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.

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