Advice for how to gracefully handle mistakes often emphasizes 1) taking responsibility for the error, 2) presenting a plan for the remedy, and then 3) fixing what was wrong. Although these directions sound simple, they can be extremely difficult to execute in real life. No one finds it easy to own up to a mistake -- particularly a costly one.
One case in point I came across recently was Brad. He manages a $2 billion hedge fund that had a terrible quarter -- two of his largest positions, both energy stocks, dropped 25%, turning what would have been a lackluster result into a disaster. He procrastinated on writing the shareholder letter for so long that both the marketing and compliance directors were constantly emailing him and stopping by his office.
He finally came up with an explanation: "The fund was negatively impacted during the quarter by weakening energy prices due to irrational supply factors and excess inventories." Brad sent it off, believing that he adequately addressed the issue. Did he?
Another example was when James Comey, director of the FBI, spoke in front of the House Judiciary Committee about the need for Apple to unlock the iPhone used by one of the San Bernardino, California, attackers. In describing some actions taken by the agency and other law enforcement entities immediately following the attack he said: "There was a mistake made in the 24 hours after the attack" that made it impossible later to cause the phone to back up to the iCloud.
Is this what an apology sounds like? Not to me.
As a professional investor, I am well acquainted with the phenomenon of thinking something is a great bargain, only to realize that the sale was just getting started and the prices would be further slashed each day. I have learned to tell clients that we bought a stock incorrectly, that we misjudged, mistimed, or misunderstood the environment or the market.
In his letter, Brad never acknowledged that he or his firm made a mistake. He made it seem that the fund suffered from external forces beyond management's control -- as if it were a victim of an assault or a disease. While, of course, he can't be blamed for not seeing the extent to which oil prices would fall, he had still miscalculated the downside.
The FBI director followed the exact same playbook. When Comey said, "There was a mistake made," he doesn't say who made the mistake, leaving us to wonder if it was all beyond their control.
Speakers and their institutions are often judged by the manner in which they communicate. In both cases, regardless of whether Brad or James Comey individually did anything wrong, their respective constituencies were affected by the words they chose and the tone they used. Being direct is a signal that you are confident enough to admit fault. In Brad's case, by not owning the bad news, he potentially lost even more of his shareholders' and clients' confidence. Comey, too, risked losing the trust of his colleagues, the president, other law enforcement agencies, the press, and the U.S. public.
Why is it so hard for most of us to say, "I did it"?
Many people are afraid of appearing incompetent in front of our colleagues and bosses. But what we sometimes don't realize is that it is worse to be viewed as a coward incapable of owning up to mistakes or accepting criticism. Rather than saying, "The plate dropped," it is good practice to say, "I dropped the plate" -- especially if that is exactly what happened. The best executives and investors "drop plates" all the time; without doing so, they would lack experience and a healthy understanding of risk.
Developing a culture where people feel comfortable admitting mistakes needs to start at the top, because employees watch their leaders for clues on acceptable behavior and etiquette. One of the most valuable things that a manager can teach her staff is the ability (no matter how embarrassing) to show fallibility, admit wrongdoing, listen to tough feedback, and persevere through the corrective action toward the next challenge.
I learned years ago that the most "cleansing" process for me, particularly when it comes to investment mistakes, is to take responsibility for losing positions and to be open with my clients and colleagues about what happened. Clients are never happy with poor performance, but accepting blame is far preferable to hiding or deflecting it. And being honest within our equity team improves our mutual trust and allows us to move forward effectively.
Of course, attorneys today play a major role in counseling clients to sometimes avoid all suggestion of wrongdoing. But in most workplace situations the mistake falls far below the legal threshold for damage management and control.
Getting a real apology out can be uncomfortable and even agonizing. We need to help each other learn to put the "we" or "I" before the "bought," "sold," "changed," or "lost," and then the bad outcome. The benefit in the long run far outweighs the short-term pain. When you accept and own up to an error, it becomes much easier to pinpoint its origination and analyze its progression through the system. You'll have a better chance of avoiding a recurrence.