Mistakes happen in every business, but how you respond to them can make all the difference. When faced with an error, you have two choices:
- Own it fully:
“We made a mistake. It’s our full responsibility, and we are working hard to make things better.” - Deflect blame:
“It’s not our fault.”
So, which approach works better? A study by social psychologist Fiona Lee provides a definitive answer.
The Study: How Accountability Impacts Favorability
Fiona Lee conducted a fascinating study to determine how the way businesses communicate their faults impacts public perception and favorability. She analyzed hundreds of real corporate reports, each focused on explaining why the company had performed poorly in the previous year.
The findings were striking: companies that openly admitted their mistakes and took full responsibility—similar to Example #1—experienced higher stock prices the following year. In contrast, companies that deflected blame or denied responsibility (like Example #2) failed to build the same level of trust and credibility with stakeholders.
Why Owning Mistakes Works
- Builds Trust and Credibility
Taking responsibility shows honesty and integrity, which strengthens trust between the business and its customers, investors, and employees. People value transparency and are more likely to forgive mistakes when a company admits them openly. - Shows Accountability and Action
Admitting fault and committing to improvement signals to stakeholders that the company is proactive and serious about resolving issues. This approach conveys confidence in the organization’s ability to learn, adapt, and grow. - Enhances Brand Reputation
Owning up to mistakes can actually make a brand seem more human and relatable. It demonstrates humility and a commitment to doing better, which resonates positively with audiences.
Key Takeaway
Mistakes are inevitable, but your response to them defines your business. Taking responsibility and focusing on solutions not only improves public perception but also has tangible benefits, like increased stock prices and customer loyalty. The next time your company faces a misstep, remember: honesty and accountability are your best tools for turning a mistake into an opportunity to build trust.