Assignment #3
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Chapter Six— Detecting Weak Signals: Making Sure That You Are the First to Get the Worst News!
''Failure does not strike like a bolt from the blue; it develops gradually according to its own logic. [C]omplicated situations seem to elicit habits of thought that set failure in
motion from the beginning. From that point, the continuing complexity of the task and the growing apprehension of failure encourage methods of deci
C o p y r i g h t 2 0 0 0 . A M A C O M .
A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r ,
e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .
EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 1/31/2020 5:16 PM via FLORIDA INTL UNIV AN: 50485 ; Mitroff, Ian I..; Managing Crises Before They Happen : What Every Executive and Manager Needs to Know About Crisis Management Account: s8862125.main.ehost
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sion making that make failure even more likely and then inevitable.
We can learn, however. People court failure in predictable ways . . .''
Dietrich Dörner, The Logic of Failure 1
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In the last chapter, I argued that assuming responsibility is not solely or merely a matter of telling the truth, acknowledging the consequences of one's actions or
inactions, or saying that one is sorry. As important as these are, effective crisis management is much more a matter of putting the appropriate mechanisms in place
prior to a crisis that will help reduce the chances of a crisis and managing it more effectively once one has occurred.
Once again, it is instructive to consider Machiavelli as a prominent crises advisor. I can well imagine his stating the thesis of this chapter as follows:
Machiavelli: Dear Prince, you are extremely well advised to listen closely to all of the signals, however faint, of impending bad news. They are your only
first line of defense. You need to constantly scan your kingdom for signals of bad things that are about to happen, whether they are of your doing or
someone else's. This is the only chance you have to gain advantage.
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Therefore, set up throughout your kingdom ears and eyes that can pick up the weakest signals before they are apparent to your enemies. Furthermore, you
must have couriers transmit on a steady basis the results of these ears and eyes to a central location in your palace so that you can see what patterns, if
any, are emerging from the haze. I advise you to err on the side of acting on bad news, i.e., admitting that you may have been responsible for a bad
situation instead of stonewalling it. Therefore, my lesson is to pick up bad news before others do, admit your responsibility as soon as possible, and
undertake those actions to correct the situation.
The Importance of Signals
Prior to their actual occurrence, all crises send out a repeated train of early warning signals. If these signals can be picked up, amplified, and acted upon, then many
crises can be averted before they happen. True, in many cases, the signals are weak and filled with noise. Nonetheless, it usually turns out that there is at least one
person in every organization who knows about an impending crisis. The problem is that those who often know most about it are the ones who have the least power to
bring it to the attention of the organization.
The Space Shuttle Challenger
One of the most important examples of signal detection pertains to the tragic explosion of the space shuttle Challenger with the resulting loss of seven lives. The
Presidential Com
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mission Report into the causes of the accident found in no uncertain terms that the technical cause was the faulty Oring design. However, even more serious was a
faulty organization that prevented those who had serious doubts about the adequacy of the design from being heard. In effect, their voices and concerns were
prevented from getting to the top of the organization. The case of the space shuttle thus shows that it is one thing to have ''weak signals." It is quite another to have
them blocked by an organization. It is for good reason that organizations that deliberately block signals deserve the label "crisis prone."
The case of the space shuttle Challenger is a tragic example. The Appendix to the Presidential Commission Report contains an "audit" of a string of memos that failed
to make it from the bowels of the organization to the top. One of the most revealing memos begins with the painful cry "Help!" In no uncertain terms, the memo says
that if the space shuttle continues to fly with the current design, then a disaster is virtually guaranteed to happen. The Presidential Commission Report shows all too
well how an organization that exercises power and creativity in blocking bad news, rather than in attending to it, is guaranteed to produce a disaster. This is one of the
saddest cases I know of, where an organization had clear signals of bad news and then deliberately chose to block them.
Ignoring the Warnings
Consider another case: My colleagues and I had occasion to audit a power utility that served extreme northern settlements. It was literally the case that if the electric
power failed to these communities, they only had twentyfour to thirtysix hours before their inhabitants would freeze to death. In performing a crisis audit of the utility,
it turned out that those most likely to find potential flaws in the electrical generators
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The Challenger disaster is one of the saddest cases I know of, where an organization had clear signals of bad news and then deliberately chose to block
them.
that served the communities were maintenance workers. At the end of each shift, these workers filled out a log. In theory, the logs were then read by the workers'
supervisors. However, in practice, the logs were almost never scrutinized. In exploring this situation, we found that maintenance operators had the lowest status of any
person in the organization. As a result, their warnings were not taken seriously.
What is so sad and tragic about this particular situation is that it illustrates precisely the essential differences between natural and humancaused disasters. The status of
maintenance operators is conferred by humans. It is not dictated by Mother Nature. The roles, functions, and jobs in organizations are the result of human decisions,
not God's.
This story also illustrates another important point. People are not stupid. They do exactly what they are rewarded for, and as a result, they know exactly what is
rewarded. Organizations thus get exactly the behavior they reward. If something is relatively unimportant or regarded as such, then people don't take it very seriously.
The case of the utility has another unsavory aspect that adds to the potential tragedy. Linemen had the highest prestige of anyone in the organization. In climbing poles
to repair lines, they almost always chose not to wear safety equipment. In fact, the job of a lineman typically attracted people who couldn't wait to take risks. Part of
the ''thrill" of the job was to see how much one could get away with by not wearing nec
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essary safety equipment. In effect, being ''crisis prone" was an unstated job requirement. Little wonder that maintenance operators were not perceived in the same
light. They were not macho enough!
A typical objection that my colleagues and I have encountered repeatedly is a rationalization, which, like all particular rationalizations, contains a grain of truth. This
rationalization, another example of cultural denial we discussed in Chapter Three, is the contention that all organizations contain so many signals that it would be
impossible to attend to every one of them. Thus, if one attended to such signals, one would need to attend to them all of the time, and this would inevitably crowd out
the necessary work that needs to get done.
Whatever truth this rationalization contains, it obscures a basic point. Whenever it is in our direct interest, we humans can search out and magnify the most insignificant
of signals.
For instance, consider the following. Most humans are naturally intensely interested in finding life on other planets. The verification that such life exists, especially
higherorder, intelligent life, as well as successful contact with it, would be one of the most eventful moments in human history. As a result, huge electronic telescopes
have been set up in conjunction with complex computers to constantly monitor signals from outer space. The computers work by noticing the most minute signals that
deviate from "normal background noise," which is always present in the sky. To do this necessitates monitoring, as well as noticing, minute "blips" in literally millions of
signals. The point is that humans can pick up the most minute signals when it is in their interest, whether to satisfy curiosity, imagination, or security needs.
The Case of a Major Insurance Company
Dr. Judy Clair, who teaches at Boston College, did her Ph.D. dissertation (under my supervision) on "signal detection in a
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large insurance company.'' The particular insurance company did a significant amount of work involving government Medicaid payments. Literally billions of dollars
flowed through its operations annually. Given the presence of such large amounts of money, the temptation to commit fraud was always extremely high. Indeed, the top
executives of the company made the reasonable assumption that if they had not recently encountered a fraud scheme, then it was not because it wasn't happening. It
was only because they hadn't picked up on the latest scam. As a result, picking up signals of potential fraud schemes ranked high in the organization.
As a result of her research, Dr. Clair found a number of important things with regard to signals in organizations. While many of them are perhaps obvious, they are all
important nonetheless. Indeed, their obviousness may prevent us from realizing their true importance.
The first point about signal detection is that to detect a signal, one needs to have detectors. As obvious as this may be, it is apparently not obvious enough, since most
organizations do not have signal detectors.
The best way to think about detectors is in terms of a radio. If a radio is tuned to one and only one frequency, then it obviously only picks up signals that are broadcast
on exactly that frequency. It does not pick up programs broadcast on other frequencies.
The point is that different types of crises send out very different types of signals. For this reason, every organization has to ask itself the following: "What would count
as a signal of the impending or near occurrence of a particular type of crisis?" For instance, a pattern of slow, but noticeable, increases in the accident rate at an oil
refinery may be a potential signal of an impending serious accident, such as an oil spill, fire, or explosion. Or, increasing amounts of graffiti
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scribbled on the walls of toilets and an increase in the number of sick jokes that are passed around an organization may be signals of impending employee unrest and
sabotage. Once again, the point is that different crises have different kinds of signals associated with them. We would not expect signals that are signs of product
tampering to be the same as signals of the breakdown of critical equipment, although the two can be related.
Different types of crises send out very different types of signals. Every organization has to ask itself: ''What would count as a signal of the impending
or near occurrence of a particular type of crisis?
The Dimensions of Signals
Signals can be differentiated along two dimensions. The first dimension pertains to the source of a signal. The second pertains to the kind of signal.
With regard to the first dimension, signals of impending trouble can originate from either inside or outside an organization. With regard to the second dimension, signals
can be either technical (they are recorded by remote sensing devices), or noticed by people. In general, all four kinds of signals apply to every organization. Thus:
1. Internal technical signals
2. Internal people signals
3. External technical signals
4. External people signals
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Internal technical signals are those that are recorded by technical monitoring devices, such as monitoring hazardous operations, possibly in remote locations. External
technical signals can be recorded by community monitoring signals, such as environmental activist groups, in the immediate area surrounding a manufacturing plant.
Internal people signals often come from the people working inside of a plant, such as the maintenance operators in the utility discussed earlier. External people signals
often come from people living in the immediate vicinity surrounding a plant, who, for example, may literally ''smell" that something is wrong.
Dr. Clair naturally found that if an organization doesn't have any kind of signal detector, then the probability of picking up a signal is virtually nil.
The Intensity Threshhold
Signals go off all the time in organizations, but because there is no one there to recognize them, record them, or attend to them, then for all practical
reasons the signals are "not heard."
The second stage in the "signal detection chain" is that once a signal is picked up, it must cross an "intensity threshold" in order to be recognized as such. In other
words, every signal detector must be "calibrated." It must be set up to observe what is clearly in the "danger" or "potential danger" region. This means that criteria must
be specified such that if the criteria are exceeded, then an alarm must go off.
Once an alarm is sounded, then it must be heard by the right person, organization, or instrument. As trivial as this
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sounds, it is anything but trivial, especially in complex organizations. Signals go off all the time in organizations, but because there is no one there to recognize them,
record them, or attend to them, then for all practical reasons the signals are ''not heard."
What Can Happen
A few years ago, on an extremely hot day, a brownout occurred in New York City due to an overload on the city's power system, ConEd. Because AT&T is
dependent upon ConEd to provide the power to run its electronic communication systems, AT&T experienced a breakdown.
Two of AT&T's systems that depend on ConEd are extremely critical because they provide the information for the air traffic control systems for La Guardia and
Kennedy airports. When the brownout occurred, the power to AT&T's system dropped. A backup generator automatically kicked in. As is so often the case with
complex systems, however, the generator failed. Fortunately, there was a backup to the backup in the form of a battery with a sixhour lifetime.
As soon as the battery kicked in, an alarm sounded to alert a human operator to monitor the life of the battery. Before six hours elapsed, the battery had to be
replaced. Unfortunately, in this particular case no human operators were available to hear the alarm. By the time someone did hear it, six and onehalf hours had
elapsed. By then airplanes were circling dangerously in the air because the computer systems to bring them down safely were not functioning.
The irony of this whole situation is that the operators were not available to hear the alarm because they were attending a class on a new backup system!
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Signal Transmission
Returning to Dr. Clair's research on signal detection, once a signal is heard, it has to be transmitted to the right people, as well as in the right form, so that people can
take action. Unfortunately, if a signal does not relate to any of the daily, standard operating procedures of an organization, then even though it may be loud enough to
be observed by many people, they may not know what to do about it. If it falls outside of the repertoire of known or expected behaviors, then people are at a loss
what to do. For this reason, an important aspect of signal detection is the specification as to what potential problem a signal might relate, and further, if a signal is
noted, what is to be done about it.
Next, according to Dr. Clair, even if a signal relates to a known problem in an organization, there must still be a clear reporting sequence. If one picks up a signal, but
it is not known to whom one should send it, or, if the signal is sent but those to whom it is sent don't know what to do about it, then once again the signal will be
ineffective.
Finally, it is not enough to pick up individual signals in isolation from one another. For instance, in many plants, one part of the operation may have a signal of a
potential problem, and another may have another signal pertaining to another aspect of the problem. However, if these two signals are not sent to a central location
point such that they can be pieced together into a larger whole, then the potential crisis may go undetected. In effect, one will not be able to see the ''whole elephant"
to which the separate signals pertain. In complex organizations, separate individual signals, no matter how loud, may not be sufficient to connote a problem. If in effect
the signals "don't connect the dots," then we cannot and do not see a "problem."
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In complex organizations, separate individual signals, no matter how loud, may not be sufficient to connote a problem. If in effect the signals ''don't
connect the dots," then we cannot and do not see a "problem."
As we mentioned in an earlier chapter, almost invariably there is at least one other person in every organization who "smells that something is rotten." Consider the
cases of Barron's Bank and the bankruptcy of Orange County. In the case of Orange County, not only was the county's Treasurer, Robert L. Citron, implicated in the
scandal, but also highlevel officials from Merrill Lynch were implicated as well. Given the large numbers of persons who were involved in recommending and making
risky investments for the county, it is inconceivable that no one at all knew in advance of the financial crisis that something was terribly wrong with Orange County's
investments.
In the case of Barron's Bank, it is also inconceivable that a lone individual, a twentyeightyearold bank officer, could bring down a venerable institution with a 128
year history.
In both cases, Orange County and Barron's Bank, highrisk investments were being made with very little independent oversight. It strains the imagination to assume
that no one knew what was occurring. In the case of Barron's Bank, it is almost as if the system was designed from the very beginning to hide signals. The young bank
officer involved in making risky trades was both the executor of his activities as well as his own supervisor! Putting operational responsibility and oversight into a single
job is thus almost a surefire prescription for disaster.
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The case of Barron's Bank is also interesting for an additional reason. It shows how virtually all crises are linked to one another. In the case of Barron's Bank, the
investments were made in Japan. They went sour when a major crisis, the Kobe earthquake, caused many of the investments to be called due. It thus showed not only
how one type of disaster—a natural one—can affect another humancaused crisis, but that all disasters have human implications. At some point, all natural disasters
involve human response systems. If those systems are poor, then they can contribute to a chain reaction of additional humancaused crises.
Strategy List for Chapter Six
• Do not deliberately block signals that would alert you to an impending crisis.
• Do not ignore warnings.
• Keep lines of communication open.
• Make sure you utilize signal detection mechanisms that are already in place.
• Reward signal detection and emphasize safety.
• Make sure your detection mechanisms search for signals from all seven types of crises listed in Chapter Three.
• Make sure your mechanisms are directed internally and externally, attuned to both technical and people signals.
• Make sure there is someone who is watching over these signals and who is ready to sound an alarm if necessary.
• Create a clear reporting sequence so that people know what to do in the event of a crisis.
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