Avoiding a Chain of Mistakes that Can Destroy Your Organization

Will Your Next Business Mistake Be Fatal? Avoiding a Chain of Mistakes that Can Destroy Your Organization

Published: August 25, 2004 in Knowledge@Wharton

By Robert E. Mittelstaedt, Jr. (Wharton School Publishing)

From the Introduction:

What
do the failure of Enron, the Watergate scandal, the nuclear accident at
Three Mile Island, and most airline crashes have in common? Quite
simply, it would be almost impossible to make each of these things
happen without a serious sequence of errors that goes unchecked.
Whether it is a physical disaster, a political blunder, a corporate
misstep, or a strategic mistake, as the investigation unfolds, we
always find out that it took a unique set of compounding errors to
bring the crisis to front-page status.

In many cases,
these blunders are so complex and the impact so serious that we find
ourselves saying, “You couldn’t make that happen if you tried.” The
difference between organizations that end up on the front page of a
national newspaper in a negative light, those you never hear about, and
those that end up on the front page in a positive light, is the process
of Managing Multiple Mistakes (M3).

It
has long been known that most man-made physical disasters are the
result of a series of mistakes. In most cases, if one can find a way to
“break the chain,” a major catastrophe can be avoided. This recognition
of failure chains in operating aircraft, trains, nuclear power plants,
chemical plants, and other mechanical devices has led to an emphasis on
understanding causes and developing procedures, training, and safety
systems to reduce the incidence of accidents and to mitigate damage if
one does occur. Strangely, there has been little emphasis on extending
this process to help avoid business disasters—whether operational or
strategic.

Enron, WorldCom, and HealthSouth are now
widely known as major business disasters. Enron might even be
classified as a major economic disaster given the number of employees,
pensions, and shareholders affected at Enron and their accountants,
Arthur Andersen. As investigations unfolded, we learned that none of
these was the result of a single bad decision or action. Each involved
a complicated web of mistakes that were either unnoticed, dismissed as
unimportant, judged as minor, or purposely ignored in favor of a
high-risk, high-payoff gamble.

This book is about the avoidable
traps that we set for ourselves as business people that lead to
disasters. It is about what we can learn from the patterns of action or
inaction that preceded disasters (sometimes called “accidents”) in a
variety of business and nonbusiness settings in order to avoid similar
traps and patterns of mistakes. This goes beyond kaizen and six-sigma
on the factory floor to M3 in the executive suite and at all
operational levels of companies.

This is not a book about
crisis management. It is not about managing public relations, the
victims, the lawyers, or the shareholders. It is about discipline,
culture, and learning from the experiences of others to improve the
odds that you can avoid the things we label as accidents, disasters, or
crises altogether. Even if you do not totally avoid such situations,
knowledge of the typical patterns that occur should help you create an
organization that is observant enough to intervene early and minimize
damage. Learning and implementing the lessons described here will not
mean that you throw away your plans for handling problem situations.
But it could mean that you will never have to manage the aftermath of
an unpleasant situation.

There are lessons to be learned
from looking at the mistake patterns and commonalities in other
organizations, especially since most organizations do not do a very
good job of evaluating their own mistakes even though they have the
most information. We miss learning opportunities by not being curious
enough to look deeply at our own failures, but we also miss a very rich
set of opportunities when we do not look at the mistakes others have
made, especially when they have been well documented. We often miss
these opportunities to learn from others because we believe, “Their
situation was different—we don’t have much to learn from them.”

The
reality is very different because studies show that while the specifics
may be different across industries and situations, the patterns of
mistakes preceding accidents are quite similar. Learning doesn’t always
come from the sources you expect, like your own experience, your own
industry, or very similar companies. It takes a bit of extra effort,
but you can often learn more by looking at examples in an industry or
situation that is markedly different from your own and recognizing that
there are great similarities in the patterns of actions and behaviors.
This is because without the burden of a set of assumptions around what
you “know” is the right or wrong way to do something, it is easy to
observe the salient facts, absent all the distracting details, and
quickly say to yourself something like:

  • Didn’t they know water would boil if they lowered the pressure? (Three Mile Island )
  • Why did they fail to follow the procedure and fly into the ground? (Korean Air)
  • Didn’t they know customers would want a replacement for a defective chip? (Intel)
  • Don’t they know that customers are often more loyal if you admit a mistake and fix it? (Firestone)
  • Didn’t they know the leverage and/or fraud might kill the company? (Enron, WorldCom, HealthSouth)
  • Didn’t NASA learn anything the first time? (Columbia )
  • Why is J&J legendary for its handling of the Tylenol crisis over 20 years ago?
  • How
    did a United Airlines crew minimize loss of life with a crash landing
    where “everything” went wrong? (UA-232 at Sioux City, Iowa)

 

In each case of a crisis with an adverse outcome, there is a very common pattern:

  • An initial problem, often minor in isolation, that goes uncorrected
  • A subsequent problem that compounds the effect of the initial problem
  • An inept corrective effect
  • Disbelief at the accelerating seriousness of the situation
  • Generally, an attempt to hide the truth about what is going on while an attempt is made at remediation
  • Sudden recognition that the situation is out of control or “in extremis”*
  • Finally,
    the ultimate disaster scenario involving significant loss of life,
    financial resources, or both, and ultimately, the recriminations

We
will explore a number of famous and not-so-famous disasters or near
disasters from the perspective of the mistake sequence and where it
might have been broken to change the outcome or was broken to minimize
the damage. We will call your attention to the mistakes so that you
might think about the signals that were present and how you, in an
ideal world, might have acted differently.

The mistakes
identified are usually the result of direct action or inaction by
humans. In many scenarios, the mistake sequence was initiated with
equipment malfunctions that were known but not taken into account in
decision-making. In other situations, the mistakes may have been in the
design of systems or business procedures that were based on faulty
assumptions. Sometimes there were significant, uncontrollable
initiating or contributing factors, such as equipment failure, a
natural weather occurrence, or some other “act of God.” These
initiating factors must be considered in decision-making when they are
present because, although they are not always human in origin, they are
a part of the chain of causes that leads to disasters where humans have
an opportunity to intervene effectively or ineffectively.

In
the past, you may have looked at the occurrence of disasters or
recovery from near-disasters as a matter of passing interest in the
news. We are suggesting that you look a little deeper, learn a little
more, and stretch a little further for the implications that you can
use:

  • Is there a disaster waiting to happen in my organization?
  • Will we see the signs?
  • Will we stop it soon enough?
  • Do we have the skills to see the signals and the culture to “break the chain?”
  • Are we smart enough to realize that it makes economic sense to care about reducing or stopping mistakes?

Learn
from the mistakes of others and envision business success without
mistakes, because your future may depend on your ability to do just
that. To aid in this quest, we will identify some “Insights” linking
common themes that come out of the study of mistakes across industries
and situations. These will appear appropriately in each chapter and
will be summarized in a broad way again in Chapter 10, “Making M3 Part
of Your Culture for Success.”

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