Apology and Organizations: Exploring an Example from Medical Practice

Abstract

In 1987, the Veterans Affairs Medical Center in Lexington, Kentucky took a surprising step. They decided that when they made a medical error they would truly "come clean" and fully assume responsibility for the error, including apologizing for it. Over the next decade, they went from being one of the highest net legal cost hospitals to among the lowest net legal cost hospitals in the VA system. This paper uses their experience as a springboard for exploring the potential for the use of apology by organizations. Topics discussed include (i) the impact of apology on learning to prevent future errors, (ii) divergent interests toward apology stemming from principal-agents tensions in employment, risk preferences, and sources of insurance, (iii) non-pecuniary benefits of apology to corporate morale, productivity and reputation, (iv) standing and scope when apologizing, and (v) the articulation of policies toward injuries to others.

JEL Classification: K40, K41, K00