The Link between Organizational Errors and Adverse Consequences: The Role of Error-Correcting and Error-Amplifying Feedback Processes
We examine when and how organizations experience major adverse outcomes as a result of latent errors in their operations—i.e., unintended deviations from pre-specified rules and standard operating procedures that can potentially generate adverse outcomes of organizational significance. To address these questions, we develop a conceptual framework around organizational feedback processes for error correction and error amplification and their organizational antecedents. We illustrate the framework using two contrasting cases. In one case set in an investment bank, several recognizable precursors of errors were present over an extended period of time and eventually contributed to losses in excess of $1 billion. In the other case set in a hospital that adopted several recommended practices for effective error management, errors nevertheless caused the preventable deaths of three infants. We discuss the challenges and opportunities for future research about the role of organizational feedback processes in linking latent errors and adverse consequences.