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Kathie Sutcliffe
  Kathleen Sutcliffe
 

Managing the Unexpected

5/10/2010 --

Recent disasters show business needs to spend more time asking, "What if…?"

ANN ARBOR, Mich. — Whether natural or manmade, recent calamities stretching from Iceland to the Gulf of Mexico illustrate that business still has a way to go when it comes to planning for — and responding to — unforeseen events.

Professor Kathleen Sutcliffe, co-author of Managing the Unexpected: Resilient Performance in an Age of Uncertainty (Jossey-Bass, 2007) says a key attribute of top-performing companies is their capacity to deal with the unexpected. No matter the industry or the challenge, a prepared organization should be at the ready to implement systems designed to navigate through disasters.

"Organizations need to develop pockets of resilience and establish some ad-hoc resources and ad-hoc expertise so they're ready to deal with these kinds of problems," Sutcliffe says. "You have to anticipate what could go wrong and how it could go wrong. At the same time, you also have to be able to cope with surprises."

Sutcliffe is associate dean for faculty development and research at Ross. She also is the Gilbert and Ruth Whitaker Professor of Business Administration and professor of management and organizations.

Ask Yourself, 'What If…?'

On the surface, grounding European flights in response to the Icelandic volcano appeared unavoidable. Flying through volcanic ash is extremely dangerous, and winds distributed the plume right over some of the busiest parts of the continent. Airlines seemed to have no choice other than to halt flights. Or did they?

Sutcliffe cites a report by the Wall Street Journal that points out Alaska Airlines, faced with the 1980 eruption of Mount St. Helens just 35 miles from its main hub, developed a way to predict and model the paths of volcanic ash. It also implemented a program to put pilots though volcanic ash scenarios in flight simulators.

The report confirms Sutcliffe's research that shows high-performing companies, including airlines, are the ones to ask, "What if…?" and run simulations on all kinds of rare problems.

"They try to mentally simulate what could happen and what they would do," she says. "That way they'll at least have some ideas ready and maybe some uncommitted resources set aside."

Alaska still has to ground planes sometimes due to volcanoes, but the airline's processes allow for better planning and, in some cases, the ability to find ways to fly around the ash and keep more planes in the air. Those processes, while potentially expensive on the front end, can reveal their true worth in the wake of a crisis. Airlines are estimated to have lost $1.7 billion in revenue due to the recent groundings forced by the Icelandic volcano.

And while preventive measures may be costly, they pale in comparison to the long-term consequences of disaster. Few manmade debacles can compare to the recent explosion of British Petroleum's offshore oil rig in the Gulf of Mexico. Failure of the rig's device to shut off the flow of oil in such an event was "unprecedented," according to media reports quoting BP Group CEO Tony Hayward. Meanwhile, the media is reporting that the BP rig was not equipped with a remote acoustic shutoff system, which isn't required in the U.S., though some oil companies employ one anyway.

"To say people haven't imagined these things is incorrect," Sutcliffe says. After all, things that have never happened before happen all the time.

Overreactions

The post-mortem of a crisis is something else organizations often get wrong. For example, in the wake of the Icelandic volcano, some European officials have been lobbying to speed up a unification of airspace on the continent.

"That might be a good idea, but my first inclination after something like the recent event is to say, 'Whoa, wait a minute,'" Sutcliffe says. "Sometimes organizations rush to resolutions by creating new policies, rules or structures — and sometimes they do it too fast. I can see the advantages of having a centralized airspace but I also can see some disadvantages."

It's human nature to look for a quick fix after a problem. But what higher performing companies do is seek to simulate the bad events again, she says. That way they can collect data and study challenges while not under real duress, and they can learn more about the health of their system as a whole. This means they can make better judgments in the long run.

Know Where Your Experts Are

The recent interruption of air traffic illuminated yet another key issue relevant to management, Sutcliffe says. Several companies had personnel stranded across the globe. Locating staff, maintaining contact with them, and tapping interim resources is critical to minimizing the disruption caused by such an event, she notes.

"Organizations should be thinking about their staffs and where they are," she says. "We don't do this enough. We don't spend enough time understanding the workforce and developing a sense of who and where the experts are. In fact, most organizations haven't given any thought to how they would be able to get things done if something happened to their key members."

Sutcliffe calls this the "bus test." If somebody in the group or organization were hit by a bus, would you still be able to get key work done? If not, where can you access the resources and expertise to do the job? What if a key person or key people are stuck offshore and the telecommunications network goes down? It pays to have some ad-hoc problem-solving groups ready in every location. Resources have to be available in an emergency.

"We can't make the assumption that things are going to work the way we're used to," Sutcliffe says. "That only happens in our fantasies."

—Terry Kosdrosky



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu