Organizational Error Management Culture and Its Impact on Performance: A Two-Study Replication.

Abstract

The authors argue that a high-organizational error management culture, conceptualized to include norms and common practices in organizations (e.g., communicating about errors, detecting, analyzing, and correcting errors quickly), is pivotal to the reduction of negative and the promotion of positive error consequences. Organizational error management culture was positively related to firm performance across 2 studies conducted in 2 different European countries. On the basis of quantitative and qualitative cross-sectional data from 65 Dutch organizations, Study 1 revealed that organizational error management culture was significantly correlated with both organizational goal achievement and an objective indicator of economic performance. This finding was confirmed in Study 2, using change-of-profitability data from 47 German organizations. The results suggest that organizations may want to introduce organizational error management as a way to boost firm performance.

Internally Reporting Risk in Financial Services: An Empirical Analysis

“…In contrast, the error reporting literature also argues that the move to punish, and fear thereof, can be considered as a characteristic of a facet-specific 'error-averse management climate' which may be counterproductive to the future reporting of operational risk events (Van Dyck et al 2005;Van Dyck 2009;Gronewold et al 2013;IRM 2012). In addition, the work of Morrison (2011) introduces the notion of the futility of expectation, arguing that an institution will suffer if an individual believes the reporting of events to be futile, particularly first reports, (see also Taylor and Curtis 2010;Van Scotter et al 2005).…”

“…Further, the potential costs (reputation, increased effort, loss of bonus) and negative emotions (fear, embarrassment, guilt) incurred in self-reporting an event should not be understated in this climate as highlighted by Zhao and Olivera (2006). In contrast the facet-specific 'high-error management climate' as posited by Van Dyck et al (2005) is typified by open dialogue and communication with management around errors. This has the benefit of not only addressing errors in an attempt to correct them, but also in doing it in a timely manner, by placing less emphasis on punishment and more on learning from the incident.…”

“…Situational factors affect an employee's individual sense of right and wrong when, in our setting, they encounter operational risk events, and this forms shared beliefs, norms and common practices regarding the management of error reporting in the organisation (Van Dyck et al 2005). Thus, the interaction of the situational and the individual can lead an individual to make a decision to remain silent and ignore reporting important error events occurring around them (see Wang and Hsieh 2013) or actually undertaken by them (see Zhao and Olivera 2006).…”

“…It is also critical to how financial institutions model their risk losses to the regulator and maintain financial stability (Bryce et al 2011). With these sometimes-competing objectives in mind, financial institutions have attempted to instil a 'high-error management' climate (Gronewold et al 2013) in which the reporting of errors (in our case risk events) and the errors themselves are to be tolerated in an attempt to encourage ethical behaviour and ongoing error reporting (Van Dyck et al 2005).…”

“…In addition, a variety of theoretical approaches have been utilised with affective attachments (see Kenny 2014 for a rare banking example,) ethical climate theory and prosocial behaviour (see Dozier and Miceli 1985;Miceli et al 2012;Victor and Cullen 1987;Van Dyck et al 2005) all apparent in the literature. The theory of 'error reporting' and the ethical dilemmas it causes within organisations is well established in a number of industries including: Auditing (Gronewold et al 2013); Aviation (Catino and Patriotta 2013) and Health care (Uribe et al 2002).…”