IBM may have survived the Great Depression, but in the 1950s, it was in a precarious position. It chose not to lay off part of its workforce and to maintain inventory at high levels. It was imperative for these inventories to be sold in order for the company to survive.
At that time, a big government contract, worth $600,000, was on the table. Unfortunately, the salesman failed, and IBM lost the bid. That day, the salesman appeared disappointed in Mr. Watson's office. He sat down and placed a folder containing his resignation on the desk of the CEO and founder of IBM. Without looking at it, Mr. Watson knew what it was. He expected it.
He asked, "What happened?"
The man described every step of the deal. He pointed out where mistakes had been made and what could have been done differently. Finally, he said, "Thank you, Mr. Watson, for giving me the opportunity to explain. I know we needed this deal. I know what it meant for us." He got up to leave.
Tomas Watson met him at the door, looked him in the eyes, and handed him back the folder, saying, "Why would I accept this when I've just invested thousands of dollars in your training?"
Watson may have been a tough leader with several flaws, but his anger was mainly directed at those in management who failed to think ("Think" was IBM's motto, coined by himself and pervasive throughout the company). However, one of his charisma's was this: he created a corporate culture where mistakes were acknowledged (as long as they were "innocent" and never repeated).
IBM's culture recognized that mistakes are human and therefore inevitable. It recognized that through mistakes, personnel can become wiser and more productive. It recognized that strict punishment breeds fear and inertia, resulting in personnel not to think.