Managing organizational errors: Three theoretical lenses on a bank collapse

Vincent Giolito

No 15-033, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Errors have been shown to be a major source of organizational disasters, yet scant research has paid attention to the management of errors that is, what managers do once errors have occurred and how actions may determine outcomes. In an early attempt to build a theory of the management of organizational errors, this paper examines how extant theory applies to the collapse of a bank. The financial industry was chosen because of the systemic risks it entails, as demonstrated by the financial crisis in 2008. It examines the demise of the Fortis group, a Belgian bank that collapsed after a strategic acquisition in the wake of the financial crisis. This paper adds to the current theory of errors by showing how errors defined as rule violations are by and large irrelevant; to the theory of "natural accidents" by exposing how the daily interconnection between an institution and its peers constitutes a factor that makes catastrophes more likely; and to the theory of high reliability by shifting the focus from the organizational to the individual- and team-levels specifically for the top management.

Keywords: Errors; Top management; Banks; Accidents; High-reliability organizations (search for similar items in EconPapers)
JEL-codes: L10 M14 (search for similar items in EconPapers)
Pages: 56 p.
Date: 2015-08-26
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