Don’t let red flags ignored become crises ensured

Sometimes it takes a human disaster to make management pay attention to red flags and other warning signs of impending crises.

A case in point is this month’s report into the AirAsia Airbus crashing into the sea off Indonesia a year ago. Accident investigators found the cause was human error triggered by a maintenance fault which had occurred 23 times in the previous 12 months. Little wonder the BBC called the report: ”Anatomy of an avoidable crash.”

Sadly, research shows that most crises are not sudden, unexpected events but are preceded by warnings which could have and should have been identified and acted upon. As French oil executive Pierre Wack put it: “Any adult knows a magician cannot produce a rabbit unless it is already in (or very near) his hat. In the same way, surprises in the business environment almost never emerge without a warning.”

Take the fatal gas explosion at the Pike River coal mine, one of New Zealand’s worst mining disasters with 29 killed. The ensuing Royal Commission found that in the previous seven weeks there had been 21 reports of gas build-up to dangerous levels, and a further 27 incidents of lesser gas build-up, including on the day of the explosion.

Or the sole rogue trader whose activities lost the French bank Société Générale $7 billion. An independent panel found the bank failed to act on 75 separate warning signs over 18 months.

Or Victoria’s Black Saturday bushfires, pone of Australia’s worst natural disasters, which killed 173 victims. Subsequent inquiries revealed clear warnings about allegedly inadequate maintenance of power lines, which caused at least some of the fires.

Or take the notorious McDonald’s hot coffee case where an elderly woman was severely burned when coffee spilled in her lap. The case is best remembered for an eye-popping $2.9 million jury award (eventually settled out of court). Less well known is that McDonald’s knew its coffee was among the hottest in the industry, and had received at least 700 complaints of coffee burns in the previous decade.

In each case, and scores more like them, red flags were unrecognized or ignored. So what can managers do to avoid being ‘surprised’ by a crisis? Here are just a few suggestions:

• Establish a formal process for issue identification and prioritization

• Actively encourage blame-free upward communication of bad news

• Engage with stakeholders to identify potential issues

• Link issue management directly with strategic planning

• Listen to doubters and critics, not just yes-men

• Support a mechanism for all employees to raise issues and concerns

• Monitor media, call-centres and customer feedback for emerging problems

• Implement proactive planned actions to prevent issues becoming crises

• Formally assess all incidents and near-misses and take action to manage risk

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About managingoutcomes

Issue and crisis management expert
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