On Anniversary of Challenger Explosion, Study Examines Why Organizations Repeat Big Mistakes

AUSTIN, Texas – On the 30th anniversary of the explosion of the Challenger space shuttle, recent research from the McCombs School of Business at The University of Texas at Austin examines why large organizations as diverse as NASA and BP have a tendency to make the same mistakes again and again, sometimes with serious and far-reaching consequences.

The study, written by Professor Emeritus Pamela Haunschild and Associate Professor Francisco Polidoro of the McCombs School and Assistant Professor David Chandler of the University of Colorado Denver, was published this fall in the journal Organization Science.

Previous research argued that organizations either learn from their mistakes or don’t, but the new research shows that organizations across all industries actually go through cycles of learning and forgetting, and the periods of forgetting can have tragic (but preventable) outcomes.

The learning stage of the cycle typically occurs after an organization has just experienced a significant accident, referred to throughout the study as a “serious error.” Serious errors push firms toward a focus on safety but consequently pull them away from other priorities, such as efficiency or innovation. Over time, the effect of a serious error on safety weakens (or is forgotten), allowing alternative activities to emerge that lead to subsequent errors.

Researchers already know that these errors are disruptive within companies, but Polidoro’s study explains how the behavior of the same organization changes over time to cause the repeated errors in the first place.

The problem, explains Polidoro, is that organizations can’t operate with their attention focused equally on both safety and nonsafety objectives. While safety and profitability, for example, are not mutually exclusive, they do compete.

“What we have found is that organizations manage these conflicting goals by oscillating between them,” says Polidoro. “One [goal] isn’t necessarily better than the other, but there has to be a compromise.”

Previous research has said that it’s possible for companies to be equally good at two competing goals, but Polidoro and his co-authors suggest that this is an unrealistic scenario. Polidoro points out “there was no single data point in our entire sample to support that,” which corroborates the notion that it is incredibly challenging for companies to maintain sharp focus on safety while also excelling at other goals, such as innovation or efficiency.

To understand the dynamics that lead to repeated organizational errors, the researchers examined 146 pharmaceutical companies and found that 48 (or 33 percent) experienced a serious drug error between 1997 and 2004. They find that following a serious error, drug companies react by significantly reducing patent applications (innovation focus) while increasing drug testing and scientific articles connected to new clinical trials (safety focus).

Those changes indicate the company has turned its attention away from innovation and back to safety in response to the serious error, which, for pharmaceutical companies, can result in safety-based drug withdrawals from the market, nonapproval by the Food and Drug Administration of a new drug, or new boxed warnings added to a drug’s label.

“However, over time, this caution and investigation into potential problems declines,” the authors write.

They find that organizations fluctuate between learning and forgetting because of pressures from external and internal forces. Forgetting can occur because of employee turnover, complacency (such as an extended period of no serious errors occurring), reorganization and changes in organizational culture, investor tension, and new executive leadership.

At the same time, organizations also have forces such as the media, lobbyist groups, and governmental agencies pushing them toward accountability, particularly in the wake of major problems or catastrophes.

“A period of no serious errors is not justification for weakening focus on safety,” says Polidoro. “We need to make safety more salient in organizational decisions rather than only caring about pushing new products to market, for example. Being aware of our tendency to forget should inform our actions to sustain our focus on safety.”

The full paper can be viewed here.