IBM's Tom Watson was asked if he was going to fire an employee who made a mistake that cost IBM $600,000. He replied, "No, I just spent $600,000 training him. Why would I want somebody to hire his experience?"

I love Tom Watson for that courageous decision, which of course is very true.

Can we still find CEOs/Managers like Tom Watson today?

Food for thought. All the same, not every CEO can afford to do so.

It will depend on the nature of the mistake. If employee is a "true asset" and the mistake made could provide experience, clues and answers that may potentially lead to ground breaking profits for the company, then no wahala. Otherwise, if the mistakes made was due to recklessness, or a lackadaisical attitude to work, i wouldn't just let the employee off, I would also be suing to recoup cost of damages made to the company.

As a shareholder, even if the employee is a "true asset", I would question the quality of experience gained by losing 600 grand, and the Judgmental call of the CEO who says such an employee could remain at his job. If there are no consequences, then how much has the employee really learnt? To call this a a "cost of training" is not only wrong but sends a wrong message. In the end, if the company files a chapter 11, it's not the CEO that loses, it's the shareholders!

violent:
It will depend on the nature of the mistake. If employee is a "true asset" and the mistake made could provide experience, clues and answers that may potentially lead to ground breaking profits for the company, then no wahala. Otherwise, if the mistakes made was due to recklessness, or a lackadaisical attitude to work, i wouldn't just let the employee off, I would also be suing to recoup cost of damages made to the company.

As a shareholder, even if the employee is a "true asset", I would question the quality of experience gained by losing 600 grand, and the Judgmental call of the CEO who says such an employee could remain at his job. If there are no consequences, then how much has the employee really learnt? To call this a a "cost of training" is not only wrong but sends a wrong message. In the end, if the company files a chapter 11, it's not the CEO that loses, it's the shareholders!

Everybody makes mistakes all the time. From the investor who gambles on a potentially risky stock, to the CEO that commits shareholder funds to loss-making projects, mistakes tend to happen in the corporate world. I've been part of a couple of errors myself, though maybe not at the level of $600k cost

I don't think any employee should be fired for that kind of mistake, unless it could be proved that the employee either (a) acted maliciously, or (b) did not seek appropriate approval or authorization to carry out the task that led to the mistake. A good corporate leader should discourage opportunities that showcase scapegoating and buck-passing. Usually, mistakes are made when a lot of people weren't paying attention, and it usually gets blamed on one poor sod. If I were to fire anyone for a mistake, I'd also can their boss along with them.

AjanleKoko:

Everybody makes mistakes all the time. From the investor who gambles on a potentially risky stock, to the CEO that commits shareholder funds to loss-making projects, mistakes tend to happen in the corporate world. I've been part of a couple of errors myself, though maybe not at the level of $600k cost

I don't think any employee should be fired for that kind of mistake, unless it could be proved that the employee either (a) acted maliciously, or (b) did not seek appropriate approval or authorization to carry out the task that led to the mistake. A good corporate leader should discourage opportunities that showcase scapegoating and buck-passing. Usually, mistakes are made when a lot of people weren't paying attention, and it usually gets blamed on one poor sod. If I were to fire anyone for a mistake, I'd also can their boss along with them.

If you would observe, my post took on two different perspectives: The Managers and the shareholders.

As a shareholder, I'm not inclined to believe in the theory that everybody makes mistakes. Cash is the soul of a business, if someone pisses of 600 grand in a single flick, I would want to know if that person is actually the most suited for that job, and why, if for any reason, should they remain at that role? I want to see someone take responsibility and I want to be sure appropriate checks and balances are put in place so that such mistakes do not repeat themselves again in the future.

Every mistake has a cost. I am currently helping to co-manage a pension fund product and we know that the ultimate beneficiaries of that product are people in their mid 60s to late 90s. These are people whose survival depend on me and my colleagues doing our jobs well, which meant selecting the best investments for that product. Supposing a huge percentage of my holdings is on IBM and a certain employee at IBM has just made a "mistake" which resulted in a huge economical cost for the company, then I would want to know if the future of IBM is actually in the right hands otherwise, how am i going to explain the consequences to my clients? How do I explain to a 70 year old that she wouldn't be getting any pensions that month because one of the companies we invested in had a "huge loss" due to "mistakes" made by a certain employee - who for some reason, is still at that same company, in that same role? Obviously, a 600 grand loss is nothing to IBM, but more than the amount of current loss, is the potential for future losses, and the fact that the 600 grand could easily have been a lot higher than that.

I saw you mentioned "an investor who gambles on a potentially risky stock" or a "CEO that commits funds to loss making projects" - in the eyes of a shareholder, these aren't necessarily mistakes. First, because investing with someone who "gambles on risky stocks" comes with its risk and you are responsible, as a shareholder for understanding these risks.

For instance, i know that investing with a trader at Goldman sachs who may potentially lose 1 million in a single trade and make 2 million in another, is a risky thing to do. I have an alternative of investing that same money in gilts where i can be sure of getting my money back any day any time. If i want to go in the way of the former, then it meant i fully understand the risk involved and would be demanding for higher returns than the latter.

Also when a CEO commits funds to a project, the intrinsic value and the share price of the company may likely rise or fall once the news is dissipated regardless, whether or not the project is a winning shot. The rise or fall in the intrinsic value represents shareholders judgment of the risk of the projects. When RBS insisted on buying ABN Amro, the share price fell by a huge amount, reflecting the fact that shareholders were not comfortable with that idea.

As a manager, I understand what you meant by discouraging scapegoating and buck-passing, but as a shareholder, I am only interested to know that the future of the company is in the hands of those who wouldn't pass off 600 grand loss as a "cost of training" the employee. When JPM whale, the same dude who had made the company huge benefits in the past, recorded a 2billion dollar loss, JPM insisted he wouldn't be sacked. But the outcry from shareholders was too much and several people at the top of the food chain eventually have to take some responsibility and bow out.

BizBloke:

Perhaps so.

True. But in an era where companies are looking for quick and immediate good results, most CEOs/ Managers will not tolerate such.

In all, like some commentators have said above, I agree with them that it depends on nature/type of the mistake.

Mustay:
Food for thought. All the same, not every CEO can afford to do so.

I agree with you...not every CEO's can do so.

$600,000 is enough to bankrupt a company most CEO's won't forgive any staff that carelessly looses such amount.

BizBloke:


Perhaps so.

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