Monday, July 30, 2012

Errors, Misjudgments and Dishonesty-Picking up the Pieces Part II

In this blog I want to return to the subject of  "Picking up the Pieces" segment I wrote about on 10 July.  One of the points I made earlier was that blog was that leader behaviors over time must reinforce the values and norms that are expected.  I want to focus on what is it exactly that leaders DO...what are those behaviors that reinforce the norms and values?  I think they fall into four simple, be direct, be unambiguous and be visible.

I'll start with simplicity.  When an organization has endured a leadership crisis where senior leaders have been removed or resigned, the people who are left behind are almost aching for someone to lead them out of the crisis.  They need to know there is a way forward and there are concrete actions being taken to move forward.  One of the best examples I personally witnessed once again refers to Jeroen van der Veer who became CEO of Shell after his predecessors were found to intentionally misstated the oil reserves of the company.  In Jeroen's first big leadership event of his top 80 or so executives he used a single handwritten slide he titled "The Basis for Success".  It had four blocks.  Those were "beliefs", "principles", "strategy" and "priorities". Each of those blocks had three no more than four bullet points ....handwritten, dated and signed.  No multi-colored PowerPoint, 60 slide slide, handwritten with a very complex, global business reduced to four blocks.  This single slide, both in words and symbol reinforced the notion that the way forward required day-to-day head down heavy lifting by every person in the company every day....nothing fancy...deliver results consistent with our beliefs and principles.

When it comes to being direct, leaders need to be clear and candid about wrongdoing but not dwell on it.  This means being fully cooperative with investigations and audits and insure compliance with directives to preserve relevant documents.  It also means acknowledging the many thousands of honest hardworking staff who had nothing to do with the wrongdoing.

Be unambiguous about core values, ethics and compliance.  Laws like the US Corrupt Practices Act or Technology Transfer prohibitions and other regulatory guidance need to be known and adhered to.  This may require mandatory training or retraining.  Global companies encounter a lot of "grey area" situations....especially in the developing world.  Corruption and graft are seldom the "cash-in-an- envelope" type but more often are disguised as "commissions", "transfer payments",  "agent fees" or "padded invoices" and can be buried deep in  complicated contracts or agreements.  Leaders sometimes need guidance to alert them to situations they may encounter and guidelines established for proper behavior

Be visible.  Communicate frequently at multiple levels and in multiple channels.  The best of these I've seen involve a matrix with potential audiences on one side of the matrix, and key messages on the other.  the key messages block might also include the channels....face-to-face, newsletter, web cast, focused email to certain audiences.

Friday, July 27, 2012

Errors, misjudgments and dishonesty-Top 10 Leader Behaviors that Create a High Reliability Culture

A couple of days ago I outlined systemic barriers leaders can create to minimize error and associated risk.  Yesterday I also outlined processes leaders can implement that can help create a high reliability culture.  The US Army's After Action, Review, Root Cause Analysis and the teaching hospital's Morbidity and Mortality conference are examples.  Embedding these processes as a way of doing business over a long period of time can help create the culture.  In addition to systems and processes there are individual and team behaviors that help create the culture.  I mentioned some of these back in April when discussing how to make a diverse team effective. My top 10 leader behaviors that create a high reliability culture are:
1. Designate a "devil's advocate". A very senior person told me not long ago that in his board meetings he designates a devil's advocate to present a challenge to an emerging convergence of opinion.  A retired US Army three-star general told me last week he successfully used the same technique
2. Know the style preferences and cultural nuances of your team members. Rather than open dialogue, designate someone to lead the conversation who might otherwise defer to an assertive, first mover.
3. "Listen for silence". This is especially important in teleconferences. If you haven't heard someone for some time on a conversation, invite their voice in.
4. Know your people well enough to detect non-verbal signs of discomfort. "Tom, I can tell you aren't comfortable with the way this conversation is headed. Can you share with us what you are thinking?"
5. Master the engagement skills of Inquiry, Advocacy, Mental Models and the Ladder of Inference. A short reference is at this link.
6. Daniel Kahneman even suggests team members write out their point of view on agenda items before dialogue starts. It's not practical for every agenda item in every meeting but for certain issues it is quite useful.
7. Be choiceful about when you express your point of view. If you truly are seeking divergence on an issue, guide the conversation but also let it flow. If you have a strong point of view, acknowledge it up front and invite challenge. How you handle the challenge is will determine to the degree to which people are later willing to do so. If you hammer dissenting views into submission, don't expect challenges to your thinking in the future. If you do have a strong point of view, withhold it and then later hammer disagreement into submission, don't expect much conversation in the future until you have spoken.
8. Watch for weak signals that challenge your own mental models. This can be especially important in mature teams where the leader's attitudes and views are well known and shared. This makes it even harder to surface a dissenting view.
9.  Be careful not to dismiss the message because of the messenger.  I call this the "chicken little' problem.  For those  who don't know, there is a fable in which a chicken gets hit in the head by an acorn and concludes the sky is falling.  Chicken Little convinces others the sky is falling and, depending on the version of the fable, everyone meets an unpleasant end.  It's central lesson is that some people are unreasonably afraid and try to incite unreasonable fear in others.  There are "chicken littles" in every organization who see every challenge, barrier and risk.  The problem is, sometimes they are right.
10.  Pay attention to the "been there, tried that, didn't work" curmudgeon at the end of the table.  There was a time when I resented the "curmudgeon"..."they slow things down", "they are risk averse", "they are living in the past" .  There is a temptation to dismiss their contribution, however they are often the institutional source of organizational learning.  They can help the leader keep from "reinventing the wheel.'

The point is there are individual leader behaviors and team behaviors the leader can encourage that generate the trust that....combined with systems and processes leads to a high reliability culture.

Thursday, July 26, 2012

Errors, Midjudgments and Dishonesty- Creating a High Reliability Culture

Yesterday, I touched on four systemic barriers that leaders can establish....disciplined execution of standard operating procedures, sound project management methodology, simulations and emergency management/crisis management plans.  The effectiveness of these barriers is very dependant on the culture in which they exist.  This leaves open the question of what is it leaders can do to create a high reliability culture?
In his book, Complications:  A Surgeon's Notes on an Imperfect Science surgeon Atul Gawande describes the Morbidity and Mortality conference that is conducted weekly in most teaching hospitals in the United States.  Laws in most states protect the proceedings from legal discovery, encouraging absolute candor.  In these meetings "surgeons gather behind closed doors to review the mistakes, untoward events and deaths that occurred on their watch, determine responsibility and figure out what to do differently next time."  Gawande gives a compelling account of one such conference involving one of his cases on p. 58 of the book.

Likewise, the US Army's use of the After Action Review is a well documented example of another tool aimed at not fixing blame but identifying opportunities for improved performance.  Gen(ret) Gordon Sullivan, former Chief of Staff of the US Army describes this process, it's evolution and its importance in creating a high performance culture in his book Hope is Not a Method. This process  can be formal or informal and scaled to either large or small groups.    Key elements include an identifiable event, a statement of what was supposed to happen, a conversation about what actually happened, and why, and what will be done differently next time.  Key characteristics of a good AAR are that the environment is nonthreatening and participants are willing to take personal risk for  the team to learn and grow.  In the best ones I participated in, early in the AAR, senior officers admitted their own misjudgments, error and what they'd do differently.  This was a key step in creating the safe environment.

Root Cause Analysis is another such organizational process I observed in the oil and gas sector with the same goal of discovering "ground truth" and addressing.

The peer review process is common among many professional fields and is dominant in the field of academic journals.  I've also seen this process used in the oil and gas business.

Great leaders embed one or more of these processes into work and in so doing demonstrate to everyone in the organization that they recognize the possibility of failure.  These processes condition the work force to recognize and recover from errors and look for systemic fixes that prevent recurrence.  Repeated execution of these processes.....every day, every week, every month, every year, year after year after year.... are an important component of building a high reliability culture.

Tuesday, July 24, 2012

Errors, Misjudgments and Dishonesty- Building Barriers and Safeguards against Error

Accepting the premise of Reasons' work...that there are both personal and systems categories of error... what is it exactly that great leaders do to build defensive barriers and safeguards...the layers of Swiss cheese in his model?
Well documented standard operating procedures and discipline around execution of those procedures is a great place to start.   ExxonMobil's Operations Integrity Management System(OIMS) is a great example of just such a set of standard operating procedures and they have a well known record of discipline around execution of this system. Another is simply good project management/stage gate methodology...conducting appropriate reviews, challenge sessions and taking incremental decisions in the life of project development..  A third barrier would include simulations.  There are many different kinds of simulations from individual to team to large scale computer driven "war-games".  Flight and driving simulators are well known and widely used at the individual level .  There are also drilling simulators in the oil and gas field where operators can simulate the drilling of a well and the various circumstances that a driller can encounter.  The essence of all simulations is to place individuals or teams in an environment where they can practice without the risk or expense of actual error.  Good simulations can also allow for the introduction of low probability, high risk events.   Last, good emergency response/crisis management plans that are practiced, critiqued and refined is yet a fourth barrier.

All of these barriers exist in the context of a company culture.  Great leaders create not only the systemic barriers but the culture that leads to high reliability.

Monday, July 23, 2012

Errors, Misjudgments and Dishonesty-"Error is not the monoply of the unfortunate few"

I want to stay with this subject of how capable, experienced, professional people who know the consequences of their errors, still make them.

James Reasons article in the British Medical Journal sheds as much light on this subject as any.  Reasons is the originator of the "Swiss cheese model" of risk management.  It's worth a read in its entirety at the attached link.

Reasons' approach is to divide error into two broad categories.  One focuses on the person and fixes accountability/blame on forgetfulness, inattention or other weakness.  One of the flaws he identifies in the person approach is it de-couples the person from the context of the error and ignores two important facts....often the best people make the worst mistakes and there are recurring patterns of error in the same system.  The other approach is to focus on the system...the conditions under which decisions are made.  He further subdivides system errors into active(those made by people in the system) and latent(those inherent in the design of the system).  Reasons argues for the systems approach, recognizing that good, capable people, ......experienced professionals.... still make mistakes.  Creating defensive barriers and safeguards is a key element in the systems approach to error prevention.  The "Swiss cheese" metaphor refers to the fact that every barrier has a weakness...a hole in the cheese....and that successive barriers need to be created in the system.  He calls organizations that employ the systems approach "high reliability organizations"...those that have "less than their fair share of accidents."

Quoting from the article "Perhaps the most important distinguishing feature of high reliability organizations is their preoccupation with the possibility of failure.  They expect to make errors and train their workforce to recognize and recover from them.  They continually rehearse familiar scenarios of failure and strive hard to imagine novel areas. Instead of isolating failures, they generalise them.  Instead of local repairs they look for system reforms"

Great leaders create a "high reliability" environment where, in spite of multiple barriers and best intentions, mistakes are expected.  They generate trust by their ability to distinguish between "blameworthy" and "blameless" error.

Friday, July 20, 2012

Errors, Misjudgments and Dishonesty-"No one sets out to take wild risks"

A few days after the Deepwater Horizon oil spill began, I had a conversation with a friend at NASA.  All of us in the oil and gas business were eager to not only understand the technical flaws that led to the accident, but also understand some of the human factors that can result in errors in large scale, complex engineering accidents.  Since NASA has had a couple of those accidents with disastrous consequences and my colleague was in a senior position, I explored the subject with him.

One comment he made that day has stuck with me.  "No one sets out to take wild risks in these ventures", he said.  "You are talking about capable, experienced professionals who know the consequences of their mistakes.  I think errors in decisions are made when there is some combination of time pressure, money pressure, political pressure and previous success."

The time pressure issue seems obvious to me.  If I reflect on my own behavior, I'm most likely to take risks when time is a factor...I'm more likely to speed when driving.  I'm more likely to enter a crosswalk after the "red hand" light has come on...gambling a little on the time lag between when that hand lights up and when the traffic light actually changes.  Time pressure equally effects our decision making in more complex business activities.

Most interesting to me among these is the role of confidence that comes from previous success.  Basically the inner voice of the leader is saying "I've taken this risk before and nothing happened"  or the self referential "I've got a long track record of decision making  under pressure and I'm usually right".  Another way I've explained this it is unlikely the person who has an accident or is arrested while driving drunk, is driving drunk for the first time.  I've driven after drinking like this before and nothing happened.

Here are couple of tips for leaders who have to make complex decisions under pressure.   First, recognize that how data are presented makes a difference...are you looking at performance data or failure data...or both?.  Second, recognize that under pressure we tend to make go/no go decisions.....are there options other than go/no go?  Is it feasible to gather more data?  Third, have you framed the decision properly?  What assumptions am I making?  What mental models am I using?  What biases might be in play(see Kahneman again.)

Most importantly be aware that in spite of your previous success when time, money, or political pressures are high, your risk of making a poor decision are greatest.  You can't let it paralyze you, but in Kahneman's terms, it's time to Think Slow. 

Thursday, July 19, 2012

Errors, Misjudgments and Dishonesty- Human Frailty

There are two big categories of errors and misjudgments that people make in organizations.  One category has to do with errors and misjudgments that are individually based.  The other category deals with errors of process or system.  Today I'll deal with individual errors and misjudgments.

One of the kinds of individual errors has to do with one of the  "unforgivable" errors...violations of company values(honesty, integrity, respect for people as an example), violations of company business principles(rules, standards, expected behaviors) or some types of health, safety and environmental policies.  As I said in my last blog,  a violation of any of these values, principles or policies, in any organization should be grounds for dismissal.  Given the seriousness of the consequences, it's important that leaders are explicit about the absolute nature of these values, principles and some policies.  They need to be reinforced with training at least annually and embedded in all formal leader development training.
Other kinds of errors and misjudgments are made by honest people of good intent...really a product of human frailty.  Daniel Kahneman's book "Thinking Fast and Slow" is probably the best single volume reference to the research of the last several decades into why we all make errors of judgment.  I'll not go into a summary of his work...just simply state that a lot of errors can be attributable to how our brains work. Cordelia Fine's A Mind of its Own, Kathryn Schultz' Being Wrong, and Jonah Lehrer's How We Decide all contribute to a deeper understanding of how highly capable people of good intent make serious error.

An important part of any leader's toolkit is  understanding mental models and mastering the skills of inquiry and advocacy to both challenge her own thinking as well as the thinking of others..  Reveal your own thinking by the use of some key phrases..."I came to this conclusion because...", "This is the experience that leads me to conclude..." and invite challenge  "Do my assumptions seem valid?"  "What's your reaction to what I'm saying?".  When inquiring,  key phrases might include "What causes you to conclude....?"..."The reason I'm asking the question is...."  "Help me understand, can you give me an example?"   Mastery of dialogue skills can help both the leader and others minimize those errors honest people of good intent can make.

Tuesday, July 17, 2012

Errors, Midjudgments and Dishonesty-They aren't all created equal

This may seem self evident but all errors and misjudgments aren't equal.  That said, there are no "shades of grey" when it comes to dishonesty.  It's important that leaders are able to distinguish among different kinds of errors and misjudgments and dishonesty.

The difference between errors and mistakes that can be forgiven, and those that cannot, really has to do with the consequences that result from the error or mistake.  I strongly believe staff need to be able to make mistakes...that's how we learn.  You don't want staff asking permission to do every task.  In addition, taking decisions and managing risk is an important component of leader development.  A short list of  the kinds of errors that should be correctable might include such things as overspending an allocated budget, missing deadlines, failure to coordinate with key stakeholders, poor prioritization resulting in over-promising and under-delivering,  and failure to properly accrue year end expenses.  This list could go on and on.  The point is, mistakes will be made and should be used as learning and development opportunities.  There are limits.  Staff shouldn't be making every possible mistake, nor should they make the same one twice.

There are errors and misjudgments that cannot be forgiven or written off as a development experience.  These mostly have to do with consequences.  There are those that have to do with catastrophic business loss or reputational damage due to undue risk.  A short list would include the recent losses at JP Morgan, the Deepwater Horizon spill in the Gulf of Mexico,  "no docs" mortgages to people who have never paid a debt, and the space shuttle Challenger disaster in 1986.  Yes, lessons should be learned from these incidents, but those in positions of responsibility must be held accountable for these type errors and misjudgments.   Another type of "unforgivable" has to do with violations of company values(honesty, integrity, respect for people as an example), violations of company business principles(rules, standards, expected behaviors) or some types of health, safety and environmental policies.  An example of the health, safety and environmental "unforgivables" are the twelve lifesaving rules in Shell.  A violation of any of these rules, in any part of the company globally, is grounds for dismissal.
The last category in the "errors, misjudgments and dishonesty" group, is of course, dishonesty.   Sometimes there is a fine line between violation of "the rules, regulations or standards" and dishonesty.  The key differentiator for me between rules violations and dishonesty has always been whether or not there was an "intent to deceive".  Often a forgivable rules violation turns into dishonesty when actions are taken to "cover up" a violation.
Great leaders know the difference among errors, misjudgments and dishonesty.  They create an environment where mistakes can be made and both personal and professional development can be robust.  They also take actions to be explicit about errors that are unacceptable and put in place processes to mitigate risk in complex business activities.

Tuesday, July 10, 2012

Errors, Misjudgments and Dishonesty-Picking up the Pieces

There are quite a few variations to discuss in this space.  For the time being I'm going to only deal with the circumstance where misconduct or illegal activity has resulted in the removal or resignation of the most senior leaders in a company.  I'm also not going to deal with personal misconduct(inappropriate relationships with subordinates, falsified expense statements, inappropriate use of company resources, etc).  This blog entry will deal with removal or resignation in the pursuit of business activity.  I'll start at the point at which the senior leader or leaders have been removed or resigned under pressure.

My first point is it takes a long time to recover both inside the company and with outside stakeholders.  Recovery from the reputational damage is measured in years not months.  New leadership has to be prepared to stay after it for the long term.

Second,  appointment of the new leader or leadership team is critical.  The person needs to be of unassailable integrity and have the ability to inspire confidence with both internal and external stakeholders.  Often(I'm tempted to say always) they need to come from a different part of the business where the offensive activity took place.  In my own experience, the appointment of
Jeroen van der Veer as CEO of Shell following the misstating of reserves in 2004 was critical to its reputational recovery.  Jeroen is a no-nonsense Dutchman with a remarkable knack for simplifying very complex activities.  Maybe just as importantly, he came from the "Downstream" part of the business....far removed from the "Upstream" sub-culture where the misstatements of reserves occurred.

Third, the new leadership needs to address underlying structural issues that drive behavior.   Contrary to what many outsiders believe, there are rarely evil people who intentionally skirt law or regulation or act contrary to a companies stated values.  More often structure, either organizational or behavioral norms, are driving behavior.  To once again return to my Shell experiences two really important actions were taken to address structural issues. One, the corporate governance structure was changed to strengthen accountability of those in the corporate center.  Two, Jeroen drove a corporate initiative titled "Enterprise First" to address a previous structure that optimized at the business unit level rather than the enterprise.  Among other things, one element of Enterprise First was to establish a business performance factor used to compute variable pay at the enterprise level rather than at the business unit or function level.  Another structural change was to eliminate business or function specific leadership competency frameworks in favor of a single Enterprise-wide leadership competency framework.  The point of all this is new leadership must address structural issues that drive behavior at multiple levels.

Fourth, behaviors over time must reinforce the values and behavioral norms.  Specifically, who gets promoted and advanced in the new structure will "speak loudly" both inside and outside the company.

My last point is it takes more than a single leader or senior leadership team.  All the tens of thousands of honest, hardworking people who take great pride in their company need to collectively and individually commit to restoring the organization to its previous standing.

Friday, July 6, 2012

Errors, Misjudgments and Dishonesty

I've had conversations this week with two friends and former colleagues.  One is employed by Glaxco/Smith/Kline...the "Big Pharma" company.  The other by Barclays, "Big Banking" in the UK.  Major transgressions in both companies have come to light this week.    G/S/K was fined $3B....yes, $3 billion dollars.... for knowingly promoting drugs for unapproved uses, failure to report safety problems with some drugs and false representation of the safety of other drugs.  The Chairman of Barclays and the CEO both resigned after Barclays were fined $451M in the UK for the intentional manipulation of interest rates.  US government officials have opened their own investigation.

In the coming days I'll spend some time discussing the leadership dimensions of these type cases.  For now, I want to concentrate on the impact of "those who are left behind".  By this I mean the tens of thousands of honest, hard-working people in both organizations.  Just about all big companies these days have some version of corporate values that include honesty, integrity and respect for people.  The overwhelming majority of employees in these companies believe in these values and live them everyday.  In fact, in many cases those values are the very reason some employees join these firms and take pride in being part of an organization that lives those values every day.

When the senior leaders of a company are found not to have lived those values, it is often an extreme shock to the workforce.  The effects are not unlike the corporate version of the Kubler-Ross grieving model....change managers will recognize the SARAH model.
Shock(I can't believe our leaders would do that)
Anger(How could they?),
Resistance(The regulators/government are unfairly targeting us),
Acceptance( Our leaders were wrong) and
Help( What can we/I do to keep this from happening to us again?)

All that to say, it is all too easy.....and dead wrong..... to take these cases and level an across the board indictment of one's favorite target(Big Pharma, Big Oil, Wall Street, The City, The 1%) and in so doing stain tens of thousands of honest hard-working people who are completely unconnected to the incidents of egregious misconduct..  Bad things happen in the best organizations.  It isn't the prevention of bad things happening that defines success.  Success is defined by how new leaders....and staff at every level.... handle the bad things that do happen and put remedies in place to prevent their recurrence.