisible to the recipients."
"No problem," she replied. She phoned her compensation manager and left a voice-mail message that relayed the president's request. Later that night Schmidt called the office to check her voice mail. A message from her staffer left her believing that the bonuses had already been direct deposited. Rejiggering the amounts would be difficult but manageable. She slept peacefully that night, not knowing the disaster that awaited her the next morning. Over the next 24 hours, Schmidt learned firsthand the four stages of admitting a mistake.
Stage 1: Recognizing the mistake.
"As soon as I walked into the office the next morning, a vice president screamed at me, asking why $3,000 had been pulled out of his checking account. I literally broke into a cold sweat. It turned out that his account was debited for $3,000 before the bonus was direct deposited. That resulted in overdrafts on checks he had written. This guy ran right to the president. He told him that he felt as if money had been taken out of his pocket. He wanted the $3,000 back. The president was livid."
Stage 2: Taking ownership of the mistake.
"I decided that the best tactic was to be completely honest. I went to all the other executives whose bonuses were rounded down and explained the situation. Then I went to the president and told him that I was responsible for the mistake. I said the problem arose from the fact that my compensation manager and I had two different definitions of the word 'invisible.' I promised that I'd do a better job of communicating."
Stage 3: Confronting the underlying problem.
"I sat down and talked to my compensation manager. I was very open and direct about what I thought had gone wrong. I believe I've gotten through to him about the importance of maintaining a high level of customer service. He's smart, but sometimes he stops just short of putting himself in the customer's shoes. As a result of this mistake, he's learning to do that."
Stage 4: Picking up the pieces.
"In the end, there were no repercussions from the president. He told me he was happy I didn't try to smooth it over. I just wish I'd gotten to him faster, so that he heard first from me — and not from an irate vice president."
A version of this article appeared in the June/July 1997 issue of Fast Company magazine.