Making Mistakes

Imagine running a company where every time an employee makes a mistake that loses money for the company, the employee gets fired.  Or worse yet, the employee is prosecuted and goes to jail.  Such a company would not be very successful.  Employees would not have an incentive to do anything.  There are very few actions that one can take in life that have a zero probability of a negative outcome.  If one’s mandate is to avoid negative outcomes, one will give up taking action altogether and forsake all potential positive outcomes as well.

Successful companies need honest, hardworking and intelligent people who are willing to take calculated risks in the interest of the company based on information available at the time.  Situations change, the environment changes and business realities change. Sometimes things work out and sometimes they don't.  But all companies that desire to be successful need their employees to continuously make decisions and to take reasonable risks.  Successful companies train and inculcate this attribute in their employees.

However, if the culture of the organization changes such that employees’ interests become misaligned with the interests of the company and if employees deliberately make poor decisions that are likely to cause loses for the company while enriching themselves personally, the organization is doomed.  Such actions of employees become grounds for them getting fired, prosecuted and potentially jailed.

The difference between the honest mistake and the deliberate poor decision is identified by the intent of the action taken, the misalignment of interests and the unjust enrichment by the action.  In the absence of looking at these three things, both actions are likely to look identical from a distance.

What is true for successful businesses and their employees is true for successful governments and their employees as well.  Governments that desire to succeed and fulfill the aspirations of people, need government employees who are intelligent, honest, hardworking and who make lot of decisions and take reasonable risks.

In 1988 India enacted a law called the Prevention of Corruption Act that did not distinguish between erroneous decisions of government employees and those that caused them unjust enrichment (via bribes or corruption). The intent of the act should be to prevent a misalignment of interests between government employees and public interest and should not foster a culture of indecision which has become the norm in government.  In 2013 the UPA government proposed amendments to the PCA but the act could not be passed. The NDA government has proposed further changes and the amendment is currently in Parliament. If the dysfunction in Parliament ends, it is likely that the amendment will get passed.  I believe that in time, this will prove a landmark amendment that will reduce the culture of indecision in government and will encourage (at least a few to begin with) honest, intelligent, hard working and motivated officers to take potentially disruptive and game changing decisions in the public interest.  Some of those decisions will fail, but a few will succeed and that will in turn potentially change the trajectory of the country.

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