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Managing the Unexpected - The Library of Congress

11 Managing theUnexpectedWhat Business Can Learn fromHigh Reliability OrganizationsOne of the greatest challenges any business organizationfaces is dealing with the Unexpected . For example, a lead-ing manufacturer of integrated circuits expects to boostcompetitiveness by dramatically improving quality and doublingcapacity, but it unexpectedly finds its share price falling as cus-tomers switch to the new products being offered by its competi-tors. A premier forest products firm continues production duringa normal trough in the business cycle, only to be surprised by adeeper and more long-lasting trough than they ever responsible manager of the largest corporate division of aconsumer products firm suddenly realizes that his market hasbeen conquered by a certain competitor a development that 5/26/01 9:14 AM Page 12 Managing the Unexpectedsubordinates sus

Managing the Unexpected 3 shrink and ongoing activity continues. How you can improve your organization’s management of the unexpected is the sub-

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Transcription of Managing the Unexpected - The Library of Congress

1 11 Managing theUnexpectedWhat Business Can Learn fromHigh Reliability OrganizationsOne of the greatest challenges any business organizationfaces is dealing with the Unexpected . For example, a lead-ing manufacturer of integrated circuits expects to boostcompetitiveness by dramatically improving quality and doublingcapacity, but it unexpectedly finds its share price falling as cus-tomers switch to the new products being offered by its competi-tors. A premier forest products firm continues production duringa normal trough in the business cycle, only to be surprised by adeeper and more long-lasting trough than they ever responsible manager of the largest corporate division of aconsumer products firm suddenly realizes that his market hasbeen conquered by a certain competitor a development that 5/26/01 9:14 AM Page 12 Managing the Unexpectedsubordinates suspected had been building steadily for severalyears.

2 As these examples show, the Unexpected doesn t take theform of a major crisis. Instead, it is triggered by a deceptivelysimple sequence in organizational life: A person or unit has anintention, takes action, misunderstands the world; actual eventsfail to coincide with the intended sequence; and there is an un-expected dislike Unexpected outcomes andsurprises. Because of that, they sometimes make situationsworse. That s the tragedy that motivates this suspect that the inability to manage the Unexpected liesbehind a number of the pressing problems that executives , after all, occur either when something that we ex-pected to happen fails to happen or something that we did notexpect to happen does happen.

3 For example, consider the chiefconcerns of today s business professionals reported in the firstannual (2000) University of Michigan Business School PressingProblems survey. The second most frequent problem executivesreported was thinking and planning strategically ; the thirdmost pressing problem was maintaining a high-performanceclimate. From our perspective, both these problems are vari-ants of one that is the focus of this book, dealing with the issue is strategy or performance, problemsbecome more pressing when expected strategy and performanceoutcomes fail to materialize or when Unexpected impedimentsto strategy and performance materialize.

4 Either scenario is abrush with the Unexpected . And in either case people often taketoo long to recognize that their expectations are being violatedand that a problem is growing more severe. Moreover, once theybelatedly recognize that the Unexpected is unfolding, their ef-forts at containment are general, people can manage Unexpected events poorly,in which case the events spiral, get worse, and disrupt ongoingactivity; or they can manage them well, in which case the 5/26/01 9:14 AM Page 2 Managing the Unexpected3shrink and ongoing activity continues. How you can improveyour organization s management of the Unexpected is the sub-ject of this does it mean to manage an Unexpected event well?

5 Good management of the Unexpected is mindfulmanagement ofthe Unexpected . That answer comes from careful study of or-ganizations that operate under very trying conditions all thetime and yet manage to have fewer than their fair share of acci-dents. These organizations, which are referred to collectively ashigh reliability organizations(HROs), include power grid dis-patching centers, air traffic control systems, nuclear aircraft car-riers, nuclear power generating plants, hospital emergencydepartments, and hostage negotiation teams. The better of theseorganizations rarely fail even though they encounter numerousunexpected events.

6 They face an excess of Unexpected eventsbecause their technologies are complex and their constituenciesare varied in their demands and because the people who runthese systems, like all of us, have an incomplete understandingof their own systems and what they attribute the success of HROs in Managing the unex-pected to their determined efforts to act this wemean that they organize themselves in such a way that they arebetter able to notice the Unexpected in the making and halt itsdevelopment. If they have difficulty halting the development ofthe Unexpected , they focus on containing it.

7 And if some of theunexpected breaks through the containment, they focus on re-silience and swift restoration of system we call this approach mindful,we mean that HROsstrive to maintain an underlying style of mental functioning thatis distinguished by continuous updating and deepening of in-creasingly plausible interpretations of what the context is, whatproblems define it, and what remedies it contains. The key dif-ference between HROs and other organizations in Managing 5/26/01 9:14 AM Page 34 Managing the Unexpectedunexpected often occurs in the earliest stages, when the unex-pected may give off only weak signals of trouble.

8 The over-whelming tendency is to respond to weak signals with a weakresponse. Mindfulness preserves the capability to see the signif-icant meaning of weak signals and to give strong responses toweak signals. This counterintuitive act holds the key to manag-ing the book is grounded in the assumption that high relia-bility organizations enact on a larger scale what all of us try todo well on a much smaller one. We can all get better at manag-ing the Unexpected if we pay more attention to those who haveno choice but to do it well. In this first chapter we will illustratethis argument by taking a close look at how the Union PacificRailroad mismanaged the Unexpected during its merger withthe Southern Pacific Railroad and ended up gridlocking signif-icant portions of its transportation system.

9 We argue that UnionPacific got into trouble because it failed to use any of the fiveprocesses that enable HROs to manage the Unexpected mind-fully. The five processes are previewed briefly in this chapter;linked with expectations, blind spots, and mindfulness in Chap-ter Two; described in fuller detail in Chapter Three; formattedas an organizational audit for use by executives and managersin Chapter Four; interpreted as the infrastructure of a safety cul-ture in Chapter Five; and translated into a set of practical guide-lines for action in Chapter Six. Union Pacific Mismanages the Unexpected An old brakeman faces his ultimate test.

10 This breathless head-line in the October 6, 1997, issue of Business Week2signaled thefailure of Union Pacific CEO Richard Davidson to manage theunexpected when Union Pacific (UP) merged with Southern Pa-cific (SP). The Surface Transportation Board had 5/26/01 9:14 AM Page 4 Managing the Unexpected5approved the merger in August 1996 because it promised tobring the vaunted expertise of UP to bear on the badly deterio-rating SP. Not long after the formal acquisition on September 11,1996, the vaunted expertise of the UP began to unravel. Un-expected events came in waves.


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