The Crisis-Prone Society: A Brief Guide to Managing the Beliefs that Drive Risk in Business

A Brief Guide to Managing the Beliefs that Drive Risk in Business

I. Mitroff, C. Alpaslan

• Publisher: Palgrave Pivot
• Year: 2014
• Print ISBN:
  9781137455611
• eBook ISBN:
  9781137454836
• Topic: Política y relaciones internacionales
• Subtopic: Ética empresarial

The Crisis-Prone Society offers preventative measures that can be taken by business professionals and scholars alike to alleviate the growing potential for crises today. These measures are distilled by close analysis of our recent social history of disasters.

1

Living in a Crisis-Prone World

Abstract: Without exception, crises cause the collapse of the major operating assumptions that we use to give meaning and order to our world. In one fell swoop, they destroy our entire belief systems, leaving us adrift in a disorderly and meaningless world. Nonetheless, the collapse of assumptions is the least appreciated and least understood aspects of crises. In each chapter and the book as a whole, we analyze a diverse array of major crises to show systematically what the prevailing assumptions were that the crises destroyed. We also show how the assumptions were a major factor that led to the initial crises themselves. To help us prepare better for future crises, we show what is common to the assumptions.

Mitroff, Ian I. and Can M. Alpaslan. The Crisis-Prone Society: A Brief Guide to Managing the Beliefs That Drive Risk in Business. New York: Palgrave Macmillan, 2014. DOI: 10.1057/9781137454836.0003.

Fort Hood

On November 5, 2009, U.S. Army Major and psychiatrist Nidal Malik Hassan fatally shot 13 people and injured more than 30 others at Fort Hood near Killeen, Texas. From Mitroff’s and Alpaslan’s more than 45 years of combined experience in studying and consulting with crises of all kinds, the massacre was unfortunately not an isolated exception. It fitted an all-too-common, general pattern. Indeed, we were only able to quickly hone in on the key assumptions that underlay this particular crisis because of our experience in surfacing and analyzing assumptions with regard to countless other crises.

Although there are obviously different types of crises, all crises have the all-too-real potential to cause major financial losses, serious injuries, deaths, long-lasting psychological trauma, major lawsuits, and unfavorable media coverage. In addition, without exception, they cause something just as devastating. They cause the collapse of the major operating assumptions that we use to give meaning and order to our world.

Precisely because it is far less apparent and less anticipated than more overt losses, such as financial costs, multiple injuries, the collapse of assumptions is just as bad as the initial crisis. In many cases, it is the crisis.

With regard to the Fort Hood massacre, three major assumptions were invalidated:

1 Soldiers are trained explicitly, and thus hopefully well prepared, for the serious possibility of being injured or killed overseas in foreign battles, but they won’t be killed in battle-like conditions here at home. In other words, it can’t and won’t happen here;

2 One of our own won’t attack and kill us. Alternately, we don’t have anything to fear from “one of us;” and,

3 Least of all, a member of one of the “helping professions” won’t turn on his “fellow comrades” and kill them.

Unfortunately, the preceding assumptions are all-too general. As such, they apply to many crises.

The first assumption has to do with geography. It is assumed implicitly that where we live and work is protected ground. Either it is too far removed from places where such tragedies normally occur, or it is physically insulated and secure.

Notice that this same type of assumption applied to 9/11. Terrorism is only supposed to happen in Europe, the Middle East, and other dangerous parts of the world where it occurs on a regular basis, not in the U.S.

The second assumption has to do with one’s close friends and colleagues. For most people, it is literally unthinkable that someone with whom one works daily and knows intimately, or thinks one does, would turn and act completely out of character by committing one of the most heinous acts imaginable. It goes completely against the grain of what it is “to be one of us.”

The third assumption takes the second even further. It is akin to violating the special bond and trust that is placed in one’s fellow police officers, priests, physicians, rabbis, or teachers. Certain roles and professions are so sacred that they are invested with feelings such that if they were dishonored—defiled—it would lead to the deepest feelings of betrayal.

Sandy Hook

On December 14, 2012, 20-year-old Adam Lanza shot and killed 20 children and six adults at Sandy Hook Elementary School in Newtown Connecticut. Before driving to the school, Lanza shot and killed his mother at their Newtown home. He later committed suicide by shooting himself.

After the 2007 Virginia Tech massacre, it was the second deadliest mass shooting by a single person in American history.

The shootings prompted renewed debate about gun control. It also prompted a proposal for new legislation banning the sale and manufacture of certain types of semi-automatic firearms and magazines with more than ten rounds of ammunition.

As before, the shootings invalidated a set of deeply held assumptions:

1 Schools are special places where children, especially very young children, are protected from the dangers of the outside world; in a word, they are insulated from harm. Indeed, as much as any institution in society, schools are supposed to guarantee the protection of children. This “guarantee” is one of their most fundamental features.

2 A single gunman will not enter a school with the intent to commit mass murder; everyone respects that schools are special, especially elementary schools.

3So many children will not be killed at one time in one place. A mass shooting of very young children will not occur. It is literally unthinkable.

Once again, the first assumption pertains to geography. Only this time, it takes on a very special meaning. In many ways, schools are like churches. They are “holy places.” Families can implicitly entrust schools to guard and take care of their most precious “possessions.” Parents don’t have to worry constantly throughout the day about whether their children will be safe or not.

The second assumption is that everyone respects the “holiness” of schools precisely because they are schools.

The third assumption is that so many children will not be killed at one time in one place. The death of a single child is horrific enough, but there is something terribly wrong when so many are killed at one time in one place. Numbers compound the senselessness of the tragedy. Notice once again how this same type of assumption applied to 9/11 as well.

It is important to stress that such assumptions were held even after the Columbine shootings. Even though one part of our minds knows that schools are not perfectly safe, other parts still have to believe that they are safe for our children. The assumption is necessary for without it, we are paralyzed. We couldn’t dream for one moment of sending our children out of the supposed safety and comfort of our homes.

BP

On April 20, 2010, a British Petroleum (BP) oil rig in the Gulf of Mexico exploded and sank causing a massive oil spill, and killing 11 people. It is considered to be the largest “accidental marine oil spill” in the history of the petroleum industry. Oil flowed for 87 days until it was capped on July 15, 2010. The total discharge was estimated at 4.9 million barrels.

A significant part of the tragedy was the fact that BP deliberately misreported the number of gallons spilled.

A White House commission blamed BP and its commercial partners for a series of cost-cutting decisions and insufficient safety systems that led to the disaster. It also concluded that the spill resulted from “systemic” root causes and poor industry practices as well as poor government policies.

In November 2012, BP pled guilty to 11 counts of manslaughter, misdemeanors, and lying to Congress. BP agreed to four years of government monitoring of its safety practices. The Environmental Protection Agency (EPA) announced that BP would be temporarily banned from new contracts with the U.S. government. BP and the Department of Justice agreed to a record-setting $4.525 billion in fines and other payments. As of February 2013, criminal and civil settlements and payments to a trust fund have cost the company $42.2 billion.

The following key assumptions were invalidated by the disaster:

1 The disaster was an “accident.”

2 The oil spill in the Gulf was not related to earlier “accidents” caused by BP.

3 Cost cutting will not endanger operations in sensitive areas.

4 It is enough to react to crises once they’ve occurred; backup disaster and damage containment systems do not already have to be designed, well-tested, and in place before one is granted a license to drill for oil in precarious parts of the world.

After a 2005 massive explosion at its Texas refinery, BP engaged a close friend and colleague of Mitroff’s, Professor Karlene Roberts, Director of the Center for Catastrophic Risk Management (CCRM) at the Haas School of Business, University of California. (As a member of CCRM, Mitroff works closely with Professor Roberts.) Precisely because she is one of the founders of the field of High Reliability Organizations, or HROs, Professor Roberts was engaged to improve safety operations at the refinery.

HROs are organizations that have an especially high potential for “catastrophic accidents.” Because of the extreme danger to humans, animals, and the environment, HROs cannot afford to have even one disaster. As a result, they have evolved through trial and error—often through having one too many accidents and near-misses—a special set of procedures that lower as much as humanly possible the chances of a major catastrophe. U.S. Aircraft carriers, nuclear power plants, and hospital operating rooms are just a few examples of the types of HROs that have been studied, and as a result, led to the initial concept of HROs.

As a result of studying the causes of the Texas explosion, Professor Roberts prepared a special manual for BP, which if it had been followed would have helped BP become a HRO, and hopefully would have lowered substantially the chances of future catastrophes. The manual was never fully adopted. Indeed, it was jettisoned soon after it was produced.

The Gulf oil spill and the Texas refinery explosion were not the only crises BP has experienced over the past decade. For example, the company experienced a major oil spill in Alaska. It was also found guilty by the Department of Justice of manipulating the U.S. market for natural gas. As a result, BP had to pay more than $370 million in criminal fines.

Experts and critics argue that, in many instances, BP has shown that it prefers to pay fines for violating laws and regulations. In BP’s way of reckoning, paying fines is cheaper than changing its business practices. Recklessness seems to be a calculated and ingrained aspect of BP’s culture and its way of doing business.

The fact that BP failed to take Professor Robert’s recommendations, and that of others, seriously undermines the first two assumptions. The spill was not just an “‘accident’ that was unrelated to BP’s culture and past operations.”

BP could have avoided the rig explosion and the subsequent oil spill if it had taken at least one of the following precautions:¹

(1) Circulate the drilling fluid (“mud”) long enough to detect whether there was gas in the well. If it was detected, gas could have been removed to prevent a potential leak and blowout;

(2) Don’t replace heavy drilling fluid with relatively lighter seawater before installing the last cement plug. If the heavier fluid was left in the drilling pipe, the pressure in the oi...

Table of contents

• Cover
• Title
• 1  Living in a Crisis-Prone World
• 2  The Risks of Risk Management
• 3  Why Technology Always Bites Back
• 4  Why People and Organizations Break Down
• 5  Economic Crises
• 6  Political Crises
• 7  National Insecurity
• 8  Global Warming
• 9  The Future of Crises
• Bibliography
• Index