Dealing With Large Mistakes
By Joan Lloyd
Dear Joan:
I am a business owner who has had an employee work for me for approximately three years. She is a very well trained employee at that. She made a MAJOR mistake in one of our business dealings, in which she had to redo the whole job over, costing us literally thousands of dollars.
How do I handle the discipline of this person? She was in charge of this job from beginning to end and stated she could handle it. Now she has to do the job all over again, which will take approximately two weeks and expects to be paid the same salary for doing it the first time.
She does not feel the bite that the company has felt and doesn't seem to really worry about the fact that she lost the company money. She is a good employee and I want to keep her but this was a major mistake. I am thinking I should have her pay for her mistake by fixing it for free (off the clock) My question is - Is that asking too much? I already paid her once. I think she should pay for it out of her own pocket. Next time she will be more careful and probably not make the same mistake again. Please Advise.
Answer:
You do need to impress upon this employee the seriousness of the mistake-especially since she doesn't seem to realize the magnitude of the error. However, punishing her will not achieve the result you want.
As an owner you are acutely aware of every rise and fall in revenue. You invest your own money and sweat equity to build your business one, customer at a time. You have your own skin in the game, so a mistake like this is painful.
Your employees don't share your pain. They have a job, not a business. Whether you make a profit or not is usually not part of an employee's major focus, as long as they get paid on time. That's not necessarily self-centered; it is just the nature of the arrangement. You take personal risk by being an owner and therefore, you reap bigger rewards and take bigger personal risks if things fail.
For example, if you make a bigger profit on a job than you anticipated do you also give the employee a bump in pay for that job? If you are sued for something, do you pass the hat and ask employees to help you cover the cost?
Now before I hear a howl of protest from all the excellent employees out there...I need to say that there are many employees who are committed and focused on helping the company make money and grow, but let's be realistic-it all ties back to making sure the company grows so they can grow with it. The bottom line is that if the company fails, they simply leave and find another job. If the business fails for you, it's financially and emotionally devastating.
You may not like to here it but this mistake may also be partly your fault. If this was such a costly piece of work, why weren't you monitoring it more closely? Did you delegate it without any oversight? In the future you may want to meet one-on-one with your employees on a regular basis, to hear progress reports and do some coaching.
Making her correct the mistake without paying her would likely backfire, even if it was legal. However, since you mention having her work "off the clock," I'm assuming she is an hourly employee. If she is hourly, and had to correct this error after working her regularly hours, in addition to paying her for her regular hours, she would also be entitled to overtime pay for any hours in excess of 40 in a given work week. I'd recommend a different approach.
Sit her down and explain how much this mistake has cost, both in direct and indirect costs. Paint a clear picture about the impact that has on the business. (Often, employees think the business makes much more money than it actually does. They see customer invoices and naively assume a lot of that income goes directly in the pocket of the owner, rather than to taxes, insurance, rent, employee benefits, etc.)
In fact, this may be a wake up call to you to be more proactive about regular communication to all employees about your company's financial performance. Often, when owners share the real costs of running the business, employees are surprised-and much more cognizant about managing costs and avoiding mistakes. If you are reluctant to share actual dollars, then use percentages.
Once the employee understands the serious nature of the mistake, ask her for her plan on how to fix it. Also ask her what lessons she can take from this (such as asking for help sooner, getting you involved at checkpoints to monitor progress). Explain that this will require her to fix the problem quickly, even if it means working longer hours. Perhaps you may decide to give her less of an increase this year (or non at all), if she has a pattern of errors or other problems with her performance.
The main point here is that punishing employees for mistakes is usually not a good practice. People don't make mistakes on purpose. That's why they are called mistakes. If you can use this as a learning opportunity, she will not make the mistake again. If you choose to punish her monetarily for this onetime error, you will likely lose her and create fear in everyone else.
In the end, there are lessons for both of you. Chalk it off as part of the risk of running a business but use it as an opportunity to change how you manage and monitor the business going forward.
