Make Smarter Mistakes

It took less than five minutes for Janet Skadden, 45, to realize she had made a mistake. She'd recently become manager of human resources for Cisco Systems, the networking-equipment giant based in San Jose, California. One of her first initiatives was to organize an afternoon of team-building exercises for 300 company managers. As the young executives took turns falling backwards into each other's arms, she could hear the dubious reactions. "They were saying, 'Who thought of this?'" Skadden recalls. "'Is this supposed to be fun?' It was so depressing."

By the time Larry Smith, 40, realized he had made a mistake, his partners had reached the same conclusion. Two years after cofounding US Interactive, a New York City-based digital marketing agency that builds corporate Web sites, Smith pushed to expand the company into a new line of business: online advertising sales. "I thought it would be a great opportunity, a real growth area," he says.

It was -- for the company's better-capitalized competitors. In June 1996, five months after the Smith-inspired diversification, with ad revenues just trickling in and the new unit detracting from the core business, US Interactive sold its ad-sales division.

Frank Bergandi's mistake was to follow the recommendation of his staff. Bergandi, 46, president and CEO of Objectivity Inc., a Mountain View, California-based developer of object-oriented databases, spent $150,000 on a new software tool. His sales and marketing staff had convinced him that incorporating the tool into one of Objectivity's new products would create a real advantage in the market. Only later did Bergandi learn that his technical staff had no idea how it could handle the engineering work. "No one had ever talked to them," the CEO concedes -- no one, including him.

In the annals of business mistakes, these three setbacks don't even warrant a footnote. No one was forced out or fired as a result. None of the errors really affected the bottom line. They were relatively small and easily avoidable -- the kinds of mistakes that all of us make all of the time. Which is what makes them so important.

Let's be honest: more of us are making bigger decisions in less time -- and with less information -- than ever. That's why, almost of necessity, we are messing up more than ever. The flip side of making progress is making mistakes.

"If you're not making mistakes, you're not taking risks, and that means you're not going anywhere," argues John W. Holt Jr., 49, coauthor of "Celebrate Your Mistakes" (Irwin Professional Publishing, 1996). "The key is to make errors faster than the competition, so you have more chances to learn and win."

An utterly reasonable proposition -- and one that most of us routinely ignore. Perhaps the most widely embraced delusion in business today is that it's possible (or even desirable) to create organizations where mistakes are rare, rather than a necessary cost of doing business. The problem with embracing this delusion: it encourages you to hide mistakes, shift the blame for them, or pretend they're something else. "Small mistakes are great learning opportunities," says Dennis Matthies, 51, a Bellevue, Washington-based learning consultant who spends much of his time coaching team leaders at Microsoft. "They show 'cracks' -- areas of vulnerability -- where you don't pay the price now but might later."

How can you make smarter mistakes? We sought advice from executive coaches, customer-service gurus, and people on the front lines of business. What follows is a six-step plan to help you learn from and minimize the setbacks that come with moving forward.

I. The cover-up is always worse than the crime.

It's the favorite aphorism of Washington politicians -- nearly all of whom ignore their own advice the moment something goes wrong. But businesspeople don't have to play by inside-the-Beltway rules. Every coach and service guru we consulted made the same point: the surest way to defuse a mistake is to 'fess up to it -- early. Don't wait to tell the people who need to know.

"The best damage control is to preempt conclusions and complaints before they happen," says Karen Otazo, 52, president of the Kelso Group, an executive-coaching firm with offices in Los Angeles, Hong Kong, and London. Otazo's clients include executives at Motorola and General Electric. "You will develop a bank account of goodwill and build people's trust in you."

Janet Skadden is a case in point. Her boss, Barbara Beck, Cisco's vice president for human resources, warned that the exercises she planned might be, as Skadden put it, "too touchy feely" for the company's fast-moving, tough-minded culture. But Skadden, who had signed up with Cisco just six months earlier, insisted that Beck let her try them anyway. "I'd worked at Tandem Computers for 13 years, and I'd used those same exercises there," she says.