Mistakes—Are you making enough?

In the annals of business lore, a legendary tale recounts an IBM executive’s million-dollar mistake. Dreading the CEO’s wrath, the executive prepared a resignation, only to be met with Thomas J. Watson’s iconic response: “Why would I accept your resignation when I have just invested a million dollars in your education?” This anecdote perfectly encapsulates the transformative power of “smart mistakes”—a concept particularly relevant for credit unions navigating today’s dynamic financial landscape.

The credit union conundrum: Risk management vs. learning

Credit unions understand risk. They have dedicated Chief Risk Officers and teams meticulously managing potential pitfalls. Yet, a culture of “no surprises,” often morphs into “no mistakes,” stifling innovation and growth. We readily celebrate successes, but how often do we acknowledge the valuable lessons learned from calculated risks—even if they don’t pan out as planned?

The power of “smart mistakes”

The key lies in embracing “smart mistakes”—those made with good intentions, a willingness to learn, reflecting a bias for action, and a commitment to improvement. Behavioral economics sheds light on how we can foster such a culture:

  • Loss aversion: People are naturally more sensitive to losses than gains. This can lead to risk aversion, hindering experimentation. By reframing mistakes as learning opportunities, we shift the focus from blame to valuable insights.
  • Nudges: Subtle cues can influence behavior. Encourage post-project analyses, regardless of the outcome. Analyzing both successes and failures surfaces invaluable knowledge.
  • Framing: How information is presented matters. Describe new initiatives as “experiments,” not “projects,” reducing the fear of failure associated with the latter.

Rewarding the right kind of mistakes

Let’s move beyond just celebrating successes. Recognize and reward thoughtful and bold mistakes that illuminate what doesn’t work. This fosters a culture of taking calculated risks and learning from experience. Distinguish between inaction and mistakes arising from action. The latter demonstrates a willingness to try, a crucial ingredient for progress. The language we use matters. When we conduct research or implement new programs, we often describe them as “experiments.” This aligns perfectly with the principles of behavioral economics. Just as in scientific research, not every experiment will yield the desired outcome. However, each one adds to our knowledge base and helps us refine our approach. As Dan Ariely aptly states, “The biggest enemy of progress is fearing mistakes so much that we end up doing nothing.”

Building a culture of learning

Credit unions must focus on creating a culture of learning. Too often, we think that learning consists of classes, or seminars, or conferences; valuable yes, but only part of the process. Creating spaces where teammates can brainstorm or share ideas without fear, and providing resources, support and encouragement to explore and experiment are critical. By embracing smart mistakes credit unions can foster a dynamic learning environment. This environment will drive innovation, lead to better member service, and propel credit unions towards lasting success.

Leadership role: Building a culture of learning

Leaders set the tone for any organizational culture. In fostering a culture of learning, credit union leadership plays a pivotal role. This includes:

  • Modeling curiosity and experimentation: Leaders who openly ask questions, explore new ideas, and champion calculated risks demonstrate the value of learning through action.
  • Creating psychological safety: Leaders must cultivate an environment where employees feel safe to share mistakes, offer diverse perspectives, and learn from each other without fear of judgement.
  • Providing resources and support: Leaders allocate resources for learning and development opportunities, and fund those experiments that are geared toward learning or trying something new.
  • Celebrating learning: Leaders actively recognize and reward employees who learn from mistakes, take calculated risks, and contribute to a knowledge-sharing environment.

Tracking the effectiveness of a learning culture goes beyond simply counting training hours. Here are some metrics credit unions can utilize:

  • Employee engagement in learning activities: Monitor participation rates in training programs, knowledge-sharing sessions, and internal innovation initiatives.
  • Idea generation and implementation: Track the number of new ideas submitted by employees and the rate at which these ideas are piloted or implemented.
  • Employee surveys: Conduct surveys to gauge employee perceptions of psychological safety, comfort level with taking risks, and overall satisfaction with learning opportunities.
  • Member satisfaction and growth: While not a direct measure of learning culture, improved member satisfaction and growth can indicate the positive impact of a learning environment that fosters innovation and better member service.

Let’s move beyond the fear of mistakes and embrace them as stepping stones to progress. By fostering a culture of learning and calculated risks, credit unions can unlock their true potential and thrive in the ever-evolving financial landscape.

Rick Leander

Rick Leander

Rick Leander is Founder and Managing Partner of LFB Holdings, a behavioral insights consultancy that works with established and startup enterprises. At LFB Holdings we teach clients how to leverage ... Web: www.lfbholdings.com Details