It seems hard for many business leaders to admit they made a mistake. They fear losing credibility or suffering embarrassment. But not admitting a mistake is often worse. Employees usually know when a mistake has been made and are waiting for the leader to step up and take responsibility. When a leader fails to do so, their credibility often takes a worse hit than if they had simply admitted the mistake at the get go, and the business reputation suffers as well. Their ability to lead effectively is impacted. On Monday, the new head of North American operations for Toyota ( TM) stood up and admitted that they had made a mistake and lost their way. Yoshimi Inaba said they had become "complacent and arrogant" and that he was going to conduct an "overall re-planning of our North American operation." That takes guts, and he was right. By doing this he sent a message to his employees, partners, and prospective customers that you're going to get the truth from him and his organization. This serves as the foundation of a successful business. As a nation, we have yet to see anyone in the financial sector or government stand up and take responsibility for their part in our financial bust. Quite the contrary. All we have seen is finger-pointing, especially in Washington. Apparently nobody wanted to loosen lending standards and make housing "more affordable." Politicians who were on record years ago pushing for these changes have "revised and extended" their remarks, saying the exact opposite today.
It appears that no one at Fannie Mae ( FNM) and Freddie Mac ( FRE) made the strategic decision to attack residential mortgage market share. Subprime lending by major financial institutions was created out of thin air. Mortgage- backed securities, credit default swaps, and collateralized debt obligations appeared one day and began trading. Interest rates were magically low for years. The list goes on. The financial industry has lost the confidence of Main Street because no one is accountable or takes responsibility for their actions or decisions. I'd add that politicians have also suffered a blow to their credibility, but you know the deal. I come from an organization where accountability is a guiding precept. It has to be or failure is certain. A tragic mishap in my former squadron serves as a poignant example. On Dec. 8, 2008, an F/A-18 Hornet assigned to the "Sharpshooters" of VMFAT-101 was conducting carrier operations off the coast of San Diego. When the aircraft developed engine problems, the student pilot was ordered first to fly to the closest field at Naval Air Station North Island and then to its home field, Marine Corps Air Station Miramar, only eight miles away. As he approached Miramar, the remaining engine gave out leading to the failure of both engines. The student attempted to turn the aircraft away from the populated area and pulled the ejection handle. The aircraft slammed into a house, killing four members of a Korean immigrant family. Don Yun Yoon was at work and lost his mother, wife and two children. The Marine Corps immediately convened a mishap board to investigate.
As a result of the investigation, the commanding officer of the Sharpshooters, a former colleague, was relieved. Three other officers and 12 Marines were disciplined. The pilot was grounded and faced an additional board to determine if he will ever fly again. People who were identified as responsible were held accountable. The Marines learned valuable lessons, hoping to avoid this type of mishap in the future. I believe that this type of leadership should be displayed by our leaders in Washington and on Wall Street and instilled in the culture. While not promising that we wouldn't be in this mess, I can assure you that we'd know who was responsible and they'd be held accountable. We'd also know how we're going to avoid a similar event in the future. Effective leadership requires a display of authority, accountability, responsibility and trust. These are traits that identify a culture of an organization that can execute with unparalleled success.