How Can Leaders Predict And Prevent Organizational Failure Before It Happens?

Why Is Sustained Success The Only True Measure Of Business Reliability?

Master the science of resilience with K. Scott Griffith’s The Leader’s Guide to Managing Risk. Learn how to combine human and system reliability to mitigate hidden threats and ensure long-term success. Stop relying on luck to keep your business safe. Continue reading to discover the “Sequence of Reliability” framework that turns unpredictability into a manageable advantage.

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K. Scott Griffith, risk management consultant and former American Airlines chief safety officer, explains that the world is complicated and laden with risk. From the discovery of fire to today’s advanced digital technologies, humans have used their minds to survive and thrive despite risk. Everyone loves success and hopes it will continue, but people sometimes make mistakes or misunderstand their situations, and everything goes awry. People and companies make bad choices, and accidents happen, sometimes with dire consequences. However, you and your company can mitigate and manage your risk, build collaborative risk management into your culture, and even prevent some of those consequences if you understand the underlying causes of bad outcomes.

Take-Aways

• Sustained success over time is the only way to demonstrate reliability.
• Leaders must recognize and understand risks.
• A system’s design creates the boundaries within which it is reliable.
• People are fallible.
• Achieving organizational reliability requires a combination of human and systemic factors.
• You can predict human and organizational reliability – within limits.
• Today’s global risks can seem overwhelming, but you can meet them.
• People and organizations can achieve reliable sustained success.

Summary

Sustained success over time is the only way to demonstrate reliability.

If you strive to be reliable, doing something just once in a while is insufficient – even when you do it well. You might be lucky or do good work in limited circumstances; however, if you wish for others to see you as reliable, you must perform your work regularly with excellence over time. This matters to your shareholders and consumers. For instance, if you need a heart surgeon, you want one with a proven record. When you’re flying home for the holidays, you want to know your pilot is reliable.

“To be reliable, high performance must be sustainable.”

Reliability isn’t perfection. Mistakes and accidents happen. Unexpected and unpredictable circumstances arise. Even performing solidly over time doesn’t guarantee future flawless performance. The risk of failure doesn’t magically disappear. Whether you are analyzing everyday tasks, creating presentations, flying jets, or performing surgery, the risk of failure is always present.

Some risk issues are “socio-technical,” meaning that certain human activities are risky because they require interacting with complicated systems, such as vehicles, computer hardware and software, or surgical equipment – the examples are endless – that can malfunction or that people can misuse. No matter how many safeguards engineers and designers build into technologies, people still make mistakes and machines still break.

Leaders must do more than manage the quality of their firm’s products or services. They need to manage risk based on solid science. And they must understand that companies are groups of people working within systems, and both human beings and systems can go wrong.

Leaders must recognize and understand risks.

The theory of reliability teaches that nothing that happens is truly random – events always emerge within a probability distribution. Whether in an individual’s personal life or in a company, when someone makes a mistake or a system fails, that event contributes to an overall mathematical profile.

To manage an organization’s risk, leaders must pay attention to each level of its operations. Risk management first requires perceiving and grasping the presence of a risk. Leaders need to know what each risk is and understand its potential consequences and possible mitigations. They must perceive risks in context as they apply to relevant systems, the people involved, and the overall institution.

“One of the biggest challenges you face as a business leader is preparing for hidden risks.”

A leader wrestling with multiple competing priorities might miss non-obvious risks. Indeed, sometimes the risks a leader recognizes are just the “tip of the iceberg,” and graver risks remain hidden under the surface.

To manage risk effectively, leaders must develop “risk intelligence,” the straightforward capacity to perceive a risk’s severity and its possible harmful results. Leaders’ risk intelligence derives from their experience and history with their organization, but it is subject to psychological and cognitive limitations. People put extra weight on more recent risks and overvalue the results of the actions they took in response.

Leaders also must be aware of their personal “risk tolerance,” the level of risk they are willing to countenance. Leaders might tolerate excess risk when the rewards are massive and they have financial back-up, but they must arrive at such high-risk decisions by undertaking a rational, fact-based exploration. Risk management leaves no room for magical thinking.

A system’s design creates the boundaries within which it is reliable.

Sometimes systems fail, whether due to human error or technological or systemic flaws. To manage systems and make them reliable, leaders need to understand how they work both when they are functioning properly and when they fail. Systems come in a variety of forms, big and small. For example, a national system of highways and transportation infrastructure and laws is a huge system. A Wi-Fi network that enables broad internet access is also a big system. Small systems may be entirely personal, such as making lists for grocery shopping, remembering to pay your bills, or establishing an exercise routine.

“How can we predict and manage system performance? The answer begins with understanding what shapes system performance – the influences that determine the results systems produce.”

Human reliability maintains system reliability. Systems should optimize their core functions, like making calls or sending email messages, while also heeding the functions they may deem less important.

Systems can become unreliable due to a number of factors other than flaws or design limitations. For example, a system may wear out due to lack of maintenance or, in the case of digital systems, lack of updating. A system may break down when users push it beyond its capacity or when it can’t get necessary resources, such as gasoline or electricity. Environmental factors, such as hurricanes, are beyond anyone’s control and can take a system down, as can human incompetence or malice.

People and organizations can improve their systems’ performance reliability by addressing a number of factors, but system design is the most crucial element in keeping systems functional, resilient, and trustworthy. Engineers and designers can create obstacles that block various forms of failure, redundancies that protect against mechanical breakdowns, and mechanisms that promote recovery from malfunctions. Organizations can prioritize training their leaders to manage human and operational risk factors.

People are fallible.

One of the principal socio-technical risks is a simple, unavoidable fact about human beings: they make mistakes. But, as with system failures, organizations can manage and minimize human failures – if their leaders understand how performance works and what motivates and shapes it.

First, reliable human performance is predictable. Employees are most likely to perform their tasks reliably if they have the appropriate knowledge and skills, the resources they need, and the related talent and capacity. People perform most reliably in well-functioning systems.

“Most days, the socio-technical combinations of system and human performance produce positive results. Ironically, these same combinations also cause disasters.”

Corporate risk management should include some inherent features, such as proper training and education, effective methods, well-maintained professional equipment, and a good working environment. Companies can maintain a positive, productive working culture, recruit and hire qualified people, and help them remain highly reliable – including supporting their professional training and their physical and psychological health. Inequality and discrimination undermine reliable performance; inclusive, collaborative work encourages it.

Human performance failures come in multiple forms: one-off lapses, lack of attention to a task, or straightforward mistakes or accidents. To manage human error and reduce the consequences of mistakes, build guardrails into your systems and improve your training and culture based on a deep awareness of risk management.

Achieving organizational reliability requires a combination of human and systemic factors.

Organizations are ultimately groups of people working together within a system. An organization is reliable when its workforce and its systems perform without disruption. Organizational reliability derives from a broad combination of the factors that affect both human and system reliability, from effective leadership to a myriad of internal and external moving parts.

“Highly reliable organizations continuously try to see and understand risk, including internal and external factors influencing their performance.”

Organizations, like leaders, need to perceive risk and manage the factors that might blind them to it. For example, leaders or their employees might face intense financial or time-related pressures that drive them to downplay or ignore risk. They might passively accept that the organization itself is safe based on its long history of good performance. They may know that a decision could have bad consequences, but those results appear so far in the future that no one takes the possibility seriously.

Leaders can manage risk when they inspire their people to work to achieve the organization’s goals, balance its competing priorities, demonstrate reliability, and grasp the risk of error. As they encourage employee reliability, leaders need to ensure that the company itself has reliable systems, appropriate resources, and effective ways of working.

You can predict human and organizational reliability – within limits.

Leaders must manage and understand their organizations, employees, and systems. They can’t predict the future, but they do have several ways to assess future risks, including investigations, audits, inspections, employee reports, and “predictive risk modeling.”

“All methods of seeing and understanding risk have systematic limitations and are subject to human interpretation bias.”

Predictive risk modeling helps leaders anticipate the future risks of negative outcomes and mitigate or prevent them. This might include, for example, efforts to prevent accidents or errors – or ameliorate their effects – in hospitals or in a transportation system.

Predictive risk assessment analyzes the potential factors that could cause an error or failure – such as exhausted or poorly trained employees or outdated or broken equipment – and then assigns probabilities to each aspect of these preconditions that could lead to a damaging event. In response to the findings of predictive risk analysis, organizations can make improvements to mitigate risk, such as upgraded training, new technology, and better system maintenance.

Today’s global risks can seem overwhelming, but you can meet them.

The world has changed dramatically over the past 100 years, from the dominance of cars and airline travel to the internet, with all its upsides and downsides. Dangerous forms of nationalism have arisen and could lead to disruption and conflict. Climate change presents tremendous risk. Still, individuals and organizations are not helpless; they can help mitigate these global risks.

“We live in a dangerous world. Many of the things you and I do in our everyday lives – fly in an airplane, get treated in a hospital, or drive a vehicle, for example – bring with them inherent risks.”

Following World War II and the American use of nuclear bombs in Japan, nuclear capabilities served to deter war. But a powerful nuclear arsenal isn’t enough to ensure peace when nations or peoples are at odds. To avoid war, people need to grasp how it affects “system, human, and national performance.” Since no single nation caused climate change and it affects everyone, cooperation among many countries is necessary to address and mitigate it.

Parenting comes with substantive risks, from toxic household chemicals to car accidents. You can partially address these risks by teaching your children to be aware of them and their implications. The natural world is replete with unusual high-risk events, like massive hurricanes and wildfires, which can be overwhelming. But instead of giving into despair, people can approach even the biggest problems in a systematic, objective, empirical way.

People and organizations can achieve reliable sustained success.

Between 1995 and 2005, the aviation industry in the United States reduced fatal airline accidents by a massive 78%. This dramatic safety improvement didn’t result from any single policy instituted by the US National Transportation Board. Instead, a board of professionals from all aspects of the aviation industry – airline executives, pilots, engineers, and people with knowledge of systems management and human psychology – came together to form the Commercial Aviation Safety Team, which examined multiple dimensions of aviation risk. Thanks in large part to their efforts, the United States’ rate of fatal aviation accidents continues to decline.

“If we are to manage risk optimally, we must take a deeper dive into the realities of socio-technical risk and think differently.”

Dealing with risk, from your private life to your industry, requires a systematic, scientific approach. Organizations should follow a “Sequence of Reliability,” to maximize positive risk management results. The Sequence of Reliability begins with perceiving and grasping the implications of risk and moves on to managing the reliability of relevant systems, organizations, and employees. The best ways to address risk vary depending on the particular risk. The hazards in your personal life aren’t the same as hazards facing your company or industry. Use the Sequence of Reliability as a framework in all instances – by discovering and analyzing risk, and managing your systems and people to prevent harm – while varying your hypotheses, analyses, and solutions to fit the scale and circumstances at hand.

About the Author

K. Scott Griffith, founder of SG Collaborative Solutions, helped create the Aviation Safety Action Programs. A retired airline pilot and former American Airlines chief safety officer, he received the Flight Safety Foundation’s Florez Award for contributions to aviation safety and – three times – the Federal Aviation Administration’s Good Friend Award. A frequent public speaker, Griffith pioneered the development of predictive risk management strategies, including socio-technical probabilistic risk assessment (STPRA) and Reliability Management Systems (RMS).