Alto42
Understanding Organisational Failure
We can but dream! This does not mean however that management cannot position their organisations to be more capable of withstanding the vagaries of the future. This preparation should be a key concern of Risk Governance. The question therefore is, what realistically can be done?
ASSOCIATED TERMS:
Anticipation
Resilience
Robustness
Redundancy
Agility
Flexibility
Adaptability
Responsiveness
While we might like to be able to see the future, the best we can hope for is foresight
TERMS ASSOCIATED WITH THE PREPARATIONS FOR THE FUTURE
How do you use these terms?
Do they mean the same thing to everyone within your organisation or are you talking at cross purposes with your colleagues?
There are other terms linked to this proposition. Seen from an optimistic perspective (pursuit of desired outcomes) these might include:
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Strategic Foresight
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Agile Capability (often connected with Supply Chain Management)
Seen from a pessimistic perspective (prevention of the unwanted) this might be referred to as:
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Failure of Foresight.
FORESIGHT
I offer some tools that I have found helpful.
The first is a three step process (See, Appreciate, Act) looking at the precursors to action. Within my research I have seen many instances where it is a failure of this process that has resulted in the tragedy that followed. Some people have added 'decide' into this model. I think this is wrong because within our mental process we have to decide to see, decide to appreciate, and them decide to act once we have decided on the right course of action. We decide at every step.
The second is a list of twenty questions which I produced as a part of my doctoral research into the causes of organisations failure. The use of these questions may help you to spot whether you have some nascent within you organisation.
The next is designed to help change the way you think to being more multidimensional. Most MBA training uses two dimensions grid thinking. Here I take it one step further and and a third dimension. I have called this the Catalytic Cube.The purpose of this is to help you think about which dimensions of any issues you are examining and which have been set aside consciously or unconsciously.
Finally I offer a way of assessing the degree to which an organisation might be able to cope with change before it breaks. This is referred to as elasticity.
In addition to these I also see a roles for tools such a Barry Turner's Disaster Incubation Theory can also be used to promote foresight.
SEE, APPRECIATE, ACT
This powerful triptych is designed to make practitioners ask themselves why they did not intervene to avert a crisis or disaster.
If they could see the raw evidence, why did they not appreciate what it was telling them about impending disaster?
If they could appreciate it, why did they not act?
Anyone involved in risk governance needs to be aware that to prevent something they wish to avoid, they must understand what stops them seeing, appreciating and acting.
When asking you the questions in the next section, will you act on the evidence available and, if not, why not?
Academics have identified many reasons why we, as individuals and organisations, might fail, in the end, to act in the most appropriate manner when judged with hindsight. I list some of those reasons below.
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Not See the warning signs.
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Inattentional Blindness
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Invisible Gorilla
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Taboo Subjects
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Organisational Silence
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Organisational Secrecy
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Failure of imagination
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Fallacy of Complete Reporting
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Not Appreciate it implications.
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Weak Signals
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Groupthink
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Bounded Rationality
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Distancing through differencing
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Cognitive Dissonance
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Misinterpreting Signals
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Not Act in an effective way.
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Bystander syndrome
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Normalisation of Deviance
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Learned Helplessness
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Folly
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Efficiency Thoroughness Trade-Off”s
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Failure to Launch
There are many others. However, for the average practitioner, I think it is sufficient to think about this issues in the most general terms;
See - Appreciate - Act
Twenty Questions
My research identified over 250 phenomena relevant to corporate failure. This was seen as being too many to be of any practical use. I therefore synthesised them (using the criteria of foresight & practical utility) into 20 questions which were subsequently tested on those at corporate executive level. The respondents found the questions made them think differently and gave them new insights into areas they thought they already knew well. Some questions caused a quite visceral reaction, which we called the squirm test. Respondents accepted this as being their intuition warning them that they might not like the answers they get but they are questions that should be being asked.
Again, driven by the desire to make them easier to use, I divided under four headings these were The Problem, The Group, The Process and Summary Questions.
The Questions
The Problems
[1] Where do we need to have clear and fully justifiable criteria for which events or scenarios are included in and excluded from our risk management process?
[2] While we normally monitor “outcomes” (“end”), where do we need to monitor the “processes” (“means”) that might create unacceptable outcomes?
[3] What risks are “acceptable” to us and why; how have we tested our reasoning for both core and non-core activity (against both internal and external yardsticks) to ensure that our reasoning is robust?
[4] Of those issues that we judge to be so improbable as to be “inconceivable”, which of these still have such potentially serious consequences (unacceptable) that we must stay alert to them?
[5] What evidence do we have that we have a shared understanding about:
(1) when we will prepare an alternative plan (anticipation),
(2) when we will set aside reserve capacity (resilience),
(3) where we just react to situations (reactive)?
[6] How might our approach to risk taking be stifling our organisation?
The Group
[7] Are we aware of what factors might:
(1) inhibit us from taking note of warning signs,
(2) affect our perception of them,
(3) restrain us from acting upon them?
[8] (a) How well do we understand our system’s operating modes (routine, high tempo, emergency and maintenance) and manage the transition between them?
(b) How well do we know those who will have to handle potential crises and are we sure they are equipped to do so?
[9] How do we judge the most appropriate level within our organisation for decisions to be made and whether each decision maker has the appropriate intuitive understanding of the issues, the organisation and its resources, and the ability to act in a timely manner?
[10] What proof is there that we are conscious of the dynamics and personal interactions that might cause our board and executive team to be dysfunctional (thereby generating risk) and what are we doing to ensure that we do not fall into these traps?
The Process
[11] How can we be sure that we have a culture that takes every key opportunity to learn from unwanted events experienced within the organisation (accidents and near-misses) and from the experience of other organisations?
[12] How do we, as the board/ executive group and as an organisation, ensure that we are getting the appropriate and relevant data to feed into our risk discourse? How do we judge appropriate and relevant?
[13] How do we judge whether the way we analyse risk is appropriate to the risks we face?
[14] What might give us confidence that after an unwanted event our decision-making will stand up, in hindsight, to critical external scrutiny?
[15] How do we ensure that all the members of the board/ executive have a shared view and understanding of the organisation, the way it works and its risks?
[16] What evidence can be provided that our plans and policies are robust enough to withstand a disruptive event?
[17] How might we notice where an emerging gap between our practice and our formal procedures becomes a potential source of risk?
[18] When would we expect our people to use their experience and intuition rather than adhering strictly to written plans or standards; when might this cause problems? Where might our “rule-book” actually hamper the achievement of our organisational goals?
Summarising Questions
[19] What “unwanted” occurrences (including those perceived as “inconceivable”) might affect our organisation?
[20] What evidence exists to show that our organisation’s culture, structure or processes do NOT provoke errors or rule violations?